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Transcript of Cwm La Base Case
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Investment Strategy Insights
INVESTMENT AND INSURANCE PRODUCTS: NOT FDIC INSURED – NOT CDIC INSURED – NOT GOVERNMENTINSURED – NO BANK GUARANTEE – MAY LOSE VALUE
Renato Grandmont
[email protected](212) 559 1766
Charles [email protected]
(212) 559 6485
Enrique Alvarez [email protected]
(212) 559 4222
David Nieuchowicz
[email protected](212) 559 8203
Nelson [email protected]
(212) 559 8601
Base CaseDecember 2015
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2
Forecast SummaryCiti Research Global Economic Forecasts and Changes to Our Views
Global Outlook
Our Revised Forecast: The global growth forecast forthis year and next have not changed (2015: 2.6%; 2016:2.8%) but the 2017 outlook was trimmed back to 3.1%(2017 started this year at a forecast of 3.4%). 2017 waspulled down by weaker outlooks for EM (including China,Taiwan, Turkey, South Africa, Brazil and Mexico), UK andJapan. But the 2017 forecasts for the Eurozone and USwere raised, mitigating the downward revision.
EM in Trouble: 2016 GDP growth for EM ex-China is nowforecast below 2%, for the first time in 10 years fallingbelow DM growth. Pressures on EM: Persistent weaktrade growth, Buildup in EM debt in recent years,Looming Fed tightening.
United States
Rates: We see a flatter US curve, with 100bp of Fedhiking expected between now and 1Q17 and just 15bprise in the 10Y yield (2.35% in 1Q17). Typically curveflattening is indicative later stages of a business cycle.
Growth: While demand is seen growing 3% YoY for thenext 3 years, external factors will likely keep GDP growthat just around 2.5%.
Eurozone
Growth: Forecast 2015: 1.5% (unchanged); 2016: 1.8%(was 1.6%); 2017: 1.7 (was 1.5%).
Inflation: Forecast 2015: 0.1% (unchanged); 2016: 1.1%(was 1.0%); 2017: 1.5 (was 1.4%).
ECB Policy: We expect the ECB to eventually bothexpand QE and extend its duration, doubling theprogram’s size to EUR2.2Tn.
China
Response to Growth Doubts: The central bank is likelyto respond with reserve requirement ratio cuts (~250bpsto 14.5%), benchmark rate cuts (2x25bps to 1%) andsome contained degree of FX depreciation (CNY/USDseen at 6.65 YE16, 3.9% lower than current level).
Corporate Leverage: Loose monetary conditions may beneeded amid the likely uptrend in corporate defaults.
Japan
Additional Loosening: the policy meeting to be held onJanuary 28 and 29 may be the date for fresh BoJ action,when the BoJ may increase monthly JGB purchases byJPY1Tn and annual ETF purchases by JPY2Tn.
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of f uture events. These are Citi Research Forecasts.
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Charts and tables are for illustrative purposes only. Refer to Important Information at the end of thispresentation. Indices are not managed, have no expenses and cannot be directly invested in.
3
Macroeconomic ViewDeveloped Markets in Economic Recovery
Global GDP and Inflation Rates
2015F 2016F 2017F 2015F 2016F 2017F
Global 2.6% 2.8% 3.1% 2.2% 2.7% 3.0%Based on PPP 3.0% 3.2% 3.7% 3.4% 4.0% 4.4%Industrial Countries 1.9% 2.0% 2.0% 0.3% 1.4% 1.8%
United States 2.5% 2.5% 2.5% 0.3% 1.6% 1.8%Japan 0.6% 0.7% 0.3% 0.9% 0.6% 1.6%Euro Area 1.5% 1.8% 1.7% 0.1% 1.1% 1.5%United Kingdom 2.4% 2.3% 2.3% 0.1% 0.8% 1.1%Emerging Markets 3.5% 4.0% 4.7% 5.0% 4.5% 4.8%
China 6.9% 6.3% 6.2% 1.4% 1.7% 2.0%India 7.5% 7.8% 8.2% 5.0% 4.8% 5.0%Korea 2.5% 2.4% 2.8% 0.7% 1.7% 2.4%Russia -3.7% 0.5% 2.2% 15.5% 7.4% 5.9%Brazil -3.2% -2.2% 0.9% 9.0% 8.0% 6.1%Mexico 2.5% 2.8% 3.5% 2.8% 3.6% 3.6%Source: Citi Research, 30 November 2015
GDP Growth CPI Inflation
-15
-12
-9
-6-3
0
3
6
9
Jun 1990 Jun 1995 Jun 2000 Jun 2005 Jun 2010 Jun 2015
-5
-4
-3
-2-1
0
1
2
3
F inanc ial Cond it ions I ndex (Left ) Industr ia l Production I ndex (R igh t)
Source: Cit i Research as of 25 June 2015. Note: Industrial Production is lagged 9 months.
Financial Conditions and Industrial Production Indexes
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.The investor should not base its decision to enter into a trade solely on the basis of the forecasts.
Growth Prospects: Uncertainty on global growth has grown on doubtsabout the accuracy of Chinese data. In the US, solid but not acceleratinggrowth is expected, a disappointment relative to previous expectations.Eurozone growth and inflation are picking up modestly.
Emerging Markets (EM): Declines in commodity prices continue tochallenge for EM exporters. Weakening trade flows with China anddeveloped markets have undermined the EM growth model. A Fed inhiking mode and the uncertainty around its pace will also weigh on EM.
Policy Issues: A depreciating Chinese currency has altered the landscapefor monetary policy, both in DM and EM. Citi economists project a need foradditional QE coming from both the ECB and the BoJ to raise inflation to
the 2% target. The Fed and the BOE may start tightening cycles, but withslow/shallow rate increases. Asian China competitors may manage theircurrencies toward depreciation to retain trade competitiveness.
-3.0
-1.5
0.0
1.5
3.0
4.5
2 0 0 5
2 0 0 6
2 0 0 7
2 0 0 8
2 0 0 9
2 0 1 0
2 0 1 1
2 0 1 2
2 0 1 3
2 0 1 4
2 0 1 5
2 0 1 6
2 0 1 7
2 0 1 8
Contributions to Global Growth
(in percentage po ints)
E merg ing Markets Devel oped M arkets
Source: I MF, Citi R esearch, 30 November 2015
Forecasts
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4Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation. Indices arenot managed, have no expenses and cannot be directly invested in . Chart as of 30 November 2015.
