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  • 1. The Asset Allocation Research Team (AART) conducts economic, fundamental, and quantitative research to produce asset allocation recommendations for Fidelity’s portfolio managers and investment teams. At any given time, asset price fluctuations are driven by a confluence of various short-, intermediate-, and long-term factors. For this reason, AART employs a comprehensive asset allocation framework that analyzes underlying factors and trends across three time horizons: tactical (one to 12 months), business cycle (six months to five years), and secular (five to 30 years). AART has developed a secular outlook for global economic growth, which is used to derive estimates of long-term asset market performance. These capital market assumptions (CMAs) are forward-looking statements but are not presented as investment recommendations or guarantees of actual future performance. General framework We employ a research-based, multifaceted process to develop long-term capital market assumptions for our asset allocation strategies. This comprehensive global approach is underpinned by fundamental analysis of the core drivers and the principal linkages between economic trends and the performance of various asset classes across all geographies. The methodology for our approach combines empirical research with foundational principles underlying the relationships between economic growth and asset performance. The basis for our asset return and volatility assumptions is our 20-year forecast of each country’s gross domestic product (GDP) growth, which we describe in the Leadership Series article “Secular Outlook for Global Growth: Challenges and Opportunities,” June 2013. Whereas some CMA frameworks assume that the connection between GDP growth and asset returns is either perfect or nonexistent, our approach avoids such simplistic assumptions and focuses on the specifics of how they are related and how they differ. Our framework has the following characteristics: 1. We view the economy as the backdrop for equity and bond markets, with clear connections to how those asset classes may perform. 2. Our forward-looking approach generates 20-year estimates whose underlying assumptions depend on neither past historical averages nor future infinite time horizons. 3. We employ a multidimensional model that provides a common framework for making direct country- to-country comparisons while still capturing the different characteristics that make economies unique. 4. Our 20-year time horizon strikes an appropriate balance, minimizing the impact of temporary cycli- cal fluctuations but remaining grounded in current market fundamentals. The sections that follow describe our methodology for generating estimates of asset class returns, vola- tility, and correlations, which are the building blocks of portfolio construction. Capital Market Assumptions: A Comprehensive Global Approach for the Next 20 Years July 2013 leadership series | market research Lisa Emsbo-Mattingly Director of Asset Allocation Research Jordan Alexiev, CFA Senior Research Analyst Irina Tytell, PhD Senior Research Analyst Dirk Hofschire, CFA SVP, Asset Allocation Research key takeaways • Our research-based approach to long-term capital market assumptions emphasizes the principal relationships between economic trends and asset class performance. • By deriving country-specific assumptions at each stage of the process, we can generate estimates that are forward- looking, global, and adaptive across diverse economies and asset categories. • Given slower economic growth and low starting bond yields, we expect asset returns to be somewhat lower than long-term averages over the next 20 years—yet still able to outpace inflation. • We expect global equity returns to be generally in line with historical results, with U.S. stocks having the best risk-adjusted performance and non-U.S. stocks benefiting from low starting valuations. • Low correlations of stocks and bonds will likely keep fixed income a key compo- nent for managing risk within a well diversified global investment portfolio.
