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ASSET ALLOCATION. Redefining diversification in your portfolio

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ASSET ALLOCATION Redefining diversification in your Three things to know about asset allocation Different assets play different roles While stocks have significant appreciation and wealth-building potential,
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ASSET ALLOCATION Redefining diversification in your Three things to know about asset allocation Different assets play different roles While stocks have significant appreciation and wealth-building potential, can generate steady income. can buffer the effect of market losses, while alternative investments can help improve a s diversification potential. Markets are unpredictable Capital markets are dynamic, and today s asset class leader may be tomorrow s laggard. A diversified investment approach that includes a range of asset classes can help investors pursue their long-term financial goals while managing the risks along the way. The mix matters Selecting the mix of assets in your may be the dominant contributor to total return more so than the choice of individual holdings. In fact, an influential, decade-long study of 8 large pension plans revealed that this asset mix explained, on average, nearly 9% of the variation in total return (Brinson, Singer, and Beebower, 99). There s no telling which asset class will be the best performing from year to year Annual returns of asset class categories WORST PERFORMER BEST PERFORMER % %.77%.% % 7.% 6.97% 6.% 6.5% 5.77% 4.74%.9%.57% 5.4%.8% 6.85% 6.9% % % 57.5% 4.4% 9.5% 8.4% 7.7% 7.5% 5.9%. 6.85% 6.% 5.9% 5.5%.%. 6.54%.% 7.84% 4.8%.5%.8%.. 4.8%.% 7.9% 6.4% 6.5% 5.58%.87% 6. 4.%.7% 8.8%.% 5.78% %.5%.47%.% Asset class diversification can provide you with exposure to the strongest performers in any given year while helping you avoid owning too much of the weakest..4% 5.97% 4.89% 4.%.5%.54%.%.44%.9%.55%.%.79% 4.4% 4.64% 5.7% 5.5% Stay diversified Those who stayed invested in a diversified throughout the last decade fared well, despite volatility along the way. of $, for diversified s $K 6 9 $7.5K 5 Source: John Hancock Investments, as of //5. The investment universe is expanding 58 The number of fund categories The tracked by Morningstar in number of fund categories tracked by Morningstar TODAY Today, there are over Morningstar categories, which now include niche styles and alternative investments. This variety of asset classes and specialized managers presents new opportunities for investors. Source: Morningstar, as of //5. Investment-grade is represented by the Barclays U.S. Aggregate Bond Index, which tracks the performance of U.S. investment-grade in government, asset-backed, and corporate debt markets. is represented by the Bank of America Merrill Lynch (BofA ML) U.S. High Yield Master II Index, which tracks the performance of globally issued, U.S. dollar-denominated high-yield. is represented by the Citigroup -Month U.S. Treasury Bill Index, which is a marketvalue-weighted index that tracks the performance of three-month U.S. Treasury debt. is represented by the MSCI All Country (AC) World ex-usa Index, which tracks the performance of publicly traded large- and mid-cap stocks of companies in developed and emerging markets outside the United States. Total returns are calculated gross of foreign withholding tax on dividends. is represented by the Russell Index, which tracks the performance of, publicly traded small-cap companies in the United States. is represented by the Russell Index, which tracks the performance of, publicly traded large-cap companies in the United States. is represented by an equally weighted combination of the HFRI Macro Index, the HFRI Equity Market Neutral Index, the HFRI Merger Arbitrage Index, the Morningstar real estate funds category average, the Morningstar emerging markets bond funds category average, and the Morningstar Long-Only Commodity Index. is represented by the average return of the six asset classes in the chart above, rebalanced monthly, excluding cash. It does not represent any specific index. Annual returns are based on calendar years. Indexes are unmanaged and do not take transaction costs or fees into consideration. It is not possible to invest directly in an index. Performance figures assume reinvestment of dividends and capital gains. This chart is for illustrative purposes only and does not represent the performance of any John Hancock fund. Past performance does not guarantee future results. Source: Morningstar, as of //5. Static categories, those currently without description and without funds, are omitted from this figure. Diversification does not guarantee a profit or eliminate the risk of a loss. Asset allocation at John Hancock Investments A leader in multi-asset s Our expertise in multi-asset investing dates back to 995, with our first suite of s employing multiple asset managers. Since then, we have been at the forefront of design, introducing a wide array of new and alternative strategies into