Fixed IncomeLow-rate World Remains Afoot
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0 5 10 15 20 25 3011/30/2015 1-Week 1-Month YTD 1-Year
Source: Bloomberg
US Yield Curve
(in percent and years)
Short and Long Rates (Forecasts)
Current 2Q16F 4Q16F Current 2Q16F 4Q16FUnited States 0.25 0.75 1.00 2.21 2.25 2.30Japan 0.10 0.10 0.10 0.31 0.35 0.50Euro Area 0.05 0.05 0.05 0.47 0.20 0.40
Australia 2.00 1.75 1.75 2.86 2.55 2.70United Kingdom 0.50 0.50 0.50 1.83 -0.45 1.75China 1.50 1.00 1.00 3.18 NA 2.74India 6.75 6.50 6.50 7.97 NA 7.00Korea NA NA NA 2.27 NA 1.93Russia NA NA NA 9.55 NA 8.01Brazil 14.25 14.25 14.25 16.56 NA 14.38Mexico 3.00 3.50 3.25 6.51 NA 6.34
Policy Rates (quarter end) Long Rates*
Note: Developed Markets long rates are period averages. Emerging Markets long rate forecasts
are full-year averages. Long Euro Area rates are German yields. Source: Citi Research, 30
November 2015. Spot as of 30 Nov 2015.
0
5
10
15
20
Nov 90 Nov 95 Nov 00 Nov 05 Nov 10 Nov 15
Credit Bond Yields(in percent)
High Yield BBB Yield US 10-Year Bond EM Sovereign Yield
Source: Bloomberg
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of f uture events.
The investor should not base its decision to enter into a trade solely on the basis of the forecasts.
Yield Curve Steepness: The US curve looks set to flattened more withless US acceleration forecast, and with QE programs pressuring currenciesin the Eurozone and Japan, and constraining US rates.
Rate Hikes: After a surprisingly dovish Fed September decision, Citieconomists sees the Fed hiking rates in December. This would take thepolicy rate to just 1.00% at YE2016 and 1.25% in early 2017. Growthscares or market volatility could delay a December hike.
Corporate Credit: Low crude oil prices have revived concerns about anincrease in HY Energy sector defaults. The low rate environment in DMshould support credits outside Energy. US HG and HY issuance has putpressure on spreads to sovereign bonds.
Emerging Markets: Headwinds have increased: potential Fed rate hikes,declines in commodities prices and poor trade growth are pressuring aspace which has seen potentially excessive issuance.
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5Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation. Indices arenot managed, have no expenses and cannot be directly invested in . Chart as of 30 November 2015.
EquitiesFocused on US Growth, Earnings Recovery and EM Risks
600
800
1000
1200
1400
1600
1800
20002200
5
15
25
35
45
55
65
7585
Nov 05 Nov 07 Nov 09 Nov 11 Nov 13 Nov 15
S&P 500 Index and Volatility
VIX Index ( left scal e) S&P 500 Index ( ri gh t sca le)Source: Bloomberg
-60
-30
0
30
60
90
-1.2
-0.6
0.0
0.6
1.2
1.8
Oct 90 Oct 95 Oct 00 Oct 05 Oct 10 Oct 15
US Panic/Euphoria Model (Other PE)
S&P 500 12-Month Forward Return (r ight scale) The Other PE (left scale)
Euphoria
Panic
Source: Cit i Research as of 2 October 2015
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of f uture events. The investor should not base itsdecision to enter into a trade solely on the basis o f the forecasts.
Earnings Outlook: The outlook for earnings remains positive globally. UScorporate earnings may continue to grow in 2016, hitting fresh recordlevels. Europe and Japan earnings may keep rebounding on loose policy.China problems, however, could weigh on EM earnings.
US Outlook: Citi Research sees US large and small caps new highs mid-2016, primarily contingent on earnings expansion. The 2016YE outlook isclouded by mildly rich valuations, Fed hikes and the presidential election.
Emerging Markets: We would focus on countries with exposure to USgrowth, reform agendas, robust GDP expansion and solid expectedearnings growth in 2016. US rate rises, a weak yen (and yuan) andsluggish DM imports are weighing on earnings and cheap valuations.
Japan/Europe: Fresh central bank liquidity will likely support Eurozoneand Japan earnings and equity prices. Politics (Greece) and geopolitics(Russia, Syria) are the principal risks in Europe; policy mistakes in Japan.
The 12-Month Forward Return indicates the 1-year returnrecorded from a specified date.
Consensus EPS Estimates & Citi Targets for IndicesLevel P/E EPS YoY % Div Yld End 2016 Target
11/25/15 15E 15E 15E Levels ReturnsGlobal (MS CI World) 409 17.5 4.4 2.5 535 30.9%Developed 17.9 3.1 2.5Emerging 839 14.5 13.3 2.7 980 16.8%
US (S&P 500) 2,089 18.6 1.8 2.0 2,200 5.3%Europe (Euro Stoxx) 381 17.1 13.5 3.2 440 15.5%UK (FTSE 100) 6,338 14.9 -9.1 3.9 7,600 19.9%Japan (Topix) 1,595 18.7 7.3 3.1 1,850 16.0%China (MSCI China) 62 12.4 30.1 1.6 93 49.6%India (SENSEX) 25,776 21.0 5.0 3.2 NA NABrazil (Bovespa) 46,867 17.9 34.8 1.8 NA NAMexico (Bolsa) 44,139 27.7 18.8 3.1 NA NARussia 879 8.8 69.8 3.7 NA NA
P/E, EPS YoY% and Div Yld based on MSCI Indexes. 15E denotes 2015 Estimates. Source: MSCI,
Citi Research, 2 October 2015. Spot as of 25 Nov 2015.
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6Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation. Indices arenot managed, have no expenses and cannot be directly invested in . Chart as of 30 November 2015.
CurrenciesFrom Strengthening Fundamentals to Policy Normalization to Loosening Policies
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of f uture events.
Currency risk: One currency may decline in value versus another. The value of a multicurrency portfolio will fluctuate with exchange rates.
65
85
105
125
145
165
0
400
800
1200
1600
2000
Dec 75 Dec 85 Dec 95 Dec 05 Dec 15
US Dollar Index versus Gold Price
Gold Price (LHS, US dollars) Dollar Index (RHS)
Source: Bloomberg
70
90
110
130
150
170
0.8
1.0
1.2
1.4
1.6
Dec 95 Dec 00 Dec 05 Dec 10 Dec 15
DM Exchange Rates(USD/EUR; JPY/USD)
Euro YenSource: Bloomberg
USD: Dollar strength remains a dominant currency theme. Interest rate
differentials may persist between the US other DM (engaging in QE), andEM macro still struggle. USD has appreciated against every major currencyin 2015 (JPY least at 2.7%) and 2016 looks like another strong year.
EUR/USD: As the ECB potentially deepens its QE program and the Fedintends to hike policy rates, the euro looks set to weaken further. Euro atparity to the dollar in 1Q16 looks like a trough valuation.
Emerging Markets: EM currencies may remain under pressure due to theprospect of even slow Fed rate normalization, China economicdeceleration and lower commodity prices. Commodity exporters withincreasing political issues, such as Brazil, may be the most visibly weak
currencies, but contagion to other is also possible.
