Download Q1 2017 Market ChartBook

Q2 2017 Market ChartBook
Baird Private Wealth Management
June 30, 2017
Wealth Management | Capital Markets – Investment Banking | Private Equity | Asset Management
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Table of Contents
03
19
26
35
Economy & Market
Domestic Equity
International Equity
Fixed Income
Market Highlights
The Markets at a Glance
Returns by Asset Class
S&P 500 Index
Economic Growth
Inflation Watch
Jobs Market
Housing Market
Consumer Health
Corporate Profitability
Market Volatility
Commodity Markets
Energy Markets
Mutual Fund and ETF Flows
Fund Flow Heat Map
U.S Equity Snapshot
Asset Class Performance
U.S. Sector Performance
Investment Style Leadership
Historical Market Valuations
Historical Sector Valuations
Mutual Fund Performance
Global Market Performance
Intl. Equity Performance
Country Performance
Sector Performance
Investment Style Leadership
Global Market Valuations
Country Valuations Ranges
Bond Market Snapshot
Maturity/Credit Performance
Yield and Volatility
U.S. Treasury Bonds
Corporate Bond Yields
Bonds Spreads
Mutual Fund Performance
Economy and Markets
Q2 2017 Market ChartBook
Q2 2017 Market Highlights
Economy and Market
Domestic Equity
Fixed Income
At A Glance: The first half of the year has come to
an end and many market events have transpired thus
far. Nervousness regarding the future of the EU has
faded, the Federal Reserve has continued their
hawkish monetary policy with consecutive hikes in
March and June and the US economy continued to
muddle along with final revisions for Q1 GDP coming
in at 1.4%, down from Q4’s 2.1%. US policy-making
efforts remain in gridlock causing market skeptics to
reduce future growth and inflation expectations. As
economic data relies heavily on the ability of the
Trump administration to push forward with tax reform,
debt negotiations and infrastructure spending, the
upbeat economic outlook may be challenged this fall.
At a Glance: The S&P 500 generated a solid 3.1%
return during the quarter. Strong Q1 earnings growth
and continued optimism among equity investors has
led to attractive returns.
At a Glance: In the US, investors have started to
question the path of Fed rate hikes given the weaker
than expected inflation data and economic growth,
leading 10 year rates to fall to a low of 2.13% during
the quarter. The 10-year Treasury yield was largely
flat from 2.32% to start the quarter to 2.31% at the
finish. In all, the Barclays Aggregate Bond Index
produced a modest gain of 1.5%.
Economic Health: The labor market continued to
tighten, adding an average of 149,000 jobs for the
previous three months through May. The strong gains
have helped to hold the national unemployment rate
to 4.3%, a 16-year low. Jobless claims extended the
trend of below 300,000, a streak the US has not seen
since 1973.
Inflation. Core consumer prices, which exclude the
effects of food and energy, fell to 1.7% y/y through
May. When including the effects of food and energy,
headline inflation also fell during the quarter to 1.9%
y/y.
Fed Speak. In a widely anticipated move, the FOMC
elected to raise the target fed funds rate 25bps at its
June meeting. Chairwomen Yellen conveyed her
views regarding recent slowing growth in economic
activity deeming it transitory and the committee has
maintained their long term economic outlook. The
FOMC has also detailed a plan for balance sheet
reduction with consensus believing it should begin
before the end of the year.
Market Cap and Style: Large cap stocks
outperformed mid and small-cap stocks while growth
remained in favor relative to its value-style
counterpart.
Sector: Winning sectors for the quarter included
healthcare (7.1%), industrials (4.7%), and financials
(4.3%). Positive returns were largely supported by
strong earnings and continued gridlock in Washington
over healthcare reform. Losers for the quarter include
energy (-6.4%) and telecom services (-7.1%).
International Equity
At a Glance: Risk assets continued to rally through
the second quarter, with international equity markets
taking the lead relative to the US. Improving global
growth, sustained global trade and structural reforms
including initiatives in India, Indonesia, Argentina and
Brazil have helped drive markets upward. Attractive
valuations relative to US markets has caused
international investors to benefit from a strong
technical bid this past quarter. Investors in developed
international markets received 6.1% in Q2 led by
Denmark, France, and Italy while emerging markets
largely followed suit with Q2 returns of 6.4%. Euroskeptics Le Pen and Wilders lost in their respective
elections and much of Europe has moved away from
the populist movement which took over the markets
earlier this year. German elections this fall have now
turned into a non-event, as Merkel is expected to
comfortably come out on top.
Sector: In the taxable bond market, investors were
more averse to risk and preferred high quality bonds
over high yield. Investment grade corporate bonds
and high yield bonds were among the strongest areas
of the fixed income market returning 2.5% and 2.1%
respectively. Leveraged loans and US TIPS lagged
this quarter with spreads in the loan market coming to
post-crisis lows and yields grinding tighter with a pickup in re-pricing. TIPS struggled this quarter as the
market has grown skeptical of the reflation trade and
inflation expectations falling to pre-election levels.
Maturity and Credit Quality: Longer maturity bonds
finished higher while shorter maturity bonds delivered
small positive returns. Among credit, high quality
outpaced high yield.
Yield Curve: Treasury yields decreased this past
quarter, leading to a flatter yield curve. This flattening,
largely seen in the belly of the curve resulted in a
slope of 89 basis points, measured by the 2s/10s
spread.
Municipal Bonds: Municipal bonds continued their
momentum by posting 2.0% in Q2. The murky
outlook for any significant tax reform combined with
lower inflation and strong investor demand for yield
has helped municipal bonds outperform taxable peers
during the quarter and throughout the year.
Robert W. Baird & Co. Member SIPC.
4
Markets at a Glance
As of June 30, 2017
Trailing Returns (%)
Asset Class
Annual Returns (%)
Last Qtr
YTD
1-Year
3-Year
5-Year
10-Year
2016
2015
2014
Benchm ark
Large Cap Value
1.3
4.7
15.5
7.4
13.9
5.6
17.3
(3.8)
13.5
Russell 1000® Value
Large Cap Grow th
4.7
14.0
20.4
11.1
15.3
8.9
7.1
5.7
13.1
Russell 1000® Growth
Mid Cap
2.7
8.0
16.5
7.7
14.7
7.7
13.8
(2.4)
13.2
Russell Midcap®
Small Cap
2.5
5.0
24.6
7.4
13.7
6.9
21.3
(4.4)
4.9
Russell 2000®
6.1
13.8
20.3
1.2
8.7
1.0
1.0
(0.8)
(4.9)
Short-Term Taxable
0.3
0.7
0.4
1.0
1.0
2.3
1.3
0.7
0.8
BBgBarc 1-3 Yr Govt/Credit
Intermediate-Term Taxable
0.9
1.7
(0.2)
1.9
1.8
3.9
2.1
1.1
3.1
BBgBarc Intermed. Govt/Credit
Short-Term Municipal
0.3
1.2
0.5
0.8
0.9
2.1
0.2
0.8
0.7
BBgBarc 1-3 Yr Municipal
Intermediate-Term Municipal
1.9
3.9
0.2
2.8
2.8
4.7
(0.5)
3.3
6.1
BBgBarc 7 Yr Municipal
0.2
0.4
0.6
0.3
0.2
0.5
0.3
0.1
0.0
Citi 3 Month T-bills
High Yield
2.1
4.9
12.8
4.5
6.9
7.5
17.5
(4.6)
2.5
BofA/ML High Yield Master II
Real Estate
2.6
5.9
1.4
8.3
9.3
5.2
7.6
2.1
27.2
DJ US REIT
Commodities
(3.0)
(5.3)
(6.5)
(14.8)
(9.3)
(6.5)
11.8
(24.7)
(17.0)
Bloomberg Commodity
6.3
18.4
23.8
1.1
4.0
1.9
11.2
(14.9)
(2.2)
MSCI Emerging Mkts (Net)
U.S. Stocks
International Stocks
Developed Markets
MSCI EAFE (Net)
Bonds
Cash
Cash/Cash Equivalents
Satellite
Emerging Markets
Source: Morningstar Direct; Russell, MSCI, Barclays, Citigroup, and Dow Jones benchmarks. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative
benchmark” column. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
5
Returns by Asset Class
As of June 30, 2017
Year-to-Date Performance of Various Asset Classes
35%
Market
Cap
U.S.
Sectors
Emerging
Markets
International
Markets
Fixed
Income
29%
30%
25% 25%
25%
22%
21%
19%
20%
17%
16%
18%
16%
15%
11%
10%
10% 9%
9%
9%
8%
10% 10%
8%
9% 9%
8%
7% 6%
5%
4%
5%
5% 4%
4% 4%
3%
2% 2% 2%
1%
0%
-5%
-10%
-15%
-11%
-13%
-14%
-20%
Source: Morningstar Direct. Asset classes are represented by the following benchmarks: Large Cap (S&P 500), Mid Cap (Russell Mid Cap), Small Cap (Russell 2000), Cons. Discretionary (S&P 500 Sectors/Consumer
Discretionary), Cons. Staples (S&P 500 Sectors/Consumer Staples), Energy (S&P 500 Sectors/Energy), Financials (S&P 500 Sectors/Financials), Health Care (S&P 500 Sectors/Health Care), Industrials (S&P 500
Sectors/Industrials), Info. Technology (S&P 500 Sectors/Info. Technology), Materials (S&P 500 Sectors/Materials), Telecom. (S&P 500 Sectors/Telecommunications), Utilities (S&P 500 Sectors/Utilities), Real Estate (S&P 500
Sectors/Real Estate), Australia ((MSCI Australia), Canada (MSCI Canada), France (MSCI France), Germany (MSCI Germany), Japan ((MSCI Japan), Switzerland ((MSCI Switzerland), United Kingdom (MSCI United Kingdom),
United States (S&P 500), Brazil (MSCI Brazil), China (MSCI China), India (MSCI India), Korea (MSCI Korea), Mexico (MSCI Mexico), Russia (MSCI Russia), South Africa (MSCI South Africa), Taiwan (MSCI Taiwan), Agency
(BBgBarc US Agency), Broad Market (BBgBarc US Agg. Bond), Corporate (BBgBarc US Corporate IG), High Yield (BBgBarc US Corporate HY), Municipal (BBgBarc Municipal), TIPS (BBgBarc US Treasury US TIPS), Treasury
(BBgBarc US Treasury)
Robert W. Baird & Co. Member SIPC.
