Alternative Investment Opportunities Through a Slowing Economy

FIGURE 11 shows the cumulative returns for the S&P 500, the S&P 500 Quality Index (which tracks the top 100 companies in the S&P 500 based on return on equity, accrual ratios, and financial leverage), theS&P 500 – Lowest Quintile Index (which tracks the lowest 100 companies in the S&P 500 based on the aforementionedmeasures) and the S&P 500 150/50 Quality Index (which takes a levered longposition in the quality index and a short position in the lowest quest quintile index). It is evident that actively taking long exposure to quality and short exposure to the lowest quintile canprovide additional returns for investors. Historically, not only have quality companiesoutperformed the broader market, but companies that are of the lowest quality and have the opposite characteristicsof those mentionedabove have significantly lagged the broader market. FIGURE 11 : Disper sion of Highest to Lowest Quality Quint ile Returns 0% 1000% 2000% 3000% 4000% 5000% 6000% 7000% Dec-94 Jan-96 Feb-97 Mar-98 Apr-99 May-00 Jun-01 Jul-02 Aug-03 Sep-04 Oct-05 Nov-06 Dec-07 Jan-09 Feb-10 Mar-11 Apr-12 May-13 Jun-14 Jul-15 Aug-16 Sep-17 Oct-18 Nov-19 Dec-20 Jan-22 Feb-23 S&P 500 Quality Total Return Index (USD) S&P 500 Quality - Lowest Quintile Index TR S&P 500 (Total Return) S&P 500 150/50 Quality Index (USD) TR Source: Bloomberg asofMarch 31, 2023; Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance. Past performance is no guarantee of future results. Real results may vary. OPPORTUNITIES | WEALTH OUTLOOK 2023 | MID-YEAR EDITION │ ALTERNATIVE INVESTMENTS | 19