China: In response to growth doubts the PBOC may loosen policy andallow a degree of FX depreciation.
Exchange Rate Forecasts
Spot 2015 YE 2016 YE
Euro 1.07 1.05 1.01
Japanese yen 123 124 129
Australian Dollar 0.72 0.70 0.67
Swiss Franc 1.02 1.02 1.06
British Pound 1.52 1.50 1.48
Chinese Renminbi 6.38 6.41 6.67
Indian Rupee 66.2 66.6 68.0
Korean Won 1,154 1,177 1,212
Russian Ruble 64.9 66.3 70.1
Brazilian Real 3.71 4.01 4.14
Mexican Peso 16.6 16.9 16.8
Source: Citi Research as of 20 November 2015. Spot price as of 20 Nov 2015.
Versus US Dollar
7/25/2019 Cwm La Base Case
http://slidepdf.com/reader/full/cwm-la-base-case 7/257Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation. Indices arenot managed, have no expenses and cannot be directly invested in . Chart as of 30 November 2015.
CommoditiesReacting to Global Demand Questions
0.0
1.0
2.0
3.0
4.0
5.0
Dec 05 Dec 07 Dec 09 Dec 11 Dec 13 Dec 15
Key Commodity Prices(rebased to 1)
Oil Gold Corn Copper
Source: Bloomberg
All forecasts are expressions of opinion and are subject to change without notice and are not intended tobe a guarantee of future events. The investor should not base its decision to enter into a trade solely on
the basis of the forecasts.
0
4
8
12
16
20
Oct 07 Oct 08 Oct 09 Oct 10 Oct 11 Oct 12 Oct 13 Oct 14 Oct 15US Europe Japan
Global Natural Gas Prices
(in US$ per million BTU)
Source: World Bank as of 1 September 2015
Energy: Supply that has only begun to react to lower prices and slower
growth’s impact on demand questions point to extended weakness in crudeprices. The Citi commodities team sees modest recovery in coming years,leaving crude well below the $100 level of recent years.
Precious Metals: Gold lacks major drivers as US monetary and fiscalpolicy are well contained (policy rate hiking seen coming and deficitsslashed from crisis levels) and jewelry demand in EM looks flat.
Industrial Metals: Supply outlooks have weakened as some productionlooks likely to be cut as uneconomic (e.g. China) . China demand howeverlooks surprisingly strong, especially for energy transformation purposes.
Agriculture: The Citi commodities team expects somewhat balancedmarkets ahead, which translates into a flat forward prices structure forthese markets.
Spot 4Q15 4Q16 5Yr CyclicalEnergy
WTI Crude USD/bl 42.5 42.0 55.0 70.0 Brent Crude USD/bl 45.4 45.0 60.0 75.0 Natural Gas (USD/MMBtu) 2.24 2.40 3.20 3.50 Base Metals
LME Aluminium USD/mt 1,458 1,495 1,530 2,200 LME Copper USD/mt 4,573 4,930 5,550 6,200 LME Nickel USD/mt 8,775 9,600 12,500 21,000 Bulk Commodities
Iron Ore Spot (TSI) USD/mt 44.10 48.00 40.00 55.00 Precious Metals
Gold USD/oz 1,063 1,075 960 1,050 Silver USD/oz 14.11 14.70 14.00 16.50 Platinum USD/oz 830 910 1,050 1,763 Agriculture
Corn (USd/bu) 363 370 400 N/AWheat (USd/bu) 460 490 525 N/ASource: Citi Research 30 Nov 2015. Forecasts are period averages. Spot: 30 Nov 2015.
Citi Research Commodity Price Forecasts
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Charts and tables are for illustrative purposes only. Refer to Important Information at the end of thispresentation. Indices are not managed, have no expenses and cannot be directly invested in.
8
Global GDP Rates 2015F 2016F 2017F
Global 2.6% 2.8% 3.1%
Industrial Countries 1.9% 2.0% 2.0%
United States 2.5% 2.5% 2.5%
Japan 0.6% 0.7% 0.3%
Euro Area 1.5% 1.8% 1.7%
United Kingdom 2.4% 2.3% 2.3%
Emerging Markets 3.5% 4.0% 4.7%
China 6.9% 6.3% 6.2%
India 7.5% 7.8% 8.2%
Russia -3.7% 0.5% 2.2%
Brazil -3.2% -2.2% 0.9%
Mexico 2.5% 2.8% 3.5%Source: Citi Research, 30 November 2015
Policy Rates ForecastsCurrent 1Q16 2Q16 3Q16 4Q16 1Q17
United States 0.25 0.50 0.75 0.75 1.00 1.25
Japan 0.10 0.10 0.10 0.10 0.10 0.10
Euro Area 0.05 0.05 0.05 0.05 0.05 0.05
United Kingdom 0.50 0.50 0.50 0.50 0.50 0.50Source: Citi Research, 30 November 2015
Citi House View Summary
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of f uture events.
The investor should not base its decision to enter into a trade solely on the basis of the forecasts.
Gold
Equities
Cash
Fixed Income
Neutral Neutral
UnderweightOverweight
Alternatives
Neutral
Global Asset Allocation
1. Europe: Core, Peripheryand UK
2. US
3. Japan
4. Emerging Markets
5. Developed Asia ex-Japan
1. Corporate High Grade(focus on 7- to 10-yearbonds)
2. High Yield
3. Emerging Markets
4. Inflation Linked
5. Developed Sovereign(ranking: US, Japan,Europe)
Citi Research Economic Outlook
Our economists forecast below trend global GDP growth in 2016, steady growth in theUS and mild European reflation on QE. Removal of accommodative policy in the USand UK and decline of EM macro advantages are significant challenges. EnhancedEurozone and Japan QE will likely provide support.
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Charts and tables are for illustrative purposes only. Refer to Important Information at the end of thispresentation. Indices are not managed, have no expenses and cannot be directly invested in.
9
Global Asset Allocation
Strategic Asset Allocation Pies
Adaptive Valuation Strategies (AVS)
Source: Citi Private Bank's Global
Investment Committee, October 2015
Strategic Asset Allocation Commentary
Adaptive Valuation Strategies (AVS), our proprietarystrategic asset allocation methodology, uses a valuation-driven forecasting method and employs a riskmeasurement framework that draws on historicalperformance metrics to set allocation levels.
Changes to the Strategic Asset Allocation areimplemented annually in the beginning of each calendar
year.
