Plan Talk: Analyzing risks and opportunities in today’s plan menu lineups
In this episode of Plan Talk, Retirement Director Ben Rizzuto speaks with Damien Comeaux, Senior Portfolio Strategist, about how the Portfolio Construction and Strategy (PCS) team analyzes plan menu lineups to help ensure they provide adequate diversification.
38 minute listen
- The PCS team helps plan advisors and sponsors identify where certain risks may exist in their core plan menus and understand how core menu options might behave during different market cycles.
- Some risks the team has identified include lack of diversification and potential overlap within fixed income and a tendency to be overweight U.S. equities due to home bias.
- The portfolio diagnostics offered through the PCS team can help plan sponsors manage these risks while identifying opportunities to create diversified allocations that align with participants’ goals.
Ben Rizzuto: Hi there. I’m Ben Rizzuto, and you’re listening to Plan Talk from Janus Henderson Investors. You know, many times when I talk to advisors, one of the main questions that they ask me is what other folks are doing [and] where they’re having success? And as humans, we’re always interested to find and understand trends. And I think we do this to try to replicate the success of others and be knowledgeable about what may be new and different. This probably explains some of our infatuation with many of the social media sites out there. Another topic that comes up a lot, or has come up a lot this year is, of course, the markets. The S&P 500® has been down as much as 23% and we remain in bear market territory. Because of this poor performance, many advisors and plan sponsors have been thinking and, probably more accurately, worrying about participants’ retirement assets. And more broadly, thinking about how the core menu of their retirement plans are holding up through all of this volatility.
So in this episode, we’re going to discuss those two questions. You know, we offer a service here at Janus Henderson Investors to plan sponsors and advisors through our Portfolio Construction and Strategy team, which analyzes plan menu lineups and models to help those folks better understand the menus that have been created, the risks that may exist and where opportunities may lie to help participants create allocations that will help them reach their retirement goals.
In providing these services, we’ve been able to gather a lot of data from the advisors and plan sponsors we’ve worked with to get an idea of some of those trends that we’re seeing in plan menu design, but also how plan menus might be improved upon to better deal with difficult periods in the market. So, to do this today, I’m joined by Damien Comeaux, Senior Portfolio Strategist on the PCS team, to discuss some of those items with me. Damien, thanks for joining me.
Damien Comeaux: Thanks, Ben. Great to be here.
Rizzuto: So let’s start with an interesting question: How many funds are you finding on average in the plan lineups that you all have analyzed?
Comeaux: Yes, thanks, Ben. And our team has been around since 2015, initially focused more on the wealth management side. But over the last couple of years, we’ve had more emphasis on helping retirement clients looking at lineups. And since we’ve released our DC diagnostics in the past year, what we’re seeing in consultations is roughly 20 funds on average in a plan. So break that down: Nine in U.S. equity, two in ex-U.S. equity, you have three, call it, in fixed income, and then a handful of target date funds. So we’d argue that fixed income could use additional diversification and could be in that four-to-five fund range, right? You still have 10 to 11 equity options in your target date series and that gets you to 20 funds on average.
And Ben, I know you’re a man of analogy, so I’m going to try to squeeze a couple in here. I took my kids to the ice cream shop yesterday. Really hot here in Denver. And it made me think: You have an ice cream shop; you just offer up a few flavors. That’s too few options, right? My kids get tired of it, they want to leave. I bring them to an ice cream shop and they have 30-plus flavors, too many options. Analysis paralysis. They can’t make a decision. The line out the door. Experience isn’t great, right? But if you have just the right options, 15 or 20 flavors, there’s enough diversification to keep them coming back for more ice cream and we’re all happy, right?
So obviously the number of funds should align with plan goals, investment policy statements, demographics, etc. But really, you want participants to have the ability to build that well-diversified portfolio without overwhelming them with too many options, especially if you have what we see as multiple funds across certain categories. So you want the generic coverage across U.S. equities, ex-U.S. equities, maybe some diversifying equity, fixed income, and then target date funds for those easy options, so to speak. But if you start with this principle that every investment should serve a purpose – stocks for growth and capital appreciation, [and] you have bond funds delivering income and capital preservation – and then you look for a fund to serve each purpose, then you can potentially consider avoiding some of that overlap.
