TEXT FOR HEADER

FUNDMARKET INSIGHT REPORT

THOMSON REUTERS LIPPER RESEARCH SERIES
TEXT FOR SUBHEADER
EQUITY MARKET - QUARTER-END ANALYSIS
SEPTEMBER 30,DATE
2017

Equity Funds Q3 Return Remains Positive on

Average for an Eighth Consecutive Quarter

EXECUTIVE SUMMARY
Equity investors proved fairly resilient in Q3, dodging shake-ups in the White House;
Equity Funds Q3 Return Remains Positive on Average
increasingly negative rhetoric between North Korea and the United States; and the for an Eighth Consecutive Quarter
devastation of Hurricanes Harvey, Irma, and Maria. While a weaker-than-expected
For Q3 2017 equity funds (+4.64% on average) posted
nonfarm-payrolls report at the beginning of September led some investors to their eighth consecutive quarterly gain. Thomson
believe the Federal Reserve Board might soften its hawkish tonewhich many Reuters Lippers World Equity Funds macro-classification
thought could be beneficial to equities, the fresh threats out of North Korea, (+6.10%) remained at the top of the leader board for the
third quarter in a row, followed by U.S. Diversified Equity
lofty stock prices, and the prospects of another round of hurricane catastrophes (USDE) Funds (+4.16%), Sector Equity Funds (+3.56%),
led many to be less risk seeking in the middle of the month. However, positive and Mixed-Asset Funds (+3.02%).
economic reports toward month-end, accompanied by details of the proposed tax
The Sector Equity Funds macro-classification housed
reform, pushed markets to new highs at the end of September. For Q3 2017 the three of the four worst performing classifications in the
average equity fund posted a return of 4.64%, with Lippers World Equity Funds equity universe for Q3, with Commodities Agriculture
macro-classification (+6.10%) staying at the top of the four major equity groups for Funds (-3.59%) being the group laggard.
the third consecutive quarter. For the third consecutive quarter USDE growth-
oriented funds (+5.26%) outperformed their core-
Investors pushed the NASDAQ Composite Index to new highs at the beginning oriented (+4.31%) and value-oriented (+3.75%) cousins.
of September on low volume after learning the U.S. had created 156,000 new Meanwhile, for the first quarter in three small-cap funds
jobs for August (coming in below analyst expectations of 170,000), which lowered (+5.05%) were at the top of the leader board as investors
bid up small-cap information technology and industrial
expectations of another rate hike in 2017. Some pundits believed that rising rates issues.
might stall the ongoing bull market run.
However, with Hurricane Irma barreling down on Florida after devastating parts of
the Caribbean and on increased saber rattling between North Korea and the U.S.,
many investors began taking some of their hard-won profits off the table, bidding
up safe-haven instruments and turning their backs on some recent high flyers and
crude oil.
Nonetheless, the following week investors breathed a sigh of relief after Hurricane
Irma was weaker than expected. Although Irma slammed the Florida Keys and
south Florida, she delivered lighter-than-expected damage, helping push many of
the battered insurance companies into positive territory. All three major indices hit
record closes after data from the Department of Labor showed that job openings in
the U.S. hit records in July and as Census Bureau data showed that income in the
U.S. jumped in 2016, supporting signs of a growing, healthy economy.
Investors shook off North Koreas second missile test over Japans air space
midmonth. Hoping that risks had subsided, they pushed the major U.S. indices to
new highs, despite learning that August retails sales and U.S. industrial output had
declined. While big-name tech stocks remained under fire, investors pushed the
Russell 2000 index into record territory. This was in spite of investors witnessing Authored by:
the verbal exchange intensify between the U.S. and North Korea after President
TOM ROSEEN
Donald Trumps address to the United Nation and after the Fed confirmed its plan HEAD OF RESEARCH SERVICES
to begin unwinding its $4.5-trillion balance sheet in October and to hike interest THOMSON REUTERS LIPPER

1
 FUNDMARKET INSIGHT REPORT SEPTEMBER 2017

rates one more time in 2017.

