HomeMy WebLinkAbout07.a.1)a) Receive presentation from Andrew Brown, Director of HighMark Capital Management, on the following topics regarding the Governmental Accounting Standards Board (GASB) 45 Trust and Other Post-Employment Benefits (OPEB) Trust investments Central Contra Costa Sanitary District
Active/Passive Investment Discussion
March 2017
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PEBIPension Trust Team
Dwe
PARS CC b n k,.. IG:
I1,._
CAPITAL MANAGEMENT
Trust Administrator & Consultant r Investment Manager
Record keeping/Sub-trust 0 Safeguard plan assets An Investment sub-advisor to
accounting a Oversight protection U.S. Bank
0 Actuarial Coordination 0 Plan Fiduciary • Open architecture
0 Monitor Contributions/Process e Custodian of assets
Disbu rsements Investment policy assistance
0 Monitor Plan Compliance
0 Ongoing Client Liaison
e PreJund Pension Option
Corporate
33 years (1984 — 2017) 154 years (1863 — 2017) 98 years (1919 — 2017)
Experience
OPEB Experience 21 years 12 years 21 years
Plans under I
1,400+ plans for 700+ public agencies
Administration
Dollars under More than $2.2 billion More than $4 trillion More than $15.2 billion
Administration under management
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CAPITAL MANAGFMFNT
------- I
PARS: Central Contra Costa Sanitary District
About HighMark Capital Management, Inc.
LONGEVITY TALENT STABILITY
Managing assets for clients 53. investment professionals Investment boutique structure
since 1919* 30 professionals hold the Chartered headquartered in San Francisco
backed by global strength within
Financial Analyst@ (CFA) designation
MUFG Union Bank, N.A. and
22 years average industry experience Mitsubishi UFJ Financial Group
ASSETS UNDER MANAGEMENT
$15.2 Billion as of 12/31/2016
Asset Class ($B) Client Base ($B)
a Equity $6.5bn
m Fixed Income $5.2bn m Institutional $6.5bn
n Liquidity $2.7bn n Wealth Mgmt $5.4bn
m Cash $0.8bn a Sub-Advised $3.3bn
Includes predecessor organizations,HighMark Capital Management, Inc. registered with the SEC as an investment adviser on August 7, 1 998.
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CAPITAL MANAGEMENT
PARS: Central Contra Costa Sanitary District
ASSET ALLOCATION — Central Contra Costaaniry Districtto
As of March 28, 2017
ICurrent Asset Allocation Investment Vehicle
Equity 50.17% Range:40Vo-60% 25J443910
Large Cap Core 4.97% SMGIX Columbia Contrarian Core Cl Z 2,490,706
11.51% VGIAX Vanguard Growth & Income Adm 51768,468
Large Cap Value 4.20% DODGX Dodge & Cox Stock Fund 21106)682
Large Cap Growth 2.15% HACAX iShares S&P 500 Growth 110751857
PRUFX T. Rowe Price Growth Stock 1 11074,872
Mid Cap Core 3.60% IWR iShares Russell MidCap Index Fund 118051201
Small Cap Value 3.76% UBVLX Undiscovered Mgrs Behavioral Value Inst 118857611
Small Cap Growth 3.78% PRJIX T. Rowe Price New Horizons Fund 1 1,893,363
International Core 4.05% NWHMX Nationwide Ballard Intl Equities 1 2,030,405
International Value 2.61% DODFX Dodge & Cox International Stock Fund 1,3101074
International Growth 2.61% MQGIX MFS International Growth Fund 17308)996
Emerging Markets 3.27% SEMNX Schroder Emerging Market Equity 1,638,263
Real Estate 1.51% FARCX Nuveen Real Estate Securities 1 756,410
.Fixed Income 46.95% Range:40%-60% 23,525,845
Short-Term 6.31% VFSUX Vanguard Short-Term Corp Adm Fund 3)1607116
Intermediate-Term 15.62% NWJIX Nationwide HighMark Bond Fund Inst 718291314
10-01% PTTRX PIMCO Total Return Instl Fund 57018,599
12.52% PTRQX Prudential Total Return Bond 0 67273,777
Floating Rate Notes 2.48% EIFHX Eaton Vance Floating-Rate and Hi Inc 1 11245,038
.Cash - 2.88% Range: 0%-20% 1 A427409
2.88% FGA First American Government Oblig Z 1,4421409
.TOTAL 100.00% $50,114,164
Source: Union Bank
