S t r a t e g y I n s i g h t s

Markets, the Income Trade and Alternatives

The Federal Reserve Board has set its monetary policy to encourage investors toseek risk. The Fed has pegged short-term administered money rates at very lowlevels and has executed “Operation Twist” to lower long-term interest rates. As aresult, savers and investors have set out on a search for higher cash returns ontheir investments. If not properly managed, this quest for higher income couldresult in a higher-risk portfolio that endangers lifetime savings and investmentreturns. Meanwhile, stock market volatility has caused heightened investor concerns. This fear has led to portfolio decisions where cash reserves are kepthigh or diversification rules are being ignored as investors try to reduce or avoidexposure to equity markets. We believe risk-controlling investments, in the formof hedge funds and other alternative investments, can help solve volatility wor-ries. We explore these tactics in this issue of Hawthorn Strategy Insights.

Current Markets

After a very volatile second half of 2011, investors fully switched to the “riskon” trade at the end of 2011, and this positive feeling has carried over into2012. In December, prospects for holiday retail sales began to improve along

with other economic indicators.This news was followed by theJanuary jobs report onFebruary 3, 2012, in which the Labor Departmentannounced that the economyadded more than 200,000 jobs.With encouraging trends in the economy reinforced bystrong employment numbers,investors continued to movethe stock market upward. TheFed’s announcement that itintends to keep interest rateslow through 2014 also boostedmorale. Table 1 illustrates market returns throughFebruary 29, 2012.

Some of the underperformersin 2011 have become the starsof 2012.

Second Quarter 2012

At Hawthorn, we believe the tax efficient growth of

capital can best be achievedthrough an integrated portfolio constructed

through a valuation-based,risk-aware, diversified

investment approach.

Operation Twist, originally

created in the early

1960s during the

Kennedy administration,

is a monetary policy tool

used by the Fed to sell or

reduce its short-term

Treasury holdings in favor

of buying longer-term

Treasuries. The goal is

to reduce longer-term

interest rates to

encourage borrowing

and help stimulate

economic activity.

John A. Martin, CFA®Managing Director, Director of Investments412.762.2766john.martin@hawthorn.pnc.com

Martyn S. Babitz, J.D., hawthorn.pnc.com

Table 1

Investment Market Returns

Year to Date through February 29, 2012

S&P 500® 9.00%

Russell MidCap® 10.46%

Russell 2000® (Small Cap) 9.63%

MSCI EAFE (net) 11.38%

MSCI Emerging Markets 18.05%

Lipper Intermediate Municipals 1.93%

Gold 12.74%

Crude Oil, West Texas Intermediate 8.34%

iShares China 25 * 15.50%

iShares S&P India 50 * 25.80%

iShares MSCI Russia Capped * 24.90%

iShares MSCI Brazil * 27.70%

* price only

Source: First Rate Performance, Thomson One

Domestic stocks as measured by the S&P 500®

could only muster a 2.1% returnlast year but are up 9% this year through the end of February. More noteworthyare emerging market stocks. After declining more than 18% last year, the MSCIEmerging Markets Index is up 18% in the first two months of 2012. The Chinesemarket is up15.5%, the India market is up 26%, and Brazil is up 28%.

Stock market investors continue to be encouraged by positive economic trends,good earnings comparisons, and reasonable valuations. Recent corporate dividend increase announcements have added to the optimistic feeling.

The bond market also has a positive return this year. The Lipper IntermediateTerm Municipal Bond Average is up 1.9% through February, as tax-exemptyields remain competitive with taxable bonds, attracting income investors.Fundamentally, state and local governments have been taking action to controlthe risk of deficit budgets, thus focusing on keeping their finances balanced.Taxable bonds have posted gains between 0.5% and 1%; the higher returns have been reported in corporate bonds and the smaller returns in Treasuries.Looking at the remainder of 2012, PNC continues to expect steady but moderate economic growth in the United States and some economic weakness overseas.

With the jobs picture on more stable footing, we think the key test will be howconsumers deal with recent increases in gasoline prices. Table 2 shows the currentPNC economic forecast for the United States exhibiting moderate growth in personal consumption expenditures and inflation.

Overseas, Europe appears to be in the beginning stage of economic weaknessthat could result in a recession in selected countries. Economic activity in theEurozone will likely remain slow due to fiscal “austerity” programs, as selectedcountries attempt to reduce debt and control spending.