6
S&P 500 Index
As of June 30, 2017
Year-to-Date Performance of the S&P 500 Index
2,500
Q1: +6.1%
Q2: +3.1%
2,450
Adjusted Closing Level
2,400
2,350
2,300
2,250
2,200
2,150
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Source: Standard and Poor’s. The S&P 500 Index, computed by the Standard & Poor's Corporation, is a well known gauge of stock market movements determined by the weighted capitalization of the 500 leading U.S. common
stocks. Indices are unmanaged and it is not possible to invest directly in an index.
Robert W. Baird & Co. Member SIPC.
7
Economic Growth
As of March 31, 2017
US GDP Growth
10
8
6
GDP Grow th (%)
4
2
0
-2
-4
-6
-8
-10
Mar-97
Mar-99
Mar-01
Mar-03
Mar-05
Mar-07
Mar-09
Mar-11
Mar-13
Mar-15
Mar-17
Gross Domestic
Product (GDP)
Contribution to U.S. GDP Growth
Contribution to GDP Grow th (%)
8
6
GDP is a basic measure of
U.S. economic output.
Alternatively, it can be
thought of as the final value
of all goods and services
produced within the U.S.
Positive GDP growth signals
an expanding economy.
GDP is comprised of four
major categories: personal
consumption, private
investment, government
spending and net exports.
4
2
0
-2
-4
-6
Personal Consumption
Govt. Spending
-8
-10
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Private Investment
Next Exports
Mar-16
Mar-17
Source: US Department of Commerce: Bureau of Economic Analysis (GDP Growth)
Robert W. Baird & Co. Member SIPC.
8
Inflation Watch
As of May 31, 2017
Historic CPI Level
Year-Over-Year Change in CPI
6
Headline CPI
Core CPI
4
2
0
-2
May-07
May-08
May-09
May-10
May-11
May-12
Headline CPI
May-13
May-14
May-15
May-16
Core CPI: Headline less Food and Energy
Com ponents
Weight (%)
12-m o Change (%)
Headline CPI
100
1.9
Housing
43
Transportation
Com ponents
Weight (%)
12-m o Change (%)
Core CPI
79
1.7
3.1
Food
14
0.9
16
1.8
Energy
7
5.4
Food & Beverage
15
0.9
Medical Care
9
2.7
Education
7
(2.5)
Recreation
6
0.9
Apparel/Clothing
2
(1.2)
Other
3
2.4
May-17
Consumer Price Index
(CPI)
A common measure of
inflation, Headline CPI tracks
a broad basket of goods and
services relatable to most
consumers. Core CPI
excludes Food and Energy
due to the volatile nature of
those categories and the
distortive effect it can have
on the broader inflation
measure.
Source: Bureau of Labor Statistics; Baird Analysis. CPI figures lag one month.
Robert W. Baird & Co. Member SIPC.
9
Jobs Market
As of May 31, 2017
Jobs Gained/Lost
Unemployment and Underemployment Rates
18
800
600
15
Unemployment Rate (%)
Change in Payroll (000s)
400
12
200
0
9
-200
-400
8.4
6
4.3
-600
3
-800
U-3 Unem ployment Ra te
U-6 Underemploym ent Rate
-1,000
May-07
May-09
May-11
May-13
May-15
0
May-07
May-17
Labor Force Participation
May-09
May-11
May-13
May-15
May-17
Wage Growth (y/o/y%)
67
4
3
65
64
63
62.7
Wage Grrowth (%)
Participation Rate (%)
66
2.6
2
62
1
61
60
May-07
May-09
May-11
May-13
May-15
May-17
0
Mar-07
Mar-08 Mar-09
Mar-10
Mar-11 Mar-12
Mar-13
Mar-14
Mar-15
Mar-16 Mar-17
Source: US Department of Labor: Bureau of Labor Statistics. Data will lag one month and is subject to revision. Wage growth is calculated quarterly and will lag one quarter.
Robert W. Baird & Co. Member SIPC.
10
Housing Market
As of May 31, 2017
S&P/Case Shiller Home Price Index (20 City)
Average Selling Price of New and Existing Homes
Median Price (New Homes)
$37 5,0 00
240
Median Price (E xist ing)
220
$32 5,0 00
Index Level
200
$27 5,0 00
180
160
$22 5,0 00
140
$17 5,0 00
120
100
May-07
May-08
May-09
May-10
May-11
May-12
May-13
May-14
May-15
May-16
May-17
Housing Affordability Index
$12 5,0 00
May-07
220
Units (000s)
Index Level
120
80
May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15 May-16 May-17
May-12
New Housing Starts
Existing Hom e S ale s
6,000
5,500
5,000
4,500
4,000
100
May-11
7,500
6,500
140
May-10
8,000
7,000
200
160
May-09
Home Starts/Sales
240
180
May-08
May-13
May-14
May-15
May-16
May-17
Consumer Price Index
(CPI)
A common measure of
inflation, Headline CPI tracks
a broad basket of goods and
services relatable to most
consumers. Core CPI
excludes Food and Energy
due to the volatile nature of
those categories and the
distortive effect it can have
on the broader inflation
measure.
3,500
3,000
May-07 May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15 May-16 May-17
Source: Standard & Poor’s, US Department of Commerce: Bureau of Economic Analysis.
Robert W. Baird & Co. Member SIPC.
11
Consumer Health
As of May 31, 2017
University of Michigan Consumer Sentiment Survey
Consumer Spending Growth (y/o/y%)
100
8
Consumer Spending Growth (%)
95
90
85
Index Level
80
75
70
65
60
6
4
2
0
-2
55
50
May-07
May-08
May-09
May-10
May-11
May-12
May-13
May-14
May-15
May-16
May-17
Personal Savings Rate
-4
May-07
May-08
May-09
May-10
May-11
May-12
May-13
Personal Income Per Capita
12
Personal Savings Rate (%)
May-15
May-16
May-17
$40 ,00 0
A common measure of
inflation, Headline CPI tracks
a broad basket of goods and
services relatable to most
consumers. Core CPI
excludes Food and Energy
due to the volatile nature of
those categories and the
distortive effect it can have
on the broader inflation
measure.
10
$38 ,00 0
8
6
$36 ,00 0
4
$34 ,00 0
2
0
May-07
May-14
Consumer Price Index
(CPI)
May-08
May-09
May-10
May-11
May-12
May-13
May-14
May-15
May-16
May-17
$32 ,00 0
May-07
May-08
May-09 May-10
May-11
May-12
May-13
May-14 May-15 May-16
May-17
Source: Thomas Reuters/University of Michigan, US Department of Commerce: Bureau of Economic Analysis.
Robert W. Baird & Co. Member SIPC.
12
Corporate Profitability
As of March 31, 2017
S&P 500 Earnings Per Share (EPS)
$1,400
$14 0
Earnings Per Sh (right ax is)
Revenues Per S h (left axis)
$1,200
$12 0
$1,000
$10 0
$80 0
$80
$60 0
$60
$40 0
$40
$20 0
$20
$0
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
$0
Mar-17
Corporate Profitability
Corporate Profits (% of GDP)
Corporate Profits /GDP
12%
Earnings power ultimately
drives long-term changes to
stock prices. These two
charts display how profitable
US corporations are. The
top chart measures earnings
(top line growth) and
revenue (bottom line growth)
of the companies within the
S&P 500 Index. The bottom
chart displays corporate
profitability (after taxes) in
terms of total US GDP
growth.
9%
6%
3%
Mar-07
Mar-09
Mar-11
Mar-13
Mar-15
Mar-17
Source: BEA, Bloomberg, Standard & Poors, Baird analysis. Past performance is not a guarantee of future results.
Robert W. Baird & Co. Member SIPC.
13
Market Volatility
As of June 30, 2017
Historic VIX Level
90
80
70
VIX Level
60
50
40
30
20
10
0
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
VIX (CBOE
Volatility Index)
Quarterly S&P 500 Trading Volatility
80%
% of days up/down 2% or more
Percent of Trading Days
% of days up/down 1-2%
60%
The VIX measures the
implied volatility of S&P 500
future options. Simply put, it
measures the expected
volatility of the S&P 500
Index over the next 30 days.
The higher the index, the
higher the expected volatility.
It is also commonly referred
to as the “fear index.”
