Description
This month Citi economists made mostly minor changes
to its outlook, with global growth now forecast at 2.9% in
2015. On a country basis, they downgraded 2015 growth
forecasts for the US, UK, Korea and Australia, with larger
cuts for South Africa, Turkey and Venezuela. For 2016,
they slightly upgraded the 2016 growth forecasts for the
euro area and Japan, although they left global growth for
2016 unchanged at 3.4% .
Investment Strategy Insights
INVESTMENT AND INSURANCE PRODUCTS: NOT FDIC INSURED – NOT CDIC INSURED – NOT GOVERNMENT
INSURED – NO BANK GUARANTEE – MAY LOSE VALUE
Renato Grandmont
[email protected]
(212) 559 1766
Charles Iragui
[email protected]
(212) 559 6485
Enrique Alvarez
[email protected]
(212) 559 4222
David Nieuchowicz
[email protected]
(212) 559 8203
Nelson Sotomayor
[email protected]
(212) 559 8601
Base Case
April 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 2
Forecast Summary
Global Economic Forecasts and Changes to Our Views
Global Outlook
? This month Citi economists made mostly minor changes
to its outlook, with global growth now forecast at 2.9% in
2015. On a country basis, they downgraded 2015 growth
forecasts for the US, UK, Korea and Australia, with larger
cuts for South Africa, Turkey and Venezuela. For 2016,
they slightly upgraded the 2016 growth forecasts for the
euro area and Japan, although they left global growth for
2016 unchanged at 3.4% .
United States
? Rate Forecast: 10Y forecast for 4Q15 is 2.45% and for
2Q16 is 2.55%.
? Rate Hike Timing: We expect the Fed to begin hiking
rates in December 2015, and to leave the policy rate at
0.50% at yearend.
? Gasoline Price/Retail Benefit: Consumer gains from the
40% drop in gasoline prices since last summer will likely
drive 4% real consumer spending in 1H15.
? Inflation: We estimate underlying inflation likely will stay
near 1.5%, below the Fed’s 2% target through 2016. This
implies a Fed program of slow hikes, reaching 1.00% only
in 3Q16.
Eurozone
? Asset Friendly Policy Mix: Policymakers see fiscal
austerity as less important than structural reforms in those
member states with a deficit below 3% of GDP.
? Positive v Negative Risks to Forecast: Assuming the 4-
month extension for Greece holds, the crisis in Ukraine
does not escalate, Citi expects the trend of looser bank
lending standards to continue, driven by cheaper funding
costs and increased competition. This could signal some
upside risks to our forecast in 2015-16.
Japan
? Export-led Growth: A resilient US economy and a pick-
up in the global high-technology cycle appear to be
boosting Japan’s exports, leading to 25% profit growth.
? New QE: We continue to expect the BoJ will implement
additional easing measures around July this year.
China
? We expect the economy will slow as credit stimulus fades,
leading to monetary easing (rate cut and lowering of the
required reserve ratio, or RRR).
? The trend of sustained currency appreciation versus the
USD since 2005 is probably over.
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 3
Macroeconomic View
Developed Markets in Economic Recovery
Global GDP and Inflation Rates
2014F 2015F 2016F 2014F 2015F 2016F
Global 2.7% 2.9% 3.4% 2.6% 2.0% 2.7%
Based on PPP 3.4% 3.4% 4.0% 3.4% 3.1% 3.5%
I ndustrial Countries 1.7% 2.2% 2.5% 1.4% 0.3% 1.6%
United States 2.4% 3.1% 3.0% 1.3% 0.3% 1.8%
Japan 0.0% 1.0% 2.2% 2.7% 0.4% 0.9%
Euro Area 0.9% 1.5% 2.0% 0.4% 0.2% 1.5%
United Kingdom 2.5% 2.8% 3.1% 1.5% 0.3% 1.5%
Emerging Markets 4.2% 3.8% 4.6% 4.4% 4.6% 4.3%
China 7.4% 6.9% 6.7% 2.0% 1.5% 1.9%
India 7.4% 8.1% 8.4% 6.5% 5.0% 5.0%
Korea 3.3% 3.1% 3.5% 1.3% 1.2% 2.3%
Russia 0.5% -3.0% 1.5% 7.8% 15.1% 7.3%
Brazil 0.0% -0.8% 0.7% 6.3% 8.1% 6.1%
Mexico 2.1% 3.0% 3.9% 4.0% 3.3% 3.6%
Source: Citi Research, 25 March 2015
GDP Growth CPI I nflation
-15
-12
-9
-6
-3
0
3
6
9
Jun 1989 Jun 1994 Jun 1999 Jun 2004 Jun 2009 Jun 2014
-5
-4
-3
-2
-1
0
1
2
3
Financial Condit ions Index (Left ) Industrial Product ion (Right)
Source: Citi as of 24 September 2014. Note: Industrial Production is lagged 9 months.
Financial Conditions Index and Industrial Production
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
The investor should not base its decision to enter into a trade solely on the basis of the forecasts.
? Growth Prospects: We expect global growth to accelerate mildly this year
and next. Citi economists have slightly revised downward global growth
expectations for 2015 but upgraded Eurozone and Japanese 2016 growth.
? Emerging Markets (EM): Lower commodities prices will hamper growth in
exporting nations, causing a deterioration to many fiscal accounts. Trade
growth has remained muted even as DM growth has accelerated, dragging
forecast 2015 growth lower than 2014. Likely Fed rate hikes may challenge
EM credit markets and sovereign borrowing.
? Policy Questions: Despite a weakening euro, our economists doubt the
ECB’s QE program will be enough to break the economy out of low-flation
and see the ECB scaling up their QE program over time. The BoJ should
also expand QE further around midyear. We should see the first Fed hike
in late-2015, and we expect the first BoE hike in early 2016. The UK and
US tightening should be more gradual than historical norms.
-3.0
-1.5
0.0
1.5
3.0
4.5
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
Contributions to Global Growth
(in percentage points)
Emerging Markets Developed Markets
Source: IMF, CIRA, 25 March 2015
Forecasts
4
Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.
Bloomberg charts as of 25 March 2015
Fixed Income
Low-rate World Remains Afoot
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0 5 10 15 20 25 30
3/ 25/2015 1-Week 1-Month YTD 1-Year
Source: Bloomberg
US Yield Curve
(in percent and years)
Short and Long Rates (Forecasts)
Current 4Q15F 2Q16F Current 4Q15F 2Q16F
United States 0.25 0.50 0.75 1.88 2.45 2.55
Japan 0.10 0.10 0.10 0.33 0.45 0.50
Euro Area 0.05 0.05 0.05 0.23 0.20 0.30
Australia 2.25 1.75 1.75 2.32 2.65 2.85
United Kingdom 0.50 0.50 1.00 1.48 1.30 1.75
China 2.50 2.00 2.00 3.53 NA 3.99
India 7.50 7.25 7.00 7.82 NA 7.50
Korea NA NA NA 2.18 NA NA
Russia 14.00 12.00 11.00 12.02 NA NA
Brazil 12.75 12.25 11.50 13.60 NA 12.58
Mexico 3.00 3.50 3.75 5.95 NA 6.65
Policy Rates (quarter end) Long Rates*
Note: Developed Markets long rates are period averages. Emerging Markets short rates are for
1Q16 and long rate forecasts are full-year averages. Long Euro Area rates are German yields.
Source: Citi Research, 25 March 2015
0
5
10
15
20
Mar 90 Mar 95 Mar 00 Mar 05 Mar 10 Mar 15
Credit Bond Yields
(in percent)
High Yield BBB Yield US 10-Year Bond EM Sovereign Yield
Source: Bloomberg
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
The investor should not base its decision to enter into a trade solely on the basis of the forecasts.
? Yield Curve Flattening: The trend towards a flatter US Treasury curve
should remain as one of the key features of the rates picture in 2015.
Shorter-duration yields should rise more rapidly as the date of Fed
movement on policy rates nears, while low DM rates/low US inflation keep
the long-end from rising too steeply.
? Rate Hikes: Citi anticipates that the Fed will increase the funds rates in
December of 2015, though this target could be moved closer on good US
economic news. Fed hiking cycle will likely occur at a gradual pace, with
small rate increases offered.
? Corporate Credit: Potential defaults and downgrades within the Energy
sector of High Yield corporate credit are the main risks ahead. Citi expects
US and European HY to return 4% to 4.5% in 2015.
? Emerging Markets: EM credit should remain hampered by a stronger US
dollar and weak commodities prices. Politics across EM return as a risk.
5
Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.
Bloomberg charts as of 25 March 2015
Equities
Focused on US Growth, Earnings Recovery and EM Risks
600
800
1000
1200
1400
1600
1800
2000
2200
5
15
25
35
45
55
65
75
85
Mar 05 Mar 07 Mar 09 Mar 11 Mar 13 Mar 15
S&P 500 Index and Volatility
VI X Index (left scale) S&P 500 Index (right scale)
Source: Bloomberg
-60
-30
0
30
60
90
-1.2
-0.6
0.0
0.6
1.2
1.8
Jan 90 Jan 95 Jan 00 Jan 05 Jan 10 Jan 15
US Panic/Euphoria Model (Other PE)
S&P 500 12-Month Forward Return (right scale) The Other PE (right scale)
Euphoria
Panic
Source: Citi Research as of 26 March2015
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events. The investor should not base its
decision to enter into a trade solely on the basis of the forecasts.
Consensus EPS Estimates & Citi Index Targets
P/E EPS YoY % Div Yld
3/25/15 15E 15E 15E Levels Returns
Global (MSCI World) 494 16.4 4.2 2.5 525 6.3%
Developed 17.1 3.4 2.5
Emerging 976 12.0 9.3 2.8 1180 20.9%
US (S&P 500) 2,061 17.8 2.4 2.0 2,200 6.7%
Europe (Euro Stoxx) 377 16.7 10.9 3.1 450 19.4%
UK (FTSE 100) 6,991 15.8 -6.4 3.9 7,700 10.1%
Japan (Topix) 1,592 13.2 7.9 3.1 1,650 3.6%
China 69 10.0 24.4 1.6 78 12.5%
India 28,112 15.9 7.2 3.2 33,000 17.4%
Brazil (Bovespa) 51,858 19.0 30.4 1.9 59,000 13.8%
Mexico (Bolsa) 43,631 15.8 21.2 2.9 50,500 15.7%
Russia 882 13.6 39.9 3.9 NA N/A
End 2015 Target
P/E, EPS YoY% and Div Yld based on MSCI Indexes. 15E denotes 2015 Estimates. Source: MSCI,
Citi Research, 5 March 2015.
? Earnings Outlook: The outlook for earnings is positive globally. US
corporate earnings will likely continue to grow in 2015, even as earnings
have already hit record levels. Europe, EM and Japan earnings will keep
rebounding in 2015.
? US Outlook: Citi estimates US large caps and small caps will finish 2015
at new highs, primarily contingent on earnings expansion. The near-term
outlook is clouded, with prices not far from mid- and yearend targets.
? Emerging Markets: We would focus on countries with exposure to US
growth, strong fiscal / account balances, robust GDP expansion and solid
expected earnings growth in 2015. US rate rises, a weak yen (and yuan)
and sluggish DM imports are weighing on earnings and cheap valuations.
? Japan/Europe: Central bank liquidity will likely support Eurozone and
Japan earnings and equity prices. Politics (Greece) and geopolitics
(Russia) are the principal risks in Europe; policy mistakes in Japan.
The 12-Month Forward Return indicates the 1-year return
recorded from a specified date.
6
Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.
Bloomberg charts as of 25 March 2015
Currencies
From Strengthening Fundamentals to Policy Normalization to Loosening Policies
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
Currency risk: One currency may decline in value versus another. The value of a multicurrency portfolio will fluctuate with exchange rates.
65
85
105
125
145
165
0
400
800
1200
1600
2000
Mar 75 Mar 85 Mar 95 Mar 05 Mar 15
US Dollar Index versus Gold Price
Gold Price (LHS, US dollars) Dollar Index (RHS) EM Currency Index (RHS)
Source: Bloomberg
70
90
110
130
150
0.8
1.0
1.2
1.4
1.6
Mar 95 Mar 00 Mar 05 Mar 10 Mar 15
DM Exchange Rates
(USD/EUR; JPY/USD)
Euro Yen
Source: Bloomberg
? USD Strengths: Given our expectations of significant monetary easing in
most DM (and many EM), we expect to see more appreciation for the dollar
in 2015 and 2016. Looking at USD price movements historically, the typical
bullish USD cycle lasts five to six years and the total move higher is on
average about 40%. The current 4-year USD appreciation cycle has seen
the USD strengthen by 24%, so by historical standards this suggests the
USD has room to appreciate further.
