The information contained in this presentation is distributed for informational purposes only and should not be considered investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. The information contained in this presentation is accurate as of the date submitted, but is subject to change. Any performance information referenced in this presentation represents past performance and is not indicative of future returns. Any projections, targets, or estimates in this presentation are forward looking statements and are based on Epoch’s research, analysis, and assumptions made by Epoch. There can be no assurances that such projections, targets, or estimates will occur and the actual results may be materially different. Other events which were not taken into account in formulating such projections, targets, or estimates may occur and may significantly affect the returns or performance of any accounts and/or funds managed by Epoch. To the extent this presentation contains information about specific companies or securities including whether they are profitable or not, they are being provided as a means of illustrating our investment thesis. Past references to specific companies or securities are not a complete list of securities selected for clients and not all securities selected for clients in the past year were profitable.
Global Choice
Presented to: Public Employees' Retirement System of Mississippi | June 22, 2020
WILLIAM W. PRIEST, CFACEO, Co-CIO & Portfolio Manager
WILLIAM J. BOOTH, CFAManaging Director, Co-Chief Investment Officer & Portfolio Manager
SCOTT WEISENBERGERManaging Director, Global Portfolio Management
399 Park Ave, New York, NY 10022
2
Topics for Discussion
2
EPOCH INVESTMENT
PARTNERS
Firm and Client Profile
Global Choice Team
Process
1 3
CLIENT INVESTMENT REVIEW
Performance and Attribution
Portfolio Positioning
Track Record
4
A RELATIONSHIP
WITH EPOCH
CAPITAL MARKETS
OUTLOOK
5 APPENDIX
3
Epoch Investment Partners
FIRM AND CLIENT PROFILE
GLOBAL CHOICE TEAM
PROCESS
4
1 As of March 31, 2020 may not total due to rounding.
2 The institutional clients shown were selected based on client type and client domicile across all strategies. It is not known whether the listed clients approve or disapprove of the advisory services provided.
Epoch’s Clients at a Glance
AUM: $25.4 BILLION1
REPRESENTATIVE CLIENTS2
Client Domicile
Global & Non-U.S. Equity Shareholder Yield
$10.2B
$16.8B $8.5B
Global Strategies U.S. Strategies
Global Equity
$1.6B
Non-U.S Large Cap
$2.5B
Global Choice
$2.5B
U.S. Small/ SMID Cap
$0.8B
U.S. Equity Shareholder Yield
$1.8B
U.S. All Cap/Choice
$1.5B
U.S. Large Cap
$4.4B
United States
$11.3B
Canada
$11.6B
Europe/Africa
$1.4B
Asia/Australia
$1.1B
Corporations Non-Profit & Other Government Health Services & Insurance Intermediary Union
• ArcelorMittal USA
• DXC Technology
• Kellogg Company
• Nova Scotia Power Inc.
• Sentinel Retirement Fund
• Bradley University
• Church of the Nazarene
• Masonic Homes of California
• Florida State Boardof Administration
• London CIV
• North Dakota StateInvestment Board
• Ohio Bureau of Workers’Compensation
• Public Employees’ Retirement System of Mississippi
• Blue Cross and Blue Shield of Kansas
• Boston Medical Center
• Greater Baltimore Medical Center
• OhioHealth
• CI – Assante Funds
• John Hancock Funds
• New York Life –MainStay Funds
• TD Bank Group
• Major League BaseballPlayers Association
• Theatrical State Employees, Local No. One, I.A.T.S.E.
• Steelworkers Pension Trust
Reporting Currency: USD
5
Global Choice
THE STRATEGY
• A concentrated global portfolio of 25 to 35
companies selected based on their ability to
generate free cash flow and allocate
it intelligently to create shareholder value
• High-conviction holdings, selected primarily
from other Epoch portfolios
• Flexibility to invest across geographies and the
market capitalization spectrum
• Blend of individual bottom-up opportunities with
top-down macroeconomic insights
• Portfolio construction framework designed to
minimize unintended risks and reduce volatility:
the strategy has below-market volatility in U.S.
dollars despite being concentrated
STRATEGY ROLE IN A PORTFOLIO
• Global capital appreciation
• Source of alpha in a core/satellite allocation
• Portfolio diversifier offering low correlations
with growth, value, and other accounting-based
styles due to strategy emphasis on free cash
flow
• Part of a best-ideas multimanager allocation
6
Portfolio Management Team
STRATEGY-FOCUSED TEAM INTEGRATING EXTENSIVE FIRM RESOURCES
Quantitative
Analysis & Risk
Management TeamPortfolio Strategy
Investment Policy Group
(IPG)
Analyze macroeconomic
conditions, geopolitical
influences and industry trends.
Communicate risk exposures
and provide tools for idea
generation and portfolio
construction.
Client
Portfolio
Management
Product specialists
embedded within the
investment team, focused
on client communications.
Global Choice Team
Bill Priest, CFAPortfolio Manager/Co-CIO
Bill Booth, CFAPortfolio Manager/Co-CIO
David PearlPortfolio Manager/Co-CIO
Mike Welhoelter, CFAPortfolio Manager/Co-CIO
Josepha KaufmanAnalyst
Michael TakataAnalyst
Tamzin Manning Client Portfolio Manager
Contribute to the investment process
through product management,
responsible investing research, and
portfolio implementation.
Fundamental Research Team
Epoch's research team offers industry experience and security analysis across strategies.