40%
20%
0%
Q2 201 7
Q1 201 7
Q4 201 6
Q3 201 6
Q2 201 6
Q1 201 6
Q4 201 5
Q3 201 5
Q2 201 5
Q1 201 5
Q4 201 4
Q3 201 4
Q2 201 4
Q1 201 4
Q4 201 3
Q3 201 3
Q2 201 3
Q1 201 3
Q4 201 2
Q3 201 2
Q2 201 2
Q1 201 2
Q4 201 1
Q3 201 1
Q2 201 1
Q1 201 1
Q4 201 0
Q3 201 0
Q2 201 0
Q1 201 0
Q4 200 9
Q3 200 9
Q2 200 9
Q1 200 9
Q4 200 8
Q3 200 8
Q2 200 8
Q1 200 8
Q4 200 7
Q3 200 7
Q2 200 7
Source: Standard & Poor’s; CBOE; Baird Analysis.
Robert W. Baird & Co. Member SIPC.
14
Commodity Markets
As of June 30, 2017
Year-to-Date Returns of Various Commodity Types (%)
18.3
20
12.3
15
10
6.3
11.4
7.0
6.3
7.4
3.1
5
2.4
0
-5
-10
-3.4
-5.3
-7.3
-15
-20
-20.0
-25
-18.5
-21.2
-24.8
-30
Oil Prices
Gold Prices
$16 0
$2,000
London PM Gold ($/oz)
$14 0
WTI Oil Price ($/b)
$12 0
$10 0
$80
$60
$40
$1,500
$1,242
$1,000
$50 0
$46.04
$20
$0
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
$0
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Source: U.S. Dept of Energy; London PM Gold Fix Index; Baird Analysis. “Broad Market” is represented by the Bloomberg Commodity Index, specific commodity types are reported
segments of that index. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
15
Energy Markets
As of June 30, 2017
Oil Prices (West Texas Intermediate)
Natural Gas Prices (Henry Hub)
$16
$16 0
$12
$10
$10 0
$80
$60
$40
$46.04
$20
$3.04
$4
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Tot al Oil Production
2,500
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
100
Global Over/Under Supply
4
Global Oil Supply
2,000
8,500
6,500
Jun-08
Global Oil Supply and Demand (LH) and Supply Imbalance (RH)
Tot al Active Rig Count
7,500
$0
Jun-07
1,500
1,000
5,500
500
4,500
3,500
0
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Global Oil De mand
3
95
2
90
1
0
85
-1
-2
80
-3
Supply / Demand Imbalances (MMbb/d)
Jun-10
Oversupply
Jun-09
Undersupply
Jun-08
Baker Hughes Oil & Gas Rig Count
Total U.S. Oil Production (mmbb/d)
9,500
$6
$2
Total U.S. Oil Production (LH) and Rig Count Index (RH)
10,500
$8
Global Oil Supply and Demand (MMbb/d)
WTI Oil Price ($/b)
$12 0
$0
Jun-07
Henry Hub Natural Gas Price
($/mmbtu)
$14
$14 0
75
-4
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17
Source: U.S. Energy Information Administration; Bloomberg; Baird Analysis.
Robert W. Baird & Co. Member SIPC.
16
Mutual Fund and ETF Flows
As of May 31, 2017
Annual Mutual Fund and ETF Flows ($ millions)
Calendar Year Net Flow s ($M)
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
YTD
Money Market
340,833
613,001
(60,745)
23,827
40,622
24,080
52,648
84,147
(71,307)
Municipal Bond
14,353
12,758
75,969
16,043
(8,574)
54,251
(56,361)
32,748
21,822
33,533
14,625
Taxable Bond
112,649
61,001
333,826
246,664
190,178
329,181
34,920
110,193
29,820
199,509
170,426
Allocation
45,974
(21,999)
6,453
18,527
19,307
29,553
61,961
51,267
(20,669)
(51,899)
(7,333)
US Equity
37,163
709
(33,563)
(21,054)
(45,395)
(41,163)
175,444
127,309
(60,053)
(8,997)
41,516
International Equity
174,946
(41,542)
63,246
91,729
19,051
61,056
200,740
153,487
209,444
12,420
105,713
Alternative
11,561
19,820
28,434
24,006
23,172
17,902
49,512
20,076
20,516
(296)
2,387
Com m odities
6,542
12,370
36,636
24,972
8,171
11,928
(32,890)
(3,317)
(1,526)
14,456
1,742
(290,490) (431,604)
Annual Fund Flows
Biggest % Gainers/Losers by Asset Class
Top 10 In-Flow s
(as a % of assets)
Trailing 1-Year
Grow th Rate
Top 10 Out-Flow s
(as a % of assets)
Trailing 1-Year
Grow th Rate
Industrials
51.4%
Prime Money Market
-53.6%
Money Market - Taxable
49.8%
Money Market - Tax-Free
-23.4%
Bank Loan
34.4%
Utilities
-13.4%
Financial
33.6%
Consumer Cyclical
-10.9%
Ultrashort Bond
31.9%
Europe Stock
-10.4%
Emerging Markets Bond
26.0%
Long Government
-10.0%
Equity Precious Metals
21.7%
Japan Stock
-9.6%
Preferred Stock
21.5%
Allocation--85%+ Equity
-9.5%
Inflation-Protected Bond
18.7%
World Allocation
-8.9%
Energy Limited Partnership
18.0%
Health
-8.6%
The examination of annual
mutual fund and ETF flows
shows the investment
pattern of the average
investor by broad asset
class. For example, in 2008
investors exited stocks when
the markets fell. In 2009,
large amounts of capital
went to fixed income, but
little flowed back to stocks.
Source: Morningstar Direct; Baird Analysis. Asset classes with less than $25 billion invested were excluded from the analysis.
Robert W. Baird & Co. Member SIPC.
17
Fund Flow Heat Map
As of May 31, 2017
Mutual Fund and ETF Net Flow (YoY % Grow th)
Asset Class
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
YTD
US Equity
Large Cap Grow th
-1.0%
0.0%
-1.2%
-2.3%
-4.2%
-3.1%
-3.9%
-1.6%
-1.8%
-8.2%
Large Cap Blend
1.2%
2.6%
4.9%
-0.9%
-0.3%
0.7%
1.8%
6.5%
6.9%
0.6%
2.2%
Large Cap Value
3.9%
-0.3%
-2.9%
-5.2%
-0.1%
0.0%
0.5%
5.4%
2.8%
-1.8%
-0.2%
Mid Cap Grow th
0.4%
5.7%
-5.6%
-0.5%
0.5%
-4.8%
-4.3%
2.2%
-3.6%
-9.3%
-1.1%
Mid Cap Blend
4.3%
2.1%
-3.7%
4.9%
3.6%
-1.4%
2.5%
15.0%
6.2%
-0.1%
2.9%
Mid Cap Value
1.8%
1.2%
-4.9%
-1.4%
0.8%
-1.0%
-4.8%
8.6%
0.5%
-6.2%
-1.7%
Small Cap Grow th
-1.7%
-1.4%
-2.0%
-2.1%
4.4%
0.0%
-1.0%
-3.8%
4.4%
-7.4%
-7.1%
-1.1%
Small Cap Blend
8.6%
-2.8%
1.9%
4.6%
3.4%
-3.6%
-3.0%
10.0%
2.1%
0.0%
1.3%
Small Cap Value
6.2%
-2.3%
7.2%
4.2%
7.6%
-3.4%
-4.6%
4.4%
-0.5%
1.1%
1.0%
International Equity
Internationl Grow th
16.3%
9.3%
-2.9%
3.3%
0.3%
-2.7%
-2.1%
4.4%
-0.7%
-2.1%
0.5%
International Blend
24.7%
19.9%
0.4%
6.9%
10.5%
5.2%
4.1%
17.8%
15.3%
6.4%
6.5%
International Value
11.8%
10.0%
-7.0%
-5.2%
4.4%
5.6%
7.5%
10.2%
9.5%
-1.5%
1.7%
Emerging Markets
18.1%
19.5%
3.6%
32.6%
27.5%
7.4%
19.2%
9.4%
3.5%
-0.3%
6.5%
Global Equity
12.3%
8.8%
-4.8%
-5.3%
-4.2%
-5.4%
-6.2%
5.2%
2.5%
-5.0%
-0.5%
3.9%
Fixed Incom e
Short-Term Bond
-4.9%
2.4%
0.3%
70.3%
28.7%
7.8%
19.2%
12.5%
6.5%
2.0%
Intermediate-Term Bond
11.6%
16.1%
2.3%
26.7%
9.8%
5.2%
12.8%
-7.5%
4.8%
8.9%
4.6%
3.3%
2.7%
3.5%
28.3%
11.3%
12.0%
15.7%
2.0%
-5.4%
3.6%
-2.9%
Bank Loan
29.5%
-7.9%
-26.9%
38.3%
78.0%
32.6%
24.0%
93.4%
-14.3%
5.9%
14.7%
TIPS
-3.1%
6.7%
39.0%
55.5%
10.9%
11.6%
6.1%
-23.9%
-2.2%
6.9%
8.0%
Short-Term Muni
-5.6%
4.6%
27.4%
105.5%
10.2%
4.0%
11.7%
2.2%
7.4%
1.9%
2.3%
7.4%
8.8%
9.7%
22.9%
7.1%
2.0%
14.4%
-9.5%
13.4%
8.7%
3.2%
25.5%
1.3%
-5.7%
27.6%
5.0%
-1.5%
22.6%
-15.0%
17.1%
5.2%
6.2%
3% to 5%
3% to 0%
High Yield Bond
Intermediate-Term Muni
High Yield Muni
>10%
5% to 10%
0% to -3%
-3% to -5%
-5% to -10%
<-10%
Source: Morningstar Direct; Baird Analysis.
