active index advisors (aia) · aia s&p 500® strategy after-tax 0.30% fee 5.53 15.28 10.57...

Active Index Advisors® (AIA)

Unlocking tax alpha to grow and differentiate your business

FOR INVESTMENT PROFESSIONAL USE ONLY1

For Investment Professional Use Only

Table of contents

Introduction

What is tax alpha and why does it matter?

How do you create tax alpha?

Performance examples

Next steps

2 FOR INVESTMENT PROFESSIONAL USE ONLY

Tax alpha defined

• “Alpha” is the difference in performance relative to a benchmark

• Tax alpha is the incremental benefit attributed to tax management

– Incorporating tax considerations changes the equation

• Maximizing after-tax wealth is the goal

• On a 3 year annualized basis, the SPY ETF loses 50bps of return to taxes*

– Capital gains are positive tax costs — they lower after-tax returns

– Capital losses help reduce the tax bill — and allow for possible excess returns over the benchmark

3

* December 1, 2002 – December 31, 2016

Fund performance is provided without applicable sales charges. Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Performance would have been lower if such fees, were included. Please see the disclosure pages for additional information.

FOR INVESTMENT PROFESSIONAL USE ONLY

Tax alpha

• Industry trends are putting new pressures on your business

– Fee compression

– Rise of passive investing

– Robos and other online solutions

– Growing regulatory burden

• Investors are hyper focused on fees, but don’t fully understand tax implications that can also eat away at return

• The bottom line is total return after taxes

• If you are going to index in a taxable account, you can still demonstrate value as an FA and generate excess return above the benchmark

Helps differentiate and grow your practice

4

The after-tax returns shown are subject to the limitations of the specific calculation methodology applied. Since the client’s actual circumstances and tax rates determined after the fact may differ from the anticipated tax rates used in this process, the reported returns may not equal the actual after-tax returns for specific clients. After-tax returns are calculated using the maximum federal and state tax rates for dividends, short-term capital gains and long-term capital gains. The current rates applied are 43.4% for income and short-term gains and 23.8% for long-term capital gains.


The impact of taxes

Annualized quarter-end tax impact (December 1, 2002 – March 31, 2017)

-0.14

1.23

0.65

2.36

-0.53 -0.53 -0.52-0.42

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1 Year 3 Year 5 Year 10 Year

AIA S&P 500® Strategy Tax Impact Pre-Tax 0.30%

SPDR S&P 500® ETF Tax Impact

5

AIA S&P 500® After-Tax Composite performance is shown with a 0.30% minimum management fee. Fund performance is shown without applicable sales charges.

Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Performance would have been lower if such fees, were included. Please see the disclosure pages for additional information.


0

2

4

6

8

10

12

14

16

18

QTD YTD 1 Year 3 Year 5 Year 10 Year

AIA S&P 500® Strategy Pre-Tax 0.30% Fee 5.73 5.73 15.42 9.34 12.24 6.91

AIA S&P 500® Strategy After-Tax 0.30% Fee 5.53 5.53 15.28 10.57 12.89 9.27

SPDR S&P 500® ETF Pre-Tax 6.03 6.03 17.04 10.25 13.17 7.42

SPDR S&P 500® ETF After-Tax 5.81 5.81 16.51 9.72 12.65 7.00

S&P 500® TR 6.07 6.07 17.17 10.37 13.30 7.51

The impact of taxes

Annualized quarter-end performance (Periods ending March 31, 2017)

AIA S&P 500® After-Tax Composite performance is shown with a 0.30% minimum management fee. Fund performance is shown without applicable sales charges. Performance data quoted represents pastperformance and is no guarantee of future results. Performance would have been lower if such fees and sales charges were included. Total return and value will vary and you may have a gain or loss when sharesare sold. Current performance may be lower or higher than quoted. For most recent month end performance, visit ngam.natixis.com. For other fund families or managed accounts, please visit the respectivecompany’s website for most recent month-end performance. Performance for other share classes or fee-paying managed accounts will be greater or less than shown based on differences in fees and/or salescharges. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends, if any.

6

Since inception Inception date

9.04 11/29/2002

11.11 11/29/2002

9.27 1/22/1993

8.81 11/29/2002


As an alternative to an ETF or index fund

Index-based SMA has greater potential for tax efficiency

Distributions and taxes S&P 500® mutual fund S&P 500® ETF Index-based SMA

Dividends distributed Yes Yes Received as paid

Long-term capital gains distributed Yes YesOnly realized when stocks sold

Short-term capital gains distributed

Yes, as ordinary income, so they cannot be offset with capital losses

Yes, as ordinary income, so they cannot be offset with capital losses

Only realized when stocks sold

May have capital gains distributions, even if you don’t sell

Yes, but not very common Yes, but not very common No

Direct benefit from loss harvesting No, net losses stay in fund No, net losses stay in fund Yes

Fees eligible as an itemized deduction

No No Yes

7

For illustrative purposes only.