Online Trust & Custody
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CAPITAL MANAGEMENT
PARS: Central Contra Costa Sanitary District
Selected Period Performance
PARS/CENTRAL CONTRA COSTA SANT P'RHCP
Account 674603060 ]
Period Ending: 02/28/2017
Year Inception
to Date to Date
Sector (2 Months) 3 Months 1 Year 3 Years 5 Years (95 Months)
Cash Equivalents .07 .10 .31 .13 .09 .13
M
i
1-.-7
oneyNet, Inc. Taxab/e .04 .06, .05
Total Fixed Income 1.21 1.61 3.60 2.28 2.64 4.82
BC US Aggregate Bd Index .87 1.91 1.42 2.64 2.24 4.05
Total Equities 5.73 6.91 25.92 6.20 10.97 15-02
Large Cap Funds 6.05 7.19 26.83 8.87 13-49 15-96
S&P 500 Composite Index 5.94 8.04 24,98 10.63 14.01 17,17
Mid Cap Funds 4.96 6.39 28.66 6.40 10.76
Russell Midcap Index 5.31 6.51 26-81 8.44 13-63 19.10
Small Cap Funds 5.03 5.50 31-57 7.45 14.18 19.72
Russell 2000 Index 2.33 5,20 36-11 6,93 4,'12,89 17,78
REIT Funds 2.72 7.52 15.14
Wilshire REIT Index 2.85 7,85 15.75 11-56 11.50 22,42
International Equities 6.12 7.38 19.85 .31 2.48 9.21
MSCI EAFE Index 4,37 7.94 15.75 -.62 5.16 9.67
MSCI EM Free /ndex 8,70 8.94 29.46 1.35 -,37 9.05
Total Managed Portfolio 3.35 4.14 13.93 4.28 6.67 9.87
Account Inception: 04/01/2009
Returns are gross of account level investment advisory fees and net of any fees,including fees to manage mutual fund or exchange traded fund holdings. Returns for periods
over one year are annualized. The information presented has been obtained from sources believed to be accurate and reliable. Past performance is not indicative of future
returns. Securities are not FDIC insured,have no bank guarantee, and may lose value.
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4 PARS: Central Contra Costa Sanitary District CAPITAL MANAGEMENT
Mutual Fund Performance Report
February 28, 2017
Morningstar Category Ranking Annualized Total Rate of Return
Name 3 Mo 1 Yr 3 Yr Yr '� Yr 3 Mo* '1 Yr 3 Yr Yr 't D Yr
00000
Columbia Contrarian Core 51 66 7.41 21.95 10.11 14.2$ 9.56
Vanguard Growth&Income Fund Adm 62 42 40 7,09 24.39 19.$4 14.$2 7.01
Dodge&Cox Stock 51 33 6.67 38.12 19.95 15.91 6.44
Harbor Capital Appreciation Instl 37 47 51 35 0 8.531 29.99 7.57 112.88 8.8$
T.Rowe Price Growth Stock 1 9.48 23.58 8.89 14.25 8.8$
S&P 500 TR USD 8.+04 24.98 10.V 14.01 7.62
iShares Russell MidCap Index Fund 37 52 33 34 6.47 1 2 6 13.45 7.87
Russell Mid Cap TR USD 6.51 25.81 8.44 13.83 8.04
Undiscovered Managers Behavioral Value Fund 55 • 4.33 29.13 19.48 151.26 9.95
T. Rowe Price New Horizons 1 34 6.92 31.45 7.11 14.86 11.40
Russell 2000 T R USD 5.20 36.11 6.93 12.89 7.22
Nationwide Ballard Intl Eqs Instl 72 34 6.31 12.01 -0.15 6.01 1.86
Dodge&Cox International Stock.For Lg Blend 32 0 0 8.15 29.8$ -0.02 6.61 2.45
MFSO International Growth 1 41 31 64 016.56 13.4'1 0.95 4.36 3.20
MSCI SAFE NR USD 7,94 15.75 -0.62 5.16 1.03
Schroder Emerging Market Equity Inv 35;:dEMjjL 39 38 8.93 30.65 1.30 0.51 8.81
MSCI EM NR USD 8 37 2.86
Nuveen Real Estate Securities 1 53 1 39 28 30 7.39 15.00 10.$4 11.16-q%N 5.54
MSCI US REIT GR USD .30 16.69 11.14 11. 4.71
Vanguard Short-Term Investment-Grade Adm 34 28 0.77 2.14 3.28
Nationwide Hi hMark Bond Instl 60 3$ 37 38 26 1.16 3.42 2.61 2.5$ 4.67
PIMCO Total Return Instl 29 39 2.30 3.93 2.58 2.97 5.64
Prudential Total Return Bond Q 2.31 5.01 3.76 8.91 5.86
Barclays US Agg Bond TR USD 1.01 1.42 2.64 2.24 4.28
Eaton Vance Floating-Rate and Hi Inc I 26 27 2.65 13.9$ 3.66 4.+65 4.24
Source: SEI Investments,Morningstar Investments
Returns less than one year are not annualized. Past performance is no indication of future results. The information,presented has been obtained from sources
believed to be accurate and reliable. Securities are not FDIC insured, have no bank guarantee and may lose value.