Robert W. Baird & Co. Member SIPC.
18
Domestic Equity
Q2 2017 Market ChartBook
U.S. Stock Market Snapshot
As of June 30, 2017
Trailing Returns (%)
Last Qtr
2.0
YTD
3.0
1-Year
4.0
S&P 500
3.1
9.3
DJIA
4.0
9.4
Mega
2.6
Large
3.2
Mid
Small
Micro
5-Year Risk Stats
3-Year
5.0
5-Year
6.0
10-Year
7.0
Std. Dev. Max. Loss
8.0
9.0
17.9
9.6
14.6
7.2
9.6
22.1
11.0
13.5
7.6
10.1
9.3
16.9
10.2
13.5
6.8
9.8
18.7
9.9
14.6
7.2
2.7
8.0
16.5
7.7
14.7
2.5
5.0
24.6
7.4
13.7
3.8
4.2
27.6
6.7
Value
1.3
4.3
16.2
Core
3.0
8.9
Grow th
4.7
13.7
Consumer Discretionary
2.4
Consumer Staples
1.6
(6.4)
Other Metrics
Representative
P/E
10.0
EPS Gr.
16.0
Div. Yld.
12.0
Benchm ark
(8.4)
21.2
0.6
2.1
S&P 500
(9.0)
19.6
4.6
2.5
Dow Jones Industrial Avg.
9.9
(8.5)
21.4
2.3
2.2
Russell Top 50
9.6
(8.6)
21.0
5.3
2.1
Russell Top 200
7.7
10.4
(12.8)
22.0
5.9
1.6
Russell Midcap
6.9
13.9
(16.8)
20.7
4.4
1.5
Russell 2000
13.7
5.5
15.1
(21.0)
17.0
(2.1)
1.3
Russell Micro Cap
7.3
13.9
5.6
10.0
(10.4)
18.2
0.1
2.5
Russell 3000 Value
18.5
9.1
14.6
7.3
9.8
(8.8)
20.9
4.2
2.0
Russell 3000
20.7
10.8
15.2
8.8
10.2
(8.8)
24.3
10.0
1.7
Russell 3000 Growth
11.0
16.9
12.2
17.4
10.5
11.6
(8.0)
21.1
8.0
1.5
S&P 500/Cons. Disc.
8.0
3.1
10.2
12.6
10.5
10.2
(7.5)
21.2
2.7
2.7
S&P 500/Cons. Staples
(12.6)
(4.1)
(10.5)
1.6
1.3
15.9
(38.7)
25.1
(21.3)
3.1
S&P 500/Energy
Bellw ethers
Market Cap
Style
S&P 500 Sectors
Energy
Financials
4.3
6.9
35.4
12.4
18.0
0.4
13.5
(15.2)
14.0
3.1
2.0
S&P 500/Financials
Health Care
7.1
16.1
12.5
11.0
17.9
10.6
11.8
(13.1)
19.9
9.8
1.8
S&P 500/Health Care
Industrials
4.7
9.5
22.3
10.2
16.1
7.7
11.2
(11.3)
19.6
0.4
2.2
S&P 500/Industrials
Information Technology
4.1
17.2
33.9
16.0
17.2
10.7
12.8
(8.2)
23.2
2.7
1.4
S&P 500/Info. Tech.
Materials
Telecomm
Utilities
3.2
9.2
18.6
4.7
11.1
5.4
14.4
(22.7)
19.3
(6.3)
2.2
S&P 500/Materials
(7.1)
(10.7)
(11.7)
4.0
5.9
3.7
13.9
(12.6)
15.1
(0.7)
5.0
S&P 500/Telecomm
2.2
8.8
2.5
9.4
11.2
7.0
13.6
(12.8)
18.0
(3.1)
3.5
S&P 500/Utilities
Source: Morningstar Direct. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative benchmark” column. See
important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
20
Domestic Asset Class Performance
As of June 30, 2017
Performance by Market Cap and Style
15
14.0
12
11.4
10.0
Return (%)
9.3
9
8.0
6
5.2
5.0
3.1
3
2.7
4.7
4.7
4.4
4.2
2.5
1.4
1.3
0.7
0.5
0
Large Cap
Mid Cap
Small Cap
Large
Value
Last Quarter
Large
Growth
Mid
Value
Mid
Growth
Small
Value
Small
Growth
Year-to-Date
Source: Morningstar Direct. Asset classes are represented by the following benchmarks: S&P 500 (Large Cap), Russell Midcap® (Mid Cap), Russell 2000® (Small Cap), Russell
1000 Value® (Large Value), Russell 1000 Growth® (Large Growth), Russell Midcap Value® (Mid Value), Russell Midcap Growth® (Mid Growth), Russell 2000 Value® (Small
Value), and Russell 2000 Growth® (Small Growth). See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
21
Domestic Asset Class Performance
As of June 30, 2017
S&P 500 Index: Performance by Sector (Latest Quarter)
S&P 500 Sector Statistics
Health Care
P/E Ratio
(TTM)
P/E Ratio
(NTM)
Dividend
Yield (%)
EPS Grow th
(%)
S&P 500 Index
21.4
19.9
2.1
9.6
Consumer Discretionary
21.7
20.9
1.6
12.4
7.1
Industrials
4.7
Financials
4.3
Info. Tech.
4.1
Materia ls
3.2
Consumer Staples
21.6
21.6
2.8
8.2
S&P 500
3.1
Energy
33.0
26.2
3.1
17.8
Financials
15.9
14.9
1.8
9.0
Health Care
23.6
20.8
1.7
9.1
Industrials
22.0
19.8
2.2
9.6
Info. Tech.
22.9
21.6
1.5
10.9
Materials
23.1
19.7
2.2
8.7
Real Estate
33.3
39.5
3.6
7.3
Telecomm
17.2
14.7
5.1
3.6
Utilities
20.2
17.4
3.6
5.3
Real E state
2.8
Cons. Disc.
2.4
Utilitie s
2.2
Cons. Staple s
1.6
Energy
-6.4
Tele comm
-7.1
-10
-5
0
5
10
Return (%)
S&P 500 Index: Performance by Sector (YTD)
Info. Tech.
17.2
Health Care
16.1
Cons. Disc.
11.0
Industrials
9.5
S&P 500
9.3
Materia ls
9.2
Real E state
9.0
Utilitie s
8.8
Cons. Staple s
8.0
Financials
6.9
Tele comm
-10.7
Energy
-12.6
-20
-15
-10
-5
0
5
10
15
20
Return (%)
Source: Morningstar Direct. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative benchmark” column. See
important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
22
Investment Style Leadership
As of June 30, 2017
Large Cap vs. Small Cap (Rolling 12-Month Periods)
20
Large Cap Outperforms
12-Mo Performance Differential (%)
15
10
5
0
-5
-10
-15
Small Cap Outperforms
-20
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Value vs. Growth (Rolling 12-Month Periods)
12-Mo Performance Differential (%)
12-Mo Performance Differential (%)
15
10
5
0
-5
-10
-15
Growth Outperforms
Jun-09
Jun-10
Jun-11
Jun-12
Jun-15
40
Value Outperforms
Jun-08
Jun-14
Jun-16
Jun-17
Defensive vs. Cyclical (Rolling 12-Month Periods)
20
-20
Jun-07
Jun-13
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Defensive Outperforms
30
20
10
0
-10
-20
-30
-40
Jun-07
Cyclical Outperforms
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Source: Morningstar Direct. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative benchmark” column. See
important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
23
Historical Market Cap Valuations
As of June 30, 2017
S&P 500 Valuation History
25
21.2
P/E Ratio (TTM)
20
15
10
S&P 500 P/E
Average +1 Std. Dev.
5
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Mid Cap Valuations History
Jun-13
10-Year Average P/E
Average -1 Std. Dev.
Jun-14
Jun-15
Jun-16
Jun-17
Small Cap Valuation History
25
25
22.7
21.9
20
P/E Ratio (TTM)
P/E Ratio (TTM)
20
15
10
5
Jun-07
15
10
Jun-08
Jun-09
Mid Ca p
10-Y ear Average P/E
Average +1 Std. Dev.
Average - 1 S td. Dev .
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
5
Jun-07
Jun-08
Jun-09
Sm all Cap
10-Y ear Average P/E
Average +1 Std. Dev.
Average - 1 S td. Dev .
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Source: Morningstar Direct. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative benchmark” column. See
important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
24
Historical Sector Valuation and Growth Ranges
As of June 30, 2017
S&P 500 Sectors: 10-Year P/E Valuation Range
50
45
P/E Ratio
40
35
LEGEND
30
10-Year High
25
25.1
21.1
20
23.2
21.2
19.8
15
19.6
19.3
18.0
15.1
14.0
10
Current
5
0
Cons. Disc.
Cons. Staple s
Energy
Financials
Health Care
Industrials
Info Te ch
Materia ls
Tele comm
Utilitie s
S&P 500 Sectors: 10-Year Earnings Growth Range
25
Average
21.1
LT Earnings Growth
20
15
12.0
10-Year Low
10.7
10
8.3
9.5
9.2
8.9
8.7
5.4
5
3.3
0
Cons. Disc.