our asset allocation s to strengthen their diversification benefits for individual and institutional investors. A pioneer in manager-of-managers approach to asset allocation since 995 Heritage of innovation, embracing alternative investments since 997 Asset allocation s represent nearly half of our business today A better way to invest We build funds based on investor needs, then search the world to find proven teams with specialized expertise in those strategies. As a manager of managers, we apply vigorous oversight to ensure that they continue to meet our uncompromising standards and serve the best interests of our shareholders. Over 75 professionals dedicated to investment manager research and oversight Over meetings each year to identify proven managers More than in-person oversight meetings with managers annually At John Hancock Investments, our history of asset allocation leadership and innovation spans two decades Our asset allocation s bring together some of the best investment teams from around the world 995 Multimanager asset allocation s for retirement plans p FUNDS LAUNCHED q UNDERLYING EXPOSURES INTRODUCED 5 Target-risk s for individuals 6 Target-date retirement s 9 Alternative Asset Allocation Fund Retirement Choices 997 Real estate investment trusts Natural resources, international small caps 7 Emerging-market, floating-rate debt Long/short currency Global absolute return Hedge fund of funds Asset allocation $55 billion TODAY Our asset allocation franchise represents more than a third of the nearly $ billion in client assets under management. n Asset allocation n U.S. n Fixed income n Alternative n n Other 4 Source: John Hancock Investments, as of //6. Representative list of asset managers as of //6. All logos are the property of their respective owners. 5 Our investment approach puts the best to work in each Our philosophy: a deeper level of diversification We believe diversification should extend beyond asset classes to include multiple investment styles and multiple managers. Refining the techniques of diversification, this approach harnesses expert ideas from independent investment teams across the world. Our oversight process ensures that each manager adheres to its assignment and that each mandate behaves according to our expectations. The industry-leading team we ve hired at John Hancock Asset Management is one of the five largest managers of asset allocation funds in the United States.* A time-tested process The management team follows a consistent, battle-proven process that has endured over multiple market cycles. Managing multi-asset s for over two decades, this global team combines macroeconomic research, fundamental analysis, and robust risk management. Implementing this process with different specialized managers enables the team to add or remove exposures with an unparalleled degree of precision. Our method delivers three layers of diversification to shareholders of our asset allocation s Representative portion of John Hancock Lifestyle Balanced Portfolio n Oversight Monitoring each team for the repeatability of its investment process and management of risk 6. Develop global market outlook Examine core asset markets and beyond, including alternative investment strategies and targeted regional and sector exposures Analyze macroeconomic and fundamental factors Forecast expected returns to identify the best market opportunities Boston partners.49 Value JHAM 4.75 Value Barrow Hanley.9 Value GMO.94 Core QS Investors fixed income.8 Core Wellington.47 Core T. Rowe Price.58 Jennison.47 n Multiple asset classes Both within and beyond traditional and n Multiple styles Continual exposure to a variety of strategies, as different characteristics go in and out of favor n Multiple managers Boston Partners Oversight by John Hancock Investments Value Core JHAM Barrow Hanley GMO Wellington QS Investors T. Rowe Price Jennison Select asset classes and strategies Tailor search criteria so each underlying investment serves a specific purpose Craft an asset roster, contingent upon expected returns, risks, and correlations Design a multimanager approach, searching worldwide for required expertise Build s Optimize asset, strategy, and manager mix with proprietary methodology Allocate capital to funds, aiming to maximize return per unit of risk Create an enduring of funds, implementing the desired long-run asset mix A diversity of approaches from some of the world s best managers Review, monitor, adjust, and repeat Manage asset mix actively to exploit short-term market dislocations Introduce asset classes, strategies, and managers as new opportunities surface Eliminate positions and managers as valuations wax and conviction wanes Revisit long-term strategic asset allocation Source: John Hancock Investments, as of //6. * Strategic Insight, as of //5. Includes target-date and risk-based lifecycle mutual fund assets. 