Index Dashboard: S&P 500® Factor- Indices Q3, 2018 ...

[Pages:17]Index Dashboard: S&P 500? Factor- Indices Q3, 2018

QUARTERLY AND 12M TRAILING PERFORMANCE SUMMARY

S&P 500 Quality S&P 500 Momentum

S&P 500 Growth S&P 500 QVM Multi-Factor S&P 500 Dividend Aristocrats S&P 500 Minimum Volatility

S&P 500 Buyback S&P 500 Value

S&P 500 Enhanced Value S&P 500 High Momentum Value

S&P 500 Equal Weight S&P 500 Pure Value S&P 500 High Beta

S&P 500 Low Volatility S&P 500 Pure Growth S&P 500 Low Volatility High Dividend S&P 500 High Dividend

0%

Q3 2018 Total Return

2.11% 1.84% 2% 4%

9.87%

9.75%

9.28%

8.21%

7.91%

7.05%

6.78%

5.86%

5.73%

5.60%

5.42%

5.17%

5.08%

5.04%

5.04%

S&P 500: +7.71%

6% 8% 10% 12%

S&P 500 Momentum S&P 500 Growth

S&P 500 Pure Growth S&P 500 QVM Multi-Factor

S&P 500 Buyback S&P 500 Minimum Volatility

S&P 500 Quality S&P 500 High Beta S&P 500 Dividend Aristocrats S&P 500 Pure Value S&P 500 Equal Weight S&P 500 Enhanced Value S&P 500 High Momentum Value S&P 500 Low Volatility

S&P 500 Value S&P 500 High Dividend S&P 500 Low Volatility High Dividend

0%

12M Total Return

30.37%

25.21%

21.05%

19.54%

17.77%

16.82%

16.22%

16.07%

15.30%

14.17%

13.95%

11.67%

10.98%

10.71%

10.06% 9.79% 5.33%

S&P 500: +17.91%

10%

20%

30%

40%

COMMENTARY

More than any other factor, momentum-based strategies present challenges to the intuition for disciplined investors. As a security or market displays stronger and stronger positive momentum, it becomes harder to imagine yet-higher valuations.

Momentum positions can creep up on you; in the absence of rebalancing, the best-performing portfolio constituent takes a larger and larger weight. Famously, momentum strategies also tend to suffer significant drawdowns when the winds change, yet rebalancing to avoid the risk of a turnaround can leave you lagging for years, or even decades. Working out how to maintain an allocation in momentum-based strategies without undue risk is a challenging problem.

Our factor dashboard provides several perspectives on how complementary exposures from other factor indices might help manage a portfolio's momentum exposure. The table provides selected highlights ? six indices that display opposite characteristics to momentum, and three that may provide relatively limited diversification:

As the table on the left illustrates, three perspectives in particular can be helpful.

First, what is each alternative index's exposure to the momentum factor?

Second, which alternatives outperformed when momentum underperformed; in other words, which indices have an excess return (ER) that is negatively correlated to the excess return of the momentum index?

Finally, from a constituent perspective, which indices hold the most securities in common, and which have minimal overlap?

The utility of these questions is illustrated by the graph on the right, which compares the 3-year relative performance of the S&P 500 Low Volatility High Dividend Index to the 3-year relative performance of the S&P 500 Momentum Index (each taken relative to the S&P 500).

In those periods where Momentum (in red) significantly underperformed, the Low Volatility High Dividend index (in green) frequently displayed significant or rising outperformance.

Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of September 28, 2018.

ANNUAL PERFORMANCE

Core factor performance by calendar year, 2003-present:

Total Return Value Low Volatility Momentum Quality

2003 31.79% 22.75% 22.54% 28.75%

S&P 500

28.68%

Relative to Benchmark

2003

20%

2004 15.71% 17.69% 11.05% 11.21%

10.88%

2004

2005 5.82% 2.20% 16.69% 5.07%

4.91%

2005

15%

Value

10%

5%

Low Volatility

0%

Momentum

-5% -10%

Quality

-15% -20%

2006 20.80% 19.69% 9.61% 17.59%

15.79%

2006

Index Dashboard: S&P 500? Factor Indices

Q3, 2018

2007 1.99% 0.58% 9.89% 15.50%

5.49%

2007

2008 -39.22% -21.41% -34.56% -34.06%

-37.00%

2008

2009 21.18% 19.22% 17.24% 30.46%

26.46%

2009

2010 15.10% 13.36% 18.72% 14.95%

15.06%

2010

Total Return Value Low Volatility Momentum Quality

2011 -0.48% 14.78% 1.60% 10.89%

S&P 500

2.11%

Relative to Benchmark

20%

2011

2012 17.68% 10.30% 17.33% 14.68%

16.00%

2012

2013 31.99% 23.59% 31.42% 34.24%

32.39%

2013

Value

15%

10%

Low Volatility

5%

0%

Momentum

-5% -10%

Quality

-15%

-20%

Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of September 28, 2018.

