asset management, llc · macro driven, performance oriented p 1 company profile company profile...

Asset Management, LLCMacro-driven, Performance-oriented

Since 1987

Asset Management, LLC

Macro Driven, Performance Orientedwww.hillswickasset.com P 1

Company Profile

Company Profile

•Macro-driven, value-focused manager of U.S. equity andfixed income strategies

•In operation since 1987

•100% employee-owned

•Registered with SEC* as an Investment Adviser with $1.1billion in assets under management as of December 31,2016**

*Registration does not imply a certain level of skill or training**All data as of 12/31/2016. The above information is supplemental to the full presentation disclosure located on the last page of this presentation. Past performance is not indicative of future results. Performance is gross of fees.


Portfolio Manager Profile

Jan Erik Warneryd, CFA

•Portfolio Manager for strategy since inception

•Former Global Macro Portfolio Manager for Tudor Investment Corporation

•Former Head of Global Macro Proprietary trading at Morgan Stanley

•31 years of investment experience


An Overview of theS&P 500 Sector Selection Strategy

S&P 500 Sector Selection Strategy

•Factor-oriented

•Macro-driven

•Positioned for the long-term

*Data courtesy of S&P Dow Jones Indices

Consumer Discretionary, 12%

Consumer Staples, 9%

Energy, 8%

Financials, 15%

Health Care, 14%

Industrials, 10%

Information Technology, 21%

Materials, 3%

Real Estate, 3%

Telecom Services, 3% Utilities, 3%

The 11 GICS Sectors of the S&P 500 Index*


Strategy Sector Weightings comparedto S&P 500 Index Sector Weightings

Consumer Discretionary, 12%

Consumer Staples, 9%

Energy, 8%

Financials, 15%

Health Care, 14%

Industrials, 10%

Information Technology, 21%

Materials, 3%

Real Estate, 3%Telecom Services, 3% Utilities, 3%

Consumer Discretionary, 7.8%

Consumer Staples, 9.7%

Energy, 1.3%

Financials, 17.9%

Health Care, 18.4%Industrials, 10.5%

Information Technology, 22.5%

Materials, 1.2%Real Estate, 0.0%

Telecom Services, 7.6% Utilities, 3.1%

S&P 500 Index* S&P 500 Sector Selection Strategy**

*Data courtesy of S&P Dow Jones Indices **All data as of 12/31/2016. The above information is supplemental to the full presentation disclosures located at the end of this presentation. Cash and accrued expenses are not included in strategy sector weight calculations.


Strategy Sector Weightings comparedto S&P 500 Index Sector Weightings

*Data courtesy of S&P Dow Jones Indices **All data as of 12/31/2016. The above information is supplemental to the full presentation disclosures located at the end of this presentation. Cash and accrued expenses are not included in strategy sector weight calculations.

0%

5%

10%

15%

20%

25%

S&P 500 Sector Selection Strategy** S&P 500 Index*


An Overview of theS&P 500 Sector Selection Strategy

#1• Exposure to the S&P 500 Index• Exposure to the S&P 500 Index

#2• Favorable factor tilts for the long-

term investor• Favorable factor tilts for the long-

term investor

#3• Actively managed to anticipate

macro events• Actively managed to anticipate

macro events

Intended for Investors that seek:


An Overview of theS&P 500 Sector Selection Strategy: Factor Tilts

Long-Term Compensated Return Factors

Dividend Yield

Dividend Yield

Low Volatility

Low Volatility

ValueValue

The Tailwinds of Compensated Factor Exposures

•Low Volatility

•Value

•Dividend yield


An Overview of theS&P 500 Sector Selection Strategy: Macro Overlay

Macro-EconomicOverlay

Factor Tilts

Applying a Macro-Economic Overlay

•Incorporates Hillswick’s established process

•Aim to protect strategy from factor-onlypitfalls (i.e., Value Traps)