The S&P 500, NASDAQ Composite, and Russell 2000 indices
all closed the month with records amid multiple releases of
strong economic data and after the president and congressional
Republicans announced a sweeping tax overhaul. In the last few
days of September it was reported that new orders for durable
goods rose 1.7% for August, Q2 GDP was revised to 3.1%, and
August personal income rose 0.2%.
Lippers preliminary Q3 2017 fund-flows numbers showed mutual
fund investors were net purchasers of fund assets for the quarter,
injecting an estimated $81.8 billion into the conventional funds
business (excluding ETFs). However, the headline number was a
bit misleading. During the quarter investors were net redeemers
of equity funds (-$51.7 billion), continuing to shun domestic equity
funds (withdrawing $63.0 billion) but being net purchasers of
nondomestic equity funds (injecting some $11.3 billion). Once again,
investors were net purchasers of taxable bond funds (+$32.1 billion)
and municipal bond funds (+$6.3 billion). And for the first quarter
in three they were net purchasers of money market funds (+$95.1
billion). ETF investors (authorized participants) were net purchasers
for Q3 (+$62.9 billion), injecting $37.1 billion into equity ETFs,
$24.9 billion into taxable fixed income ETFs, and $0.9 billion into
municipal debt ETFs.
All the major U.S. broad-based indices posted plus-side returns
for Q3, with tech-focused indices still leading the pack despite
the turbulence witnessed late in the quarter. For the quarter the
NASDAQ Composite Price Only Index and the Russell 2000 Price
Only Index posted the strongest returns, gaining 5.79% and 5.33%,
respectively, while the Dow Jones Industrial Average Price Only
Index and the S&P 500 Composite Price Only Index finished the
quarter up 4.94% and 3.96%. Overseas, the Xetra Dax Total Return
Index posted the largest return (+7.88%) for the quarter, followed
by the Shanghai Composite Price Only Index (+7.06%), the FTSE
100 Price Only Index (+4.14%), and the Nikkei 225 Price Only Return
Index (+1.43%).
For the quarter 92 of Lippers 96 equity and mixed-equity fund
classifications posted positive returns. For the third quarter in a row
the World Equity Funds macro-classification (+6.10%) outpaced
Lippers other three broad equity groupings. USDE Funds (+4.16%)
took the runner-up position for the quarter, followed by Sector
Equity Funds (+3.56%) and Mixed-Asset Funds (+3.02%). In total,
96% of all individual equity and mixed-asset funds posted plus-side
returns for the quarter.
During Q3 the dollar weakened against the euro (-3.40%) and the
pound (-3.02%) but gained against the yen (+0.26%). Commodity
prices rose, with near-month crude oil prices gaining 9.40% to close
the quarter at $51.67/barrel and with gold prices rising 3.29% to
end the quarter at $1,281.50/ounce.

2
 FUNDMARKET INSIGHT REPORT SEPTEMBER 2017

U.S. DIVERSIFIED EQUITY (USDE) LIPPER U.S. DIVERSIFIED EQUITY FUNDS CLASSIFICATION
FUNDS SUMMARY FIGURE 1 PERFORMANCE FOR THE QUARTER ENDED SEPTEMBER 30,
The USDE Funds macro-classification (+4.16% [quarter] 2017
and 3.02% [September]) was the second best performing
of Lippers four broad equity macro-classifications for
the quarter and the best performer for September. US DIVERSIFIED EQUITY
Equity Leverage Funds
Market participants kept a keen eye on lofty tech issues, Small-Cap Growth Funds
North Korea and the U.S., the Feds September policy Large-Cap Growth Funds
meeting, and storms in the Caribbean but continued to Multi-Cap Growth Funds
favor growth-oriented issues (for the third consecutive Small-Cap Core Funds
Small-Cap Value Funds
quarter), while small-cap issues came into favor for the
Alternative Active Extension Funds
first quarter in three. Despite some investors belief that S&P 500 Index Funds
the recent market rally had become overextended, for Large-Cap Core Funds
the eighth consecutive quarter Lippers bear-oriented Mid-Cap Growth Funds
Dedicated Short-Bias Funds classification (-8.91% Multi-Cap Core Funds
Large-Cap Value Funds
[quarter] and -3.47% [September]) posted a negative Multi-Cap Value Funds
return. At the top of the macro-classification for the Equity Income Funds
second quarter in three was Equity Leverage Funds Mid-Cap Core Funds
(+10.29% [quarter] and +4.92% [September]), followed Mid-Cap Value Funds
Alternative Long/Short Equity Funds
by Small-Cap Growth Funds (+5.51% [quarter] and
Specialty Diversified Equity Funds
+4.62% [September]) and Large-Cap Growth Funds Alternative Equity Market Neutral Funds
(+5.49% [quarter] and +0.93% [September]). Dedicated Short Bias Funds