2014 12.36% 17.49% 11.23% 14.95%

13.69%

2014

2015 -3.13% 4.34% 5.56% 0.38%

1.38%

2015

2016 17.40% 10.37% 5.70% 9.56%

11.96%

2016

2017 15.36% 17.41% 28.27% 19.51%

21.83%

2017

YTD 3.51% 5.79% 19.48% 9.35%

10.56%

YTD

15 YEAR RISK & RETURN - ABSOLUTE 14%

Index Dashboard: S&P 500? Factor Indices Q3, 2018

15Y Total Return (Ann.)

High Momentum Value

13%

QVM Multi-Factor

Low Volatility High Dividend

Buyback

12%

Pure Growth

Pure Value

Dividend Aristocrats

Quality

11%

Momentum Equal Weight

Minimum Volatility

Low Volatility

Growth

High Dividend

10%

Enhanced Value

S&P 500

9% Value

8%

0%

5%

TOTAL RETURN AND VOLATILITY

10%

15%

20%

Volatility (Ann.)

TOTAL RETURN

1M QTR 1YR 3YR 5YR 10YR 15YR

S&P 500 Low Volatility High Dividend -0.3% 2.1% 5.3% 14.2% 13.2% 13.9% 12.6%

S&P 500 Buyback

-0.3% 6.8% 17.8% 16.7% 13.5% 15.1% 12.4%

S&P 500 High Momentum Value

-1.1% 5.6% 11.0% 14.6% 13.3% 14.6% 13.4%

S&P 500 Dividend Aristocrats

1.0% 7.9% 15.3% 15.7% 13.1% 13.6% 11.6%

S&P 500 Pure Growth

-0.4% 5.0% 21.0% 16.8% 14.7% 15.8% 12.3%

S&P 500 Pure Value

-0.4% 5.2% 14.2% 15.5% 11.9% 14.1% 12.1%

S&P 500 Low Volatility

-0.4% 5.0% 10.7% 13.9% 12.5% 11.8% 10.5%

S&P 500 Equal Weight

0.1% 5.4% 13.9% 15.4% 12.5% 13.1% 11.1%

S&P 500 Growth

0.7% 9.3% 25.2% 19.9% 16.6% 14.0% 10.5%

S&P 500 Quality

1.8% 9.9% 16.2% 15.2% 12.7% 13.0% 11.4%

S&P 500 High Dividend

-0.7% 1.8% 9.8% 15.1% 13.3% 12.3% 10.3%

S&P 500 QVM Multi-Factor

0.7% 8.2% 19.5% 16.7% 13.7% 12.5% 13.0%

S&P 500 Minimum Volatility

0.6% 7.0% 16.8% 15.2% 13.5% 11.2% 10.7%

S&P 500 Momentum

1.4% 9.8% 30.4% 20.7% 16.1% 12.9% 11.0%

S&P 500 Enhanced Value

-1.2% 5.7% 11.7% 16.1% 12.2% 11.5% 9.9%

S&P 500 Value

0.4% 5.9% 10.1% 14.1% 10.9% 9.6% 8.6%

S&P 500 High Beta

-0.3% 5.1% 16.1% 18.4% 12.5% 10.9% 6.2%

S&P 500

0.6% 7.7% 17.9% 17.3% 13.9% 12.0% 9.7% Performance figures for more than one year are annualized.

Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of September 28, 2018.