? EUR/USD: As the ECB embarks upon QE and the Fed begins to hike
policy rates (likely in late 2015), the euro should weaken further. We see
the euro at parity to the dollar by the end of 2015.
? Emerging Markets: EM currencies are supported by carry trades and the
lack of local quantitative easing programs, so Citi strategists believe EM
currencies, though likely headed lower, may fall less against USD than
most DM currencies.
Exchange Rate Forecasts
Spot 2015 YE 2016 YE
Euro 1.10 0.93 0.95
Japanese yen 120 130 134
Australian Dollar 0.79 0.70 0.70
Swiss Franc 0.96 1.18 1.16
British Pound 1.49 1.37 1.38
Chinese Renminbi 6.21 6.30 6.30
Indian Rupee 62.3 65.0 64.6
Korean Won 1,101 1,179 1,147
Russian Ruble 57.1 70.1 68.0
Brazilian Real 3.16 3.40 3.23
Mexican Peso 14.9 15.0 14.3
Source: Citi Research as of 20 March 2015. Spot price as of 25 Mar 2015.
Versus US Dollar
7
Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.
Bloomberg charts as of 25 March 2015
Commodities
Reacting to Global Demand Questions
0.0
1.0
2.0
3.0
4.0
5.0
Mar 05 Mar 07 Mar 09 Mar 11 Mar 13 Mar 15
Key Commodity Prices
(rebased to 1)
Oil Gold Corn Copper
Source: Bloomberg
All forecasts are expressions of opinion and are subject to change without notice and are not intended to
be a guarantee of future events. The investor should not base its decision to enter into a trade solely on
the basis of the forecasts. These are indicative market prices and cannot be directly invested in.
0
4
8
12
16
20
Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15
US Europe Japan
Global Natural Gas Prices
(in US$ per million BTU)
Source: World Bank as of 25 March 2015
? Energy: Oversupply in the oil market has pushed oil prices below $50 (an
over 50% fall since the recent peak in June 2014). We believe US supply
will continue to increase given the industry’s healthy productivity gains,
heightened focus on more prolific drilling areas and trend to switch from
vertical to horizontal oil rigs.
? Precious Metals: Concerns about the euro, coupled with low interest rates
and quantitative easing in major economies have supported the price of
gold. We are neutral on gold and see a steady price through 2Q16.
? Industrial Metals: Slowing supply growth bodes well for copper, especially
in a strengthening global economy.
? Agriculture: Citi Research expects grain supplies to remain high. Barring a
weather or geopolitical event, strong demand matching supply should keep
prices steady.
Spot 4Q15 2Q16 5Yr Cyclical
Energy
WTI Crude USD/bl 47.5 57.0 56.0 70.0
Brent Crude USD/bl 56.1 65.0 65.0 75.0
Natural Gas (USD/MMBtu) 2.75 2.80 2.90 5.50
Base Metals
LME Aluminium USD/mt 1,791 2,000 2,090 2,200
LME Copper USD/mt 6,145 7,100 7,600 6,200
LME Nickel USD/mt 13,950 22,500 25,000 21,000
Bulk Commodities
Iron Ore Spot (TSI) USD/mt 58.60 58.00 62.00 81.00
Precious Metals
Gold USD/oz 1,197 1,240 1,250 1,050
Silver USD/oz 17.03 16.80 16.90 16.50
Platinum USD/oz 1,148 1,410 1,500 1,763
Agriculture
Corn (USd/bu) 394 385 425 N/A
Wheat (USd/bu) 520 540 560 N/A
Source: Citi Research 25 March 2015. Estimates are period averages.
Citi Commodity Price Forecasts
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 8
Global GDP Rates
2014F 2015F 2016F
Global 2.7% 2.9% 3.4%
Industrial Countries 1.7% 2.2% 2.5%
United States 2.4% 3.1% 3.0%
Japan 0.0% 1.0% 2.2%
Euro Area 0.9% 1.5% 2.0%
United Kingdom 2.5% 2.8% 3.1%
Emerging Markets 4.2% 3.8% 4.6%
China 7.4% 6.9% 6.7%
India 7.4% 8.1% 8.4%
Russia 0.5% -3.0% 1.5%
Brazil 0.0% -0.8% 0.7%
Mexico 2.1% 3.0% 3.9%
Source: Citi Research, 25 March 2015
Policy Rates Forecasts
Current 2Q15 3Q15 4Q15 1Q16 2Q16
United States 0.25 0.25 0.25 0.50 0.50 0.75
Japan 0.10 0.10 0.10 0.10 0.10 0.10
Euro Area 0.05 0.05 0.05 0.05 0.05 0.05
United Kingdom 0.50 0.50 0.50 0.50 0.75 1.00
Source: Citi Research, 25 March 2015
Citi House View Summary
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
The investor should not base its decision to enter into a trade solely on the basis of the forecasts.
Gold
Equities
Cash
Fixed Income
Overweight Neutral
Underweight Overweight
Alternatives
Neutral
CPB Asset Allocation
1. US
2. Europe: Core, Periphery
and UK
3. Japan
4. Emerging Markets
5. Developed Asia ex-Japan
1. High Yield
2. Supranational / Agencies
3. Corporate High Grade
(focus on 7- to 10-year
bonds)
4. Emerging Markets
5. Inflation Linked
6. Developed Sovereign
(ranking: US, Japan,
Europe)
Citi Research Economic Outlook
Our economists forecast below trend global GDP growth in 2015, US growth
acceleration and European QE. Removal of accommodative policy in the US and UK
and decline of EM macro advantages are significant challenges. New Eurozone and
Japan QE provides support.
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 9
Citi Private Bank Asset Allocation
Strategic Asset Allocation Pies
Adaptive Valuation Strategies (AVS)
Source: Citi Private Bank's Global
Investment Committee, March 2015
Strategic Asset Allocation Commentary
? Adaptive Valuation Strategies (AVS), our proprietary
strategic asset allocation methodology, uses a valuation-
driven forecasting method and employs a risk
measurement framework that draws on historical
performance metrics to set allocation levels.
? Changes to the Strategic Asset Allocation are
implemented annually in the beginning of each calendar
year.
Cash: 12%
Fixed Income: 79%
Equit ies: 9%
Hedge Funds: 0%
Precious Metals: 0%
Level 1
Seeks liquidity management and
capital preservation
Cash: 8%
Fixed Income: 59%
Equities: 33%
Hedge Funds: 0%
Precious Metals: 0%
Level 2
Seeks income generation and
capital preservation
Cash: 0%
Fixed Income: 21%
Equities: 79%
Hedge Funds: 0%
Precious Metals: 0%
Level 3
Seeks modest capital appreciation
and, secondly, capital
Cash: 0%
Fixed Income: 21%
Equities: 79%
Hedge Funds: 0%
Precious Metals: 0%
Level 4
Seeks long-term growth of capital
with moderate volatility
Cash: 0%
Fixed Income: 3%
Equities: 97%
Hedge Funds: 0%
Precious Metals: 0%
Level 5
Seeks maximum long-term growth
of capital
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 10
Citi Private Bank Asset Allocation
Tactical Asset Allocation Pies
Source: Citi Private Bank's Global
Investment Committee, March 2015
Global Investment Committee (GIC)
Tactical Asset Allocation Commentary
? The Global Investment Committee (GIC) adds a monthly
tactical under/overweight overlay to the strategic
allocation recommendation. The GIC incorporates
quantitative and qualitative inputs, such as economic
data, forecasts and observed market trends.
? Over the last year and a half, the GIC has had an
overweight exposure to risky assets: an overweight to
equities (focus on DM; small EM equity overweight) and
an underweight to fixed income (strong underweight to
DM sovereign debt; small overweight to riskier HY).
Cash: 12%
Fixed Income: 77%
Equit ies: 11%
Hedge Funds: 0%
Precious Metals: 0%
Level 1
Seeks liquidity management and
capital preservation
Cash: 8%
Fixed Income: 55%
Equities: 37%
Hedge Funds: 0%
Precious Metals: 0%
Level 2
Seeks income generation and
capital preservation
Cash: 0%
Fixed Income: 14%
Equities: 86%
Hedge Funds: 0%
Precious Metals: 0%
Level 3
Seeks modest capital appreciation
and, secondly, capital preservation
Cash: 0%
Fixed Income: 14%
Equities: 86%
Hedge Funds: 0%
Precious Metals: 0%
Level 4
Seeks long-term growth of capital
with moderate volatility
Cash: 0%
Fixed Income: 0%
Equities: 100%
Hedge Funds: 0%
Precious Metals: 0%
Level 5
Seeks maximum long-term growth
of capital
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 11
Citi Private Bank Asset Allocations: Our Active Stance
Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)
Our Active Tactical Stance on Asset Allocation
? Tilt Toward Risk: overweight equities, underweight to fixed
income. A slight overweight to cash leaves allocation to
deploy.
? Underweight to High Grade corporate debt, overweight
High Yield (HY) bonds (US and especially European).
? Large underweight to developed markets (DM) sovereign
debt and small underweight to emerging markets (EM)
debt.
? Overweight DM equities (Europe large and small/mid cap,
UK, US large, Japan). Small overweight EM North Asia
equities (China, Taiwan, India). Underweight Brazil and
Turkey. Neutral US SMID.
Change to Tactical Asset Allocation
? Reduce overweight to Spain (-0.2%) and reduce Mexico
(-0.2%) from overweight to neutral.
? Increase overweight to broad Europe (+0.4%, new
overweight to Nordic countries).
? Increase exposure to EM Asia local bonds (+0.3%),
funded by decrease to EM Europe and LatAm (-0.3%).
