Post on 27-Sep-2020
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
February 24, 2015
Jeff Passmore, CFA, FSA – Client Portfolio Manager, LDI Strategist
LDI from an Investment Actuarial Point of View
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
QUESTIONS
Short Maturity
$1.0 Billion
Long Duration
Credit
$5.3 Billion
Core/Core Plus
$3.4 Billion
Credit/Other
Benchmarks
$2.4 Billion
Short Maturity $0.8 Billion
Long Duration
$6.5 Billion
Core/Core Plus
$3.2 Billion
Credit/Other
Benchmarks
$2.9 Billion
1
By a show of hands:
• Have you been involved with investing assets
for ERISA pension plans?
• Have you been involved in designing or
implementing a liability driven investment
(LDI) approach?
• Are you currently part of a group responsible
for implementing LDI?
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
LIABILITY DRIVEN INVESTING BACKGROUND AND (MY) DEFINITIONS
Short Maturity
$1.0 Billion
Long Duration
Credit
$5.3 Billion
Core/Core Plus
$3.4 Billion
Credit/Other
Benchmarks
$2.4 Billion
Short Maturity $0.8 Billion
Long Duration
$6.5 Billion
Core/Core Plus
$3.2 Billion
Credit/Other
Benchmarks
$2.9 Billion
2
• Predominant approach to US corporate pension plan investing
• Maximizing risk adjusted returns (net of fees)
• Risk - funded status volatility (not asset volatility)
• Typically includes derisking (but not required)
• Acknowledges fundamental changes in pension accounting
and funding rules (around 2006)
• Has existed under different names for a long time
• Glidepath – plan to derisk based on funded status and/or rates
and/or timing
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
GLIDEPATHS – HYPOTHETICAL ILLUSTRATIONS OF TWO APPROACHES
Short Maturity
$1.0 Billion
Long Duration
Credit
$5.3 Billion
Core/Core Plus
$3.4 Billion
Credit/Other
Benchmarks
$2.4 Billion
Short Maturity $0.8 Billion
Long Duration
$6.5 Billion
Core/Core Plus
$3.2 Billion
Credit/Other
Benchmarks
$2.9 Billion
3
Funded Status Hedge Ratio
111% (or more) 100%
100-110% 75%
91-100% 50%
81-90% 35%
80% (or less) 25%
One Dimensional Glidepath
• Funded status based Glidepath
• Most typical and straightforward
• Goal – excess return helps close funded status gap
Two Dimensional Glidepath
• Funded status and rates based Glidepath
• Increasingly common
• Goal – Rates exposure explicitly managed
• Hedgepath (rates) and Glidepath (asset alloc.)
Funded Status <2.5% 2.75% 3.00% 3.25% 3.5%+
111% (or more) 80% 80% 90% 95% 100%
100-110% 60% 70% 80% 90% 95%
91-100% 45% 55% 70% 85% 90%
81-90% 35% 45% 60% 80% 85%
80% (or less) 25% 35% 50% 75% 80%
UST 10 yr
Hedge Ratio
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
FUNDED STATUS RISK – ASSET ALLOCATION IMPLICATIONS
Short Maturity
$1.0 Billion
Long Duration
Credit
$5.3 Billion
Core/Core Plus
$3.4 Billion
Credit/Other
Benchmarks
$2.4 Billion
Short Maturity $0.8 Billion
Long Duration
$6.5 Billion
Core/Core Plus
$3.2 Billion
Credit/Other
Benchmarks
$2.9 Billion
4
Ass
et E
xce
ss R
etu
rn
Funded Status Volatility
LDI Efficient Frontier
Feasible Investment Set
Long Duration Bonds
Core Bonds
Liability Adjusted Sharpe Ratio (LASR)
Asset Return - Liability Return
Funded Status Volatility
Implications
• Core bonds are not efficient
• Long bonds are usually the low risk (“risk free”) asset; not cash
• Risk is plan specific - each plan has opportunities relative to market due to unique risk profile
• Liability noise and discount curve risk is present
Source: BHMS
This sample is intended to illustrate a quantitative risk analysis technique and not intended to represent or recommend any strategy.
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
FUNDED STATUS RISK – ASSET ALLOCATION IMPLICATIONS
RISK BUDGET ILLUSTRATION
5
Implications
• Liability creates a short position in rates (and spreads)
• LDI risk is greater than asset only risk
• Risk spend should be proportional to strength of convictions
Rates
$55M
45%
Dev Mkt Eq
$31M
26%
EM Eq/Debt
$17M
14%
Alts
$18M
15%
Risk Budget
Core Bonds
VaR5 $121M
This sample is intended to illustrate a quantitative risk analysis technique and not intended to represent or recommend any strategy.
Rates
$39M
38%
Dev Mkt Eq
$30M
29%
EM Eq/Debt
$17M
16%
Alts
$18M
17%
Risk Budget
Long Duration Bonds
VaR5 $104M
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
LDI CUSTOM SOLUTIONS – ALL PENSIONS NOT THE SAME
LDI solutions are evolving to
become more customized
Each plan has unique liability
benefit projected cash flows
These cash flows sometimes
require different solutions based
on differences in benefit
structures, e.g. as a result of
acquisitions, plan redesigns, etc.