VOLATILITY (ANN.) S&P 500 Low Volatility High Dividend S&P 500 Buyback S&P 500 High Momentum Value S&P 500 Dividend Aristocrats S&P 500 Pure Growth S&P 500 Pure Value S&P 500 Low Volatility S&P 500 Equal Weight S&P 500 Growth S&P 500 Quality S&P 500 High Dividend S&P 500 QVM Multi-Factor S&P 500 Minimum Volatility S&P 500 Momentum S&P 500 Enhanced Value S&P 500 Value S&P 500 High Beta S&P 500

25%

30%

1YR 3YR 5YR 10YR 15YR 8.2% 8.8% 8.8% 13.5% 12.2% 9.9% 11.9% 11.4% 17.0% 15.3% 9.1% 9.9% 10.2% 19.8% 17.5% 8.9% 9.0% 9.4% 13.5% 12.2% 9.8% 10.5% 10.8% 17.1% 15.3% 9.1% 12.2% 12.1% 23.1% 20.5% 7.1% 7.9% 8.3% 10.7% 9.7% 7.6% 9.5% 9.7% 17.2% 15.4% 9.4% 10.1% 10.2% 14.2% 12.9% 8.7% 9.0% 9.6% 13.6% 12.5% 7.8% 8.8% 9.0% 17.7% 15.8% 9.6% 10.0% 10.3% 14.4% 13.4% 7.0% 7.5% 7.9% 11.4% 10.6% 10.2% 9.5% 10.0% 14.2% 13.7% 10.5% 12.6% 12.2% 20.9% 18.4% 8.8% 9.5% 9.6% 15.8% 14.2% 10.7% 17.0% 15.6% 26.8% 24.6% 8.4% 9.2% 9.4% 14.6% 13.1%

15 YEAR RISK & RETURN RELATIVE TO S&P 500

5%

Index Dashboard: S&P 500? Factor Indices Q3, 2018

15Y Outperformance Relative to S&P 500 (Ann.)

4% High Momentum Value

QVM Multi-Factor

3%

Low Volatility High Dividend

Buyback

Pure Growth

2%

Dividend Aristocrats

Quality

Momentum

1%

Growth

Equal Weight Minimum Volatility

Low Volatility High Dividend

0% S&P 500

Enhanced Value

Pure Value

-1%

Value

-2%

-3%

-4%

0%

2%

RELATIVE RETURN AND TRACKING ERROR

High Beta

4%

6%

8%

10%

12%

14%

16%

Tracking Error to S&P 500 (Ann.)

PERFORMANCE v S&P 500

1M QTR 1YR 3YR 5YR 10YR 15YR

S&P 500 Low Volatility High Dividend -0.9% -5.6% -12.6% -3.1% -0.8% 2.0% 3.0%

S&P 500 Buyback

-0.8% -0.9% -0.1% -0.6% -0.4% 3.1% 2.7%

S&P 500 High Momentum Value

-1.7% -2.1% -6.9% -2.7% -0.6% 2.6% 3.7%

S&P 500 Dividend Aristocrats

0.4% 0.2% -2.6% -1.6% -0.8% 1.6% 1.9%

S&P 500 Pure Growth

-1.0% -2.7% 3.1% -0.5% 0.7% 3.9% 2.6%

S&P 500 Pure Value

-1.0% -2.5% -3.7% -1.8% -2.1% 2.2% 2.5%

S&P 500 Low Volatility

-0.9% -2.7% -7.2% -3.4% -1.5% -0.2% 0.9%

S&P 500 Equal Weight

-0.4% -2.3% -4.0% -1.9% -1.5% 1.2% 1.4%

S&P 500 Growth

0.2% 1.6% 7.3% 2.6% 2.6% 2.1% 0.8%

S&P 500 Quality

1.3% 2.2% -1.7% -2.1% -1.3% 1.0% 1.7%

S&P 500 High Dividend

-1.3% -5.9% -8.1% -2.2% -0.7% 0.3% 0.6%

S&P 500 QVM Multi-Factor

0.1% 0.5% 1.6% -0.6% -0.2% 0.6% 3.3%

S&P 500 Minimum Volatility

0.1% -0.7% -1.1% -2.1% -0.4% -0.8% 1.0%

S&P 500 Momentum

0.9% 2.0% 12.5% 3.3% 2.1% 0.9% 1.3%

S&P 500 Enhanced Value

-1.8% -2.0% -6.2% -1.2% -1.8% -0.5% 0.2%

S&P 500 Value

-0.2% -1.8% -7.8% -3.2% -3.1% -2.3% -1.0%

S&P 500 High Beta

-0.8% -2.6% -1.8% 1.1% -1.4% -1.1% -3.4% Performance figures for more than one year are annualized.

Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of September 28, 2018.

