January market update – a month when diversifiers diversified

January (and the last 12-months) was the tale of two divergent real assets: global REITs and commodities. Global REITs continued on an upward trajectory through January, posting the best broad asset class return (represented by the FTSE EPRA/NAREIT Developed Real Estate Index, up 4.9% for the month) with support from a defensive market environment and further declines in interest rates. Overall, global real estate securities registered performance well ahead of the broader global equity market (represented by the Russell 3000® Index down -2.8%, Russell Developed ex-U.S. Large Cap Index down -0.4%, Russell Emerging Markets Index up 0.6%) . Commodites, on the other hand, continued on its downward trajectory through January, posting the worst broad asset class return (represented by the Bloomberg Commodity Index, at -3.3% for the month), driven by grains and energy. Despite continued expectations to the contrary, the yield on 10-year U.S. Treasury bonds declined over the month, helpful for real estate as mentioned earlier and fixed income (represented by the Bloomberg U.S. Aggregate Bond Index, up 2.1% for the month). On the equities front, in an about-face from previous months, while still negative, non-U.S. developed equities (represented by the Russell Developed ex-U.S. Large Cap Index) outpaced U.S. equities (represented by the Russell 3000® Index).  However, the gap between U.S. equities and non-U.S. equities over a 12-month period is still substantial (with U.S. equities outperforming non-U.S. equities by over 13%). Emerging markets had a relatively flat (but positive) month (represented by the Russell Emerging Markets Index), yet the 12-month return has shown strong positive signs of improvement (dropping off an abysmal January 2014 in the return calculation certainly helped). A hypothetical balanced index portfolio was only slightly negative, but had strong 12-month returns, reinforcing the benefit of diversification. Sources: U.S. Equity: Russell 3000® Index, Non-U.S. Equity: Russell Developed ex-U.S. Large Cap Index, Emerging Markets: Russell Emerging Markets Index, U.S. Bonds: Bloomberg U.S. Aggregate Bond Index, Global REITs: FTSE EPRA/NAREIT Developed Real Estate Index, Commodities: Bloomberg Commodities Index, Balanced: 30% U.S. Equity, 20% Non-U.S. Equity, 5% EM, 35% Bonds, 5% REITs, 5% Commodities

Asset Class Dashboard – as of January 31, 2015

Like last month, every asset class posted a return within its typical twelve month historical range with two exceptions: cash and commodities. The historically low interest rate environment has kept cash returns below normal for a number of years now and the recent pull back in oil prices led to a historically bad 12-month period for commodities. Large cap U.S. equity: Russell 1000 Index, Large cap Defensive U.S. equity: Russell 1000 Defensive Index, Large cap dynamic U.S. equity: Russell 1000 Dynamic Index, Small cap U.S. equity: Russell 2000 Index, Non-U.S. Equity: Russell Developed ex-U.S. Large Cap Index, Global equity: Russell Developed Large Cap Index, Emerging markets: Russell Emerging Markets Index, Commodities: Dow Jones – UBS Commodity Total Return Index, Global infrastructure: S&P Global Infrastructure Index, Global real estate: FTSE EPRA/NAREIT Developed Index, Cash: Citigroup 3-Month U.S. Treasury Bill Index, Global high yield bonds: Bank of America Merrill Lynch (BofAML) Global High Yield Index, Emerging markets debt: JP Morgan Emerging Markets Bond Index Plus, U.S. bonds: Bloomberg U.S. Aggregate Bond Index. How do I read this chart? This dashboard is intended as a tool to set context and perspective when evaluating the current state of a sample of asset classes. The ranges of 12 month returns for each asset class are calculated from its underlying monthly index returns. The stated inception date is the first full month of an index's history available for the dashboard calculation. Here is how to read the graphic on this page: FOR EACH INDICATOR, THE HORIZONTAL BAR SHOWS FOUR THINGS A GRAY BAR shows the full range of historical rolling 12?month returns for a sample of asset classes. A BLUE COLOR BAND represents the typical range (one standard deviation away from the mean, i.e. 68% of historical observations) of rolling 12-month returns for these asset classes. AN ORANGE MARKER represents the most recent 12?month return of the asset classes. A WHITE LINE within the blue bar represents the mean of the historical observations.