7
Epoch Investment Process
STOCK SELECTION
Fundamental, bottom-up deep-dive focused
on evaluating three key issues:
• Free Cash Flow profile: the ability of the
company to generate, sustain, and grow
FCF over time
• Capital allocation: management’s
framework and ability to allocate capital
effectively to create shareholder value
• Valuation: is there a disconnect between
the value of the business based on FCF
and the current market price of the security
Fundamental Research
• Market cap and liquidity filters narrow the
universe to ~6,000 stocks
• Analysts generate research candidates
based on their experience and insights
• The Epoch Core Model quantitatively
expresses our fundamental investment
beliefs and provides a complementary
source of ideas
– Increases breadth of research
– Helps prioritize research
• Strategy-specific screens are also utilized
in some cases
Idea Generation
~10,000 Stock Investment Universe
• Underlying strategies share the firm's Free
Cash Flow philosophy
• Strategies differ based on their investable
universe (geography, market capitalization)
and/or capital allocation focus
• Epoch portfolios provide a diversified pool
of investment candidates for consideration
in the Global Choice strategy
Epoch Portfolios
500–600 Holdings Across Strategies
8
Global Choice Investment Process
STOCK SELECTION
Considerations
• Risk-return profile
• Catalysts
• Market cap and liquidity
Considerations
Investment Policy Group insights
• Provides investment context
• Identifies global opportunities and risks
• Potentially influences sector and country choices
Top-Down Macroeconomic
Assessment
Global Choice
Portfolio(25–35)
Fundamental Bottom-Up Stock Opportunities(500 - 600 Epoch Portfolio holdings)
Analysts’ Best Ideas
9
Global Choice Investment Process
Analysis
• Third –party and
proprietary models
• Barra risk factors
• Performance attribution
analysis
• Epoch Core Model
Communication
• A risk manager is integrated
within the team as a co-portfolio
manager
• Facilitates constant
communication and more
accurate expression of
PM/analyst views in the portfolio
• Regular reports and periodic
reviews with investment team
Portfolio Construction
• Ensure the portfolio is taking
the risks it intends to take
• Further reduce overall volatility
by creating an efficient
portfolios, with position sizing
based on risk-return
considerations
PORTFOLIO CONSTRUCTION AND RISK MANAGEMENT
Ongoing Stock Evaluation
• Price target reached
• Change in investment thesis
• Alternatives with superior
risk-return characteristics
• Portfolio rebalancing
Page Intentionally Left Blank
11
Client Investment Review
PERFORMANCE AND ATTRIBUTION
PORTFOLIO POSITIONING
TRACK RECORD
12
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
Performance
PUBLIC EMPLOYEES' RETIREMENT SYSTEM MISSISSIPPI(As of March 31, 2020)
QTD 1 Year 3 Year 5 Year
Inception to Date
(2/26/12)
◼ Public Employees Retirement System
of Mississippi (Gross)-24.1 -13.9 2.2 2.2 6.6
◼ Public Employees Retirement System
of Mississippi (Net)-24.2 -14.3 1.7 1.6 6.1
◼ MSCI AC World Index (Net) -21.4 -11.2 1.5 2.8 5.8
Reporting Currency: USD
2019 2018 2017 2016 2015 2014 2013 20121
Public Employees Retirement System of
Mississippi (Gross)27.6 -8.6 30.9 -0.5 0.4 3.6 33.4 5.1
Public Employees Retirement System of
Mississippi (Net)27.0 -9.0 30.2 -1.0 -0.1 3.0 32.6 4.6
MSCI AC World Index (Net) 26.6 -9.4 24.0 7.9 -2.4 4.2 22.8 4.6
1 Data represents a partial year from 2/26/12–12/31/12.
Performance for the most recent quarter is preliminary and subject to change. Returns are annualized for periods greater than one year. Periods less than one year are cumulative, unless otherwise noted.
Additional information regarding policies for calculating and reporting returns is available upon request. Past performance is no guarantee of future results.
13
-15%
-10%
-5%
0%
5%
10%
15%
20%
Performance
PUBLIC EMPLOYEES' RETIREMENT SYSTEM MISSISSIPPI(As of May 31, 2020)
QTD YTD 1 Year 3 Year 5 Year
Inception to Date
(2/26/12)
◼ Public Employees Retirement
System of Mississippi (Gross)15.0 -12.8 0.6 4.7 4.7 8.3
◼ Public Employees Retirement
System of Mississippi (Net)15.0 -12.9 0.1 4.1 4.2 7.8
◼ MSCI AC World Index (Net) 15.5 -9.2 5.4 5.2 5.3 7.5
Reporting Currency: USD
Performance for the most recent quarter is preliminary and subject to change. Returns are annualized for periods greater than one year. Periods less than one year are cumulative, unless otherwise noted.
Additional information regarding policies for calculating and reporting returns is available upon request. Past performance is no guarantee of future results.
14
Performance Attribution
Source: FactSet Research Systems, Inc.; MSCI, Inc. Totals may not add due to rounding.
Account MSCI AC World Index Attribution Effects
Sectors
Average
Weight
Return
(%)
Average
Weight
Return
(%)
Allocation
Effect
Stock
Selection
Total
Effect
Communication Services 6.8 -15.0 8.9 -6.1 0.3 -2.0 -1.7
Consumer Discretionary 6.0 -30.1 10.8 -11.3 -0.0 -1.2 -1.2
Consumer Staples 4.1 -7.7 8.3 -6.0 -0.5 -0.4 -0.9
Energy 3.9 -32.7 5.3 -44.4 0.8 -0.1 0.7
Financials 8.6 -2.5 16.5 -22.1 0.8 1.7 2.5
Health Care 23.3 -4.7 11.6 0.6 1.8 -1.1 0.7
Industrials 19.9 -34.2 10.3 -18.0 -0.4 -2.4 -2.9
Information Technology 16.7 0.6 16.7 6.5 -0.2 -0.5 -0.7
Materials 6.9 -0.2 4.7 -21.3 -0.1 1.4 1.3
Real Estate -- -- 3.3 -19.0 0.3 -- 0.3
Utilities -- -- 3.4 -5.9 -0.1 -- -0.1
[Cash] 4.0 1.7 -- -- -0.2 -- -0.2
[Unassigned] -- -- 0.4 -12.6 -0.0 -- -0.0
Total 2.5 -4.7 -2.2
PUBLIC EMPLOYEES' RETIREMENT SYSTEM MISSISSIPPI(One Year Ending March 31, 2020)
15
Top Five Contributors and Detractors & New and Closed Positions
Source: FactSet Research Systems, Inc. New and closed positions are sorted in descending order from the largest position weight.
Top Five Contributors
Contribution to
Portfolio Return (%)
Martin Marietta Materials, Inc. 1.3
Microsoft Corporation 1.1
Applied Materials, Inc. 0.8
Marvell Technology Group Ltd. 0.6
Costco Wholesale Corporation 0.4
Bottom Five Detractors
Contribution to
Portfolio Return (%)
MGM Resorts International -2.2
Nexstar Media Group, Inc. Class A -1.8
Bausch Health Companies Inc. -1.5
Safran S.A. -1.3
Boeing Company -1.3
New Positions
Amazon.com, Inc.