TRACKING ERROR v S&P 500 (ANN.) S&P 500 Low Volatility High Dividend S&P 500 Buyback S&P 500 High Momentum Value S&P 500 Dividend Aristocrats S&P 500 Pure Growth S&P 500 Pure Value S&P 500 Low Volatility S&P 500 Equal Weight S&P 500 Growth S&P 500 Quality S&P 500 High Dividend S&P 500 QVM Multi-Factor S&P 500 Minimum Volatility S&P 500 Momentum S&P 500 Enhanced Value S&P 500 Value S&P 500 High Beta

1YR 3YR 5YR 10YR 15YR 7.3% 7.2% 7.0% 7.9% 7.1% 3.4% 4.9% 4.2% 5.3% 5.1% 4.5% 4.8% 4.4% 8.6% 7.6% 4.3% 4.4% 3.9% 5.2% 5.0% 5.3% 4.6% 5.0% 5.8% 5.3% 5.0% 6.2% 5.7% 11.8% 10.8% 5.4% 6.2% 6.1% 8.0% 7.1% 3.0% 2.8% 2.5% 4.5% 4.1% 3.3% 3.3% 2.9% 3.0% 3.0% 2.9% 2.2% 2.2% 3.1% 3.2% 6.6% 6.4% 6.8% 9.6% 8.6% 3.1% 3.7% 3.2% 3.7% 4.8% 3.4% 5.5% 4.8% 5.9% 5.2% 4.9% 4.7% 4.8% 5.8% 6.5% 5.0% 6.8% 6.0% 8.9% 8.0% 3.7% 3.7% 3.2% 3.4% 3.3% 6.2% 10.9% 9.4% 14.6% 13.9%

DEGREE OF PORTFOLIO OVERLAP AND RELATIVE RETURN CORRELATIONS

PORTFOLIO OVERLAP

Index Dashboard: S&P 500? Factor Indices

Q3, 2018

Dividend

Value

Value

Enhanced High Beta

Equal Weight Pure Value Buyback

High Momentum Value

QVM Multi-Factor

Aristocrats

Pure Growth Momentum

Low Volatility High High Dividend

Minimum Volatility

S&P 500

500 500

500 500 500

500 500 500 500 500

S&P 500 Growth

Dividend Quality

Low Volatility

500 500 500 500 500 500

S& P S& P

S& P S& P S& P

S& P S& P S& P S& P S& P

S& P S& P S& P S& P S& P S& P

S&P 500 Low Volatility

100% 20% 14% 29% 16% 8% 14% 11% 6% 12% 21% 21% 20% 9% 12% 9% 1% 19%

S&P 500 Minimum Volatility

20% 100% 13% 16% 19% 17% 33% 20% 21% 15% 13% 30% 22% 9% 14% 12% 14% 40%

S&P 500 Low Volatility High Dividend 14% 13% 100% 56% 14% 5% 5% 0% 1% 9% 8% 23% 10% 9% 0% 15% 3% 14%