The relative importance of
benefit structures can change
over time, e.g. through spinoffs,
lump sum windows and ongoing
benefit accruals
Plan sponsors are becoming
more aware of LDI “gotchas”
like embedded interest rate
options and solutions are
available to help hedge these
risks
Cash Balance Projected Benefit Cash Flows; Source: Barrow Hanley
Typical (Non Cash Balance) Projected Benefit Cash Flows; Source: Barrow Hanley
20
40
60
80
100
120
140
2015 2025 2035 2045 2055 2065 2075 2085
Traditional Pension ($M)
2
4
6
8
10
12
14
16
18
20
2015 2025 2035 2045 2055 2065 2075 2085
Cash Balance ($M)
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
LIABILITY DRIVEN MEANS KNOWING VOLATILITY SOURCES
Cash Balance Projected Benefit Cash Flows; Source: Barrow Hanley
Pension Liabilities Generally Have Three
Sources of Hedgeable Volatility: Rates,
Spreads and Curve
Rates-based Volatility Can Be Measured and
Managed Mostly With Duration Matching
Techniques
Spread Volatility Is Also Important When
Hedging Pension Liabilities (Pension Cash
Flows Are Discounted Using Corporate
Bond Yields)
Curve Volatility Not Hedged Through
Duration Matching Is Small And Can Be
Managed Through Key-rate Duration
Matching
Different Benefit Cash Flows Have Different
Sensitivities To Each Source
Embedded Options Can Have a Significant
Impact On Liability Volatility And Hedge
Effectiveness
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
ASSUMPTIONS AND DISCLOSURES
We have used typical pension benefit projections, based on our experience working with corporate pension plans implementing
LDI mandates. These are typical of benefit projections prepared on a projected benefit obligation (PBO) basis by the plan
actuary. Cash Balance benefits represent a blend of Active and Terminated Vested participants. Traditional benefits represent
Active, Terminated Vested and retired participants.
We calculated the plan liability as of November 30, 2004 using the Citigroup Pension Discount Curve in effect on that date and
downloaded from the Society of Actuaries website (www.soa.org). We also calculated the liability for each future month end
through October 2014 using the curve as of each date. Citigroup changed the method used to determine their pension discount
curve and for a period of time provided both curves determined using the old and new method. We used the new approach
beginning December 31, 2009.
We then calculated the change in liability by moving the curve in a parallel fashion in the amount of the month over month
change in yield of the 10 year US Treasury Note for each month end beginning with December 31, 2004 through October 31,
2014. The resulting change in liability is the monthly change series for which we calculated the Rates Volatility statistics. We
obtained these yields from the Federal Reserve website (http://www.federalreserve.gov/releases/h15/update/) and used the
series: “Market yield on U.S. Treasury securities at 10-year constant maturity, quoted on investment basis” selecting those
yields at the end of the month or the day next following the end of the month if a month end did not have a quoted yield (e.g. if
it fell on a weekend).
We then developed a yield curve for each month end. To construct this yield curve we used yields from the above Federal
Reserve website using Treasury securities with maturities of one year, two years, three years, five years, 10 years, 20 years and
30 years. We used linear interpolation to determine yields for years in between these maturity dates. During the period between
February 2002 and February 2006, the 30 year US Treasury bond was not issued. On those dates that we needed for our
analysis, we used the extrapolation technique and factors published by the US Treasury to estimate an 30 year long bond
yield. For each month, we determined the change in yield curve for each annual point along the yield curve. We then applied
these changes to the Citigroup pension curve as of each prior month to determine the liability. The change in liability from this
series was used to calculate the Curve Volatility statistics.
Finally, we determined the residual change in liability, that is the amount remaining of the total liability change using the
Citigroup discount curve after subtracting those changes attributable to the change in rates and change in curve. This series of
changes in liability was used to calculate the Spread Volatility statistics.
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
APPENDIX
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
MARKET TRENDS
New Pension Mortality Tables
Society of Actuaries Formally Released an Updated Mortality Table (RP-2014) and Projection Scale (MP-2014) in October 2014
Last Pension Mortality Table was Prepared in 2000; Improvements Since then Have Been Estimated
New Study Found Life Expectancy Has Improved Faster than Expected
New Tables Both Catch Up with Past Improvements and Are Designed to Do a Better Job Keeping Up in the Future
Lump Sum Payments Will Be More Expensive Once New Tables Are Used – Possibly in 2016
Gap Between Accounting Liabilities and Annuity Purchase Price Will Be Reduced
Impacting Impact Expected
Accounting Liability 3%-10% 2014 (EOY)
Funding, Liability, Lump-Sums 3%-10% 2016
Duration 3/4-1 Year 2014 (EOY)
LDI Considerations Include: Changes to Glidepaths and LDI Benchmarks, Re-risking Based on Decreased Funded Status, Lump Sum Windows And annuity Settlements
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
MARKET TRENDS
Pension Funding Relief
Highway And Transportation Funding Act of 2014 (HATFA) Extends MAP-21 Pension Funding Relief
MAP-21 placed a floor of 90% on the 25-year Average of Corporate Bond Yields in 2012, then Decreasing to 70% in 2016
HAFTA Keeps 90% Floor through 2017
Due to the Funding Relief, We Estimate Significant Benefits for a Sample Plan1
There would be a 74 Basis Point Higher Effective Interest Rate Used For 2014 Pension Minimum Contributions (6.66% Vs. 5.92%)
Without MAP-21 Relief, the Discount Rate Would Have Been 210 Basis Points Lower (4.56%)
No Required Contributions Under HATFA for a Frozen Pension Plan that was 80% Funded
MAP-21 Reduced Contributions by Two-Thirds, i.e. 67% Reduction
1 Our analysis uses a four-month look back for the 2014 plan year and as a rule of thumb, assumes that the effective interest rate is the average of the second and third segment rates. The frozen plan is assumed to have no normal cost
component of the minimum required contribution calculation, a liability effective duration of 10 years, and ignores plan specific information such as pre-funding balances and shortfall amortization bases.
2 See “Utilization of MAP-21 Pension Funding Stabilization in 2012,”, published April 28, 2014 by the Society of Actuaries and available at: https://www.soa.org/research/research-projects/pension/default.aspx.
