82 unidentified characteristics of fund holdings are material, pie charts and other breakdowns may rescale identified characteristics to 100% for more intuitive presentation.)
Note that all other portfolio statistics presented in this report are based on the long (or long rescaled) holdings of the fund only.
Average Effective Duration
Duration is a time measure of a bond's interest-rate sensitivity. Average effective duration is a weighted average of the duration of the fixed-income securities within a portfolio.
Average Effective Maturity
Average Effective Maturity is a weighted average of the maturities of all bonds in a portfolio.
Average Weighted Coupon
A coupon is the fixed annual percentage paid out on a bond. The average weighted coupon is the asset-weighted coupon of each bond in the portfolio.
Average Weighted Price
Average Weighted Price is the asset-weighted price of bonds held in a portfolio, expressed as a percentage of par (face) value. This number reveals if the portfolio favors bonds selling at prices above or below par value (premium or discount securities respectively.)
Best Fit Index
Alpha, beta, and R-squared statistics are presented for a broad market index and a “best fit” index. The Best Fit Index identified in this report was determined by Morningstar by calculating R-squared for the fund against approximately 100 indexes tracked by Morningstar. The index representing the highest R-squared is identified as the best fit index. The best fit index may not be the fund’s benchmark, nor does it necessarily contain the types of securities that may be held by the fund or portfolio.
Beta
Beta is a measure of a security or portfolio’s sensitivity to market movements (proxied using an index.) A beta of greater than 1 indicates more volatility than the market, and a beta of less than 1 indicates less volatility than the market.
Credit Quality Breakdown
Credit Quality breakdowns are shown for corporate-bond holdings in the fund’s portfolio and depict the quality of bonds in the underlying portfolio. It shows the percentage of fixed-income securities that fall within each credit-quality rating as assigned by a Nationally Recognized Statistical Rating Organization (NRSRO).
Bonds not rated by an NRSRO are included in the Other/Not-Classified category.
Data Coverage %
The Data Coverage % data point is a summary metric describing the level of data completeness used to generate the overall rating. If the pillar is assigned directly or indirectly by analysts, the pillar has complete data availability, as no model was used to estimate the pillar score. If the pillar is assigned directly by algorithm, Morningstar counts the number of data points feeding both the positive and negative models and counts whether the vehicle has strategy- specific data available. A simple percentage is calculated per pillar. The overall data coverage % is then scaled by pillar weights.
Deferred Load %
The back-end sales charge or deferred load is imposed when an investor redeems shares of a fund. The percentage of the load charged generally declines the longer the fund’s shares are held by the investor. This charge, coupled with 12b-1 fees, commonly serves as an alternative to a traditional front-end load.
Expense Ratio %
The expense ratio is the annual fee that all funds charge their shareholders. It expresses the percentage of assets deducted each fiscal year for fund expenses, including 12b-1 fees, management fees, administrative fees, operating costs, and all other asset-based costs incurred by the fund. Portfolio transaction fees, or brokerage costs, as well as front-end or deferred sales charges are not included in the expense ratio. The expense ratio, which is deducted from the fund’s average net assets, is accrued on a daily basis. The gross expense ratio, in contrast to the net expense ratio, does not reflect any fee waivers in effect during the time period.
Front-end Load %
The initial sales charge or front-end load is a deduction made from each investment in the fund and is generally based on the amount of the investment.
Geometric Average Market Capitalization
Geometric Average Market Capitalization is a measure of the size of the companies in which a portfolio invests.
Growth of 10,000
For funds, this graph compares the growth of an investment of 10,000 (in the base currency of the fund) with that of an index and/or with that of the average for all funds in its Morningstar Category. The total returns are not adjusted to reflect sales charges or the effects of taxation but are adjusted to reflect actual ongoing fund expenses, and they assume reinvestment of dividends and capital gains. If adjusted, effects of sales charges and taxation would reduce the performance quoted. If pre-inception data is included in the analysis, it will be graphed.
The index in the Growth of 10,000 graph is an unmanaged portfolio of specified securities and cannot be invested in directly. The index does not reflect any initial or ongoing expenses. A fund's portfolio may differ significantly from the securities in the index. The index is chosen by Morningstar.
Management Fees %
The management fee includes the management and administrative fees listed in the Management Fees section of a fund’s prospectus. Typically, these fees represent the costs shareholders paid for management and administrative services over the fund’s prior fiscal year.
Maximum Redemption Fee %
The Maximum Redemption Fee is the maximum amount a fund may charge if redeemed in a specific time period after the fund’s purchase (for example, 30, 180, or 365 days).
Mean
Mean is the annualized geometric return for the period shown.
Morningstar Medalist Rating™
The Morningstar Medalist Rating is the summary expression of Morningstar’s forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. The Medalist Ratings indicate which investments Morningstar believes are likely to outperform a relevant index or peer group average on a risk-adjusted basis over time. Investment products are evaluated on three key pillars (People, Parent, and Process) which, when coupled with a fee assessment, forms the basis for Morningstar’s conviction in those products’ investment merits and determines the Medalist Rating they’re assigned. Pillar ratings take the form of Low, Below Average, Average, Above Average, and High. Pillars may be evaluated via an Release date 03-31-2024
©2024 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial professional which cannot be verified by Morningstar, (3) may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. Opinions expressed are as of the date written and are subject to change without notice. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. This report is supplemental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent, and disclosure statement. Please see important disclosures at the end of this report. ß®
83 analyst’s qualitative assessment (either directly to a vehicle the analyst covers or indirectly when the pillar ratings of a covered vehicle are mapped to a related uncovered vehicle) or using algorithmic techniques. Vehicles are sorted by their expected performance into rating groups defined by their Morningstar Category and their active or passive status. When analysts directly cover a vehicle, they assign the three pillar ratings based on their qualitative assessment, subject to the oversight of the Analyst Rating Committee, and monitor and reevaluate them at least every 14 months. When the vehicles are covered either indirectly by analysts or by algorithm, the ratings are assigned monthly. For more detailed information about the Medalist Ratings, including their methodology, please go to http://global.morningstar.com/managerdisclosures.
The Morningstar Medalist Ratings are not statements of fact, nor are they credit or risk ratings. The Morningstar Medalist Rating (i) should not be used as the sole basis in evaluating an investment product, (ii) involves unknown risks and uncertainties which may cause expectations not to occur or to differ significantly from what was expected, (iii) are not guaranteed to be based on complete or accurate assumptions or models when determined algorithmically, (iv) involve the risk that the return target will not be met due to such things as unforeseen changes in changes in management, technology, economic development, interest rate development, operating and/or material costs, competitive pressure, supervisory law, exchange rate, tax rates, exchange rate changes, and/or changes in political and social conditions, and (v) should not be considered an offer or solicitation to buy or sell the investment product. A change in the fundamental factors underlying the Morningstar Medalist Rating can mean that the rating is subsequently no longer accurate.
Analysts do not have any other material conflicts of interest at the time of publication. Users wishing to obtain further information should contact their local Morningstar office or refer to the Analyst Conflicts of Interest and Other Disclosures for North America at
https://global.morningstar.com/managerdisclosures under “Methodology Documents and Disclosures”.
Morningstar Category
Morningstar Category is assigned by placing funds into peer groups based on their underlying holdings. The underlying securities in each portfolio are the primary factor in our analysis as the investment objective and investment strategy stated in a fund’s prospectus may not be sufficiently detailed for our proprietary classification methodology. Funds are placed in a category based on their portfolio statistics and compositions over the past three years. Analysis of performance and other indicative facts are also considered. If the fund is new and has no portfolio history, Morningstar estimates where it will fall before giving it a permanent category assignment. Categories may be changed based on recent changes to the portfolio.
Morningstar Rank
Morningstar Rank is the total return percentile rank within each Morningstar Category. The highest (or most favorable) percentile rank is zero and the lowest (or least favorable) percentile rank is 100. Historical percentile ranks are based on a snapshot of a fund at the time of calculation.
Morningstar Rating™
The Morningstar Rating™for funds, or "star rating", is calculated for funds and separate accounts with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. For more information about the Morningstar Rating for funds, including its methodology, please go to
global.morningstar.com/managerdisclosures
The Morningstar Return rates a fund’s performance relative to other managed products in its Morningstar Category. It is an assessment of a product's excess return over a risk-free rate (the return of the 90-day Treasury Bill) in comparison with the products in its Morningstar category. In each Morningstar category, the top 10% of products earn a High Morningstar Return (High), the next 22.5% Above Average (+Avg), the middle 35% Average (Avg), the next 22.5% Below Average (-Ave), and the bottom 10% Low (Low). Morningstar Return is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the product. Products with less than three years of performance history are not rated.
Morningstar Risk
Morningstar Risk evaluates a fund’s downside volatility relative to that of other products in its Morningstar Category. It is an assessment of the variations in monthly returns, with an emphasis on downside variations, in comparison with the products in its Morningstar category. In each Morningstar category, the 10% of products with the lowest measured risk are described as Low Risk (Low), the next 22.5% Below Average (-Avg), the middle 35% Average (Avg), the next
22.5% Above Average (+Avg), and the top 10% High (High). Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the product. Products with less than three years of performance history are not rated.
Style Analysis
The Morningstar Style Box reveals a fund's investment style as of the date noted on this report.
For equity funds, the vertical axis shows the market capitalization of the long stocks owned, and the horizontal axis shows the investment style (value, blend, or growth.) A darkened cell in the style box matrix indicates the weighted average style of the portfolio.
For portfolios holding fixed-income investments, a Fixed Income Style Box is calculated. The vertical axis shows the credit quality based on credit ratings and the horizontal axis shows interest-rate sensitivity as measured by effective duration. There are three credit categories- “High”, “Medium”, and “Low; and there are three interest rate sensitivity categories- “Limited”, “Moderate”, and “Extensive” resulting in nine possible combinations. As in the equity Style Box the combination of credit and interest rate sensitivity for a portfolio is represented by a darkened cell in the matrix.
Morningstar uses credit rating information from credit rating agencies (CRA’s) that have been designated Nationally Recognized Statistical Rating Organizations (NRSRO’s) by the Securities and Exchange Commission (SEC) in the United States. For a list of all NRSROs, please visit https://www.sec.gov/ocr/ocr-learn-nrsros.html. Additionally, Morningstar will use credit ratings from CRA’s which have been recognized by foreign regulatory institutions that are deemed the equivalent of the NRSRO designation.