Source: Active Index Advisors®


Morningstar strategy summaries

8

Funds and strategies were selected by the NGAM Distribution, L.P. PRCG Team. The comparison does not include all investment vehicles in the elected categories, investments not included may have outperformed those included. Data included herein is based upon the most recently reported data by each fund/entity.

AIA S&P 500® SPDR S&P 500® ETF

Ticker SPY

Morningstar Category Large Blend Large Blend

Primary Index S&P 500® TR USD S&P 500® TR USD

Fund Size Date 1/27/2017 1/27/2017

Fund Size (Millions) $288.9 $228,260.73

Fund Incept. Date 11/29/2002 01/22/1993

Manager Names Kevin Maeda, Serena Stone, Daniel Price, Peter Klos Management Team

Manager Tenure (Longest) 14 23.12

Management Fee (%) 0.30 0.06

Net Expense Ratio (%) NA 0.09

Gross Expense Ratio (%) NA 0.11

Stocks 150 505

# of Stock Holdings (Long) 22.54 18

Portfolio Date 12/31/2016 01/27/2017

% US Stocks 100.00 98.53

% Non-US Stocks 0.00 0.90

% US Bonds 0.00 0.00

% Other 0.00 0.17

% Cash 0.00 0.57

AIA S&P 500®

AIA’s managers seek to provide a pre-tax return similar to the S&P 500® Index. Each separately managed account is unique and can incorporate existing holdings and stock restrictions. For taxable investors, the strategy additionally seeks to provide after-tax returns greater than the index. Key features include: providing consistent and diversified exposure to the S&P 500® Index; deploying a proprietary stratified sampling methodology to represent the index with a subset of stocks and delivering customization and tax management at the individual account level.

SPDR S&P 500® ETFThe investment seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500® Index. The Trust seeks to achieve its investment objective by holding a portfolio of the common stocks that are included in the index (the “Portfolio”), with the weight of each stock in the Portfolio substantially corresponding to the weight of such stock in the index.


Benefits of tax loss harvesting in an SMA index

• Quarterly, systematic tax loss harvesting

• AIA has a track record dating back to 2002

Active Index Advisors’ goal is to replicate an index like the S&P 500® on a pre-tax basis and outperform

on an after tax basis via TAX ALPHA

ON A PRE-TAX BASIS:

The AIA S&P 500®

has an annualized return of 9.04% net of fees since inception, just 22bps less than SPY. Standard deviation differs by 0.05%

ON AN AFTER-TAX BASIS:

The AIA S&P 500®

has an annualized return of 11.11% net of fees, while SPY’s after tax return is 8.81%

9

AIA S&P 500® After-Tax Composite performance is provided with a 0.30% minimum management fee. Fund performance is shown without applicable sales charges. Performance data quoted represents past performance and is no guarantee of future results. Performance would have been lower if such fees and sales charges were included. Total return and value will vary and you may have a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month end performance, visit ngam.natixis.com. For other fund families or managed accounts, please visit the respective company’s website for most recent month-end performance. Performance for other share classes or fee-paying managed accounts will be greater or less than shown based on differences in fees and/or sales charges. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends, if any.


Taxed managed index vs. SPY ETF

Hypothetical growth of $10,000 (October 31, 2002 – March 31, 2017)

AIA S&P 500® After-Tax Composite performance is shown with a 0.30% minimum management fee. Fund performance is shown without applicable sales charges. Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results. Performance would have been lower if such fees, were included. Please see the disclosure pages for additional information.

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

AIA S&P 500® Strategy Pre-Tax 0.30% Fee

AIA S&P 500® Strategy After-Tax 0.30% Fee

SPDR S&P 500 ETF Pre-Tax

SPDR S&P 500 ETF After-Tax

S&P 500 TR


Top reasons to use a tax managed strategy

Offers the potential for better equity returns after taxes — ”tax alpha”1

Proactive tax loss harvesting can reduce capital gains taxes2

Combines the benefits of index investing with tax management and customization tailored to specific client needs

3

Potentially more tax efficient than index funds and ETFs, as taxes on their distributions can cost 0.50% a year or more

4


Other ways to use AIA in your business

Build a customized core index to exclude specific stocks, whole sectors, or implement ESG/SRI screens

Transition portfolios of concentrated stock positions, using customized tax constraints for specific situations

For long-term estate planning, may offer a source for low basis stock gifting, and inheritors may be able

to benefit from a step-up in cost basis


ACTIVE INDEX ADVISORS®

A smarter way to indexContact your Natixis representative for more information and a free proposal.