The non-European developing economies are expected to report mixed results,and all eyes are on China as it maneuvers through a period of slower growth.

The Income Trade

Investors and other parties appear to be clamoring for income. With the FederalReserve clarifying its low interest rate announcement by saying that it expects tokeep rates “exceptionally low…. at least through the end of 2014,” investors seem to have an even larger appetite for income investments. In addition, recentequity market volatility and low 2011 stock market returns have encouraged

2

Operation Twist, originallycreated in the early 1960s

during the Kennedy administration, is a

monetary policy tool used by the Fed to sell or reduce

its short-term Treasuryholdings in favor of buying

longer-term Treasuries. The goal is to reduce

longer-term interest ratesto encourage borrowing

and help stimulate economic activity.

Table 2

U.S. Economic Outlook

2011P 2012E 2013E

(Percent Change)Real GDP 1.7% 2.3% 2.6%

Personal Consumption Expenditures 2.2% 2.1% 2.4%

Industrial Production 3.4% 4.5% 3.9%

Consumer Price Index 3.1% 2.2% 2.3%

Housing Starts (Thousands, Annual Rate) 607 715 781

Auto Sales (Millions) 12.7 14.1 14.2

* P=Projected E=Estimated

Source: PNC

3

equity investors to ask for returns up-front in the form of dividends or highinterest rate bond funds. Both factors have led to investors pulling money out ofmoney market mutual funds and equity funds in favor of higher yielding bondfunds. Table 3 shows mutual fund flows for the 12 months ending January 2012.

Of the fund inflows over the last 12 months, the subcategory leaders are shownin Table 4. Intermediate-term bond funds have received the largest fund inflowsat a time when domestic interest rates appear near absolute lows. Our belief thatinterest rates are near their absolute lows is based on the Fed maintaining its lowinterest rate policy for short-term rates at 0.1% through 2014, the continuationof Operation Twist which has the Fed pulling down long-term interest rates, andinflation that appears to be hovering at the 2.0–2.5% rate. As long as interestrates in general stay flat, yield-stretching strategies can produce a competitivereturn. However, if investors begin to push interest rates up because of increasinginflation or the need to add to risk premiums because of fiscal challenges orother fears, bond market strategies that are focused on longer-term maturitiescould produce out-sized losses.

At a most basic level, investors seeking income-biased investments should considerthat in many instances current yields do not eclipse inflation. While this facttempts investors to seek ultra-high yielding investments such as utility stocks, preferred stocks, or high yield (junk) bonds, investments with higher yields will be sensitive to rising interest rates or inflation. Concentrating a portfolio in thehighest yielding investments could expose a portfolio to severe volatility. Table 5compares the current yield of selected income investments to inflation. As can beseen, only very long maturity investments beat out the inflation rate on anincome-only basis.

Table 3

Mutual Fund Net Cash Flows(millions)

12 Months Ended

January 2012 January 2012

Money Market -$37,679 -$68,008

U.S. Stock -$2,752 -$103,127

International Stock $243 -$6,195

Taxable Bonds $24,644 $142,520

Source: Morningstar, Inc.

Table 4

Mutual Fund Subcategory Leaders

12 Months Ended January 31, 2012

(millions)

Intermediate Term Bond $46,449

World Bond $20,817

Diversified Emerging Markets $18,907

High Yield Bond $16,696

World Allocation $14,186

Emerging Markets Bond $13,359

Source: Morningstar, Inc.

4

Knowing that investors have been clamoring for yield in both equities and bonds,we have gathered the investment returns and risk statistics for popular incomeinvestment strategies. Because income yield is only one component of return,investors need to be alert to principal value changes from their income favorites.Our goal in analyzing total return data is to illustrate the benefits and risks ofincome-related investments. What we found was that over the last 14 years,income-producing strategies generally earned similar annualized returns to eachother. However, there were wide divergences in the levels of volatility encounteredto achieve these similar returns. Chart 1 shows the results of our review.