S&P 500 High Dividend

29% 16% 56% 100% 13% 6% 6% 1% 2% 10% 18% 23% 16% 19% 3% 17% 7% 15%

S&P 500 Dividend Aristocrats

16% 19% 14% 13% 100% 12% 12% 6% 7% 8% 9% 17% 11% 10% 8% 10% 6% 15%

S&P 500 Quality

8% 17% 5% 6% 12% 100% 26% 23% 30% 46% 7% 13% 20% 5% 18% 7% 15% 22%

S&P 500 Growth

14% 33% 5% 6% 12% 26% 100% 38% 43% 17% 7% 27% 39% 0% 15% 4% 25% 67%

S&P 500 Pure Growth

11% 20% 0% 1% 6% 23% 38% 100% 32% 18% 9% 0% 23% 0% 16% 3% 34% 26%

S&P 500 Momentum

6% 21% 1% 2% 7% 30% 43% 32% 100% 37% 12% 15% 19% 6% 18% 6% 19% 30%

S&P 500 QVM Multi-Factor

12% 15% 9% 10% 8% 46% 17% 18% 37% 100% 35% 21% 20% 20% 21% 31% 13% 19%

S&P 500 High Momentum Value

21% 13% 8% 18% 9% 7% 7% 9% 12% 35% 100% 26% 20% 35% 35% 35% 16% 18%

S&P 500 Value

21% 30% 23% 23% 17% 13% 27% 0% 15% 21% 26% 100% 49% 27% 22% 31% 13% 60%

S&P 500 Equal Weight

20% 22% 10% 16% 11% 20% 39% 23% 19% 20% 20% 49% 100% 21% 20% 19% 20% 54%

S&P 500 Pure Value

9% 9% 9% 19% 10% 5% 0% 0% 6% 20% 35% 27% 21% 100% 28% 45% 11% 16%

S&P 500 Buyback

12% 14% 0% 3% 8% 18% 15% 16% 18% 21% 35% 22% 20% 28% 100% 25% 19% 20%

S&P 500 Enhanced Value

9% 12% 15% 17% 10% 7% 4% 3% 6% 31% 35% 31% 19% 45% 25% 100% 11% 16%

S&P 500 High Beta

1% 14% 3% 7% 6% 15% 25% 34% 19% 13% 16% 13% 20% 11% 19% 11% 100% 22%

"Portfolio Overlap" is percentage of index weights held in common between any two indices.

RELATIVE RETURN CORRELATIONS

Dividend

Value

Value

Enhanced High Beta

Equal Weight Pure Value Buyback

High Momentum Value

QVM Multi-Factor

Aristocrats

Pure Growth Momentum

Low Volatility High High Dividend

Minimum Volatility

500 500

500 500 500

500 500 500 500 500

S&P 500 Growth

Dividend Quality

Low Volatility

500 500 500 500 500 500

S& P S& P

S& P S& P S& P

S& P S& P S& P S& P S& P

S& P S& P S& P S& P S& P S& P

S&P 500 Low Volatility

1.00 0.85 0.74 0.59 0.67 0.22 -0.08 -0.21 0.08 -0.14 -0.02 0.09 0.05 -0.26 -0.33 -0.39 -0.65

S&P 500 Minimum Volatility

0.85 1.00 0.72 0.60 0.63 0.27 -0.05 -0.16 0.12 -0.14 -0.08 0.06 0.06 -0.25 -0.29 -0.41 -0.62

S&P 500 Low Volatility High Dividend 0.74 0.72 1.00 0.91 0.59 0.10 -0.30 -0.38 -0.21 -0.21 0.07 0.30 0.34 0.06 -0.12 -0.16 -0.32

S&P 500 High Dividend

0.59 0.60 0.91 1.00 0.52 0.06 -0.40 -0.39 -0.32 -0.20 0.13 0.40 0.53 0.28 0.06 0.03 -0.08

S&P 500 Dividend Aristocrats

0.67 0.63 0.59 0.52 1.00 0.36 -0.39 -0.33 -0.12 0.02 0.16 0.40 0.35 0.09 0.08 -0.04 -0.33

S&P 500 Quality

0.22 0.27 0.10 0.06 0.36 1.00 0.08 0.12 0.12 0.31 0.01 -0.07 0.11 -0.13 0.11 -0.21 -0.16

S&P 500 Growth

-0.08 -0.05 -0.30 -0.40 -0.39 0.08 1.00 0.74 0.49 -0.20 -0.59 -1.00 -0.53 -0.73 -0.44 -0.73 -0.30

S&P 500 Pure Growth

-0.21 -0.16 -0.38 -0.39 -0.33 0.12 0.74 1.00 0.51 0.05 -0.26 -0.73 -0.08 -0.38 -0.07 -0.40 0.06

S&P 500 Momentum

0.08 0.12 -0.21 -0.32 -0.12 0.12 0.49 0.51 1.00 0.23 -0.04 -0.46 -0.33 -0.41 -0.24 -0.40 -0.28

S&P 500 QVM Multi-Factor

-0.14 -0.14 -0.21 -0.20 0.02 0.31 -0.20 0.05 0.23 1.00 0.61 0.21 0.11 0.20 0.43 0.34 0.15

S&P 500 High Momentum Value

-0.02 -0.08 0.07 0.13 0.16 0.01 -0.59 -0.26 -0.04 0.61 1.00 0.60 0.47 0.61 0.60 0.70 0.32

S&P 500 Value

0.09 0.06 0.30 0.40 0.40 -0.07 -1.00 -0.73 -0.46 0.21 0.60 1.00 0.52 0.72 0.44 0.73 0.29

S&P 500 Equal Weight

0.05 0.06 0.34 0.53 0.35 0.11 -0.53 -0.08 -0.33 0.11 0.47 0.52 1.00 0.72 0.65 0.50 0.53