April 2015 Over/Underweights: with Alternatives
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 0.0% 0.0% 0.1% 0.1% 0.0%
Fixed I ncome -2.4% -4.0% -6.1% -6.6% 0.0%
Developed Sovereign FI
-5.8% -7.1% -6.3% -4.3% 0.0%
North America
-1.4% -1.8% -1.7% -1.2% 0.0%
Europe
-1.2% -1.8% -1.9% -1.6% 0.0%
Asia ex Japan
-0.1% -0.1% -0.1% 0.0% 0.0%
Japan
-3.2% -3.6% -2.6% -1.3% 0.0%
Supranational/Agencies
0.1% 0.1% 0.0% -0.1% 0.0%
Developed Investment Grade FI
2.2% 1.8% -0.1% -2.2% 0.0%
Developed High Yield FI
1.6% 1.8% 1.0% 0.2% 0.0%
Emerging Market FI
-0.4% -0.5% -0.7% -0.3% 0.0%
Emerging Market Asia FI
-0.1% -0.1% -0.1% -0.2% 0.0%
Emerging Market EMEA FI
-0.2% -0.2% -0.3% -0.1% 0.0%
Emerging Market LatAm FI
-0.2% -0.2% -0.3% -0.1% 0.0%
Equities 2.4% 4.0% 6.0% 6.5% 0.0%
Developed Market EQ
2.1% 3.4% 5.1% 5.5% -0.2%
North America Large Cap
1.0% 1.8% 2.7% 2.9% 0.1%
North America Small/Mid Cap
0.2% 0.2% 0.0% -0.1% -0.7%
Europe Equities
0.6% 1.2% 2.2% 2.6% 1.2%
Japan Equities
0.2% 0.3% 0.5% 0.6% 0.1%
Asian Equities
0.1% -0.0% -0.3% -0.4% -0.8%
Emerging Markets EQ
0.3% 0.6% 0.9% 1.0% 0.2%
Emerging Latin America Equities
0.0% -0.1% -0.5% -0.7% -1.0%
Emerging EMEA Equities
0.0% 0.0% 0.0% 0.0% -0.2%
Emerging Asia Equities
0.2% 0.6% 1.4% 1.8% 1.5%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 0.0% 0.0% 0.0% 0.0% 0.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 12
Citi Private Bank Asset Allocations: Strategic and Tactical
Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)
April 2015 Strategic Allocations: with Alternatives
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 12.0% 8.0% 2.0% 0.0% 0.0%
Fixed I ncome 75.6% 53.0% 30.0% 12.3% 0.0%
Developed Sovereign FI
38.4% 26.9% 14.1% 6.2% 0.0%
North America
11.5% 8.1% 4.2% 1.9% 0.0%
Europe
16.3% 11.4% 6.0% 2.6% 0.0%
Asia ex Japan
0.3% 0.2% 0.1% 0.0% 0.0%
Japan
9.4% 6.6% 3.5% 1.5% 0.0%
Supranational/Agencies
0.9% 0.6% 0.3% 0.2% 0.0%
Developed Investment Grade FI
32.7% 22.9% 12.0% 5.3% 0.0%
Developed High Yield FI
2.3% 1.6% 1.9% 0.4% 0.0%
Emerging Market FI
2.3% 1.6% 2.1% 0.4% 0.0%
Emerging Market Asia FI
1.6% 1.1% 1.5% 0.3% 0.0%
Emerging Market EMEA FI
0.3% 0.2% 0.3% 0.1% 0.0%
Emerging Market LatAm FI
0.3% 0.2% 0.3% 0.1% 0.0%
Equities 4.4% 25.0% 52.0% 67.7% 80.0%
Developed Market EQ
3.8% 21.8% 45.3% 59.1% 69.8%
North America Large Cap
1.9% 10.9% 22.6% 29.5% 34.8%
North America Small/Mid Cap
0.3% 1.9% 4.0% 5.2% 6.1%
Europe Equities
1.1% 6.1% 12.7% 16.5% 19.5%
Japan Equities
0.3% 1.8% 3.8% 4.9% 5.8%
Asian Equities
0.2% 1.1% 2.2% 2.9% 3.4%
Emerging Markets EQ
0.6% 3.2% 6.7% 8.7% 10.3%
Emerging Latin America Equities
0.1% 0.6% 1.3% 1.7% 2.0%
Emerging EMEA Equities
0.1% 0.6% 1.2% 1.6% 1.8%
Emerging Asia Equities
0.4% 2.0% 4.2% 5.5% 6.4%
Hedge Funds 8.0% 14.0% 16.0% 20.0% 20.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
April 2015 Tactical Allocations: with Alternatives
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 12.0% 8.0% 2.1% 0.1% 0.0%
Fixed I ncome 73.2% 48.9% 24.0% 5.7% 0.0%
Developed Sovereign FI
32.6% 19.8% 7.8% 2.0% 0.0%
North America
10.1% 6.3% 2.5% 0.6% 0.0%
Europe
15.0% 9.6% 4.0% 1.0% 0.0%
Asia ex Japan
0.2% 0.1% 0.0% 0.0% 0.0%
Japan
6.2% 3.0% 0.8% 0.2% 0.0%
Supranational/Agencies
1.0% 0.7% 0.3% 0.1% 0.0%
Developed Investment Grade FI
34.9% 24.7% 11.9% 3.1% 0.0%
Developed High Yield FI
3.9% 3.4% 2.9% 0.5% 0.0%
Emerging Market FI
1.9% 1.1% 1.4% 0.1% 0.0%
Emerging Market Asia FI
1.5% 1.0% 1.4% 0.1% 0.0%
Emerging Market EMEA FI
0.2% 0.1% 0.0% 0.0% 0.0%
Emerging Market LatAm FI
0.2% 0.1% 0.0% 0.0% 0.0%
Equities 6.8% 29.0% 58.0% 74.2% 80.0%
Developed Market EQ
5.9% 25.3% 50.4% 64.6% 69.5%
North America Large Cap
3.0% 12.7% 25.3% 32.4% 34.9%
North America Small/Mid Cap
0.5% 2.1% 4.0% 5.1% 5.4%
Europe Equities
1.7% 7.3% 14.9% 19.1% 20.7%
Japan Equities
0.5% 2.1% 4.3% 5.5% 5.9%
Asian Equities
0.3% 1.1% 2.0% 2.5% 2.6%
Emerging Markets EQ
0.9% 3.8% 7.6% 9.7% 10.5%
Emerging Latin America Equities
0.1% 0.5% 0.8% 0.9% 0.9%
Emerging EMEA Equities
0.2% 0.6% 1.2% 1.5% 1.6%
Emerging Asia Equities
0.6% 2.6% 5.6% 7.2% 7.9%
Hedge Funds 8.0% 14.0% 16.0% 20.0% 20.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 13
Citi Private Bank Asset Allocations: Changes from Last Month
Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)
April 2015 Strategic Allocations: Change
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 0.0% 0.0% 0.0% 0.0% 0.0%
Fixed I ncome 0.0% 0.0% 0.0% 0.0% 0.0%
Developed Sovereign FI
0.0% 0.0% 0.0% 0.0% 0.0%
North America
0.0% 0.0% 0.0% 0.0% 0.0%
Europe
0.0% 0.0% 0.0% 0.0% 0.0%
Asia ex Japan
0.0% 0.0% 0.0% 0.0% 0.0%
Japan
0.0% 0.0% 0.0% 0.0% 0.0%
Supranational/Agencies
0.0% 0.0% 0.0% 0.0% 0.0%
Developed Investment Grade FI
0.0% 0.0% 0.0% 0.0% 0.0%
Developed High Yield FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market Asia FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market EMEA FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market LatAm FI
0.0% 0.0% 0.0% 0.0% 0.0%
Equities 0.0% 0.0% 0.0% 0.0% 0.0%
Developed Market EQ
0.0% 0.0% 0.0% 0.0% 0.0%
North America Large Cap
0.0% 0.0% 0.0% 0.0% 0.0%
North America Small/Mid Cap
0.0% 0.0% 0.0% 0.0% 0.0%
Europe Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Japan Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Asian Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Markets EQ
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Latin America Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging EMEA Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Asia Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 0.0% 0.0% 0.0% 0.0% 0.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
April 2015 Tactical Allocations: Change
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 0.0% 0.0% 0.0% 0.0% 0.0%
Fixed I ncome 0.0% 0.0% 0.0% 0.0% 0.0%
Developed Sovereign FI
0.0% 0.0% 0.0% 0.0% 0.0%
North America
0.0% 0.0% 0.0% 0.0% 0.0%
Europe
0.0% 0.0% 0.0% 0.0% 0.0%
Asia ex Japan
0.0% 0.0% 0.0% 0.0% 0.0%
Japan
0.0% 0.0% 0.0% 0.0% 0.0%
Supranational/Agencies
0.0% 0.0% 0.0% 0.0% 0.0%
Developed Investment Grade FI
0.0% 0.0% 0.0% 0.0% 0.0%
Developed High Yield FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market Asia FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market EMEA FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market LatAm FI
0.0% 0.0% 0.0% 0.0% 0.0%
Equities 0.0% 0.0% 0.0% 0.0% 0.0%
Developed Market EQ
0.0% 0.0% 0.0% 0.0% 0.0%
North America Large Cap
0.0% 0.0% 0.0% 0.0% 0.0%
North America Small/Mid Cap
0.0% 0.0% 0.0% 0.0% 0.0%
Europe Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Japan Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Asian Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Markets EQ
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Latin America Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging EMEA Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Asia Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 0.0% 0.0% 0.0% 0.0% 0.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 14
Non-Illiquid Asset Allocations: Strategic and Tactical
Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC) Excluding Hedge Funds
April 2015 Strategic Allocations: Traditionals
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 12.0% 8.0% 4.0% 0.0% 0.0%
Fixed I ncome 79.0% 59.0% 33.3% 20.9% 3.3%
Developed Sovereign FI
40.1% 29.9% 16.9% 10.6% 1.7%
North America
12.0% 9.0% 5.1% 3.2% 0.5%
Europe
17.0% 12.7% 7.2% 4.5% 0.7%
Asia ex Japan
0.3% 0.2% 0.1% 0.1% 0.0%
Japan
9.9% 7.4% 4.2% 2.6% 0.4%
Supranational/Agencies
1.0% 0.7% 0.4% 0.3% 0.0%
Developed Investment Grade FI
34.2% 25.5% 14.4% 9.0% 1.4%
Developed High Yield FI
2.4% 1.8% 1.0% 0.6% 0.1%
Emerging Market FI
2.4% 1.8% 1.0% 0.6% 0.1%
Emerging Market Asia FI
1.7% 1.3% 0.7% 0.4% 0.1%
Emerging Market EMEA FI
0.3% 0.3% 0.1% 0.1% 0.0%
Emerging Market LatAm FI
0.4% 0.3% 0.2% 0.1% 0.0%
Equities 9.0% 33.0% 62.7% 79.2% 96.7%
Developed Market EQ
7.8% 28.8% 54.7% 69.0% 84.3%
North America Large Cap
3.9% 14.4% 27.3% 34.4% 42.1%
North America Small/Mid Cap
0.7% 2.5% 4.8% 6.1% 7.4%
Europe Equities
2.2% 8.1% 15.3% 19.3% 23.6%
Japan Equities
0.7% 2.4% 4.6% 5.8% 7.0%
Asian Equities
0.4% 1.4% 2.7% 3.4% 4.2%
Emerging Markets EQ
1.2% 4.2% 8.0% 10.1% 12.4%
Emerging Latin America Equities
0.2% 0.8% 1.6% 2.0% 2.4%
Emerging EMEA Equities
0.2% 0.8% 1.4% 1.8% 2.2%
Emerging Asia Equities
0.7% 2.7% 5.0% 6.4% 7.8%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
April 2015 Tactical Allocations: Traditionals
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 12.0% 8.0% 4.1% 0.1% 0.0%
Fixed I ncome 76.6% 54.9% 27.3% 14.3% 0.0%
Developed Sovereign FI
34.1% 22.2% 9.7% 4.9% 0.0%
North America
10.6% 7.1% 3.2% 1.6% 0.0%
Europe
15.7% 10.8% 5.0% 2.6% 0.0%
Asia ex Japan
0.2% 0.1% 0.1% 0.0% 0.0%
Japan
6.5% 3.4% 1.0% 0.5% 0.0%
Supranational/Agencies
1.1% 0.8% 0.4% 0.2% 0.0%
Developed Investment Grade FI
36.5% 27.8% 14.7% 7.8% 0.0%
Developed High Yield FI
4.1% 3.8% 2.4% 1.3% 0.0%
Emerging Market FI
1.9% 1.2% 0.5% 0.3% 0.0%
Emerging Market Asia FI
1.6% 1.1% 0.5% 0.3% 0.0%
Emerging Market EMEA FI
0.2% 0.1% 0.0% 0.0% 0.0%
Emerging Market LatAm FI
0.2% 0.1% 0.0% 0.0% 0.0%
Equities 11.4% 37.0% 68.7% 85.7% 100.0%
Developed Market EQ
9.9% 32.2% 59.7% 74.5% 86.9%
North America Large Cap
5.0% 16.1% 30.0% 37.4% 43.6%
North America Small/Mid Cap
0.8% 2.6% 4.7% 5.8% 6.8%
Europe Equities
2.8% 9.4% 17.6% 22.1% 25.9%
Japan Equities
0.8% 2.7% 5.1% 6.3% 7.4%
Asian Equities
0.5% 1.4% 2.3% 2.9% 3.3%
Emerging Markets EQ
1.5% 4.8% 9.0% 11.2% 13.1%
Emerging Latin America Equities
0.2% 0.6% 0.9% 1.1% 1.2%
Emerging EMEA Equities
0.3% 0.8% 1.4% 1.7% 2.0%
Emerging Asia Equities
1.0% 3.4% 6.6% 8.4% 9.9%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 15
Asset Class Performance
The Case for Diversification
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
MSCI Emerging
Markets
39.4%
BarCap US Gov 10-
Year
18.9%
MSCI Emerging
Markets
78.5%
DJ Equity REIT
Index
27.7%
BarCap US Gov 10-
Year
15.5%
DJ Equity REIT
Index
19.6%
Russell 2000 Small
Cap Index
38.8%
DJ Equity REIT
Index
26.0%
DJ Equity REIT
Index
5.9%
DJ UBS Commodity
Total Return Index
16.2%
BarCap Global Corp
-5.1%
BarCap Global Corp
HY
36.7%
Russell 2000 Small
Cap Index
26.9%
DJ Equity REIT
Index
7.5%
MSCI Emerging
Markets
18.2%
S&P 500 Large Cap
Index
32.4%
S&P 500 Large Cap
Index
13.2%
Russell 2000 Small
Cap Index
5.1%
BarCap Global Corp
HY
13.3%
BarCap Global Corp
HY
-5.9%
DJ Equity REIT
Index
28.5%
MSCI Emerging
Markets
18.9%
BarCap Global Corp
4.8%
Russell 2000 Small
Cap Index
16.3%
BarCap Global Corp
HY
4.7%
BarCap US Gov 10-
Year
8.5%
MSCI Emerging
Markets
2.6%
BarCap US Gov 10-
Year
10.4%
Russell 2000 Small
Cap Index
-33.8%
Russell 2000 Small
Cap Index
27.2%
DJ UBS Commodity
Total Return Index
16.8%
BarCap Global Corp
HY
3.0%
BarCap Global Corp
HY
16.0%
DJ Equity REIT
Index
2.7%
BarCap Global Corp
7.2%
S&P 500 Large Cap
Index
2.1%
S&P 500 Large Cap
Index
5.5%
DJ UBS Commodity
Total Return Index
-35.6%
S&P 500 Large Cap
Index
26.5%
S&P 500 Large Cap
Index
15.1%
S&P 500 Large Cap
Index
2.1%
S&P 500 Large Cap
Index
16.0%
BarCap Global Corp
0.1%
BarCap Global Corp
HY
5.5%
BarCap Global Corp
HY
1.3%
BarCap Global Corp
3.2%
S&P 500 Large Cap
Index
-37.0%
DJ UBS Commodity
Total Return Index
18.9%
BarCap Global Corp
HY
9.7%
Russell 2000 Small
Cap Index
-4.2%
BarCap Global Corp
10.9%
MSCI Emerging
Markets
-2.6%
MSCI Emerging
Markets
0.5%
BarCap Global Corp
2.2%
Russell 2000 Small
Cap Index
-1.6%
DJ Equity REIT
Index
-37.6%
BarCap Global Corp
16.6%
BarCap US Gov 10-
Year
9.4%
DJ UBS Commodity
Total Return Index
-13.3%
BarCap US Gov 10-
Year
3.8%
BarCap US Gov 10-
Year
-5.8%
Russell 2000 Small
Cap Index
0.3%
DJ UBS Commodity
Total Return Index
-4.2%
DJ Equity REIT
Index
-15.6%
MSCI Emerging
Markets
-53.3%
BarCap US Gov 10-
Year
6.9%
BarCap Global Corp
7.2%
MSCI Emerging
Markets
-18.4%
DJ UBS Commodity
Total Return Index
-1.1%
DJ UBS Commodity
Total Return Index
-9.5%
DJ UBS Commodity
Total Return Index
-10.1%
BarCap US Gov 10-
Year
2.8%
Source: Bloomberg, 25 Mar 2015
16
Brazilian Bovespa: The Bovespa Index is a gross total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Exchange. The
Bovespa Index has been divided 10 times by a factor of 10 since Jan 1, 1985: 12/02/85, 08/29/88, 04/14/89, 01/12/90, 05/28/91, 01/21/92, 01/26/93, 08/27/93, 02/10/94, and 03/03/97.
