Navigating an Evolving Crisis

March 16, 2020

Extraordinary Events

Week ended March 13, 2020

Saudi Arabia announces higher oil production

COVID-19 confirmed cases globally rise from 98,000 to 133,000

Closures include schools, churches, cruise lines, Broadway, Masters, Disneyland

President Trump declares national emergency, higher funding, more tests

Central bankers cut rates, buy bonds, commit additional liquidity to stem follow-on effects

Week’s High Week’s Low Closing Price

DJIA 25,021 21,154 23,186

Oil $41 $27 $33

U.S. Treasury 0.99% 0.40% 0.95%

Gold $1,704 $1,504 $1,529

Bitcoin $8,914 $4,107 $5,564

Today’s Agenda

Holly MacDonaldChief Investment Officer

Michael MarquezChief Operating Officer

Marc SternChief Executive Officer

Providing Context

Ensuring Operational Readiness

Focusing on Investment Fundamentals

Q&A

The Path We Expect Over Time

People come together

Policymakers take action

Markets find their footing

Recovery takes shape

Focus areas in 2020

Behavioral changes stem

spread of the coronavirus

Aid soothes corporate

funding markets and limits

business failures

Asset valuations reach

compelling levels, sparking

new buying interest

Bessemer’s wherewithal for turbulent times

Business continuity planning

Stability from private ownership

Strong balance sheet

Investments team focus on fundamentals

Culture of client service

From

disruption

to

recovery

Operational Readiness: Serving Clients at the Core

CommunicationKeeping you informed

Information Security Keeping client information safe

Operational Readiness Sustaining business operations

Workforce Supporting safety and wellbeing

of our people

People

Process

Tech

Crisis ManagementNavigating through turbulence

Clients

Continued emphasis on stability

Rigorous controls and risk management

Extensive preparation, tests, and drills

Take Care With Emails, Especially in Times of Crisis

91%

AVOID

Opening emails if you don’t trust the source

Clicking on suspicious links or opening attachments you’re unsure of

Putting sensitive information in personal emails

Scammers Exploiting Coronavirus

Elicit a sense of fear and urgency to entice their victims to

click a malicious link, open a malicious document, or

donate to a fake charity

Recent phishing emails appear to come from:

• Centers for Disease Control and Prevention

• School districts

• Social media with breaking news

Percent of

cybercrimes

started with email

S&P 500 Volatility

Historical Perspective on Market Volatility

0%

15%

30%

45%

60%

75%

90%

Jan 18 Jul 18 Jan 19 Jul 19 Jan 20

COVID-19 and Oil Shocks

Black Monday

0%

15%

30%

45%

60%

75%

90%

Jan 87 Jul 87 Jan 88 Jul 880%

15%

30%

45%

60%

75%

90%

May 01 Aug 01 Nov 01 Feb 02 May 02

September 11 Terrorist Attacks

Global Financial Crisis

0%

15%

30%

45%

60%

75%

90%

Jul 07 Jan 08 Jul 08 Jan 09 Jul 09

October 19, 1987 September 11, 2001

2008-2009February 2020 to Present

Record-Breaking Cash Movement

Biggest corporate bond and emerging markets debt outflow ever = $(34.1) billion

Biggest financial sector outflow ever = $(3.3) billion

Aggregate Fund Outflows/Inflows for the Week of March 13

Biggest inflow to energy funds since Dec. 2015 = $1.3 billion

Second-biggest inflow to gold ever = $3.1 billion

Biggest government bond inflow ever = $13.9 billion

Biggest cash inflow ever = $136.9 billion

Market Volatility Strikes Bonds as Well

0%

1%

2%

3%

4%

Mar 18 Aug 18 Jan 19 Jun 19 Nov 19

U.S. 10-Year AAA

Municipals Yield

U.S. 10-Year

Treasury Yield

Funding Markets Under Stress

High yield, investment grade,

and mortgage spreads have

widened

Short-term interbank rates

high versus fed funds

U.S. dollar borrowing rates for

foreign central banks at

expensive levels

Fed actions could provide

some relief

2%

3%

4%

5%

6%

7%

8%

9%

Mar 15 Dec 15 Sep 16 Jun 17 Mar 18 Dec 18 Sep 19

U.S. High Yield minus 10-Year Treasury Yield

High Yield Spread Widening

Oil Market Developments Adding to Volatility

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2009 2012 2015 2018

Top Oil-Producing CountriesThousands of

barrels per day

U.S.

Russia

Saudi Arabia

Iran

Iraq

U.A.E.