Centene Corporation
SoftBank Group Corp.
Walmart Inc.
Charter Communications, Inc. Class A
Coca-Cola Company
Broadcom Inc.
Samsung Electronics Co., Ltd. Sponsored GDR
Fidelity National Information Services, Inc.
ABB Ltd.
Closed Positions
Safran S.A.
Airbus SE
PayPal Holdings Inc
Phillips 66
Hexcel Corporation
DuPont de Nemours, Inc.
Deutsche Telekom AG
United Technologies Corp.
Applied Materials, Inc.
Marvell Technology Group Ltd.
PUBLIC EMPLOYEES' RETIREMENT SYSTEM MISSISSIPPI(One Year Ending March 31, 2020)
16
Sector Allocation & Characteristics
Source: FactSet Research Systems; MSCI, Inc. The data is unaudited and may change at any time. The data is shown for informational purposes only and is not indicative of future portfolio characteristics or
returns. Totals may not add due to rounding.
Sector
Portfolio
Weight (%)
MSCI AC
World (%)
Communication Services 10.7 9.3
Consumer Discretionary 7.4 10.8
Consumer Staples 6.5 8.8
Energy -- 3.7
Financials 6.9 14.4
Health Care 24.5 13.2
Industrials 6.3 9.6
Information Technology 22.8 18.7
Materials 6.0 4.4
Real Estate -- 3.1
Utilities -- 3.6
[Cash] 8.9 --
Characteristics Portfolio MSCI AC World
Dividend Yield (%) 1.7 2.9
Enterprise Value to EBITDA (x) 18.0 13.2
Weighted Average Market Cap ($M) 249,924 184,489
Weighted Median Market Cap ($M) 96,264 57,444
Predicted Beta 0.87 --
12-Month Turnover 89% --
Number of Equity Positions 30 3,047
Sector Weights Relative to Benchmark
-7.5
-3.7
-3.6
-3.4
-3.2
-3.1
-2.3
1.4
1.6
4.0
11.2
Financials
Energy
Utilities
Consumer Discretionary
Industrials
Real Estate
Consumer Staples
Communication Services
Materials
Information Technology
Health Care
Reporting Currency: USD
PUBLIC EMPLOYEES' RETIREMENT SYSTEM MISSISSIPPI(As of March 31, 2020)
17
Top Ten Holdings & Countries
Source: FactSet Research Systems, Inc. Totals may not add due to rounding.
Top Ten Holdings Portfolio Weight (%)
Amazon.com, Inc. 5.4
Microsoft Corporation 5.2
Alphabet Inc. Class C 3.8
Takeda Pharmaceutical Co. Ltd. 3.8
Centene Corporation 3.8
Danaher Corporation 3.7
SoftBank Group Corp. 3.6
Merck & Co., Inc. 3.5
Amgen Inc. 3.5
CME Group Inc. Class A 3.4
Total 39.8
Top Ten Countries Portfolio Weight (%)
United States 72.3
Japan 7.4
Korea 2.9
Switzerland 2.7
France 2.7
Germany 1.9
Hong Kong 1.6
Total 91.5
PUBLIC EMPLOYEES' RETIREMENT SYSTEM MISSISSIPPI(As of March 31, 2020)
18
Performance Attribution
Source: FactSet Research Systems, Inc.; MSCI Inc. Totals may not add due to rounding.
19
Country and Regional Weights
Source: FactSet Research Systems Inc.; MSCI Inc. The data shown above is of a representative account and such data may vary for each client in the strategy due to market conditions, client guidelines and
diversity of portfolio holdings. The data is unaudited and may change at any time. The data is supplemental to the composite presentation, is shown for informational purposes only, and is not indicative of future
portfolio characteristics or returns. Totals may not add due to rounding.
EPOCH GLOBAL CHOICE STRATEGY(Quarter Ending March 31, 2020)
Revenue by Region
Portfolio
Weight (%)
MSCI All Country
World Weight (%)
North America 53.2 44.4
Asia 19.3 28.0
Europe 14.5 17.8
Other 12.2 9.5
Revenue by Market
Classification
Portfolio
Weight (%)
MSCI All Country
World Weight (%)
Developed Markets 75.2 71.3
Emerging Markets 14.3 22.2
Other 10.4 6.5
Top Countries by Domicile
Portfolio
Weight (%)
MSCI All Country
World Weight (%)
United States 76.3 56.6
Japan 7.8 7.5
Korea 3.1 1.4
Switzerland 2.8 3.1
France 2.8 3.1
20
Characteristics
1 The data shown is of a representative account and such data may vary for each client in the strategy due to market conditions, client guidelines and diversity of portfolio holdings. The data is unaudited and
may change at any time. The data is supplemental to the composite presentation, is shown for informational purposes only, and is not indicative of future portfolio characteristics or returns.
2 As of December 31, 2018. Inception date is September 30, 2005. Performance for the most recent quarter is preliminary and subject to change.
3 The risk statistics are shown as supplemental information only and supplement the Composite presentation which is located within the Disclosure section of the presentation.
Source: FactSet Research Systems; MSCI, Inc.
EPOCH GLOBAL CHOICE STRATEGY(As of March 31, 2020)
Characteristics Portfolio
MSCI All
Country World
Dividend Yield (%) 1.7 2.9
Enterprise Value to EBITDA (x) 19.3 13.1
Weighted Average Market Cap ($M) 249,549 184,490
Weighted Median Market Cap ($M) 96,264 57,444
Predicted Beta 1.02 --
12-Month Turnover 85.7% --
Number of Equity Positions 30 3,047
Risk Return Metrics
Since Inception1,2 Portfolio
MSCI All
Country World
Standard Deviation 14.9 15.8
Portfolio vs. MSCI
All Country World
Information Ratio 0.45
Alpha3 2.92
Beta 0.88
R-Squared 0.88
Reporting Currency: USD
21
Portfolio Positioning
As of March 31, 2020
Microsoft
Amazon
SAP
Merck
Abbott Laboratories
Takeda
AIA Group
Linde
ASML
The Digital Age and the transition from “atoms” to “bits” implies a capital-light economy in which
technology is being substituted for labor and physical assets. Free cash flow generation is increasingly
dependent on how companies adapt their business model to the Digital Age. "As a service" business
models; the Cloud, the Internet of Things, big data, AI, and mobile and digital payments, are particularly
attractive.
