Schroders Equity Lens - Strategic Research Unit April 2021
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Schroders Equity Lens Strategic Research Unit April 2021 Marketing material for professional investors or advisers only.
Table of contents 01 Reflation trades 02 Regional 03 Sectors & Styles 04 Fundamentals 05 Income 2
Summary (1 of 2) – Global equities continued their positive momentum in March, but returns varied greatly across regions and sectors. – In local currency terms, performance was led by European equities (+6.8%) and Japanese equities (+5.0%), but much of these gains were eroded for US dollar investors due to a strengthening dollar. – Markets seem to have downplayed new waves of Covid-19 in Europe and its resulting economic restrictions, as Eurozone manufacturing PMI data grew at its fastest pace on record since 2006. – Meanwhile, a major correction in Chinese equities (38% of the MSCI EM Index) resulted in EM equities falling by 1.5%, as lofty valuations and rising global bond yields weighed on market sentiment. – Such EM index concentration highlights the opportunities and risks facing EM investors. For example, 14 out of the 27 countries in the EM universe have outperformed the MSCI EM Index in the last six months, up from only 9 countries in February. 3
Summary (2 of 2) – In US dollar terms, the UK is currently one of the best performing equity markets this year (+6.2% YTD), supported by a strong vaccine roll-out and bullish earnings forecasts. – Among sectors, performance was mixed as a handful of cyclical and defensive industries posted strong returns. Utilities (+7.5%), consumer staples (+6.1%) and industrials (+5.8%) outperformed the global index, while IT (+0.4%), communication services (+0.3%) and consumer discretionary (+1.4%) underperformed. – Global value stocks posted their best return against growth stocks since 2001, outperforming by 4.9% in March. The prevailing market narrative is that higher bond yields are driving the rotation because they tend to harm long-duration growth stocks more. – However, our analysis finds that this recent strong positive correlation is an outlier compared to long-term history and may not persist beyond the economic recovery. Neither value nor growth indices hold a constant set of securities over time and this turnover means that their overall relationship with interest rates varies. – Despite their recent underperformance, US growth stocks are still trading at their largest valuation premium relative to value stocks since the year 2000, as measured on a cyclically adjusted price-to-earnings (CAPE) basis. 4
Global equities Reflation trades
Non-US equities poised to outperform in economic recovery
Cyclical opportunities are less represented in US stock market vs Rest of World
Exposure to economically sensitive sectors is significantly In the 2000s, US equities underperformed as global economic
lower in the US compared to markets elsewhere activity rebounded...could the 2020s repeat this pattern?
Cyclical exposure, % Total return rebased to 100
75 20 65
70
15
Global equities outperformed
60
65
10
60
55
5
55
50 0
50
45
-5
40 US equities outperformed 45
-10
35
30 -15 40
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 1999 2000 2001 2002 2003 2004
US UK Europe Japan EM MSCI World (ex US) vs MSCI USA Global PMI Composite Index (RHS)
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021 in US dollars. Notes: cyclical exposure captures the share of total index market capitalisation in energy, materials, industrials,
financials, consumer discretionary and real estate stocks.
6What’s driving the reflation trade?
Banks and energy companies have rebounded over improving economic outlook
Steeper yield curve is helping banking sector Higher commodity prices are helping energy sector
120 1.8 140 50
120
100 1.6 40
100
80 1.4 30
80
60 1.2 60 20
40
40 1 10
20
20 0.8 0 0
-20
0 0.6 -10
-40
-20 0.4 -20
-60
-40 0.2 -80 -30
Mar 20 May 20 Jul 20 Sep 20 Nov 20 Jan 21 Mar 21 Mar 20 May 20 Jul 20 Sep 20 Nov 20 Jan 21 Mar 21
US banks, yoy % total return Yield curve (UST 10yr - 2yr), RHS US energy, yoy % total return Bloomberg Commodity Index, RHS
Forecasts included are not guaranteed and should not be relied upon. Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv and Schroders. Data to 31 March 2021 in US dollars.