Cash: 12%
Fixed Income: 76%
Equities: 4 %
Hedge Funds: 8%
Precious Metals: 0%
Level 1Seeks liquidity management andcapital preservation
Cash: 8%
Fixed Income: 53%
Equities: 25%
Hedge Funds: 14%
Precious Metals: 0%
Level 2Seeks income generation andcapital preservation
Cash: 2%
Fixed Income: 30%
Equities: 52%
Hedge Funds: 16%
Precious Metals: 0%
Level 3Seeks modest capital appreciationand, secondly, capital
Cash: 0%
Fixed Income: 21%
Equities: 79%
Hedge Funds: 0%
Precious Metals: 0%
Level 4Seeks long-term growth of capitalwith moderate volatility
Cash: 0%
Fixed Income: 3%
Equities: 97%
Hedge Funds: 0%
Precious Metals: 0%
Level 5Seeks maximum long-term growthof capital
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Charts and tables are for illustrative purposes only. Refer to Important Information at the end of thispresentation. Indices are not managed, have no expenses and cannot be directly invested in.
10
Global Asset Allocation
Tactical Asset Allocation Pies
Source: Citi Private Bank's Global
Investment Committee, October 2015
Global Investment Committee (GIC)
Tactical Asset Allocation Commentary
The Global Investment Committee (GIC) adds a monthlytactical under/overweight overlay to the strategicallocation recommendation. The GIC incorporatesquantitative and qualitative inputs, such as economicdata, forecasts and observed market trends.
The GIC continues to have a tilt to risky assets: anoverweight to equities (focus on DM; small EM equity
overweight) and an underweight to fixed income (strongunderweight to DM sovereign debt; small overweight toriskier HY).
A process of risk reduction is anticipated, expressed sofar in a shift to overweight in HG.
Cash: 12%
Fixed Income: 74%
Equities: 7 %
Hedge Fu nds: 8%
Precious Metals: 0%
Level 1Seeks liquidity management andcapital preservation
Cash: 7%
Fixed Income: 50%
Equities: 29%
Hedge Funds: 14%
Precious Metals: 0%
Level 2Seeks income generation andcapital preservation
Cash: 1%
Fixed Income: 25%
Equities: 58%
Hedge Funds: 16%
Precious Metals: 0%
Level 3Seeks modest capital appreciationand, secondly, capital preservation
Cash: 0%
Fixed Income: 6%
Equities: 74%
Hedge Funds: 20%
Precious Metals: 0%
Level 4Seeks long-term growth of capitalwith moderate volatility
Cash: 0%
Fixed Income: 0%
Equities: 80%
Hedge Funds: 20%
Precious Metals: 0%
Level 5Seeks maximum long-term growthof capital
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Charts and tables are for illustrative purposes only. Refer to Important Information at the end of thispresentation. Indices are not managed, have no expenses and cannot be directly invested in.
11
Global Asset Allocation: Our Active Stance Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)
Our Active Tactical Stance on Asset Allocation
Tilt Toward Risk: moderate overweight equities andunderweight to fixed income.
Overweight to developed markets (DM) High Grade (HG)and High Yield (HY) corporate debt.
Moderate underweight to DM sovereign debt and smallunderweight to emerging markets (EM) debt (expressedas strong underweight to LatAm debt).
Overweight DM equities (Europe large and small/mid cap,UK, US large, Japan). Small overweight EM Asia equities(China, Taiwan, India). Underweight Brazil, South Africaand Turkey. Neutral US SMID.
Change to Tactical Asset Allocation
Reduced overweights to US Large Caps, China equities,
Taiwan equities. South Africa and Turkey equities droppedto underweight.
Reduced underweight to UK gilts, US short termtreasuries and US MBS.
US intermediate treasuries raised to neutral.
Eurozone corporate HG raised to small overweight.
December 2015 Over/Underweights: with Alternatives
Level 1 Level 2 Level 3 Level 4 Level 5Cash 0.0% 0.0% 0.0% 0.0% 0.0%Fixed Income -1.4% -2.3% -3.5% -3.8% 0.0%Developed Sovereign FI -4.6% - 5.6% -4.9% - 3.1% 0.0%North America 0.3% 0.1% -0.3% -0.5% 0.0%Europe -1.8% -2.2% -1.9% -1.3% 0.0% Asia ex Japan 0.0% 0.0% 0.0% 0.0% 0.0%Japan -3.2% -3.6% -2.6% -1.3% 0.0%Supranational/Agencies 0.1% 0.0% 0.0% 0.0% 0.0%Developed Inv estment Grade FI 2.5% 2.5% 1.1% -0.7% 0.0%Developed High Yield FI 1.1% 1.2% 0.8% 0.2% 0.0%
Emerging Market FI -0.3% -0.4% -0.5% -0.2% 0.0%Emerging Market Asia FI -0.1% - 0.1% -0.1% - 0.1% 0.0%Emerging Market EMEA FI -0.2% -0.2% -0.3% -0.1% 0.0%Emerging Market LatAm FI -0.1% -0.1% -0.1% 0.0% 0.0%Equities 1.4% 2.3% 3.5% 3.8% 0.0%Developed Market EQ 1.2% 2.1% 3.4% 3.8% 0.6%North America Large Cap 0.6% 0.7% 0.7% 0.5% -1.4%North America Small/Mid Cap 0.1% 0.1% -0.1% -0.2% -0.6%Europe Equities 0.4% 1.0% 2.1% 2.6% 2.0%Japan Equities 0.1% 0.3% 0.7% 0.9% 0.7%
Asian Equities 0.1% 0.1% 0.0% 0.0% -0.2%Emerging Markets EQ 0.2% 0.2% 0.1% 0.0% -0.6%Emerging Latin America Equities 0.0% - 0.1% -0.4% - 0.5% - 0.7%Emerging EMEA Equities 0.0% 0.0% - 0.2% - 0.3% - 0.4%Emerging Asia Equities 0.1% 0.3% 0.7% 0.8% 0.5%Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 0.0% 0.0% 0.0% 0.0% 0.0%Source: Citi Private Bank's Global Investment Committee, 19 November 2015
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Charts and tables are for illustrative purposes only. Refer to Important Information at the end of thispresentation. Indices are not managed, have no expenses and cannot be directly invested in.