Our health care sector positions provide exposure to a variety of structural growth trends we see shaping
the industry, such as precision-based medicine, innovative drug and device development, the shift from
fee for service to value based healthcare and direct-to-consumer services. A focus on innovation should
drive performance regardless of the economic backdrop and provide insulation against pricing pressure.
Overweight the United States due to the domicile of technology companies, superior growth relative to
the rest of the world and ex-US geopolitical concerns. Focus on Global Champions outside of the United
States, who possess market share characteristics implying pricing power and volume opportunities.
Against the backdrop of the COVID-19 crisis, we are focused on owning resilient companies that
can weather the storm, delivering good operating performance, including solid free cash flow
generation, without over-reliance on broader macroeconomic developments.
22
Source: Epoch Investment Partners, Inc. The data shown above is of a representative account and such data may vary for each client in the strategy due to market conditions, client guidelines and diversity of
portfolio holdings. The data is unaudited and may change at any time. The data is supplemental to the composite presentation, is shown for informational purposes only, and is not indicative of future portfolio
characteristics or returns.
Global Choice Portfolio Holdings
(As of March 31, 2020)
Sector Security Domicile Portfolio Weight (%)Health Care 26.0% Centene Corporation United States 4.2
Takeda Pharmaceutical Co. Ltd. Japan 4.0
Danaher Corporation United States 3.9
Merck & Co., Inc. United States 3.7Amgen Inc. United States 3.7
UnitedHealth Group Incorporated United States 3.5
Abbott Laboratories United States 2.9Information Technology 24.0% Microsoft Corporation United States 5.5
Broadcom Inc. United States 3.2
Samsung Electronics Co., Ltd. Sponsored GDR Korea 3.1
Spotify Technology SA United States 2.9
Fidelity National Information Services, Inc. United States 2.9Universal Display Corporation United States 2.3Visa Inc. Class A United States 2.1
SAP SE Germany 2.0Communication Services 11.3% Alphabet Inc. Class C United States 4.1
SoftBank Group Corp. Japan 3.8Charter Communications, Inc. Class A United States 3.5
Consumer Discretionary 7.9% Amazon.com, Inc. United States 5.7
Dollar Tree, Inc. United States 2.2Financials 7.4% CME Group Inc. Class A United States 3.6
Willis Towers Watson Public Limited Company United States 2.0
AIA Group Limited Hong Kong 1.8Consumer Staples 6.9% Walmart Inc. United States 3.5
Coca-Cola Company United States 3.3Industrials 6.7% ABB Ltd. Switzerland 2.8
Bureau Veritas SA France 2.8
Raytheon Company United States 1.0Materials 6.3% Linde plc United States 3.3
Martin Marietta Materials, Inc. United States 3.0Cash 3.6
Total 100.0
23
1 Inception date is September 30, 2005. Performance for the most recent quarter is preliminary and subject to change.
2 The risk statistics are shown as supplemental information only and supplement the Composite presentation which is located within the Disclosure section of the presentation.
3 Data represents a partial year from 9/30/05-12/31/05.
4 Implied alpha is adjusted for the lower beta achieved by the strategy.
Past performance is no guarantee of future results.
Composite
Reporting Currency: USD
Returns – Global Choice(As of March 31, 2020)
2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005³
Epoch Gross Return 27.5 -8.9 30.8 -0.6 0.1 3.2 32.5 15.4 -0.1 6.8 37.4 -35.6 17.2 30.0 6.4
Epoch Net Return 26.7 -9.4 30.0 -1.1 -0.5 2.6 31.8 14.9 -0.6 6.3 36.2 -36.3 16.2 28.9 6.1
MSCI World Index (Net) 27.7 -8.7 22.4 7.5 -0.9 4.9 26.7 15.8 -5.5 11.8 30.0 -40.7 9.0 20.1 3.1
Risk Return Metrics – Since Inception1,2
(As of March 31, 2020 )
Epoch
MSCI World
Index (Net)
Standard Deviation 14.9 15.4
Sharpe Ratio 0.41 0.24
Epoch vs. Index
Information Ratio 0.44
Alpha4 2.67
Beta 0.91
R-Squared 0.89
-28-24-20-16-12-8-4048
12
QTR 1 Year 3 Year 5 Year 10 Year
Annualized
Since
Inception¹
◼ Epoch (Gross) -23.9 -13.8 2.1 2.0 6.4 7.3
◼ Epoch (Net) -24.1 -14.3 1.5 1.4 5.8 6.6
◼ MSCI World Index (Net) -21.1 -10.4 1.9 3.2 6.6 5.0
Page Intentionally Left Blank
25
Capital Markets Outlook
26
The 90% Economy: The Long Road Back to Normal
Source: BLS, NBER, Bloomberg, Epoch Investment Partners
10 years of jobs growth wiped out in 2 months
125
130
135
140
145
150
155
Reccessions Employment (mn)
“There will be well into the millions of people who don’t get to go back to their old job. In fact,
there may not be a job in that industry for them for some time.” – Jerome Powell, Jun 10
In many things 90% is just fine; in an economy it is miserable
• Bankruptcies and the fear of a second wave
• Life will be hard—at least until a vaccine or a treatment is found
27
New cases over the last week: Flat ex-NY
The 90% Economy: Until the Coronavirus is Contained
Second wave? Worrisome that it is increasing in three of the four most populous states.