7Covid-19 laggards continue to make up lost ground
Although sluggish vaccine roll-out + travel restrictions dim hopes for quick recovery
Global cumulative total $ return, %
30
20
10
0
-10
-20
-30
-40
-50
-60
Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Jan 21 Feb 21 Mar 21
Airlines Banks Energy MSCI AC World
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021 in US dollars.
8Is inflation good or bad for equities? Low and rising inflation is the sweet spot, but increases above 3% can be damaging % of rolling 12-month periods when asset class returns exceeded US CPI inflation rate, 1973 to 2020 Inflation regime Rate of occurrence US Treasuries US equities US REITs Commodities Low (3%) and rising 26% 47% 48% 67% 83% High (>3%) and falling 26% 80% 76% 80% 37% Low (
Price-to-earnings valuations vs inflation Weak relationship between P/E and inflation at low inflation levels (i.e.
Which equity sectors can combat higher inflation? US equity performance in high (+3%) and rising inflation environments Past performance is not a guide to future performance and may not be repeated. Source: Datastream Refinitiv and Schroders. Data from March 1973 to December 2020. Notes: based on monthly rolling 12-month returns in excess of US CPI inflation rate. High inflation defined as periods where y/y % change in US CPI is above 3% on average over last 12 months. Rising inflation is defined as the absolute change in the inflation rate over last 12 months. All sectors proxied using US Datastream indices, except real estate which is the FTSE NAREIT All Equity and Mortgage US REITs Index. 11
Rotation from growth to value stocks holding up globally
Performance differential widened significantly in February as bond yields spiked
Global cumulative total $ return, %
25
Global value, +19.4%
20
15
10
5-year US Treasury
yield spikes by 0.2%
5
Joe Biden confirmed by US Global growth, +4.5%
Congress as president-elect
0
Pfizer vaccine announcement
-5
06 Nov 20 20 Nov 20 04 Dec 20 18 Dec 20 01 Jan 21 15 Jan 21 29 Jan 21 12 Feb 21 26 Feb 21
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data from 6 November 2020 to 31 March 2021 in US dollars.
12Inflection points in profit cycle are key for value’s prospects
Current US rotation from growth to value appears very strong by historical standards
US value vs. growth return (%) rebased
20
+15%
15
10 Value outperforms
5
0
-5
10/90th pct
Average
Growth outperforms
-10 Current
-12m -9m -6m -3m +0m +3m +6m +9m +12m
-15
1 2 3 4 5 6 7 8 9 -48%
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Months around EPS growth inflection point
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv and Schroders. Data from 30 April 1992 to 31 March 2021. Notes: average based on 9 market episodes of performance of MSCI USA Value less Growth. Inflection point calculated as
y/y change in annual EPS growth lagged by 3 months to account for lag in which quarterly profits are reported. Current EPS growth inflection is measured as at 31 August 2020.
13Global equities Regional performance
Could 2021 be the year when the US underperforms?
UK equities now top performance leadership board after years of lacklustre gains
Total $ return, %
Best
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD
EM US Europe US US Japan US EM US US US UK
19.2% 2.0% 22.5% 32.6% 13.4% 9.9% 11.6% 37.8% -4.5% 30.6% 21.4% 6.2%
Japan UK EM Europe EM US EM Europe Japan Europe EM US
15.6% -2.5% 18.6% 28.7% -1.8% 1.3% 11.6% 27.8% -12.6% 25.9% 18.7% 5.5%
US Japan US Japan Japan Europe Japan Japan UK UK Japan Europe
15.4% -14.2% 16.1% 27.3% -3.7% 0.1% 2.7% 24.4% -14.1% 21.1% 14.9% 3.6%
UK Europe UK UK UK UK Europe UK EM Japan Europe EM
8.8% -14.5% 15.3% 20.7% -5.4% -7.5% 0.3% 22.4% -14.2% 20.1% 11.6% 2.3%
Europe EM Japan EM Europe EM UK US Europe EM UK Japan
2.4% -18.2% 8.4% -2.3% -5.8% -14.6% 0.0% 21.9% -14.4% 18.9% -10.4% 1.7%
Worst
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021 in US dollars. Europe = Europe ex UK.