For the first quarter in three small-cap funds (+5.05% -9.0% -7.0% -5.0% -3.0% -1.0% 1.0% 3.0% 5.0% 7.0% 9.0% 11.0%

[quarter] and +5.61% [September]) were at the top of the

leader board as investors bid up small-cap information
technology and industrial issues. Large-cap funds
(+4.58% [quarter] and +2.02% [September]) outpaced
the remaining capitalization groups for Q3, with multi- LIPPER U.S. DIVERSIFIED EQUITY MATRIX,
FIGURE 2 TOTAL RETURN (%) FOR THE QUARTER ENDED
cap funds (+4.34%) and mid-cap funds (+3.64%) at the
bottom of the broad-based capitalization groups for the SEPTEMBER 30, 2017
quarter. For the third quarter in a row growth-oriented
funds (+5.26%) outperformed their core-oriented VALUE CORE GROWTH AVERAGE
(+4.31%) and value-oriented (+3.75%) cousins. Large-Cap 3.72 4.33 5.49 4.58
According to Lippers active indices, Small-Cap Growth Multi-Cap 3.66 3.96 5.36 4.34
Funds (+5.51%, the 4x3-matrix quarterly leader) was Mid-Cap 2.63 3.48 4.31 3.64
helped in Q3 by heavier weightings and stronger Small-Cap 4.69 4.89 5.51 5.05
performance results in the software & services, capital AVERAGE 3.75 4.31 5.26
goods, and pharmaceutical, biotechnology, & life
sciences industry groups, which accounted for over
half the performance of small-cap growth funds. For
Septemberfor the first month in foursmall-cap funds
(+5.61%) performed better than the other capitalization FIGURE 3 LIPPER U.S. DIVERSIFIED EQUITY MATRIX, TOTAL RETURN
groups, while value-oriented funds (+4.08%)for the (%) FOR THE MONTH ENDED SEPTEMBER 30, 2017
first month in threeshouldered out their core- (+3.67%)
and growth-oriented (+2.37%) counterparts. For
September Small-Cap Value Funds (+6.87%) outpaced VALUE CORE GROWTH AVERAGE
the other classifications in Lippers style-based funds Large-Cap 3.27 2.19 0.93 2.02
group, while Large-Cap Growth Funds (+0.93%) was Multi-Cap 3.41 2.52 1.69 2.46
the laggard of the 4x3-matrix group. According to Mid-Cap 3.34 3.46 2.52 3.07
Lippers active indices, the average small-cap value
Small-Cap 6.87 5.82 4.62 5.61
fund benefitted from relatively stronger performance
AVERAGE 4.08 3.67 2.37
from capital goods and bank issues, while energy and
materials stocks were the next strongest contributors.