  • 2. 2 Real Rates Reversion after Financial Booms/Busts Sovereign Rates Time Value of Money and Term Premium Probability of Default and Recovery Rates Credit Bond Gov’t Bond Cash Leverage Productivity Composition Return on Equity Equity Valuation Real GDP RETURNS The flowchart above depicts how we derive assumptions of fixed income and equity returns from our projections of real GDP growth. Fixed income returns Government bonds Real economic growth—as measured by GDP—and real bond yields are highly correlated. Theoretically, faster growing econo- mies tend to be supported by more productive investment that justifies higher borrowing costs. Empirically, there have been deviations from this relationship during financial booms and sub- sequent busts. But over long time horizons, higher real (inflation- adjusted) rates of GDP growth have generally coincided with higher real interest rates (see Exhibit 1, right). Therefore, we base our fixed-income return expectations on the assumption that sovereign—or government—bond yields will gravi- tate toward the rate of economic growth in the long term. Specifi- cally, we assume that the real yield on 10-year U.S. Treasury bonds will converge nonlinearly from the current low levels to our real GDP forecast of 1.9% annually over a 20-year time horizon. The real total return for government bonds is a combination of bond price changes, coupon income, and roll down returns that occur during the 20-year period.1 Starting from today’s extremely low real yield, we believe falling bond prices will be a drag on future returns as real yields rise over time. Positive returns from higher coupon income—in addition to roll down returns achieved as bonds mature along a steep yield curve—will offset the price deprecia- tion, resulting in our estimate of a relatively meager 0.2% annual- ized real return for government bonds over the next 20 years. Corporate bonds The returns to credit-sensitive bonds are a function of both the real “risk-free” rate calculated for government bonds and the additional return potentially generated by the credit spread, which seeks to compensate investors for the uncertainty and potential default risk of corporate bonds.2 Based on our expectations for the probability of default and the recovery rates for corporate bonds, we estimate the annualized real return to U.S. corporate bonds to be 1.6% over the next 20 years.3 Bond return expectations We estimate that the combination of government and corporate bonds will result in an annualized real return of 0.7% for an investment-grade bond portfolio over the next 20 years.4 The current environment of historically low yields and the shift to lower trend GDP growth will result in price depreciation and diminished income gains relative to historical averages, so we expect substan- tially lower real fixed-income returns over the next 20 years than during recent decades. Cash Building on our estimated government bond returns, we use term premia to derive potential returns to short-maturity government securities and hence our expectation for cash returns.5 Nominal cash yields are near zero, and the price depreciation as real yields move from negative territory today to an expected 0.4% over time—along with meager income returns—will result in negative real cash returns of –0.4% annually, which will fail to outpace inflation over the next 20 years. Exhibit 1: Real government bond yields and real GDP growth have been highly correlated over the long term. government yields and real gdp growth for major economies 1985–2013 Average real 10-year yield and real GDP compound annual growth rates are calculated since the inception dates of inflation-adjusted government securities for the following countries: United Kingdom (Jan. 1985), Austra- lia (Jun. 1985), Canada (Nov. 1991), United States (Apr. 1998), and Japan (Apr. 2004). Average yields and GDP growth rates also calculated for the common time period: Apr. 2004 through Jun. 2013. Source: Country sta- tistical organizations, Haver Analytics, Fidelity Investments (AART) through Jun. 30, 2013. AverageReal10-YearYield Real GDP Compound Annual Growth Rate Historical Observations in UK, Australia, Canada, U.S., and Japan U.S. June 2013 U.S. 20-Year Forecast 0% 1% 2% 3% 4% 0% 1% 2% 3% 4% asset returns framework For illustrative purposes only.
  • 3. 3 Equity returns Return on equity (ROE) Economic growth has a profound effect on stock market returns because both are broadly determined by similar factors, including demographics, productivity, interest rates, and leverage. However, the return on equity (ROE) may deviate from overall GDP growth due to three key differences: Industry composition. The weights of various industries may be different in the overall economy than in the stock market. For example, the government sector accounts for roughly 13% of U.S. GDP, but is obviously not represented directly in the equity market.6 Productivity rates. Because the industry composition is different, productivity rates tend to be higher in the equity market than in the overall economy. Again using the U.S. government as an example, the productivity rate of government activity is generally assumed to be extremely low or near zero, which pulls down the average for the entire economy relative to the equity market. We found that the rate of productivity growth in the U.S. stock market during the past 24 years was roughly twice as high as the rate of productivity growth in the U.S. economy (see Exhibit 2, below). Leverage levels. Public companies issue debt at a level that may differ from that of the overall economy. Because corporate earnings and ROE are magnified by leverage, a higher level of corporate leverage will tend to boost stock market ROE above the rate of economic growth. Our ROE estimates thus begin with our GDP growth assumptions, which are then adjusted for measures of leverage, sector composi- tion, and corporate market productivity that are different from the economy-wide averages. Despite our forecast of lower real U.S. GDP growth over the next 20 years, we expect that the U.S. stock market’s ROE can still approach historical averages because