To determine the rating applicable to a holding and the subsequent holding weighted value of a portfolio two methods may be employed. First is a common methodology approach where if a case exists such that two rating organizations/ agencies have rated a holding, the lower rating of the two should Release date 03-31-2024
©2024 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial professional which cannot be verified by Morningstar, (3) may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. Opinions expressed are as of the date written and are subject to change without notice. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. This report is supplemental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent, and disclosure statement. Please see important disclosures at the end of this report. ß®
84 be applied; if three or more CRA’s have rated a holdingt the median rating should be applied, and in cases where there are more than two ratings and a median rating cannot be determined the lower of the two middle ratings should be applied. Alternatively, if there is more than one rating available an average can be calculated from all and applied. Please Note: Morningstar, Inc. is not an NRSRO nor does it issue a credit rating on the fund. Credit ratings for any security held in a portfolio may change over time.
Morningstar uses the credit rating information to calculate a weighted-average credit quality value for the portfolio. This value is based only upon those holdings which are considered to be classified as “fixed_income”, such as government, corporate, or securitized issues. Other types of holdings such as equities and many, though not all, types of derivatives are excluded. The weighted-average credit quality value is represented by a rating symbol which corresponds to the long-term rating symbol schemas employed by most CRA’s.
Note that this value is not explicitly published but instead serves an an input in Style Box calculation. This symbol is then used to map to a Style Box credit quality category of “low,” “medium,” or “high”. Funds with a "low" credit quality category are those whose weighted-average credit quality is determined to be equivalent to the commonly used High Yield classification, meaning a rating below “BBB”, portfolios assigned to the “high” credit category have either a “AAA” or “AA+” average credit quality value, while "medium" are those with an average rating of “AA” inclusive to “BBB-“. It is expected and intended that the majority of portfolios will be assigned a credit category of “medium”.
For assignment to an interest-rate sensitivity category Morningstar uses the average effective duration of the portfolio. From this value there are three distinct methodologies employed to determine assignment to category.
Portfolios which are assigned to Morningstar municipal-bond categoriesemploy static breakpoints between categories. These breakpoints are “Limited” equal to
4.5 years or less,; (ii) “Moderate” equal to 4.5 years to less than 7 years, and “Extensive” equal to more than 7 years. For portfolios assigned to Morningstar categories other than U.S> Taxable, including all domiciled outside the United States, static duration breakpoints are also used. The values differ from the municipal category values, : (i) “Limited” equals less than or equal to 3.5 years,“Moderate” equals greater than 3.5 years but less than or equal to 6 years, “Extensive” is assigned to portfolios with effective durations of more than 6 years. Note: Interest-rate sensitivity for non-U.S. domiciled portfolios (excluding those in Morningstar convertible categories) may be assigned using average modified duration when average effective duration is not available.
For portfolios Morningstar classifies as U.S Taxable Fixed-Income, interest-rate sensitivity category assignment is based on the effective duration of the Morningstar Core Bond Index (MCBI). The classification assignment is dynamically determined relative to the benchmark index value. A “Limited” category will be assigned to portfolios whose average effective duration is between 25% to 75% of MCBI average effective duration, where the average effective duration is between 75% to 125% of the MCBI the portfolio will be classified as “Moderate”, and those portfolios with an average effective duration value 125% or greater of the average effective duration of the MCBI will be classified as “Extensive”.
P/B Ratio TTM
The Price/Book Ratio (or P/B Ratio) for a fund is the weighted average of the P/B Ratio of the stocks in its portfolio. Book value is the total assets of a company, less total liabilities. The P/B ratio of a company is calculated by dividing the market price of its outstanding stock by the company's book value, and then adjusting for the number of shares outstanding. Stocks with negative book values are excluded from this calculation. It shows approximately how much an investor is paying for a company’s assets based on historical valuations.
P/C Ratio TTM
The Price/Cash Flow Ratio (or P/C Ratio) for a fund is the weighted average of the P/C Ratio of the stocks in its portfolio. The P/C Ratio of a stock represents the amount an investor is willing to pay for a dollar generated from a company’s operations. It shows the ability of a company to generate cash and acts as a gauge of liquidity and solvency.
P/E Ratio TTM
The Price/Earnings Ratio (or P/E Ratio) for a fund is the weighted average of the P/E Ratios of the stocks in its portfolio. The P/E Ratio of a stock is the stock’s current price divided by the company’s trailing 12-month earnings per share. A high P/E Ratio usually indicates the market will pay more to obtain the company’s earnings because it believes in the company’s abilities to increase their earnings. A low P/E Ratio indicates the market has less confidence that the company’s earnings will increase, however value investors may believe such stocks have an overlooked or undervalued potential for appreciation.
Percentile Rank in Category
Percentile Rank is a standardized way of ranking items within a peer group, in this case, funds within the same Morningstar Category. The observation with the largest numerical value is ranked zero the observation with the smallest numerical value is ranked 100. The remaining observations are placed equal distance from one another on the rating scale. Note that lower percentile ranks are generally more favorable for returns (high returns), while higher percentile ranks are generally more favorable for risk measures (low risk).
Performance Quartile
Performance Quartile reflects a fund’s Morningstar Rank.
Potential Capital Gains Exposure
Potential Capital Gains Exposure is an estimate of the percent of a fund’s assets that represent gains. It measures how much the fund’s assets have appreciated, and it can be an indicator of possible future capital gains distributions. A positive potential capital gains exposure value means that the fund’s holdings have generally increased in value while a negative value means that the fund has reported losses on its book.
Quarterly Returns
Quarterly Return is calculated applying the same methodology as Total Return except it represents return through each quarter-end.
R-Squared
R-squared is the percentage of a security or portfolio’s return movements that are explained by movements in its benchmark index, showing the degree of correlation between the security or portfolio and the benchmark. This figure is helpful in assessing how likely it is that beta and alpha are statistically significant. A value of 1 indicates perfect correlation between the security or portfolio and its benchmark. The lower the R-squared value, the lower the correlation.
Regional Exposure
The regional exposure is a display of the portfolio’s assets invested in the regions shown on the report.
Sector Weightings
Super Sectors represent Morningstar's broadest classification of equity sectors by assigning the 11 equity sectors into three classifications. The Cyclical Super Sector includes industries significantly impacted by economic shifts, and the stocks included in these sectors generally have betas greater than 1. The Defensive Super Sector generally includes industries that are relatively immune to economic cycles, and the stocks in these industries generally have betas less than 1. The Sensitive Super Sector includes industries that ebb and flow with the overall economy, but not severely so. Stocks in the Sensitive Super Sector Release date 03-31-2024
©2024 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial professional which cannot be verified by Morningstar, (3) may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. Opinions expressed are as of the date written and are subject to change without notice. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. This report is supplemental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent, and disclosure statement. Please see important disclosures at the end of this report. ß®
85 generally have betas that are close to 1.
Share Change
Shares Change represents the number of shares of a stock bought or sold by a fund since the previously reported portfolio of the fund.
Sharpe Ratio
Sharpe Ratio uses standard deviation and excess return (a measure of a security or portfolio’s return in excess of the U.S. Treasury three-month Treasury Bill) to determine the reward per unit of risk.
Standard Deviation
Standard deviation is a statistical measure of the volatility of the security or portfolio’s returns. The larger the standard deviation, the greater the volatility of return.
Standardized Returns
Standardized Return applies the methodology described in the Standardized Returns page of this report. Standardized Return is calculated through the most recent calendar-quarter end for one-year, five-year, 10-year, and/or since- inception periods, and it demonstrates the impact of sales charges (if applicable) and ongoing fund expenses. Standardized Return reflects the return an investor may have experience if the security was purchased at the beginning of the period and sold at the end, incurring transaction charges.
Total Return
Total Return, or "Non Load-Adjusted Return", reflects performance without adjusting for sales charges (if applicable) or the effects of taxation, but it is adjusted to reflect all actual ongoing security expenses and assumes reinvestment of dividends and capital gains. It is the return an investor would have experienced if the fund was held throughout the period. If adjusted for sales charges and the effects of taxation, the performance quoted would be significantly reduced.
Total Return +/- indicates how a fund has performed relative to its peers (as measure by its Standard Index and/or Morningstar Category Index) over the time periods shown.
Trailing Returns
Standardized Return applies the methodology described in the Standardized Returns page of this report. Standardized Return is calculated through the most recent calendar-quarter end for one-year, five-year, 10-year, and/or since- inception periods, and it demonstrates the impact of sales charges (if applicable) and ongoing fund expenses. Standardized Return reflects the return an investor may have experienced if the fund was purchased at the beginning of the period and sold at the end, incurring transaction charges.
Load-Adjusted Monthly Return is calculated applying the same methodology as Standardized Return, except that it represents return through month-end. As with Standardized Return, it reflects the impact of sales charges and ongoing fund expenses, but not taxation. If adjusted for the effects of taxation, the performance quoted would be significantly different.
Trailing Return +/- indicates how a fund has performed relative to its peers (as measure by its Standard Index and/or Morningstar Category Index) over the time periods shown.
Investment Risk Disclosures
Morningstar makes no representation concerning the appropriateness of any investment or investment strategy. Other types of investments or investment strategies may be more appropriate depending upon an investor's specific situation, including the investor’s investment objectives, financial status, tax situation, and risk tolerance. These disclosures cannot and do not list every conceivable factor that may affect the results of any investment or investment strategy. Additional risks will arise, and an investor must be willing and able to accept those risks. You should speak with your financial professional to understand the risks and limitations on investing in any particular investment or investment strategy, including those that are shown in this report, before making investment decisions.
The performance data given represents past performance and should not be considered indicative of future results. Principal value and investment return will fluctuate, so that an investor's shares/units, when sold or redeemed, may be worth more or less than the original investment. Portfolio statistics change over time. Securities are not FDIC-insured, may lose value, and are not guaranteed by a bank or other financial institution. Portfolio statistics change over time.
The risks associated with investing are numerous and include, but are not limited to, those listed below:
International/Emerging Market Equities: Investing in international securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.