S&P 500 Pure Value

-0.26 -0.25 0.06 0.28 0.09 -0.13 -0.73 -0.38 -0.41 0.20 0.61 0.72 0.72 1.00 0.66 0.84 0.65

S&P 500 Buyback

-0.33 -0.29 -0.12 0.06 0.08 0.11 -0.44 -0.07 -0.24 0.43 0.60 0.44 0.65 0.66 1.00 0.67 0.55

S&P 500 Enhanced Value

-0.39 -0.41 -0.16 0.03 -0.04 -0.21 -0.73 -0.40 -0.40 0.34 0.70 0.73 0.50 0.84 0.67 1.00 0.60

S&P 500 High Beta

-0.65 -0.62 -0.32 -0.08 -0.33 -0.16 -0.30 0.06 -0.28 0.15 0.32 0.29 0.53 0.65 0.55 0.60 1.00

Correlation of weekly excess total returns (versus S&P 500), three years to Sept 28, 2018

Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of September 28, 2018.

12M Tracking Error to S&P 500 (Ann.)

Index Dashboard: S&P 500? Factor Indices

Q3, 2018

TRACKING ERROR & ACTIVE SHARE- RELATIVE TO S&P 500

8%

Low Volatility High Dividend

7% High Dividend

6%

High Beta

Low Volatility

Pure Growth

Enhanced Value

5%

Momentum

Pure Value

High Momentum Value

Dividend Aristocrats 4%

Value

Minimum Volatility

Buyback

3%

Growth

Equal Weight

QVM Multi-Factor Quality

2%

1%

S&P 500

0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Current Active Share to S&P 500

FACTOR EXPOSURE SUMMARY (See following page for factor scoring methodology)

INDEX

AVERAGE LOW VOLATILITY MOMENTUM

S&P 500 High Momentum Value

14.3%

2.1%

-7.2%

S&P 500 QVM Multi-Factor

16.8%

2.1%

25.6%

S&P 500 Pure Value

7.8%

-56.4%

-15.9%

S&P 500 Enhanced Value

9.6%

-17.6%

-31.9%

S&P 500 Quality

8.1%

-7.8%

8.0%

S&P 500 Low Volatility

7.5%

79.0%

-25.6%

S&P 500 High Beta

2.6%

-70.6%

-3.6%

S&P 500 High Dividend

6.0%

4.0%

-49.4%

S&P 500 Value

5.5%

6.7%

-22.3%

S&P 500 Low Volatility High Dividend 4.9%

28.8%

-61.9%

S&P 500 Buyback

5.1%

-15.8%

1.4%

S&P 500 Dividend Aristocrats

6.6%

20.3%

-14.0%

S&P 500

0.0%

0.0%

0.0%

S&P 500 Momentum

2.3%

-12.5%

68.1%

S&P 500 Equal Weight

1.5%

-21.6%

-14.4%

S&P 500 Minimum Volatility

-2.1%

7.8%

-5.9%

S&P 500 Growth

-6.8%

-9.5%

18.6%

S&P 500 Pure Growth

-7.6%

-43.2%

26.7%

Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of September 28, 2018.

VALUE

73.0% 37.0% 83.9% 86.4% -13.4% 11.8% 11.3% 42.8% 41.0% 41.5% 37.4% 9.8%

0.0%

-22.1% 19.9% 0.0% -27.7% -28.5%

HIGH BETA

-19.3% -2.9% -19.3% -13.1% -0.2% -70.8% 67.2% -65.2% -24.0% -70.7% -7.0% -30.8%

0.0%

29.0% -18.8% -24.8% 16.1% 21.8%

DIVIDEND

10.9% -2.1% 27.2% 31.8% -9.6% 30.2% -14.6% 85.3% 30.9% 86.2% -13.7% 32.6%

0.0%

-32.2% 4.6% 7.5% -22.0% -51.8%

QUALITY

-0.3% 46.0% -11.7% -0.4% 72.8% -11.7% 0.5% -18.4% -2.6% -21.4% -1.5% -1.0%

0.0%

1.7% -2.6% -2.3% 0.3% 0.5%

SMALL SIZE

41.1% 11.7% 46.4% 11.7% 6.9% 40.0% 28.1% 43.2% 8.6% 32.1% 35.1% 29.0%

0.0%

-15.7% 43.2% 3.3% -23.6% 21.5%

KEY TO FACTOR SCORINGS FOR INDICES

Index Dashboard: S&P 500? Factor Indices

Q3, 2018

Factor Definitions

Each constituent of the S&P 500 index is provided with a factor "score" for each of Beta, Volatility, Momentum, Dividend, Size, Value and Quality.

