Investment Strategy

Evaluating blended asset allocation outcomes

As part of the capital market assumption (CMA) process, we evaluated our expected performance statistics forecasts (return, risk, and risk-adjusted return) for three strategic asset allocations — Moderate Income (MI), Moderate Growth and Income (MGI), and Moderate Growth (MG) — by comparing them to index-based performance statistics from January 1, 2010, through December 31, 2024². The expectations are based on our CMAs that we formulated each year over the 15-year period. The strategic CMAs are designed in an effort to estimate performance over multiple market cycles and do not represent the anticipated return or risk performance of any particular year. In terms of macroeconomic conditions, most of the 15-year time frame we examined was expansionary and was coupled with historically low equity-market volatility.

Our findings

Our overall assessment of the average expected performance compared to the annualized 15-year performance for the allocations over this period can be summarized as follows:

• Our forecasted average expected returns for the three allocations were largely aligned with the longer-term (15-year) annualized index-based returns. The equity-oriented mixes (MGI and MG) modestly exceeded our expected estimates as U.S. equities performed better than we had anticipated over the 15-year period. These allocations benefited from U.S. equity outperformance due to the strategic overweight to U.S. Large Cap Equities compared to the global benchmark. Meanwhile, the bond-oriented MI allocation’s performance fell short of our estimations as many fixed-income indexes suffered their worst one-year performance ever in 2022.
• Our forecasted average expected risk (measured by standard deviation³) over the period was closely aligned with the 15-year annualized standard deviation as the record-long 2009 – 2020 bull market led to historically low volatility for most of the period. However, higher volatility has persisted since.
• Chart 1 shows that the average risk-adjusted performance (measured by the Sharpe ratio⁴) over the 15-year period for the allocations generally exceeded our estimates based on our CMAs, indicating that return per unit of risk topped our forecast. The 15-year annualized risk-adjusted return for the more conservative MI allocation exceeded the expected average, largely due to an extended stretch of low interest rates and nominal fixed-income market volatility for most of the period. Low volatility and U.S. equity outperformance enhanced the risk-adjusted performance of the MGI and MG allocations over the period. 

Chart 1. Risk-adjusted versus expected risk-adjusted performance for blended investment objectives from 2010 to 2024Sources: © Morningstar Direct, All Rights Reserved, and Wells Fargo Investment Institute. Data as of December 31, 2024. Forecasts are not guaranteed and are subject to change. See end of report for important disclosures. Past performance does not guarantee future results.

Return and risk outcomes over the long term

Our CMAs reflect our expectations for long-term performance of the economy and markets. While not every asset class returned exactly what was forecasted over the period, as a collection of assets, the allocations performed remarkably in line with our expectations. Keep in mind that past performance does not guarantee future results.

Wells Fargo Investment Institute recently published updated CMAs and strategic asset allocations for 2025-26. We remain committed to creating allocations using a disciplined approach that historically has provided a reasonable estimate of risk and return. Providing risk and return statistics may help investors plan which level of volatility risk is most appropriate for their circumstances and how much return they may reasonably expect for taking on that risk.

We believe a well-diversified portfolio may offer less volatility with potential for attractive risk-adjusted returns. Investors with long-term time horizons may be able to weather periods of volatility better than short-term investors because markets have historically moved higher over a long-term strategic time frame.

² We analyzed the three moderate asset allocations because they reflect a moderate risk tolerance for each of the three allocation objectives provided by Wells Fargo Investment Institute: Income, Growth & Income, and Growth. In addition to allocations for those with a moderate risk tolerance, allocations for conservative and aggressive risk tolerances are also provided by WFII for each of the three objectives. *The performance information for the remaining six asset allocations (Conservative Income, Aggressive Income, Conservative Growth & Income, Aggressive Growth & Income, Conservative Growth, and Aggressive Growth) not discussed in this report can be found on page 9 and 10 in a table titled “Performance statistics for the nine strategic asset allocations.” Performance results for the strategic allocations are calculated using blended index returns. Results do not represent actual trading, and the results achieved do not represent the experience of any individual investor. In addition, results do not reflect the impact of any fees, expenses, or taxes applicable to an actual investment. An index is unmanaged and not available for direct investment. Past performance does not guarantee future results.