48%
33%
19%
Survey of MAP-21 Pension 2012 Funding Relief Elections and
Contributions
Relief but voluntary
contributions
Relief and minimum
contributions
No Relief
Source: Society of Actuaries
MAP-21 And HATFA Funding Relief
Optional
81% of Plan Sponsors Are Electing
Funding Relief 2
48% of Plan Sponsors Are Making
Voluntary Contributions
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
MARKET TRENDS
Pension PBGC Premiums
PBGC Premium Rates Have Been Increasing as a Result Of Recent Legislation
MAP-21 Increased Premium Rates and Tied Future Premium Rates to Wage Inflation
The Bipartisan Budget Act (BBA) Was Enacted in December 2013
It Increased PBGC Premium Rates for Both Flat Rate Premiums and Variable Rate Premiums
1 See Russell (“Do PBGC Premiums Incent Sponsors to Borrow to Fund Their Pension Plans?”, December, 2013); this paper listed a range of breakeven debt costs depending on a number of factors. 7% is our conservative summary figure.
2 See, for example, discussion of NCR’s pension de-risking strategy which included a $500M bond issuance and contribution in September 2012 at http://www.ncr.com/newsroom/resources/lump-sum-pension and $1.4B Motorola issuance
announced September 2014 and described on next slide, and Northrup Grumman’s $600M issuance in February 2015..
Higher PBGC Premiums Encourage Funding
Borrowing to Fund a Pension Deficit Can Be Accretive to Earnings If Cost of Debt Is 7% Or Less1
Some Have, in Fact Borrowed to Fund their Pension Plan and Have De-Risked Their Asset Allocation Strategy to
Lock in These Funded Status Improvements2.
*Indexed to Increase with National Average Wages
Year
Prior Law MAP-21 BBA Prior Law MAP-21 BBA
2012 35 35 35 90 90 90
2013 35 42 42 90 90 90
2014 35 49* 49 90 130* 140
2015 35 49* 57 90 180* 240
2016 35 49* 64 90 180* 290
2017 35 49* 64* 90 180* 290*
Flat Rate Premium
(Per Participant in Dollar
Amount)
Variable Rate Premium
(Based on Unfunded Liabilites
in Basis Points)
Significant increases coming
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
MARKET TRENDS
Pension Risk Transfer: Annuity Purchases and Lump Sum Windows
Motorola Solutions Announced In September 2014 a Three Pronged Pension De-risking Initiative:
Annuity Purchased to Settle Motorola’s Pension Obligations to Certain Retirees
Lump Sum Window for Another 32,000 Vested and Terminated Employees, for Another $1b in Offered Lump Sum Value
Borrow-to-Fund Implementation: $1.4B In New Bonds Issued August 12, 2014, with $1B Planned to be Used as a Pension Contribution
Context: There Were Three Other Significant Pension Settlements Announced in 2012
GM: Announced a Two Pronged Settlement: an Annuity Purchase and a Lump Sum Window for 42,000 Retirees; Those Who Declined the Lump Sum Offer Will Be Included in the Annuity
Verizon: Announced an Annuity Purchase
Ford: Announced a Lump Sum Window to 98,000 Retirees, Along with Vested and Terminated Participants
Annuity Transactions Year
Liability
Transferred
Purchase
Price
Retirees
Covered
GM 2012 $26B $29B 76,000
Verizon 2012 $7.5B $8.5B 41,000
Motorola 2014 $3.1B $3.1B 30,000
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
MARKET TRENDS
40-Year Plus Issuance
Twelve Issuers Totaling $10.6 Billion Have Come to Market Year-To-Date, with Maturities of 40 Years or Longer Versus the Issuers Totaling $700 Million in 2013
Companies Want to Extend Average Maturity Debt Profiles and Take Advantage of Low Rates and Tight Credit Spreads
These Longer Dated Bonds Provide LDI Participants Better Cash Flow Matching Characteristics Beyond 30 Years, with Additional Yield and Convexity.
30 Year vs 50 Year Illustration
Date of Issue Issuer Sector CPN Maturity Issue Size ($M) MDY S&P FITCH Spread @ Issue
1/13/2014 Electricite De France SA Utilities 6.000 100 yrs $700M Aa3 A+ A+ 240.0
5/5/2014 Caterpillar Industrials 4.750 50 yrs $500M A2 A A 137.5
5/20/2014 South Carolina E&G Utilities 4.500 50 yrs $300M A3 A A 120.0
6/10/2014 Johnson Controls Vehicle Parts 4.950 50 yrs $450M Baa2 BBB+ NR 150.0
6/16/2014 Guardian Life Financials 4.875 50 yrs $450M A1 AA- AA- 150.0
6/26/2014 Monsanto Materials 4.700 50 yrs $750M A3 BBB+ A- 140.0
7/16/2014 CSX Corp. Industrials 4.500 40 yrs $450M Baa1 BBB+ NR 120.0
7/24/2014 Verizon Communications Communications 5.012 40 yrs $5500M Baa1 BBB+ A- 167.0
9/2/2014 Marathon Petroleum Energy 5.000 40 yrs $400M Baa2 BBB NR 190.0
9/3/2014 Cleveland Clinic Healthcare 4.858 100 yrs $400M Aa2 AA- NR 160.0
10/2/2014 Enterprise Products Oper. Energy 4.950 40 yrs $400M Baa1 BBB+ BBB+ 190.0
10/7/2014 Dignity Health Healthcare 5.267 50 yrs $300M A3 A A 220.0
Date of Issue Issuer Sector CPN Maturity Issue Size ($M) Spread @ Issue Mod. Duration Convexity
6/10/2014 Johnson Controls Industrial 4.625 7/2/1944 $450M 120 16.08 3.75
6/10/2014 Johnson Controls Industrial 4.95 7/2/1964 $450M 150 18.52 5.76
Increase +30 2.44 2.02
Source Bloomberg
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
MARKET TRENDS
An Ultra-Long Credit Custom Index – Is It A Viable Alternative To STRIPS For Longer Dated Cashflows?