Table 5

Inflation Rate Compared with Current Yields of Income Investments

Yield versus

Current Inflation

CPI Inflation (January year over year) 2.9% -

1-Year Treasury Bill 0.2% -2.7%

10-Year Treasury Note 2.0% -0.9%

30-Year Treasury Bond 3.2% 0.3%

Barclays Intermediate Aggregate 1.8% -1.1%

Barclays Corporate Intermediate 2.7% -0.2%

Barclays 10 Year Muni 2.3% -0.6%

Barclays 10 Yr Muni TE* 3.5% 0.6%

S&P 500 1.9% -1.0%

iShares DJ Select Dividend 3.2% 0.3%

iShares DJ Real Estate 3.9% 1.0%

SPDR Lehman High Yield 7.3% 4.4%

* Taxable equivalent - taxed at 35% rate.

Source: Bloomberg LP, Thomson One Baseline

Barclays Capital Municipal Bond

Barclays Capital US Corp (Investment Grade)

Barclays Capital US Aggregate

Barclays Capital US Corp (High Yield)

BofA ML Preferred Securities

Dow Jones US Select Real Estate Composite

Dow Jones US Select Dividend Stocks

MSCI World Index

S&P 500

9.0%

8.0%

7.0%

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Dates - January 1998 - December 2011Source: Barclays, Bank of America ML, Dow Jones, MSCI, Standard & Poor’s

Chart 1

Comparison of Income-Producing Strategies

5

From 1998-2011, the Dow Jones Select REIT Composite Indexsm was the highest-performing income strategy earning a compound annual return of 8.5%. To earnthis highest annual return, the REIT index also recorded the highest volatilityranking (23.8%), which was even higher than the S&P 500 (16.6%) over thesame time period. Tactically, PNC believes that REITs are in a favorable performance trend, but investors need to be aware that the investment has highvolatility. Selected income-sensitive investments included in our analysis earned a 6–7% annualized return over the review period, but with different volatility levels. Among these assets, the ones with the lowest volatility measures includedmunicipal bonds and investment grade domestic bonds. (See Barclays CapitalMunicipal Bond, Barclays Capital US Corporate Investment Grade, and BarclaysCapital US Aggregate.) Each of these investments earned about a 6% return withthe lowest volatility measures among the group – no other candidates were evenclose to these low volatility measures.

From a portfolio management perspective, all of this information is important toincome investors. We believe the following conclusions can be drawn:

� Not all income investments are the same; higher volatility income investments should be balanced with other lower risk income strategies.

� Bond strategies are low risk. Municipal bonds appear the most attractive to high net worth investors because they offer similar returnsto taxable bonds but in a tax advantaged way with low risk/volatility. Higher income taxes expected in 2013 makes the case for municipals even stronger.

� Equity income strategies are more volatile than fixed income strategies.

� Equity dividend strategies have outperformed the S&P 500 over the selected time period with similar risk characteristics to the general stock market.

� The best income strategies mix stocks and bonds to enjoy favorablediversification benefits and add some additional growth return overbond income. Dividend growth is a critical component of an equityincome strategy – Hawthorn/PNC believes investors should look formore than yield.

Alternatives Investing

Investors are logically concerned about equity market volatility given the twosharp market downturns recorded in the last 12 years. Many of these investorsare relying on “income” strategies to protect the principal value of their portfolios. However, investors concentrating only on the income trade are missingwhat we see as an essential ingredient—alternative investments—in managing thevolatility of today’s markets. Alternative investments have earned better returnswith significantly lower risk/volatility than the S&P 500 over the last 14 yearsthan traditional equity markets. In fact, hedge fund volatility has only been a bithigher than the bond market, a low volatility investment.

Alternative investments include hedge funds, private equity, partnership investments in commodities, and real assets such as natural resources. Typically,alternatives investments contain some liquidity constraints, but more “liquid alternatives” have been introduced. These strategies are being delivered in mutual fund format that decrease liquidity concerns. Given this mix of choices,investment advisors are able to “ladder” liquidity, mixing top performing less liquid limited partnerships (LPs) with liquid mutual fund format choices.

6

For purposes of our analysis, we have used the risk and return figures for theHFRX Global Hedge Fund Index. This index does not include private equity, butis illustrative of a broad spectrum of alternative investments. It includes relativevalue arbitrage hedge funds, event driven funds, and equity hedge and macrocommodity futures trading hedge funds. Chart 2 illustrates the performance of the HFRX Global Hedge Fund Index compared to the S&P 500 and the MSCIWorld Index from 1998 through 2011.