³ Standard deviation is a measure of volatility. The higher the standard deviation, the greater the risk.

⁴ Sharpe ratio measures the additional return investors can expect for accepting additional risk.

Is it time to overweight small caps?

The Russell 2000 Index, our benchmark for U.S. Small Cap Equities, is up 27% since the April 8 low, as of July 21. This matches the return for the vaunted S&P 500 Index and bests the other major equity asset classes over the same period. Is this the start of sustained small-cap outperformance? In our view, no.

There are some structural issues with the asset class that we expect will be headwinds to this outperformance continuing. A considerable one is that the quality of the Russell 2000 Index has continued to deteriorate, as evidenced in the chart, which shows that the percentage of non-earners in the Russell 2000 Index has steadily increased from 11% to 42% over the past 20 years — indicating that fewer companies in the index are profitable. Additionally, based on Bloomberg data and an in-house study, we believe easier access to private capital has made staying private an attractive option for founders looking to raise capital but also looking to avoid the additional regulatory challenges of being a public company. We have also seen an increase in merger and acquisition (M&A) activity from public and private acquirers. We look for these factors to likely have the effect of driving higher-quality names out of the Russell 2000 Index and leaving investors with lower-quality companies within the benchmark.

There are tailwinds that counterbalance our outlook and support our neutral rating — expected deregulation and other business friendly policies — as well as a continued easing cycle from the Federal Reserve (Fed) and our forecasted economic rebound through 2026. We would consider this opportunity to trim U.S. Small Cap Equities holdings back to long-term target allocations and reallocate the proceeds into U.S. Large Cap Equities and U.S. Mid Cap Equities.

U.S. Small Cap Equities non-earners have risenSources: Bloomberg and the Wells Fargo Investment Institute. Data range from July 31, 2005 — July 21, 2025. An index is unmanaged and not available for direct investment. Past performance does not guarantee future results.

The impact of U.S. credit markets on global investors

Just as tariffs, volatility, and questions around U.S. debt sustainability have risen, so have concerns around the threat of global investors moving away from U.S. financial assets. These fears are most acute in credit markets, with foreign investors being important buyers of both U.S. government and corporate debt. However, we believe that the size of U.S. debt as percent of global debt makes a widespread move away highly unlikely.

The chart shows the total corporate and government debt securities of the U.S. alongside total debt securities of the other G7 countries and the gross value of global savings — the sum of public and private saving. With tens of trillions of dollars in annual savings and more than $110 trillion in cash equivalents globally,⁵ investors must necessarily continue allocating a share of capital to U.S. assets — not as a matter of preference, but because no other market offers the depth, liquidity, and capacity to deploy these funds. Other developed economies do not have the same capacity for investment as the U.S. Any widespread move away from U.S. assets would face a simple problem that begins with no other markets having as much liquidity as either the U.S. government or corporate markets.

Total value of G7 debt securitiesSources: BIS, World Bank, as of fourth quarter 2024. Data for Canada, France, Germany, Italy, Japan, and the UK includes a combination of both corporate and government debt. Gross global savings is calculated as gross domestic product (GDP) less total consumption.

We believe this simple problem for international investors would cushion any move away from the U.S. and maintains the U.S. as the backbone of global credit markets. We currently favor U.S. fixed income over international as a result and see continued strength for the U.S. dollar. Even if debt sustainability issues were to further impact Treasury demand, the slack would likely be picked up by more fiscally responsible U.S. Investment Grade Corporate Securities. We are currently favorable on that space and see the mix of yields and quality as attractive. 

⁵ Bloomberg, as of July 21, 2025. An estimate of global M2, which includes all physical currency and demand deposit, plus near-money assets that can be quickly converted into cash.

Copper tariffs set to take effect in August

President Trump has announced plans to implement a 50% tariff on U.S. copper imports beginning on August 1. The tariff rate was steeper than expectations; however, some form of tariffs were expected prior to the announcement.

For months, the premium for U.S. copper has risen in anticipation of tariffs, eventually reaching the highest level in decades at 29% above the global benchmark (London Metal Exchange Copper Futures). Price arbitrage opportunities, incentivized by the premium, led to global inventories being drawdown materially and imported to the U.S.