12
Global Asset Allocation: Strategic and Tactical Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)
December 2015 Strategic Allocations: with Alternatives
Level 1 Level 2 Level 3 Level 4 Level 5Cash 12.0% 8.0% 2.0% 0.0% 0.0%Fixed Income 75.6% 53.0% 30.0% 12.3% 0.0%Developed Sovereign FI 38.4% 26.9% 14.1% 6.2% 0.0%North America 11.5% 8.1% 4.2% 1.9% 0.0%Europe 16.3% 11.4% 6.0% 2.6% 0.0% Asia ex Japan 0.3% 0.2% 0.1% 0.0% 0.0%Japan 9.4% 6.6% 3.5% 1.5% 0.0%Supranational/Agencies 0.9% 0.6% 0.3% 0.2% 0.0%Developed Inv estment Grade FI 32.7% 22.9% 12.0% 5.3% 0.0%Developed High Yield FI 2.3% 1.6% 1.9% 0.4% 0.0%
Emerging Market FI 2.3% 1.6% 2.1% 0.4% 0.0%Emerging Market Asia FI 1.6% 1.1% 1.5% 0.3% 0.0%Emerging Market EMEA FI 0.3% 0.2% 0.3% 0.1% 0.0%Emerging Market LatAm FI 0.3% 0.2% 0.3% 0.1% 0.0%Equities 4.4% 25.0% 52.0% 67.7% 80.0%Developed Market EQ 3.8% 21.8% 45.3% 59.1% 69.8%North America Large Cap 1.9% 10.9% 22.6% 29.5% 34.8%North America Small/Mid Cap 0.3% 1.9% 4.0% 5.2% 6.1%Europe Equities 1.1% 6 .1% 12.7% 16.5% 19.5%Japan Equities 0.3% 1.8% 3.8% 4.9% 5.8%
Asian Equities 0.2% 1.1% 2.2% 2.9% 3.4%Emerging Markets EQ 0.6% 3.2% 6.7% 8.7% 10.3%Emerging Latin America Equities 0.1% 0.6% 1.3% 1.7% 2.0%Emerging EMEA Equities 0.1% 0.6% 1.2% 1.6% 1.8%Emerging Asia Equities 0.4% 2.0% 4.2% 5.5% 6.4%Hedge Funds 8.0% 14.0% 16.0% 20.0% 20.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 100.0% 100.0% 100.0% 100.0% 100.0%Source: Citi Private Bank's Global Investment Committee, 19 November 2015
December 2015 Tactical Allocations: with Alternatives
Level 1 Level 2 Level 3 Level 4 Level 5Cash 12.0% 8.0% 2.0% 0.0% 0.0%Fixed Income 74.2% 50.6% 26.5% 8.5% 0.0%Developed Sovereign FI 33.7% 21.3% 9.2% 3.1% 0.0%North America 11.8% 8.2% 3.9% 1.4% 0.0%Europe 14.5% 9.2% 4.0% 1.4% 0.0% Asia ex Japan 0.3% 0.2% 0.1% 0.0% 0.0%Japan 6.2% 3.0% 0.8% 0.2% 0.0%Supranational/Agencies 1.0% 0.7% 0.3% 0.1% 0.0%Developed Inv estment Grade FI 35.2% 25.4% 13.0% 4.6% 0.0%Developed High Yield FI 3.4% 2.8% 2.7% 0.6% 0.0%
Emerging Market FI 1.9% 1.2% 1.6% 0.2% 0.0%Emerging Market Asia FI 1.5% 1.0% 1.4% 0.2% 0.0%Emerging Market EMEA FI 0.2% 0.1% 0.0% 0.0% 0.0%Emerging Market LatAm FI 0.3% 0.2% 0.2% 0.0% 0.0%Equities 5.8% 27.4% 55.5% 71.5% 80.0%Developed Market EQ 5.1% 24.0% 48.7% 62.9% 70.3%North America Large Cap 2.5% 11.6% 23.3% 30.0% 33.4%North America Small/Mid Cap 0.4% 2.0% 3.9% 5.0% 5.5%Europe Equities 1.5% 7 .1% 14.8% 19.2% 21.6%Japan Equities 0.4% 2.1% 4.5% 5.8% 6.6%
Asian Equities 0.2% 1.1% 2.3% 2.9% 3.3%Emerging Markets EQ 0.7% 3.4% 6.8% 8.7% 9.7%Emerging Latin America Equities 0.1% 0.5% 0.9% 1.1% 1.3%Emerging EMEA Equities 0.1% 0.5% 1.0% 1.3% 1.4%Emerging Asia Equities 0.5% 2.3% 4.9% 6.3% 7.0%Hedge Funds 8.0% 14.0% 16.0% 20.0% 20.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 100.0% 100.0% 100.0% 100.0% 100.0%Source: Citi Private Bank's Global Investment Committee, 19 November 2015
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Charts and tables are for illustrative purposes only. Refer to Important Information at the end of thispresentation. Indices are not managed, have no expenses and cannot be directly invested in.
13
Global Asset Allocation: Changes from Last Month Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)
December 2015 Strategic Allocations: Change
Level 1 Level 2 Level 3 Level 4 Level 5Cash 0.0% 0.0% 0.0% 0.0% 0.0%Fixed Income 0.0% 0.0% 0.0% 0.0% 0.0%Developed Sovereign FI 0.0% 0.0% 0.0% 0.0% 0.0%North America 0.0% 0.0% 0.0% 0.0% 0.0%Europe 0.0% 0.0% 0.0% 0.0% 0.0% Asia ex Japan 0.0% 0.0% 0.0% 0.0% 0.0%Japan 0.0% 0.0% 0.0% 0.0% 0.0%Supranational/Agencies 0.0% 0.0% 0.0% 0.0% 0.0%Developed Inv estment Grade FI 0.0% 0.0% 0.0% 0.0% 0.0%Developed High Yield FI 0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market Asia FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market EMEA FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market LatAm FI 0.0% 0.0% 0.0% 0.0% 0.0%Equities 0.0% 0.0% 0.0% 0.0% 0.0%Developed Market EQ 0.0% 0.0% 0.0% 0.0% 0.0%North America Large Cap 0.0% 0.0% 0.0% 0.0% 0.0%North America Small/Mid Cap 0.0% 0.0% 0.0% 0.0% 0.0%Europe Equities 0.0% 0.0% 0.0% 0.0% 0.0%Japan Equities 0.0% 0.0% 0.0% 0.0% 0.0%
Asian Equities 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Markets EQ 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Latin America Equities 0.0% 0.0% 0.0% 0.0% 0.0%Emerging EMEA Equities 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Asia Equities 0.0% 0.0% 0.0% 0.0% 0.0%Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 0.0% 0.0% 0.0% 0.0% 0.0%Source: Citi Private Bank's Global Investment Committee, 19 November 2015
December 2015 Tactical Allocations: Change
Level 1 Level 2 Level 3 Level 4 Level 5Cash 0.3% 0.5% 0.8% 0.0% 0.0%Fixed Income 0.5% 0.8% 1.2% 2.2% 0.0%Developed Sovereign FI 1.1% 1.3% 1.1% 1.0% 0.0%North America 0.9% 1.1% 0.8% 0.5% 0.0%Europe 0.0% 0.1% 0.2% 0.4% 0.0% Asia ex Japan 0.1% 0.1% 0.1% 0.0% 0.0%Japan 0.0% 0.0% 0.0% 0.0% 0.0%Supranational/Agencies -0.0% -0.0% 0.0% 0.0% 0.0%Developed Inv estment Grade FI -0.4% -0.3% 0.2% 1.0% 0.0%Developed High Yield FI -0.1% -0.1% 0.0% 0.1% 0.0%
Emerging Market FI -0.1% -0.1% 0.0% 0.0% 0.0%Emerging Market Asia FI -0.1% -0.1% 0.0% 0.0% 0.0%Emerging Market EMEA FI 0.0% 0.0% 0.0% 0.0% 0.0%Emerging Market LatAm FI -0.0% - 0.0% 0.0% 0.0% 0.0%Equities -0.8% -1.3% -2.0% -2.2% 0.0%Developed Market EQ -0.7% -1.0% -1.2% -1.1% 0.9%North America Large Cap - 0.3% -0.6% -1.0% - 1.1% - 0.2%North America Small/Mid Cap -0.1% -0.1% -0.1% -0.1% 0.1%Europe Equities -0.2% -0.2% -0.1% -0.0% 0 .7%Japan Equities -0.1% -0.1% -0.0% 0.0% 0.3%
Asian Equities -0.0% -0.0% 0.0% 0.0% 0.1%Emerging Markets EQ - 0.1% - 0.4% - 0.8% - 1.0% - 0.9%Emerging Latin America Equities -0.0% -0.0% 0.0% 0.1% 0.2%Emerging EMEA Equities - 0.0% -0.1% -0.2% - 0.2% - 0.2%Emerging Asia Equities - 0.1% - 0.3% - 0.6% - 0.9% - 0.9%Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 0.0% 0.0% 0.0% 0.0% 0.0%Source: Citi Private Bank's Global Investment Committee, 19 November 2015
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Charts and tables are for illustrative purposes only. Refer to Important Information at the end of thispresentation. Indices are not managed, have no expenses and cannot be directly invested in.