These Longer Dated Cash Flows May Provide an Alternative to 20+ Year Strips for LDI Custom Benchmarks
Longer Dated Cash Flows Will Become More Important to LDI with New Mortality Tables
Source Barclays 10/31/2014
Ultra-Long Credit Bonds Have Become 5.7% of Long Credit Index Market Value
Yield Pickup Of 23 bps Compared to the Long Credit Index
Duration Pickup is 3.1 Years
Long Credit US STRIPS (20+ Yrs)
Barclays Index "Index" vs. Long Credit Index
Mkt Value $1,514.3 B $86.4 B 5.70% $91.9B
Issuers 1,900 97 68 (Issues)
Yield 4.51% 4.74% +23 bps 3.14%
Duration 13.5 Yrs 16.6 Yrs +3.1 Yrs 27.3 Yrs
Sector Weights
Finance 16.0% 4.0%
Industrials 53.0% 36.0%
Utilities 10.0% 2.0%
Non-Corporate 21.0% 58.0%
Total 100.0% 100.0%
Ultra Long Credit (30+ Yrs)
BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(1.0)
(0.5)
0.0
0.5
1.0
Ex
cess
Ret
urn
Corporate
Outperforms Credit
Credit Outperforms
Corporate
PPA Segment Rates are More Like the Barclays Corporate Index
-- Rolling 3-Year Excess Returns (Barclays Long Credit Vs. Barclays Long Corporate)
LONG CREDIT VS. LONG CORPORATE COMPARISON
Build America Bonds
Sovereign Risk
Rolling 3-Year Excess Returns as of 12/31/14
16
STRICTLY PRIVATE/CONFIDENTIAL
Liability Driven Investment
J.P. Morgan Asset ManagementLiability Driven Investment
February 24th, 2015
Prashant Lamba, CFA, Client Portfolio Manager Michael Buchenholz, CFA, FSA, Associate, Client Portfolio Managerg212.648.0414, prashant.lamba@jpmorgan.com
, , , , g212.648.2968, michael.buchenholz@jpmorgan.com
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
This page intentionally left blank
STRICTLY PRIVATE/CONFIDENTIAL
Pension Risk FrameworkAsymmetric Risks
100
120
Short Call Option
60
80
nefit
to P
lan Unproductive/Trapped
Surplus
0
20
40Ben
PBGC Default
Long Put Option
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120%Plan Funded Status
PBGC Default: A distressed plan will be taken over by the Pension Benefit Guaranty Corporation (PBGC), which will pay beneficiaries up a maximum guarantee amount
Risk Appetite Considerations
PBGC default is equivalent to a long put option on the plan, incentivizing the sponsor/participants to maximize risk taking in the plan
Unproductive Surplus: The surplus assets after all benefits have been paid are not owed to beneficiaries and sponsors must pay heavy tax penalties to revert the cash back to the corporate balance sheet
Unproductive surplus is equivalent to a short call option on the plan, as excess assets provide little benefit to participants or the sponsor
In between these two bookends, sponsors/participants should have a decreasing risk appetite as the plan moves from distressed to fully funded
3
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
Relationship between the pension fund and the sponsor
Sponsor’s balance sheet
Sponsor’s cash flow statement
Contributions reduce sponsor’s total assets but reduce the debt of the sponsor’s
Sponsor’s balance sheet
Sponsor’s cash flow statement
Contributions reduce sponsor’s total assets but reduce the debt of the sponsor’s
Sponsor’s balance sheet
Sponsor’s cash flow statement
Contributions reduce sponsor’s total assets but reduce the debt of the sponsor’s
Sponsor’s balance sheet
Sponsor’s cash flow statement
Contributions reduce sponsor’s total assets but reduce the debt of the sponsor’s
Sponsor’s balance sheet
Sponsor’s cash flow statement
Contributions reduce sponsor’s total assets but reduce the debt of the sponsor’s
Sponsor’s balance sheet
Sponsor’s cash flow statement
Contributions reduce sponsor’s total assets but reduce the debt of the sponsor’s
Sponsor’s balance sheet
Sponsor’s cash flow statement
Contributions reduce sponsor’s total assets but
reduce the debt of the sponsor’s vs.
Pension liabilities are a commitment taken
vs. the pension fund
Contributions reduce Pension liabilities are a commitment taken
vs. the pension fund
Contributions reduce Pension liabilities are a commitment taken
vs. the pension fund
Contributions reduce Pension liabilities are a commitment taken
vs. the pension fund
Contributions reduce Pension liabilities are a commitment taken
vs. the pension fund
Contributions reduce Pension liabilities are a commitment taken
vs. the pension fund
Contributions reduce Pension liabilities are a commitment taken by
the pension fund
Contributions reduce by the sponsor vs.