Citigroup Global Markets High Yield Market Index: A measure that tracks actual economic data relative to consensus estimates of market economists
Citigroup Global Markets High Yield Market Index: The High-Yield Market Index includes cash-pay, deferred-interest, and Rule 144A bonds with remaining maturities of at least one
year and a minimum amount outstanding of $100 million. The issuers must be domiciled in the United States or Canada for consideration in this index.
Citigroup Global Emerging Market Sovereign Bond Index: The Global Emerging Market Sovereign Bond Index (ESBI) includes Brady bonds and US dollar-denominated emerging
market sovereign debt issued in the global, Yankee, and Eurodollar markets excluding loans. The ESBI offers diversification benefits with respect to the geographical and asset class
dimensions. It comprises debt in Africa, Asia, Europe, and Latin America.
The Consumer Confidence Survey: Reflects prevailing business conditions and likely developments for the months ahead. This monthly report details consumer attitudes and buying
intentions, with data available by age, income, and region
CPI Inflation: Consumer Price Index (CPI) - The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of US inflation. The US
Department of Labor publishes the CPI every month.
Current Balance: The difference between the nation's total exports of goods, services and transfers and its total imports of them. Current account balance calculations exclude
transactions in financial assets and liabilities.
Currency Abbreviations: AUD: Australia; NZD: New Zealand; NOK: Norway; GBP: UK; EUR: Euro Zone; SEK: Sweden; CAD: Canada; CHF: Switzerland; JPY: Japan; ZAR: South
Africa; PLN: Poland; BRL: Brazil; RUB: Russia; KRW: Korea; TRY: Turkey; MXN: Mexico; CNY: China; INR: India
DJIA: Dow Jones Industrial Average - The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that
trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest US companies are performing.
DXY Index: The DXY Index represents a basket of currencies, giving a price level for the US dollar.
Event Driven: In the context of hedge funds, a style of management that combines many different types of hedge fund investing such as merger arbitrage, distressed securities and high
yield investing, in conjunction with an important "event" that is supposed to unlock firm value (like a merger announcement, earnings announcement, or a regulator decision).
Fiscal Balance: The Fiscal Balance represents the difference between General Government revenues over expenses. It includes capital expenditure, but excludes depreciation.
Global Macro: Directional Macro strategies frequently employ leverage and may trade futures, options on future contracts and foreign exchange contracts as well as trade in diversified
markets or focus on one market sector. Two types of strategies employed by directional macro managers are discretionary and systematic trading.
Industrial Production: Measures the output of the industrial sector of an economy. The industrial sector includes manufacturing, mining, and utilities.
LIBOR: London Interbank Offered Rate - A short-term interest rate often quoted as a 1,3,6-month rate for U.S. dollars.
Managed Futures: In the context of hedge funds, a style of management that focuses on short-term trading in the futures market.
Glossary
17
Glossary (Cont’d)
Mexican Bolsa: A capitalization weighted index of the leading stocks traded on the Mexican Stock Exchange. The index was developed with a base level of .78 as of October 30, 1978.
MSCI World Consumer Discretionary Price Index: An index measuring the performance of the Consumer Discretionary equities of developed countries including U.S.; a useful
benchmark for global funds.
MSCI World Free Index: An index measuring the performance of equities of developed and EM countries; a useful benchmark for global funds.
Nikkei 225 Index: Applies mainly to international equities. Price-weighted average of 225 stocks of the first section of the Tokyo Stock Exchange started on May 16, 1949. Japanese
equivalent of the US Dow.
Repo rate: A repo is a repurchase agreement. A procedure for borrowing money by selling securities to a counterparty and agreeing to buy them back later at a slightly higher price
based on a rate of interest called the repo rate.
Russell Mid-Cap Index: A market capitalization-weighted benchmark index made up of the 800 smallest US companies in the Russell 1000.
Russell Top 200 Growth Index: A market capitalization-weighted benchmark index made up of the largest 200 US companies by market cap that exhibit growth characteristics.
Russell Top 200 Value Index: A market capitalization-weighted benchmark index made up of the largest 200 US companies by market cap that exhibit value characteristics.
Russell 2000 Index: A market capitalization-weighted benchmark index made up of the 2000 smallest US companies in the Russell 3000.
S&P/ Case-Shiller US National is the broadest national measurement of home prices, with coverage going beyond the 20 MSAs that make up the composites.
S&P/Case-Shiller Composite-20 Home Price Index reflects price changes for Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle, Tampa, Boston,
Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington DC. In addition to those 10 markets.
S&P 400 Index: A market capitalization-weighted benchmark index made up of 400 securities with market values between $200 million and $5 billion
S&P 500 Index: Index of 500 widely held common stocks that measures the general performance of the market.
VIX Index: The Chicago Board Options Exchange SPX Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide
range of strikes 1st & 2nd month expirations are used until 8 day from expiration, then the 2nd and 3rd are used.
U.S. Treasuries: Interest-bearing obligations if the U.S. government issued by the U.S. Department of the Treasury as a means of borrowing money to meet government
expenditures not covered by tax revenues. There are three types of marketable Treasury securities-bills, notes and bonds.
U.S. Investment-Grade Bonds: A bond that is assigned a rating in the top four categories by commercial credit rating companies. S&P classifies investment-grade bonds as BBB or
higher, and Moody's classifies investment grade bonds as BAA or higher. Related: High-yield bond.
U.S. High Yield Bonds: A bond with a speculative credit rating of BB (S&P) or BA (Moody's) or lower. Junk or high-yield bonds offer investors higher yields than bonds of financially
sound companies. Two agencies, Standard & Poors and Moody's Investor Services, provide the rating systems for companies' credit.
Wilshire 5000 Index: Measures the performance of all US equity securities with readily available price data. Over 5,000 capitalization weighted security returns are used to adhust the
index. The Wilshire 5000 base is its 12/31/1980 capitalization of $1,404.596 billion.
18
Glossary (Agency Ratings)
Moody's
Investment grade
Aaa: Moody judges obligations rated Aaa to be the highest quality,
with the "smallest degree of risk".
Aa1, Aa2, Aa3: Moody judges obligations rated Aa to be high
quality, with "very low credit risk", but "their susceptibility to long-
term risks appears somewhat greater".
A1, A2, A3: Moody judges obligations rated A as "upper-medium
grade", subject to "low credit risk", but that have elements "present
that suggest a susceptibility to impairment over the long term".
Baa1, Baa2, Baa3: Moody judges obligations rated Baa to be
"moderate credit risk". They are considered medium-grade and as
such "protective elements may be lacking or may be
characteristically unreliable".
Speculative grade
Ba1, Ba2, Ba3: Moody judges obligations rated Ba to have
"questionable credit quality
B1, B2, B3: Moody judges obligations rated B as speculative and
"subject to high credit risk", and have "generally poor credit
quality."
Caa1, Caa2, Caa3: Moody judges obligations rated Caa as of "poor
standing and are subject to very high credit risk", and have
"extremely poor credit quality. Such banks may be in default..."
Ca: Moody judges obligations rated Ca as "highly speculative" and
are "usually in default on their deposit obligations".
C: Moody judges obligations rated C as "the lowest rated class of
bonds and are typically in default," and "potential recovery values
are low".
S&P
Investment Grade
AAA: the best quality borrowers, reliable and stable
(many of them governments)
AA: quality borrowers, a bit higher risk than AAA
A: economic situation can affect finance
BBB: medium class borrowers, which are satisfactory
at the moment
Non-Investment Grade
BB: more prone to changes in the economy
B: financial situation varies noticeably
CCC: currently vulnerable and dependent on
favorable economic conditions to meet its
commitments
CC: highly vulnerable, very speculative bonds
C: highly vulnerable, perhaps in bankruptcy or in
arrears but still continuing to pay out on obligations
CI: past due on interest
R: under regulatory supervision due to its financial
situation
SD: has selectively defaulted on some obligations
D: has defaulted on obligations and S&P believes that
it will generally default on most or all obligations
NR: not rated
Fitch
Investment grade
AAA: the best quality companies, reliable
and stable
AA: quality companies, a bit higher risk
than AAA
A: economic situation can affect finance
BBB: medium class companies, which are
satisfactory at the moment
Non-investment grade
BB: more prone to changes in the economy
B: financial situation varies noticeably
CCC: currently vulnerable and dependent
on favorable economic conditions to meet
its commitments
CC: highly vulnerable, very speculative
bonds
C: highly vulnerable, perhaps in bankruptcy
or in arrears but still continuing to pay out
on obligations
D: has defaulted on obligations and Fitch
believes that it will generally default on
most or all obligations
NR: not publicly rated
19
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doc_658257095.pdf
This month Citi economists made mostly minor changes
to its outlook, with global growth now forecast at 2.9% in
2015. On a country basis, they downgraded 2015 growth
forecasts for the US, UK, Korea and Australia, with larger
cuts for South Africa, Turkey and Venezuela. For 2016,
they slightly upgraded the 2016 growth forecasts for the
euro area and Japan, although they left global growth for
2016 unchanged at 3.4% .