Cons. Staple s
Energy
Financials
Health Care
Industrials
Info Te ch
Materia ls
Tele comm
Utilitie s
Source: Morningstar Direct. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative benchmark” column. See
important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
25
Mutual Fund Over/Under Performance (Equity Funds)
As of June 30, 2017
Percent of Funds Outperforming Market Benchmarks (Trailing 1 Year)
100%
Percent of Total
75%
50%
% Underperform
62%
25%
58%
% Outperform
63%
45%
41%
37%
41%
Int'l
Global
Mutual Fund
Performance
16%
0%
Large
Growth
Large
Value
Mid
Growth
Mid
Value
Small
Growth
Small
Value
Active investment managers
often have a primary
objective of outperforming a
relevant market benchmark
based on the fund’s
investment style. In certain
periods, active managers
can find it easier or more
difficult to outperform.
Percent of Funds Outperforming Market Benchmarks (Trailing 5 Years)
100%
Percent of Total
75%
50%
% Underperform
% Outperform
25%
55%
46%
35%
23%
20%
24%
Large
Growth
Large
Value
Mid
Growth
34%
14%
0%
Mid
Value
Small
Growth
Small
Value
Int'l
Global
This chart examines seven
main assets classes,
detailing what percentage of
mutual fund managers overor under-performed in a
given period. This provides
useful context when
assessing mutual funds that
you may own.
Mutual Fund Style Universe: Style-specific universe of mutual funds as categorized by Morningstar. Number of funds in each category as of June 2017: 362 for Large Growth, 298
for Large Value, 178 for Mid Growth, 103 for Mid Value, 205 for Small Growth, 109 for Small Value, 154 for International, and 213 for Global. Source: Morningstar Direct; S&P 500,
MSCI, and Russell benchmarks; Baird Analysis. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
26
International Equity
Q2 2017 Market ChartBook
Global Market Performance
As of June 30, 2017
Year-to-Date Performance
Europe
15.9%
UK
10.0%
Russia
-14.0%
Germany
16.0%
Canada
3.5%
France
17.9%
S&P 500
9.3%
China
25.0%
Spain
24.2%
Mexico
25.5%
India
20.5%
Japan
10.1%
Hong Kong
21.6%
Brazil
3.1%
South Africa
8.4%
Australia
9.0%
Source: Standards & Poor’s (S&P 500); MSCI benchmarks (country returns). All performance is measured in USD. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
28
International Equity Snapshot
As of June 30, 2017
Trailing Returns (%)
Asset Class/Region
Annual Returns (%)
Last Qtr
YTD
1-Year
3-Year
5-Year
10-Year
2016
2015
2014
Benchm ark
Developed Markets (USD)
6.1
13.8
20.3
1.2
8.7
1.0
1.0
(0.8)
(4.9)
MSCI EAFE (Net) USD
Developed Markets (Local Currency)
2.7
7.6
22.1
7.0
12.5
2.0
5.3
5.3
5.9
MSCI EAFE (Net) Local
Currency Effect (USD - Local Returns)
3.4
6.3
(1.8)
(5.9)
(3.9)
(1.0)
(4.3)
(6.1)
(10.8)
Emerging Markets
6.3
18.4
23.8
1.1
4.0
1.9
11.2
(14.9)
(2.2)
MSCI Emerging Markets (Net)
BRIC
4.8
16.9
25.6
1.9
4.2
1.2
12.4
(13.3)
(2.6)
MSCI BRIC
Value
4.8
11.1
25.0
(0.6)
8.1
(0.1)
5.0
(5.7)
(5.4)
MSCI EAFE Value
Grow th
7.5
16.7
15.7
2.8
9.2
2.1
(3.0)
4.1
(4.4)
MSCI EAFE Growth
Large Cap
5.8
13.3
20.0
0.5
8.1
0.8
1.1
(2.1)
(5.5)
MSCI EAFE Large Cap
Mid Cap
7.3
15.6
21.2
3.9
11.1
1.8
0.7
4.4
(2.1)
MSCI EAFE Mid Cap
Small Cap
8.1
16.7
23.2
5.6
12.9
3.4
2.2
9.6
(5.0)
MSCI EAFE Small Cap
Europe
7.7
15.9
21.8
0.3
9.4
1.2
0.2
(2.3)
(5.7)
MSCI Europe
Japan
5.2
10.1
19.6
5.9
9.9
1.4
2.7
9.9
(3.7)
MSCI Japan
Pacific (ex Japan)
1.6
13.6
19.6
1.4
6.9
3.8
8.0
(8.4)
(0.3)
MSCI Pacific ex Japan
Broad Developed Markets
Broad Em erging Markets
Returns by Style
Returns by Region
Source: Morningstar Direct; MSCI benchmarks. Performance greater than one year is annualized. Performance is represented by the benchmark listed in the “representative
benchmark” column. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
29
International Country Performance
As of June 30, 2017
Selected Country Performance (Latest Quarter)
Selected Country Performance (Year to Date)
Developed Markets
Fra nce
24.2
Italy
9.6
Netherlands
20.3
Switzerland
9.4
Swe de n
19.9
Swe de n
Switzerland
9.1
Spain
8.1
Netherlands
8.1
Germa ny
Italy
4.7
China
Japan
10.1
U.K.
10.0
South Korea
10.3
25.0
24.5
9.0
Mexico
Indone sia
8.8
Taiw an
Mexico
6.3
13.9
South Africa
8.4
Bra zil
-6.6
Rus sia
-9.8
-10
16.5
Malaysia
2.9
-15
18.4
Indone sia
3.6
India
20.5
MSCI Em. Mk ts
5.1
South Africa
21.8
India
7.3
Malaysia
28.9
China
Taiw an
MSCI Em. Mk ts
9.0
South Korea
10.7
Bra zil
16.0
13.8
Aus tra lia
-1.8
Rus sia
16.4
MSCI EAFE
5.2
Aus tra lia
17.9
Germa ny
6.1
Japan
19.1
Fra nce
6.9
MSCI EAFE
U.K.
Emerging Markets
Spain
9.9
-5
0
Return (%)
5
10
15
3.1
-14.0
-20
-10
0
10
20
30
40
Return (%)
Source: Morningstar Direct.; MSCI Indices; Baird Analysis. All returns are reported in USD. MSCI EAFE (Developed markets) and MSCI EM (Emerging markets) are broad benchmarks representing many countries. Includes the 10
largest countries by weighting in the benchmark. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
30
International Economic Sector Performance
As of June 30, 2017
MSCWI ACWI Ex U.S. Performance by Sector (Latest Quarter)
Info. Tech.
12.9
Cons. Staple s
7.1
Utilitie s
5.2
Cons. Disc.
Sector Weighting (%) of the MSCI ACWI Ex U.S. Index
5.6
Industrials
6.8
Health Care
Utilities
3.2
7.2
Tele comm
4.0
MSCI ACWI e x US
Telecomm
4.7
5.8
Financials
Energy
6.9
5.7
Energy
Financials
24.2
-2.9
Materia ls
1.7
-5
0
5
10
15
Materials
8.4
Return (%)
MSCWI ACWI Ex U.S. Performance by Sector (Year to Date)
Health Care
8.4
Info. Tech.
Industrials
12.2
29.3
Cons. Staple s
16.3
Industrials
Info. Tech.
10.0
16.9
Health Care
15.7
Utilitie s
13.9
MSCI ACWI E x US
14.1
Cons. Disc.
Cons. Staples
10.2
Cons. Disc.
11.7
12.9
Tele comm
10.2
Financials
13.6
Materia ls
10.2
Energy
-3.8
-10
-5
0
5
10
15
20
25
30
35
Return (%)
Source: Morningstar Direct; Baird Analysis. Sectors based on global industry classification standards (GICS). The MSCI ACWI Ex US Index is a benchmark designed to measure
developed market and emerging market performance excluding the U.S. See important disclosures in appendix.
Robert W. Baird & Co. Member SIPC.