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5 CAPITAL MANAGEMENTPARS: Central Contra Costa Sanitary District
ASSET ALLOCATION — Central Contra Costa Sanitary District
,Pro Forma Portfolio Based on March 28, 2+017 Market Values
ICurrent Asset Allocation — Investment Vehicle
Equity 50.17% Range:40Vo-60% 2511441910
Large Cap Core 16.48% IVV iShares Core S&P 500 8,259,173
Large Cap Value 4.20% IVE iShares S&P 500 Value 21106,682
Large Cap Growth 4.29% IVW iShares S&P 500 Growth 2,150,729
Mid Cap Core 3.60% IWR iShares Russell MidCap Index Fund 1,805,201
Small Cap Value 3.76% UBVLX Undiscovered Mgrs Behavioral Value Inst 1,885,611
Small Cap Growth 3.78% PRJIX T. Rowe Price New Horizons Fund 1 118931363
International Core 4.05% NWHMX Nationwide Ballard Intl Equities 1 21030,405
International Value 2.61% DODFX Dodge & Cox International Stock Fund 113101074
International Growth 2.61% MQGIX MFS International Growth Fund 11308$996
Emerging Markets 3.27% SEMNX Schroder Emerging Market Equity 1,638,263
Real Estate 1.51% VNQ Vanguard REIT ETF 756,410
.Fixed Income 46.95% Range:40%-60% 233526y845
Short-Term 6.31% VFSUX Vanguard Short-Term Corp Adm Fund 3,160,116
Intermediate-Term 15.62% NWJIX Nationwide HighMark Bond Fund Inst 71829,314
10-01% PTTRX PIMCO Total Return Instl Fund 510181599
12-52% PTROX Prudential Total Return Bond Q 6,273,777
Floating Rate Notes 2.48% EIFHX Eaton Vance Floating-Rate and Hi Inc 1 1,245,038
.Cash 2.88% Range: OVo-20% 134425409
2.88% FGZXX First American Government Oblig Z 1,442,409
.TOTAL 100.00% $50JUJ64_
Source: UnionBank
Online Trust & Custody
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CAPITAL MANAGEMENT
PARS: Central Contra Costa Sanitary District
Fee Impact
Embedded Expense Analysis
Current Investment Platform 0.52%
Current Portfolio: Index Large Cap & REIT 0.42%
Hybrid Small Cap & International Developed 0.35%
Other — Fixed Income Segment 0. 18%
All Index 0. 13%
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CAPITAL MANAGEMENT
PARS: Central Contra Costa Sanitary District
Central Contra Costa Sanitary District
Liquid Alternatives Proposal
March 2017
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Table of Contents
0 Defining Alternative Investments
8 Proposed Liquid Alternatives Portfolio
a Impact on Return and Risk
a Impact on Fees
0 Manager Summary
CAPITAL MANAGEMENT
Defining Alternative Investments
Alternative investments offer exposure to opportunities not generally found through
traditional equity and fixed income markets.
What are Alternative Investments?
0 A group of non-traditional asset classes and investment strategies that
cannot be clearly defined as long-only publicly-traded stocks or bonds.
Why Invest in Alternative Investments .?
0 Add value to a total portfolio solution by improving risk-adjusted return by
reducing portfolio volatility or enhancing returns.
How to Invest in Alternatives?
• Alternatives can be accessed through mutual funds and limited
partnerships (LPs).