Sector Strategies: Portfolios that invest exclusively in one sector or industry involve additional risks. The lack of industry diversification subjects the investor to increased industry-specific risks.
Non-Diversified Strategies: Portfolios that invest a significant percentage of assets in a single issuer involve additional risks, including share price fluctuations, because of the increased concentration of investments.
Small Cap Equities: Portfolios that invest in stocks of small companies involve additional risks. Smaller companies typically have a higher risk of failure, and are not as well established as larger blue-chip companies. Historically, smaller- company stocks have experienced a greater degree of market volatility than the overall market average.
Mid Cap Equities: Portfolios that invest in companies with market capitalization below $10 billion involve additional risks. The securities of these companies may be more volatile and less liquid than the securities of larger companies.
High-Yield Bonds: Portfolios that invest in lower-rated debt securities (commonly referred to as junk bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. The investor should be aware of the possible higher level of volatility, and increased risk of default.
Tax-Free Municipal Bonds: The investor should note that the income from tax- free municipal bond funds may be subject to state and local taxation and the Alternative Minimum Tax.
Bonds: Bonds are subject to interest rate risk. As the prevailing level of bond interest rates rise, the value of bonds already held in a portfolio declines.
Portfolios that hold bonds are subject to declines and increases in value due to general changes in interest rates.
Hedge Funds: The investor should note that hedge fund investing involves specialized risks that are dependent upon the type of strategies undertaken by the manager. This can include distressed or event-driven strategies, long/short strategies, using arbitrage (exploiting price inefficiencies), international Release date 03-31-2024
©2024 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial professional which cannot be verified by Morningstar, (3) may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. Opinions expressed are as of the date written and are subject to change without notice. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. This report is supplemental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent, and disclosure statement. Please see important disclosures at the end of this report. ß®
86 investing, and use of leverage, options and/or derivatives. Although the goal of hedge fund managers may be to reduce volatility and produce positive absolute return under a variety of market conditions, hedge funds may involve a high degree of risk and are suitable only for investors of substantial financial means who could bear the entire loss of their investment.
Bank Loan/Senior Debt: Bank loans and senior loans are impacted by the risks associated with fixed income in general, including interest rate risk and default risk. They are often non-investment grade; therefore, the risk of default is high.
These securities are also relatively illiquid. Managed products that invest in bank loans/senior debt are often highly leveraged, producing a high risk of return volatility.
Exchange Traded Notes (ETNs): ETNs are unsecured debt obligations. Any repayment of notes is subject to the issuer's ability to repay its obligations.
ETNs do not typically pay interest.
Leveraged ETFs: Levered investments are designed to meet multiples of the return performance of the index they track and seek to meet their fund objectives on a daily basis (or other time period stated within the Fund objective). The leverage/gearing ratio is the amount of excess return that a levered investment is designed to achieve in comparison to its index performance (i.e. 200%, 300%, -200%, or -300% or 2X, 3X. -2X, -3X).Leveraged investments are designed to meet multiples of the return performance of the index they track and seek to meet their fund objectives on a daily basis (or other time period stated within the prospectus objective). The leverage/gearing ratio is the amount of excess return that a leveraged investment is designed to achieve in comparison to its index performance (i.e. 200%, 300%, -200%, or - 300% or 2X, 3X, -2X, -3X). Compounding has the ability to affect the performance of the fund to be either greater or less than the index performance multiplied by the multiple stated within the funds objective over a stated time period.
Short Positions: When a short position moves in an unfavorable way, the losses are theoretically unlimited. The broker may demand more collateral and a manager might have to close out a short position at an inopportune time to limit further losses.
Long-Short: Due to the strategies used by long-short funds, which may include but are not limited to leverage, short selling, short-term trading, and investing in derivatives, these funds may have greater risk, volatility, and expenses than those focusing on traditional investment strategies.
Liquidity Risk: Closed-end fund, ETF, and HOLDR trading may be halted due to market conditions, impacting an investor’s ability to sell a fund.
Market Price Risk: The market price of ETFs, HOLDRs, and closed-end funds traded on the secondary market is subject to the forces of supply and demand and thus independent of the NAV. This can result in the market price trading at a premium or discount to the NAV, which will affect an investor’s value.
Market Risk: The market prices of ETFs and HOLDRs can fluctuate as a result of several factors, such as security-specific factors or general investor sentiment.
Therefore, investors should be aware of the prospect of market fluctuations and the impact it may have on the market price.
Target-Date Funds: Target-date funds typically invest in other mutual funds and are designed for investors who are planning to retire during the target date year.
The fund's target date is the approximate date when investors expect to begin withdrawing their money. A target-date fund's investment objective/strategy typically becomes more conservative over time, primarily by reducing its allocation to equity mutual funds and increasing its allocations in fixed-income mutual funds. An investor's principal value in a target-date fund is not guaranteed at any time, including at the fund's target date.
High double- and triple-digit returns: High double- and triple-digit returns were the result of extremely favorable market conditions, which may not continue to be the case. High returns for short time periods must not be a major factor when making investment decisions.
Benchmark Disclosure
Bloomberg US Agg Bond TR USD
This index is composed of the BarCap Government/Credit Index, the Mortgage- Backed Securities Index, and the Asset-Backed Securities Index. The returns we publish for the index are total returns, which includes the daily reinvestment of dividends. Bloomberg Indexes and its associated data, Copyright © 2024 Bloomberg Index Services Limited. Bloomberg® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”).
Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Bloomberg does not approve or endorse this material or guarantee the accuracy or completeness of any information herein, nor does Bloomberg make any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, Bloomberg shall not have any liability or responsibility for injury or damages arising in connection therewith. The constituents displayed for this index are from the following proxy: iShares Core US Aggregate Bond ETF.
Morningstar Gbl Allocation TR USD
The index measures the performance of a multi-asset class portfolio of global equities, global bonds and cash. This portfolio is held in a static allocation that is appropriate for investors who seek average exposure to global equity market risk and returns. This Index does not incorporate Environmental, Social, or Governance (ESG) criteria.
Morningstar Lifetime Mod 2020 TR USD
The Morningstar Lifetime Moderate 2020 Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS.
This portfolio is held in proportions appropriate for a U.S. investor who is about ten years away from retirement. The Moderate risk profile is for investors who are comfortable with average exposure to equity market volatility.
Morningstar Lifetime Mod 2025 TR USD
The Morningstar Lifetime Moderate 2025 Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS.
This portfolio is held in proportions appropriate for a U.S. investor who is about 15 years away from retirement. The Moderate risk profile is for investors who are comfortable with average exposure to equity market volatility.
Morningstar Lifetime Mod 2030 TR USD
The Morningstar Lifetime Moderate 2030 Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS.
This portfolio is held in proportions appropriate for a U.S. investor who is about 20 years away from retirement. The Moderate risk profile is for investors who are comfortable with average exposure to equity market volatility.
Morningstar Lifetime Mod 2035 TR USD
The Morningstar Lifetime Moderate 2035 Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS.
This portfolio is held in proportions appropriate for a U.S. investor who is about 25 years away from retirement. The Moderate risk profile is for investors who Release date 03-31-2024
©2024 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial professional which cannot be verified by Morningstar, (3) may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. Opinions expressed are as of the date written and are subject to change without notice. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. This report is supplemental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent, and disclosure statement. Please see important disclosures at the end of this report. ß®
87 are comfortable with average exposure to equity market volatility.
Morningstar Lifetime Mod 2040 TR USD
The Morningstar Lifetime Moderate 2040 Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS.
This portfolio is held in proportions appropriate for a U.S. investor who is about 30 years away from retirement. The Moderate risk profile is for investors who are comfortable with average exposure to equity market volatility.
Morningstar Lifetime Mod 2045 TR USD
The Morningstar Lifetime Moderate 2045 Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS.
This portfolio is held in proportions appropriate for a U.S. investor who is about 35 years away from retirement. The Moderate risk profile is for investors who are comfortable with average exposure to equity market volatility.
Morningstar Lifetime Mod 2050 TR USD
The Morningstar Lifetime Moderate 2050 Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS.
This portfolio is held in proportions appropriate for a U.S. investor who is about 40 years away from retirement. The Moderate risk profile is for investors who are comfortable with average exposure to equity market volatility.
Morningstar Lifetime Mod 2055 TR USD
The Morningstar Lifetime Moderate 2055 Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS.
This portfolio is held in proportions appropriate for a U.S. investor who is about 45 years away from retirement. The Moderate risk profile is for investors who are comfortable with average exposure to equity market volatility.
Morningstar Lifetime Mod 2060 TR USD
The index measures the performance of a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS. This portfolio is held in proportions appropriate for a US investor who has a target maturity date of 2060. The Moderate risk profile is for investors who are comfortable with average exposure to equity market volatility. This Index does not incorporate Environmental, Social, or Governance (ESG) criteria.
Morningstar Lifetime Mod Incm TR USD
The Morningstar Lifetime Moderate Income Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS. This portfolio is held in proportions appropriate for a U.S. investor who is at least ten years into retirement. The Moderate risk profile is for investors who are comfortable with average exposure to equity market volatility.
Morningstar Mod Tgt Risk TR USD
The Morningstar Moderate Target Risk Index represents a portfolio of global equities, bonds and traditional inflation hedges such as commodities and TIPS.
This portfolio is held in a static allocation appropriate for U.S. investors who seek average exposure to equity market risk and returns.
Morningstar US Con Tgt Alloc NR USD
The Morningstar Target Allocation Index family consists of indexes that offer a diversified mix of stocks and bonds created for local investors to benchmark their allocation funds. Morningstar's Category classification system defines the level of equity and bond exposure for each index. The Morningstar US Conservative Target Allocation Index seeks 22.5% exposure to global equity markets.
Morningstar US Core Bd TR USD
The index measures the performance of fixed-rate, investment-grade USD- denominated securities with maturities greater than one year. It is market- capitalization weighted. This Index does not incorporate Environmental, Social, or Governance (ESG) criteria.
Morningstar US LM Brd Growth TR USD
The index provides a comprehensive depiction of the performance and fundamental characteristics of the Large-Mid Cap Growth segment of U.S. equity markets. It targets stocks representing the faster growing half of the U.S. large- and mid-cap market. This Index does not incorporate Environmental, Social, or Governance (ESG) criteria.
