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Exposure to the cash asset class is represented by allocations to money market mutual funds. For certain asset classes, S&P IAS may substitute a mutual fund if an ETF does not yet exist that may provide the desired exposure or if S&P IAS does not believe available ETFs meet selection criteria.

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An investment based upon the model should only be made after consulting with a financial advisor and with an understanding of the risks associated with any investment in securities, including, but not limited to, market risk, currency risk, interest rate risk, political and credit risks, the risk of economic recession and the risk that issuers of securities or general stock market conditions may worsen, over time.  Foreign investing involves certain risks, including currency fluctuations and controls, restrictions on foreign investments, less governmental supervision and regulation, less liquidity and the potential for market volatility and political instability. As with any investment, investment returns and principal value will fluctuate, so that when redeemed, an investor’s shares may be worth more or less than their original cost. S&P Global is not a tax advisor. A tax advisor should be consulted to evaluate the impact of tax-exempt securities on portfolios and the tax consequences of making any particular investment decision.

Risks disclaimers:

Investors should be aware that there are risks in investing in securities and investing in these securities involves risk of loss of an investor’s principal investment and other losses that clients should be prepared to bear. Additionally, Models that allocate to the following assets classes are subject, but not limited, to additional risks:

Emerging markets and international developing equity investing involves greater risks such as economic and political systems that are less developed, and likely to be less stable, than those of more advanced countries and markets that are characterized by lack of liquidity and price volatility.

  • Small Cap and Mid Cap companies entail greater risk than investing in larger, more established ones.
  • Large cap companies investment may underperform investment that are primarily focus on stocks of lower quality, smaller capitalization companies during periods when the stocks of such companies are in favor.
  • Real estate investment trusts may be affected by changes in the value of the underlying property, the quality of credit extended, defaults by borrowers and heavy cash flow dependency.
  • High yield bonds are lower-rated fixed income securities that may involve greater risk than investments in higher-rated (“investment grade”) securities.
  • Commodities are affected by underlying commodity prices which may exhibit high volatility.
  • Mortgage-backed securities have heightened sensitivity to interest rate risk, are subject to prepayment risk and the resulting uncertainty of the timing of cash flow and are subject to the market’s perception of the creditworthiness of the issuer.
  • Inflation-protected securities are subject to several general risks, including interest rate risk, credit risk, and market risk. Interest payments on inflation-protected securities will vary as the principal and/or interest is adjusted for inflation and may be more volatile than interest paid on ordinary fixed-income securities.
  • The price of fixed-income securities will fluctuate with changes in interest rates and in response to changes in the financial condition of the issuer.  The value of fixed-income securities generally rises when interest rates fall, and fall when interest rates rise.  Prices of longer-term securities generally increase or decrease more sharply than those of shorter-term securities in response to interest rate changes.  An investor could lose money if the issuer or guarantor of a fixed income security, or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations. Credit ratings may reflect the varying degrees of risk. Municipal bonds are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer’s ability to make payments of principal and/or interest.
  • Although funds may generally use derivative instruments such as futures contracts and swaps for hedging and risk management, funds in the alternative asset class may use them to a greater extent, which may result in magnified risks. These instruments are subject to certain risks such as unanticipated changes in securities prices and global currency markets and sudden changes in the liquidity of the market for the derivative instrument. The use of derivatives may also create leveraging risk which may cause greater volatility.
  • Index investing risk – The indexing strategy does not attempt to manage volatility, use defensive strategies, or reduce the effects of any long-term periods of poor stock performance. Market fluctuations can cause the performance of an index to be significantly influenced by a handful of companies. Because different types of stocks tend to shift in and out of favor depending on market and economic conditions, performance may sometimes be lower than funds that actively invest in stocks that comprise the index. As a result of index sampling the securities selected will not provide investment performance matching that of the index.
  • Managed portfolio risk – As an actively managed portfolio, the value of a fund’s investments could decline because the financial condition of an issuer may change (due to such factors as management performance, reduced demand or overall market changes), financial markets may fluctuate or overall prices may decline, or the manager’s investment techniques could fail to achieve the fund’s investment objective.
  • Fixed income risks –Investing in fixed income securities and related derivatives involves risks such as interest rate risk, credit risk and the possibility that an issuer will default on the payment of interest and principal.  An investor could lose money if the issuer or guarantor of a fixed income security or the counterparty to a derivatives contract, repurchase agreement or a loan of portfolio securities, is unable or unwilling to make timely principal and/or interest payments, or to otherwise honor its obligations.  Credit ratings may reflect the varying degrees of risk. 

Model portfolios may be subject, but not limited, to these additional risks:

  • Model portfolio returns are also affected by the ability of the underlying fund managers to achieve their investment objectives.
  • Equity model portfolios and models that may include them tend to be more volatile, have higher betas and sector concentration or exclude entire sectors. In addition, models that use S&P Global’s fair value methodology are sensitive to earnings estimates and their realizations.
  • Currency Risk – The value of a fund’s foreign investments will be affected by changes in currency exchange rates.  The U.S. dollar value of a foreign security decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated and increases when the value of the U.S. dollar falls against such currency.
  • Event risk – There may be risk due to unforeseen events associated with a company.
  • Market risk – Securities may also decline in value due to factors affecting securities markets generally, such as real or perceived adverse economic conditions, or particular industries represented in the securities markets, such as competitive conditions.  In addition, the markets may not favor a particular kind of security, such as dividend-paying securities, and may not favor equities or bonds at all.
  • Stock market risk – Stock market risk refers to the fact that stock prices typically fluctuate more than the values of other types of securities, typically in response to changes in the particular company’s financial condition and factors affecting the market in general.  Over time, the stock market tends to move in cycles, with periods when stock prices rise, and periods when stock prices decline.  Consequently, a broad-based market drop may also cause a stock’s price to fall.  Bond market risk generally refers to credit risk and interest rate risk.
  • Fixed income model portfolios’ selection of fixed income securities are subject to shifts in interest rates and credit risks and the risk that an issuer may default on payments of interest and principal. 

Performance Disclosures for Model Allocation Portfolios

Performance Disclosures for Equity Models

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