*Risk-adjusted return:A concept that contextualizes an investment's return by measuring how much risk is involved in
producing said return, which is generally expressed as a ratio.
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3 �� CAPITAL MANAGEMENT
Defining Alternative Investments
Alternative
► Classes D Alternative
•
Tactical use of alternative assets, such as precious metals specific investments in strategies expected to add value over
and commodities, can add value when certain market the long-terra will comprise a fairly stable weighting_ in the
conditions exist• portfolio over time.
Given that it's an investment in a certain {asset, managers are selection of investment managers is important since they are
not expected to add value through their investment process. expected to add value through their investment decisions by
Passive strategies are more commonly used. employing specific investment strategies.
Commodities Global Macro Discretionary
• Investments in goods and real assets, such as energy, industrial • seek to profit from changes in global economies and financial
and precious metals, agriculture, and livestock markets brought about by political, fiscal and monetary policies
• Offer enhanced risk 1 return profile given that prices respond
differently than traditional asset classes to capital market and
economic conditions Managed Futures
• Trend following: buys asset classes when their prices are rising
Precious Metals and sells them when prices are falling
. Investments in gold, silver, platinum, and palladium can act as
hedges against inflation and benefit from fiat currency concerns Market Neutral
• Have some limited industrial uses Buy stocks expected to outperform based on fundamentals and
short stocks in same sector expected to underperform
Relative value Fixed Income
• Invest across the fixed income and credit spectrum based on
relative risk/reward opportunities
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4 CAPITAL MANAGEMENT
Proposed Portfolio with Liquid Alternatives
Allocation
Fund Name Ticker Category Current Proposed
EQUITY ALLOCATION
Columbia Contrarian Core Z SMGIX US Large Core 5.0% S.D%
Vanguard Growth&Income Adm VGIAX US Large Core 11.5% 11.5%
Dodge&Cox Stock DODGX US Large Value 4.30 4.3%
T.Rowe Price Growth Stock I PRUFX US Large Growth 2.1% 2.1%
Harbor Capital Appreciation Instl HACAX US Large Growth 2.1% 2.1%
iShares Russell Mid-Cap IWR US Mid Core 3.6% 3.6%
Undiscovered Managers Behavioral Val L UBVLX US Small Value 3.8% 3.8%
T.Rowe Price New Horizons I PRJIX US Small Growth 3.8% 3.8%
Nuveen Real Estate Securities I FARCX REITs 1.S% 1.5%
JUS Equity
37.5% 37.5
Nationwide Bailard Intl Ecls R6 NWHMX International Core 4.0% 4.0%
Dodge&Cox International Stock DODFX International Value 2.6% 2.6%
MFS International Growth I MQGIX International Growtl 2.6% 2.6%
Hartford Schroders Emerging Mkts Eq I SEMNX Emerging Markets 3.3% 3.3%
International Equity 12.5% 12.5%
Total Equity 50.0% 50.0% The information in this slide is for
illustrative purposes only,and is not
FIXED-INCOME ALLOCATION intended to provide investment
recommendations as to which securities
Nationwide High Mark Bond R6 NWJIX Intermediate Term E 15.6% 8.7% to buy or sell,or when to buy or sell
PI MCO Total Return Instl PTTRX Intermediate Term E 10.0% 8.7% securities.The Sample Portfolio is
Prudential Total Return Bond Q PTRQX Intermediate Term E 12.5% 8.7% hypothetical and does not reflect actual
Vanguard Short-Term Investment-Grade Adm VFSUX Short Term Bond 6.3% 6.0% investment decisions or
Eaton Vance Floating-Rate&Hi Inc Inst FIFHX Bank Loans 2.5% 3.0% recommendations,and does not
ITotal Bonds 46.9% 35.0%! represent actual trading or actual
portfolio performance.A client's
LI QU I D ALTE RNATIVES ALLOCATI 0 N portfolio construction and performance
Eaton Vance GIbI Macro Abs Ret Advtg I EGRIX Global Macro 0.0% 2.5% will vary depending on the client's
Western Asset Macro Opportunities IS LAOSX Global Macro 0.0% 2.S% investment needs,objectives and
AQR Managed Futures Strategy I AQMIX Managed Future 0.0% 2.0% restrictions and market conditions.Asset
allocation ranges and performance for
Natixis ASG Managed Futures Strategy Y ASFYX Managed Future 0.0% 2.0%
each investment objective may also vary
AQR Equity Market Neutral I QMNIX Market Neutral 0.0% 1,D%
depending on the prevailing market
BlackRock Strategic Income Apps Instl BSIIX Relative Value FI 0.0% 1.0% conditions.The percentages in the
AQR Style Premia Alternative I QSPIX Multi-Strategy 0.0% 1.0% illustration above are rounded to the
iTotal Liquid Alternatives 0.0% nearest decimal point.