Morningstar US LM Brd Val TR USD
The index provides a comprehensive depiction of the performance and fundamental characteristics of the Large-Mid Cap Value segment of U.S. equity markets. It targets stocks representing the cheaper half of the U.S. large- and mid-cap market. This Index does not incorporate Environmental, Social, or Governance (ESG) criteria.
Morningstar US Mid Brd Grt TR USD
The index measures the performance of US mid-cap growth stocks. It targets stocks representing the faster growing half of the mid-cap market. This Index does not incorporate Environmental, Social, or Governance (ESG) criteria.
Morningstar US Mod Con Tgt Alloc NR USD
The Morningstar Target Allocation Index family consists of indexes that offer a diversified mix of stocks and bonds created for local investors to benchmark their allocation funds. Morningstar's Category classification system defines the level of equity and bond exposure for each index. The Morningstar US Moderately Conservative Target Allocation Index seeks 40% exposure to global equity markets.
MSCI ACWI Ex USA Growth NR USD
The index measures the performance of the growth large and mid cap segments of the particular regions, excluding USA equity securities, including developed and emerging market. It is free float-adjusted market-capitalization weighted.
The constituents displayed for this index are from the following proxy: iShares MSCI ACWI ETF.
MSCI ACWI Ex USA NR USD
The MSCI AC World ex USA is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets. The index consists of 48 developed and emerging market country indices. The returns we publish for the index are total returns, which include reinvestment of dividends. The constituents displayed for this index are from the following proxy: iShares MSCI ACWI ex US ETF.
MSCI ACWI Ex USA Value NR USD
The index measures the performance of the value large and mid cap segments of the particular regions, excluding USA equity securities, including developed and emerging market. It is free float-adjusted market-capitalization weighted.
The constituents displayed for this index are from the following proxy: iShares MSCI ACWI ETF.
MSCI ACWI NR USD
The index measures the performance of the large and mid cap segments of all country markets. It is free float-adjusted market-capitalization weighted. The constituents displayed for this index are from the following proxy: iShares MSCI ACWI ETF.
MSCI EAFE NR USD
This Europe, Australasia, and Far East index is a market-capitalization-weighted Release date 03-31-2024
©2024 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial professional which cannot be verified by Morningstar, (3) may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. Opinions expressed are as of the date written and are subject to change without notice. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. This report is supplemental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent, and disclosure statement. Please see important disclosures at the end of this report. ß®
88 index of 21 non-U.S., industrialized country indexes.
This disclosure applies to all MSCI indices: Certain information included herein is derived by Morningstar in part from MSCI’s Index Constituents (the “Index Data”). However, MSCI has not reviewed any information contained herein and does not endorse or express any opinion such information or analysis. MSCI does not make any express or implied warranties, representations or guarantees concerning the Index Data or any information or data derived therefrom, and in no event will MSCI have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) relating to any use of this information. The constituents displayed for this index are from the following proxy: Schwab International Index Fund®.
Russell 1000 Growth TR USD
Tracks the companies within the Russell 1000 with higher price-to-book ratios and higher forecasted growth values. The constituents displayed for this index are from the following proxy: iShares Russell 1000 Growth ETF.
Russell 1000 TR USD
Consists of the 1000 largest companies within the Russell 3000 index, which represents approximately 98% of the investable US equity market. Also known as the Market-Oriented Index, because it represents the group of stocks from which most active money managers choose. The constituents displayed for this index are from the following proxy: iShares Russell 1000 ETF.
Russell 1000 Value TR USD
Tracks the companies within the Russell 1000 with lower price-to-book ratios and lower forecasted growth values. The constituents displayed for this index are from the following proxy: iShares Russell 1000 Value ETF.
Russell 2000 TR USD
Consists of the 2000 smallest companies in the Russell 3000 Index. The constituents displayed for this index are from the following proxy: iShares Russell 2000 ETF.
Russell Mid Cap Growth TR USD
Tracks the companies within the Russell Midcap Index with higher price-to-book ratios and higher forecasted growth values. The constituents displayed for this index are from the following proxy: iShares Russell Mid-Cap Growth ETF.
Russell Mid Cap TR USD
Measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000 Index. The constituents displayed for this index are from the following proxy: iShares Russell Mid-Cap ETF.
Russell Mid Cap Value TR USD
Tracks the companies within the Russell Midcap Index having lower price-to- book ratios and lower forecasted growth values. The constituents displayed for this index are from the following proxy: iShares Russell Mid-Cap Value ETF.
S&P 500 TR USD
A market capitalization-weighted index composed of the 500 most widely held stocks whose assets and/or revenues are based in the US; it's often used as a proxy for the U.S. stock market. TR (Total Return) indexes include daily reinvestment of dividends. The constituents displayed for this index are from the following proxy: SPDR® S&P 500 ETF Trust.
USTREAS T-Bill Auction Ave 3 Mon
Three-month T-bills are government-backed, short-term investments considered to be risk-free and as good as cash because the maturity is only three months.
Morningstar collects yields on the T-bill on a weekly basis from the Wall Street Journal.
Release date 03-31-2024
©2024 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may include, or be derived from, account information provided by your financial professional which cannot be verified by Morningstar, (3) may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (6) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. Opinions expressed are as of the date written and are subject to change without notice. Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. This report is supplemental sales literature. If applicable it must be preceded or accompanied by a prospectus, or equivalent, and disclosure statement. Please see important disclosures at the end of this report. ß®
89 Important Disclosures:
The material in this Report is intended solely for the use of the persons to whom it has been delivered. This information is being provided as a part of the services you receive from your Hyas Group Consultant and does not supersede or replace your customer account statement provided by your custodian (“Custodial Statement”). Information in this Report may vary from the information in your Custodial Statement as a result of differences in accounting procedures, reporting dates, or valuation methodologies of certain securities. The market values reflected in this Report may vary slightly from the market values in your Custodial Statement. The information in this Report is as of the date(s) noted and subject to daily market fluctuation.
Sources of Information. Material in this Report has been obtained from sources that we believe to be reliable, but we do not guarantee its accuracy, completeness, or timeliness. The performance produced herein is calculated utilizing custodian data downloads and manually entered material. Although we take every precaution to ensure accuracy, we are not able to guarantee complete accuracy.
No Tax or Legal Advice. When Hyas Group, its affiliates and Hyas Group Consultants provide “investment advice” regarding a retirement or welfare benefit plan account, an individual retirement account or a Coverdell education savings account (“Retirement Account”), Hyas Group is a “fiduciary” as those terms are defined under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and/or the Internal Revenue Code of 1986 (the “Code”), as applicable. When Hyas Group provides investment education or otherwise does not provide “investment advice”, Hyas Group will not be considered a “fiduciary” under ERISA and/or the Code. Tax laws are complex and subject to change. Hyas Group does not provide tax or legal advice.
Key Asset Class Risk Disclosures. Investing involves market risk, including possible loss of principal. Please refer to Hyas Group’s Form ADV Brochure for more information about the risks associated with certain investment products. The Hyas Group’s Form ADV Brochure is available upon request.
ALL MUTUAL FUND PRODUCTS AND EXCHANGE-TRADED FUNDS ARE SOLD BY PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION ABOUT A FUND, ITS EXPENSES AND MATERIAL RISKS RELATED TO THAT FUND’S INVESTMENT STRATEGY.
PLEASE CONTACT YOUR HYAS GROUP CONSULTANT FOR A COPY OF A FUND’S PROSPECTUS.
PLEASE READ THE PROSPECTUS AND CONSIDER THE FUND’S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES CAREFULLY BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER IMPORTANT INFORMATION ABOUT THE FUND.
Performance. Performance results illustrated herein do not reflect a deduction of any investment advisory fees charged by Hyas Group or any investment manager but do include the fund’s internal expenses. Performance results are annualized for time periods greater than one year and include all cash and cash equivalents, realized and unrealized capital gains and losses, and dividends, interest, and income. The investment results depicted herein represent historical performance. As a result of recent market activity, current performance may vary from the figures shown. Past performance is not a guarantee of future results.
The underlying fund’s internal expenses (also known as the expense ratio) generally covers investment management fees, marketing, and distribution fees (also known as 12b-1 fees) and other operating expenses of the fund. The expense ratios being displayed for mutual funds reflect each fund's prospectus "net" expenses as provided by Morningstar. Such "net" expenses are subject to change and may increase at any time.
To learn more about the Hyas Group advisory services, please see the Hyas Group ADV Brochure for more information. It is available from your Hyas Group Consultant.
Performance data quoted is historical. Past performance does not guarantee future results. Current performance may be higher or lower than the performance quoted. You can obtain performance data current to the most recent month-end for each fund by visiting the fund company website. The investment return and principal value of an investment will fluctuate such that an investor's shares, when redeemed, may be worth more or less than their original cost. Total 90 returns include reinvestment of dividends and capital gains and are net of all fund fees and expenses.
Performance figures are based on Net Asset Value (NAV) within a qualified retirement plan. If an individual were to purchase shares outside of a qualified plan, they would likely be subject to all, or a portion of, any applicable sales charges. These charges would lower the performance indicated above.
Each fund's performance may, from time to time, have been affected significantly by material market and economic conditions, including interest rates, market trends, and general business and economic cycles, which may or may not be repeated in the future. Also, keep in mind that any double-digit returns are highly unusual and cannot be sustained. Such returns are primarily achieved during favorable market conditions.
Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment. The indices selected by Hyas Group to measure performance are representative of broad asset classes. Hyas Group retains the right to change representative indices at any time. Performance of indices may be more or less volatile than any investment product. The risk of loss in value of a specific investment is not the same as the risk of loss in a broad market index. Therefore, the historical returns of an index will not be the same as the historical returns of a particular investment a client selects. Past performance does not guarantee future results.
The "Investment Policy Statement Compliance Report" indicates funds that are on the Plan's Watch List, as based on investment monitoring criteria which is provided to Hyas Group by the plan sponsor. The plan sponsor should inform its Hyas Group Consultant of any changes to the plan's investment policy.
Fund data provided by Morningstar.
Peer Groups. Peer Groups are a collection of similar investment strategies that essentially group investment products that share the same investment approach.