cor- porate leverage levels are currently higher than historical averages, that stock market productivity rates will be near the upper end of historical ranges, and that much lower interest rates will likely boost profit margins in the coming years. Valuations Actual stock performance depends on not only the earnings growth that can help generate ROE but also the stock price valua- tion that is placed on those earnings. As a result, our equity return assumptions require an adjustment based on movements in valuations over the next 20 years. Instead of assuming that valu- ations revert to historical averages, we develop estimates based on expectations of the key drivers of a country’s price-to-earnings (P/E) multiples, such as demographics, inflation, and GDP growth. For instance, the asset accumulation phase that accompanies a middle-aged population with a high proportion of workers typically results in higher valuation multiples. Conversely, higher infla- tion rates tend to increase uncertainty and risk premia, resulting in lower valuations. In the aggregate, our worldwide valuation estimates for the next 20 years are generally in line with historical averages, as we believe lower inflation and other factors will mostly offset deteriorating demographics. Whether a country’s equity market return will be boosted or hindered by repricing back to this long-term trend will depend on starting valuations. We define current valuations as today’s cyclically adjusted P/E ratio, using current stock prices relative to five-year peak real earnings—the highest level of inflation- adjusted profits during the trailing five-year period. This approach helps to smooth corporate earnings by adjusting for cyclical extremes, specifically preventing a cyclical trough in earnings from sending a false signal that valuations are expensive just as profits might be expected to recover. In addition, the five-year cyclical adjustment better reflects the average length of a typical business cycle; periods of 10 years and longer tend to incorpo- rate too much history. The current five-year P/E for the U.S. stock market is roughly con- sistent with our estimated P/E, implying that the valuation adjust- ment for the 20-year return expectation is minimal. Outside the U.S., equity valuations are generally low relative to their estimated trend P/Es, so upward valuation adjustments boost our expected Exhibit 2: The U.S. equity market has greater weights in more productive sectors relative to the overall economy. Stock market weights derived using Global Industry Classification Standard (GICS) of the 3000 largest U.S. stocks by market capitalization. Productivity rate = compound annual productivity growth rate in 1987–2011. Govern- ment productivity is unavailable but generally assumed to be extremely low or near zero. Source: Bureau of Labor Statistics, Haver Analytics, Fidelity Investments (AART) as of Dec. 31, 2011. sector composition and Productivity 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Gov’t Health Care Real Estate Finance Info Tech Stock Market Weight Economy Weight Sector Productivity Total Stock Market Productivity = 4.2% Economy Productivity = 2.1% 0% 2% 4% 6% 8% 10% 12% 14% Weight ProductivityRate Higher Productivity Sectors Lower Productivity Sectors
  • 4. 4 Bond volatility The volatility of government bonds is a function of both the overall yield and the target duration of the portfolio.8 Higher bond yields are generally associated with higher growth, which can lead to more uncertainty and thus greater volatility in government bond returns. Similarly, for corporate bonds, changes in credit spreads tend to be more volatile when credit spreads are high. Given our forecast for slower GDP growth, and thus lower bond yields over the next 20 years, we expect that the volatility of U.S. investment-grade bond returns will be toward the low end of the historical range. Equity volatility Equity volatility is generally a function of macroeconomic volatility, and tends to be lower when affluence—represented by per capita GDP—is higher. More developed economies often shift to bigger weights in less volatile sectors, becoming more flexible and better equipped to withstand shocks. This suggests that stock market volatility is generally higher in less developed economies and countries that are more prone to financial crisis. Equity volatility is also a function of the market’s sector composi- tion and diversity. Stock markets with a greater representation of volatile sectors (such as technology) will experience wider fluctua- tions than markets with more exposure to historically steadier per- forming sectors (such as utilities). For instance, South Korea has more than 30% of its market capitalization in the volatile technol- ogy sector—a primary reason that we expect the country’s equity market to have fairly high volatility despite its more advanced stage of economic development.9 In addition, equity markets that are concentrated in a smaller number of sectors will generally be more volatile than those with a more diverse market composition. For example, we estimate that Peru, with a 71% weight in materi- als stocks, will have the highest equity volatility among the major stock markets.10 In general, we anticipate that greater economic and financial mar- ket volatility will continue to make emerging-market equities much returns of both developed-country and emerging-market returns in the aggregate. With most European countries trading at relatively low current P/Es, this region’s estimates benefit the most from our valuation adjustment (see Exhibit 3, below). Equity return expectations For U.S. equities, the combination of fair valuations and solid ROE expectations leads us to estimate a 6.6% annualized real rate of return over the next 20 years, roughly in line with long-term histori- cal averages. Among non-U.S. developed markets, ROE potential will likely be lower because of expected slower GDP growth rates and weaker demographics, although our expected upward adjust- ment from current inexpensive valuations will contribute positively to estimated real U.S.