Investment Strategy Insights
INVESTMENT AND INSURANCE PRODUCTS: NOT FDIC INSURED – NOT CDIC INSURED – NOT GOVERNMENT
INSURED – NO BANK GUARANTEE – MAY LOSE VALUE
Renato Grandmont
[email protected]
(212) 559 1766
Charles Iragui
[email protected]
(212) 559 6485
Enrique Alvarez
[email protected]
(212) 559 4222
David Nieuchowicz
[email protected]
(212) 559 8203
Nelson Sotomayor
[email protected]
(212) 559 8601
Base Case
April 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 2
Forecast Summary
Global Economic Forecasts and Changes to Our Views
Global Outlook
? This month Citi economists made mostly minor changes
to its outlook, with global growth now forecast at 2.9% in
2015. On a country basis, they downgraded 2015 growth
forecasts for the US, UK, Korea and Australia, with larger
cuts for South Africa, Turkey and Venezuela. For 2016,
they slightly upgraded the 2016 growth forecasts for the
euro area and Japan, although they left global growth for
2016 unchanged at 3.4% .
United States
? Rate Forecast: 10Y forecast for 4Q15 is 2.45% and for
2Q16 is 2.55%.
? Rate Hike Timing: We expect the Fed to begin hiking
rates in December 2015, and to leave the policy rate at
0.50% at yearend.
? Gasoline Price/Retail Benefit: Consumer gains from the
40% drop in gasoline prices since last summer will likely
drive 4% real consumer spending in 1H15.
? Inflation: We estimate underlying inflation likely will stay
near 1.5%, below the Fed’s 2% target through 2016. This
implies a Fed program of slow hikes, reaching 1.00% only
in 3Q16.
Eurozone
? Asset Friendly Policy Mix: Policymakers see fiscal
austerity as less important than structural reforms in those
member states with a deficit below 3% of GDP.
? Positive v Negative Risks to Forecast: Assuming the 4-
month extension for Greece holds, the crisis in Ukraine
does not escalate, Citi expects the trend of looser bank
lending standards to continue, driven by cheaper funding
costs and increased competition. This could signal some
upside risks to our forecast in 2015-16.
Japan
? Export-led Growth: A resilient US economy and a pick-
up in the global high-technology cycle appear to be
boosting Japan’s exports, leading to 25% profit growth.
? New QE: We continue to expect the BoJ will implement
additional easing measures around July this year.
China
? We expect the economy will slow as credit stimulus fades,
leading to monetary easing (rate cut and lowering of the
required reserve ratio, or RRR).
? The trend of sustained currency appreciation versus the
USD since 2005 is probably over.
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 3
Macroeconomic View
Developed Markets in Economic Recovery
Global GDP and Inflation Rates
2014F 2015F 2016F 2014F 2015F 2016F
Global 2.7% 2.9% 3.4% 2.6% 2.0% 2.7%
Based on PPP 3.4% 3.4% 4.0% 3.4% 3.1% 3.5%
I ndustrial Countries 1.7% 2.2% 2.5% 1.4% 0.3% 1.6%
United States 2.4% 3.1% 3.0% 1.3% 0.3% 1.8%
Japan 0.0% 1.0% 2.2% 2.7% 0.4% 0.9%
Euro Area 0.9% 1.5% 2.0% 0.4% 0.2% 1.5%
United Kingdom 2.5% 2.8% 3.1% 1.5% 0.3% 1.5%
Emerging Markets 4.2% 3.8% 4.6% 4.4% 4.6% 4.3%
China 7.4% 6.9% 6.7% 2.0% 1.5% 1.9%
India 7.4% 8.1% 8.4% 6.5% 5.0% 5.0%
Korea 3.3% 3.1% 3.5% 1.3% 1.2% 2.3%
Russia 0.5% -3.0% 1.5% 7.8% 15.1% 7.3%
Brazil 0.0% -0.8% 0.7% 6.3% 8.1% 6.1%
Mexico 2.1% 3.0% 3.9% 4.0% 3.3% 3.6%
Source: Citi Research, 25 March 2015
GDP Growth CPI I nflation
-15
-12
-9
-6
-3
0
3
6
9
Jun 1989 Jun 1994 Jun 1999 Jun 2004 Jun 2009 Jun 2014
-5
-4
-3
-2
-1
0
1
2
3
Financial Condit ions Index (Left ) Industrial Product ion (Right)
Source: Citi as of 24 September 2014. Note: Industrial Production is lagged 9 months.
Financial Conditions Index and Industrial Production
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
The investor should not base its decision to enter into a trade solely on the basis of the forecasts.
? Growth Prospects: We expect global growth to accelerate mildly this year
and next. Citi economists have slightly revised downward global growth
expectations for 2015 but upgraded Eurozone and Japanese 2016 growth.
? Emerging Markets (EM): Lower commodities prices will hamper growth in
exporting nations, causing a deterioration to many fiscal accounts. Trade
growth has remained muted even as DM growth has accelerated, dragging
forecast 2015 growth lower than 2014. Likely Fed rate hikes may challenge
EM credit markets and sovereign borrowing.
? Policy Questions: Despite a weakening euro, our economists doubt the
ECB’s QE program will be enough to break the economy out of low-flation
and see the ECB scaling up their QE program over time. The BoJ should
also expand QE further around midyear. We should see the first Fed hike
in late-2015, and we expect the first BoE hike in early 2016. The UK and
US tightening should be more gradual than historical norms.
-3.0
-1.5
0.0
1.5
3.0
4.5
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
Contributions to Global Growth
(in percentage points)
Emerging Markets Developed Markets
Source: IMF, CIRA, 25 March 2015
Forecasts
4
Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.
Bloomberg charts as of 25 March 2015
Fixed Income
Low-rate World Remains Afoot
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0 5 10 15 20 25 30
3/ 25/2015 1-Week 1-Month YTD 1-Year
Source: Bloomberg
US Yield Curve
(in percent and years)
Short and Long Rates (Forecasts)
Current 4Q15F 2Q16F Current 4Q15F 2Q16F
United States 0.25 0.50 0.75 1.88 2.45 2.55
Japan 0.10 0.10 0.10 0.33 0.45 0.50
Euro Area 0.05 0.05 0.05 0.23 0.20 0.30
Australia 2.25 1.75 1.75 2.32 2.65 2.85
United Kingdom 0.50 0.50 1.00 1.48 1.30 1.75
China 2.50 2.00 2.00 3.53 NA 3.99
India 7.50 7.25 7.00 7.82 NA 7.50
Korea NA NA NA 2.18 NA NA
Russia 14.00 12.00 11.00 12.02 NA NA
Brazil 12.75 12.25 11.50 13.60 NA 12.58
Mexico 3.00 3.50 3.75 5.95 NA 6.65
Policy Rates (quarter end) Long Rates*
Note: Developed Markets long rates are period averages. Emerging Markets short rates are for
1Q16 and long rate forecasts are full-year averages. Long Euro Area rates are German yields.
Source: Citi Research, 25 March 2015
0
5
10
15
20
Mar 90 Mar 95 Mar 00 Mar 05 Mar 10 Mar 15
Credit Bond Yields
(in percent)
High Yield BBB Yield US 10-Year Bond EM Sovereign Yield
Source: Bloomberg
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
The investor should not base its decision to enter into a trade solely on the basis of the forecasts.
? Yield Curve Flattening: The trend towards a flatter US Treasury curve
should remain as one of the key features of the rates picture in 2015.
Shorter-duration yields should rise more rapidly as the date of Fed
movement on policy rates nears, while low DM rates/low US inflation keep
the long-end from rising too steeply.
? Rate Hikes: Citi anticipates that the Fed will increase the funds rates in
December of 2015, though this target could be moved closer on good US
economic news. Fed hiking cycle will likely occur at a gradual pace, with
small rate increases offered.
? Corporate Credit: Potential defaults and downgrades within the Energy
sector of High Yield corporate credit are the main risks ahead. Citi expects
US and European HY to return 4% to 4.5% in 2015.
? Emerging Markets: EM credit should remain hampered by a stronger US
dollar and weak commodities prices. Politics across EM return as a risk.
5
Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.
Bloomberg charts as of 25 March 2015
Equities
Focused on US Growth, Earnings Recovery and EM Risks
600
800
1000
1200
1400
1600
1800
2000
2200
5
15
25
35
45
55
65
75
85
Mar 05 Mar 07 Mar 09 Mar 11 Mar 13 Mar 15
S&P 500 Index and Volatility
VI X Index (left scale) S&P 500 Index (right scale)
Source: Bloomberg
-60
-30
0
30
60
90
-1.2
-0.6
0.0
0.6
1.2
1.8
Jan 90 Jan 95 Jan 00 Jan 05 Jan 10 Jan 15
US Panic/Euphoria Model (Other PE)
S&P 500 12-Month Forward Return (right scale) The Other PE (right scale)
Euphoria
Panic
Source: Citi Research as of 26 March2015
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events. The investor should not base its
decision to enter into a trade solely on the basis of the forecasts.
Consensus EPS Estimates & Citi Index Targets
P/E EPS YoY % Div Yld
3/25/15 15E 15E 15E Levels Returns
Global (MSCI World) 494 16.4 4.2 2.5 525 6.3%
Developed 17.1 3.4 2.5
Emerging 976 12.0 9.3 2.8 1180 20.9%
US (S&P 500) 2,061 17.8 2.4 2.0 2,200 6.7%
Europe (Euro Stoxx) 377 16.7 10.9 3.1 450 19.4%
UK (FTSE 100) 6,991 15.8 -6.4 3.9 7,700 10.1%
Japan (Topix) 1,592 13.2 7.9 3.1 1,650 3.6%
China 69 10.0 24.4 1.6 78 12.5%
India 28,112 15.9 7.2 3.2 33,000 17.4%
Brazil (Bovespa) 51,858 19.0 30.4 1.9 59,000 13.8%
Mexico (Bolsa) 43,631 15.8 21.2 2.9 50,500 15.7%
Russia 882 13.6 39.9 3.9 NA N/A
End 2015 Target
P/E, EPS YoY% and Div Yld based on MSCI Indexes. 15E denotes 2015 Estimates. Source: MSCI,
Citi Research, 5 March 2015.
? Earnings Outlook: The outlook for earnings is positive globally. US
corporate earnings will likely continue to grow in 2015, even as earnings
have already hit record levels. Europe, EM and Japan earnings will keep
rebounding in 2015.
? US Outlook: Citi estimates US large caps and small caps will finish 2015
at new highs, primarily contingent on earnings expansion. The near-term
outlook is clouded, with prices not far from mid- and yearend targets.
? Emerging Markets: We would focus on countries with exposure to US
growth, strong fiscal / account balances, robust GDP expansion and solid
expected earnings growth in 2015. US rate rises, a weak yen (and yuan)
and sluggish DM imports are weighing on earnings and cheap valuations.
? Japan/Europe: Central bank liquidity will likely support Eurozone and
Japan earnings and equity prices. Politics (Greece) and geopolitics
(Russia) are the principal risks in Europe; policy mistakes in Japan.
The 12-Month Forward Return indicates the 1-year return
recorded from a specified date.
6
Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.
Bloomberg charts as of 25 March 2015
Currencies
From Strengthening Fundamentals to Policy Normalization to Loosening Policies
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
Currency risk: One currency may decline in value versus another. The value of a multicurrency portfolio will fluctuate with exchange rates.
65
85
105
125
145
165
0
400
800
1200
1600
2000
Mar 75 Mar 85 Mar 95 Mar 05 Mar 15
US Dollar Index versus Gold Price
Gold Price (LHS, US dollars) Dollar Index (RHS) EM Currency Index (RHS)
Source: Bloomberg
70
90
110
130
150
0.8
1.0
1.2
1.4
1.6
Mar 95 Mar 00 Mar 05 Mar 10 Mar 15
DM Exchange Rates
(USD/EUR; JPY/USD)
Euro Yen
Source: Bloomberg
? USD Strengths: Given our expectations of significant monetary easing in
most DM (and many EM), we expect to see more appreciation for the dollar
in 2015 and 2016. Looking at USD price movements historically, the typical
bullish USD cycle lasts five to six years and the total move higher is on
average about 40%. The current 4-year USD appreciation cycle has seen
the USD strengthen by 24%, so by historical standards this suggests the
USD has room to appreciate further.