employees. Their net value (liabilities –
assets) or deficit is part of the sponsor’s
debt
Pension assets
Pension Liabilities
sponsor’s cash flows and increase pension
assets
Minimum contributions are set by law (Pension
P i A )
by the sponsor vs. employees. Their net
value (liabilities –assets) or deficit is
part of the sponsor’s debt
Pension assets
Pension Liabilities
sponsor’s cash flows and increase pension
assets
Minimum contributions are set by law (Pension
P i A )
by the sponsor vs. employees. Their net
value (liabilities –assets) or deficit is
part of the sponsor’s debt
Pension assets
Pension Liabilities
sponsor’s cash flows and increase pension
assets
Minimum contributions are set by law (Pension
P i A )
by the sponsor vs. employees. Their net
value (liabilities –assets) or deficit is
part of the sponsor’s debt
Pension assets
Pension Liabilities
sponsor’s cash flows and increase pension
assets
Minimum contributions are set by law (Pension
P i A )
by the sponsor vs. employees. Their net
value (liabilities –assets) or deficit is
part of the sponsor’s debt
Pension assets
Pension Liabilities
sponsor’s cash flows and increase pension
assets
Minimum contributions are set by law (Pension
P i A )
by the sponsor vs. employees. Their net
value (liabilities –assets) or deficit is
part of the sponsor’s debt
Pension assets
Pension Liabilities
sponsor’s cash flows and increase pension
assets
Minimum contributions are set by law (Pension
P i A )
commitment taken by the sponsor vs.
employees. Their net value (liabilities –
assets) or deficit is part of the sponsor’s debt
Pension assets
Pension Liabilities
sponsor’s cash flows and increase pension
assets
Minimum contributions are set by law (Pension
Protection Act)
The cost of running
Protection Act)
The impact of the The cost of running
Protection Act)
The impact of the The cost of running
Protection Act)
The impact of the The cost of running
Protection Act)
The impact of the The cost of running
Protection Act)
The impact of the The cost of running
Protection Act)
The impact of the The cost of running a The impact of the The cost of running
a pension fund is reflected in the
income statement Sponsor’s income
statement
pension fund on the accounts of
the sponsor is set by US Gaap(SFAS 156)
The cost of running a pension fund is reflected in the
income statement Sponsor’s income
statement
pension fund on the accounts of
the sponsor is set by US Gaap(SFAS 156)
The cost of running a pension fund is reflected in the
income statement Sponsor’s income
statement
pension fund on the accounts of
the sponsor is set by US Gaap(SFAS 156)
The cost of running a pension fund is reflected in the
income statement Sponsor’s income
statement
pension fund on the accounts of
the sponsor is set by US Gaap(SFAS 156)
The cost of running a pension fund is reflected in the
income statement Sponsor’s income
statement
pension fund on the accounts of
the sponsor is set by US Gaap(SFAS 156)
The cost of running a pension fund is reflected in the
income statement Sponsor’s income
statement
pension fund on the accounts of
the sponsor is set by US Gaap(SFAS 156)
The cost of running a pension fund is reflected in the
income statement Sponsor’s income
statement
ppension fund on the
accounts of the sponsor is set by US GAAP (SFAS 158)
STRICTLY PRIVATE/CONFIDENTIAL - FOR INTERNAL USE ONLY 14
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Pension Example – XYZ Corporation
112%
92%81%
90%96%
76%72%
70%80% 100%
120%
1,400
1,600
1,800 Assets Liability Funded Status
70%80%90%
100%
Historical Asset AllocationHistorical Funded Status
75%
80% 81%
83% 72% 74%76%
40%
60%
80%
400
600
800
1,000
1,200
Mill
ions
10%20%30%40%50%60%70%
0%
20%
0
200
400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
0%10%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Other % Fixed Income % Equities %
Corporate Financial Metrics – XYZ PlanMarket Levels
As of 12/31/2013 Value
Funded Status 80%
Liability/Market Cap % 54%1 000
1,2001,400
1,6001,800
2,000
400
500
600
700
800
00 L
evel
bps)
10yr UST (bps) A+ OAS (bps) S&P500
2013 Pension Expense/Net Income % 53.2%
2013 Contribution/EBIDTA % 16.7%
Correlation of Funded Status to Stock Price % 85%0
200400
600800
1,000
0
100
200
300
400
S&P5
0
Yiel
d/O
AS (
5
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.Source: Milliman survey, Barclays Live. As of December 31, 2013
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Pension Risk Metrics – Current Allocation at 80% Funded
Hedge Ratio =$ Duration of Assets
=1,931K
≈ 10%
Plan Metrics
1 6001,8002,000
usan
ds
Asset Liability
DV01 Asset-Liability Profile
Assets Value
Asset Value ($mm) $1,136
Asset Duration (yrs) 1.7
Liabilities Value
Liability Value ($mm) $1,420
Liability Duration (yrs) 13.4 Hedge Ratio = = ≈ 10%$ Duration of Liabilities 19,028K
400600800
1,0001,2001,4001,600
Thou
From a DV01 perspective, the plan is underhedged overall and
Hedge Ratio measures the sensitivity of the Plan to parallel changes in interest
rates
(y )
Value-at-Risk ($mm) $176
y (y )
Value-at-Risk ($mm) $206
30%15% 5% US Aggregate
S&P500
Total Plan Value
Funded Status % 80%