6 7 Inside John Hancock Lifestyle Consider this: John Hancock Lifestyle are designed for investors seeking a relatively stable balance of risk- and-return potential over time. Each invests in a combination of actively managed funds, adjusting positions to capture market opportunities and manage -level risks while harnessing the expertise of some of the best managers in the business. Multi-asset class, multistyle, multimanager approach Actively managed asset allocation and actively managed underlying funds HIGHER POTENTIAL RETURN AND RISK John Hancock Asset Management is the largest manager of target-risk asset allocation s in the industry. Fixed income % Engage a roster of proven teams, each with a distinct philosophy Long-term growth of capital Alternative and specialty 4% and approach Balanced Equity 7% 4 Long/short Fixed income 7% High level of current income Alternative and specialty 4% Moderate and growth of capital 8% Long/short 5% Thematic 8 High level of current income Equity 5% 8% 4% Fixed income 7% 6 Conservative and growth of capital 7% Thematic Alternative and specialty % 4 High level of current income Equity 5% Absolute 9% return U.S. small cap Long/short Fixed income 5 and growth of capital Emerging market Alternative and specialty 8% Thematic 4% Equity 7% U.S. mid cap ctor Long/short 5% Fixed income 7% Alternative and specialty % 5% 7% Inflation-protected 5-year standard bond deviation:.7% % Scale affords shareholders of our % Thematic 5-year beta to S&P 5 Index:.4 U.S. large cap asset allocation funds the advantage ation-protected bond Long/short 5% % of a broader opportunity set of 7% 9% 5% 5-year standard deviation:.8% erging market debt 7% % Inflation-protected 5-year bond beta to S&P 5 Index:.9 % potential investments. 5% Thematic 4% U.S. small cap gh yield bond Inflation-protected 5-year standard bond deviation: 8.9 Source: Strategic Insight, as of //5. % Emerging market 9% 5-year beta to S&P 5 Index:.7 Includes risk-based lifecycle mutual fund assets. 8% U.S. small cap U.S. mid cap U.S. small cap ermediate term bond High-yield 5-year tandard deviation: 6.47% 5% Emerging market 5-year beta to S&P 5 Index:.5 Emerging market Short-term bond U.S. mid cap U.S. mid cap S. small cap 5-year standard deviation: 4.4% Inflation protection bond U.S. small cap Equity Fixed income Alternative and specialty 5-year beta to S&P 5 Index:. n n n erging market Emerging market Managed by: Barrow Hanley, Boston Partners, GMO, Managed by: JHAM, Stone Harbor, T. Rowe Price Managed by: Allianz, DeAWM, Jennison, JHAM, Jennison, JHAM, QS Investors, T. Rowe Price, Wellington U.S. large cap T. Rowe Price n S. mid cap LOWER POTENTIAL RETURN AND RISK U.S. small cap U.S. mid cap n Managed by: JHAM, PIMCO, Wellington, n Managed by: Baillie Gifford, Dimensional, Epoch, Franklin Wells Capital Managed by: First Quadrant, Standard Life ernational Emerging market Templeton, GMO, Invesco, JHAM n n Thematic The s performance depends on the advisor s skill in determining asset class allocations, the mix of underlying funds, and the performance n U.S. mid-cap Managed by: WAMCO Managed by: Wellington of those underlying funds. The is subject to the Intermediate-term same risks as bond the underlying funds and exchange-traded U.S. mid cap funds in which it invests: Stocks U.S. large cap Managed by: Invesco, T. Rowe Price, Wellington n n Long/short and can decline due to adverse issuer, market, regulatory, or economic developments; foreign investing, especially in emerging markets, has n Emerging-market Managed by: JHAM, WAMCO, Wells Capital Managed by: Boston Partners, Wellington additional risks, such as currency and market volatility U.S. and small political cap and social instability; the securities of small companies are subject to higher Managed by: Dimensional, JHAM n volatility than those of larger, more established companies; and high-yield are subject to additional risks, such as increased risk of default. n Managed by: JHAM, PIMCO Liquidity the extent to which a security may be sold or Emerging a derivative market position closed without negatively affecting U.S. large cap its market value, if at all may be Managed by: Brandywine, Dimensional, GW&K, Invesco, n impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. Please see the s prospectuses JHAM, T. Rowe Price, Wellington Managed by: JHAM for additional risks. U.S. mid cap n Source: John Hancock Investments, as of //6. Standard deviation measures performance fluctuation, may not be indicative of future risk, and is not a predictor of returns. Beta Managed by: PIMCO measures the sensitivity of the to its benchmark. The beta of the market (as represented by the stated benchmark) is.. Accordingly, a with a. beta is expected to n Short-term bond have % more volatility than the market. The S&P 5 Index tracks the performance of 5 of the largest publicly traded companies in the United States. It is not possible to invest directly Managed by: JHAM 8 in an index. Allocation figures are rounded to the nearest whole number. U.S. Allocations large cap less than 5% are not labeled within the charts. 