Peer Groups are used for comparison purposes to compare and illustrate a clients investment portfolio versus its peer across various quantitative metrics like performance and risk. Peer Group comparison is conceptually another form of benchmark comparison whereby the actual investment can be ranked versus its peer across various quantitative metrics. All Peer Group data are provided by Investment Metrics, LLC. The URL below provides all the definitions and methodology about the various Peer Groups https://www.invmetrics.com/style-peer-groups Peer Group Ranking Methodology. A percentile rank denotes the value of a product in which a certain percent of observations falls within a peer group. The range of percentile rankings is between 1 and 100, where 1 represents a high statistical value and 100 represents a low statistical value. The 30th percentile, for example, is the value in which 30% of the highest observations may be found, the 65th percentile is the value in which 65% of the highest observations may be found, and so on.
Percentile rankings are calculated based on a normalized distribution ranging from 1 to 100 for all products in each peer group, where a ranking of 1 denotes a high statistical value and a ranking of 100 denotes a low statistical value. It is important to note that the same ranking methodology applies to all statistics, implying that a ranking of 1 will always mean highest value across all statistics.
For example, consider a risk/return assessment using standard deviation as a measure of risk. A percentile ranking equal to 1 for return denotes highest return, whereas a percentile ranking of 1 for standard deviation denotes highest risk among peers.
In addition, values may be used to demonstrate quartile rankings. For example, the third quartile is also known as the 75th percentile, and the median is the 50th percentile.
Hyas Group is a separate business unit within Morgan Stanley Institutional Advisors LLC. 91 457 DEFERRED COMPENSATION
PLAN, 401(a) DEFINED
CONTRIBUTION PLAN, AND
RETIREMENT HEALTH SAVINGS
PROGRAM
STATEMENT OF INVESTMENT POLICIES
AND GUIDELINES
CITY OF VALLEJO, CA
Revised April 20232024
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 1
INTRODUCTION AND PURPOSE
This statement is set forth to provide a clear understanding of the investment policies, guidelines and objectives related to the administration of the City of Vallejo 457 Deferred Compensation, 401(a) Defined Contribution, and Retirement Health Savings Program (hereinafter “Plans”). The Plans are salary deferral retirement plans available to eligible employees who are interested in saving for retirement and health care expenses on a tax-favored basis. The Plans’ purpose is to provide a vehicle for and to encourage additional savings to supplement the retirement benefits provided to City employees.
This Investment Policy Statement is further intended to assist the fiduciaries of the Plans in making investment-related decisions in a prudent manner. It outlines the underlying philosophies and processes for the selection, monitoring and evaluation of the investment options and investment providers utilized by the Plans. This Investment Policy Statement will be reviewed at least annually and it can be revised at any time to reflect changes in the capital markets, plan participant objectives, or other factors relevant to the Plans.
SUMMARY OF RESPONSIBILITIES
Plans’ Sponsor – The City of Vallejo is the Plans’ Sponsor, whose responsibilities include but are not limited to:
Adopting and amending the Plan Documents;
Approving Plan services contracts;
Appointing the Committee members; and
Designating other fiduciaries of the Plans.
Committee – The City of Vallejo 457 Deferred Compensation Plan, 401(a) Defined Contribution Plan, and Retirement Health Savings Program Committee (hereinafter “Committee”) serves as Administrator and has responsibility for the operation and administration of the Plans in accordance with the terms of the Plan Documents. It is the intent of the Committee to fulfill its fiduciary responsibilities with respect to the Plans solely in the interest of the participants and beneficiaries. The Committee members, as fiduciaries, are to perform their duties with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.
The Committee’s responsibilities also include but are not limited to the following:
Selecting the investment design features of the Plans, including establishing the investment policy and objectives and the number and types of investment alternatives available to Plan participants; Appointing, monitoring and evaluating all investment providers and managers in accordance with guidelines and benchmarks established within this document and consistent with applicable laws; Selecting and monitoring other Plan service providers, including, but not limited to, the Plans’ record-keeper, trustee, investment consultants, accountants, and/or any other providers; and Monitoring Plan costs which are charged to Plan assets and/or paid by Plan participants, including but not limited to investment management fees, custodial fees and fees paid to other service providers from Plan and/or participant assets (net of fees basis in evaluating the performance of investment managers);
Establishing performance objectives and monitoring guidelines.
Investment Consultant - The Committee may engage an independent investment consultant (hereinafter “Consultant”) to assist in carrying out the duties and responsibilities of this Investment Policy Statement.
Such Consultant must be registered with either State or Federal securities regulators pursuant to the Investment Advisors Act of 1940. The Consultant’s role is to provide information and advice to the Committee on various investment related issues. The Consultant has no discretionary control or authority
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 2 over Plan assets. In its role as an advisor to the Committee the Consultant acknowledges a fiduciary role with respect to the investment advice provided to the Committee. The services of the Consultant will be set forth in a separate agreement.
Investment Provider – An entity that offers investment option products and manages assets for the Plans.
Examples of investment option products offered by an investment provider may include mutual funds, commingled trust funds, separate accounts and/or variable annuity contracts.
Investment Manager – The person(s) at the Investment Provider responsible for implementing an investment option’s investing strategy and managing its portfolio trading activities.
Services Provider – An entity engaged to assist the Plans’ Sponsor and the Committee in regard to the administration of the Plans. Service providers may include but are not limited to: the Plans’ record-keepers, trustees, investment consultants, accountants, and/or any other providers. This assistance may include Plan enrollment, communication, education, including providing general investment information to Plan participants regarding the procedures for making investment choices under the Plans and general investment information regarding each of the investment options offered under the Plans, distribution processing, record keeping and other administrative functions as prescribed in an agreement entered into between the Plans’ Sponsor and the Services Providers.
GENERAL COMPLIANCE
The Plans are designed to meet the applicable requirements of the Internal Revenue Code of 1986 (the Code), as amended. The Plans’ investment policies and guidelines shall be reviewed on a regular basis for modifications, as needed, but may be modified at any time as deemed necessary by the Committee.
At minimum, it is intended that plan participants shall be provided with the following opportunities:
A. Choose from a minimum of three diverse investment categories, each with materially different risk and return characteristics. At least one of the categories will provide for a high degree of safety and capital preservation.
B. Make and/or modify investment decisions at least quarterly.
C. Receive or have access to the following information, as updated:
A description of the investment alternatives available under the Plans including a general description of the investment objectives, risk and return characteristics, and type and diversification of assets comprising each alternative;
Identification of the designated Investment Providers, Managers and investment products; A description of any transaction fees or expenses charged to the Plan participant's account, and information on costs and fees for an investment product that reduces the rate of return to Plan participants (expense ratios; and
Prospectuses, annual reports, and semi-annual reports on investment products, if available.
GENERAL INVESTMENT POLICY, OBJECTIVES AND STANDARDS
It is the policy of the Plans to foster an investment environment that encourages and facilitates participant efforts to supplement other sources of retirement income. The Plans will be structured in an attempt to provide Plan participants with an array of diversified investment options that offer competitive rates of return and reasonable overall cost. Participants in the Plans are solely responsible for their own investment decisions and bear the risks and assume responsibility for the results of the investment options that they select. The Plans’ Sponsor and Committee make no representations, promises, or warranties regarding the suitability of Plan participation for any participant’s individual investment or retirement needs. Additionally, the Plans’ Sponsor and Committee make no representations, promises or warranties about the performance
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 3 of the Plans or the Plans’ investments.
The Plans exist in a dynamic marketplace in which new investment alternatives may become available over time. At present, the market offers a broad array of investment products. Investment products available to the Plans are limited to those permissible under state law. These products may include:
Fixed annuity options
Variable annuity options
Co-mingled trust funds
Mutual funds
Shares of any company, association or corporation
The primary investment objective of the Plans is to present participants with a range of investment options, which give participants an opportunity to increase the value of their investment assets in a manner consistent with varying levels of participant risk/reward tolerances and investment decision making skills. While the Plans cannot meet all plan participant investment preferences and attitudes, the Plans attempt to provide investment vehicles for participants at various levels of investment sophistication and with varying requirements for risk and return.
Information that may be used to select which investment products to offer includes, but is not limited to, the following:
Age, income and other demographic data on Plan participants Liquidity and administrative constraints imposed on the Plans by service providers Development of new investment products in the marketplace Level of participant usage of investment products
To enable participants to establish different investment strategies, the Plans will offer investment categories that have varying return and volatility characteristics. It is the responsibility of each participant to evaluate the investment options and to select an appropriate mix.
A risk/reward structure is basic to investments. Generally, those vehicles offering the greatest return over time also carry the highest risk or volatility of return. The inherent conflict between volatility and long-range asset accumulation can be lessened through diversification among asset classes. To provide participants the opportunity to select risk/reward strategies and to diversify the Plans’ assets, the Plans will offer a number of investment alternatives.
In addition to providing a range of investment options, the Plans seek to provide investment options that are competitive in terms of performance relative to appropriate investment performance and risk benchmarks.
The performance and risk relationships of the Plans’ investment options will be reviewed periodically.
Investment options should generally be given a full market cycle to achieve stated objectives (market cycles normally occur over 3-5 year time periods). Investment options are expected to meet or exceed their pre- determined benchmark index(es) net of fees. Where peer groups are definable, investment options are also expected to perform within the upper half of a sample of same style peers net of fees. In addition to net investment performance, the options’ risk characteristics will also be reviewed. The risk associated with an investment option generally should be similar to that of the same-style peer group.
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 4
INVESTMENT OPTIONS
Investment options offered by the Plans will be categorized or grouped by similarities in investment objectives, style and risk. The Plan Service Provider(s) and/or Consultant may be asked to assist in determining the categories of investment options. The Plan will be structured to assist participants in meeting their long-term investment objectives by providing investment options within the following permitted investment categories (these categories are further explained in the following pages of this document):
Tier 1: Target Retirement Date Pre-Mixed Portfolios
Tier 2: Asset Class Investment Options
Fixed/Stable Value
Total Return Bond
U.S. Large-Size Company Equity
U.S. Mid-Size Company Equity
U.S. Small-Size Company Equity
International Equity
Investment options and categories may be added or deleted as deemed necessary. At least one investment option shall be available within each investment category.
The following table outlines the objectives and performance benchmarks for each of the Plans’ investment options. The risk associated with an investment option will be compared to appropriate risk benchmarks or measures for a same-style group of peer investment options, where definable.