Small Size Quality

Low Volatility

S&P 500

Momentum Value

Dividend

High Beta

Factor Volatility

Momentum

Value Beta Dividend Quality Size

Measurement at single-stock level

Trailing 12-month daily volatility.

Twelve-month price change as of one month ago ("13 minus 1 momentum"), divided by the daily volatility during the twelve-month period that ended one month prior. For more details, see the S&P Momentum methodology. The average of (normalized) earnings to price ratio, book to price ratio and sales to price ratio. For more details, see the S&P Value methodology. Trailing 1 year beta of daily returns to the benchmark's returns.

Trailing 12-month dividend.

The average of the (normalized) return on equity, the negative of the accruals ratio and the negative of the financial leverage ratio. For more details, see the S&P Quality methodology. Average and standard deviations for each metric follow below. Free-float market capitalization.

Index Factor Ranking and Factor Diagram Scaling

Index Scores Each index is provided score in each factor from -100% to +100% based on how much of the total capitalization of the benchmark must be excluded in order to provide a portfolio of stocks with similar exposure to that factor. This is done by examining a ranked series of hypothetical cap-weighted portfolios, including or excluding an increasing number of the stocks with the highest or lowest scores. An illustration of the process is below, further details may be found at this link.

Factor Diagram Axis

Single-stock portfolio with the highest possible factor score

The stocks in the benchmark are ranked in order from highest to lowest factor score, and we examine portfolios including or excluding a varying number of stocks associated to high or lower factor scores. The score in each factor (and its level on the chart) reflects the active share of a hypothetical portfolios matching the factor score of that index. The weights of stocks within the hypothetical comparison portfolios are set proportional to benchmark weights, i.e. free-float market capitalization.

Fewer stocks

... ...

Fewer stocks

...

Portfolios with a tilt against the factor begin by excluding the highest-ranked stock and end up concentrated in the lowest-ranked stocks

Benchmark Portfolio has a factor rank defined by that of a capweighted average score among all stocks

Weighting matters to the ranking of the index. Each the ranked portfolios of stocks is given a factor score through the capitalization-weighted average. Factor indices can use alternative weightings, which can provide higher factor exposures with fewer stocks.

Single-stock portfolio with the lowest possible factor score

Notes On Additional Index Statistics

Statistic Active Share (Stock) Active Share (Sector)

Notes

Ranging from 0 to 100%, "active share" is a measure of how much a portfolio's composition differs from that of its benchmark, and provides the amount of trading theoretically required to switch from a position in one to a position in the other. The Active Share (Stock) for each index is calculated as the absolute sum of difference between S&P 500 stock weights and Index stock weights, divided by two.

The Active Share (Sector) is the absolute sum of difference between S&P 500 sector weights and Index sector weights, divided by two.

Concentration (HH Index)

The Herfindahl-Hirschman ("HH") concentration measure is equal to the index constituent's percentage weights, squared. For example, the HH measure of a single-stock portfolio is 10,000 (the maximum possible). The HH measure of a 100-stock, equally weighted index is 100.

Correlation (Stock)

Calculated as the weighted-average 1Yr trailing daily variance of current index constituents, divided by the 1Yr trailing daily Index variance. The value approximates an average stock-to-stock correlation of index constituents, weighted proportionally to both constituent weight and constituent volatility.

Benchmark Statistics for Value, Quality and Momentum (normalization variables)

S&P 500 index-weighted average S&P 500 index-weighted standard deviation

Earnings to Price

4.23% 3.59%

VALUE Book to

Price

28.1% 25.0%

Sales to Price

42.0% 40.0%

Accrual Ratio

8.52% 21.44%

Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of September 28, 2018.

QUALITY Return on

Equity

22.08% 23.46%

Leverage Ratio

1.32 1.44

MOMENTUM

12M - 1M Daily Price

Return

Volatility

25.55% 29.56%

1.43% 0.35%

Index Dashboard: S&P 500? Factor Indices

S&P 500 Low Volatility

Q3, 2018

Description

The S&P 500 Low Volatility is designed to measure the performance of the 100 stocks in the S&P 500 with the lowest volatility, measured on a 1-year trailing basis. The weighting of each

stock is in inverse proportion to its volatility.