Rate Hedge Ratio % 10 1%
Funded Status at Risk ($mm) Asset-Liability Cashflow Profile
0200400
0.5yr 2yr 5yr 10yr 20yr 30yr Total
across the term structure
50%
EAFE
Hedge Funds
Rate Hedge Ratio % 10.1%
Spread Hedge Ratio % 8.7%
Funded Status VaR $mm $240
($ )
Rates
Divers-ification
Spreads
300
350
400
450
500
Mill
ions
AltsEquitySpreadsRates
60708090
100
Mill
ions
Assets Liabilities
Asset Liability Cashflow Profile
TotalVaREquity
Alts
0
50
100
150
200
250
01020304050 Significant
cashflow shortfall in belly and long end of the term structure
Diversification bucket captures the correlation
between assets and liabilities
6
0Assets Liabilities Diversification Net Risk
2014 2019 2024 2029 2034 2039 2044 2049 2054 2059 2064 2069 2074 2079
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Pension Risk Metrics – End Game Allocation at 100% Funded
1400160018002000
hous
ands Asset Liability
Hedge Ratio =$ Duration of Assets
=19,000K
≈ 100%
Plan Metrics DV01 Asset-Liability Profile
Assets Value
Asset Value ($mm) $1,420
Asset Duration (yrs) 13.4
Liabilities Value
Liability Value ($mm) $1,420
Liability Duration (yrs) 13.4
400600800
100012001400Th
Hedge Ratio = = ≈ 100%$ Duration of Liabilities 19,028K(y )
Value-at-Risk ($mm) $282
y (y )
Value-at-Risk ($mm) $260
0% 5%
15%
0%0%
0%US Strips 25+ Yr
US Intermediate Credit A+
Total Plan Value
Funded Status % 80%
Rate Hedge Ratio % 100%
Improved hedge ratio overall and across the term
structure
0200
0.5yr 2yr 5yr 10yr 20yr 30yr Total
Funded Status at Risk ($mm) Asset-Liability Cashflow Profile
80%
Credit A+
US Long Credit A+
Rate Hedge Ratio % 100%
Spread Hedge Ratio % 90%
Funded Status VaR $mm $36
($ )
Rates
Spreads
400
500
600
Mill
ions
AltsEquitySpreadsRates
120 140 160 180 200
Mill
ions
Assets Liabilities
Asset Liability Cashflow Profile
The universe of 30+
Risk exposure of assets and liabilities are highly correlated
TotalVaR
Divers-ification
Spreads
Rates
0
100
200
300
0 20 40 60 80
100 The universe of 30+
maturing bonds is small and illiquid
7
0Assets Liabilities Diversification Net Risk
2014 2019 2024 2029 2034 2039 2044 2049 2054 2059 2064 2069 2074 2079
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Illustrative Impact of Bonds on Funded Status
Max: 238%
200%
250%
STANDARD DEVIATION 200%
250%
STANDARD
Funded status volatility – 65% Equity and 35% Core Bond PortfolioFunded Status Volatility – 100% Equity Portfolio
Illustrative Impact of Bonds on Funded Status
93%100%
150%
00%
nded
Status
DEVIATION 42.0% Max: 162%
86%100%
150%
200%
unde
d Status DEVIATION
26.4 %
Min: 60%50%
Dec‐94
Dec‐95
Dec‐96
Dec‐97
Dec‐98
Dec‐99
Dec‐00
Dec‐01
Dec‐02
Dec‐03
Dec‐04
Dec‐05
Dec‐06
Dec‐07
Dec‐08
Dec‐09
Dec‐10
Dec‐11
Dec‐12
Dec‐13
Dec‐14
Fu Min: 71%50%
Dec‐94
Dec‐95
Dec‐96
Dec‐97
Dec‐98
Dec‐99
Dec‐00
Dec‐01
Dec‐02
Dec‐03
Dec‐04
Dec‐05
Dec‐06
Dec‐07
Dec‐08
Dec‐09
Dec‐10
Dec‐11
Dec‐12
Dec‐13
Dec‐14
F
Funded status volatility – 65% Long Bonds and 35% Equity Portfolio Funded status volatility – 100% Long Bond Portfolio
Max: 145%150%
200%
250%
tus
STANDARD DEVIATION 12.1 %
Max: 105%150%
200%
250%
Status
STANDARD DEVIATION
2.7 %
Min: 91%
109%
50%
100%
50%
ec‐94
ec‐95
ec‐96
ec‐97
ec‐98
ec‐99
ec‐00
ec‐01
ec‐02
ec‐03
ec‐04
ec‐05
ec‐06
ec‐07
ec‐08
ec‐09
ec‐10
ec‐11
ec‐12
ec‐13
ec‐14Fund
ed Sta
Min: 94%
Max: 105%98%
50%
100%ec‐94
ec‐95
ec‐96
ec‐97
ec‐98
ec‐99
ec‐00
ec‐01
ec‐02
ec‐03
ec‐04
ec‐05
ec‐06
ec‐07
ec‐08
ec‐09
ec‐10
ec‐11
ec‐12
ec‐13
ec‐14
Fund
ed
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: Barclays Capital and J.P. Morgan Asset Management Inc as of 12/31/14. Core bonds are represented by the US Aggregate bond index; Long bonds are represented by the Long G/C index; Equities are represented by the S&P 500 Index.
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
De
8FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Glidepath Conceptp pWe’ve examined risk metrics and strategic asset allocations for the Plan at two different points:
Current Allocation: 80% Funded, 30% Fixed Income, $240mm VaR
End Game Allocation: 100% Funded, 100% Fixed Income, $36mm VaR
The vast majority of plans utilize a structured plan of phase-in de-risking through a glidepath, which systematically decreases funded status risk as the Plan funded status improvesfunded status improves
Triggers for de-risking to the next phase can be based on:
Funded Status, Interest Rates, Passage of Time, Other
90%
100%
H d F d
Equity/Alts
40%
50%
60%
70%
80%Hedge Funds
EAFE
S&P500
US Long Credit A+
US Inter Credit A+
US Strips 25+ Yr
0%
10%
20%
30%
40%
Current Phase 1 Phase 2 Phase 3 End Game
US Long Gov/Credit
US Aggregate
Fixed Income
Funded Status Trigger 80% 85% 90% 95% 100%
Growth/Hedge Portfolio 70%/30% 70%/30% 52.5%/47.5% 30%/70% 0%/100%
Hedge Ratio 10% 28% 52% 70% 100%
Funded Status VaR $240 MM $184 MM $132 MM $89 MM $36 MM
ERoA 5 6% 5 8% 5 3% 5 1% 4 5%
9
ERoA 5.6% 5.8% 5.3% 5.1% 4.5%
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
*De-risking is a general term referring to strategies that aim at reducing the risk exposure of plan sponsors to their pension fund; however the term in no way implies the removal of risk.