Over the 14-year period, the HFRX Global Hedge Fund Index recorded a 5.5%return compared with the 3.7% return earned by the S&P 500 and the 3.9%return reported by the MSCI World Index. Importantly, a close look at the performance comparison shows that most of the incremental return was earnedduring periods when the equity markets were declining. During this 14-year period, the returns of the HFRX Global Hedge Fund Index had a standard deviation (volatility measure) of 6.8% compared to the S&P 500’s 16.6% standard deviation – more than one-half less volatile than domestic stocks. Chart 3 illustrates the HFRX Global Hedge Fund Index's higher return with lower risk characteristics when compared to the S&P 500 and the MSCI WorldIndex over the review period.

Dates - January 1998 - December 2011Source: Standard & Poor’s, MSCI, Hedge Fund Research (HFR)

300

250

200

150

100

50

01998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

HFRX Global Hedge Fund Index S&P 500 MSCI World

Chart 2

Comparing Returns for HFRX Global Hedge Fund Index

S&P 500

HFRX Global Hedge Fund Index

MSCI World Index

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%0.0% 5.0% 10.0% 15.0% 20.0%

Dates - January 1998 - December 2011Source: Standard & Poor’s, MSCI, Hedge Fund Research (HFR)

Chart 3

HFRX Global Index Returns Compared to Stocks

The HFRX Global Hedge Fund

Index is designed to be

representative of the overall

composition of the hedge fund

universe. It is composed of all

eligible hedge fund strategies

falling within four principal

strategies: equity hedge,

event driven, macro/CTA, and

relative value arbitrage. The

underlying constituents and

indices are asset weighted

based on the distribution of

assets in the hedge fund

industry.

The MSCI World is a stock

market index of more than

1,600 'world' stocks which is

often used as a common

benchmark for 'world' or

'global' stock funds. The index

includes securities from 24

countries but excludes stocks

from emerging and frontier

economies.

7

While hedge funds have desirable risk and return attributes, we believe they arebest placed in a portfolio of diversified investments. As we mentioned in ouranalysis of the income trade, no single strategy should be utilized in building aportfolio. Only through broad diversification will an investment portfolio be ableto stand the test of time. We believe our analysis shows that a traditional portfoliowith alternatives will provide a smoother investment return in the longer run.Chart 4 illustrates the historical return of a portfolio constructed using theHawthorn balanced allocation with and without alternatives. Our balanced allocation includes diversified domestic and international stocks and municipal bonds.

Chart 4 shows that the portfolio invested in alternatives outperformed the traditional assets-only portfolio over the last 14 years. Note how the allocationincluding alternatives buffered downside risk in declining equity markets in 2002 and 2008.

Over the full time period, the portfolio allocation including hedge funds recordedan annual return of 4.9% while the traditional asset portfolio compounded at a 4.5% rate. This return differential is meaningful as it adds up to about $2.3 million on a $20 million investment portfolio! The portfolio with hedgefunds had 42% less volatility than the traditional asset-only portfolio. This is the very essence of portfolio diversification—investing a portfolio utilizing assets that are not correlated to each other, producing competitive returns with lower volatility.

Joint Select Committee

on Deficit Reduction, the

so-called “Super Committee,”

is a Congressional committee

formed as a result of the

Budget Control Act of 2011.

The super committee

consists of 12 members:

6 from the Senate and 6

from the House comprising

6 Republicans and 6

Democrats.

Source: Standard & Poor’s, Russell, MSCI, Barclays, Hedge Fund Research (HFR)

250

200

150

100

50

01998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Balanced Portfolio With Alternatives (45% Equities*, 35% Barclays Muni Bond, 20% HFRX Global HF)

Balanced Portfolio Without Alternatives (65% Equities*, 35% Barclays Muni Bond)Balanced Portfolio With Alternatives Average Annual Return = 4.93% Standard Deviation = 8.26%Balanced Portfolio Without Alternatives Average Annual Return = 4.46% Standard Deviation = 14.42%

Chart 4

Hawthorn Balanced Portfolio - With and Without Alternatives

8

Asset Class Strategy - Second Quarter 2012We believe the stock and bond markets are off to a great start in 2012 for these reasons:

� Investors have been encouraged by economic reports that demonstrate improving trends in retail sales and employment.