Rizzuto: Great. That reminds me of three things: First off, I probably need to cut down on my ice cream intake this past summer. But also, some of the research we’ve seen when it comes to both consumers and participants, and what is the right amount of options to give them? In the past it’s been, if we offer them too many, they become paralyzed by choice. But then more recent research from Morningstar actually showed that plan menus with over 30 options might offer participants the ability to create more … might allow participants to create better allocations. The point is this: There’s no one right or wrong answer. But this number of 20 does seem to fit with what we’ve seen in the industry from the recordkeepers as far as the average number of funds. It really gets down to the point you made, how plan sponsors are going to fill in those line items. Now, moving on from there, are there other main things that you’ve seen in digging into these lineups?
Comeaux: Yes, I mean we look for a multitude of things in our in-depth analysis. But really, our focus is around gaps, concentrations, [and] manager selection within a lineup. And a few topics, high-level topics we see are, one: the correlations in overlap are a big topic of conversation. So for example, typically, we see a few large-cap equity options within the large blend growth space. And sometimes you get high correlations where I might ask, does it make sense for, say, two active managers and a passive index option? We see this in the small- and mid-cap space as well. And then in terms of international, there’s this whole conversation around, OK, do I need a foreign large growth? Do I need a foreign large value versus a foreign large blend manager? And maybe we’ll get into this a little bit later, but there’s limited assets in the foreign space to begin with when you think of participants and how they’re allocating. And we want participants to keep that diversification. So maybe instead of confusion around, OK, do I pick a growth or value fund, perhaps a blend style is potentially more appropriate to keep them invested.
And then I would say lack of diversifying equity asset classes, meaning real estate or infrastructure, emerging markets, just things that have lower correlations to traditional U.S. or ex-U.S. equities. And then we saw this phenomenon in 2020 and 2021 where you saw a lot of the more high-octane growth style managers really outperforming during COVID and the recovery, whereas now we’re seeing a shift more into higher quality. And so what we’ve seen is, slowly, more aggressive, volatile growth funds creeping into plan lineups where we feel that needs a second look and potentially think about quality growth going forward. And then in fixed income, obviously, a hot topic with a market environment and the Fed. But overall, there’s a lack of diversification and potential overlap that we see in fixed income. So typically, Ben, we see, you know, stable value, money markets, a core and a core plus bond fund seems appropriate. But when you dig deeper, you look at correlations, they’re often elevated. And so a participant might not have diversification, but it also, again, can create that confusion for a participant not knowing OK, should I select the core, should I select the core plus? Both? So in our opinion, there’s opportunity and a need to diversify more from that traditional core strategies. And then if you have redundancy or overlap, then you have potential to consolidate and that may open up a spot for more diversification in fixed income. So those are a few of the high-level things we’re seeing as we’re consulting with clients.
Rizzuto: Yes, that conversation around fixed income is one we’ve had before on the podcast. And I always try to remind plan sponsors that the plan menu needs to be created not only for your young participant who just started working for the company, but also for the participant who is in their 40s, their 50s and their 60s. So that really speaks to that idea of creating not only a fixed income menu that is diversified, but also a full menu that is diversified. So you mentioned large-cap. I’m assuming that is one of the most used asset classes that you’re seeing in plan menus. Is that the case? And are there others that you’re seeing used most often?
Comeaux: Yes, without a doubt. And we have a decent amount of plans that we look at in our database. And the data tells us, far and away, large-cap equities are the most popular asset class used, whether it’s a large growth or a large blend. That’s no surprise, given, typically for U.S. investors, we all have that home bias where we have comfort in investing in U.S. equities. But we see that on the wealth management side as well. Then it’s followed by your traditional mid-cap exposure, some sort of foreign equity allocation. And then we touched on it just a minute ago in terms of fixed income, really those core, core plus options, which is often a bond index fund, you also have stable value and money markets. And so those are typically the traditional asset classes that we see.
Rizzuto: Great. So large growth, mid-cap, some foreign equity, core, core plus in the fixed income, and then stable value, maybe a money market fund, are used most. What asset classes are used the least, or did you see used sparingly?
Comeaux: Yes, some of the bigger categories that we see more on the wealth management side and less in plans is really areas such as real estate, the multi-sector bond space, global bonds as well. And then, of course, liquid alternatives within the wealth management side. So those are really the main categories that we see more so on the wealth management side, less so in plan lineups.
Rizzuto: Great. Did you happen to see any bitcoin or cryptocurrency in plan menus?
Comeaux: I haven’t quite seen that creep in yet, but let’s give it some time.