0
50,000
100,000
150,000
200,000
250,000
3/2/2020 4/2/2020 5/2/2020 6/2/2020 7/2/2020
US US ex-NY
Source: Bloomberg, Epoch Investment Partners
Source: Bloomberg, Epoch Investment Partners
New cases over the last week:
Rising in a large number of populous states
Slow grind back to 100%
• Restaurants, bars, cafes and hotels
• Trains, planes and buses
• Schools, houses of worship
• Retail and sports events
• Factories and offices
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
3/2/2020 4/2/2020 5/2/2020 6/2/2020 7/2/2020
NY CA+FL+TX
28
The Age of Magic MoneyFed isn’t even thinking about thinking about raising rates (until 2023)
• FOMC: unemployment rate still at 5.5% two years from now
• Big output gap (5 – 6% of GDP): Keeps core PCE < 2%
• Yield Curve Control: Next step
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
Recession Total (USD bn) 3-mo chg
QE1 QE2 QE3QET
QE4
Source: FOMC, NBER, Bloomberg, Epoch Investment Partners
QE4: Much more aggressive than previous stages
And we’re just getting started
Source: OECD
0
5
10
15
20
25
30
35
40
45
50
US CAN BEL ITA FRA AUT ESP SWE FIN DEU GBR NLD JPN
Outstanding marketable bonds held by CB (% share)
29
Fiscal Dominance: Treasury Policy Drives the Fed
Source: CBO, NBER, Bloomberg, Epoch Investment Partners
Largest peacetime deficit in US history
-5
0
5
10
15
20
Deficit (% GDP) CBO projection (Jan) CBO (Apr)
0
20
40
60
80
100
120
140
194
0
194
5
195
0
195
5
196
0
196
5
197
0
197
5
198
0
198
5
199
0
199
5
200
0
200
5
201
0
201
5
202
0
202
5
203
0
Debt (% GDP) CBO projection (Jan) CBO (Apr)
Source: CBO, NBER, Bloomberg, Epoch Investment Partners
Highest federal debt (% GDP) ever
30
The Hand of God: The Waning Power of Central Banks
Returns on credit have been diminishing for decades
• Velocity of money: Downward trajectory for two decades
• Global incremental debt output ratio: Measures growth generated by each unit of debt
o The pandemic has driven both measures into freefall
o Worrying given the addiction the financial system has developed to credit
Absent inflationary pressure the central bank has effective carte blanche
• This is the monetary trickle-down we’re all now supposed to believe in
• Evidence from Japan and Europe suggests this hinders rather than boosts growth
50
60
70
80
90
100
110
120
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Recession M2 Velocity (index) M1 MZ
Declining velocity of money: MV = PT Declining impact of debt on growth
Source: Independent StrategySource: Fed, NBER, Bloomberg, Epoch
-2
0
2
4
6
8
10
Recessions Global IDOR Trend
31
Zombification of the Economy: Crowding out GrowthCreative destruction: Obstructed by zombies
• Reduced margins for all incumbents
• Blocks new entrants: Reducing innovation and growth
Soaring corporate debt
• Increases fragility of corporate sector
• Places a hard ceiling on interest rates
Yield Curve: Historical mean is now the ceiling
• With so much debt, a steeper yield curve would crush the economy, causing recession
Corporate debt: Soaring
35
40
45
50
55
60
65
19
85
19
87
19
89
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
20
21
Recessions US corp debt (% GDP)
Source: NBER, Bloomberg, Epoch Investment Partners
32
COVID-19 as an Accelerant: Deglobalization“There are good reasons to welcome the end of 1990s-style hyper-globalization. But we should not kid
ourselves that there is any obvious alternative on offer.” - Adam Tooze, Columbia University, Jun 2
“Only an economist could argue that we should make F-35 fighter jets in China because it’s cheaper.”
- Senator Marco Rubio, May 4
“Economic thinking has privileged efficiency over resilience. We have done too much management of
globalization for the benefit of those in Davos, and too little for the benefit of those in Detroit. The kind
of thinking behind the Strategic Petroleum Reserve should probably be applied to a much wider range
of goods. … I am no fan of industrial policy generally, but somebody should have done something that
assured that there was a serious American competitor in the 5G space.” -- Larry Summers, May 22
Strategic Petroleum Reserves (mn barrels)
Source: BloombergSource: NBER, Bloomberg, Epoch Investment Partners
100
105
110
115
120
125
130
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
300
350
400
450
500
550
600
650
700
750
198
3
198
5
198
7
198
9
199
1
199
3
199
5
199
7
199
9
200
1
200
3
200
5
200
7
200
9
201
1
201
3
201
5
201
7
201
9
202
1
World Trade/IP: Peak is now behind us
33
COVID-19 as an Accelerant: Tech
Source: BoA, Bernstein, Bloomberg
E-Commerce: Plenty of runway left
“As Covid-19 impacts every aspect of our work and life, we've
seen two years' worth of digital transformation in two months“
-- Microsoft CEO, Satya Nadella, April 29
90
100
110
120
130
140
150
160
170
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9E
202
0E
202
1E
202
2E
202
3E
202
4E
202
5E
Physical industries (index) Digital industries (index)
Productivity of digital vs physical industries
Source: The Coming Productivity Boom, Epoch Investment Partners
0
5
10
15
20
25
30
35
40
US: E-Commerce as % of retail China: E-Commerce as % of retail
"If you're a shareowner in Amazon, you may
want to take a seat, because we're not thinking
small.” - Jeff Bezos, Amazon, April 29
34
COVID-19 as an Accelerant: Healthcare
The pandemic has prompted a reckoning throughout the country’s health care infrastructure
• A new era of health care preparedness: Covid-19 has prompted calls for a dramatic scaling up of the
country’s disaster readiness
• Supply-chains being domesticated: Especially diagnostic equipment, therapeutics, and PPE
• Big Tech in HC: The healthcare industry is undergoing systematic changes driven by an aging
demographic, the explosion in healthcare data, and increasingly complex administrative
infrastructure. The Covid-19 outbreak has made these challenges even more urgent.
o 1/3 of the world’s data resides in the healthcare industry – Ponemon Institute
o Covid-19 has accelerated telemedicine ‘by a decade’
• Biotech and medical devices: Have especially benefited from the pandemic
US pharmaceutical imports soar
Source: US Census Bureau, CFR, BloombergSource: National Health Statistics, NBER, Epoch Investment Partners
U.S. Healthcare Spending (% of GDP)
0
20
40
60
80
100
120
140
160
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
202
1
US pharma exports (12m, USD bn) US pharma imports (12m, USD bn)
4
6
8
10
12
14
16
18
20
22
196
0
196
3
196
6
196
9
197
2
197
5
197
8
198
1
198
4
198
7
199
0
199
3
199
6
199
9
200
2
200
5
200
8
201
1
201
4
201
7
202
0E
202
3E
202
6E
Healthcare spending (% of GDP) Post-COVID shock
35
November Election: Yet Another Source of Uncertainty and Volatility• Taxes: Biden has proposed reversing half of the Trump tax cut, taking the statuary rate to 28%.