-dollar returns of 5.9% annualized over the next two decades.7 Emerging markets will likely enjoy higher ROE and significant positive valuation adjustments from today’s low levels, resulting overall in real U.S.-dollar return estimate of 7.9% annually. VOLATILITY The flowchart on the right illustrates our framework for estimating the volatility of asset returns, the second component of our CMAs. Equity Volatility Affluence Composition of Market Diversity of Market Sovereign RatesFixed Income Volatility Target Duration Level of Yield Credit Real GDP asset volatility framework For illustrative purposes only. Exhibit 3: Non-U.S. stock valuations are generally low. cyclical p/es: price-to-five year peak earnings Price-to-earnings (P/E) ratio (or multiple) = stock price divided by earnings per share, which indicates how much investors are paying for a company’s earnings power. Five-year peak earnings are adjusted for inflation. Source: FactSet, country statistical organizations, Haver Analytics, Fidelity Invest- ments (AART) as of May 31, 2013. 0x 5x 10x 15x 20x 25x Philippines Switzerland United States Mexico Developed Markets India Japan Canada Australia Emerging Markets Germany Developed Europe South Korea China United Kingdom Brazil Poland Spain Italy Russia Ireland
  • 5. 5 more volatile than equity markets in the U.S. and other developed economies, which is consistent with historical patterns. CORRELATIONS Investors generally seek to combine bonds and equities into portfo- lios that will provide the highest return potential for a given level of risk. Along with estimates of asset returns and volatility, the correla- tion between asset classes plays an important role in determining the optimal portfolio composition for long-term performance.11 Most attempts at portfolio optimization are conducted using asset correlations that are calculated from past historical returns. However, our analysis shows that asset correlations can change dramatically over time. During the past several decades, for instance, the 20-year correlation between U.S. equities and investment-grade bonds has ranged from near zero to almost 0.4 (see Exhibit 4, above). As a result, estimating correlations using forward-looking measures may have a significant impact on port- folio performance over a 20-year time horizon. Long-term correlations generally depend on the backdrop for inflation and economic growth. Whether inflation or growth is more volatile will affect the movement in correlations. When infla- tion is low and stable, growth has a larger impact on correlations. Because stock performance is positively tied to changes in growth expectations, while bond returns are inversely related, investment- grade bond returns tend to have a low or even negative correlation with equity returns in a low inflation environment (see Correlation Thought Framework, above). By contrast, when inflation is higher and more volatile—as in the 1970s—the correlation between stocks and bonds increases. Because rising inflation negatively affects the performance of both stocks and bonds, investment- grade bonds generally become more risky and equity-like in a backdrop of high inflation. Our 20-year forecast for U.S. inflation is around 2%—a lower rate than historical averages because of the Federal Reserve’s credible monetary policy with a specific inflation target. Inflation tends to be lower and more stable in advanced economies with higher per capita incomes, particularly those that have credible, independent monetary authorities who can successfully anchor long-term infla- tion expectations. Given this relatively low expected inflation rate, we anticipate U.S. equity and investment-grade bond returns will be uncorrelated on average over the next two decades, at the low end of the historical range. CONCLUSIONS Capital market assumptions In general, we estimate that asset returns will be somewhat lower over the next 20 years than their long-term historical averages (see Exhibit 5 left, page 6). This mostly stems from our expecta- tion that returns for investment-grade bonds will be diminished by starting from such low yields in the current environment. Overall, we anticipate that global equity returns will mostly be in line with historical results. Despite somewhat slower global economic growth, current low valuations—especially in Europe and certain emerging markets—and higher corporate ROE in some countries will likely provide an offsetting boost to equities in the aggregate. U.S. stocks should benefit from strong corporate productivity, low interest rates, and relatively high corporate leverage that will help to make up for slower GDP growth. On a relative basis, our expectation is for U.S. stocks to have the best risk-adjusted performance among global equities (see Exhibit 5 right, page 6). Emerging-market equities may have the highest absolute returns, but they should also experience the greatest volatility, leading to the least favorable risk-adjusted performance of the equity categories. We expect investment- grade bonds to move from being the asset class with the best long-term risk-adjusted performance to the laggard over the next 20 years. Exhibit 4: The 20-year correlation between equities and bonds has varied along with the average annual rate of inflation. 20-year inflation rate vs. stock and bond correlation *Through Jun. 30, 2013. Past performance is no guarantee of future results. Correlation coefficient between Inflation and Stock & Bond Cor- relation from 1950. Inflation = change in Consumer Price Index (CPI). Stocks represented by S&P 500 Index. Bonds represented by Barclays U.S. Aggregate Bond Index. Source: Bloomberg, Fidelity Investments (AART) through Jun. 30, 2013. 1 2 3 4 5 6 7 0 0.1 0.2 0.3 0.4 1950-1970 1953-1973 1956-1976 1959-1979 1962-1982 1965-1985 1968-1988 1971-1991 1974-1994 1977-1997 1980-2000 1983-2003 1986-2006 1989-2009 1993-2013* Rolling20-YearAnnualizedInflationRate(%) Rolling20-YearStock&BondCorrelation Stock and Bond Correlation Inflation Correlation coefficient = 0.86 Correlation Thought Framework Asset Correlations with Economic Drivers ∆ GDP ∆ Inflation Stocks + – Nominal Bonds – – For illustrative purposes only.