Rizzuto: We’ll see if that comes to fruition. I don’t know if that’s a good thing or a bad thing. You talked about home bias; we are all subject to it. We see it whether you’re an investor in the United States or an investor in the UK. I’m assuming that this was part of plan menus.
Comeaux: Yes, Ben. We don’t always get to see plan assets by category; sometimes we just see the lineup. But I can tell you, in all my consultations, all my conversations with clients, it’s no surprise that the majority of equity assets sit in that U.S. equity space. So we see it on the wealth management side as you mentioned. Oftentimes, clients are half the weight of international versus a broad-based benchmark. But whether it’s in a plan or model, to me it’s all about the comfort level of the client, if that makes sense. And so really what I mean here is, in the U.S., you’re seeing the S&P, you’re seeing U.S. equities in the news every day. You’re comfortable with the gains and losses, in a sense, and your portfolio is tracking that. So being global is diversifying that, but many participants are comfortable with that U.S. exposure and the returns you’re seeing, we’re seeing every day. And who’s to blame? But the U.S. has a huge home bias as you mentioned in equity portfolios, and typically, if you’re overweight U.S. equities, a participant might not understand this, but they’re more overweight large-cap growth in tech. And that’s what the U.S. does for you. But if you’re allocating to, say, more European countries, for example, then you’re going to be overweight, say, more value, energy, cyclical, more cyclical exposure. So really, Ben, it’s not necessarily a good or bad thing. It depends on the clients, but obviously, the portfolio strategist in me says long-term investors can benefit from reducing some of that home bias and investing internationally.
Rizzuto: Yes, and that’s … you bring up this idea of getting comfortable with something and that’s something that I think is important for plan sponsors out there to pick up on and ask themselves, “Well, how can we get our participants more comfortable with international investing or any other aspect of the plan menu or plan design?” And it really comes down to education. So if you’re a plan sponsor out there, I would encourage you to lean on your plan advisors and have them come in and do some education around different asset classes that folks may not be as comfortable [with] as they should be. And that will help them hopefully create a more efficient allocation for the long-term. Something that is definitely uncomfortable these days is inflation. And I think this is a great segue into this idea of real estate. Real estate has been shown over the years to provide at least a good hedge against inflation. But you noted that it isn’t offered that often in retirement plans. Why do you think that’s the case?
Comeaux: Yes, I mean, I think predominantly plan lineups stick to those nine style boxes, those big buckets in the U.S. and international space, and maybe want to save a line item by skipping over real estate. So less than half the plans that we’ve looked at have a U.S. or global REIT exposure. And we’ve done some optimization studies on the wealth management side with REITs in a portfolio, and without getting into too much detail, an allocation to REITs does increase the risk-adjusted returns over the long term within a portfolio. And it’s because, as you mentioned, diversification benefits via lower correlations to traditional equities and bonds. And the biggest point you made is the potential inflationary protection. As many underlying cash flows of REITs are linked to the Consumer Price Index, or CPI, and that’s the measure of inflation over time that we all see and are worrying about in the headlines, above 8% still. So to your point, we believe in the diversification benefits of REITs within a lineup as well as some of the studies we’ve done on the wealth management side.
Rizzuto: Yes, and that goes back to that idea of what folks are comfortable with, what do they understand? I think a lot of participants out there, at least those participants here in the Denver area where we live, have seen their home values go up the past several years. So if nothing else, I think people understand real estate. They understand the value that it has, and it may help them diversify their portfolios. They may not understand why inflation occurs, or the CPI or things like that, but if they see real estate going up around them and they see a real estate fund in their plan menu, well, it may be a good way to help them diversify.
Now, you mentioned earlier that, in looking at the overall plan menu, there were only a couple of international funds or ex-U.S. funds. Within those, was there a tilt between growth and value, and how did that break out?
Comeaux: So about 40% of plans just either have a growth option or a value option. And in our opinion, we believe it could be best suited to offer up a more blend-style manager. I talked about it earlier, that avoids that growth/value dance so to speak, that could confuse participants and really keep those assets that they have invested internationally. I think less is more in the international space, so it’s difficult for participants to commit to, say, one or two options or, hey, do I need growth now or value now? I think blend is a potential opportunity to take away some of that market timing that they may be inclined to chase a little bit of that performance and go more with a blend-style manager.