9 Aggressive Long-term growth of capital Equity 8 Share of industry assets John Hancock Asset Management Firm # Firm # Firm #4 Firm #5 Inside John Hancock Retirement To achieve the most conservative mix at your retirement date. Retirement investing through a target-date approach can simplify asset allocation for a defined contribution plan participant. In target-date s, the asset mix automatically changes over time, becoming more conservative as the participant s expected retirement date draws closer. Through versus to Some target-date s continue to grow more conservative after (through) retirement. Others grow more conservative until (to) the expected retirement date, at which point they ve reached their most conservative asset mix. John Hancock Investments is one of the few investment managers to offer both types of target-date suites. Retirement Choices Aim to minimize drawdown risk as retirement approaches Use ETFs and a low-cost active asset allocation strategy to minimize the impact of expenses on returns Allocation % BEFORE RETIREMENT Income* Glide path s allocation AFTER RETIREMENT Begins at: 8% At retirement: 8% Stabilizes at: 8% RETIREMENT Se Sh In H Ba In U. Em U. Retirement Living Aim to maximize preretirement wealth accumulation while minimizing postretirement longevity risk Underlying exposures actively managed Allocation % Through continue to grow more conservative beyond your retirement date BEFORE RETIREMENT AFTER RETIREMENT Glide path s allocation Begins at: 95% At retirement: 5% Stabilizes at: 5% RETIREMENT Long/short U.S. small cap Retirement Living II Emerging market Aim to maximize preretirement U.S. mid cap wealth accumulation while minimizing postretirement longevity risk Use ETFs and a low-cost active asset allocation strategy to minimize the impact of expenses on returns Allocation Through % EQUITY GLIDE PATH continue to grow more conservative beyond your retirement date BEFORE RETIREMENT AFTER RETIREMENT Glide path s allocation Begins at: 95% At retirement: 5% Stabilizes at: 5% RETIREMENT In U. Equity n Managed by: Barrow Hanley, Boston Partners, GMO, Jennison, JHAM, T. Rowe Price, Wellington n Managed by: Baillie Gifford, Dimensional, Epoch, Franklin Templeton, GMO, Invesco, JHAM U.S. small cap Emerging market n U.S. mid-cap Managed by: Invesco, JHAM, T. Rowe Price, Wellington U.S. mid cap n Emerging-market Managed by: Dimensional, JHAM n Managed by: Invesco, JHAM, T. Rowe Price, Wellington Fixed income n Managed by: JHAM, Stone Harbor, T. Rowe Price n Managed by: Declaration/JHAM, PIMCO, Wells Capital n Managed by: WAMCO n Managed by: JHAM, WAMCO, Wells Capital n Managed by: JHAM, PIMCO n Managed by: JHAM n Managed by: PIMCO Alternative and specialty n Managed by: Allianz, Jennison, JHAM, T. Rowe Price, Standard Life n Managed by: First Quadrant, Standard Life n Long/short Managed by: Boston Partners Equity n Managed by: BlackRock (ishares), JHAM, Vanguard (ETF) U.S. small cap Emerging-market n Emerging market Managed by: JHAM, Vanguard (ETF) U.S. mid-cap n U.S. mid-cap Managed by: JHAM, Vanguard (ETF) n Emerging-market Managed by: Vanguard (ETF) n Managed by: JHAM, Vanguard (ETF) Fixed income n Managed by: BlackRock (ishares), Vanguard (ETF) n Managed by: Invesco (PowerShares) n Managed by: SSgA (SPDR) n Managed by: BlackRock (ishares) n Managed by: BlackRock (ishares), Vanguard (ETF) n Short-term bond Managed by: JHAM, SSgA (SPDR), Vanguard (ETF) Alternative and specialty n Managed by: SSgA (SPDR), Vanguard (ETF) Source: John Hancock Investments, as of //6. Portfolio performance depends on the advisor s skill in determining asset class allocations, the mix of underlying funds, and the performance of those underlying funds. The underlying funds performance may be lower than the performance of the asset class that they were selected to represent. The is subject to the same risks as the underlying funds and exchange-traded funds (ETFs) in which it invests: Stocks and can decline due to adverse issuer, market, regulatory, or economic developments; foreign investing, especially in emerging markets, has additional risks, such as currency and market volatility and political and social instability; the securities of small companies are subject to higher volatility than those of larger, more established companies; and high-yield are subject to additional risks, such as increased risk of default. Owning an ETF generally reflects the risks of owning the underlying securities it is designed to track, which may cause lack of liquidity, more volatility, and increased * Effective 4//6, John Hancock Retirement Choices at 5 Portfolio s name changed to John Hancock Retirement Choices Income Portfolio. management fees. Hedging and other strategic transactions may increase volatility of a and could result in a significant loss. Each s name refers to the approximate retirement year of the investors for whom the s asset allocation strategy is designed. The s with dates further off initially allocate more aggressively to stock funds. As a approaches or passes its target date, the allocation will gradually migrate to more conservative, fixed-income funds. The principal value of each is not guaranteed and you could lose money at a
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