Source: Thomson Reuters Lipper

3
 FUNDMARKET INSIGHT REPORT SEPTEMBER 2017

SECTOR EQUITY FUNDS SUMMARY FIGURE 4 LIPPER SECTOR EQUITY INVESTMENT CLASSIFICATION
A continued slump in select commodities prices PERFORMANCE FOR THE QUARTER ENDED SEPTEMBER
weighed marginally on Sector Equity Funds for Q3, 30, 2017
leading the group to post the third lowest return of
Lippers four equity macro-classifications. Sector Equity
Funds (+3.56% [quarter] and +1.21% [September]) SECTOR EQUITY
Global Science/Technology Funds
housed three of the four classifications in the equity Basic Materials Funds
Commodities Energy Funds
universe that posted negative returns for the quarter, Commodities Base Metals Funds
with Commodities Agriculture Funds suffering the Science & Technology Funds
Global Natural Resources Funds
second worst decline in the equity universe (-3.59% Natural Resources Funds
for the quarter). However, the macro-classification Industrials Funds
Health/Biotechnology Funds
also housed six of the ten strongest performing Global Financial Services Funds
Financial Services Funds
classifications in the universe. At the top of the Sector Commodities General Funds
Equity group for the third quarter in a row the Global International Real Estate Funds
Utility Funds
Science/Technology Funds classification returned Global Infrastructure Funds
10.41% for the quarter and 2.18% for September. The Global Health/Biotechnology Funds
Telecommunication Funds
second best performing classification of the group Commodities Precious Metals Funds
Basic Materials Funds (+9.76% for the quarter and Consumer Goods Funds
Global Real Estate Funds
+3.08% for September)benefitted from continued but Precious Metals Equity Funds
Consumer Services Funds
slowing growth in China. At the bottom of the barrel Real Estate Funds
but bettering Commodities Agriculture Funds were the Specialty/Miscellaneous Funds
Alternative Managed Futures Funds
Commodities Specialty Funds (-2.10%) and Energy MLP Energy MLP Funds
Funds (-0.42%) classifications. Commodities Specialty Funds
Commodities Agriculture Funds
The Sector Equity Funds macro-classification (+1.21%) -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

was the second worst performing of Lippers four equity

macro-classifications for September. For the month
the macro-classification was propped up by strong
performance from Natural Resources Funds (+10.80%),
Global Natural Resources Funds (+5.97%), and LIPPER WORLD EQUITY INVESTMENT CLASSIFICATION
Financial Services Funds (+5.38%). The Precious Metals FIGURE 5
PERFORMANCE FOR THE QUARTER ENDED SEPTEMBER
Equity Funds classification posted the worst return of 30, 2017
the group, declining 6.08% for September, bettered by
Commodities Precious Metals Funds (-3.53%). WORLD EQUITY
Latin American Funds
China Region Funds
WORLD EQUITY FUNDS SUMMARY International Small/Mid-Cap Growth
Strengthening foreign currencies, Chinas growing Emerging Markets Funds
role in the global tech rally, and reform efforts in International Small/Mid-Cap Core
International Multi-Cap Growth
Brazil further propped up international markets in Q3, Global Small-/Mid-Cap Funds
keeping the World Equity Funds macro-classification International Small/Mid-Cap Value
European Region Funds
(+6.10%) at the top of Lippers four broad-based Pacific Ex Japan Funds
equity macro-classifications for the third consecutive International Large-Cap Value
quarter. Latin American Funds (+15.30%, Q2s macro- International Multi-Cap Value
International Large-Cap Core
classification laggard) jumped to the head of the pack International Multi-Cap Core
for the first quarter in five, followed by China Region Global Multi-Cap Growth
International Large-Cap Growth
Funds (+10.42%) and International Small-/Mid-Cap Pacific Region Funds
Growth Funds (+7.60%). India Region Funds (+1.72%), Global Large-Cap Growth
Global Equity Income Funds (+3.57%), and Global Global Multi-Cap Core
International Equity Income Funds
Large-Cap Value Funds (+3.62%) were the relative Japanese Funds
laggards of the group for the quarter. For September Global Large-Cap Core
Global Multi-Cap Value
the World Equity Funds macro-classification (+1.67%) Global Large-Cap Value
was in the number-two position of the four Lipper Global Equity Income Funds
India Region Funds
macro-classifications. Only one of the twenty-six
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% 16.0%
classifications in the group posted a negative return for
the month, India Region Funds (-3.01%). At the top of
the group was International Large-Cap Value Funds Source: Thomson Reuters Lipper

4
 FUNDMARKET INSIGHT REPORT SEPTEMBER 2017

chalking up a 3.24% return, followed by European LIPPER INTERNATIONAL DIVERSIFIED EQUITY MATRIX
FIGURE 6 TOTAL RETURN (%) FOR THE QUARTER ENDED SEPTEMBER
Region Fundsposting a 3.11% return, and Global
Small-/Mid-Cap Fundsalso gaining 3.11%. 30, 2017