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 5 TIER 1: TARGET RETIREMENT DATE PRE-MIXED PORTFOLIOS
Lifecycle Premixed Portfolio - Retirement Income
Provide different levels of income and capital growth dependent upon an individual participant’s specific risk tolerance and income needs. The portfolio will be well diversified including U.S. and international fixed income securities as well as U.S. and international equities. Stocks generally will comprise no more than 30% of the total portfolio. The percentage of international equities generally will not exceed 40% of the equity portion of the portfolio.
Benchmark Index: Custom Blended Index
Peer Group: US Retirement Income
Lifecycle Premixed Portfolio –2020, 2025
Provide different levels of income and capital growth dependent upon an individual participant’s specific target retirement or withdrawal date. Portfolios provide different allocations to stocks and bonds dependent upon the target retirement or withdrawal date that is selected. The portfolio will be well diversified including U.S. and international fixed income securities and U.S. and international equities. Stocks generally will comprise 30%-60% of the total portfolio. The percentage of international equities generally will not exceed 40% of the equity portion of the portfolio.
Benchmark Index: Custom Blended Index
Peer Groups: US Target Date 2020, US Target Date 2025
Lifecycle Premixed Portfolio – 2030, 2035, 2040, 2045, 2050, 2055, 2060, 2065 Provide different levels of income and capital growth dependent upon an individual participant’s specific target retirement or withdrawal date. Portfolios provide different allocations to stocks and bonds dependent upon the target retirement or withdrawal date that is selected. The portfolio will be well diversified including U.S. and international fixed income securities, and U.S. and international equities. Stocks generally will comprise 60%-90% of the total portfolio. The percentage of international equities generally will not exceed 40% of the equity portion of the portfolio.
Benchmark Index: Custom Blended Index
Peer Groups:
US Target Date 2030, US Target Date 2035, US Target Date 2040, US Target Date 2045, US Target Date 2050, US Target Date 2055, US Target Date 2060, US Target Date 2065+
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 6 TIER 2: ASSET CATEGORY INVESTMENT OPTIONS
Fixed / Stable Value
Provide high current income relative to cash investments and a high degree of investment safety without fluctuation of principal. Investment returns are derived primarily from interest income. A Fixed or General Account option, which is a fixed rate contract that is backed by an insurance company’s balance sheet, is to be of mid-investment-grade rating or higher, and backed by a diversified pool of underlying investments. A stable value option will be invested in guaranteed investment contracts (GICs), “synthetic” portfolios, money market instruments, and others, each mainly comprised of investments of short- to intermediate maturity, and which provide for an adequate degree of liquidity. The weighted-average maturity is expected to remain between two and five years at most times. The overall weighted credit-quality rating of the option shall be the equivalent of mid-investment-grade rating or higher. The rating must be obtained from at least one credit rating agency such as Moody, S&P or Duff & Phelps. If the option’s weighted rating declines below this level, the option will be evaluated for corrective action.
Benchmark Index: 1. 5 Year CMT Index
2. 90-Day Treasury Bills Index
Peer Group: Stable Value
Total Return Bond
Provide capital appreciation and income through a diversified fixed income portfolio. The portfolio’s duration is expected to be comparable to that of its Benchmark Index, with some bandwidth allowed for the manager to exercise strategic deviation from the Benchmark. Average credit quality is expected to be investment grade. The fixed income portfolio will normally be primarily comprised of investments including money market instruments, U.S. Government and Agency bonds, mortgage-backed securities, corporate bonds, and others. The manager will be given discretion to hold securities that are not contained within the Benchmark Index, which may include Foreign Bonds, High Yield Bonds, Convertibles, Treasury Inflation Protected Securities, derivatives, and others. The portfolio’s aggregated composition and risk and return characteristics however are expected to be reflective of its asset class.
Benchmark Index: Barclays Capital US Aggregate Bond Index Peer Group: US Intermediate-Term Core Bond
U.S. Large Company Equity
Provide long-term capital appreciation through a diversified common stock portfolio whose average market capitalization may be categorized as Large Cap by an industry standard data provider. Stocks of foreign companies that are traded in the U.S. may also be included in the portfolio, but generally should not exceed more than 20% of the total portfolio.
Benchmark Indexes:
Blend: S&P 500 Index
Growth: Russell 1000 Growth
Value: Russell 1000 Value Index
Peer Groups:
Blend: US Large Cap Blend
Growth: US Large Cap Growth
Value: US Large Cap Value
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 7
TIER 2: ASSET CATEGORY INVESTMENT OPTIONS (continued)
U.S. Mid-Size Company Equity
Provide long-term capital appreciation through a diversified common stock portfolio whose average market capitalization may be categorized as Mid Cap by an industry standard data provider. Stocks of foreign companies that are traded in the U.S. may also be included in the portfolio, but generally should not exceed more than 20% of the total portfolio.
Benchmark Indexes:
Blend: Russell Mid-Cap Index
Growth: Russell Mid-Cap Growth Index
Value: Russell Mid-Cap Value Index
Peer Groups:
Blend: US Mid-Cap Blend
Growth: US Mid-Cap Growth
Value: US Mid-Cap Value
U.S. Small Company Equity
Provide long-term capital appreciation through a diversified common stock portfolio whose average market capitalization may be categorized as Small Cap by an industry standard data provider. Stocks of foreign companies that are traded in the U.S. may also be included, but generally should not exceed more than 20% of the total portfolio.
Benchmark Indexes: Blend: Russell 2000 Index
Peer Groups: Blend: US Small Cap Blend
International Equity
Provide long-term capital appreciation through a diversified portfolio of international equities. Stocks of emerging countries may be used at the discretion of the manager, but generally should not exceed more than 30% of the total portfolio.
Benchmark Indexes:
Blend: MSCI All Country World Index ex-U.S. IMI (net)
Growth: MSCI All Country World Index ex-U.S. Growth (net) Value: MSCI All Country World Index ex-U.S. Value (net) Peer Groups:
Blend: US Foreign Blend
Growth: US Foreign Growth
Value: US Foreign Value
INVESTMENT OPTION SELECTION GUIDELINES
Investment options offered to participants will be provided through investment provider(s) accessible on the Services Provider’s platform. Before introducing a new investment option, the Committee, in consultation with the Consultant and Services Provider will define the niche to be filled and assess any prospective investment option’s performance, quality, and risk characteristics. At a minimum, investment options under consideration should satisfy performance and risk considerations under actual, not modeled, conditions and over an appropriate time period. Investment option selection considerations may include, but are not limited to the following:
The investment option should generally, but not necessarily, have a history that spans a full market cycle, normally three to five (3-5) years.
The investment option should generally meet or exceed its predetermined benchmark index, net of fees. The investment option should generally perform at median or within the upper half of a recognized and defined sample of same-style peer options.
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 8 The investment option should be able to demonstrate a consistent performance track record attributable to a specific investment manager or team of managers.
In selecting Target Retirement Date funds, the Committee shall consider the current and prospective composition of the Target Date funds (based on their glide path), and the corresponding risk and return implications relative to the benchmark and peer group constituents.
INVESTMENT OPTION REVIEW GUIDELINES AND MONITORING
Investment providers and investment managers are required to comply with all applicable laws, rules, and regulations. However, the Committee takes no responsibility for the failure of such option and/or investment manager to comply with any and all applicable laws, rules or regulations.
With the possible exception of the Fixed Option, all options must have readily ascertainable market values and be easily marketable. It is recognized that certain stable value and Fixed options often have liquidity restrictions. Investment options with sales loads, redemption fees, or other non-investment management related expenses will be avoided to the extent possible. Options with deferred sales charges and/or market value adjustments will not be permitted.
Each investment option portfolio shall be diversified adequately to reduce risk and comply with current regulations and applicable state laws.
Investment option performance, risk and style consistency is intended to be evaluated on a quarterly basis.
Performance and risk results will be evaluated using comparisons with this policy, pertinent market indices and against other same-style peers, where definable. When necessary, investment option performance and risk may be reviewed more frequently.
The Committee will periodically review the investment options’ progress in meeting the Plans’ investment objectives. Investment options will be expected to comply with all stated investment objectives, guidelines and applicable rules contained in the prospectus or fund fact sheet. The Committee will review the performance of investment options quarterly to determine if they are achieving the established objectives.
Investment performance reviews may include, but are not limited to, a review of:
Investment portfolios;
Fees and expenses;
Investment style, process and philosophy;
Investment management personnel; and
Index tracking error.
The performance review will also include measuring the options’ investment performance relative to stated benchmarks or respective indexes and peer groups; as well as the monitoring risk measures. The following will be evaluated:
Quantitative Measures
Active Investment Strategies. Options employing active management are expected to outperform their stated asset class or style benchmark net of all management fees over a trailing five year time period; and to rank above the 50
th percentile of the appropriate peer group for the same trailing five year time period. It is also expected that the risk of each option, as defined by standard deviation of returns, be commensurate with the prescribed strategy relative to the appropriate market index and/or peer group.
Passive Investment Strategies. Passive Options are expected to track the performance of the index strategy that the option is designed to replicate, less management fees, with marginal tracking error. It is also expected that the risk of each passive option, as defined by standard deviation of returns, be commensurate
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 9 with the appropriate market index.
Qualitative Measures
The options will also be monitored on an ongoing basis for other material changes which the Committee may determine are of importance to the decision of whether or not to retain an investment option, such as personnel departures; organizational changes; or alterations in investment style, philosophy, or strategy; and adherence to stated guidelines.
Time Periods. The Committee acknowledges that fluctuating rates of return characterize the securities markets, particularly during short-term time-periods. Recognizing that short-term fluctuations may cause variations in an option’s performance, the Committee intends to employ investment options with long-term investment strategies and will evaluate option performance from a long-term perspective. Performance over market cycles of three to five years will be weighted more heavily than performance over shorter time periods, such as one year or less.