15Breakdown of YTD equity returns
Profits driving returns in EM and Japan, while valuations behind UK, US and Euro gains
YTD return source, %
20
15
10
5
0
-5
-10
UK US Europe ex UK EM Japan
Income EPS growth P/E change FX return Total Return
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021 in US dollars.
16Global earnings growth has turned a corner
More room for UK, Europe and Japan to bounce back given deeper profit declines…
12-month EPS growth, %
40
30
20
10
0
-10
-20
-30
-40
-50
Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Dec 19 Jun 20 Dec 20
US UK Europe ex UK Japan EM
Forecasts included are not guaranteed and should not be relied upon.
Source: Datastream Refinitiv, IBES, MSCI and Schroders. Data to 31 March 2021.
17UK’s yearly equity performance vs earnings revisions
Share prices have finally caught up with earnings momentum after months of lagging
80 100
80
60
60
40 40
20
20
0
0
-20
-20 -40
-60
-40
-80
-60 -100
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
UK equities (local terms), yoy % chg 13w earnings revisions ratio %, RHS
Forecasts included are not guaranteed and should not be relied upon.
Source: Datastream Refinitiv, IBES, MSCI and Schroders. Data to 31 March 2021 in GBP. Notes: 13w earnings revisions = sum of 13 week positive minus negative 12m forward EPS revisions / total revisions.
18Cracks begin to emerge in US equities’ leadership
Dollar weakness and waning earnings strength is undermining US outperformance
US vs RoW, 12m $ return, %
25
20
15
10
5
0
-5
-10
-15
-20
-25
Mar 2017 Sep 2017 Mar 2018 Sep 2018 Mar 2019 Sep 2019 Mar 2020 Sep 2020 Mar 2021
Income EPS growth P/E change FX return Total return
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021 in US dollars. Notes: RoW = MSCI AC World ex US Index $.
19Big Tech punches below its weight
Recent FAMAG underperformance has become a drag on overall US equity returns
Cumulative total return (since Pfizer vaccine announcement), %
25
20 +18.4%
15
+13.9%
10
+4.0%
5
0
-5
-10
06 Nov 20 20 Nov 20 04 Dec 20 18 Dec 20 01 Jan 21 15 Jan 21 29 Jan 21 12 Feb 21 26 Feb 21 12 Mar 21 26 Mar 21
S&P 500 S&P 500 ex FAMAGs FAMAGs
Past performance is not a guide to future performance and may not be repeated
Source: Datastream Refinitiv and Schroders. Data from 9 November 2020 to 31 March 2020. Notes: FAMAG is a market-cap weighted index of Facebook, Amazon, Apple, Microsoft and Alphabet (Google’s
parent).
20A weak US dollar may further support EM equities
EM vs. DM performance tends to be inversely correlated with the strength of US dollar
YoY total return, %
20 -15
15 -10
10
-5
5
0
0
5
-5
10
-10
15
-15
-20 20
-25 25
Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Dec 19 Jun 20 Dec 20
EM vs DM equities US dollar index (inverted RHS)
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021 in US dollars. Notes: EM = MSCI EM index $ and DM = MSCI World Index $.
21Broader group of countries driving EM equity returns
Hopes for vaccine-fuelled trade recovery are helping others to catch up
China, Korea and Taiwan account for over 2/3 of EM market cap EM performance showing stronger signs of broadening out
% of MSCI EM market cap Number of countries (total 27) in MSCI EM Index outperforming over 6m
80 20
18
70
16
60
14
50
12
40 10
8
30
6
20
4
10
2
0 0
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Dec 19 Jun 20 Dec 20
China Korea Taiwan
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021. Notes: MSCI EM Index currently consists of 27 countries in total.