Rizzuto: And that’s, I think, a great point not only in international, but just in general. If we leave allocation decisions up to your normal participant, they’re not going to know when to dance between growth and value, as you put it. So that blend is always, I think, an interesting area to explore for plan sponsors because participants don’t have to make that decision. The decision is already made for them. And if you find a good manager that can do that inherently for them, it makes it a lot easier. It may also provide you with an extra line item in the plan menu to offer a diversifying assets versus real estate, as you mentioned earlier. So Janus Henderson, of course, is an active manager. Did you see a difference in active versus passive funds used in plan menus?
Comeaux: Yes, I mean no surprise here. I mean, typically we see an active and then a passive option in some of the larger categories. Large blend, large growth. We see it in the small- and mid-cap equity space as well, where there could potentially be opportunity for active management. And I say that because you want to be aware of overlap between small- and mid-cap index funds. The larger size of these index funds in the small- and mid-cap space, especially in the small, typically drift up in market cap and can create overlap between passive, small- and mid-cap strategy. So that’s an area where we see it often. We at least bring it up and have the conversation. And then in fixed income, we talked about it as well. But in the intermediate core space, really that bond index fund in short-term, and then government categories as well. And I can touch on that a little bit more. But in terms of fixed income, we are an active shop. But we do believe in active management, especially within fixed income.
Rizzuto: So that I think provides us with a good overview of a lot of the things that are going on in plan menus. Based on your review of these plan menus, based on the fact that you look at a lot of these things both at a micro and macro level, are there specific pain points or issues that plan sponsors should be thinking about when it comes to core menus?
Comeaux: It kind of goes back to what I was saying earlier. I mean, I think the biggest thing to me is, are you meeting the requirements of the IPS? Are you conducting ongoing due diligence to ensure the plan is diversified enough yet doesn’t have redundancy or overlap that could cause some issues within a plan? And, you know, are there gaps in a lineup? And that’s where some of our analysis can help. I mean, there seems to be – and you know this, Ben – a ton of education around equities and equity strategies. And then oftentimes, you know, they have 10+ equity strategies, but from our consultations and database analysis, fixed income is a bit under-looked and something that can potentially require more education to take a closer look at. And I say that because, to me, it’s really important stuff. As participants are moving from accumulation to decumulation phase, they’re potentially keeping assets in the plan after retirement. Participants are going to have meaningful allocations to fixed income, and it’s going to be a critical or crucial component to meeting those requirements. And lastly, obviously we’ve seen a tremendous amount of volatility this year. We’ve all felt it. So it’s a great case study, an opportunity to reassess funds in a plan lineup within this environment. And really to that point, and we do this on the wealth management side, I mean we’re part-time psychologists, but help educate investors try to manage their fears. There’s a lot of fear in the markets, and really understand, to this point, that this year has been a correction in the equity markets. But nothing is officially broken, at least yet. So it’s been something to weather and it’s a process that we have as investors that these bear markets do happen over time. We’ve experienced them. But I always say it’s important to stay invested using the term “time in the market, not timing the market.” So time horizon is paramount. So I think that all goes with the overall education to participants. And those are some of the pain points I’m seeing.
Rizzuto: Yes, this idea of, you know, being a psychologist and trying to understand fears, I think is really important for plan sponsors to try to learn about at this point in the year. And I’ve encouraged plan sponsors to, again, lean on their recordkeepers to see what sort of trading activity has gone on within participants accounts over the course of the first eight or nine months of this year. Based on that volatility, have folks made naive, poor decisions? Some of the data has shown that folks have become more cautious and that they’ve moved from equity to fixed income, which makes sense. I think it’s nice to see that they haven’t gone straight from equity to cash, but that is a great way for plan sponsors to see what’s going on within the minds of participants, not only the accounts of participants, but then educate them as to the long-term focus that they should have and the fact that, unfortunately, this is one of those things that just happens periodically.
Now, you mentioned wealth management. And I know you do these for wealth managers a lot as well. And sometimes we see trends or ideas on the wealth management side steadily work their way into retirement plans. So, are there any trends that you’ve seen on the wealth management side that are interesting or that you think may find their way into retirement plans?
Comeaux: Yes, we’ve covered a little bit of it. But I’ll break it down into U.S. equities, ex-U.S. equities, and then fixed income. I mentioned it earlier, but this whole notion around quality growth – we’re really starting to focus and talk to clients about that more and more. What does that mean really? Looking for companies or funds that invest in companies that have strong balance sheets, sustainable business models, competitive advantages to help potentially protect in a downturn. And a couple examples are investing in companies with higher margins to withstand inflation and higher price increases, or having financial strength or, when I say lower amount of debt or leverage, to withstand rising rates. So, like I said, in 2020, 2021, early 2021, we saw a lot of the high-flying growth names outperform and then those have come back down, whereas more quality growth tends to, or potentially can, hold up better in recessionary time periods. So quality growth is one area that we’ve talked about on the wealth management side that can I think apply to the plan lineup as well.