In addition to the qualitative and quantitative measures referenced above, the Committee will also review the investment options’ risk characteristics in relation to that performance. Risk will be measured in various ways including, but not limited to:
Standard deviation
Downside risk or semi-variance
Risk/return ratios such as Sharp or Treynor Ratios
Other statistical measures such as Beta, Alpha and Variance
INVESTMENT OPTION TERMINATION AND WATCH GUIDELINES
Generally, all investment options are expected to remain true to their stated investment objectives and to perform as well as or better than their prescribed performance benchmarks, net of fees. The Committee recognizes the long-term nature of retirement plan investing and the variability of market returns. Periodic underperformance in any of the criteria outlined in this Investment Policy will not necessitate the termination of an option; however, any underperformance will result in consideration by the Committee of the factors causing underperformance and possible courses of action that the Committee may take.
The Committee may, at any time, place any investment option that it views as having a pattern of under- performance on a watch-status. Reasons the Committee might place an option on a watch status, include but are not limited to, the following:
Quantitative Measures
Actively Managed Options
Performance below the prescribed benchmark index over a trailing five year period, combined with
Performance below the median of its peer group over a trailing five year period
Passively Managed Options
Net of fee performance tracking error relative to the respective index that is greater than 15 basis points over a trailing five-year period
Target Date Options Composed of Passively Managed Options Net of fee performance tracking error relative to the respective index that is greater than 15 basis points (0.15%) for the trailing five-year period, combined with Performance below the median of its peer group over a trailing five-year period.
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 10 Target Date funds will be evaluated based on the performance of the entire suite as held within the Plan. A Target Date suite will normally be viewed as being in violation of investment policy performance criteria if over one-half of the funds in a Target Date suite held within the Plan lag this Investment Policy Statement’s prescribed performance measures. The Committee may elect to deviate from this approach if it appears reasonable to do so.
Certain passive investment options operate in a marketplace that includes foreign markets whose exchanges close prior to that of the United States. In these instances, some fund managers may engage in a method of “Fair Value Pricing,” whereby the managers adjust the pricing of securities in the Fund to reflect any information that has become available after the close of the applicable foreign market. Discrepancies in performance between the applicable investment option and its performance benchmark that are due to “Fair Value Pricing” and other common index fund tracking factors (such as the timing of market closures, management fees, benchmark nuances, and others) will be taken into consideration in evaluating performance of the affected investment options.
Qualitative Measures
Management team or other significant personnel turnover; Changes in the product’s investment philosophy, process, style or risk profile; Excessive or rapid asset growth or decline;
Pending regulatory investigations or material legal proceedings; Changes to firm ownership;
Significant increase in management fees or expense ratio. In the case of monitoring Target Retirement Date funds, the Committee shall consider the current and prospective composition of the Target Date funds (based on their glide path) and the corresponding risk and return implications relative to the benchmark and peer group constituents.
An investment option may remain on watch status until the Committee decides to take further action.
Committee actions include, but are not limited to, the following:
Removing the investment option from watch status; and Terminating the investment option and reallocating the assets to an alternate or replacement investment option by Committee direction.
To be removed from quantitative, performance related watch status, generally, performance for the preceding five year trailing periods should be above the benchmark index or median for at least two consecutive quarters. However, barring any breakdown in process, the Committee may decide to leave an option on watch for as long as they believe it is prudent to do so.
The Committee reserves the right to terminate investment option relationships at any time, for any reason when it determines such termination is in the best interests of the Plans and its participants and beneficiaries.
Upon termination, further contributions or transfers to an investment option may be frozen, or the option may be replaced with or without transferring existing assets from the replaced option. Once the decision to terminate an option and remove it from the Plans is made, asset transfer and liquidation should be handled to the best advantage of the Plans, with due consideration given to the anticipated effect on affected participants and beneficiaries.
INVESTMENT OVERSIGHT RESPONSIBILITY AND PROXY VOTING
The Committee shall have overall responsibility for the selection, monitoring and termination of all investment managers. Additionally, the Committee shall be responsible for reviewing and maintaining these investment policies and guidelines.
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 11
Proxy votes required by investment managers shall be cast by those parties designated by the Committee.
Voting rights shall be exercised in the best interest of the participants and beneficiaries of the Plans. The Committee may insist that they exercise their voting rights themselves by communicating their intention to do so in a timely manner.
GLOSSARY
Annualized Return
Rate of return of the account smoothed as though the return occurred equally over twelve-month periods.
When the specified time frame is for less than a year, the rate of return in projected as though the same performance continues to occur for a twelve-month period.
Benchmarks
A standard against which the performance of the portfolio can be measured, typically against a standard index, although a client manager may also set the benchmark.
Duration
The weighted maturity of a fixed-income investment’s cash flows, used in the estimation of the price sensitivity of fixed-income securities for a given change in interest rates. Time periods are weighted by multiplying by the present value of its cash flow divided by the bond’s price (a bond’s cash flows consist of coupon payments and repayment of capital). A bond’s duration will almost always be shorter than its maturity, with the exception of zero-coupon bonds, where maturity and duration are equal.
Growth Style Investing
Growth investors purchase companies that have above-average earnings growth and/or above-average sales growth rates.
Investment Objectives
The overall financial objectives of an investor. For example, whether the investor requires income or capital appreciation. The investor’s objectives govern the investment strategy.
Large Cap
Large Capitalization – refers to those companies with a market capitalization categorized as Large Cap by an industry standard data provider.
Liquidity
The ability to buy or sell an asset quickly and in large volume without substantially affecting the asset’s price.
Market Capitalization
The dollar value of a public company based on the total number of shares of stock available multiplied by the price per share.
Mid Cap
Mid Capitalization – refers to those companies with a market capitalization categorized as Mid Cap by an industry standard data provider.
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 12
GLOSSARY - CONTINUED
Net of Fees
After subtraction of management fees.
Peer Group
Contemporaries of the same asset class that can be compared against one another to achieve a larger sense of how the particular portfolio is performing.
Portfolio
Refers to the complete list of securities held in an investment vehicle.
Small Cap
Small Capitalization – refers to those companies with a market capitalization categorized as Small Cap by an industry standard data provider.
Standard Deviation
Measures the range of returns and is based on a Normal Curve. Managers with lower standard deviations than the index have historically had returns that tended to fall closer to their mean return compared to the index. Managers with higher standard deviations than the index have historically had returns that tended to be further dispersed around the mean than the index. This is another measure of volatility, but it doesn’t distinguish downside performance from upside performance.
Value Style Investing
Value investors rely on an examination of the underlying or unrealized value of a company as the primary criterion for deciding whether or not to buy a company’s stock. Value stocks are often priced lower than growth stocks due to slower growth expectations, recent financial difficulty, or a host of other reasons.
City of Vallejo 457, 401(a), and RHS Statement of Investment Policies and Guidelines 13
ADOPTED BY THE ADMINISTRATOR ON BEHALF OF THE CITY OF VALLEJO EMPLOYEES PLANS:
Signature:
Name:
Title:
Date:
EDUCATION POLICY STATEMENT
FOR THE
CITY OF VALLEJO 457 DEFERRED
COMPENSATION PLAN, 401(A) DEFINED
CONTRIBUTION PLAN, AND RETIREMENT
HEALTH SAVINGS PROGRAM COMMITTEE
C
ITY OF VALLEJO, CALIFORNIA
Table of Contents
INTRODUCTION ................................................................................................................................ 1 Background ..................................................................................................................................................................... 1 Purpose ............................................................................................................................................................................ 1 PART 1: EDUCATION POLICY – DECISION-MAKERS ................................................................. 2
1.1 Intent .................................................................................................................... .............................................. 2
1.2 Objectives of Fiduciary Education ......................................................................................... ....................... 2
1.3 Types of Educational Programs. ........................................................................................... ......................... 3
1.4 Process for Reviewing Education Objectives ................................................................................ .............. 3 PART 2: EDUCATION POLICY – PLAN PARTICIPANTS .............................................................. 4
2.1 Intent .................................................................................................................... .............................................. 4
2.2 Plan Objectives ........................................................................................................... ...................................... 4
2.3 Duties and Responsibilities ............................................................................................... .............................. 5
2.4 Objective of Educational Programs ......................................................................................... ................... 56
2.5 Types of Educational Information .......................................................................................... ...................... 6
2.6 Disclosure of Fees and Charges for Educational Services .................................................................. ....... 7
2.7 Communication to Participants ............................................................................................. ......................... 7
1 INTRODUCTION
Background
The City of Vallejo (“City”) offers to all eligib le employees salary deferral retirement plans consisting of a 457(b) Deferred Compensation Plan, a 401(a) Defined Contribution Plan, and a Retirement Health Savings Program (“Plan” or “Plans”). The City, through the City of Vallejo 457 Deferred Compensation Plan, 401(a) Defined Contribution Plan, and Retirement Health Savings Program Committee (“Committee”), seeks to comply with the Internal Revenue Code sections 401 and 457 and other applicable laws and regulations.
The City recognizes the vital role of educati on for both plan fiduciaries (the Committee, Plan Administrator, and support staff) and Plan partic ipants. The details of educational programs are divided into two parts: Part 1 covers the duties and responsibilities for fiduciary education. Part 2 covers the duties and responsibilities for participant education.
This Education Policy Statement (“Policy”) is ba sed on established ERISA and state regulatory requirements and industry best practices regarding both City and Plan provider(s) (record keeper and/or consultant) responsibilities for education. The Policy is intended to aid the City and its Committee in meeting its fiduciary and other responsibilities pertaining to the Plans.
Purpose
The purpose of this Education Policy Statement is to document the procedures demonstrating “care, skill, prudence, and diligence” that will be used by the City in the development and monitoring of educational programs for the Plan fiduciaries in Part 1 and Plan participants in Part
2. The Policy intends to establish procedures for th e identification, communication, and evaluation of educational programs to allow Plan participan ts to make informed decisions regarding their retirement planning, investments, and distributions. Further, the Policy intends to establish educational programs to allow Plan fiduciaries to fulfill their fiduciary due diligence responsibilities in managing the Plans.
2 PART 1: EDUCATION POLICY – PLAN FIDUCIARIES
1.1 Intent
For Plan fiduciaries and staff , it is the assertion of this Poli cy that the City and Plan provider(s) must:
Acknowledge that it is critically important th at Plan fiduciaries make informed decisions on all matters which come before them.
Understand the primacy of all actions for the benefit of Plan participants and their beneficiaries.
Adopt the types of objectives and procedures for Plan participants as stated in Part 2 of this Policy.