31
Investment Style Leadership
As of June 30, 2017
U.S. vs. International (Rolling 12-Month Periods)
12-Mo Performance Differential (%)
30
U.S. Outperforms
20
10
0
-10
-20
Int’l Outperforms
-30
Jun-07
Dec-07
Jun-08
Dec-08
Jun-09
Dec-09
Jun-10
Dec-10
Jun-11
Dec-11
Jun-12
Developed vs. Emerging Markets (Rolling 12-Month Periods)
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Value vs. Growth (Rolling 12-Month Periods)
50
15
Value Outperforms
Developed Outperforms
12-Mo Performance Differential (%)
40
12-Mo Performance Differential (%)
Dec-12
30
20
10
0
-10
-20
-30
10
5
0
-5
-10
-40
Emg. Markets Outperforms
-50
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Growth Outperforms
-15
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Source: Morningstar Direct. Returns based on 12-month performance, calculated monthly over the most recent 10-year period. Benchmark proxies are as follows: S&P 500 (U.S.), MSCI EAFE (Int’l), MSCI EAFE Value (Value) and
MSCI EAFE Growth (Growth), MSCI EAFE (Developed markets), and MSCI EM (Emerging markets). See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
32
Global Stock Market Valuations
As of June 30, 2017
Historical P/E Ratio
22
21.4
21.2
20
18.4
P/E Ratio (TTM)
18
16
14.8
14
12
10
8
S&P 500
6
4
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
MSCI EAFE
Jun-14
Jun-15
MSCI EM
Jun-16
Jun-17
Current P/E Ratio of Selected Countries
Europe
26
Asia-Pacific
Emerging Markets
24
21.7
22
19.2
20
18
P/E Ratio (TTM)
16
15.5
16.0
16.0
14.6
14.8
14.3
16.5
17.0
16.1
14.3
14
12.3
11.2
12
9.2
10
7.7
8
6
4
2
0
UK
France
Switzerland Germany
Spain
Japan
Australia Hong Kong Singapore
China
S. Korea
Brazil
S. Africa
India
Mexico
Russia
Source: Standards & Poor’s (S&P 500); MSCI benchmarks (country returns). All performance is measured in USD. US is measured by the S&P 500 Index, Developed International
is measured by the MSCI EAFE Index, Emerging International is measured by the MSCI EM Index. P/E ratios are based on trailing 12 month earnings. See important disclosures
and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
33
Country Valuation Ranges
As of June 30, 2017
Developed Markets: 7-Year P/E Valuation Ranges
35
30
25
21.7
20.4
P/E Ratio
19.9
18.6
20
14.3
16.0
15.5
16.5
16.0
14.8
14.6
LEGEND
18.7
17.3
14.3
14.3
7-Year High
12.7
15
10
5
Current
0
Emerging Markets: 7-Year P/E Valuation Ranges
Average
35
30
25
P/E Ratio
19.2
18.8
20
15
16.5
10
16.1
14.5
13.5
12.3
11.2
9.2
17.0
17.0
11.7
7.7
7-Year Low
5
0
Source: Morningstar Direct. USA is represented by the S&P 500. All other countries are represented by the respective MSCI country benchmark. P/E ratios are based on trailing
12 month earnings. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
34
Fixed Income
Q2 2017 Market ChartBook
Bond Market Snapshot
As of June 30, 2017
Characteristics
Bond Types
Trailing Returns (%)
Yield (%) Duration Last Qtr
Annual Returns (%)
YTD
1-Year
3-Year
5-Year
10-Year
2016
2015
2014
Benchm ark
Broad Developed Markets
U.S. Taxable Bonds
2.5
6.0
1.5
2.3
(0.3)
2.5
2.2
4.5
2.7
0.6
6.0
BBgBarc US Aggregate Bond
U.S. Municipal Bonds
2.3
6.3
2.0
3.6
(0.5)
3.3
3.3
4.6
0.3
3.3
9.1
BBgBarc Municipal Bond
International Bonds
0.8
7.9
3.6
6.1
(3.8)
(2.4)
(0.4)
3.1
1.5
(6.0)
(3.1)
4.7
5.8
1.8
5.1
5.6
4.5
5.3
7.1
9.9
1.3
4.8
BBgBarc Emerging Markets
Treasuries
1.9
6.2
1.2
1.9
(2.3)
2.0
1.3
4.1
1.0
0.8
5.1
BBgBarc US Treasury
Agencies
1.9
6.1
1.2
1.9
(2.2)
2.0
1.3
3.9
1.1
0.9
4.9
BBgBarc US Government
Mortgage-Backed
2.8
4.7
0.9
1.4
(0.1)
2.2
2.0
4.3
1.7
1.5
6.1
BBgBarc US MBS
Inv-Grade Corporate
3.2
7.5
2.5
3.8
2.3
3.6
4.0
5.8
6.1
(0.7)
7.5
BBgBarc US Corporate IG
High Yield Corporate
5.6
3.9
2.1
4.9
12.8
4.5
6.9
7.5
17.5
(4.6)
2.5
BofA/ML High Yield Master II
Insured
2.2
6.2
1.7
3.2
0.6
3.5
3.6
4.7
0.7
2.9
10.3
BBgBarc Municipal Insured
State GO
2.1
5.6
1.6
3.2
(0.6)
2.7
2.7
4.4
(0.4)
3.0
7.3
BBgBarc Municipal State GO
Local GO
2.3
6.9
2.0
3.7
(0.8)
3.2
3.1
4.8
(0.1)
3.2
8.5
BBgBarc Municipal Local GO
Revenue
2.4
6.7
2.2
3.9
(0.5)
3.7
3.6
4.7
0.4
3.6
10.1
BBgBarc Municipal Revenue
High Yield
6.1
9.6
2.0
6.1
1.2
5.6
5.2
4.5
3.0
1.8
13.8
BBgBarc High Yield Muni
BBgBarc Glbl Agg. Bond ex US
Broad Em erging Markets
Emerging Market Bonds
Taxable Bond Categories
Municipal Bond Categories
Source: Morningstar Direct; Barclays benchmarks. Individual security types are subsets of either the Barclays U.S. Aggregate or Municipal Bond benchmarks. Duration, measured in years, is a relative term that expresses the price
sensitivity of an investment/benchmark to changes in interest rates. All else equal, the lower the duration, the less price sensitivity to interest rate changes. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
36
Performance by Maturity and Credit Quality
As of June 30, 2017
Taxable Bonds
7
5.8
6
4.9
Return (%)
5
4.3
4.5
4.3
4
3.4
3.4
2.9
3
0.7
2.1
1.9
1.8
2
1
2.7
2.3
1.1
0.3
0
Short-Term
Intermediate
Long-Term
AAA
AA
QTR
A
Baa
Below Baa
(High Yield)
YTD
Municipal Bonds
7
6.1
6
Return (%)
5
4
4.3
4.2
3.9
3.7
3.2
3.1
3
2.4
1.9
2
1
2.3
2.3
2.0
1.9
1.7
1.2
0.3
0
Short-Term
Intermediate
Long-Term
AAA
QTR
AA
YTD
A
Baa
Below Baa
(High Yield)
Source: Bloomberg; Baird Analysis. Ratings are as defined by Bloomberg and represent bonds in the Barclays Aggregate Bond index (taxable bonds) and Barclays Municipal Index (municipal bonds). Short-term maturity is defined
as 1-3 years, intermediate is 5-7 years for taxable and 6-8 for municipal, long-term is 10+ years for taxable and 8-12 years for municipal. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
37
Yield and Volatility Characteristics of Various Bond Types
As of June 30, 2017
The Relationship Between Yield and Volatility
8
HY Municipal
6
High Yield
Yield (%)
Bank Loans
Emerging Mkts
4
Mortgage-Backed
Corporate
Broad Bond Market
2
Municipal
Treasury
International
0
0
2
4
6
8
10-Year Historical Volatility (Standard Deviation)
10
12
Source: Morningstar Direct; Barclays benchmarks. Individual security types are subsets of either the Barclays U.S. Aggregate or Municipal Bond benchmarks. Bond types are represented by the following indices: Barclays
Aggregate Bond (Broad Bond Market), Barclays US MBS (Mortgage-Backed), Merrill Lynch High Yield Master II (High Yield), Barclays IG Corporate (Corporate), Barclays Municipal (Municipal), Barclays US Treasury (U.S.
Treasury), Barclays Global Aggregate ex USD (International), and S&P/LSTA Leveraged Loan (Bank Loans). Indices are unmanaged and are used to measure and report performance of various sectors of the market. Past
performance is no guarantee of future results and diversification does not ensure against loss. Direct investment in indices is not available. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
38
U.S. Treasury Bonds
As of June 30, 2017
U.S. Treasury Yield Curve
Historical U.S. Treasury Rates
10
3.0
9
10-Year U.S. Treasury Rate (%)
2.5
Yield (%)
2.0
1.5
1.0
06/30/17 Current Q tr
8
7
6
5
4
3
0.5
2
1
30 yr
Maturity
20yr
10yr
5yr
2yr
3yr
0.0
6m o
06/30/16 Last Year
Current U.S. Treasury Yields by Maturity
2.84
3
Yield (%)
2.31
1.89
2
1.55
1.38
1.03
1.14
1
0
3 mo
6 mo
2 yr
3 yr
5 yr
10 yr
30 yr
Source: U.S. Department of Treasury; Baird Analysis. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
39
U.S. Treasury Bonds
As of June 30, 2017
U.S. Municipal and Treasury Yield Curve
3.0
2.5
Yield (%)
2.0
1.5
1.0
0.5
Maturity
30yr
3m o
6m o
5 yr
10yr
0.0
Municipal
20yr
Treasury
Yield Comparisons of Treasury and Municipal Bonds
5
4.6
Tre asury
4.4
Municipal
4
Yield (%)
Tax-Equiv ale nt Yield
3.3
3
2.6
2.2
2
1.6
1.2
1.0
1
1.2
1.1
1.4
1.2
0.7
0.7
0.8
3mo
6mo
1yr
1.4
1.0
1.8
2.6
2.7
2.8
2.8
2.3
2.1
2.0
1.9
1.6
1.6
1.4
1.1
0
2yr
3yr
5yr
7yr
10y r
20y r
30y r
Source: U.S. Department of Treasury; Bloomberg. Municipal yields are based on the Barclays AAA GO Bond Index. The Tax-Equivalent Yields assumes a 39.6% federal tax rate
and full exemption of those taxes. See important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
40
Corporate Bond Yields
As of June 30, 2017
Investment Grade Bonds: Current Yield and Historic Default Rate
12
Effective Yield (%)
8
6
4
100
9
90
8
80
7
70
6
60
5
50
3
1
Jun-09
Jun-11
Jun-13
Jun-15
40
2.9
2.7
30
20
0.0
0.6
2.7
AAA
AA
A
6.0
10
0
Jun-17
High Yield Bonds: Historical Yields
0
BBB
High Yield Bonds: Current Yield & Historic Default Rate
27
20
100
24
18
90
16
80
14
70
Effective Yield (%)
21
Effective Yield (%)
2.9
2
2
0
Jun-07
3.5
4
18
15
12
9
12
60
10.1
10
50
8
6
6
4
3
2
40
5.7
4.2
34.4
35.7
30
Average Default Rate (%)
Effective Yield (%)
10
10
Av erage Def ault Rate (%)
Investment Grade Bonds: Historical Yields
20
10
12.8
0
Jun-07
0
Jun-09
Jun-11
Jun-13
Jun-15
Jun-17
0
BB
B
CCC
Source: BofA/Merrill Lynch, Standard & Poor’s. Investment Grade Bonds are represented by the BofA/ML US Corporate Bond Index; High Yield Bonds are represented by the
BofA/ML High Yield Master II Index. Historic default rates provided by Standard & Poor’s and encompass the period from 1/1/81 to 12/31/15. See important disclosures and
definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
41
Bond Spreads
As of June 30, 2017
Average Option-Adjusted Spread: Max/Min/Avg
1,500
1,400
Average
Current
1314
1,300
Spread over Treasury Bond (bps)
1,200
1,100
1,000
900
800
700
600
474
500
400
300
362
200
130
124
81
100
105
0
40
11
6
(100 )
High Y ield
Corporate
MBS
Global
Age nc ies
Current/Historical Spreads (%)
High Yield
Corporate
MBS
Global
Agencies
High
1314
474
130
124
81
Average
611
188
49
64
29
Low
362
105
6
40
11
Current
364
109
32
40
15
Source: Barclays, Bloomberg. The length of each bar represents the range of a particular spread relative to an appropriate Treasury benchmark over the past 10 years. The
maximum and minimum spreads are capped at the 95th and 5th percentiles to account for outliers. The data point marked ‘current’ represents the most recent quarter. Past
performance is not a guarantee of future results and this chart is not intended to be a valuation tool.