International and global small-/mid-cap funds VALUE CORE GROWTH AVERAGE

outpaced the other capitalization groups for Q3, while
Large-Cap 5.83 5.62 5.44 5.55
once again growth-oriented funds outperformed
their value- and core-oriented brethren for both the Multi-Cap 5.64 5.59 6.43 5.98
international and global 3x3-matrix groups for Q3. Small-/Mid-Cap 6.05 6.52 7.60 7.19
For September small-/mid-cap funds and value plays AVERAGE 5.72 5.72 6.53
edged ahead of their capitalization and valuation
brethren. For the quarter Global Small-/Mid-Cap
Funds (+6.15%) outshone the other classifications
in the global 3x3-matrix group, while International LIPPER INTERNATIONAL DIVERSIFIED EQUITY MATRIX
Small-/Mid-Cap Growth Funds (+7.60%) took the FIGURE 7 TOTAL RETURN (%) FOR THE MONTH ENDED SEPTEMBER
30, 2017
honors for the international 3x3-matrix group. For
the month of September the top performers for the
individual matrices were International Large-Cap Value
Funds (+3.24%) and Global Small-/Mid-Cap Funds VALUE CORE GROWTH AVERAGE
(+3.11%). Large-Cap 3.24 2.38 1.96 2.25
Multi-Cap 2.46 2.24 2.07 2.20
Small-/Mid-Cap 2.20 2.43 2.74 2.61
AVERAGE 2.56 2.29 2.21

FIGURE 8 LIPPER GLOBAL DIVERSIFIED EQUITY MATRIX TOTAL

RETURN (%) FOR THE QUARTER ENDED SEPTEMBER
30, 2017

VALUE CORE GROWTH AVERAGE

Large-Cap 3.62 4.57 4.96 4.63
Multi-Cap 4.08 4.88 5.46 4.99
Small-/Mid-Cap (No Style) 6.15 6.15
AVERAGE (LARGE & MULTI) 3.94 4.80 5.27

LIPPER GLOBAL DIVERSIFIED EQUITY MATRIX TOTAL

FIGURE 9 RETURN (%) FOR THE MONTH ENDED SEPTEMBER
30, 2017

VALUE CORE GROWTH AVERAGE

Large-Cap 2.17 2.01 1.39 1.70
Multi-Cap 2.63 2.09 1.64 2.00
Small-/Mid-Cap (No Style) 3.11 3.11
AVERAGE (LARGE & MULTI) 2.49 2.07 1.55

Source: Thomson Reuters Lipper

5
 FUNDMARKET INSIGHT REPORT SEPTEMBER 2017

MIXED-ASSET FUNDS SUMMARY LIPPER MIXED-ASSET INVESTMENT CLASSIFICATION

FIGURE 10 PERFORMANCE FOR THE QUARTER ENDED SEPTEMBER 30,
For the quarter the Mixed-Asset Funds macro-
2017
classification (+3.02%) took the number-four spot
of Lippers four equity macro-classifications. (The
Mixed-Asset Funds group comprises primarily life-
MIXED-ASSET FUNDS
cycle funds [target date and target allocation funds], Mixed-Asset Target Alloc Agg Gro Funds
which generally have a mix of both stocks and bonds.) Mixed-Asset Target 2055+ Funds
Over the last few years the Mixed-Asset Funds macro- Mixed-Asset Target 2050 Funds
Mixed-Asset Target 2045 Funds
classification was the largest attractor of investor assets Mixed-Asset Target 2040 Funds
in the equity universe. However, year to date through Mixed-Asset Target 2035 Funds
Mixed-Asset Target 2030 Funds
August 31 the Mixed-Asset Funds group (-$3.5 billion) Mixed-Asset Target Alloc Growth Funds
witnessed net redemptions and was bettered by World Convertible Securities Funds
Mixed-Asset Target 2025 Funds
Equity Funds, taking in the only net inflows of Lippers Mixed-Asset Target Alloc Moderate Funds
four broad-based equity breakouts, some $47.9 billion. Flexible Portfolio Funds
Mixed-Asset Target 2020 Funds
(During the same period the USDE macro-classification Mixed-Asset Target 2015 Funds
experienced $118.3 billion of net outflows.) Quarterly Alternative Global Macro Funds
returns for the Mixed-Asset Funds classifications Retirement Income Funds
Mixed-Asset Target 2010 Funds
ranged from 1.03% (Alternative Event Driven Funds Mixed-Asset Target Today Funds
[+1.09% for September]) to 4.72% (Mixed-Asset Target Mixed-Asset Target Alloc Consv Funds
Alternative Multi-Strategy Funds
Allocation Aggressive Growth Funds [+2.11% for Absolute Return Funds
September]). Alternative Event Driven Funds
0.0 % 0.5 % 1.0 % 1.5 % 2.0 % 2.5 % 3.0 % 3.5 % 4.0 % 4.5 % 5.0 %