? EUR/USD: As the ECB embarks upon QE and the Fed begins to hike
policy rates (likely in late 2015), the euro should weaken further. We see
the euro at parity to the dollar by the end of 2015.
? Emerging Markets: EM currencies are supported by carry trades and the
lack of local quantitative easing programs, so Citi strategists believe EM
currencies, though likely headed lower, may fall less against USD than
most DM currencies.
Exchange Rate Forecasts
Spot 2015 YE 2016 YE
Euro 1.10 0.93 0.95
Japanese yen 120 130 134
Australian Dollar 0.79 0.70 0.70
Swiss Franc 0.96 1.18 1.16
British Pound 1.49 1.37 1.38
Chinese Renminbi 6.21 6.30 6.30
Indian Rupee 62.3 65.0 64.6
Korean Won 1,101 1,179 1,147
Russian Ruble 57.1 70.1 68.0
Brazilian Real 3.16 3.40 3.23
Mexican Peso 14.9 15.0 14.3
Source: Citi Research as of 20 March 2015. Spot price as of 25 Mar 2015.
Versus US Dollar
7
Charts are for illustrative purposes only. Refer to Important Information at the end of this presentation.
Bloomberg charts as of 25 March 2015
Commodities
Reacting to Global Demand Questions
0.0
1.0
2.0
3.0
4.0
5.0
Mar 05 Mar 07 Mar 09 Mar 11 Mar 13 Mar 15
Key Commodity Prices
(rebased to 1)
Oil Gold Corn Copper
Source: Bloomberg
All forecasts are expressions of opinion and are subject to change without notice and are not intended to
be a guarantee of future events. The investor should not base its decision to enter into a trade solely on
the basis of the forecasts. These are indicative market prices and cannot be directly invested in.
0
4
8
12
16
20
Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15
US Europe Japan
Global Natural Gas Prices
(in US$ per million BTU)
Source: World Bank as of 25 March 2015
? Energy: Oversupply in the oil market has pushed oil prices below $50 (an
over 50% fall since the recent peak in June 2014). We believe US supply
will continue to increase given the industry’s healthy productivity gains,
heightened focus on more prolific drilling areas and trend to switch from
vertical to horizontal oil rigs.
? Precious Metals: Concerns about the euro, coupled with low interest rates
and quantitative easing in major economies have supported the price of
gold. We are neutral on gold and see a steady price through 2Q16.
? Industrial Metals: Slowing supply growth bodes well for copper, especially
in a strengthening global economy.
? Agriculture: Citi Research expects grain supplies to remain high. Barring a
weather or geopolitical event, strong demand matching supply should keep
prices steady.
Spot 4Q15 2Q16 5Yr Cyclical
Energy
WTI Crude USD/bl 47.5 57.0 56.0 70.0
Brent Crude USD/bl 56.1 65.0 65.0 75.0
Natural Gas (USD/MMBtu) 2.75 2.80 2.90 5.50
Base Metals
LME Aluminium USD/mt 1,791 2,000 2,090 2,200
LME Copper USD/mt 6,145 7,100 7,600 6,200
LME Nickel USD/mt 13,950 22,500 25,000 21,000
Bulk Commodities
Iron Ore Spot (TSI) USD/mt 58.60 58.00 62.00 81.00
Precious Metals
Gold USD/oz 1,197 1,240 1,250 1,050
Silver USD/oz 17.03 16.80 16.90 16.50
Platinum USD/oz 1,148 1,410 1,500 1,763
Agriculture
Corn (USd/bu) 394 385 425 N/A
Wheat (USd/bu) 520 540 560 N/A
Source: Citi Research 25 March 2015. Estimates are period averages.
Citi Commodity Price Forecasts
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 8
Global GDP Rates
2014F 2015F 2016F
Global 2.7% 2.9% 3.4%
Industrial Countries 1.7% 2.2% 2.5%
United States 2.4% 3.1% 3.0%
Japan 0.0% 1.0% 2.2%
Euro Area 0.9% 1.5% 2.0%
United Kingdom 2.5% 2.8% 3.1%
Emerging Markets 4.2% 3.8% 4.6%
China 7.4% 6.9% 6.7%
India 7.4% 8.1% 8.4%
Russia 0.5% -3.0% 1.5%
Brazil 0.0% -0.8% 0.7%
Mexico 2.1% 3.0% 3.9%
Source: Citi Research, 25 March 2015
Policy Rates Forecasts
Current 2Q15 3Q15 4Q15 1Q16 2Q16
United States 0.25 0.25 0.25 0.50 0.50 0.75
Japan 0.10 0.10 0.10 0.10 0.10 0.10
Euro Area 0.05 0.05 0.05 0.05 0.05 0.05
United Kingdom 0.50 0.50 0.50 0.50 0.75 1.00
Source: Citi Research, 25 March 2015
Citi House View Summary
All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.
The investor should not base its decision to enter into a trade solely on the basis of the forecasts.
Gold
Equities
Cash
Fixed Income
Overweight Neutral
Underweight Overweight
Alternatives
Neutral
CPB Asset Allocation
1. US
2. Europe: Core, Periphery
and UK
3. Japan
4. Emerging Markets
5. Developed Asia ex-Japan
1. High Yield
2. Supranational / Agencies
3. Corporate High Grade
(focus on 7- to 10-year
bonds)
4. Emerging Markets
5. Inflation Linked
6. Developed Sovereign
(ranking: US, Japan,
Europe)
Citi Research Economic Outlook
Our economists forecast below trend global GDP growth in 2015, US growth
acceleration and European QE. Removal of accommodative policy in the US and UK
and decline of EM macro advantages are significant challenges. New Eurozone and
Japan QE provides support.
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 9
Citi Private Bank Asset Allocation
Strategic Asset Allocation Pies
Adaptive Valuation Strategies (AVS)
Source: Citi Private Bank's Global
Investment Committee, March 2015
Strategic Asset Allocation Commentary
? Adaptive Valuation Strategies (AVS), our proprietary
strategic asset allocation methodology, uses a valuation-
driven forecasting method and employs a risk
measurement framework that draws on historical
performance metrics to set allocation levels.
? Changes to the Strategic Asset Allocation are
implemented annually in the beginning of each calendar
year.
Cash: 12%
Fixed Income: 79%
Equit ies: 9%
Hedge Funds: 0%
Precious Metals: 0%
Level 1
Seeks liquidity management and
capital preservation
Cash: 8%
Fixed Income: 59%
Equities: 33%
Hedge Funds: 0%
Precious Metals: 0%
Level 2
Seeks income generation and
capital preservation
Cash: 0%
Fixed Income: 21%
Equities: 79%
Hedge Funds: 0%
Precious Metals: 0%
Level 3
Seeks modest capital appreciation
and, secondly, capital
Cash: 0%
Fixed Income: 21%
Equities: 79%
Hedge Funds: 0%
Precious Metals: 0%
Level 4
Seeks long-term growth of capital
with moderate volatility
Cash: 0%
Fixed Income: 3%
Equities: 97%
Hedge Funds: 0%
Precious Metals: 0%
Level 5
Seeks maximum long-term growth
of capital
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 10
Citi Private Bank Asset Allocation
Tactical Asset Allocation Pies
Source: Citi Private Bank's Global
Investment Committee, March 2015
Global Investment Committee (GIC)
Tactical Asset Allocation Commentary
? The Global Investment Committee (GIC) adds a monthly
tactical under/overweight overlay to the strategic
allocation recommendation. The GIC incorporates
quantitative and qualitative inputs, such as economic
data, forecasts and observed market trends.
? Over the last year and a half, the GIC has had an
overweight exposure to risky assets: an overweight to
equities (focus on DM; small EM equity overweight) and
an underweight to fixed income (strong underweight to
DM sovereign debt; small overweight to riskier HY).
Cash: 12%
Fixed Income: 77%
Equit ies: 11%
Hedge Funds: 0%
Precious Metals: 0%
Level 1
Seeks liquidity management and
capital preservation
Cash: 8%
Fixed Income: 55%
Equities: 37%
Hedge Funds: 0%
Precious Metals: 0%
Level 2
Seeks income generation and
capital preservation
Cash: 0%
Fixed Income: 14%
Equities: 86%
Hedge Funds: 0%
Precious Metals: 0%
Level 3
Seeks modest capital appreciation
and, secondly, capital preservation
Cash: 0%
Fixed Income: 14%
Equities: 86%
Hedge Funds: 0%
Precious Metals: 0%
Level 4
Seeks long-term growth of capital
with moderate volatility
Cash: 0%
Fixed Income: 0%
Equities: 100%
Hedge Funds: 0%
Precious Metals: 0%
Level 5
Seeks maximum long-term growth
of capital
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 11
Citi Private Bank Asset Allocations: Our Active Stance
Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)
Our Active Tactical Stance on Asset Allocation
? Tilt Toward Risk: overweight equities, underweight to fixed
income. A slight overweight to cash leaves allocation to
deploy.
? Underweight to High Grade corporate debt, overweight
High Yield (HY) bonds (US and especially European).
? Large underweight to developed markets (DM) sovereign
debt and small underweight to emerging markets (EM)
debt.
? Overweight DM equities (Europe large and small/mid cap,
UK, US large, Japan). Small overweight EM North Asia
equities (China, Taiwan, India). Underweight Brazil and
Turkey. Neutral US SMID.
Change to Tactical Asset Allocation
? Reduce overweight to Spain (-0.2%) and reduce Mexico
(-0.2%) from overweight to neutral.
? Increase overweight to broad Europe (+0.4%, new
overweight to Nordic countries).
? Increase exposure to EM Asia local bonds (+0.3%),
funded by decrease to EM Europe and LatAm (-0.3%).