22Global equities Sector and style performance
Global small vs. large caps
Years of underperformance erased in 2H 2020, but rotation has lost steam in 2021
Global small vs. large caps, 5-year rolling annualised return %
8
7
6
5
Small caps outperformed
4
3
2
1
0
-1
Large caps outperformed
-2
-3
-4
-5
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021.
24Global sector returns
Energy companies and financials have claimed top spot from Covid-19 winners
Global $ sector return, %
IT 0.4 12.1 46.1
Health care 2.4 4.4 15.4
Cons Stap 6.1 8.8
Utilities 4.3 4.6 7.5
Comm Svs 0.3 12.5 24.1
Materials 3.5 19.4 21.5
Industrials 5.8
5.8 11.8 18.1
Financials -3.2 4.3 31.1
Energy -27.7 2.2 49.9
Real estate -5.7 4.3 12.4
Cons Disc 1.4 9.9 37.0
-40 -30 -20 -10 0 10 20 30 40 50 60
1-month return Since Nov-20* 2020 return
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021 in US dollars. Notes: *Since 9 November 2020 to capture Covid-19 vaccine announcement. Utilities 1-month return is 7.5%, consumer
staples since November return is 5.2%.
25US growth stocks look increasingly expensive on CAPE basis
Long-term odds increasingly stacked in favour of value stocks…
Subsequent 10-year annualised return %, US growth minus value
10
January 2011
8
6
Growth outperformed
4
December 2016*
2
0
-2
March 2000
-4
Value outperformed
-6
March 2021*
-8
0 5 10 15 20 25 30 35 40
Starting relative CAPE ratio, US growth minus value
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021. Notes: based on total returns of MSCI USA Value less Growth. *March 2021 and December 2016 subsequent 10-year returns are
forecasts based on line of best fit.
26Global value vs. growth
Opportunity for further mean-reversion still significant given wide valuation dispersion
Relative valuations still remain high by historical standards Relative returns starting to converge towards fundamentals
Growth vs Value (global) Relative P/E Growth / Value (global), rebased to 100
50 18 200
16
40
180
14
30
12 160
20 10
140
10 8
6 120
0
4
-10 100
2
-20 0 80
2003 2005 2007 2009 2011 2013 2015 2017 2019 2008 2010 2012 2014 2016 2018 2020
yoy % total return, Growth minus Value Forward 12m P/E, Growth minus Value (RHS) Growth/value forward 12M EPS Growth/value total return
Forecasts included are not guaranteed and should not be relied upon. Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv and Schroders. Data to 31 March 2021 in US dollars. Based on MSCI ACWI World.
27Relationship between yields and value stocks is unstable
Strong correlation of last three years has been an outlier versus long-term history
Rolling 3-year correlation, value vs. growth against monthly changes in real yields
0.8
2018-2021
0.6 Positive relationship between value/growth
returns and real yield movements
0.4
0.2
0
-0.2
Negative relationship between value/growth
-0.4 returns and real yield movements
-0.6
-2 0 2 4 6 8 10 12
10-year US real yields
2010-present 2000-2010 1990-2000 1980-1990
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, Federal Reserve Bank of Cleveland and Schroders. Data to February 2021. Notes: monthly total returns of MSCI USA Value less Growth and interest rate changes expressed as
standard deviation of monthly changes over previous three years. Real yields and inflation expectations from 1982 to 2003 uses Cleveland Fed modelled data, 2003 to present is based on US 10-year TIPS and
breakeven rate.
28The speed of rates movements matters more for value
Value tends to outperform in periods of sharp and sudden real yield increases
Average US value vs growth 1m % return (since 1982)
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5Cyclical vs. defensive exposure varies over time
US value stocks currently have a strong cyclical bias vs. growth stocks
US market value vs. growth estimated weightings (rolling 12-month average)
30%
25%
Overweight
20%
15%
10%
5%
0%
-5%
-10%
Underweight
-15%
-20%
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021
Cyclical Defensive
Past performance is not a guide to future performance and may not be repeated.