•Positions portfolio defensively from perceivedmacro-economic risks


An Overview of theS&P 500 Sector Selection Strategy: Case Study

The Importance of a Macro-Economic Approach: A Case Study

•In early 2014, the Energy sector lookedundervalued

•The strategy’s macro assessmentconcluded to underweight for thesereasons…

Mean reversion

The implications of shale andnatural gas

Energy’s declining share of GDPovertime

Sector 2014e P/E P/Book Div. Yield

Consumer Discretionary 18.7 4.2 1.5%

Consumer Staples 17.7 4.3 2.7%

Energy 13.9 2.0 2.2%

Financials 13.6 1.4 1.7%

Health Care 17.6 3.7 1.7%

Industrials 17 3.2 2.1%

Information Technology 14.6 3.6 1.7%

Materials 17.6 3.0 2.1%

Utilities 15.9 1.6 3.8%

Telecom 13.7 2.5 5%

S&P 500 IndexSector Fundamentals Q1 2014*

*Data courtesy of Bloomberg


S&P 500 Sector Selection: Performance vs. Benchmark (Gross and Net of Fees)**

*Al data as of 12/31/2016. All periods longer than 12 months are annualized The above information is supplemental to the full presentation disclosures located at the end of this presentation. Past performance is not indicative of future results. Performance is gross of fees. **Courtesy of Bloomberg. ***Courtesy of Evestment.

SinceInception* YTD 2016* 1 Yr* 3 Yr* 5 Yr*

Strategy Gross 11.12% 10.94% 10.94% 9.86% 15.21%

Strategy Net 10.62% 10.39% 10.39% 9.32% 14.64%

S&P 500 Index 10.61% 11.96% 11.96% 8.87% 14.66%

0%3%6%9%

12%15%18%21%

Strategy Gross Strategy Net S&P 500 Index

# of Holdings 13Price/Earnings Ratio** 19.26Price/Book Ratio** 2.82Dividend Yield** 2.08%Beta (3 Year)*** 0.94Alpha (3 Year)*** 1.39Tracking Error (3 Year)*** 1.55Standard Deviation (3 Year)*** 10.23

Other Portfolio Characteristics

Performance vs. Benchmark *(Gross and Net of Fees as of 12/31/2016)


An Overview of theS&P 500 Sector Selection Strategy: Current Positioning

-8% -4% 0% 4% 8%

UtilitiesTelecommunication Services

Real EstateMaterials

Information TechnologyIndustrials

Health CareFinancials

EnergyConsumer Staples

Consumer Discretionary

Key Drivers for 2017

•The Energy story isn’t over…

•Despite 2016, the long-term prospects for Healthcare are promising…

•Fundamentals, higher rates and a steeper yield curve all make the case for Financials…

•A combination of the macro-landscape and fundamentals guide our Telecom overweight…

Strategy Weightings Relative to S&P 500 Index (Q4 2016)*

*All data as of 12/31/2016. The above information is supplemental to the full presentation disclosures located at the end of this presentation. Cash and accrued expenses are not included in strategy sector weight calculations.


S&P 500 Sector Selection: Performance Disclosure

Year EndTotal Assets

(Millions) USD (Millions) Number of Accounts Composite Gross Composite Net S&P 500 IndexComposite Dispersion

Composite Gross

S&P 500 Index

2016 1,073 116 Five or fewer 10.94% 10.39% 11.96% N.A. 10.09% 10.59%2015 1,222 105 Five or fewer 2.86% 2.36% 1.38% N.A. 10.04% 10.47%2014 1,372 102 Five or fewer 16.20% 15.62% 13.69% N.A. 8.51% 8.98%2013 1,223 88 Five or fewer 31.55% 30.89% 32.39% N.A. 10.87% 11.94%2012 1,395 67 Five or fewer 16.37% 15.79% 16.00% N.A. 14.09% 15.09%2011 1,340 61 Five or fewer 2.45% 1.97% 2.11% N.A. 18.23% 18.70%2010 1,211 96 Five or fewer 13.92% 13.41% 15.06% N.A. **N.A. **N.A.2009 1,299 84 Five or fewer 26.62% 26.19% 26.46% N.A. **N.A. **N.A.