� The Federal Reserve’s recent comments indicating that administeredinterest rates would remain low through 2014 help the bond market and bolster the argument that equity markets could be revalued upward.

� As long as competition from fixed income remains low andcorporate earnings continue to advance, stock marketsshould at least maintain current gains.

� Meanwhile, in a flat interest rate environment, additional risk canbe accepted in the bond market.

Investors need to remain vigilant over the next several months as this year’selection results could change the fundamental outlook for investment markets.Political philosophy could change and tax rates may be adjusted to help overcome budget deficits. We suggest that investors review the strategies and tactics discussed below in light of their own unique circumstances. A conversation with your investment advisor is the best way to fine-tune theseideas for your specific portfolio.

Equity

Strategy� Large capitalization domestic

stocks appear more attractive ona valuation basis than Mid Capor Small Cap stocks, but webelieve all of these sectors couldperform favorably given positivedomestic fundamentals.Investments in companies that arewell-capitalized, high quality, andwith earnings and dividendgrowth are preferred.

� Developed international equitymarkets remain sensitive toEurozone financial instability.Progress has been made in renegotiating excessive debt positions of a few of the weakercountries. We hope these positivedevelopments continue.

� Emerging markets will likely be affected by expected lowereconomic growth in developedcountries. We believe slower economic growth in these developing economies will still behigher than in developed markets.Emerging market countrieshold significantly less debt thandeveloped economies.

Tactics�We think attractive valuation

metrics bode well for executingpurchases of companies with top-line growth. We recommend a special allocation within theequity portfolio to dividend paying companies and strategiesto reduce the risk of volatility inthis uncertain market. In manyinstances, dividend yields arehigher than the 10-Year Treasury.Investors should remain currenton congressional discussionsabout future income tax rates on dividend income, as this could cause investors to reduceincome-paying investments infavor of capital-gains-orientedinvestments.

� Active management strategies are recommended over passivestrategies until global economicactivity strengthens and risk aversion can be reduced.

� International investments should becarefully crafted using managerswith country-by-country experienceto avoid specific sovereign risks.Hedged international strategies arealso valuable given uncertaintiesoverseas.

9

Fixed Income

Strategy�Domestic bond markets continue

to benefit from the global flight to higher quality markets and liquidity. Yields are low on anabsolute basis and prospects forfurther improvement have beenreduced. Federal Reserve policywill likely keep rates low for anextended period, reducing the risk of a quick uptick in rates, barring some calamity.

�U.S. corporate balance sheetsappear strong and recent earningstrends add to balance sheet quality. Higher yields make theCorporate sector of the bond market attractive.

� Financial conditions among thestates have improved with thepassage of balanced budgetsfeaturing slower spending growthand some absolute spending cuts.Credit analysis remains importantas state sales tax revenue hasimproved but local municipalitiescontinue to have mixed results.

�We think selected internationalcountries offer attractive fiscalconditions, currency exposure, and broader diversification fortaxable bond portfolios. Domesticinvestors should be mindful ofcurrency trends, as a stronger dollar will reduce returns.

Tactics� Active management remains

important for success in managing taxable or tax-exemptportfolios.

�We believe municipal bondsshould remain as the core of fixedincome portfolios for tax sensitiveinvestors. Yields are attractiveand fiscal conditions are solid andimproving. A broadly diversifiednational municipal portfolio isrecommended in most instancesto avoid geographic risk. Thepotential for higher taxes adds tothe attraction of municipal bonds.

�Where taxable income is required,corporate bonds appear moreattractive than Treasuries.

� To protect some portion of fixedincome portfolios from the risk of rising inflation and interestrates, we believe an allocation to leveraged loans makes sense.These securities offer highercoupons that vary with marketrates. Care needs to be exercisedto find managers who can suc-cessfully conduct credit analysisto avoid deteriorating holdings.

�Global bonds can offer addeddiversity to fixed income portfolios. Recent currency trends suggest the need for active management in this sector.

�High yield bonds should also beconsidered as part of a diversifiedfixed income portfolio.

10

Alternatives

Strategy�Many alternatives continue to

work. Typically, investments inhedge funds, private equity, realestate, real return investments,and commodities when managedtogether can add additional returnwith lower volatility.