  • 6. 6 Investment implications We expect that the returns to a portfolio diversified across the major asset classes will likely be lower over the next 20 years than the historical averages, but this performance should still be able to outpace inflation. Given our expectation for more muted gains from bonds and cash, a healthy allocation to equities may be important in pursuing return objectives, and opportunities are widely dispersed through- out the world. Investors should keep in mind that bonds and cash may still have much lower volatility than equities, and the low correlations of their returns with stock performance will likely con- tinue to make them key asset classes to help manage risk within a diversified portfolio. For investors with long time horizons, secular capital market assumptions may provide a disciplined underpinning for diversified portfolio construction—but always with the caveat that these assumptions should be revisited and monitored over time. As detailed above, we believe that our CMA approach has the following advantages relative to other frameworks: • Our multidimensional, scalable approach—based on funda- mentals like growth, return on equity, and valuation—can be applied to diverse economies to provide the building blocks for CMAs at the country, sector, and sub-asset class level. • The 20-year time horizon is flexible enough to capture shifts in the economic and market landscape, but stable enough to serve as assumptions for long-term investment strategies. • By focusing on the specifics of how GDP growth and assets returns are related—and how they differ—our approach avoids the overly simplistic assumptions of some CMA frameworks. • Rather than relying on historical averages, we emphasize what history tells us about the drivers of asset returns to generate fundamentally dynamic and forward-looking estimates. • By adapting to today’s global environment, in which developing countries account for a growing share of the world economy and the investment universe, our approach avoids the limita- tions of backward-looking data that can be dominated by the history of the U.S. and other developed markets. Exhibit 5: We expect that asset returns will generally be somewhat lower over the next 20 years than their long-term historical averages, while risk-adjusted returns for U.S. and other developed country equities may be slightly higher. Sharpe ratio compares portfolio returns above the risk-free rate relative to overall portfolio volatility, with a higher Sharpe ratio implying better risk-adjusted returns. Past performance is no guarantee of future results. You cannot invest directly in an index. See appendix for important index information. Historical asset returns include reinvestment of dividends and interest income and are since inception and represented by: U.S. Equity – S&P 500® Index (1926), Developed Markets Equity – MSCI® EAFE Index (1970), Emerging Markets Equity – MSCI Emerging Market Index (1988), Investment-Grade Bonds – Barclays U.S. Aggregate Bond Index (1976), Cash – IA SBBI US 30-Day T-Bill Index (1926). Source: Morningstar EnCorr, Fidelity Investments (AART) as of Jun. 30, 2013. sharpe ratios Total Annualized Real Returns for Major Assets 20-Year Estimate Historical U.S. Equity 6.6% 6.8% Developed Markets Equity 5.9% 5.4% Emerging Markets Equity 7.9% 9.5% Investment-Grade Bonds 0.7% 4.0% Cash –0.4% 0.5% 0.00 0.20 0.40 0.60 0.80 U.S. Equity Developed Markets Emerging Markets Investment- Grade Bonds Historical 20-Year Estimate
  • 7. 7 These materials contain statements that are “forward-looking statements,” which are based upon certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual returns or results will not be materially different than those presented. Views expressed are as of the date indicated, based on the information available at that time, and may change based on market and other conditions. Unless otherwise noted, the opinions provided are those of the authors and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information. Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk. Past performance is no guarantee of future results. All indices are unmanaged. You cannot invest directly in an index. Diversification/Asset Allocation does not ensure a profit or guarantee against a loss. Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign markets can be more volatile than U.S. markets due to increased risks of adverse issuer, political, market, or economic developments—all of which are magnified in emerging markets. These risks are particularly significant for funds that focus on a single country or region. In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Unlike individu- al bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible. Endnotes 1 The roll down return is the capital gain (loss) caused by a falling (rising) yield when a bond approaches its maturity date. Our long-term outlook is for a normal, steep yield curve, which means that shorter-term debt has a lower yield than longer-term debt. Therefore, as bonds approach their maturity date, they should roll down the yield curve to a lower yield, creat- ing a capital gain. 2 Treasury securities are considered “risk-free” because they are backed by the full faith and credit of the U.S. government. 