Robert W. Baird & Co. Member SIPC.
42
Bond Sector Yields and Returns
As of June 30, 2017
Sector Statistics
Bond Sector
Returns
Avg. Maturity
Avg. Yield
Credit Quality
YTD
1-Year
Benchm ark
U.S. Treasuries
Short-Term
2.8 yrs.
1.5%
AA+
0.9%
-0.5%
BBgBarc US Treasury 1-5 Yr
Intermediate-Term
7.0
2.1%
AA+
2.4%
-2.8%
BBgBarc US Treasury 5-10 Yr
Long-Term
14.0
2.4%
AA+
3.5%
-5.0%
BBgBarc US Treasury 10-20 Yr
TIPS
8.5
2.2%
AA+
1.0%
-0.5%
BBgBarc US Treasury US TIPS
8.3 yrs.
2.5%
AA
2.4%
-0.2%
BBgBarc U.S. Aggregate Bond
IG Corporates
10.9
3.2%
AA+
3.9%
2.4%
BBgBarc U.S. Corporate IG
HY Corporates
6.3
5.6%
B
4.9%
13.0%
BBgBarc U.S. High Yield - 2% Issuer Cap
Floating Rates
2.6
1.6%
A+
1.2%
2.4%
BBgBarc U.S. Floating Rate Notes
MBS
7.0
2.8%
AAA
1.5%
0.2%
BBgBarc U.S. Mortgage Backed Securities
ABS
2.4
1.9%
AA+
1.2%
0.7%
BBgBarc Asset-Backed Securities
Municipal
12.9
2.3%
AA-
3.6%
-0.5%
BBgBarc Municipal Bond
Broad Market
Aggregate Bond
Price Impact of a 1% Rise/Fall in Interest Rates
15%
+1%
10%
5%
-1%
6.7%
11.2%
8.2%
8.0%
6.2%
2.8%
2.3%
3.7%
4.4%
4.7%
-6.2%
-5.5%
-6.1%
MBS
Municipals
Tot al Bond
Market
0.1%
0%
-0.1%
-5%
-2.3%
-2.7%
-4.0%
-6.2%
-10%
-7.5%
-6.9%
-9.8%
-15%
1-5 Yr
Tre asury
5-10 Y r
Tre asury
TIP S
10-2 0 Y r.
Tre asury
Floating Rate
ABS
HY Corporates
IG Corporates
Source: Barclays, Baird Analysis. Sector yields reflect yield to worst. Change in bond price is calculated using both duration and convexity according to the following formula: New
Price = (Price + (Price * -Duration * Change in Interest Rates)) + (0.5 * Price * Convexity * (Change in Interest Rates)^2). Chart is for illustrative purposes only. Past performance
is not indicative of future results.
Robert W. Baird & Co. Member SIPC.
43
Mutual Fund Over/Under Performance (Bond Funds)
As of June 30, 2017
Percent of Funds Outperforming Market Benchmarks (Trailing 1 Year)
100%
Percent of Total
75%
% Underperform
50%
87%
83%
% Outperform
25%
38%
Mutual Fund
Performance
10%
0%
Short Term Taxable
Intermediate Taxable
Short Term Municipal
Intermediate Municipal
Active investment managers
often have a primary
objective of outperforming a
relevant market benchmark
based on the fund’s
investment style. In certain
periods, active managers
can find it easier or more
difficult to outperform.
Percent of Funds Outperforming Market Benchmarks (Trailing 5 Years)
100%
Percent of Total
75%
50%
83%
% Underperform
88%
% Outperform
25%
38%
26%
0%
Short Term Taxable
Intermediate Taxable
Short Term Municipal
Intermediate Municipal
This chart examines four
main assets classes,
detailing what percentage of
mutual fund managers overor under-performed in a
given period. This provides
useful context when
assessing mutual funds that
you may own.
Mutual Fund Style Universe: Style-specific universe of mutual funds as categorized by Morningstar. Number of funds in each category as of March 2017: 103 for Short-Term
Taxable, 227 Intermediate Term Taxable, 50 for Short-Term Municipal, and 77 for Intermediate Municipal. Source: Morningstar Direct; Barclays benchmarks; Baird Analysis. See
important disclosures and definitions included with this publication.
Robert W. Baird & Co. Member SIPC.
44
Appendix and Important Disclosures
Disclosures
Disclaimers
This is not a complete analysis of every material fact regarding any company, industry or security. The
information has been obtained from sources we consider to be reliable, but we cannot guarantee the
accuracy. Past performance is not a guarantee of future results.
Style Definitions
Large Growth: equity securities of large capitalization companies having growth stock characteristics (high
price to earnings, high return on equity and low dividend yield. Based upon the Russell 1000® Growth Index.
Large Value: equity securities of large capitalization companies having value stock characteristics (low
forecasted price-to-earnings ratio, low price-to-book ratio, high dividend yield). Based upon the Russell 1000®
Value Index. Mid Growth: equity securities of middle capitalization companies having growth stock
characteristics (high price to earnings, high return on equity and low dividend yield). Based upon the Russell
Midcap® Growth Index. Mid Value: equity securities of middle capitalization companies having growth stock
characteristics (high price to earnings, high return on equity and low dividend yield). Based upon the Russell
Midcap® Value Index. Small Growth: equity securities of small capitalization companies having growth stock
characteristics (high price to earnings, high return on equity and low dividend yield). Small capitalization stock
may be subject to additional risks including illiquidity. Based upon the Russell 2000® Growth Index. Small
Value: equity securities of small capitalization companies having value stock characteristics (low price-toearnings ratio, low price-to-book ratio, high dividend yield). Small capitalization stocks may be subject to
additional risks including illiquidity. Based upon the Russell 2000® Value Index. International: a free floatadjusted market capitalization index that is designed to measure developed market equity performance,
excluding the US & Canada, consisting of 21 developed market country indices. Based upon the MSCI EAFE
Index. Satellite: these asset classes, as defined by Baird, include commodities, real estate, high yield bonds
and emerging markets. Representative benchmarks are as follows: Dow Jones UBS Commodity
(commodities), Dow Jones US REIT (real estate), BofA High Yield Master II (high yield), and MSCI Emerging
Markets (emerging markets). Short Term Taxable: Short-term bond portfolios invest primarily in corporate
and other investment-grade U.S. fixed-income issues and have durations of one to 3.5 years. Based upon the
Barclays 1-3 Year Govt/Credit Index. Intermediate Taxable: Intermediate-term bond portfolios invest
primarily in corporate and other investment-grade U.S. fixed-income issues and have durations of 3.5 to six
years. Based upon the Barclays Intermediate Gov’t/Credit Index. Short Term Municipal: Muni national short
portfolios invest in bonds issued by various state and local governments to fund public projects. These
portfolios have durations of less than 4.5 years. Based upon the Barclays 3 Year Municipal Index.
Intermediate Term Municipal: Muni national short portfolios invest in bonds issued by various state and
local governments to fund public projects. These portfolios have durations of 4.5 to 7 years. Based upon the
Barclays 7 Year Municipal Index.
GICS
The Global Industry Classification Standard ("GICS") is the exclusive property of Morgan Stanley Capital
International Inc. ("MSCI") and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P") and
is licensed for use by Robert W. Baird & Co. Inc. MSCI and S&P hereby provided all information "as is" and
expressly disclaim all warranties. Without limiting any of the foregoing, in no event shall MSCI or S&P have
any liability.