**2008 1,000 0.79 Five or fewer -20.43% -20.43% -21.94% N.A. **N.A. **N.A.

N.A.- Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year.

** N.A. - The 3-year annualized standard deviation is not presented as 36 monthly returns are not available.

Total Firm Assets Composite Assets

** Results shown for the year 2008 represent partial period performance from September 30, 2008 through December 31, 2008.

3-yr Annualized Standard DeviationAnnual Performance Results

The S&P 500 Sector Selection Composite (“Composite”) consists of fully discretionary accounts. The Composite will invest in Exchange Traded Funds (ETFs) which are publicly traded securities that hold passively managed portfolios of stocks, typically emulating indices. The investment objective of the Composite is to outperform the Standard & Poor’s 500 Equity Index, over any business cycle, by over and underweighting the broad sectors of the U.S. equity market. The Composite will not adopt a posture in which itsexposure to any one sector exceeds three times the sector’s weight in the S&P 500 Index. The Composite may invest in ETFs representing pools of publicly traded U.S. equities, not all of which are members of the Standard and Poor’s 500 Index. The base currency of the Composite is U.S. Dollar. For comparison purposes the Composite is measured against the S&P 500 Index. The Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks representing all major industries of the broad domestic economy.

Effective 01/13/2016 the firm policies require that the number of accounts statistic: 1) exclude participants in pooled vehicle accounts and 2) state "five or fewer" whenever the composite account membership includes less than six accounts.

Hillswick Asset Management, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Hillswick Asset Management, LLC has been independently verified for the periods from September 15, 2004 through June 30, 2016. The verification report(s) is/are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. A third-party verification as set forth by the GIPS standards has been conducted by Ashland Partners & Company LLP.

Hillswick Asset Management, LLC is a registered investment advisor. The firm maintains a complete list and description of composites, which is available upon request. Results are based on fully discretionary accounts under management, including those accounts no longer with the firm.

The U.S. Dollar is the currency used to express performance. Returns are presented gross and net of management fees and include the reinvestment of all income. Net performance presented reflects actual fees paid, including performance-based fees when applicable. Actual fees paid vary dependent on the individual account’s chosen fee schedule (options stated below). Depending on specific circumstances, management fees may be negotiable. Actual investment advisory fees incurred by clients may vary.

Investments in the Hillswick Macro Strategy Fund Investments in Separate Accounts StructureOption 1 - Asset-based Fee Structure Option 1 - Asset-based Fee StructureAccount Size Annual Fee (%) Account Size Annual Fee (%)Any 0.50% First $10 million 0.40%

Next $15 million 0.30%The above fee schedule is subject to a minimum amount of $7,500.00 p.a.

Option 2- Performance-based Fee Structure Option 2- Performance-based Fee Structure Account Size Annual Fee (%) Performance-based fees include a negotiated asset-based fee plus a negotiated Any 0.35% percentage of the excess return generated by the portfolio (before management Plus 15% of the excess return generated by the portfolio fees) each calendar year over and above the benchmark agreed to with the client (before management fees) each calendar year over and with dividends reinvested. above the S&P 500 Index with interest/dividends reinvested.

The annual composite dispersion presented is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Past performance is not indicative of future results.

Beginning July 1, 2009, GIPS composite policy requires the temporary removal of any portfolio incurring a client initiated significant cash inflow or outflow of 50% of portfolio assets. The temporary removal of such an account occurs at the beginning of the month in which the significant cash flow occurs and the account re-enters the composite the month after the cash flow. Additional information regarding the treatment of significant cash flows is available upon request.

The S&P 500 Sector Selection Composite was created September 30, 2008. From 9/30/08 to 8/31/10 the Composite’s name was The Hillswick Macro Strategy Fund Composite.


Contact Information

For additional information, please contact

Frank TedescoManager, Marketing and Client ServiceTel: 203.425.1439Email: [email protected]

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