3 The recovery rate is the amount recovered in any settlement of a de- faulted security and is expressed as a percentage of the face value of the security. 4 The composition of the combined investment-grade bond portfolio has a similar weighting of government and corporate bonds as the Barclays U.S. Aggregate Bond Index. Investment-grade bonds are bonds rated BBB-/ Baa3/BBB- or higher by Standard & Poor’s/Moody’s/Fitch. 5 The term premium is the excess yield that investors require to commit to holding a long-term bond instead of a series of shorter-term bonds. 6 Source: Bureau of Economic Analysis, Haver Analytics, Fidelity Invest- ments (AART) as of Dec. 31, 2012. 7 International returns are expressed in U.S.-dollar terms, including the effects of foreign exchange (FX). We believe that FX rates converge to their fair value over longer time horizons, and our analysis indicates that the U.S. dollar is fundamentally undervalued relative to most curren- cies, which suggests that FX returns over the next 20 years will generally detract modestly from aggregate international returns. 8 Duration estimates a bond’s change in price given a change in interest rates, assuming a parallel shift in the yield curve (neither steepening nor flattening). 9 Source: FactSet, Fidelity Investments (AART) as of Dec. 31, 2012. 10 Source: FactSet, Fidelity Investments (AART) as of Dec. 31, 2012. 11 Correlation measures interdependencies between two random variables, with coefficients indicating perfect negative correlation at −1, absence of correlation at 0, and perfect positive correlation at +1. Index definitions Consumer Price Index (CPI) is an inflationary indicator that measures the change in the cost of a fixed basket of products and services, including housing, electricity, food, and transportation. MSCI® Europe, Australasia, Far East Index (EAFE) is an unmanaged, mar- ket capitalization-weighted index designed to represent the performance of developed stock markets outside the U.S. and Canada. MSCI Emerging Markets (EM) Index is an unmanaged, market capitaliza- tion-weighted index of over 850 stocks traded in 22 world markets. S&P 500® is an unmanaged, market capitalization-weighted index of common stocks and a registered service mark of The McGraw-Hill Companies, Inc., which has been licensed for use by Fidelity Distributors Corporation and its affiliates. Barclays® U.S. Aggregate Bond Index is an unmanaged, market value- weighted performance benchmark for investment-grade fixed-rate debt issues, including government, corporate, asset-backed, and mortgage- backed securities with maturities of at least one year. IA SBBI 30 Day TBill Total Return Index is an unmanaged index that reflects the return on the U.S. Treasury Bill maturing in 30 days. Third-party marks are the property of their respective owners; all other marks are the property of FMR LLC. For investment professional or institutional investor use only. Not for distribution to the public in any form. Fidelity Capital Markets is a division of National Financial Services LLC, Member NYSE, SIPC. Fidelity Family Office Services is a division of Fidelity Brokerage Services LLC. Clearing, custody, or other brokerage services may be provided by National Financial Services LLC or Fidelity Brokerage Services LLC, both Members NYSE, SIPC. Products and services provided through Fidelity Financial Advisor Solutions (FFAS) to investment professionals, plan sponsors, and institutional investors by Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917. Products and services provided through Fidelity Personal & Workplace Investing (PWI) to institutional investors by Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917. Authors Jordan Alexiev, CFA Senior Research Analyst Craig Blackwell, CFA; Emil Iantchev; Joshua Lund-Wilde; and Phil Thayer also contributed to this article. The Asset Allocation Research Team (AART) conducts economic, fundamental, and quantitative research to develop asset allocation recommendations for Fidelity’s portfolio managers and investment teams. AART is responsible for analyzing and synthesizing investment perspectives across Fidelity’s asset management unit to generate insights on macroeconomic and financial market trends and their implications for asset allocation. Lisa Emsbo-Mattingly Director of Asset Allocation Research Dirk Hofschire, CFA SVP, Asset Allocation Research Irina Tytell, PhD Senior Research Analyst
  • 8. 655441.6.1 1.966250.102 © 2013 FMR LLC. All rights reserved.