Would increase the effective rate by 4-5%, shaving $9 off 2021 EPS
o Might also increase payroll tax, as well as individual taxes
o Raise capital gains tax to income rates for anyone making > $1 mn a year
o Change carried interest loophole
• Energy: Roll back energy deregulation. Biden is very serious about climate change
• Pharma pricing: Allow Medicare to negotiate drug pricing directly
o With Covid the mood has changed – more bipartisan that drug prices need to come down
• Accelerate tech anti-trust: Already gaining bipartisan momentum
• Relationship with China: Will continue to deteriorate regardless of election outcome
o See our 12/2019 paper, “Cold War 2.0: The Platform, the Players, and the Stakes”
National poll average: Biden ahead
Source: Real Clear Politics, BloombergSource: PredictIt.org, Bloomberg
Betting sites: Biden has a small lead
0
10
20
30
40
50
60
70
Biden (%) Trump (%)
40
42
44
46
48
50
52
54
Biden (%) Trump (%)
36
Growth has Outperformed Since 2007: What’s Special about that Year?
Growth’s outperformance coincides with the
rise of bits vs atoms
• A trend accelerated by COVID-19
o Overdue for pullback?
• Over the last five years, platforms have ruled
• Their revenues have kept pace, so tech FCF
yield is in-line with SPX
• Digitization of economy: Still in early phase,
so growth/tech's best days remain ahead
Platforms have ruled
Growth has outperformed since 2007
Source: Bloomberg, Epoch Investment PartnersSource: Bloomberg, Epoch Investment Partners, Minack
60
70
80
90
100
110
120
130
140
Value (relative, index) Growth (relative, index)
50
100
150
200
250
300
350
2015 2016 2017 2018 2019 2020 2021
FAAANM (mkt cap, index) SPX-ex-FAAANM EAFE SPX
Growth has outperformed since 2007
0
2
4
6
8
10
12
SPX - FCF yld (%) S5INFT - FCF yld (%)
Median (%) Median (%)
Tech’s FCF yield is similar to market’s
Source: Bloomberg, Epoch Investment Partners
37
Investment Conclusions
1. The 90% Economy: The Long Road Back to Normal
• The last 10 to 20% will be a tough, slow grind
2. The Age of Magic Money
• Fed isn’t even thinking about thinking about raising rates (until 2023)
• Fiscal dominance: Treasury policy drives the Fed
3. COVID as an Accelerant
• Deglobalization: Too much emphasis on efficiency over resilience
• Tech: We've seen two years' worth of digital transformation in two months
• Healthcare: A new era of health care preparedness, including supply-chains being domesticated
4. November Election
• Yet Another Source of Uncertainty and Volatility
• Policy matters: Taxes, energy, finance, anti-trust, pharma pricing, deregulation
5. A World of Yield Starvation
• Bond yields had been driven lower by elevated policy uncertainty, demographic challenges, and
hyper-aggressive central banks
• With COVID-19, bond yields plummeted to new record lows
As a result of the above points, we believe the best positioned companies are those that have a
demonstrated ability to produce sustainable FCF and allocate that cash flow effectively between return
of capital options and reinvestment/acquisition opportunities.
Page Intentionally Left Blank
39
Appendix
40
Portfolio Appraisal
PUBLIC EMPLOYEES' RETIREMENT SYSTEM MISSISSIPPI(As of May 31, 2020)
Reporting Currency: USD
Continued on next page
Quantity Security Ticker Cusip/Sedol Purchase Date Unit Cost Cost Basis Price Yield Market Value Pct. Unrealized GL
Communication Services
57,558 CHARTER COMMUNICATIONS INC-A chtr 16119P108 10/15/2019 450.93 25,954,882.21 544.00 -- 31,311,552.00 3.75% 5,356,669.79
685,400 SOFTBANK CORP 9984 6770620 2/17/2020 45.17 30,959,514.23 44.85 0.91% 30,740,732.35 3.68% (218,781.87)
18,782 ALPHABET INC CL C goog 02079K107 7/24/2018 1,173.83 22,046,799.32 1,428.92 -- 26,837,975.44 3.22% 4,791,176.12
115,757 SPOTIFY TECHNOLOGY SA spot L8681T102 12/31/2018 130.29 15,082,220.42 180.93 -- 20,943,914.01 2.51% 5,861,693.59
79,810 FACEBOOK INC fb 30303M102 4/14/2020 183.16 14,618,158.67 225.09 -- 17,964,432.90 2.15% 3,346,274.23
210,493 CELLNEX TELECOM SAU clnx BX90C05 4/16/2020 53.81 11,325,963.52 56.64 0.08% 11,922,499.89 1.43% 596,536.37
119,987,538.36 0.21% 139,721,106.60 16.74% 19,733,568.23
Consumer Discretionary
19,793 AMAZON COM INC COM amzn 023135106 4/26/2019 1,883.61 37,282,258.99 2,442.37 -- 48,341,829.41 5.79% 11,059,570.42
214,938 DOLLAR TREE INC COM dltr 256746108 3/17/2020 75.36 16,196,826.99 97.87 -- 21,035,982.06 2.52% 4,839,155.07
180,024 TJX COMPANIES INC tjx 872540109 4/17/2020 48.91 8,805,141.89 52.76 -- 9,498,066.24 1.14% 692,924.35
62,284,227.87 0.00% 78,875,877.71 9.45% 16,591,649.84
Consumer Staples
267,179 WALMART INC wmt 931142103 3/18/2020 120.68 32,243,068.61 124.06 1.74% 33,146,226.74 3.97% 903,158.13
520,554 COCA COLA CO ko 191216100 8/6/2019 52.48 27,321,236.26 46.68 3.51% 24,299,460.72 2.91% (3,021,775.54)
59,564,304.87 2.49% 57,445,687.46 6.88% (2,118,617.41)
Financials