Visit https://ngam.natixis.com/us/tax-managed-index-solutions

FOR INVESTMENT PROFESSIONAL USE ONLY13

0

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QTD YTD 1 Year 3 Year 5 Year 10 Year

AIA S&P 500® Strategy Pre-Tax 2.0% Max Fee 5.29 5.29 13.50 7.51 10.37 5.11

AIA S&P 500® Strategy After-Tax 2.0% Max Fee 5.09 5.09 13.36 8.72 11.00 7.44

AIA S&P 500® Strategy Pre-Tax 0.30% Fee 5.73 5.73 15.42 9.34 12.24 6.91

AIA S&P 500® Strategy After-Tax 0.30% Fee 5.53 5.53 15.28 10.57 12.89 9.27

AIA S&P 500® Strategy Pre-Tax No Fee 5.81 5.81 15.77 9.67 12.58 7.22

AIA S&P 500® Strategy After-Tax No Fee 5.61 5.61 15.63 10.90 13.23 9.60

SPDR S&P 500® ETF Pre-Tax 6.03 6.03 17.04 10.25 13.17 7.42

SPDR S&P 500® ETF After-Tax 5.81 5.81 16.51 9.72 12.65 7.00

S&P 500® TR 6.07 6.07 17.17 10.37 13.30 7.51

Appendix ‒ annualized return

14

Annualized quarter-end performance (Periods ending March 31, 2017)

AIA S&P 500® After-Tax Composite performance is shown with and without a 0.30% management fee and 2.0% maximum fee. Fund performance is shown without applicable sales charges. Performancedata quoted represents past performance and is no guarantee of future results. Performance would have been lower if such fees and sales charges were included. Total return and value will vary and you mayhave a gain or loss when shares are sold. Current performance may be lower or higher than quoted. For most recent month end performance, visit ngam.natixis.com. For other fund families or managedaccounts, please visit the respective company’s website for most recent month-end performance. Performance for other share classes or fee-paying managed accounts will be greater or less than shownbased on differences in fees and/or sales charges. Performance for periods less than one year is cumulative, not annualized. Returns reflect changes in share price and reinvestment of dividends, if any.

Since inception Inception date

7.21 11/29/2002

9.25 11/29/2002

9.04 11/29/2002

11.11 11/29/2002

9.36 11/29/2002

11.44 11/29/2002

9.25 1/22/1993

8.81 11/29/2002


DisclosuresWho we are: Natixis Global Asset Management consists of Natixis Global Asset Management, S.A., NGAM Distribution, L.P., NGAM Advisors, L.P., NGAM, S.A., and NGAM, S.A.’s businessdevelopment units across the globe, each of which is an affiliate of Natixis Global Asset Management, S.A. The affiliated investment managers and distribution companies are each an affiliate ofNatixis Global Asset Management, S.A.

NGAM Distribution, L.P. is a limited purpose broker-dealer and distributor of Natixis and Loomis Sayles fund families, which provide advisory services as affiliates of Natixis Global AssetManagement, S.A. NGAM Distribution, L.P. also serves as a marketing agent for the Oakmark Funds. Not all funds shown are distributed by NGAM Distribution, L.P.

NGAM Advisors, L.P. provides advisory services through its divisions Active Index Advisors® and Managed Portfolio Advisors®. Advisory services are generally provided with the assistance of modelportfolio providers, some of which are affiliates of Natixis Global Asset Management, L.P.

NGAM Advisors, L.P. does not provide tax or legal advice. Investors should consult with an investment professional prior to making any investment decision.

Investment Disclosure: This report is provided to the Investment Professional for his/her sole use and is not intended for use with clients of the Investment Professional. The report is forinformational purposes only and should not be construed as a recommendation or investment advice, as the analysis provided in this report does not take into account the investment objectives,risk tolerance, restrictions, liquidity needs or other characteristics of any one particular investor. No investment advisory or other fiduciary relationship, including any under the EmployeeRetirement Security Act of 1974 (ERISA) or other law or regulation, should be considered to exist or develop between NGAM and the Investment Professional and/or any client of the InvestmentProfessional. Information about the underlying portfolio and/or representative account has been supplied to NGAM by the Investment Professional that has requested that this analysis beconducted. NGAM has no role in selecting or recommending the portfolio that is referred to in this report. However, certain portfolio holdings identified in this report may be sponsored or managedby NGAM or its affiliates.

Views & Opinions: This presentation is provided for informational purposes only and should not be construed as investment advice. Any opinions or forecasts contained herein reflect thesubjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Global Asset Management, or any of its affiliates. There can be no assurance thatdevelopments will transpire as forecasted and actual results will be different. Data and analysis does not represent the actual or expected future performance of any investment product. We believethe information, including that obtained from outside sources, to be correct, but we cannot guarantee its accuracy. The information is subject to change at any time without notice.