Source: Thomson Reuters Lipper

6
 FUNDMARKET INSIGHT REPORT SEPTEMBER 2017

FIGURE 11 PERFORMANCE OF SECURITIES MARKET INDICES

ONE QUARTER YEAR TO DATE ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
6/30/2017 12/31/2016 9/30/2016 9/30/2014 9/30/2012 9/30/2007
9/30/2017 9/30/2017 9/30/2017 9/30/2017 9/30/2017 9/30/2017
INDEX CUM. RETURN CUM. RETURN CUM. RETURN ANN. RETURN ANN. RETURN ANN. RETURN
FTSE 100 P IX 0.82 3.22 6.86 3.64 5.13 1.32
Xetra Dax TR IX 4.09 11.74 22.05 10.63 12.20 5.02
Nikkei 225 Avg:Yen P IX 1.61 6.50 23.75 7.97 18.07 1.95
DJ Ind Dly Reinv Avg IX 5.58 15.45 25.45 12.35 13.57 7.72
NASDAQ Composite P IX 5.79 20.67 22.29 13.07 15.83 9.17
S&P 500 Daily Reinv IX 4.48 14.24 18.61 10.81 14.22 7.44

FIGURE 12 PERFORMANCE OF THE TEN LARGEST FUNDS

ONE QUARTER YEAR TO DATE ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
06/30/17 12/31/16 09/30/16 09/30/14 09/30/12 09/30/07
NASDAQ 09/30/17 09/30/17 09/30/17 09/30/17 09/30/17 09/30/17
FUND NAME CLASS SYMBOL CUM CUM CUM ANN ANN ANN
SPDR S&P 500 ETF SPSP SPY 4.45 14.15 18.47 10.70 14.09 7.34
Vanguard 500 Index;Adm SPSP VFIAX 4.48 14.21 18.57 10.78 14.18 7.43
Vanguard TSM Idx;Adm MLCE VTSAX 4.54 13.95 18.64 10.69 14.18 7.69
Vanguard Instl Indx;Inst SPSP VINIX 4.48 14.21 18.57 10.79 14.19 7.44
iShares:Core S&P 500 SPSP IVV 4.47 14.21 18.57 10.76 14.17 7.39
Vanguard TSM Idx;Inv MLCE VTSMX 4.52 13.86 18.51 10.58 14.05 7.57
Vanguard TSM Idx;Inst+ MLCE VSMPX 4.55 13.97 18.66 - - -
Vanguard Tot I Stk;Inv IMLC VGTSX 5.96 21.56 19.26 5.24 7.41 1.27
Vanguard TSM Idx;Inst MLCE VITSX 4.54 13.95 18.64 10.70 14.19 7.70
Vanguard Instl Indx;InsP SPSP VIIIX 4.48 14.23 18.60 10.81 14.22 7.46

Source: Thomson Reuters Lipper

Thomson Reuters 2017. All Rights Reserved. Lipper FundMarket Insight

Reports are for informational purposes only, and do not constitute investment
advice or an offer to sell or the solicitation of an offer to buy any security of any
entity in any jurisdiction. No guarantee is made that the information in this report
is accurate or complete and no warranties are made with regard to the results to
be obtained from its use. In addition, Thomson Reuters Lipper will not be liable for
any loss or damage resulting from information obtained from Lipper or any of its
affiliates.

For immediate assistance, feel free to contact Lipper Client Services toll-free at
877.955.4773 or via email at LipperClientServices@thomsonreuters.com.
For more information about Thomson Reuters Lipper, please visit our website at
financial.tr.com or lipperalphainsight.com

7
2017 Thomson Reuters S029309/1-16