150,660 CME GROUP INC cme 12572Q105 3/2/2018 169.81 25,583,264.25 182.60 1.86% 27,510,516.00 3.30% 1,927,251.75
25,583,264.25 1.86% 27,510,516.00 3.30% 1,927,251.75
Health Care
884,782 TAKEDA PHARMACEUTICAL CO 4502 6870445 1/9/2019 37.29 32,994,900.53 38.90 4.29% 34,418,910.86 4.12% 1,424,010.33
125,748 AMGEN INC COM amgn 031162100 12/11/2018 193.54 24,337,381.33 229.70 2.79% 28,884,315.60 3.46% 4,546,934.27
285,484 ABBOTT LABORATORIES abt 002824100 11/28/2018 73.22 20,902,192.30 94.92 1.52% 27,098,141.28 3.25% 6,195,948.98
161,859 DANAHER CORP dhr 235851102 10/20/2016 88.77 14,367,692.37 166.61 0.43% 26,967,327.99 3.23% 12,599,635.62
327,228 MERCK & CO INC mrk 58933Y105 5/31/2018 65.99 21,593,786.26 80.72 3.02% 26,413,844.16 3.16% 4,820,057.90
71,348 THERMO FISHER SCIENTIFIC INC tmo 883556102 4/6/2020 311.03 22,191,292.44 349.19 0.25% 24,914,008.12 2.98% 2,722,715.68
308,193 CENTENE CORP cnc 15135B101 4/30/2019 51.26 15,798,843.94 66.25 -- 20,417,786.25 2.45% 4,618,942.31
75,149 ALIGN TECHNOLOGY INC COM algn 016255101 5/5/2020 211.15 15,868,017.75 245.62 -- 18,458,097.38 2.21% 2,590,079.63
57,194 UNITEDHEALTH GROUP INC unh 91324P102 4/18/2019 251.55 14,387,066.60 304.85 1.42% 17,435,590.90 2.09% 3,048,524.30
15,846 DANAHER CONV-B SHS 0 4/15/23 PFD dhr.b 235851409 5/13/2020 997.50 15,806,385.00 1,023.74 4.88% 16,222,184.04 1.94% 415,799.04
60,829 ZOETIS INC zts 98978V103 5/19/2020 134.84 8,201,878.22 139.39 0.57% 8,478,954.31 1.02% 277,076.09
206,449,436.75 1.91% 249,709,160.89 29.92% 43,259,724.14
41
Portfolio Appraisal
PUBLIC EMPLOYEES' RETIREMENT SYSTEM MISSISSIPPI(As of May 31, 2020)
Reporting Currency: USD
Quantity Security Ticker Cusip/Sedol Purchase Date Unit Cost Cost Basis Price Yield Market Value Pct. Unrealized GL
Industrials
50,267 NORTHROP GRUMMAN CORP COM noc 666807102 5/15/2020 320.34 16,102,369.93 335.20 1.73% 16,849,498.40 2.02% 747,128.47
787,559 BUREAU VERITAS bvi B28DTJ6 9/26/2019 23.83 18,766,475.42 20.34 -- 16,022,787.71 1.92% (2,743,687.70)
34,868,845.35 0.89% 32,872,286.11 3.94% (1,996,559.23)
Information Technology
242,185 MICROSOFT CORP msft 594918104 2/1/2016 92.07 22,298,120.52 183.25 1.11% 44,380,401.25 5.32% 22,082,280.73
104,716 BROADCOM INC avgo 11135F101 1/14/2020 288.76 30,237,954.86 291.27 4.46% 30,500,629.32 3.65% 262,674.46
26,571 SAMSUNG ELECTRONICS-GDR REG S smsn 4942818 3/10/2020 1,081.21 28,728,759.13 1,025.00 2.42% 27,235,275.00 3.26% (1,493,484.13)
172,923 FIDELITY NATL INFORMATION SVCS fis 31620M106 3/10/2020 130.02 22,484,263.50 138.83 1.01% 24,006,900.09 2.88% 1,522,636.59
184,627 SAP SE sap_de 4846288 3/26/2020 111.71 20,625,423.53 126.25 1.39% 23,309,467.32 2.79% 2,684,043.79
139,514 UNIVERSAL DISPLAY CORP oled 91347P105 2/27/2020 145.17 20,253,886.37 146.60 0.41% 20,452,752.40 2.45% 198,866.03
49,699 ASML HOLDING NV asml_na B929F46 4/14/2020 296.93 14,757,099.15 325.86 0.82% 16,195,054.99 1.94% 1,437,955.85
49,323 VISA INC v 92826C839 4/5/2018 153.74 7,582,990.94 195.24 0.61% 9,629,822.52 1.15% 2,046,831.58
166,968,498.00 1.72% 195,710,302.89 23.45% 28,741,804.89
Materials
87,746 LINDE PLC COM lin G5494J103 10/30/2018 161.08 14,134,522.09 202.34 1.90% 17,754,525.64 2.13% 3,620,003.55
27,426 MARTIN MARIETTA MATERIALS mlm 573284106 3/24/2020 175.57 4,815,276.02 192.09 1.15% 5,268,260.34 0.63% 452,984.32
18,949,798.11 1.73% 23,022,785.98 2.76% 4,072,987.87
Cash and Equivalents
CASH ACCOUNT US DOLLAR cash CASH 28,309,478.85 -- 28,309,478.85 3.39% 0.00
98,227,580JAPANESE YEN DIVIDEND ACCRUAL
ACCOUNTdivacc DIVACC 0.01 908,799.37 0.01 -- 911,751.80 0.11% 2,952.43
DIVIDEND ACCRUAL ACCOUNT - US divacc DIVACC 584,342.20 -- 584,342.20 0.07% 0.00
-2,382 JAPANESE YEN cash CASH 0.01 -22.11 0.01 -- -22.11 0.00% 0.00
-206 SWISS FRANC cash CASH 1.04 -214.15 1.04 -- -214.15 0.00% 0.00
-364 EUROPEAN UNION EURO cash CASH 1.11 -404.48 1.11 -- -404.48 0.00% 0.00
29,801,979.68 0.00% 29,804,932.11 3.57% 2,952.43
724,457,893.24 1.32% 834,672,655.76 100.00% 110,214,762.52
Epoch Thought Leadership
RECENT PUBLICATIONS AND WHITE PAPERS
Winning at Active Management
Authored by three Epoch portfolio managers, the
book examines the issues facing the investment
management industry and explores the essential
roles of culture, philosophy and technology.
“Cold War 2.0”
The trade truce between the U.S. and China has
been well received by markets. But the conflict is
bigger than trade or even tech. At stake are the
values that will determine the architecture and
governance of the global world order.
“The P/E Ratio: A User's Manual”Does a stock's price and its P/E ratio tell
you how much a company is worth?
Conventional wisdom says yes, but we
think otherwise …
Our New Podcast – Actively Speaking
Join us each episode as host and Portfolio
Manager Steve Bleiberg takes on current topics
and issues concerning capital markets, portfolio
management and the asset management industry.