Offer regular, recurring educational programs to Plan fiduciaries and staff that cover Plan compliance, legislative, and regulatory activities, fund selection and monitoring, and fiduciary best practices in operational standards.
Encourage Plan fiduciaries to participate to the fullest extent possible in educational activities provided by recognized associations and institutes for defined contribution plans. Establish and make a commitment to ongoing fu nding for internal and external educational programs as appropriate for the Plans.
Develop an annual plan of scheduled educational programs for Plan fiduciaries and staff. Expressly focus attention on new Plan fiduci aries and staff to assure they know and understand their fiduciary roles.
Establish mutually agreeable performance stan dards for the delivery of education to Plan fiduciaries and staff.
1.2 Objectives of Fiduciary Education
The goal of fiduciary education is to assure that all Committee members and support staff understand their fiduciary and due diligence responsibilities in the actions they take on behalf of Plan participants and their beneficiaries. The objectives of fiduciary education are to:
Assure that new Plan fiduciaries and staff r eceive comprehensive education covering their responsibilities.
Especially for investment performance revi ew, assure that Plan fiduciaries and staff understand basic fund evaluation methodology, fund objectives, and characteristics and appropriate benchmarks.
Increase Plan fiduciary awareness of national best practices in Plan monitoring, especially in educational programs available to Plan participants.
3 Understand and help shape Plan review content and frequency. Incorporate essential performance standards an d financial guarantees into all requests for proposals and renegotiation of services by Plan provider(s). Supply sufficient communication of information and education. Wherever possible, screen and participate in the types of education programs offered to participants (e.g. group and individual educat ion, guidance and advice services, basic Plan provider education programs, etc.).
1.3 Types of Educational Programs
Below are a series of categories and types of inform ation provided in education to Plan fiduciaries.
These categories and informational types are meant to be illustrative, not exhaustive.
For new fiduciaries, a comprehensive review of basic plan features, documents (e.g. Plan Document, Investment Policy Statement, Fee Policy, Education Policy Statement, By-Laws, etc.), forms, past fiduciary actions (prior year of minutes), reports, etc. Detailed review and understanding of charts/graphs used in Plan provider or third-party fund performance reviews.
Detailed review and understanding of performa nce standards and guarantees used in Plan provider performance reviews.
Familiarity with Plan participant education, guidance, and advice services. Understanding special plan responsibilities, even if the task is outsourced, covering unforeseen emergencies, catch up provisions (both 50+ an d special), loan options, domestic relation orders, and Roth feature.
Awareness of rollover options and strategies for encouraging Plan participants to remain in the Plans after retirement.
Coordination of defined benefit and defined contribution assets to influence both asset allocation strategies as well as retirement objectives. Use of outside educational programs such as the National Association of Government Defined Contribution Administrators (NAGDCA), International Foundation of Employee Benefit Plans (IFEBP), and/or International Foundation of Retirement Education (InFRE).
1.4 Process for Reviewin g Education Objectives
At least annually, the Committee will review this Po licy and identify upcoming education based on Committee priorities. The Committee w ill determine the frequency of fiduciary education with the intent of having education modules frequently and broader, more comprehensive, education at least periodically.
4 PART 2: EDUCATION POLICY – PLAN PARTICIPANTS
2.1 Intent
For Plan participants, it is the assertion of this Policy that the City and Plan provider(s) must:
Acknowledge that the purpose of education is to enable Plan participants to make self- interested, informed decisions regarding their retirement planning and security. Offer regular, recurring educational programs and services to Plan participants that incorporate basic plan information as well as investment guidance and advice. Make financial planning services (including Certified Financial Planning services) available to all participants irrespective of age but especially those near or in retirement. Tailor educational content to participants at va rious stages in their life/career (from early employment through retirement).
Utilize diverse mediums and formats (face-to-f ace, print, electronic or telephonic, and/or internet) to maximize participant education.
Develop an annual plan of scheduled educational programs to meet the diverse needs of Plan participants.
Communicate to Plan participants, at least a nnually, the content and schedule of upcoming educational programs.
Evaluate educational programs primarily based on participant satisfaction but also considering other behavioral impacts including plan part icipation, contribution, diversification, rebalancing, and distribution management.
Establish mutually agreeable performance standards for the delivery of participant education.
2.2 Plan Objectives
The goal of the Plans is to provide all empl oyees with a comprehensive, prudently managed voluntary retirement savings program. The Plan objectives are the following:
The Plans are established for the exclusive be nefit of the Plan participants and their beneficiaries.
The Plans are a vehicle through which eligible employees and Plan participants may accumulate assets to provide for a portion of their retirement needs. The Plans seek to provide a broad range of educational programs recognizing Plan participants’ diverse demographics and their differing retirement objectives. The Plans will assure that investment guidance and advice programs are readily available with no cost or reasonable cost to Plan participants. Ideally, the range of programs will allow Plan participants to manage their own investment s without assistance, to manage their own investments with assistance or to have their investments managed entirely by a designated provider of services to the Plans.
The Plans will regularly, at least annually, review its educational policies, educational curriculum, performance standards, and proced ures to assure that strong and effective strategies for plan participants are represented.
5 2.3 Duties and Responsibilities
The City must identify individuals responsible for carrying out Plan duties. The City has appointed a Committee whose general duties and responsibilit ies for Plan participant education are as follows:
Establish educational services offered by Plan provider(s) to Plan participants. Require Plan provider-adherence to this Policy.
Develop education-specific Plan provider performance standards based on goals and financial guarantees that will be part of ongoing Plan provider evaluation. Review this Policy at least annually and recommend amendments to the Policy at any time to reflect changes in the procedures or to incorporate requirements based on new regulations and/or best practices.
Approve annual educational topics and the schedule of on-site educational programs targeted to both current employees and retiree participan ts and assure that the programs are easily accessible by all Plan participants.
Identify multi-channel (i.e., electronic, face-to-face, printed, etc.) educational programs which are made available to Plan participants.
Provide input and approve ongoing communication/marketing of educational programs. Promote Plan participant use of guidance and investment advice services. Encourage coordination of defined benefit and defined contribution information as well as other participant assets in order to achieve the most comprehensive development of asset allocation strategies.
Establish and monitor, at least annually, the impact of educational programs on participant behavior including, but not limited to, the numb er of participants in the Plans, total and average Plan contributions, number of fund selections per participant, frequency of re- balancing by Plan participants, and Plan part icipant usage of different components of the educational program. Wherever possible, the id entified information will be distinguished by gender, age, and department/occupation.
Assure that the Policy is easily accessible by Plan participants as appropriate. Although the Employee Retirement Income Security Act of 1974 (“ERISA”) does not apply to the Plan, the Committee intends to operate the Plan generally in conformance with ERISA 404(c).
2.4 Objective of Educational Programs
Each year, sufficient educational programs will be offered to cover the breadth of Plan participant needs from entry level personnel, mid- and near-term employees as well as retired Plan participants. The City deliberately chooses to orga nize its target groups for education into four categories: entry level, mid-career, pre-retirement, and retirement.
The objective of all educational programs is to elevate Plan participant understanding of their retirement financial objectives and to impact th eir behavior when they are planning for these objectives.
6 2.5 Types of Educational Information
Below are a series of categories and types of in formation provided in an educational program.
These categories and informational types are meant to be illustrative, not exhaustive.
Entry-Level
Asset allocation strategies including investment strategies, diversification and risk of fund options, tax consequences, minimum required distributions, and liquidity strategies. Basic investment strategies including trad itional pre-tax contributions, untaxed asset growth, basic retirement objectives, self-ris k-assessment, identification of retirement objectives and time horizon, basic understanding of diversification, asset allocation, and fund selection.
Awareness of specific deferred compensation plan requirements including contribution limits, taxation, distribution requirements/restrictions (unforeseen emergencies, in- service, de minimus and post-service distributions) and portability. Summary of City- and Plan provider-specifi c policies and documents including the Plan Document, application, and other transaction forms, investment and education policies, issue-specific documents (unforeseen emer gencies, catch-up provisions, domestic relations orders).
Summary of City procedures including timing and method of accessing account information and obtaining and completing transactions.
Mid-Career
Asset allocation strategies including investment strategies, diversification and risk of fund options, tax consequences, minimum required distributions, and liquidity strategies. Coordinating other assets with defined contribution assets, including defined benefit programs, other household income and assets, and Social Security benefits. Understanding basic risk/reward theories within the core fund line-up and exposure to tools addressing risk tolerance, retirement objectives, and time horizon. Increasing knowledge of investment terminology and concepts. Considering available investment guidance and advice services and managed account options.
Familiarity with asset allocation options including life cycle funds.
Pre-Retirees
Asset allocation strategies including investment strategies, diversification and risk of fund options, tax consequences, minimum required distributions, and liquidity strategies. Maximizing contributions to include 50+ and special catch-up provisions. Preliminary understanding of distribution options and impact on meeting long-term retirement needs.
7 Termination options including use of sick leav e, vacation, and other accrued benefits as contributions to their retirement plan assets.
Rollover options and the pros and cons of ma intaining funds in the Plan compared to non-Plan options.
Retirees
Asset allocation strategies including investment strategies, diversification and risk of fund options, tax consequences, minimum required distributions, and liquidity strategies. Evaluating alternate retirement options incl uding Individual Retirement Accounts and annuitized distributions.
Rollover options and the pros and cons of ma intaining funds in the Plans compared to non-Plan options.
2.6 Disclosure of Fees and Ch arges for Educational Services Educational services requiring payment of participant fees and charges must be fully disclosed to the City and fiduciaries before services are made available to Plan participants.
In addition, Plan participant fees and charges for educational services must be disclosed to all Plan participants at enrollment and at any other time as appropriate. It is important to note that the current Plan providers (MissionSquare and Hyas Group) do not charge any fee for educational and/or financial planning services.
2.7 Communication to Participants
Information about education programs and services will be made available to Plan participants.
The City will communicate, at least annually, a nnouncing the schedule of educational on-site programs, the schedule of Plan provider repr esentative availability for group sessions and individual participant appointments, website ed ucational material, and special support programs (covering guidance and advice services, managed account options and any other financial planning services). Communication will be delivered in su ch format(s) to reach the widest participant audience, as determined by the City.
_________________________________________________ _____________________ C h a i r , C o m m i t t e e D a t e