April 2015 Over/Underweights: with Alternatives
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 0.0% 0.0% 0.1% 0.1% 0.0%
Fixed I ncome -2.4% -4.0% -6.1% -6.6% 0.0%
Developed Sovereign FI
-5.8% -7.1% -6.3% -4.3% 0.0%
North America
-1.4% -1.8% -1.7% -1.2% 0.0%
Europe
-1.2% -1.8% -1.9% -1.6% 0.0%
Asia ex Japan
-0.1% -0.1% -0.1% 0.0% 0.0%
Japan
-3.2% -3.6% -2.6% -1.3% 0.0%
Supranational/Agencies
0.1% 0.1% 0.0% -0.1% 0.0%
Developed Investment Grade FI
2.2% 1.8% -0.1% -2.2% 0.0%
Developed High Yield FI
1.6% 1.8% 1.0% 0.2% 0.0%
Emerging Market FI
-0.4% -0.5% -0.7% -0.3% 0.0%
Emerging Market Asia FI
-0.1% -0.1% -0.1% -0.2% 0.0%
Emerging Market EMEA FI
-0.2% -0.2% -0.3% -0.1% 0.0%
Emerging Market LatAm FI
-0.2% -0.2% -0.3% -0.1% 0.0%
Equities 2.4% 4.0% 6.0% 6.5% 0.0%
Developed Market EQ
2.1% 3.4% 5.1% 5.5% -0.2%
North America Large Cap
1.0% 1.8% 2.7% 2.9% 0.1%
North America Small/Mid Cap
0.2% 0.2% 0.0% -0.1% -0.7%
Europe Equities
0.6% 1.2% 2.2% 2.6% 1.2%
Japan Equities
0.2% 0.3% 0.5% 0.6% 0.1%
Asian Equities
0.1% -0.0% -0.3% -0.4% -0.8%
Emerging Markets EQ
0.3% 0.6% 0.9% 1.0% 0.2%
Emerging Latin America Equities
0.0% -0.1% -0.5% -0.7% -1.0%
Emerging EMEA Equities
0.0% 0.0% 0.0% 0.0% -0.2%
Emerging Asia Equities
0.2% 0.6% 1.4% 1.8% 1.5%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 0.0% 0.0% 0.0% 0.0% 0.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 12
Citi Private Bank Asset Allocations: Strategic and Tactical
Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)
April 2015 Strategic Allocations: with Alternatives
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 12.0% 8.0% 2.0% 0.0% 0.0%
Fixed I ncome 75.6% 53.0% 30.0% 12.3% 0.0%
Developed Sovereign FI
38.4% 26.9% 14.1% 6.2% 0.0%
North America
11.5% 8.1% 4.2% 1.9% 0.0%
Europe
16.3% 11.4% 6.0% 2.6% 0.0%
Asia ex Japan
0.3% 0.2% 0.1% 0.0% 0.0%
Japan
9.4% 6.6% 3.5% 1.5% 0.0%
Supranational/Agencies
0.9% 0.6% 0.3% 0.2% 0.0%
Developed Investment Grade FI
32.7% 22.9% 12.0% 5.3% 0.0%
Developed High Yield FI
2.3% 1.6% 1.9% 0.4% 0.0%
Emerging Market FI
2.3% 1.6% 2.1% 0.4% 0.0%
Emerging Market Asia FI
1.6% 1.1% 1.5% 0.3% 0.0%
Emerging Market EMEA FI
0.3% 0.2% 0.3% 0.1% 0.0%
Emerging Market LatAm FI
0.3% 0.2% 0.3% 0.1% 0.0%
Equities 4.4% 25.0% 52.0% 67.7% 80.0%
Developed Market EQ
3.8% 21.8% 45.3% 59.1% 69.8%
North America Large Cap
1.9% 10.9% 22.6% 29.5% 34.8%
North America Small/Mid Cap
0.3% 1.9% 4.0% 5.2% 6.1%
Europe Equities
1.1% 6.1% 12.7% 16.5% 19.5%
Japan Equities
0.3% 1.8% 3.8% 4.9% 5.8%
Asian Equities
0.2% 1.1% 2.2% 2.9% 3.4%
Emerging Markets EQ
0.6% 3.2% 6.7% 8.7% 10.3%
Emerging Latin America Equities
0.1% 0.6% 1.3% 1.7% 2.0%
Emerging EMEA Equities
0.1% 0.6% 1.2% 1.6% 1.8%
Emerging Asia Equities
0.4% 2.0% 4.2% 5.5% 6.4%
Hedge Funds 8.0% 14.0% 16.0% 20.0% 20.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
April 2015 Tactical Allocations: with Alternatives
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 12.0% 8.0% 2.1% 0.1% 0.0%
Fixed I ncome 73.2% 48.9% 24.0% 5.7% 0.0%
Developed Sovereign FI
32.6% 19.8% 7.8% 2.0% 0.0%
North America
10.1% 6.3% 2.5% 0.6% 0.0%
Europe
15.0% 9.6% 4.0% 1.0% 0.0%
Asia ex Japan
0.2% 0.1% 0.0% 0.0% 0.0%
Japan
6.2% 3.0% 0.8% 0.2% 0.0%
Supranational/Agencies
1.0% 0.7% 0.3% 0.1% 0.0%
Developed Investment Grade FI
34.9% 24.7% 11.9% 3.1% 0.0%
Developed High Yield FI
3.9% 3.4% 2.9% 0.5% 0.0%
Emerging Market FI
1.9% 1.1% 1.4% 0.1% 0.0%
Emerging Market Asia FI
1.5% 1.0% 1.4% 0.1% 0.0%
Emerging Market EMEA FI
0.2% 0.1% 0.0% 0.0% 0.0%
Emerging Market LatAm FI
0.2% 0.1% 0.0% 0.0% 0.0%
Equities 6.8% 29.0% 58.0% 74.2% 80.0%
Developed Market EQ
5.9% 25.3% 50.4% 64.6% 69.5%
North America Large Cap
3.0% 12.7% 25.3% 32.4% 34.9%
North America Small/Mid Cap
0.5% 2.1% 4.0% 5.1% 5.4%
Europe Equities
1.7% 7.3% 14.9% 19.1% 20.7%
Japan Equities
0.5% 2.1% 4.3% 5.5% 5.9%
Asian Equities
0.3% 1.1% 2.0% 2.5% 2.6%
Emerging Markets EQ
0.9% 3.8% 7.6% 9.7% 10.5%
Emerging Latin America Equities
0.1% 0.5% 0.8% 0.9% 0.9%
Emerging EMEA Equities
0.2% 0.6% 1.2% 1.5% 1.6%
Emerging Asia Equities
0.6% 2.6% 5.6% 7.2% 7.9%
Hedge Funds 8.0% 14.0% 16.0% 20.0% 20.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 13
Citi Private Bank Asset Allocations: Changes from Last Month
Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC)
April 2015 Strategic Allocations: Change
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 0.0% 0.0% 0.0% 0.0% 0.0%
Fixed I ncome 0.0% 0.0% 0.0% 0.0% 0.0%
Developed Sovereign FI
0.0% 0.0% 0.0% 0.0% 0.0%
North America
0.0% 0.0% 0.0% 0.0% 0.0%
Europe
0.0% 0.0% 0.0% 0.0% 0.0%
Asia ex Japan
0.0% 0.0% 0.0% 0.0% 0.0%
Japan
0.0% 0.0% 0.0% 0.0% 0.0%
Supranational/Agencies
0.0% 0.0% 0.0% 0.0% 0.0%
Developed Investment Grade FI
0.0% 0.0% 0.0% 0.0% 0.0%
Developed High Yield FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market Asia FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market EMEA FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market LatAm FI
0.0% 0.0% 0.0% 0.0% 0.0%
Equities 0.0% 0.0% 0.0% 0.0% 0.0%
Developed Market EQ
0.0% 0.0% 0.0% 0.0% 0.0%
North America Large Cap
0.0% 0.0% 0.0% 0.0% 0.0%
North America Small/Mid Cap
0.0% 0.0% 0.0% 0.0% 0.0%
Europe Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Japan Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Asian Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Markets EQ
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Latin America Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging EMEA Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Asia Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 0.0% 0.0% 0.0% 0.0% 0.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
April 2015 Tactical Allocations: Change
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 0.0% 0.0% 0.0% 0.0% 0.0%
Fixed I ncome 0.0% 0.0% 0.0% 0.0% 0.0%
Developed Sovereign FI
0.0% 0.0% 0.0% 0.0% 0.0%
North America
0.0% 0.0% 0.0% 0.0% 0.0%
Europe
0.0% 0.0% 0.0% 0.0% 0.0%
Asia ex Japan
0.0% 0.0% 0.0% 0.0% 0.0%
Japan
0.0% 0.0% 0.0% 0.0% 0.0%
Supranational/Agencies
0.0% 0.0% 0.0% 0.0% 0.0%
Developed Investment Grade FI
0.0% 0.0% 0.0% 0.0% 0.0%
Developed High Yield FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market Asia FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market EMEA FI
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Market LatAm FI
0.0% 0.0% 0.0% 0.0% 0.0%
Equities 0.0% 0.0% 0.0% 0.0% 0.0%
Developed Market EQ
0.0% 0.0% 0.0% 0.0% 0.0%
North America Large Cap
0.0% 0.0% 0.0% 0.0% 0.0%
North America Small/Mid Cap
0.0% 0.0% 0.0% 0.0% 0.0%
Europe Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Japan Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Asian Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Markets EQ
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Latin America Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging EMEA Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Asia Equities
0.0% 0.0% 0.0% 0.0% 0.0%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 0.0% 0.0% 0.0% 0.0% 0.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 14
Non-Illiquid Asset Allocations: Strategic and Tactical
Adaptive Valuation Strategies (AVS) and Global Investment Committee (GIC) Excluding Hedge Funds
April 2015 Strategic Allocations: Traditionals
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 12.0% 8.0% 4.0% 0.0% 0.0%
Fixed I ncome 79.0% 59.0% 33.3% 20.9% 3.3%
Developed Sovereign FI
40.1% 29.9% 16.9% 10.6% 1.7%
North America
12.0% 9.0% 5.1% 3.2% 0.5%
Europe
17.0% 12.7% 7.2% 4.5% 0.7%
Asia ex Japan
0.3% 0.2% 0.1% 0.1% 0.0%
Japan
9.9% 7.4% 4.2% 2.6% 0.4%
Supranational/Agencies
1.0% 0.7% 0.4% 0.3% 0.0%
Developed Investment Grade FI
34.2% 25.5% 14.4% 9.0% 1.4%
Developed High Yield FI
2.4% 1.8% 1.0% 0.6% 0.1%
Emerging Market FI
2.4% 1.8% 1.0% 0.6% 0.1%
Emerging Market Asia FI
1.7% 1.3% 0.7% 0.4% 0.1%
Emerging Market EMEA FI
0.3% 0.3% 0.1% 0.1% 0.0%
Emerging Market LatAm FI
0.4% 0.3% 0.2% 0.1% 0.0%
Equities 9.0% 33.0% 62.7% 79.2% 96.7%
Developed Market EQ
7.8% 28.8% 54.7% 69.0% 84.3%
North America Large Cap
3.9% 14.4% 27.3% 34.4% 42.1%
North America Small/Mid Cap
0.7% 2.5% 4.8% 6.1% 7.4%
Europe Equities
2.2% 8.1% 15.3% 19.3% 23.6%
Japan Equities
0.7% 2.4% 4.6% 5.8% 7.0%
Asian Equities
0.4% 1.4% 2.7% 3.4% 4.2%
Emerging Markets EQ
1.2% 4.2% 8.0% 10.1% 12.4%
Emerging Latin America Equities
0.2% 0.8% 1.6% 2.0% 2.4%
Emerging EMEA Equities
0.2% 0.8% 1.4% 1.8% 2.2%
Emerging Asia Equities
0.7% 2.7% 5.0% 6.4% 7.8%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
April 2015 Tactical Allocations: Traditionals
Level 1 Level 2 Level 3 Level 4 Level 5
Cash 12.0% 8.0% 4.1% 0.1% 0.0%
Fixed I ncome 76.6% 54.9% 27.3% 14.3% 0.0%
Developed Sovereign FI
34.1% 22.2% 9.7% 4.9% 0.0%
North America
10.6% 7.1% 3.2% 1.6% 0.0%
Europe
15.7% 10.8% 5.0% 2.6% 0.0%
Asia ex Japan
0.2% 0.1% 0.1% 0.0% 0.0%
Japan
6.5% 3.4% 1.0% 0.5% 0.0%
Supranational/Agencies
1.1% 0.8% 0.4% 0.2% 0.0%
Developed Investment Grade FI
36.5% 27.8% 14.7% 7.8% 0.0%
Developed High Yield FI
4.1% 3.8% 2.4% 1.3% 0.0%
Emerging Market FI
1.9% 1.2% 0.5% 0.3% 0.0%
Emerging Market Asia FI
1.6% 1.1% 0.5% 0.3% 0.0%
Emerging Market EMEA FI
0.2% 0.1% 0.0% 0.0% 0.0%
Emerging Market LatAm FI
0.2% 0.1% 0.0% 0.0% 0.0%
Equities 11.4% 37.0% 68.7% 85.7% 100.0%
Developed Market EQ
9.9% 32.2% 59.7% 74.5% 86.9%
North America Large Cap
5.0% 16.1% 30.0% 37.4% 43.6%
North America Small/Mid Cap
0.8% 2.6% 4.7% 5.8% 6.8%
Europe Equities
2.8% 9.4% 17.6% 22.1% 25.9%
Japan Equities
0.8% 2.7% 5.1% 6.3% 7.4%
Asian Equities
0.5% 1.4% 2.3% 2.9% 3.3%
Emerging Markets EQ
1.5% 4.8% 9.0% 11.2% 13.1%
Emerging Latin America Equities
0.2% 0.6% 0.9% 1.1% 1.2%
Emerging EMEA Equities
0.3% 0.8% 1.4% 1.7% 2.0%
Emerging Asia Equities
1.0% 3.4% 6.6% 8.4% 9.9%
Hedge Funds 0.0% 0.0% 0.0% 0.0% 0.0%
Precious Metals 0.0% 0.0% 0.0% 0.0% 0.0%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Source: Citi Private Bank's Global Investment Committee, 18 March 2015
Charts and tables are for illustrative purposes only. Refer to Important Information at the end of this presentation. 15
Asset Class Performance
The Case for Diversification
2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD
MSCI Emerging
Markets
39.4%
BarCap US Gov 10-
Year
18.9%
MSCI Emerging
Markets
78.5%
DJ Equity REIT
Index
27.7%
BarCap US Gov 10-
Year
15.5%
DJ Equity REIT
Index
19.6%
Russell 2000 Small
Cap Index
38.8%
DJ Equity REIT
Index
26.0%
DJ Equity REIT
Index
5.9%
DJ UBS Commodity
Total Return Index
16.2%
BarCap Global Corp
-5.1%
BarCap Global Corp
HY
36.7%
Russell 2000 Small
Cap Index
26.9%
DJ Equity REIT
Index
7.5%
MSCI Emerging
Markets
18.2%
S&P 500 Large Cap
Index
32.4%
S&P 500 Large Cap
Index
13.2%
Russell 2000 Small
Cap Index
5.1%
BarCap Global Corp
HY
13.3%
BarCap Global Corp
HY
-5.9%
DJ Equity REIT
Index
28.5%
MSCI Emerging
Markets
18.9%
BarCap Global Corp
4.8%
Russell 2000 Small
Cap Index
16.3%
BarCap Global Corp
HY
4.7%
BarCap US Gov 10-
Year
8.5%
MSCI Emerging
Markets
2.6%
BarCap US Gov 10-
Year
10.4%
Russell 2000 Small
Cap Index
-33.8%
Russell 2000 Small
Cap Index
27.2%
DJ UBS Commodity
Total Return Index
16.8%
BarCap Global Corp
HY
3.0%
BarCap Global Corp
HY
16.0%
DJ Equity REIT
Index
2.7%
BarCap Global Corp
7.2%
S&P 500 Large Cap
Index
2.1%
S&P 500 Large Cap
Index
5.5%
DJ UBS Commodity
Total Return Index
-35.6%
S&P 500 Large Cap
Index
26.5%
S&P 500 Large Cap
Index
15.1%
S&P 500 Large Cap
Index
2.1%
S&P 500 Large Cap
Index
16.0%
BarCap Global Corp
0.1%
BarCap Global Corp
HY
5.5%
BarCap Global Corp
HY
1.3%
BarCap Global Corp
3.2%
S&P 500 Large Cap
Index
-37.0%
DJ UBS Commodity
Total Return Index
18.9%
BarCap Global Corp
HY
9.7%
Russell 2000 Small
Cap Index
-4.2%
BarCap Global Corp
10.9%
MSCI Emerging
Markets
-2.6%
MSCI Emerging
Markets
0.5%
BarCap Global Corp
2.2%
Russell 2000 Small
Cap Index
-1.6%
DJ Equity REIT
Index
-37.6%
BarCap Global Corp
16.6%
BarCap US Gov 10-
Year
9.4%
DJ UBS Commodity
Total Return Index
-13.3%
BarCap US Gov 10-
Year
3.8%
BarCap US Gov 10-
Year
-5.8%
Russell 2000 Small
Cap Index
0.3%
DJ UBS Commodity
Total Return Index
-4.2%
DJ Equity REIT
Index
-15.6%
MSCI Emerging
Markets
-53.3%
BarCap US Gov 10-
Year
6.9%
BarCap Global Corp
7.2%
MSCI Emerging
Markets
-18.4%
DJ UBS Commodity
Total Return Index
-1.1%
DJ UBS Commodity
Total Return Index
-9.5%
DJ UBS Commodity
Total Return Index
-10.1%
BarCap US Gov 10-
Year
2.8%
Source: Bloomberg, 25 Mar 2015
16
Brazilian Bovespa: The Bovespa Index is a gross total return index weighted by traded volume and is comprised of the most liquid stocks traded on the Sao Paulo Exchange. The
Bovespa Index has been divided 10 times by a factor of 10 since Jan 1, 1985: 12/02/85, 08/29/88, 04/14/89, 01/12/90, 05/28/91, 01/21/92, 01/26/93, 08/27/93, 02/10/94, and 03/03/97.