Source: CopyRight 2021 Morgan Stanley Research and Schroders. Data to 31 March 2021. Notes: estimated weightings based on Morgan Stanley US Top 1000 Value and Growth Index. Weights will not add up
to 100% as remainder will capture “secular” stock exposure, which is neither cyclical nor defensive.
30Global equities Fundamentals
Nothing looks cheap these days
Bargains are difficult to find, but Japanese and UK equities offer relative value
Valuations vs. 15-year median (31 March 2021)
Equity market CAPE Forward P/E Trailing P/E P/B Dividend yield
34 23 34 4.6 1.4
US
(23) (15) (19) (2.8) (2.0)
14 13 20 1.7 3.3
UK
(13) (12) (14) (1.8) (3.8)
22 18 27 2.2 2.1
Europe ex. UK
(16) (13) (16) (1.7) (3.2)
23 18 25 1.6 1.9
Japan
(23) (14) (16) (1.3) (2.0)
16 15 22 2.1 1.8
EM
(15) (11) (14) (1.7) (2.6)
Key: >20% 10-20% 0-10% 0-10% 10-20% +20%
Expensive Cheap
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021. Figures are shown on a rounded basis. Assessment of cheap/expensive is relative to 15-year median in brackets.
32US equities most expensive on record vs rest of world
History suggests non-US equities are likely to outperform over the coming decade
Subsequent relative 10-year annualised total return, US minus global (ex US) equities, %
20
15
10
US equities expensive vs RoW
5
December 2007
0
March 2021*
-5
US equities cheap vs RoW
-10
-25 -20 -15 -10 -5 0 5 10 15 20
Starting relative CAPE, US minus global (ex US) equities
Past performance is not a guide to future performance and may not be repeated. Forecasts included are not guaranteed and should not be relied upon.
Source: Refinitiv Datastream and Schroders. Data from January 1974 to March 2021. Notes: US equities = MSCI USA Index, global equities = MSCI World ex US Index $. *Forecast return based on line of best fit.
33Introducing the “Tesla” effect
Tesla’s soaring market cap has started to skew US market fundamentals
Tesla is rubbing shoulders with Big Tech US P/E multiples have fallen ex Tesla since the summer
Market cap ($ billions) Forward price-to-earnings ratio
9 26
8 24
7 22
6
20
5
18
4
16
3
14
2
12
1
0 10
Dec 19 Feb 20 Apr 20 Jun 20 Aug 20 Oct 20 Dec 20 Feb 21
Dec 19 Feb 20 Apr 20 Jun 20 Aug 20 Oct 20 Dec 20 Feb 21
MSCI USA Index MSCI USA Index ex Tesla
Apple Amazon Microsoft Alphabet Facebook Tesla
Past performance is not a guide to future performance and may not be repeated.
Source: Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021.
34Analysts are projecting a global V-shaped recovery
But less severe US downturn limits the 2021 profit recovery vs Rest of World
YoY EPS growth, %
60
51
50
37
40 33
28
30 25
20 14 15 14
12 12
10
0
-10
-20 -14
-19
-30 -23
-40 -33
-37
-50
2020 2021e 2022e
US UK Europe ex UK Japan EM
Forecasts included are not guaranteed and should not be relied upon.
Source: IBES, Datastream Refinitiv, MSCI and Schroders. Data to 31 March 2021. Notes: Japan EPS for 2021/2022 is 4 quarter sum until 31 March of next calendar year, e.g. 2022 = 31/03/2022 – 31/03/2023.
