INVESTMENT RISK MANAGEMENT AND EXTRACTING VALUE FROM MERCER LIBERTAS PD DAY FEBRUARY 2014.

INVESTMENT RISK MANAGEMENT AND EXTRACTING VALUE FROM MERCERLIBERTAS PD DAYFEBRUARY 2014

MERCER 2

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52 MANAGER RESEARCHERS 35 MANAGER RESEARCHERS

22 MANAGER RESEARCHERS

SPECIALIST MANAGER RESEARCHERS IN KEY GLOBAL LOCATIONSA COMPREHENSIVE QUALITATIVE RESEARCH AND MONITORING PROGRAM

◙ MERCER’S INVESTMENT OFFICES

MERCER 33

MERCER’S APPROACH TO PROTECTING YOUR CLIENTS

Regulation

Product support

• Our research process is forward-looking and consistent across all regions and asset classes

• Mercer’s research process is undertaken at the strategy level, as opposed to rating to a team and arbitrarily mapping this rating to any and all strategies

• Research is the activity of meeting managers; globally, quantitative filtering as a sole research activity lends itself more to the exercise of quarantining of toxic assets

• Mercer’s Manager Researchers are globally located alongside investment managers giving us a local advantage in being able to maintain a continuous visitation and monitoring program

• Re-appraisal of all highly rated managers is conducted annually – this amounts to a $50m spend on Mercer’s part and over 4,000 manager visits annually. We don’t do desk top reviews and we don’t have to plan and fund a ‘world trip’ to revisit our rated managers

• One of our key strengths is the 6,500 new documents produced annually that contribute to Mercer >IS< across annual research notes, interim notes, monitoring documents, manager news, and portfolio and business analysis data

• Under RG79 we can make available our full ratings and monitoring history covering around 30 years of research for many products in your wider ‘exposure’

• With $6.5 trill under our advice, Mercer’s Manager Researchers are assessed on the identification of new strategies and re-appraisal of existing strategies and the performance of recommendations

MERCER 4

UNPARALLELED GLOBAL MONITORING PROGRAM‘EXPOSURE AWARE’

4

Immediate notification of

rating/manager changes

A comprehensive knowledge base of monitoring documents

A comprehensive knowledge base of monitoring documents

MERCER 55

MERCER TOOL SUITEA POWERFUL & VERSATILE SUITE OF INDUSTRY LEADING APPLICATIONS

Manager Performance Analytics (MPA)

Portfolio Structuring Tool (PST)

Style ResearchOutput (SRO)

Growth PortfolioTool (GPT)

Capital MarketSimulator (CMS)

Manager Fulfilment

Managing Investment Risk

Model PortfolioManagement

Leveraging technology to enhance risk management and productivity

Strategic ResearchDatabase

(SRD)

Global Investment Manager Database

(GIMD)

Style ResearchOutput (SRO)

Global Investment Manager Database

(GIMD)

MERCER 66

MERCER >IS< INTEGRATION WITH INSTITUTIONAL STRENGTH

Portfolio analysis extracted from MercerInsight PST

Research Profile extracted from GIMD Research Note

Quant Charts extracted from MercerInsight MPA

MERCER 7

GLOBAL INVESTMENT RESEARCH GOVERNANCE STRUCTURE

Global Policy Committee

Single Asset Class Research Group

Bonds

Equity

Real Estate

Alternatives

ESG

Multi- Asset Class Research Group

Manager ResearchGlobal Capital MarketsPortfolio Construction

ResearchDAAESG

Delegated Solutions

Client Segment Research Group

DC

DB

Insurance

E&F

WM

Global Strategic Research CommitteeEuropean Strategic Research

US Strategic Research

Canadian Strategic Research

Pacific Strategic Research

Growth Markets Strategic Research

Manager Research

Delegated Solutions

Portfolio Construction

MERCER 8

MERCER CAPITAL MARKET VIEWSMERCER MARKET INSIGHTS

A comprehensive monthly report includes:

• A summary report on the key themes throughout the investment environment

• Capital market updates including the month in review, selected market indicators and economic commentary

• Dynamic Asset Allocation including comparisons between strategic and dynamic positioning

• Relevant manager research updates, including news items as

• Historical Returns Analysis

• Mercer Surveys

• Monthly valuation data

• Monthly market data

MERCER 99

RG 79: IMPROVING THE QUALITY OF INVESTMENT RESEARCH AN OVERVIEW

The guidance includes measures to address:

• Management of conflicts of interest, particularly business model conflicts among research report providers

• Quality and robustness of the research process including the need to allocate appropriate resources and expertise to the research task

• Transparency of the research process, including the way products are selected for research, what ratings mean and how they are applied, and

• The ability of users of research to form a view about the quality and reliability of the research.

MERCER 1010

RG 79: IMPROVING THE QUALITY OF INVESTMENT RESEARCH ARE WE IN THIS BOAT TOGETHER?

• Advisers are specifically not caught - RG 79.26

• Licence-holders (advisers who are licence-holders) can be significantly caught if research is provided to clients - RG 79.31

• Beware of RG 79.169 as you could be caught under RG 175 if you don’t understand and can’t articulate the research model of your provider

• Expect to prove reasonable investigation into financial products

• Demonstrate due diligence on your provider AND be able to show your understanding of the business model and conflicts of interests associated with your service provider

• You are expected to make your own inquiries and research into the products you give advice on - RG 79.178.