Citigroup Global Markets High Yield Market Index: A measure that tracks actual economic data relative to consensus estimates of market economists
Citigroup Global Markets High Yield Market Index: The High-Yield Market Index includes cash-pay, deferred-interest, and Rule 144A bonds with remaining maturities of at least one
year and a minimum amount outstanding of $100 million. The issuers must be domiciled in the United States or Canada for consideration in this index.
Citigroup Global Emerging Market Sovereign Bond Index: The Global Emerging Market Sovereign Bond Index (ESBI) includes Brady bonds and US dollar-denominated emerging
market sovereign debt issued in the global, Yankee, and Eurodollar markets excluding loans. The ESBI offers diversification benefits with respect to the geographical and asset class
dimensions. It comprises debt in Africa, Asia, Europe, and Latin America.
The Consumer Confidence Survey: Reflects prevailing business conditions and likely developments for the months ahead. This monthly report details consumer attitudes and buying
intentions, with data available by age, income, and region
CPI Inflation: Consumer Price Index (CPI) - The CPI, as it is called, measures the prices of consumer goods and services and is a measure of the pace of US inflation. The US
Department of Labor publishes the CPI every month.
Current Balance: The difference between the nation's total exports of goods, services and transfers and its total imports of them. Current account balance calculations exclude
transactions in financial assets and liabilities.
Currency Abbreviations: AUD: Australia; NZD: New Zealand; NOK: Norway; GBP: UK; EUR: Euro Zone; SEK: Sweden; CAD: Canada; CHF: Switzerland; JPY: Japan; ZAR: South
Africa; PLN: Poland; BRL: Brazil; RUB: Russia; KRW: Korea; TRY: Turkey; MXN: Mexico; CNY: China; INR: India
DJIA: Dow Jones Industrial Average - The best known U.S. index of stocks. A price-weighted average of 30 actively traded blue-chip stocks, primarily industrials including stocks that
trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest US companies are performing.
DXY Index: The DXY Index represents a basket of currencies, giving a price level for the US dollar.
Event Driven: In the context of hedge funds, a style of management that combines many different types of hedge fund investing such as merger arbitrage, distressed securities and high
yield investing, in conjunction with an important "event" that is supposed to unlock firm value (like a merger announcement, earnings announcement, or a regulator decision).
Fiscal Balance: The Fiscal Balance represents the difference between General Government revenues over expenses. It includes capital expenditure, but excludes depreciation.
Global Macro: Directional Macro strategies frequently employ leverage and may trade futures, options on future contracts and foreign exchange contracts as well as trade in diversified
markets or focus on one market sector. Two types of strategies employed by directional macro managers are discretionary and systematic trading.
Industrial Production: Measures the output of the industrial sector of an economy. The industrial sector includes manufacturing, mining, and utilities.
LIBOR: London Interbank Offered Rate - A short-term interest rate often quoted as a 1,3,6-month rate for U.S. dollars.
Managed Futures: In the context of hedge funds, a style of management that focuses on short-term trading in the futures market.
Glossary
17
Glossary (Cont’d)
Mexican Bolsa: A capitalization weighted index of the leading stocks traded on the Mexican Stock Exchange. The index was developed with a base level of .78 as of October 30, 1978.
MSCI World Consumer Discretionary Price Index: An index measuring the performance of the Consumer Discretionary equities of developed countries including U.S.; a useful
benchmark for global funds.
MSCI World Free Index: An index measuring the performance of equities of developed and EM countries; a useful benchmark for global funds.
Nikkei 225 Index: Applies mainly to international equities. Price-weighted average of 225 stocks of the first section of the Tokyo Stock Exchange started on May 16, 1949. Japanese
equivalent of the US Dow.
Repo rate: A repo is a repurchase agreement. A procedure for borrowing money by selling securities to a counterparty and agreeing to buy them back later at a slightly higher price
based on a rate of interest called the repo rate.
Russell Mid-Cap Index: A market capitalization-weighted benchmark index made up of the 800 smallest US companies in the Russell 1000.
Russell Top 200 Growth Index: A market capitalization-weighted benchmark index made up of the largest 200 US companies by market cap that exhibit growth characteristics.
Russell Top 200 Value Index: A market capitalization-weighted benchmark index made up of the largest 200 US companies by market cap that exhibit value characteristics.
Russell 2000 Index: A market capitalization-weighted benchmark index made up of the 2000 smallest US companies in the Russell 3000.
S&P/ Case-Shiller US National is the broadest national measurement of home prices, with coverage going beyond the 20 MSAs that make up the composites.
S&P/Case-Shiller Composite-20 Home Price Index reflects price changes for Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland, Seattle, Tampa, Boston,
Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington DC. In addition to those 10 markets.
S&P 400 Index: A market capitalization-weighted benchmark index made up of 400 securities with market values between $200 million and $5 billion
S&P 500 Index: Index of 500 widely held common stocks that measures the general performance of the market.
VIX Index: The Chicago Board Options Exchange SPX Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide
range of strikes 1st & 2nd month expirations are used until 8 day from expiration, then the 2nd and 3rd are used.
U.S. Treasuries: Interest-bearing obligations if the U.S. government issued by the U.S. Department of the Treasury as a means of borrowing money to meet government
expenditures not covered by tax revenues. There are three types of marketable Treasury securities-bills, notes and bonds.
U.S. Investment-Grade Bonds: A bond that is assigned a rating in the top four categories by commercial credit rating companies. S&P classifies investment-grade bonds as BBB or
higher, and Moody's classifies investment grade bonds as BAA or higher. Related: High-yield bond.
U.S. High Yield Bonds: A bond with a speculative credit rating of BB (S&P) or BA (Moody's) or lower. Junk or high-yield bonds offer investors higher yields than bonds of financially
sound companies. Two agencies, Standard & Poors and Moody's Investor Services, provide the rating systems for companies' credit.
Wilshire 5000 Index: Measures the performance of all US equity securities with readily available price data. Over 5,000 capitalization weighted security returns are used to adhust the
index. The Wilshire 5000 base is its 12/31/1980 capitalization of $1,404.596 billion.
18
Glossary (Agency Ratings)
Moody's
Investment grade
Aaa: Moody judges obligations rated Aaa to be the highest quality,
with the "smallest degree of risk".
Aa1, Aa2, Aa3: Moody judges obligations rated Aa to be high
quality, with "very low credit risk", but "their susceptibility to long-
term risks appears somewhat greater".
A1, A2, A3: Moody judges obligations rated A as "upper-medium
grade", subject to "low credit risk", but that have elements "present
that suggest a susceptibility to impairment over the long term".
Baa1, Baa2, Baa3: Moody judges obligations rated Baa to be
"moderate credit risk". They are considered medium-grade and as
such "protective elements may be lacking or may be
characteristically unreliable".
Speculative grade
Ba1, Ba2, Ba3: Moody judges obligations rated Ba to have
"questionable credit quality
B1, B2, B3: Moody judges obligations rated B as speculative and
"subject to high credit risk", and have "generally poor credit
quality."
Caa1, Caa2, Caa3: Moody judges obligations rated Caa as of "poor
standing and are subject to very high credit risk", and have
"extremely poor credit quality. Such banks may be in default..."
Ca: Moody judges obligations rated Ca as "highly speculative" and
are "usually in default on their deposit obligations".
C: Moody judges obligations rated C as "the lowest rated class of
bonds and are typically in default," and "potential recovery values
are low".
S&P
Investment Grade
AAA: the best quality borrowers, reliable and stable
(many of them governments)
AA: quality borrowers, a bit higher risk than AAA
A: economic situation can affect finance
BBB: medium class borrowers, which are satisfactory
at the moment
Non-Investment Grade
BB: more prone to changes in the economy
B: financial situation varies noticeably
CCC: currently vulnerable and dependent on
favorable economic conditions to meet its
commitments
CC: highly vulnerable, very speculative bonds
C: highly vulnerable, perhaps in bankruptcy or in
arrears but still continuing to pay out on obligations
CI: past due on interest
R: under regulatory supervision due to its financial
situation
SD: has selectively defaulted on some obligations
D: has defaulted on obligations and S&P believes that
it will generally default on most or all obligations
NR: not rated
Fitch
Investment grade
AAA: the best quality companies, reliable
and stable
AA: quality companies, a bit higher risk
than AAA
A: economic situation can affect finance
BBB: medium class companies, which are
satisfactory at the moment
Non-investment grade
BB: more prone to changes in the economy
B: financial situation varies noticeably
CCC: currently vulnerable and dependent
on favorable economic conditions to meet
its commitments
CC: highly vulnerable, very speculative
bonds
C: highly vulnerable, perhaps in bankruptcy
or in arrears but still continuing to pay out
on obligations
D: has defaulted on obligations and Fitch
believes that it will generally default on
most or all obligations
NR: not publicly rated
19
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20
Important Information
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21
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22
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24
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