FIRST AMERN GOVT 0 BLI G FD CL Z FGZXX Cash 3.1% 3.1%
[Total Portfolio 100.0% 100�.Ofl.
5
HIGHMARK'
'CAPITAL MANAGEMENT
Impact on Return and Risk
Liquid Alternatives Performance Expectations
Total Return.- Cash +4%
Standard Deviation: 4-6%
Correlation to Equities-, +/- 0.3
Annualized Performance through February 28, 2017
Portfolios rebalanced annually at year-end
Return Return Return Return Return Return Std Dev Std Dev Sharpe Sharpe
Portfolio 1 Year 2 Year 3 Year 2016 2015 2014 1 Year 3 Year 1 Year 3 Year
ACR Managed Futures Strategy 1 -10.71 -4.35 2.90 -8.43 2.00 9.69 9.70 10.22 -1.16 0.31"
ACR Market Neutral* 4.22 10-56 11-03 5.85 17.60 10.25 3.73 5.84 1.03 1.801
ACR Style Premia Alternative 1 2.74 8.38 8.36 -0.47 8.76 11.30 4.65 6.98 0.53 1.16
BlackRock Strategic Income Opps Instl 6.23 1.62 2.45 3.61 -0-30 3.89 1.09 1.63 5.25 1.40
Eaton Vance G1b1 Macro,Abs Ret Advtg 1 8.05 3.69 6.02 5.86 4.21 6.28 3.27 3.88 2.27 1.49
Natixis ASG Managed Futures Strategy Y -10.25 -6.41 5.97 -5.47 -1.22 22.21 9.44 11.29 -1.14 0.55
Western Asset Macro Opportunities IS 13.82 3.82 5.09 6.57 1.57 8.11 7.76 6.03 1.66 0.83
Liquid Alts proposed portfolio 1.81 1.46 5.75 1.02 3.50 10.51 3.82 4.05 0.39 1.36
Current portfolio (no liquid alts) 13.37 3.93 4.94 6.63 0.42 6.28 4.64 5.37 2.66 0.90
,Proposed portfolio (with liquid alts) 13.16 3.90 5.29 6.30 0.82 6.82 4.59 5.36 2.65 0.96
*A QR Market Neutral-utilized private fund performance of identical strategy from 11112014 through 1013112014 prior to mutual fund inception on 111112014
Source.-Morningstar Direct
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CAPITAL MANAGEMENT
Impact on Fees
Allocation Expense Ratio
Fund Name Ticker Category Current Proposed Exp Ratio Current Proposed
EQU ITY ALLO CATI 0 N
Columbia Contrarian Core Z SMGIX US Large Core 5.0% 5.0% 0.82%
Vanguard Growth&Income Adm VGIAX US Large Core 11.5% 11.5% 0.23%
Dodge&Cox Stock DO DGX US Large Value 4.3% 4.3% 0.52%
T.Rowe Price Growth Stock I PRUFX US Large Growth 2.1% 2.1% 0.52%
Harbor Capital Appreciation Instl HACAX US Large Growth 2.1% 2.1% 0.64%
iShares Russell Mid-Cap IWR US Mid Core 3.6% 3.6% 0.20%
Undiscovered Managers Behavioral Val L UBVLX US Small Value 3.8% 3.8% 0.89%
T.Rowe Price New Horizons I PRJIX US Small Growth 3.8% 3.8% 0.65%
Nuveen Real Estate Securities I FARCX REITs 1.5% 1.51 1.05%
Nationwide Ballard Intl Eqs.R6 NWHMX International Core 4.0% 4.0% 0.86%
Dodge&Cox International Stock DODFX International Value 2.6% 2.6% 0.64%
MFS International Growth I MQGIX International Growtl 2.6% 2.6% 0.95%
Hartford Schroders Emerging Mkts Eq I SEMNX Emerging Markets 3.3% 3.3% 1.24%
Frq u ity Allocation 50.0% 50.0% 0.62% 0.624
ees for Equity Allocation 0.31% 0.31%,
FIXED INCOME ALLOCATION
Nationwide High Mark Bond R6 NWJIX Intermediate Term P 15.6% 8.7% 0.50%
PIMCO Total Return Instl PTTRX Intermediate Term F 10.0% 8.7% 0.46%
Prudential Total Return Bond Q PTRQX Intermediate Term E 12.5% 8.7% 0.44%
Vanguard Short-Term Investment-Grade Adm VFSUX Short Term Bond 6.3% 6.0% 0.10%
Eaton Vance Floating-Rate&Hi Inc Inst EIFHX Bank Loans 2.5% 3.0% 0.82%
Fixed Income Allocation 46.9% 35.0% 0.44% 0.43%
Fees for Fixed Income Allocation 0.21% 0.15%_
LIQUID ALTERNATIVES ALLOCATION
Eaton Vance GIbI Macro Abs Ret Advtg I EGRIX Global Macro 0.0% 2.5% 1.23%