Index Statistics Total Return (Ann)

1M

3M YTD 12M

-0.4% 5.0% 5.8% 10.7%

Relative to Benchmark -0.9% -2.7% -4.8% -7.2%

Index Volatility

7.1%

Tracking Error

5.4%

Benchmark: S&P 500. 1 Yr trailing beta to benchmark = 0.8

3Y 13.9% -3.4% 7.9% 6.2%

5Y 12.5% -1.5% 8.3% 6.1%

10Y 11.8% -0.2% 10.7% 8.0%

15Y 10.5% 0.9% 9.7% 7.1%

Small Size

Low Volatility Momentum

Benchmark

Portfolio Statistics Active Share (Stock) Active Share (Sector) Concentration (HH Index) Correlation (stock) Ann. Turnover (last 10 yr)

Index 81% 44% 100.7 9.95 0.74

Bmark 0% 0% 89.1 0.30 0.05

Index-Weighted Avg. Stock Volatility 12M - 1M price return Book/Price Earnings/Price Sales/Price Stock Beta Yield (12M trailing) R.O.E. Market Cap (U.S. $ bn)

Index 17% 11% 0.36 0.04 0.39 0.64 2.5% 12% 54.9

Bmark 23% 26% 0.28 0.04 0.44 1.01 1.8% 15% 231.9

Top Sector Tilts (versus benchmark)

Sector

Index Bmark

Utilities

23% 3%

Real Estate

18% 3%

Comms

0% 10%

Info Tech

11% 21%

Difference 20% 15% -10% -10%

Sector Tilts (Detail)

50%

Quality

Value

Dividend

High Beta

Factor Exposure Chart

25%

3%

3%

0%

-6%

-4%

-4%

-9%

-10%

-25% Cons. Disc. Cons. Energy Financials Health Care Industrials IT

Staples

20% 15% 3%

-10%

Materials Real Estate Telecoms Utilities

S&P 500 Minimum Volatility Description The S&P 500 Minimum Volatility uses an optimization process to find the portfolio of S&P 500 stocks, and weights, that would have demonstrated the lowest volatility on a historical basis, subject to constraints maintaining limiting sector and factor exposures. As of Sept 28, 2018 the index comprised 120 constituents.

Index Statistics Total Return (Ann) Relative to Benchmark Index Volatility Tracking Error Benchmark: S&P 500.

1M

3M YTD 12M

0.6% 7.0% 7.9% 16.8%

0.1% -0.7% -2.6% -1.1%

7.0%

3.4%

1 Yr trailing beta to benchmark = 0.82

3Y 15.2% -2.1% 7.5% 5.5%

5Y 13.5% -0.4% 7.9% 4.8%

10Y 11.2% -0.8% 11.4% 5.9%

15Y 10.7% 1.0% 10.6% 5.2%

Small Size

Low Volatility Momentum

Benchmark

Portfolio Statistics Active Share (Stock) Active Share (Sector) Concentration (HH Index) Correlation (stock) Ann. Turnover (last 10 yr)

Index 60% 15% 128.0 0.25 0.68

Bmark 0% 0% 89.1 0.30 0.05

Index-Weighted Avg. Stock Volatility 12M - 1M price return Book/Price Earnings/Price Sales/Price Stock Beta Yield (12M trailing) R.O.E. Market Cap (U.S. $ bn)

Index 22% 21% 0.28 0.04 0.41 0.88 2.0% 16% 170.8

Bmark 23% 26% 0.28 0.04 0.44 1.01 1.8% 15% 231.9

Top Sector Tilts (versus benchmark)

Sector

Index Bmark

Utilities

8%

3%

Cons. Staples

11% 7%

Comms

7% 10%

Energy

2%

6%

Difference 5% 4% -3% -4%

Sector Tilts (Detail)

50%

Quality

Value

Dividend

High Beta

Factor Exposure Chart

25%

2%

4%

3%

0%

-4%

-3%

-1%

-3%

-25% Cons. Disc. Cons. Energy Financials Health Care Industrials IT

Staples

5% 0%

-1%

-3%

Materials Real Estate Telecoms Utilities

Source: S&P Dow Jones Indices LLC and/or its affiliates. Data as of September 28, 2018.

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