14
Non-Illiquid Asset Allocations: Strategic and Tactical Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC) Excluding Hedge Funds
December 2015 Strategic Allocations: Traditionals
Level 1 Level 2 Level 3 Level 4 Level 5Cash 12.0% 8.0% 4.0% 0.0% 0.0%Fixed Income 79.0% 59.0% 33.3% 20.9% 3.3%Developed Sovereign FI 40.1% 29.9% 16.9% 10.6% 1.7%North America 12.0% 9.0% 5.1% 3.2% 0.5%Europe 17.0% 12.7% 7.2% 4.5% 0.7% Asia ex Japan 0.3% 0.2% 0.1% 0.1% 0.0%Japan 9.9% 7.4% 4.2% 2.6% 0.4%Supranational/Agencies 1.0% 0.7% 0.4% 0.3% 0.0%Developed Inv estment Grade FI 34.2% 25.5% 14.4% 9.0% 1.4%Developed High Yield FI 2.4% 1.8% 1.0% 0.6% 0.1%
Emerging Market FI 2.4% 1.8% 1.0% 0.6% 0.1%Emerging Market Asia FI 1.7% 1.3% 0.7% 0.4% 0.1%Emerging Market EMEA FI 0.3% 0.3% 0.1% 0.1% 0.0%Emerging Market LatAm FI 0.4% 0.3% 0.2% 0.1% 0.0%Equities 9.0% 33.0% 62.7% 79.2% 96.7%Developed Market EQ 7.8% 28.8% 54.7% 69.0% 84.3%North America Large Cap 3.9% 14.4% 27.3% 34.4% 42.1%North America Small/Mid Cap 0.7% 2.5% 4.8% 6.1% 7.4%Europe Equities 2.2% 8 .1% 15.3% 19.3% 23.6%Japan Equities 0.7% 2.4% 4.6% 5.8% 7.0%
Asian Equities 0.4% 1.4% 2.7% 3.4% 4.2%Emerging Markets EQ 1.2% 4.2% 8.0% 10.1% 12.4%Emerging Latin America Equities 0.2% 0.8% 1.6% 2.0% 2.4%Emerging EMEA Equities 0.2% 0.8% 1.4% 1.8% 2.2%Emerging Asia Equities 0.7% 2.7% 5.0% 6.4% 7.8%Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 100.0% 100.0% 100.0% 100.0% 100.0%Source: Citi Private Bank's Global Investment Committee, 19 November 2015
December 2015 Tactical Allocations: Traditionals
Level 1 Level 2 Level 3 Level 4 Level 5Cash 12.0% 8.0% 4.0% 0.0% 0.0%Fixed Income 77.6% 56.6% 29.8% 17.1% 0.0%Developed Sovereign FI 35.3% 23.8% 11.3% 6.3% 0.0%North America 12.4% 9.1% 4.8% 2.7% 0.0%Europe 15.1% 10.3% 4.9% 2.7% 0.0% Asia ex Japan 0.3% 0.2% 0.1% 0.1% 0.0%Japan 6.5% 3.4% 1.0% 0.5% 0.0%Supranational/Agencies 1.0% 0.8% 0.4% 0.2% 0.0%Developed Inv estment Grade FI 36.8% 28.4% 15.9% 9.2% 0.0%Developed High Yield FI 3.5% 3.2% 2.0% 1.2% 0.0%
Emerging Market FI 2.0% 1.3% 0.6% 0.3% 0.0%Emerging Market Asia FI 1.6% 1.1% 0.5% 0.3% 0.0%Emerging Market EMEA FI 0.2% 0.1% 0.0% 0.0% 0.0%Emerging Market LatAm FI 0.3% 0.2% 0.1% 0.0% 0.0%Equities 10.4% 35.4% 66.2% 83.0% 100.0%Developed Market EQ 9.1% 31.0% 58.1% 72.9% 87.9%North America Large Cap 4.5% 15.0% 27.8% 34.8% 41.8%North America Small/Mid Cap 0.8% 2.6% 4.6% 5.8% 6.9%Europe Equities 2.6% 9 .1% 17.6% 22.2% 27.0%Japan Equities 0.8% 2.8% 5.3% 6.8% 8.2%
Asian Equities 0.4% 1.5% 2.7% 3.4% 4.1%Emerging Markets EQ 1.3% 4.4% 8.1% 10.1% 12.1%Emerging Latin America Equities 0.2% 0.7% 1.1% 1.3% 1.6%Emerging EMEA Equities 0.2% 0.7% 1.2% 1.5% 1.8%Emerging Asia Equities 0.9% 3.0% 5.8% 7.3% 8.7%Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%Total 100.0% 100.0% 100.0% 100.0% 100.0%Source: Citi Private Bank's Global Investment Committee, 19 November 2015
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Charts and tables are for illustrative purposes only. Refer to Important Information at the end of thispresentation. Indices are not managed, have no expenses and cannot be directly invested in.
