Natixis Portfolio Clarity® is the portfolio consulting service of Natixis Investment Managers. Dedicated analysts monitor trends in asset allocation in the US and around the world, which are published periodically.

1. A strong first half of 2019 helped shake off Q4 2018’s woes. Most asset classes recovered the ground they lost in the 4th quarter of 2018, except a few such as US small-cap equity. For diversified portfolios, higher allocations to duration-sensitive assets helped boost relative performance.

Returns: Q4 2018 to Q2 2019
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The Portfolio Clarity Moderate group is comprised of 254 models, primarily retail client models, submitted by investment professionals for evaluation from January 2019-June 2019. Public and Corporate DB consists of members with net AUM >$1 billion (based on 1st cut data). Endowment & Foundation consists of members with net AUM >$250 million (based on 1st cut data). Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.

Source: Natixis Portfolio Clarity®, Invmetrics

2. Heightened volatility provides better environment for active management. With more dislocations in the market, active managers were better able to demonstrate outperformance vs. passive funds. The trailing 6-month and 1-year time periods saw active equity strategies profile more favorably across most Morningstar categories.

Percent of active funds outperforming passive funds
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Dark blue represents 50% or more of active funds outperforming passive funds. Light blue represents less than 50% of active funds outperforming passive funds. Data as of June 30, 2019. Past performance is no guarantee of future results.

Source: Morningstar, Natixis Portfolio Clarity®

3. However, many quant strategies struggled. Systematic macro and risk parity strategies largely de-risked in the Q4 2018 selloff, limiting their participation in the subsequent recovery.

Beta to S&P 500: Q4 2018 to Q2 2019
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Source: Natixis Portfolio Clarity®, Bloomberg. Systematic Macro represented by HFR Macro/CTA Index. Risk Parity represented by S&P Risk Parity 10% Target Volatility Index.

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.

4. Investors juggling duration, safety, and yield in their fixed income portfolios. Following a strong rebound in the equity market, advisors began increasing allocations to traditional safe-haven fixed income in February 2019. But with many asset categories now offering meaningfully lower yields, investors are tasked with balancing needs for both income and portfolio ballast.

Fixed income sub-allocations (January 2013 to June 2019)
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Curve includes Short/Intermediate/Long Government Bond, Short/Intermediate/Long Term Bond, Corporate Bond, TIPS, etc. Credit includes Multisector Bond, High Yield, Bank Loan, Global High Yield, etc. Others includes Nontraditional Bond, World Bond, Emerging Markets Bond, Preferred, etc.

Based on 4,037 portfolios with a moderate risk profile submitted to Natixis Portfolio Clarity® from January 2013 to June 2019. Data is based on rolling three months average. Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.

Source: Natixis Portfolio Clarity®

5. Pension liabilities increased. Falling yields in high-quality corporate bonds hurt funded status for corporate pension plans. For public pension systems with June 30 fiscal years, lower yields and higher equity valuations provided added pressure on forward-looking investment return assumptions.

FTSE Pension Discount Curve
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Source: Natixis Portfolio Clarity®, FTSE Pension Discount Curve

6. Allocators redefining role of alternatives. Institutional allocations to private equity have increased, while broad allocations to alternatives have declined slightly overall.

Private equity now a bigger part of alternatives Average alternatives allocations over time
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Data is from December 2012 to June 2019. Investors should fully understand the risks associated with any investment prior to investing. Alternative investments involve unique risks that may be different from those associated with traditional investments, including illiquidity and the potential for amplified losses or gains. Institutional data is based on quarterly data. Investors should fully understand the risks associated with any investment prior to investing. Public and Corporate DB consists of members with net AUM >$1 billion (based on 1st cut data). Endowment & Foundation consists of members with net AUM >$250 million (based on 1st cut data).

Source: Natixis Portfolio Clarity®, Invmetrics

This presentation is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the author only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. There can be no assurance that developments will transpire as forecasted and actual results will be different. Data and analysis does not represent the actual or expected future performance of any investment product. We believe the information, including that obtained from outside resources, to be correct, but we cannot guarantee its accuracy. The information is subject to change at any time without notice.

The data contained herein is the result of analysis conducted by Natixis Advisors, L.P.’s Natixis Portfolio Clarity® team on model portfolios submitted by Investment Professionals. The Natixis Portfolio Clarity® Moderate Group consists of model portfolios that have been analyzed by Portfolio Research and Consulting Group and have been designated as moderate by Investment Professionals.

*The Natixis Portfolio Clarity group evaluates model portfolios submitted by investment professionals, and then aggregates that data to create a peer group or benchmark for evaluating similar portfolios.  The portfolios are categorized as a portfolio belonging to one of the following categories: Aggressive, Moderately Aggressive, Moderate, Moderately Conservative, or Conservative. The categorization of individual portfolios is not determined by Natixis Portfolio Clarity® as its role is solely as an aggregator of the pre‐categorized portfolios. Please note that risk attributes of the Moderate Group will change over time due to movements in the capital markets. Portfolio allocations provided to Natixis Portfolio Clarity® are static in nature and subsequent changes in a Professional’s portfolio allocations may not be reflected in the current Moderate Group data.

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