Over the years, the U.S.’ reliance on copper imports has grown, as domestic mining and refining production have both declined (see chart). The future need for imports will also likely be compounded by the buildout of green energy and electrification. Given the years-long period for a supply response from new copper mines and smelting refineries, the U.S. could remain import reliant for the foreseeable future.

The impact of these tariffs are potentially far reaching, as copper is widely used in various areas, including power generation, transportation, housing, and consumer goods. A reliance on expensive imports raises the risk of higher costs for U.S. companies and consumers. For investors who have commodity exposure, including Industrial Metals, commodities have acted as a counterbalance to tariff related risks, with the broader Bloomberg Commodity Index up 8.1% year to date, as of July 23.

For the Industrial Metals sector, we remain neutral. We see tailwinds in an improving macro outlook and manufacturing activity. However, in the near term, this uplift is tempered by expectations for an easing of copper’s arbitrage rally and ample U.S. copper inventories, following the enactment of tariffs. We continue to recommend a broad basket of commodity exposure, including agriculture, industrial metals, and our two favorably rated sectors – Precious Metals and Energy.

Falling U.S. copper production drives a reliance on importsSources: Bloomberg, U.S. Geological Survey, and Wells Fargo Investment Institute. Annual data is from 2009 –2024. 

Private-market interest greater than many believe

Private-market assets have grown considerably over the past decade, particularly as fund options become more accessible to the average high-net-worth investor. Yet, the average allocation for individual investors remains well below the typical allocations used by institutional investors. According to Blackstone, the average individual allocates 3% to alternative strategies, compared to 23% for pensions and 57% for endowments.⁶ Although many financial advisors may believe this is due in part to individual investors’ lack of interest in private markets, a recent survey by private equity asset manager Hamilton Lane suggests otherwise, as shown in the chart below. According to the survey, investors that are in the prime accumulation phase of their investing careers (30 – 45 and 45 – 60 years old) have indicated stronger interest than many experts might expect. For millennial investors (30 – 45 years old), approximately 34% expressed “moderate interest” and 55% expressed “high interest”. Similarly, for generation X investors, 37% indicated “moderate interest” and 57% expressed “high interest”. While interest from the 60 – 75-year-old baby boomer generation was modestly lower (52% moderate interest and 27% high interest), the overall interest level registered 79% for this group, a surprisingly high figure given many in this group are at or nearing the typical retirement age where liquidity may be of greater importance.

We believe the interest in private markets is likely larger than many industry experts would have anticipated. Many investors are increasingly aware of the opportunity set in private markets and how private-capital strategies may help achieve their long-term investment goals.

Private-market interest by age groupSource: Hamilton Lane Global Private Wealth Survey, as of December 2024.

Alternative investments, such as hedge funds, private equity, private debt and private real estate funds are not appropriate for all investors and are only open to “accredited” or “qualified” investors within the meaning of U.S. securities laws.

⁶ Blackstone, “Essentials of Private Markets,” accessed July 22, 2025.

Cash Alternatives and Fixed Income

Equities

Real Assets

Alternative Investments**

Source: Wells Fargo Investment Institute, July 28, 2025.

*Tactical horizon is 6-18 months

**Alternative investments are not appropriate for all investors. They are speculative and involve a high degree of risk that is appropriate only for those investors who have the financial sophistication and expertise to evaluate the merits and risks of an investment in a fund and for which the fund does not represent a complete investment program. Please see end of report for important definitions and disclosures.

Asset allocation and diversification are investment methods used to help manage risk. They do not guarantee investment returns or eliminate risk of loss including in a declining market.