And then we addressed home bias and ex-U.S. equities. That’s a universal issue. And so same thing with advisors, it’s just not narrowing your range within international. Typically, what we see on the wealth management side is, 80% of advisors have a tilt towards growth when they go international. And so we’re often talking to them about balancing out some of that growth, maybe going more blend style. And then in fixed income, couple things. One, we do believe in active management in the core fixed income space to potentially help financial professionals. And that goes in line with, in our opinion, the passive U.S. aggregate benchmark, which, as a broad base, the main benchmark within fixed income, has potential flaws. And a few of those are [that] it’s weighted towards companies and agencies that have the most debt outstanding, one. It’s not well-diversified; it’s heavily weighted towards U.S. governments or Treasury exposure. And what does that equal? Well, it equals the duration, which is a measure of interest rate sensitivity of the index, has increased while the yield has come down over time. And so this would infer that a passive benchmark, say, is more sensitive to interest rate increases and less attractive in terms of yield than in the past. So that’s a couple things in terms of the core.
And then two as I mentioned, I believe, a little while ago, is about redundancy on the wealth management side as well. So either within the core space, a combination of active/passive, or we even see several core options, core fixed income options, in a wealth management model and there’s potential to consolidate and really look at it from a risk-based framework and diversify and really help clients over the long-term. And so if there is redundancy in the core space, [and there’s] potential to maybe remove a fund or two that is redundant, that allows then wealth advisors the flexibility to move into, say, a multi-sector or fixed income type manager. And we believe in this because they’re diversified, flexible, and they’re a valuable tool to help investors, call it, average into higher-yielding opportunities, but also remaining nimble to say increase or decrease their risk budget as market volatility evolves. And so I always break it down like this for multi-sector: So, it’s a useful middle ground for advisors, whether they’re looking to re-risk core fixed income or de-risk some of their higher-octane, say, benchmark constraint, like a high-yield fund. So, you know, a couple things across U.S., ex-U.S., and fixed income that we see on the wealth side that I think is starting to creep into plans as well.
Rizzuto: There’s some good ideas there and three things that I took from that. One is, reviewing a plan menu I think is always a good idea. And as an advisor, it’s something you should be doing consistently with plan sponsors. Now, the review aspect doesn’t mean that you’re going to make changes, but at least you are doing your level best to review the plan menu, bring new ideas to plan sponsors, and consider if those changes are in the best interest of participants. I think so that’s something that advisors need to be doing on a consistent basis. The other thing that came to mind as you talked about bias. And we as Americans have a home U.S. bias. But one thing that I think advisors need to think about and have a maybe conversation with themselves about is, what biases do they bring to the table when they put together a plan menu? And are those biases leading to different types of risks, overlap, higher concentration, whatever it may be? Finally, and this brings me to my next question, you mentioned things like the balance sheet, leverage, duration, yield – a lot of these words that many investment committee members may not be familiar with, but metrics that are important. So when you talk to advisors and you educate them on some of these metrics that are important to educate their plan sponsor clients on, what are those metrics and how do you talk about?
Comeaux: Scores, scoring criteria, rankings, ratings of funds … that’s important. That’s an important component in the due diligence process, and it’s a great place to start. But to us, we need another additional layer or three of due diligence. It’s necessary to make sure the plan, like I said, is aligned with the stated goals and objectives. And to your point, [that] really shows the participants that you’re being thoughtful and diligent in building and maintaining a plan lineup. And, you know, this can also apply to clients looking to build custom models as an alternative to target date funds, with some coming into question about not being diversified. But so we help with clients on a few metrics that I think are important that you may not be able to get on your own, and that’s looking at correlations. Looking at traditional risk-adjusted returns or looking at standard deviation, Sharpe ratio, but with an added layer of expenses, expense ratios, relative to one another. And so, really, are you getting the best bang for your buck, so to speak, from a return, risk, and expense standpoint? And then not just looking at, say, standard deviation or volatility, but compare that to the max drawdown, or peak to trough: What is the largest drawdown of a fund? Is it within range or is it beyond expectations relative to a category? It’s especially important during volatile time periods. We talked about quality growth versus higher momentum. That’s the type of analysis that can pick up on that. We look at style analysis and factor analysis, to identify whether there is style drift by a particular fund. Make sure, for example, a large growth fund is indeed giving the participant that large growth exposure, not a small- or mid-growth exposure. So there’s so much to unpack, but we believe that we can help and hopefully take some of that heavy lifting off the plate in terms of that due diligence and running in-depth analysis to go that additional layer too, Ben, but also digestible enough that it’s not going to be overwhelming if we can help with our consultation. So a pretty simple analogy, but I’ll go with one more here, Ben, just to please you. You know, a plan is like an automobile, and then the underlying funds are the components of the car. And so we need to, like your regular car, you take it in, routine maintenance. We need to continuously monitor and assess and service plan lineups over time. And really, that’s where our team can come in and help.