Western Asset Macro Opportunities IS LAOSX Global Macro 0.0% 2.5% 1.23%
AQR.Managed Futures Strategy I AQMIX Managed Future 0.0% 2.0% 1.20%
Natixis ASG Managed Futures Strategy Y ASFYX Managed Future 0.0% 2.0% 1.49%
AQR Equity Market Neutral I QMNIX Market Neutral 0.0% 1.0% 1.28%
BlackRock Strategic Income Opps Instl BSIIX Relative Value FI 0.0% 1.0% 0.60%
AQR Style Premia Alternative I QSPIX Multi-Strategy 0.0% 1.0% 1.49%
Liquid Alternatives Allocation 0. 12.0% 0,00% 1.24%
Fees 00/0 for Liquid Alternatives Allocation 0.00% 0.15%
FIRST A MERN GOVT 0 B LIG FD CL Z FGZXX Cash 3.1% 3.1% 0.18%
[Fees for Cash 0.01% 0=0 r/.
iTotal Portfolio Fees 0.5Z% 0.62%1
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CAPITAL MANAGEMENT
Liquid Alternatives Fuad Summaries
M
PEatonVance Global Macro Abs Return Adv EGRIX Global Macro The team persues a discretionary,top-down approach focusing on macroeconomic and political analysis on
Discretionary countries worldwide.Based on the team's macroeconomic outlook,the fund invests in sovereign credit,currency,
interest rates and broad equity investments within emerging markets.The management team expresses
investment views over the medium to longterm,typically between one and five years.Their approach employs
both long and short strategies to maximize risk-adjusted return in both up and down markets.The fund is not
benchmark constrained.
Western Asset Macro Opportunities LAOSX Global Macro The strategy focuses on top-down relative value opportunities in global interest rates and global credit
Discretionary (predominantly U.S.,Europe and Asia).Duration is actively managed,with historical duration ranging from-4 to+10
years.Returns will be primarily driven by the investment team's ability to identify long term macro themes and
position the fund accordingly.The fund will typically have a net long credit bias.
AQR Managed Futures AQMIX Global Macro The fund implements a proprietary systematic trend following strategy.The strategy is designed to capitalize on
Managed Futures price momentum signals that dictate long and short positions across global equity,fixed income,interest rate,
commodity,and currency markets through the use of short and long-term trend-following models.The Fund may
be directionally exposed over the short-term while targeting correlations close to zero over Iongertime horizons.
Natixis ASG Managed Futures Strategy Y ASFYX Global Macro The fund implements a proprietary systematic trend following strategy.The strategy is designed to capitalize on
Managed Futures price momentum signals that dictate long and short positions across global equity,fixed income,interest rate,
commodity,and currency markets through the use of short and long-term trend-following models.The Fund may
be directionally exposed over the short-term while targeting correlations close to zero over longer time horizons.
AQR Equity Market Neutral I QMNIX Long/Short Equity The strategy uses valuation,momentum,quality,stability,investor sentiment and management signaling as
Market Neutral measures to establish long and short positions that are attractive on either a relative or absolute basis.The Fund
will invest in the top 2,000 global stocks based on market capitalization and targets neutrality at market,country
and industry levels overthe long-term(3+years).