Each asset class has its own risk and return characteristics. The level of risk associated with a particular investment or asset class generally correlates with the level of return the investment or asset class might achieve. Stock markets, especially foreign markets, are volatile. Stock values may fluctuate in response to general economic and market conditions, the prospects of individual companies, and industry sectors. The prices of small/mid-company stocks are generally more volatile than large company stocks. They often involve higher risks because of smaller and mid-sized companies may lack the management expertise, financial resources, product diversification and competitive strengths to endure adverse economic conditions. Foreign investing has additional risks including those associated with currency fluctuation, political and economic instability, and different accounting standards. These risks are heightened in emerging markets. Small- and mid-cap stocks are generally more volatile, subject to greater risks and are less liquid than large company stocks. Bonds are subject to market, interest rate, price, credit/default, liquidity, inflation and other risks. Prices tend to be inversely affected by changes in interest rates. High yield (junk) bonds have lower credit ratings and are subject to greater risk of default and greater principal risk. Although Treasuries are considered free from credit risk they are subject to other types of risks. These risks include interest rate risk, which may cause the underlying value of the bond to fluctuate. U.S. government securities are backed by the full faith and credit of the federal government as to payment of principal and interest. Unlike U.S. government securities, agency securities carry the implicit guarantee of the U.S. government but are not direct obligations. Payment of principal and interest is solely the obligation of the issuer. If sold prior to maturity, both types of debt securities are subject to market risk. The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility. Investing in a volatile and uncertain commodities market may cause a portfolio to rapidly increase or decrease in value which may result in greater share price volatility. Investing in physical commodities, such as gold, silver, platinum or palladium exposes a portfolio to other risk considerations such as potentially severe price fluctuations over short periods of time and storage costs that exceed the custodial and/or brokerage costs associated with a portfolio’s other holdings. Energy sector may be adversely affected by changes in worldwide energy prices, exploration, production spending, government regulation, and changes in exchange rates, depletion of natural resources, and risks that arise from extreme weather conditions. Real estate has special risks including the possible illiquidity of underlying properties, credit risk, interest rate fluctuations and the impact of varied economic conditions. Cash Alternatives typically offer lower rates of return than longer-term equity or fixed-income securities and may not keep pace with inflation over extended periods of time.

Alternative investments, such as hedge funds, private equity/private debt and private real estate funds, are speculative and involve a high degree of risk that is appropriate only for those investors who have the financial sophistication and expertise to evaluate the merits and risks of an investment in a fund and for which the fund does not represent a complete investment program. They entail significant risks that can include losses due to leveraging or other speculative investment practices, lack of liquidity, volatility of returns, restrictions on transferring interests in a fund, potential lack of diversification, absence and/or delay of information regarding valuations and pricing, complex tax structures and delays in tax reporting, less regulation and higher fees than mutual funds. Hedge fund, private equity, private debt and private real estate fund investing involves other material risks including capital loss and the loss of the entire amount invested. A fund's offering documents should be carefully reviewed prior to investing.

Hedge fund strategies, such as Equity Hedge, Event Driven, Macro and Relative Value, may expose investors to the risks associated with the use of short selling, leverage, derivatives and arbitrage methodologies. Short sales involve leverage and theoretically unlimited loss potential since the market price of securities sold short may continuously increase. The use of leverage in a portfolio varies by strategy. Leverage can significantly increase return potential but create greater risk of loss. Derivatives generally have implied leverage which can magnify volatility and may entail other risks such as market, interest rate, credit, counterparty and management risks. Arbitrage strategies expose a fund to the risk that the anticipated arbitrage opportunities will not develop as anticipated, resulting in potentially reduced returns or losses to the fund.

*Performance statistics for the nine strategic asset allocations

Strategic allocation	15-year annualized return (%)	Average of expected return (%, 2010-2024)	Average of expected return (%, 2009-2023)	15-year annualized standard deviation	Average of expected standard deviation (%, 2010-2024)	Average of expected standard deviation (%, 2009-2023)	15-year annualized Sharpe ratio	Average of expected Sharpe ratio (%, 2010-2024)	Average of expected Sharpe ratio (%, 2009-2023)
Conservative Income	3.19	4.46	4.48	4.47	3.95	3.95	0.44	0.48	0.48
Moderate Income	4.98	5.33	5.40	5.83	5.61	5.73	0.65	0.51	0.50
Aggressive Income	6.17	5.92	6.04	7.17	7.21	7.43	0.71	0.49	0.49
Conservative Growth & Income	6.26	6.18	6.23	7.99	7.98	7.98	0.68	0.48	0.48
Moderate Growth & Income	7.28	6.79	6.90	10.14	10.14	10.27	0.68	0.46	0.46
Aggressive Growth & Income	8.25	7.30	7.46	12.34	12.27	12.53	0.68	0.44	0.44
Conservative Growth	8.24	7.38	7.49	13.18	12.72	12.72	0.65	0.43	0.44
Moderate Growth	8.84	7.84	7.98	15.24	14.77	14.86	0.63	0.42	0.42
Aggressive Growth	9.12	8.19	8.36	17.01	16.50	16.68	0.60	0.41	0.42

Sources: © Morningstar Direct, All Rights Reserved, and Wells Fargo Investment Institute. Data as of December 31, 2024. Forecasts are not guaranteed and are subject to change.