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Asset Class PerformanceThe Case for Diversification
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
MSCI Emerging
Markets39.4%
BarCap US Gov 10-
Year 18.9%
MSCI Emerging
Markets78.5%
DJ Equity REIT
Index27.7%
BarCap US Gov 10-
Year 15.5%
DJ Equity REIT
Index19.6%
Russell 2000 Small
Cap Index38.8%
DJ Equity REIT
Index28.0%
S&P 500 Large Cap
Index3.5%
BarCap Global Corp
HY
13.3%
BarCap Global Corp
-5.1%
BarCap Global Corp
HY
36.7%
Russell 2000 Small
Cap Index
26.9%
DJ Equity REIT
Index
7.5%
MSCI Emerging
Markets
18.2%
S&P 500 Large Cap
Index
32.4%
S&P 500 Large Cap
Index
13.7%
DJ Equity REIT
Index
2.1%
Bloomberg
Commodity Index
11.1%
BarCap Global Corp
HY
-5.9%
DJ Equity REIT
Index
28.5%
MSCI Emerging
Markets
18.9%
BarCap Global Corp
4.8%
Russell 2000 Small
Cap Index
16.3%
BarCap Global Corp
HY
4.7%
BarCap US Gov 10-
Year
8.8%
BarCap US Gov 10-
Year
2.0%
BarCap US Gov 10-Year
10.4%
Russell 2000 SmallCap Index
-33.8%
Russell 2000 SmallCap Index
27.2%
BloombergCommodity Index
16.7%
BarCap Global CorpHY
3.0%
BarCap Global CorpHY
16.0%
DJ Equity REITIndex
2.7%
BarCap Global Corp7.6%
Russell 2000 SmallCap Index
1.0%
S&P 500 Large Cap
Index
5.5%
Bloomberg
Commodity Index
-36.6%
S&P 500 Large Cap
Index
26.5%
S&P 500 Large Cap
Index
15.1%
S&P 500 Large Cap
Index
2.1%
S&P 500 Large Cap
Index
16.0%
BarCap Global Corp
0.1%
BarCap Global Corp
HY
5.0%
BarCap Global Corp
HY
0.8%
BarCap Global Corp
3.2%
S&P 500 Large Cap
Index
-37.0%
Bloomberg
Commodity Index
18.7%
BarCap Global Corp
HY
9.7%
Russell 2000 Small
Cap Index
-4.2%
BarCap Global Corp
10.9%
MSCI Emerging
Markets
-2.6%
Russell 2000 Small
Cap Index
4.9%
BarCap Global Corp
0.4%
Russell 2000 Small
Cap Index
-1.6%
DJ Equity REIT
Index
-37.6%
BarCap Global Corp
16.6%
BarCap US Gov 10-
Year
9.4%
Bloomberg
Commodity Index
-13.4%
BarCap US Gov 10-
Year
3.8%
BarCap US Gov 10-
Year
-5.8%
MSCI Emerging
Markets
-2.2%
MSCI Emerging
Markets
-11.7%
DJ Equity REIT
Index
-15.6%
MSCI Emerging
Markets
-53.3%
BarCap US Gov 10-
Year
6.9%
BarCap Global Corp
7.2%
MSCI Emerging
Markets
-18.4%
Bloomberg
Commodity Index
-1.1%
Bloomberg
Commodity Index
-9.6%
Bloomberg
Commodity Index
-17.0%
Bloomberg
Commodity Index
-21.9%
Source: Bloomberg, 30 Nov 2015
Past performance is not an indication of future results
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Brazilian Bovespa: The Bovespa Index is a gross total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Exchange. The
Bovespa Index has been divided 10 times by a factor of 10 since Jan 1, 1985: 12/02/85, 08/29/88, 04/14/89, 01/12/90, 05/28/91, 01/21/92, 01/26/93, 08/27/93, 02/10/94, and 03/03/97.
Citigroup Global Markets High Yield Market Index : A measure that tracks actual economic data relative to consensus estimates of market economists
Citigroup Global Markets High Yield Market Index: The High-Yield Market Index includes cash-pay, deferred-interest, and Rule 144A bonds with remaining maturities of at least one
year and a minimum amount outstanding of $100 million. The issuers must be domiciled in the United States or Canada for consideration in this index.
Citigroup Global Emerging Market Sovereign Bond Index: The Global Emerging Market Sovereign Bond Index (ESBI) includes Brady bonds and US dollar-denominated emerging
market sovereign debt issued in the global, Yankee, and Eurodollar markets excluding loans. The ESBI offers diversification benefits with respect to the geographical and asset class
dimensions. It comprises debt in Africa, Asia, Europe, and Latin America.
The Consumer Confidence Survey: Reflects prevailing business conditions and likely developments for the months ahead. This monthly report details consumer attitudes and buying
intentions, with data available by age, income, and region
CPI Inflation: Consumer Price Index (CPI) - The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of US inflation. The US
Department of Labor publishes the CPI every month.
Current Balance: The difference between the nation's total exports of goods, services and transfers and its total imports of them. Current account balance calculations exclude
transactions in financial assets and liabilities.
Currency Abbreviations: AUD: Australia; NZD: New Zealand; NOK: Norway; GBP: UK; EUR: Euro Zone; SEK: Sweden; CAD: Canada; CHF: Switzerland; JPY: Japan; ZAR: South
Africa; PLN: Poland; BRL: Brazil; RUB: Russia; KRW: Korea; TRY: Turkey; MXN: Mexico; CNY: China; INR: India
DJIA: Dow Jones Industrial Average - The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that
trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest US companies are performing.
DXY (or US Dollar) Index: The DXY Index represents a basket of currencies, giving a price level for the US dollar.
Event Driven: In the context of hedge funds, a style of management that combines many different types of hedge fund investing such as merger arbitrage, distressed securities and high
yield investing, in conjunction with an important "event" that is supposed to unlock firm value (like a merger announcement, earnings announcement, or a regulator decision).
EM Currency Index:
Fiscal Balance: The Fiscal Balance represents the difference between General Government revenues over expenses. It includes capital expenditure, but excludes depreciation.
Glossary
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Glossary (Cont’d)
Global Macro: Directional Macro strategies frequently employ leverage and may trade futures, options on future contracts and foreign exchange contracts as well as trade in diversified
markets or focus on one market sector. Two types of strategies employed by directional macro managers are discretionary and systematic trading.
Hang Seng China Enterprises Index (H shares): The Hang Seng China Enterprises Index is a free-float capitalization-weighted index comprised of H-Shares listed on the Hong Kong
Stock Exchange and included in the Hang Seng Mainland Composite Index.
Industrial Production: Measures the output of the industrial sector of an economy. The industrial sector includes manufacturing, mining, and utilities.
LIBOR: London Interbank Offered Rate - A short-term interest rate often quoted as a 1,3,6-month rate for U.S. dollars.
Managed Futures: In the context of hedge funds, a style of management that focuses on short-term trading in the futures market.
Mexican Bolsa: A capitalization weighted index of the leading stocks traded on the Mexican Stock Exchange. The index was developed with a base level of .78 as of October 30, 1978.
MSCI World Consumer Discretionary Price Index: An index measuring the performance of the Consumer Discretionary equities of developed countries including U.S.; a useful
benchmark for global funds.