35Earnings sentiment indicator
Net upgrades very positive in Japan, but momentum weakening in US, EM and UK
13-week earnings revisions ratio %, (upgrades – downgrades) / total revisions
60
40
Earnings upgrades > downgrades
20
0
-20
-40
Earnings upgrades < downgrades
-60
-80
Jan 16 Jul 16 Jan 17 Jul 17 Jan 18 Jul 18 Jan 19 Jul 19 Jan 20 Jul 20 Jan 21
US UK Europe ex UK Japan EM
Forecasts included are not guaranteed and should not be relied upon.
Source: Datastream Refinitiv, IBES, MSCI and Schroders. Data to 31 March 2021 in USD. Notes; 13w earnings revisions = sum of 13 week positive minus negative 12m forward EPS revisions / total revisions.
36Global equities Income
Income investors feeling impact of dividend cuts
EM, US and Japanese dividends forecast to return to pre-recession peak by end-2021
Dividends per share, index (100 = FY2019)
120
110
100
90
80
70
60
2019 2020 2021 2022
Forecast US UK Europe ex. UK Japan EM
Forecasts included are not guaranteed and should not be relied upon.
Source: IBES, Datastream Refinitiv, MSCI and Schroders. Data to 31 March. Notes: Japan DPS for 2021/2022 is 4 quarter sum until 31 March of next calendar year, e.g. 2022 = 31/03/2022 – 31/03/2023.
38Dividends may be down, but they are not out
Equity income attractive versus bond alternatives, but gap closing…
Forward 12m dividend yield vs bond yield, %
10
9
8
7
6
5
4
3
2
1
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
US equities US IG corps US Treasuries
Forecasts included are not guaranteed and should not be relied upon.
Source: IBES, Datastream Refinitiv, MSCI, ICE and Schroders. Data to 31 March 2021.
39Dividend vs. bond yields by region
Stocks vastly trump corporate bonds for income in UK, Europe and Japan
Forward 12-month equity dividend vs. bond yield, %
4.5
4.1
4.0
3.7
3.5
3.0 2.8
2.5 2.4 2.4
2.1
1.9
2.0
1.5
1.5
1.0
0.5 0.4
0.5
0.0
US UK Europe ex UK Japan EM
Equities IG corporate bonds
Forecasts included are not guaranteed and should not be relied upon.
Source: IBES, Datastream Refinitiv, MSCI, ICE and Schroders. Data to 31 March 2021. Corporate bond yield = unhedged local currency yield, except for EM which is in USD.
40Appendix
List of indices (1 of 2) Large cap equities US – MSCI USA Index , or S&P 500 Index where specified UK – MSCI UK Index Europe ex UK – MSCI Europe ex UK Index Japan – MSCI Japan Index Developed markets – MSCI World Index Emerging markets – MSCI EM Index China – MSCI China Index Global – MSCI All Country World Index Rest of world – MSCI All Country World ex US Index Small cap equities US – MSCI USA Small Cap Index UK – MSCI UK Small Cap Index Europe ex UK – MSCI Europe ex UK Small Cap Index Japan – MSCI Japan Small Cap Index Emerging Markets – MSCI EM Small Cap Index Factor and sector indices US Value – MSCI USA Value Index US Growth – MSCI USA Growth Index US Cyclical – MSCI USA materials, industrials, consumer discretionary, energy, financials, real estate US Defensive – MSCI USA utilities, IT, consumer staples, health care, communication services Global Value – MSCI All Country World Value Index Global Growth – MSCI All Country World Growth Index Global Cyclical – MSCI All Country Global materials, industrials, consumer discretionary, energy, financials, real estate Global Defensive – MSCI All Country Global utilities, IT, consumer staples, health care, communication services 42
List of indices (2 of 2) Bond indices US Treasuries – ICE BofA US Treasury Index US IG Corps – ICE BofA US Corporate Index UK IG Corps – ICE BofA Sterling Corporate Index Europe IG Corps - ICE BofA Euro Corporate Index Japan IG Corps - ICE BofA Japan Corporate Index EM IG Corps - ICE BofA Emerging Markets Corporate Plus Index Currency indices US Dollar – DXY US Dollar Currency Index 43
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