“Comparing Two Market Crises: A New
Type of Crisis Requires a New Solution”
There have been two monumental crises in the past
two decades, the Global Financial Crisis and the
current COVID-19 pandemic. The solution to the
current crisis will require prudent fiscal policy to see
us through.
“When ‘Bits’ Meet ‘Atoms’”
The Digital Age and the transition from
“atoms” to “bits” imply a capital-light
economy in which technology is being
substituted for labor and physical assets.
Its impact is widespread and stretches
beyond the technology sector.
43
Global Choice
Global Choice Composite Annual Performance Disclosures
Total Firm Composite Assets Annual Performance Results
Year
End
Assets
(Millions)
USD
(Millions)
Number of
Accounts
Composite
Gross
Composite
Net **
MSCI World
(Net)
Internal
Dispersion
Composite 3-Yr
St Dev
MSCI World (Net)
3-Yr St Dev
2019 34,204 4,168 15 27.45% 26.68% 27.67% 0.2% 11.71% 11.14%
2018 35,505 3,692 17 (8.88)% (9.44)% (8.71)% 0.9% 11.40% 10.38%
2017 49,482 5,097 18 30.82% 30.05% 22.40% 0.4% 11.01% 10.23%
2016 42,106 4,607 21 (0.56)% (1.12)% 7.51% 0.2% 11.13% 10.92%
2015 41,918 4,847 23 0.07% (0.52)% (0.87)% 0.4% 10.79% 10.80%
2014 43,617 4,802 23 3.17% 2.61% 4.94% 0.4% 10.04% 10.23%
2013 38,439 3,987 23 32.52% 31.83% 26.68% 0.6% 12.10% 13.54%
2012 24,534 3,095 22 15.42% 14.86% 15.83% 0.8% 15.42% 16.74%
2011 19,217 1,918 18 (0.14)% (0.61)% (5.54)% 0.4% 16.43% 20.15%
2010 14,326 1,337 14 6.82% 6.27% 11.76% 0.7% 20.42% 23.72%
2009 11,354 943 11 37.40% 36.17% 29.99% 0.8% 18.47% 21.40%
2008 5,348 108 Five or fewer (35.61)% (36.30)% (40.71)% N.A 17.52% 17.02%
2007 6,682 67 Five or fewer 17.19% 16.20% 9.04% N.A N.P N.P
2006 4,408 19 Five or fewer 29.95% 28.86% 20.07% N.A N.P N.P
2005* 2,235 23 Five or fewer 6.35% 6.13% 3.06% N.A N.P N.P
N.A. - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. *Results shown for the year 2005 represent partial period performance from
October 1, 2005 through December 31, 2005. **Net performance reflects the gross-of-fees return reduced by the investment management fee incurred. Effective 1/2008, net performance is calculated by
deducting the actual investment management fee incurred by each portfolio in the composite. Prior to 1/2008, net-of-fee returns reflect the deduction of the highest annual management fee, applied on a
monthly basis. N.P. – Information is not presented because 36 monthly returns are not available.
1. Global Choice Composite contains fully discretionary portfolios managed by Epoch using an investment strategy that pursues long-term capital appreciation by investing
in a concentrated portfolio of global businesses we believe have superior risk-reward profiles. Our bottom-up security selection and risk management process leads to a
portfolio of 25-35 stocks. The portfolio reflects the highest-conviction ideas of our investment team as appropriate for a concentrated portfolio. Companies are selected
based on their ability to generate free cash flow and allocate it intelligently to benefit shareholders. The minimum account size for this composite is $500 thousand.
2. For comparison purposes the composite is measured against the MSCI World (Net) Index [Net total return indices reinvest dividends after the deduction of withholding
taxes, using (for international indices) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties]. Effective 1/2009, the
benchmark was changed from the MSCI World (Gross) Index to the MSCI World (Net) Index because it is more representative of the firm’s accounting methodology with
regards to foreign withholding tax treatment. This change has been applied retroactively.
44
Global Choice
Global Choice (Separate account minimum $50 million)
Assets Under Management Fee
First $50 million 0.85%
Next $50 million 0.75%
Over $100 million 0.65%
Past performance is not indicative of future results. Actual investment advisory fees incurred by clients may vary. Minimum account sizes, fees and fee structure, and other conditions may be waived or
modified in the future, and have been waived or modified in the past, at the discretion of Epoch.
3. Epoch Investment Partners, Inc. claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in
compliance with the GIPS standards. Epoch Investment Partners, Inc. has been independently verified for the periods June 21, 2004 through December 31, 2019.
Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s
policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Global Choice composite has been examined
for the periods October 1, 2005 through March 31, 2019. Verification does not ensure the accuracy of any specific composite presentation. The verification and
performance examination reports are available upon request.
4. Epoch Investment Partners, Inc. is a wholly owned subsidiary of The Toronto Dominion Bank. Epoch Investment Partners, Inc. (“Epoch”) became a registered
investment adviser under the Investment Advisers Act of 1940 in June 2004. Policies for valuing portfolios, calculating performance, and preparing compliant
presentations are available upon request.
5. Results are based on fully discretionary accounts under management, including those accounts no longer with the firm.
6. Valuations are computed and performance is reported in U.S. dollars. Returns are presented gross and net of management fees and include the reinvestment of all
income. Gross-of-fees returns are presented before management fees but after all trading expenses. Net performance reflects the gross-of-fees return reduced by the
investment management fee and performance-based fee (where applicable) incurred. Effective 1/2008, net performance is calculated by deducting the actual
investment management fee incurred by each portfolio in the composite. Prior to 1/2008, net-of-fee returns reflect the deduction of the highest annual management fee,
applied on a monthly basis. Returns include the effect of foreign currency exchange rates. Composite and benchmark (international indices) returns are presented net of
non-reclaimable withholding taxes.
7. Internal dispersion is calculated using an asset-weighted standard deviation of annual gross returns of those accounts that were included in the composite for the entire
year. Internal dispersion figures that are not meaningful due to the limited number of accounts in the composite are annotated by N/A. The three-year annualized
standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period.
8. The Global Choice Composite was created in October 2005. A complete list of composite descriptions is available upon request.
9. The investment management fee schedule is as follows:
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