� Slow economic growth globallycould reduce demand for commodities. Recent price trendssupport this warning. Oil has beenthe one commodity going againstthe trend, apparently due to concerns about potential global oil supply disruptions.

� Commercial real estate appears tobe in the early stages of recovery.

� Secondary private equity is a valueapproach to investing in privatecompanies.

Tactics� Careful manager selection is

critical to invest successfully inalternative investment vehicles.

� Global multi-strategy hedge fundof funds can be attractive forlong-term investors seeking moderate rates of return with low volatility.

� Commodity exposure should bereviewed given prospects for sloweconomic growth. Oil prices willlikely remain volatile aroundMiddle East threats.

� Private real estate investments are often cheaper than publicallytraded REITs, but both sectorscould perform well as housingand the economy gain strength.

�Managed futures strategies appearattractive for long/short exposureto commodities, interest rates,equities, and currencies.

� Carefully selected alternatives inmutual fund format providedaily liquidity not available in LPformat hedge funds. These fundscould be more attractive insmaller sized accounts or whereliquidity is critical.

� For private equity investors, secondary private equity investments are favored over primary private equity investment.

11

The following disclosure is made in accordance with the rules of TreasuryDepartment Circular 230 governing standards of practice before the InternalRevenue Service: Any description pertaining to federal taxation contained hereinis not intended or written to be used, and cannot be used by you or any otherperson, for the purpose of (i) avoiding any penalties that may be imposed by theInternal Revenue Code, and (ii) promoting, marketing or recommending toanother party any transaction or matter addressed herein.

Stocks 50%

Bonds 25%

Alternative 20%

Cash 5%

Stocks 50%

Bonds 25%

Alternative 20%

Cash 5%

Real Estate 20%

Private Equity 35%

Commodities/Real Assets 20%

Hedge Funds 25%

Real Estate 20%

Private Equity 35%

Commodities/Real Assets 20%

Hedge Funds 25%

U.S. 70%

DevelopedInternational 20%

Emerging Market 10%

DevelopedInternational 16%

Emerging Market 10%

U.S. 74%

The PNC Financial Services Group, Inc. (“PNC”) uses the service marks “PNC Wealth Management”, “PNC Institutional Investments” and “Hawthorn PNCFamily Wealth” to provide investment and wealth management, fiduciary services, FDIC-insured banking products and services and lending of fundsthrough its subsidiary, PNC Bank, National Association, which is a Member FDIC, and uses the service marks “PNC Wealth Management” and “HawthornPNC Family Wealth” to provide certain fiduciary and agency services through its subsidiary, PNC Delaware Trust Company. This report is furnished for theuse of PNC and its clients and does not constitute the provision of investment advice to any person. It is not prepared with respect to the specific investment objectives, financial situation or particular needs of any specific person. Use of this report is dependent upon the judgment and analysis appliedby duly authorized investment personnel who consider a client’s individual account circumstances. Persons reading this report should consult with their PNC account representative regarding the appropriateness of investing in any securities or adopting any investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. The information contained in thisreport was obtained from sources deemed reliable. Such information is not guaranteed as to its accuracy, timeliness or completeness by PNC. The information contained in this report and the opinions expressed herein are subject to change without notice. Past performance is no guarantee of futureresults. Neither the information in this report nor any opinion expressed herein constitutes an offer to buy or sell, nor a recommendation to buy or sell,any security or financial instrument. Accounts managed by PNC and its affiliates may take positions from time to time in securities recommended and followed by PNC affiliates. PNC does not provide legal, tax or accounting advice. Securities are not bank deposits, nor are they backed or guaranteed byPNC or any of its affiliates, and are not issued by, insured by, guaranteed by, or obligations of the FDIC, the Federal Reserve Board, or any governmentagency. Securities involve investment risks, including possible loss of principal.

©2012 The PNC Financial Services Group, Inc. All rights reserved.

Balanced Portfolio

Asset Allocation

Equity Allocation

Alternative Assets

Fixed Income

Baseline Tactical

Baseline

Baseline

Baseline

Tactical

Tactical

U.S. 70%

DevelopedInternational 20%

Emerging Market 10%

Hedge Funds 25%

Commodities/Real Assets 20%

Private Equity 30%

Real Estate 25%

Tactical

Core Municipals 100% Core Municipals 80%

Leveraged Loans 10%

Global Bonds 10%