Performance Disclosure: Gross performance presented includes reinvestment of all dividends and capital gains and does not reflect the deduction of investment advisory fees or other expenses.The client's return will be reduced by the advisory fees and other expenses it may incur in the management of its account. The advisory fee, compounded over a period of years, will have anadverse effect on the value of the client's portfolio. If such fees and expenses were reflected, performance would be reduced accordingly. Such fees will normally be deducted from client accountson a quarterly basis, with a compounding effect that is directly related to gross account performance. For example, on an account with a 1% annual fee deducted quarterly, a hypothetical grossannual performance of 12% would be reduced to a net annualized performance of 10.92% for 1, 3, 5 and 10 year periods. A complete schedule of fees charged by NGAM Advisors, L.P. and otheradvisors can be found in Part 2A of each firm's respective Form ADV. Performance data shown represents past performance and is no guarantee of, and not necessarily indicative of, future results.

Intellectual Property Disclosure: This report may contain references to third party copyrights, indexes, and trademarks, each of which is the property of its respective owner. Such owner is notaffiliated with NGAM or any of its related or affiliated companies and does not sponsor, endorse or participate in the provision of any NGAM services, funds or other financial products. Indexinformation contained herein is derived from third parties and is provided on an “as is” basis. The user of this information assumes the entire risk of use of this information. Each of the third partyentities involved in compiling, computing or creating index information, disclaims all warranties (including, without limitation any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to such information.

Calculations are created using MPI Stylus Pro with data derived from Morningstar and NGAM Advisors, L.P.

Investment Risks: All securities are subject to risk, including possible loss of principal. Please read the risks associated with each investment prior to investing. Detailed discussions of eachinvestment’s risks are included in Part 2A of each firms’ respective Form ADV or the prospectus offering or offering document, which can be obtained from the fund family’s website. Theinvestments highlights in this presentation may be subject to certain additional risks.


Disclosures

Active Index Advisors® (“AIA”) is a division of NGAM Advisors, L.P (NGAM Advisors). NGAM Advisors is an SEC registered investment adviser. A complete listof composite descriptions, as well as additional information regarding the firm’s policies and procedures for valuing portfolios, calculating performance, andpreparing compliant presentations, is available upon request. The AIA S&P 500® Cash Funded After-Tax Composite includes all fully discretionary, taxable,fee paying portfolios that invest in the AIA S&P 500® which have initially been funded with cash. This strategy seeks to track the S&P 500 Index on a pre-tax basis by investing in a subset of securities from within the index, while utilizing loss harvesting and tax management techniques to outperform on anafter-tax basis. The AIA S&P 500® Cash Funded After-Tax Composite is a sub-composite of the AIA S&P 500® Pre-Tax Composite. The composite wascreated in November 2007. The benchmark used is the S&P 500®, an index representing large cap U.S. stocks. Performance is expressed in US Dollars. Allresults are time-weighted total returns that include the reinvestment of income and dividends. Returns are presented net of non-reclaimable withholdingtaxes. Management fees vary on asset size and are negotiated by the sponsor. The standard fee schedule is as follows: 0.30% on the first $5 million; 0.20%on the next $5 million; 0.15% on the next $10 million; 0.12% thereafter. Net-of-fees returns assume total custody, advisor, transaction, and investmentmanagement fees of 2.0%, deducted 1/12th per month from the gross composite return. Pure gross-of-fees returns do not reflect the deduction oftransaction costs or fees. Effective January 2006, accounts with significant cash withdrawals are temporarily removed from the composite during the monththat the withdrawal was taken. Currently, significant cash withdrawals are defined as cash withdrawals that are greater than 10% of an account’s marketvalue. Details related to the policy and the threshold for defining significant cash withdrawals historically are available upon request. The after-tax returnsshown are subject to the limitations of the specific calculation methodology applied. Since the client's actual circumstances and tax rates determined afterthe fact may differ from the anticipated tax rates used in this process, the reported returns may not equal the actual after-tax returns for specific clients.After-tax returns are calculated using the maximum federal and state tax rates for dividends, short-term capital gains and long-term capital gains. Tax alphais the benefit of loss harvesting, which is assumed to be used to offset gains inside or outside the portfolio in the period they are incurred, and thus creditedto the portfolio returns. The after-tax benchmark is an estimate based upon the average capital gain realization rate and dividend yield of the index. Themaximum federal and state tax rates for dividends and capital gains are utilized in the after-tax calculations.

NGAM Distribution, L.P. is a limited purpose broker-dealer and the distributor of various registered investment companies for which advisory services areprovided by affiliates of Natixis Global Asset Management, S.A.

NGAM Distribution, L.P. is located at 399 Boylston Street, Boston, MA 02116. • 800-862-4863 • ngam.natixis.com

Copyright © 2017 NGAM Distribution, L.P. All rights reserved.

1747056.3.1

Expiration 8/15/2017


active index advisors (aia) · aia s&p 500® strategy after-tax 0.30% fee 5.53 15.28 10.57...

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