Strong gross issuance still lags ultimate demandg g g2014 : Investment Grade Credit Fixed Supply by Sector
and Maturity
918 910 858
1,086 1,106 1,145
1,000
1,200
1,400 Annual: Investment Grade Credit Issuance
326
588
425 444 338 336
431
561 608
200
400
600
800
0
Private Defined Benefit Plans: De-risking?C t iti
Overall Supply: U.S. Long CreditDefined Benefit Pension Liabilities:
71.7 78.0 83.8 40
80
120
ns ($
)
Corporate equities
Credit market instruments
Defined Benefit Pension Liabilities:$3.1 Trillion ($0.8 Tr. in Credit)
Life Insurance Company Liabilities:$5.7 trillion ($3.5 Tr. in Credit)
Market value (‘000)
Market value (%) Count Yield to
worst
Total 1,579,317,737 100.00 1954 4.40
Corporate 1,248,546,777 79.06 1598 4.42
Aaa
(70.1)(41.8)
(4.1)
(65.4)
(11.0) (21.7) (17.3)(52.9)
4.1 35.2 27.1
-80
-40
0Bill
io Aaa 15,858,974 1.00 23 3.68
Aa 87,988,476 5.57 91 3.88
A 564,828,191 35.76 722 4.14
Baa 579,871,136 36.72 762 4.80
N C t
STRICTLY PRIVATE/CONFIDENTIAL - FOR INSTITUTIONAL USE ONLY 10
Source: Barclays Live. As of December 31, 2014. “U.S. Investment Grade Corporate Update“, Federal Reserve Flow of Funds data as of September 30, 2014.
10
-802008 2009 2010 2011 2012 2013 YTD 2014
Non-Corporate 330,770,960 20.94 356 4.32
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Finding The (Im)Perfect Hedgeg ( ) g
100%
105%
Historical Funded Status Tracking – Hedge with Long Credit A or Better
90%
95%Defaults and downgrades are reflected in asset returns but are removed from the liability
discount curve
75%
80%
85%
Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
A plan that invested in duration-matched Long Credit A+ would have experienced a funded status deterioration of almost 20% over the past 18 years
What may seem like a perfect hedge to the corporate based liability breaks down over time due to:
Downgrades and defaults: When a bond is downgraded or defaults the asset portfolio suffers a loss while the higher yielding bond will be removed from the discount curve, resulting in a higher liability and a lower funded status
Unhedged exposures: While a broad index may provide an overall duration match to the liability, there may still be resulting curve, credit and convexity exposures
Unhedgable exposures: The liability value is an imperfect measure of the pension plan obligation. Over time actual plan experience may/will differ from those baked into the underlying actuarial assumptions (e.g. mortality experience)
For these reasons, plans may structure a more bespoke fixed income benchmark to better match the liabilities and/or maintain a resilience buffer of surplus assets to offset unhedgable risks
11
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Expected return over risk-free asset:Long Credit – given downgrades/defaults vs. “fallen angels”
Corporate Index by rating
Monthly Mean (bps)
Monthly St.Dev (bps)
Excess return of the Corporates (8/88-12/14)
DowngradeYear
Number of bonds 1-Year 2-Year
Post downgrade cum. performance of “fallen angels”
Aa 2.9 83.2A 2.6 116.7Baa 5.9 138.7Ba 21.9 215.8B 15 6 280 1
1990-1994 173 3.03% 7.88%
1995-1999 211 -0.52% 5.46%
2000-2005 771 4.16% 8.77%
Average monthly excess return on the Barclays Long
B 15.6 280.1Caa 13.0 432.9 2006-2011 372 7.06% 9.25%
Cum. returns of “fallen angels” debt vs. equitiesAdditional Salient Facts
Corporate Index for same time period is 2 basis points with a volatility of 181bps
“Fallen angels” bonds represent a significant proportion of the High Yield (15%-25%)
10 year correlation (monthly observations):
High Yield Ba/B: 0.84 (spread changes vs. A/AAA Corp.) Equities: 0.73 (total rtrns vs. HY Ba/B excess rtrns) Treasuries: 0.65 (total rtrns vs. A/AAA Corp. total rtrns)
– Over 80% of time Treasury returns have the same sign
12
– 2-12% tracking error
Source: JPMAM, Barclays data, “Investing in Fallen Angels”, Barclays Capital, February 2012The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.
FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION
STRICTLY PRIVATE/CONFIDENTIAL
Interest Rate Derivatives: Monetizing the Glidepathg p The glidepath framework presents an opportunity for plans to monetize the commitment to de-risk at higher funded status levels:
Strategy: Sell out-of-the money payer swaptions
In exchange for the swaption premium, the plan gives up some of the funded status gains as rates rise
If rates at maturity are below the strike price, the plan will simply pocket the premium
The plan is selling the right to the counterparty to force the Plan to extend duration once rates rise above a certain duration – which is part of the glidepath strategy anyway!
1,000,000
rity
Illustrative Payoff of Sold 1x10 Payer Swaption Illustrative Example
Current Funded Status 80%
0
500,000
onPa
yoff
at M
atur
Current Funded Status 80%
Asset DV01 1,931Liability DV01 19,028Net DV01 (17,097)
Next Trigger 85%
Strike Price of Payer
Premium collected from sale of Payer
-500,000
Sold
Pay
er S
wap
tio Next Trigger 85%Rate Move to Next Trigger 50bps
Rate VaR as % of Total VaR ~50%Expected Time Until Next Trigger 1yrPremium 2.2%
Current At-The-Money-Forward
Rate
Payer losses offset by decreasing liabilities as rates rise
-1,000,000
S Rate
Sell a 1x10 Payer struck +25bps out-of-the-money
Assume ~50% of the funded status increase will come from rates based on the VaRattribution
Expected time frame for trigger is 1year
13
p gg y
The data/charts/graphs throughout this presentation are FOR ILLUSTRATIVE AND DISCUSSION PURPOSES ONLY. Source: J.P. Morgan Asset Management Inc.