Domestic Equity Benchmarks
S&P 500® Index: A representative sample of 500 leading companies in leading industries of the U.S.
economy. Considered a large-cap index.
Russell 3000® Growth Index: Measures the performance of those Russell 3000® Index companies with
higher price-to-book ratios and higher forecasted growth values. An all-cap index.
Russell 3000® Value Index: Measures the performance of those Russell 3000® Index companies with lower
price to- book ratios and lower forecasted growth values. An all-cap index.
Russell Top 50® Index: Measures the performance of the 50 largest companies in the Russell 1000® Index,
which represents approximately 40% of the total market capitalization of the Russell 1000® Index. A mega-cap
index.
Russell Top 200® Index: Measures the performance of the 200 largest companies in the Russell 1000®
Index, which represents approximately 68% of the total market capitalization of the Russell 1000® Index. A
large-cap index.
Russell 1000® Growth Index: Measures the performance of those Russell 1000® Index companies with
higher price-to-book ratios and higher forecasted growth values. A large-cap index.
Russell 1000® Value Index: Measures the performance of those Russell 1000® Index companies with lower
price to- book ratios and lower forecasted growth values. A large-cap index.
Russell 1000® Defensive/Dynamic Index: Measures the performance of those Russell 1000® Index
companies based in terms of volatility of price and earnings, leverage and return on assets. The Russell 1000®
Defensive Index includes those with relative stability and less sensitivity to economic cycles. The Russell
1000® Dynamics Index includes those with less stability and greater sensitivity to economic cycles.
Russell Midcap® Index: Measures the performance of the 800 smallest companies of the Russell 1000®
Index, which represents approximately 36% of the total capitalization of the Russell 1000® Index. A mid-cap
index.
Russell Midcap® Growth Index: Measures the performance of those Russell Midcap® Index companies with
higher price-to-book and higher forecasted growth values. A midcap index.
Russell Midcap® Value Index: Measures the performance of those Russell Midcap companies with lower
price-to book and lower forecasted growth values. A mid-cap index.
Russell 2000® Index: Measures the performance of the 2,000 smallest companies in the Russell 3000®
Index, which represent approximately 10% of the total market capitalization of the Russell 3000® Index. A
small-cap index.
Russell 2000® Growth Index: Measures the performance of those Russell 2000® Index companies with
higher price-to-book ratios and higher forecasted growth values. A small-cap index.
Russell 2000® Value Index: Measures the performance of those Russell 2000® Index companies with lower
price-to- book ratios and lower forecasted growth values. A small-cap index.
Russell Microcap Index: Measures the performance of smallest 1000 companies in the Russell 2000® Index,
which represents less than 3% of the total market capitalization. A micro-cap index.
Dow Jones U.S. Real Estate: Measures the performance of Real Estate Investment Trusts (REIT) and other
companies that invest directly or indirectly through development, management or ownership, including
properties.
Dow Jones Industrial Average: A price-weighted index composed of 30 actively-traded large cap stocks.
Bloomberg Commodity: Aims to provide broadly diversified representation of commodity markets and
represents 20 commodities, weighted based on economic significance and market liquidity.
S&P 500® High/Low Quality Index: The S&P Quality Rankings System measures growth and stability of
earnings and dividends within the S&P 500 Index. The S&P 500 High Quality Index tracks stocks identified by
Standard & Poor’s as high quality (ranked A and above); The S&P 500 Low Quality Index tracks stocks
identified by Standard & Poor’s as low quality (ranked B and below).
The Russell Indices are a trademark of the Frank Russell Company. Russell® is a trademark of the Frank
Russell Company.
Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. This
and other information is found in the prospectus or summary prospectus. For a prospectus or summary prospectus, contact
your Baird Financial Advisor. Please read the prospectus carefully before investing.
Disclosures
MSCI International Equity Benchmarks
Fixed Income Benchmarks
MSCI EAFE Index: A free float-adjusted market capitalization index that is designed to measure developed
market equity performance, excluding the US & Canada. The MSCI EAFE Index consists of 21 developed
market country indices in Europe, Australasia, and the Far East. An international index.
Barclays Aggregate Bond Index: is an unmanaged index that tracks domestic investment-grade bonds,
including corporate, government, and mortgage-backed securities.
MSCI EAFE Large Cap: The MSCI EAFE Large Cap Index is an unmanaged, market-weighted index of large
companies in developed markets, excluding the U.S and Canada. An international large cap index.
Barclays 1-3 Yr Government/Credit Bond Index: Includes bonds covered by the
Government/Credit Index, with maturities from 1 up to (but not including) 3 years.
Barclays
MSCI EAFE Mid Cap: The MSCI EAFE Mid Cap Index is a free float-adjusted market capitalization index
that is designed to measure the performance of mid capitalization equities in the developed markets excluding
the US & Canada. An international mid cap index.
Barclays Intermediate Government/Credit Bond Index: Composed of approximately 3,500 publicly issued
corporate and U.S. government debt issues rated Baa or better, with at least one year to maturity and at least
$1 million par outstanding. The index is weighted by the market value of the issues included in the index. The
Index has duration of a little over 3 years and a maturity equal to slightly more than 4 years.
MSCI EAFE Small Cap: The MSCI EAFE Small Cap Index represents the small cap segment in 21
developed equity markets outside of North America. It targets 40% of the eligible small cap universe in each
country. An international small cap index.
Barclays Muni Bond Index: Bonds must have a minimum credit rating of at least Baa, an outstanding par
value of at least $3 million, part of a transaction of at least $50 million, issued after December 31, 1990 and
have a year or longer remaining maturity.
MSCI EAFE Growth: A sub-set of the MSCI EAFE Index, this benchmark is generally considered to be
representative of the international growth stock market activity and often used as a benchmark for
international growth equity portfolios. An international growth index.
Barclays 3 Year Muni Bond Index: Includes bonds that have a minimum credit rating of BAA3, are issued
as part of a deal of at least $50 million, have a minimum maturity of 2 years and a maximum maturity of 4
years, and have been issued after December 31, 1990.
MSCI EAFE Value: A sub-set of the MSCI EAFE Index, this benchmark is generally considered to be
representative of international value stock market activity and often used as a benchmark for international
value equity portfolios. An international value index.
Barclays 7 Year Muni Bond Index: This index is a subset of the BC Municipal Bond Index. It includes
maturities of six to eight years.
MSCI Europe Index: A free float-adjusted market capitalization index that is designed to measure developed
market equity performance in Europe. As of June 2006, the MSCI Europe Index consisted of the following 16
developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK. An international index.
MSCI Pacific ex Japan Index: A free float-adjusted market capitalization index designed to measure equity
market performance in the Pacific region, minus Japan. As of June 2006, the MSCI Pacific ex Japan Index
consisted of the following 5 Developed Market countries: Australia, Hong Kong, New Zealand, and Singapore.
An international index.
MSCI BRIC: A free float-adjusted market capitalization weighted index that is designed to measure the equity
market performance of the following four emerging market country indices: Brazil, Russia, India and China.
MSCI Emerging Markets Index: A free float-adjusted market capitalization index that is designed to measure
equity market performance in the global emerging markets. As of December 2003 the MSCI Emerging
Markets Index consisted of 26 emerging market country indices. An emerging markets index.
MSCI Country Indices: To construct an MSCI Country Index, every listed security in the market is identified.
Securities are free float adjusted, classified in accordance with the Global Industry Classification Standard
(GICS®), and screened by size and liquidity. MSCI then constructs its indices by targeting for index inclusion
85% of the free float adjusted market capitalization in each industry group, within each country. By targeting
85% of each industry group, the MSCI Country Index captures 85% of the total country market capitalization
while it accurately reflects the economic diversity of the market. International indices.
Barclays Global Aggregate ex USD Index: Tracks investment-grade government, corporate, agency, and
mortgage-related bonds in markets outside the U.S. An international bond index.
BofA/ML US High Yield Master II Index: The US High Yield Master II Index tracks the performance of below
investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market, subject
to various qualifications. A high yield taxable bond index.
Barclays US Treasury Bond Index: Measures the performance of public obligations of the US Treasury with
a remaining maturity of one year or more.
Barclays US MBS Index: Measures the performance of investment grade mortgage-backed pass-through
securities of GNMA, FNMA and FHLMC.
Barclays IG Corporate: Measures the performance of investment grade corporate bonds with a remaining
maturity of one year or more.
Citigroup Treasury Bill 3 Month: An unmanaged index of three-month Treasury bills. Representative of
short-term money market deposits, or “cash”.
S&P/LTSA Leveraged Loan: A broad index designed to reflect the performance of U.S. dollar facilities in the
leverage loan market.
Other Benchmarks
Dow Jones CSFB Managed Futures: Designed to provide transparent representation of managed futures
hedge fund performance. Funds are selected by Credit Suisse based on eligibility standards, rebalanced
semi-annually and performance is calculated quarterly.
Dow Jones CSFB Multi-Strategy: Designed to provide transparent representation of fund of hedge fund
performance. Funds are selected by Credit Suisse based on eligibility standards, rebalanced semi-annually
and performance is calculated quarterly.
Dow Jones CSFB Long/Short: Designed to provide transparent representation of long/short equity hedge
fund performance. Funds are selected by Credit Suisse based on eligibility standards, rebalanced semiannually and performance is calculated quarterly.
Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. This
and other information is found in the prospectus or summary prospectus. For a prospectus or summary prospectus, contact
your Baird Financial Advisor. Please read the prospectus carefully before investing.