MERCER 11

A mechanism for you to administer APLs, model portfolios and asset allocation

Provides ratings and research on managed funds across multiple time periods within an exposure list

Produces PDF disclosures for asset allocation, portfolio and underlying fund recommendations

Provides capital markets and strategic research

Additional tools such as performance analysers (Mercer >IS< Quant)

Weekly email highlights rating changes in saved Watchlists or Portfolios as well as other rating changes

Portfolio construction and customisable reporting

MERCER >IS< YOUR WEB-BASED TOOL

Comprehensive help function with step-by-step user guides and helpdesk

MERCER 12

MERCER >IS< AN ADVISER STORY

The Financial Adviser utilises a Model Portfolio for new client portfolios.

Most of the firm’s AUM is invested within these Model Portfolios, however a small percentage sits outside of these.

The Adviser likes to keep clients up to date with what's happening with markets on a regular basis – keeping clients informed ensures they do not panic in times of uncertainly.

The Adviser receives referrals – most prospects have queries regarding their superannuation and utilise the default fund within their super account. Others have seen a Financial Adviser previously and have a diversified portfolio, however are not happy with its performance.

Being located in a regional centre, clients often ‘drop by’ when they are in town so the Adviser needs to keep on top of each client’s portfolio.

Financial Adviser – Case Study

This Financial Adviser owns a small practice in a regional centre.

MERCER 13

MERCER >IS< HOW TO KEEP CLIENTS INFORMED ON MARKET PERFORMANCE

MONTHLY MERCER MARKET INSIGHTS

• A monthly report outlining key market developments and general commentary on key markets

• Use the report to begin client conversations, or extract information to use within a client newsletter

MONTHLY MARKET REVIEW

• A monthly report providing performance details of key market indices

• Print the report off and keep by your desk for easy reference

MERCER 14

MERCER >IS< HOW TO KEEP TRACK OF YOUR TOTAL EXPOSURE

WATCHLISTS

• Create watchlists that contain funds you have utilised within your practice

• Filter these watchlists according to multiple criteria and obtain reports and information on this list of funds

WEEKLY MERCER >IS< EMAIL ALERT

• Mercer sends a weekly email alerting users of any changes to ratings

• This email includes a custom section, that outlines any rating changes for funds held within any of your watchlists or portfolios

• The email alert can be used as an internal risk management tool

MERCER 15

MERCER >IS< KEEPING UP TO DATE WITH A CLIENT’S PORTFOLIO

MERCER >IS< PORTFOLIO TOOL

• Load client portfolio to Mercer >IS< to access a range of customised reports, including a detailed Portfolio Report, Strategic Asset Allocation Review and consolidated Product Profile documents

• These reports can be provided to clients

• Provide Portfolio Reports to clients during client reviews

COMPARE PORTFOLIOS

• Utilise the Mercer >IS< Quant tool to compare two portfolios to each other, compare a portfolios performance versus a benchmark or simply to access historic return information for a single portfolio

• Output from the Mercer >IS< Quant tool can be used during a client pitch, as well as during a client review

Step 1 – Setting up the portfolio

Step 2 – Adding funds

Step 3 – Finalising the portfolio

MERCER

MERCER >IS< ACCESSING MANAGED FUND INFORMATION

FUND SEARCH

• Search for funds or groups of funds within your Approved Product List

• Fund Profiles – Fund performance, fee and asset allocation information

• Research Profiles – Details our forward looking research views as well as the fund style, investment process and key people

• Quant Profiles – Overview of a rated fund including table of returns against benchmark and chart exhibits

• Monitoring Report – Quarterly evaluation of qualitative and quantitative factors including confirmation of the rating

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MERCER

WHAT YOU NEED TO DO

• Develop your own ‘client suitability’ process

• Make sure you save your exposure under ‘watchlists’

• Make sure you save your potfolios

• Develop an internal AND client review process

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MERCER 18

MERCER >IS< ONGOING SUPPORT

EMAIL SUPPORT

[email protected]

TELEPHONE SUPPORT

1800 512 947

SUPPORT DOCUMENTS

Mercer User Guide

Mercer Reference Guides:

• Searching for Fund and Accessing Fund Research

• Building a Portfolio

• Creating and Using Watchlists

• Accessing Market Commentary

Mercer Guide to Ratings

About your research provider

MERCER 1919

About MercerMercer is a leading global provider of consulting, outsourcing and investment services, with more than 25,000 clients worldwide. Mercer consultants help clients design and manage health, retirement and other benefits and optimise human capital. The firm also provides customised administration, technology and total benefit outsourcing solutions. Mercer’s investment services include global leadership in investment consulting and multi-manager investment management.

Mercer’s global network of more than 20,000 employees, based in over 40 countries, helps ensure integrated, worldwide solutions. Our consultants work with clients to develop solutions that address global and country-specific challenges and opportunities. Mercer is experienced in assisting both major and growing, mid-size companies.

Mercer is a wholly owned subsidiary of Marsh & McLennan Companies, which lists its stock (ticker symbol: MMC) on the New York and Chicago stock exchanges.

Disclaimer© 2014 Mercer LLC. All rights reserved.

This contains confidential and proprietary information of Mercer and is intended for the exclusive use of the parties to whom it was provided by Mercer. Its content may not be modified, sold or otherwise provided, in whole or in part, to any other person or entity, without Mercer's permission.

The findings, ratings and/or opinions expressed herein are the intellectual property of Mercer and are subject to change without notice. They are not intended to convey any guarantees as to the future performance of the investment products, asset classes or capital markets discussed. Past performance does not guarantee future results.

This does not contain investment advice relating to your particular circumstances. No investment decision should be made based on this information without first obtaining appropriate professional advice and considering your circumstances.

All services described in this presentation will be delivered strictly on the basis of advice to a wholesale client in terms of the Financial Advisers Act 2008.