Black Rock Strategic Income Capps Insl BSIIX Relative Value The strategy employs a fundamental approach that blends top-down and bottom-up processes to construct an
Fixed Income unconstrained fixed income portfolio.The strategy can invest in a broad universe of fixed income securities and
derivatives including all sectors of the Barclays Aggregate Index,high yield,floating rate,emerging market debt,
non-US denominated debt,asset backed securities,and convertibles.Duration can range from-2 to+7 years
(typically 1-4 years).
AQR Style Premia Alternative I QSPIX Multi-Strategy The strategy's approach provides efficient,diversified exposure to four fundamental investment styles—value,
Risk Premia momentum,carry,and defensive—in a transparent and liquid vehicle.The Fund provides exposures to the four
styles by constructing diversified,long/short portfolios across global stocks/industries,equity market indices,
sovereign fixed income(bonds,interest rates and yield curve strategies),currencies and commodities.
One should not assume that investments in the securities identified and discussed were or will be profitable.
�..-._._......_._...4._.._._ -_.........__.____..-._.._-..._._.-._.W�_._.._..... ....-.. __._._..._._......_..__.._.... ...�v . _----- - -- - w._.y ._..-_ w. HIGHMARKe
CAPITAL MANAGEMENT
Disclosures
HighMork Capital Management, Inc. (HighMar0. on SEC-registered investment advise, is e subsidiary ofMUFG Union Bank. N.A. (MUB) HighMork manages institutional separate
account portfolios for a wide variety of for-profit and nonprofit organizations, public agenoiea., public and private retirement plans, and personal trusts of all sizes. It may also serve as
sub-adviser for mutual funds, common trust funds and collective investment funds. MUB, o subsidiary of MUFG Americas Ho/dings Corporation, provides certain services to
HighMark and is compensated for these services. Past performance does not guarantee future results. Individual account management and construction will vary depending on each
client's investment needs and objectives. Investments employing HighlMa,kstrategies u,owOT.nmurodbytheFO1Corbyanyotherfouam|go"ommentagono* an° NOT
deposits of or guaranteed by the Bank or any Bank affiliate,and MAY lose value, including possible loss of principal.
Each strategy represented as a Sample Portfolio is a hypothetical portfolio only and does not reflect actual investment decisions or recommendations. It is solely for illustrative
purposes and is subject to change at any time. /t is not intended to represent a specific investment. It does not reflect the liquidity constraints of actual investing or the impact that
material economic and market factors may have on an 'investment adviser's decision-making. Investors cannot invest in the Sample Portfolio and actual investment results may differ
materially.An account could incur losses as well as gains. The Sample Portfolio does not reflect the deduction of advisory fees, brokerage,commissions,or any other actual client
expenaaa,which would reduce'investor returns.Advisory fees are described in Form Aov, Port 2A and are available upon request.
While alternative investments can be used for diversification,seeking to enhance returns and manage risk in 2 portfolio,they tend to have a higher degree ofrisk than traditional
asset classes and can involve significant loss. For example, commodity prices are highly volatile. and investors may experience significant losses in 2 short period oftime.
Investments such as futures are subject to a high degree of fluctuation and should be considered speculative.And short positions could lose significant value ifsecurities prices rise.
Before investing carefully consider your financial position and risk tolerance to determine if the proposed trading style isappropriate.
The unmanaged S&P 500 Index is generally representative of the performance of large companies in the U S stock market. The Barclays U.S.Aggregate Bond Index is composed of
U.S. securities in Treasury, Govern ment-Re|oted. Co,porete, and Securitized sectors. The U.S. Corporate High-Yield Index measures the market of uSo'denominoted' non-
investment Bnode. fixed-nate.taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody'e. Fitch, and S&P is Ba1/BB+/BB+or below, excluding
emerging market debt.
The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Index is a subset of the Russell 30000 Index representing
approximately 8%of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination oftheir marketcap and current
index membership.
MSCI Emerging Markets Index iuofree float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.The MSCI Emerging
Markets Index consists of the following 21 emerging market country indices: Brazil, Chile,. Chino, Colombia, Czech Republic, Egypt, Hungary, India. |ndoneaio. Korea, Malaysia,
Mexico, Morocco. Peru. Philippines, Poland, Russia, South Africa, Ta/wan Thailand, and Turkey.
Index returns donot reflect the deduction ofadvisory fees, custody fees, transaction costs, or other investment expenses. The index returns assume the reinvestment of dividends
and other earnings.An investor cannot invest directly in an unmanaged index.
(DHighMarkCapital Management, Inc. 2O17. All rights reserved.
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