MSCI World Free Index: An index measuring the performance of equities of developed and EM countries; a useful benchmark for global funds.
Nikkei 225 Index: Applies mainly to international equities. Price-weighted average of 225 stocks of the first section of the Tokyo Stock Exchange started on May 16, 1949. Japanese
equivalent of the US Dow.
Repo rate: A repo is a repurchase agreement. A procedure for borrowing money by selling securities to a counterparty and agreeing to buy them back later at a slightly higher price
based on a rate of interest called the repo rate.
Russell Mid-Cap Index: A market capitalization-weighted benchmark index made up of the 800 smallest US companies in the Russell 1000.
Russell Top 200 Growth Index: A market capitalization-weighted benchmark index made up of the largest 200 US companies by market cap that exhibit growth characteristics.
Russell Top 200 Value Index: A market capitalization-weighted benchmark index made up of the largest 200 US companies by market cap that exhibit value characteristics.
Russell 2000 Index: A market capitalization-weighted benchmark index made up of the 2000 smallest US companies in the Russell 3000.
S&P/ Case-Shiller US National is the broadest national measurement of home prices, with coverage going beyond the 20 MSAs that make up the composites.
S&P/Case-Shiller Composite-20 Home Price Index reflects price changes for Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle, Tampa, Boston,
Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington DC. In addition to those 10 markets.
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Glossary (Cont’d)
S&P/Case-Shiller Index, New York Tiers: The S&P/Case-Shiller New York Home Price Index measures the average change in value of residential real estate in New York given a
constant level of quality. It is included in the S&P/Case-Shiller Home Price Index Series which seeks to measure changes in the total value of all existing single-family housing stock.
S&P/Case-Shiller Index, Miami Tiers: This S&P/Case-Shiller Miami Home Price Index measures the average change in value of residential real estate in Miami given a constant level
of quality. It is included in the S&P/Case-Shiller Home Price Index Series which seeks to measure changes in the total value of all existing single-family housing stock.
S&P 400 Index: A market capitalization-weighted benchmark index made up of 400 securities with market values between $200 million and $5 billion
S&P 500 Index: Index of 500 widely held common stocks that measures the general performance of the market.
Shanghai Shenzhen CSI 300 Index (A shares):
VIX Index: The Chicago Board Options Exchange SPX Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide
range of strikes 1st & 2nd month expirations are used until 8 day from expiration, then the 2nd and 3rd are used.
U.S. Treasuries: Interest-bearing obligations if the U.S. government issued by the U.S. Department of the Treasury as a means of borrowing money to meet government
expenditures not covered by tax revenues. There are three types of marketable Treasury securities-bills, notes and bonds.
U.S. Investment-Grade Bonds: A bond that is assigned a rating in the top four categories by commercial credit rating companies. S&P classifies investment-grade bonds as BBB or
higher, and Moody's classifies investment grade bonds as BAA or higher. Related: High-yield bond.
U.S. High Yield Bonds: A bond with a speculative credit rating of BB (S&P) or BA (Moody's) or lower. Junk or high-yield bonds offer investors higher yields than bonds of financially
sound companies. Two agencies, Standard & Poors and Moody's Investor Services, provide the rating systems for companies' credit.
Wilshire 5000 Index: Measures the performance of all US equity securities with readily available price data. Over 5,000 capitalization weighted security returns are used to adjust the
index. The Wilshire 5000 base is its 12/31/1980 capitalization of $1,404.596 billion.
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Glossary (Agency Ratings)
Moody's
Investment grade
Aaa: Moody judges obligations rated Aaa to be the highest quality,with the "smallest degree of risk".Aa1, Aa2, Aa3: Moody judges obligations rated Aa to be highquality, with "very low credit risk", but "their susceptibility to long-term risks appears somewhat greater".A1, A2, A3: Moody judges obligations rated A as "upper-mediumgrade", subject to "low credit risk", but that have elements "presentthat suggest a susceptibility to impairment over the long term".Baa1, Baa2, Baa3: Moody judges obligations rated Baa to be
"moderate credit risk". They are considered medium-grade and assuch "protective elements may be lacking or may becharacteristically unreliable".
Speculative grade
Ba1, Ba2, Ba3: Moody judges obligations rated Ba to have"questionable credit qualityB1, B2, B3: Moody judges obligations rated B as speculative and"subject to high credit risk", and have "generally poor creditquality."Caa1, Caa2, Caa3: Moody judges obligations rated Caa as of "poorstanding and are subject to very high credit risk", and have"extremely poor credit quality. Such banks may be in default..."Ca: Moody judges obligations rated Ca as "highly speculative" andare "usually in default on their deposit obligations".C: Moody judges obligations rated C as "the lowest rated class ofbonds and are typically in default," and "potential recovery valuesare low".
S&P
Investment Grade
AAA: the best quality borrowers, reliable and stable(many of them governments)AA: quality borrowers, a bit higher risk than AAAA: economic situation can affect financeBBB: medium class borrowers, which are satisfactoryat the moment
Non-Investment Grade
BB: more prone to changes in the economy
B: financial situation varies noticeablyCCC: currently vulnerable and dependent onfavorable economic conditions to meet itscommitmentsCC: highly vulnerable, very speculative bondsC: highly vulnerable, perhaps in bankruptcy or inarrears but still continuing to pay out on obligationsCI: past due on interestR: under regulatory supervision due to its financialsituationSD: has selectively defaulted on some obligationsD: has defaulted on obligations and S&P believes thatit will generally default on most or all obligationsNR: not rated
Fitch
Investment grade
AAA: the best quality companies, reliableand stableAA: quality companies, a bit higher riskthan AAAA: economic situation can affect financeBBB: medium class companies, which aresatisfactory at the moment
Non-investment grade
BB: more prone to changes in the economyB: financial situation varies noticeablyCCC: currently vulnerable and dependenton favorable economic conditions to meetits commitmentsCC: highly vulnerable, very speculativebondsC: highly vulnerable, perhaps in bankruptcyor in arrears but still continuing to pay outon obligationsD: has defaulted on obligations and Fitchbelieves that it will generally default onmost or all obligationsNR: not publicly rated
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This material may mention options regulated by the U.S. Securities and Exchange Commission. Before buying or selling options you should obtain andreview the current version of the Options Clearing Corporation booklet, Characteristics and Risks of Standardized Options. A copy of the booklet can beobtained upon request from Citigroup Global Markets Inc., 390 Greenwich Street, 3rd Floor, New York, NY 10013 or by clicking the following links,http://www.theocc.com/components/docs/riskstoc.pdf http://www.theocc.com/components/docs/about/publications/november_2012_supplement.pdf
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Investments in financial instruments or other products carry significant risk, including the possible loss of the principal amount invested. Financialinstruments or other products denominated in a foreign currency are subject to exchange rate fluctuations, which may have an adverse effect on the price
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