We advise investors to select an asset allocation strategy deemed fit for their designated financial goals, time horizon, and ability and willingness to withstand market ebbs and flows. Our strategic allocations are based on capital market assumptions (CMAs) that reflect prospective trends over multiple market cycles.

As forward-looking estimates, CMAs are not guarantees of returns or risk. Rather, they are average annual estimates; actual performance for each calendar year will likely fluctuate around CMA estimations. As part of a comprehensive formulation process, we regularly review previous CMAs and consider factors to account for deviations from original estimates. This evaluation step helps to refine our CMA estimates going forward.

Performance results for the strategic allocations are for illustrative purposes only. Dynamic allocations change as needed with adjustments to the strategic allocations. Results do not represent actual trading, and the results achieved do not represent the experience of any individual investor. In addition, results do not reflect the impact of any fees, expenses, or taxes applicable to an actual investment. The indexes reflect the historical performance of the represented assets and assume the reinvestment of dividends and other distributions. An index is unmanaged and not available for direct investment. Past performance does not guarantee future results. Different investments offer different levels of potential return and market risk.

Average of expected returns, risk, and Sharpe ratios from 2010-2024 are based on WFII’s strategic return and risk assumptions and strategic asset allocations from 2010 through 2024. Average of expected returns, risk, and Sharpe ratios from 2009-2023 are based on WFII’s strategic return and risk assumptions and strategic asset allocations from 2009 through 2023. For illustrative purposes. Forecasts are based on certain assumptions and on views of market and economic conditions which are subject to change. Strategic expected returns are forward-looking geometric return estimates from Wells Fargo Investment Institute of how asset classes and combinations of classes may respond during various market environments. Expected returns do not represent the returns that an investor should expect in any particular year. They are not designed to predict actual performance and may differ greatly from actual performance. There are no assurances that any estimates given will be achieved.

Capital market and asset class assumptions are estimates of how asset classes and combinations of classes may respond during various market environments. Expected returns represent our estimate of likely average returns over the next several market cycles. They do not represent the returns that an investor should expect in any particular year. Geometric return is the compounded annual return that would give the same result as a given series of annual returns based on those same assumptions. The return and risk assumptions are statistical averages that do not represent the experience of any individual investor or any specific time period. Standard deviation is a measure of volatility. It reflects the degree of variability surrounding the outcome of an investment decision; the higher the standard deviation, the greater the risk. The Sharpe ratio measures the additional amount of return that an investor could expect to receive for taking on additional risk.

CMA forecasts are not promises of actual returns or performance that may be realized. They are based on estimates and assumptions that may not occur.

The information does not take into account the specific investment objectives, financial situation and particular needs of any specific person who may receive it. Investors should understand that statements regarding future prospects may not be realized.

Conservative Income is composed of: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 76% Bloomberg U.S. Aggregate Bond Index, 3% Bloomberg U.S. Corporate High Yield Bond Index, 3% J.P. Morgan EMBI Global, 12% S&P 500 Index, 2% Russell Midcap Index, 2% Bloomberg Commodity Index.

Moderate Income is composed of: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 60% Bloomberg U.S. Aggregate Bond Index, 4% Bloomberg U.S. Corporate High Yield Bond Index, 5% J.P. Morgan EMBI Global, 18% S&P 500 Index, 5% Russell Midcap Index, 4% MSCI EAFE Index, 2% Bloomberg Commodity Index.

Aggressive Income is composed of: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 47% Bloomberg U.S. Aggregate Bond Index, 6% Bloomberg U.S. Corporate High Yield Bond Index, 8% J.P. Morgan EMBI Global, 21% S&P 500 Index, 7% Russell Midcap Index, 7% MSCI EAFE Index, 2% Bloomberg Commodity Index.