• Unlimited cash to be made available to German companies and workers

• ECB expanding its balance sheet further and loans to SMEs; additional rate cuts expected

• Broader eurozone economic stimulus expected

• Significant rate cuts and liquidity support measures

• $8.5B spending package to address the outbreak; further measures passed by House and heading to Senate

• Public-private partnerships in development to tackle testing challenges

• Buying oil for strategic reserve

• Significant expenditure on coronavirus testing and treatment

• Support to SMEs including delay in fee collection, rent deduction, tax delay/deduction

• Adjustments to unemployment insurance like delayed collection or reduction

• Rate cuts and lower reserve requirements for banks; increase in bond issuance

• Substantial rate cut

• $10 billion stimulus including small business subsidies, child care subsidies, and job retraining

• €28 billion spending package

• Doubled ETF purchases

• Small business loan packages of ~$20 billion

Global Policy Response Key to Reducing Pressure

U.S.

Germany

Italy

S. Korea

Japan

China

Bessemer Positioning

Defensive Tilt:

Modest overweight to protective assets

Focus on companies with solid balance sheets and ample free cash flow

Within equities, overweight U.S. and maintain allocation to managed volatility equities

Diversification:

Broad range of internal and external manager mandates

Hedge funds with differentiated return profiles

Outlook:

Our assessment of risk/reward in this highly volatile period reinforces our conviction in

balanced allocations and taking a long-term view

Emphasis on bottom-up security selection

A Roadmap for What’s Ahead

Fundamentals were

generally strong:

Corporate earnings

Unemployment

Inflation

Consumer confidence

Takes toll for

at least 1-2

quarters

• Fear persists into summer

• Layoffs build; small businesses close

• ’20 earnings fall sharply; ’21 estimates cut

• Policymaker discord grows

• Recessionary environment

Potential for further market declines

Path A: Weaker for longer

• Fear recedes by late spring

• Companies keep valued staff

• ’20 earnings down; ‘21 estimates holding

• Policymakers stay together

• Rising confidence lifts consumer purchases

Potential equity gains before recovery

Path B: Spring forward

2020 Coronavirus

Closer Look at Equity Portfolios

Large Cap Core

Small & Mid Cap Core

Large Cap - Global

U.S. Select

Bought high-conviction names at cheaper valuations

Sold companies with increased execution concerns

Bought quality companies impacted by exposure to

China; added quality banks

Sold companies due to thesis drift or elevated valuations

Added to high-conviction companies with strong

compounding potential

Trimmed stocks with elevated valuations

Bought companies that had de-rated excessively

Reduced overweight to restaurant industry and

outperformers

Stocks for the Long Run

54.3%58.4%

62.6%67.5% 70.5%

74.0%

84.9%89.5%

97.5% 99.9%

1 Day 1 Week 1 Month 3 Month 6 Months 1 Year 3 Years 5 Years 10 Years 15 Years

Probability of Gain in U.S. Stock Market

Even so, $100,000 investedin 1970 is now worth:

$16,000,000

This drop has occurred163 times since 1970.

The Power of Compounding

As of March 13, 2020.

Source: Dow Jones, American Association of Individual Investors

Average rise in the Dow Jones Industrial Average since 1970:

2 points per day

Weekly sentiment survey of 150,000 investors

Dow has dropped

at least 2.5% on eight days

so far this year

0

5,000

10,000

15,000

20,000

25,000

30,000

Jan-1990 Jan-1993 Jan-1996 Jan-1999 Jan-2002 Jan-2005 Jan-2008 Jan-2011 Jan-2014 Jan-2017 Jan-2020

Tracking Investor Sentiment

Dow Jones Industrial Average as of March 13, 2020. Latest investor sentiment as of March 12, 2020.

Source: Dow Jones, American Association of Individual Investors

Sentiment: 2nd percentile

Sentiment: 14th percentile

Latest Sentiment (March 12, 2020): 76th percentile

Sentiment: 8th percentile

Sentiment: 96th percentile

Sentiment: 99th percentile

Dow Jones Industrial Average

Sentiment: 92nd percentile

Sentiment: 97th percentile

Summary

The COVID-19 global pandemic is bringing significant hardship for individuals and

families, communities, healthcare providers, and economies; follow-on effects will likely

exacerbate these pressures.

Swift, coordinated, and broad policymaker responses are essential to limit contagion,

stem downside risks, and gradually restore confidence.

While recessionary risks have risen, we expect markets to gradually find their footing as

attractive valuations reach compelling levels.

Rather than dramatic swings in asset allocation, we favor a measured approach; our

portfolio teams are finding interesting entry points for new holdings while trimming less

compelling positions.

As a firm, we believe our advance planning, significant resources, and stable foundation

give us the wherewithal to deliver the comprehensive, personal, and dependable

services you rely on.