Rizzuto: You know and a couple of the ideas you brought up reminded me of at least one class action lawsuit that we’ve seen against a plan sponsor over the past couple of years. And it’s one we’ve talked about on the podcast before. But in this lawsuit, metrics like standard deviation and correlation were specifically mentioned in the complaint. Along with that, the complaint noted that the participants weren’t given the ability to diversify their allocations through the funds offered in the plan menu, which speaks to this idea of large drawdowns or possible large drawdowns. And while these may not be ideas that a lot of investment committee members feel comfortable with, I think this lawsuit, as well as the volatility we’ve seen in the market this year, really shows us that they need to, whether they like it or not, get comfortable with them and better understand how they affect participants’ allocations.
So, Damien again, thanks for being with us today. Everything we’ve talked about, you know, really reminds me that there is no one right answer for how a plan menu should be constructed. And while that’s the case, plan sponsors need to understand that they have a continuing duty to monitor the investments that they offer plan participants. They need to ensure that they have been selected with the best interest of those participants in mind. They need to consider if they will allow participants to meet their retirement goals. And part of that responsibility is going through an exercise like this to see where risks might exist and understand how core menu options might behave during certain types of market cycles. And at the very least, if I’m a plan advisor out there, I think doing this sort of diagnostic before an investment committee meeting and at least entering that into the meeting notes and meeting minutes, helps plan sponsors meet that ongoing fiduciary responsibility. So if you think this is something you’d find helpful or be interested in for your next investment committee meeting, feel free, of course, to let us know.
So, Damien, thanks again for joining us today.
Comeaux: Yes, thanks for having me, Ben. It’s been great.
Rizzuto: And with that, again, we will look forward to seeing you all next time on Plan Talk. Remember that Plan Talk is produced by Janus Henderson Investors, an asset management firm that hopes to help you connect with your clients through investment and educational resources. As always, please subscribe if you’d like to hear our next episode as soon as it drops. Until then, I’m Ben Rizzuto and you’ve been listening to Plan Talk.
Active and passive investments may both lose value when valuations fall and market and economic conditions change.
Consumer Price Index (CPI) is an unmanaged index representing the rate of inflation of the U.S. consumer prices as determined by the U.S. Department of Labor Statistics.
Correlation measures the degree to which two variables move in relation to each other. A value of 1.0 implies movement in parallel, -1.0 implies movement in opposite directions, and 0.0 implies no relationship.
Diversification neither assures a profit nor eliminates the risk of experiencing investment losses.
Growth and value investing each have their own unique risks and potential for rewards, and may not be suitable for all investors. Growth stocks are subject to increased risk of loss and price volatility and may not realize their perceived growth potential. Value stocks can continue to be undervalued by the market for long periods of time and may not appreciate to the extent expected.
S&P 500® Index reflects U.S. large-cap equity performance and represents broad U.S. equity market performance.
Sharpe Ratio measures risk-adjusted performance using excess returns versus the “risk-free” rate and the volatility of those returns. A higher ratio means better return per unit of risk.
Volatility measures risk using the dispersion of returns for a given investment.
Performance may be affected by risks that include those associated with foreign and emerging markets, fixed income securities, high-yield and high-risk securities, undervalued, overlooked and smaller capitalization companies, real estate related securities including Real Estate Investment Trusts (REITs), Environmental, Social and Governance (ESG) factors, non-diversification, portfolio turnover, derivatives, short sales, initial public offerings (IPOs) and potential conflicts of interest. Each product has different risks. Please see the prospectus for more information about risks, holdings and other details.