STRICTLY PRIVATE/CONFIDENTIAL
J.P. Morgan Asset ManagementThis document is intended solely to report on various investment views held by J.P. Morgan Asset Management. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. Indices do not include fees or operating expenses and are not available for actual investment. The information contained herein employs proprietary projections of expected returns as well as estimates of their future volatility. The relative relationships and forecasts contained herein are based upon proprietary research and are developed through analysis of historical data and capital markets theory. These estimates have certain inherent limitations, and unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees or other costs. References to future net returns are not promises or even estimates of actual returns a client portfolio may achieve. The forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendationThe value of investments and the income from them may fluctuate and your investment is not guaranteed Past performance is no guarantee of future results Please note current performance may be higher or lower than the The value of investments and the income from them may fluctuate and your investment is not guaranteed. Past performance is no guarantee of future results. Please note current performance may be higher or lower than the performance data shown. Please note that investments in foreign markets are subject to special currency, political, and economic risks. Exchange rates may cause the value of underlying overseas investments to go down or up. Investments in emerging markets may be more volatile than other markets and the risk to your capital is therefore greater. Also, the economic and political situations may be more volatile than in established economies and these may adversely influence the value of investments made Selected risks Asset-backed securities may have additional risk because they may receive little or no collateral protection from the underlying assets, and are also subject to the risk of default. The risk of such defaults is generally higher in the case of mortgage-backed investments that include so-called “sub-prime” mortgages. International investing involves a greater degree of risk and increased volatility. Changes in currency exchange rates and differences in accounting and taxation policies outside the U.S. can raise or lower returns. Also, some overseas markets may not be as politically and economically stable as the United States and other nations. The Fund's investments in emerging markets could lead to more volatility in the value of the Fund. As mentioned y p y y g g yabove, the normal risks of investing in foreign countries are heightened when investing in emerging markets. In addition, the small size of securities markets and the low trading volume may lead to a lack of liquidity, which leads to increased volatility. Also, emerging markets may not provide adequate legal protection for private or foreign investment or private property.Interest Rate Risk. The Strategy mainly invests in bonds and other debt securities. These securities will increase or decrease in value based on changes in interest rates. If rates increase, the value of the Strategy’s investments generally declines. On the other hand, if rates fall, the value of the investments generally increases. Your investment will decline in value if the value of the investments decreases. Securities with greater interest rate sensitivity and longer maturities tend to produce higher yields, but are subject to greater fluctuations in value. Usually, the changes in the value of fixed income securities will not affect cash income generated, but may affect the value of your investment.Derivatives Risk. The Strategy may use derivatives in connection with its investment strategies. Derivatives may be riskier than other types of investments because they may be more sensitive to changes in economic or
k t diti th th t f i t t d ld lt i l th t i ifi tl d th St t ’ i i l i t t C t i d i ti i i t f f l A lt th St t b market conditions than other types of investments and could result in losses that significantly exceed the Strategy’s original investments. Certain derivatives may give rise to a form of leverage. As a result, the Strategy may be more volatile than if the Strategy had not been leveraged because the leverage tends to exaggerate the effect of any increase or decrease in the value of the Strategy’s portfolio securities. Derivatives are also subject to the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index. The use of derivatives for hedging or risk management purposes or to increase income or gain may not be successful, resulting in losses to the Strategy, and the cost of such strategies may reduce the Strategy’s returns. Derivatives also expose the Strategy to the credit risk of the derivative counterparty.The deduction of an advisory fee reduces an investor’s return. Actual account performance will vary depending on individual portfolio security selection and the applicable fee schedule. Fees are available upon request.The following is an example of the effect of compounded advisory fees over a period of time on the value of a client’s portfolio: A portfolio with a beginning value of $100 million, gaining an annual return of 10% per annum would grow to $259 million after 10 years, assuming no fees have been paid out. Conversely, a portfolio with a beginning value of $100 million, gaining an annual return of 10% per annum, but paying a fee of 1% per annum, would only grow to $235 million after 10 years The annualized returns over the 10 year time period are 10 00% (gross of fees) and 8 91% (net of fees) If the fee in the above example was 0 25% per annum the portfolio would would only grow to $235 million after 10 years. The annualized returns over the 10 year time period are 10.00% (gross of fees) and 8.91% (net of fees). If the fee in the above example was 0.25% per annum, the portfolio would grow to $253 million after 10 years and return 9.73% net of fees. The fees were calculated on a monthly basis, which shows the maximum effect of compounding.There can be no assurance that the professionals currently employed by JPMAM will continue to be employed by JPMAM or that the past performance or success of any such professional serves as an indicator of such professional’s future performance or success.All case studies are shown for illustrative purposes only and should not be relied upon as advice or interpreted as a recommendation. They are based on current market conditions that constitute our judgment and are subject to change. Results shown are not meant to be representative of actual investment results. Past performance is not necessarily indicative of the likely future performance of an investment.Any securities mentioned throughout the presentation are shown for illustrative purposes only and should not be interpreted as recommendations to buy or sell. A full list of firm recommendations for the past year is available upon request. upon request. J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase & Co. Those businesses include, but are not limited to, J.P. Morgan Investment Management Inc., Security Capital Research & Management Incorporated and J.P. Morgan Alternative Asset Management, Inc.Copyright © 2015 JPMorgan Chase & Co. All rights reserved.
14FOR INSTITITIONAL USE ONLY | NOT FOR PUBLIC DISTRIBUTION