Conservative Growth & Income is composed of: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 39% Bloomberg U.S. Aggregate Bond Index, 6% Bloomberg U.S. Corporate High Yield Bond Index, 5% J.P. Morgan EMBI Global, 23% S&P 500 Index, 8% Russell Midcap Index, 2% Russell 2000 Index, 7% MSCI EAFE Index, 4% MSCI Emerging Markets Index, 4% Bloomberg Commodity Index.

Moderate Growth & Income is composed of: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 30% Bloomberg U.S. Aggregate Bond Index, 6% Bloomberg U.S. Corporate High Yield Bond Index, 5% J.P. Morgan EMBI Global, 27% S&P 500 Index, 10% Russell Midcap Index, 3% Russell 2000 Index, 8% MSCI EAFE Index, 5% MSCI Emerging Markets Index, 4% Bloomberg Commodity Index.

Aggressive Growth & Income is composed of: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 20% Bloomberg U.S. Aggregate Bond Index, 7% Bloomberg U.S. Corporate High Yield Bond Index, 6% J.P. Morgan EMBI Global, 31% S&P 500 Index, 12% Russell Midcap Index, 3% Russell 2000 Index, 9% MSCI EAFE Index, 6% MSCI Emerging Markets Index, 4% Bloomberg Commodity Index.

Conservative Growth is composed of: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 16% Bloomberg U.S. Aggregate Bond Index, 3% Bloomberg U.S. Corporate High Yield Bond Index, 33% S&P 500 Index, 13% Russell Midcap Index, 5% Russell 2000 Index, 14% MSCI EAFE Index, 9% MSCI Emerging Markets Index, 5% Bloomberg Commodity Index.

Moderate Growth is composed of: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 8% Bloomberg U.S. Aggregate Bond Index, 3% Bloomberg U.S. Corporate High Yield Bond Index, 35% S&P 500 Index, 14% Russell Midcap Index, 6% Russell 2000 Index, 15% MSCI EAFE Index, 12% MSCI Emerging Markets Index, 5% Bloomberg Commodity Index.

Aggressive Growth is composed of: 2% Bloomberg U.S. Treasury Bills (1–3 Month) Index, 37% S&P 500 Index, 16% Russell Midcap Index, 7% Russell 2000 Index, 18% MSCI EAFE Index, 15% MSCI Emerging Markets Index, 5% Bloomberg Commodity Index.

Bloomberg U.S. Aggregate Bond Index is a broad-based measure of the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market.

Bloomberg U.S. Corporate High Yield Bond Index covers the U.S. dollar-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB= or below. Included issues must have at least one year until final maturity.

Bloomberg U.S. Treasury Bills (1–3 Month) Index is representative of money markets.

Bloomberg Commodity Index is comprised of 23 exchange-traded futures on physical commodities weighted to account for economic significance and market liquidity.

J.P. Morgan Emerging Market Bond Index (EMBI) Global is a U.S. dollar-denominated, investible, market cap-weighted index representing a broad universe of emerging market sovereign and quasi-sovereign debt. While products in the asset class have become more diverse, focusing on both local currency and corporate issuance, there is currently no widely accepted aggregate index reflecting the broader opportunity set available, although the asset class is evolving. By using the same index provider as the one used in the developed-market bonds asset class, there is consistent categorization of countries among developed international bonds (ex. U.S.) and emerging market bonds.

MSCI EAFE (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization index designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.

MSCI Emerging Markets Index is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.

Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. Russell 3000® Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.

Russell Midcap® Index measures the performance of the 800 smallest companies in the Russell 1000 Index, which represent approximately 25% of the total market capitalization of the Russell 1000® Index. Russell 1000® Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index.

S&P 500 Index is a market capitalization-weighted index composed of 500 widely held common stocks that is generally considered representative of the US stock market.

An index is unmanaged and not available for direct investment.

Investment Grade bonds - A rating that indicates that a bond has a relatively low risk of default. Bond rating firms, such as Standard & Poor's, use different designations consisting of upper- and lower-case letters 'A' and 'B' to identify a bond's credit quality rating. 'AAA' and 'AA' (high credit quality) and 'A' and 'BBB' (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations ('BB', 'B', 'CCC', etc.) are considered low credit quality, and are commonly referred to as "junk bonds".

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