Balanced Endowment Model Strategy
QUARTERLY HIGHLIGHTS
Strategy Review | Data as of 03/31/2017
 For Q1‐2017, the Balanced Endowment Model Strategy performed positively during a quarter marked by a strong rise in riskier equities and a modest rise in bonds  The portfolio slightly outpaced its benchmark (before fees), a weighted average combination of the Barclays Aggregate Bond, MSCI ACWI, and HFRX Global Hedge Fund indices, helped by strong moves in technology and emerging market equities
 Managed futures and long/short equity exposures in the portfolio detracted from performance
MARKET CONTEXT | OUTLOOK
The winds of change that many thought might improve, or at least shake up, the way Washington operates appear to have blown in with
little result. The election of Donald Trump and the retention of control of both Congressional Houses by Republicans surprised many and
led to a broad reassessment of expectations
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regarding
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g taxes,, regulation,
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, economic ggrowth,, and health care,, amongg others. With the
initial failure of Republicans’ attempt at health care reform and House Speaker Paul Ryan’s acknowledgement that his caucus is more
divided on tax reform than on health care, prospects have diminished markedly from the post election optimism. For investors the key
implications are: less change in the tax and regulatory environment; more of the slow economic slog until the next recession or Black
Swan style catalyst; and an inexperienced administration’s missteps may make a geopolitical crisis more likely.
First quarter 2017 market results for riskier assets moved higher as volatility, along with growth and inflation, remained at low levels.
Bond yields moved above the 2.60% threshold only to fall back to levels near 2.30% on the absence of inflation. Meanwhile, the lack of
price trends in many non‐correlated asset strategies continued to negatively impact liquid alternative strategies. Eight years into a
gg recovery,
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push ggrowth rates back to the long‐term
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averages.
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whether both a pickup in volatility and the higher odds of an unexpected event.
KEY CONTRIBUTORS | DETRACTORS
 The portfolio’s allocations to technology, consumer discretionary, and
emerging market equities all outpaced the broad global equity market, as
measured by the MSCI ACWI NR Index, contributing the portfolio’s overall
positive performance.
performance
 Trend‐following liquid alternatives suffered for the quarter, therefore
managed futures, along with long/short equity, were negative for the
quarter detracting from overall portfolio performance.
 The strategy is actively managed with a long‐term perspective, so it is
reasonable to expect there will be periods when the strategy’s results
differ from the benchmark in pursuit of objectives over time. Given its
objectives and moderate risk tolerance, we believe the portfolio has been
conservatively positioned. Before fees, the strategy has outperformed its
weighted average benchmark over the past three years, but lagged since
inception, albeit with lower risk.
PORTFOLIO CHANGES
 We believe equity markets, especially in the U.S., continue to trade at
levels well above their implied fair market value. Search for return
continues to favor equities relative to bonds in a low interest rate
environment.
 More confounding is the record low level of market volatility and risk
aversion despite unfavorable investment fundamentals and elevated
political uncertainty. Low levels of volatility and risk aversion are typically
followed by periods of elevated volatility, hence lower market returns.
 We remain comfortable with the portfolio’s positioning, and therefore
made no changes during the quarter.
Strategy Summary
The Balanced Endowment Model Strategy, on a long‐term basis, seeks:
 To grow invested capital over the long‐
term, with moderate level of volatility
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 Moderate beta relative to global equities (~ 0.6)
 Superior risk‐adjusted return: (Sharpe ratio > 1.0)
 To diversify the portfolio’s long‐only equity and other sources of risk
 Exposure
Exposure to different sources of return to different sources of return
than just traditional stocks and bonds
The Balanced Endowment Model Strategy is:
 Actively managed by an experienced team of investment professionals, with daily liquidity  Implemented at lower cost than many multi‐asset class portfolios
 Invested in ETFs and mutual funds focused on multiple asset classes, including alternative strategies
 Typically appropriate as a moderate investor’s total portfolio, with at least a intermediate‐to‐long term investment intermediate
to long term investment
time horizon, and a moderate tolerance for risk.
©2017 Palladiem LLC. Palladiem has sole discretion to change allocations to styles and vehicles at any time. All investments are subject to risk, including the loss of principal. For additional information, please refer to the Disclosures at the end of this report.
Palladiem LLC is a Registered Investment Adviser. 1
Balanced Endowment Model Strategy
Strategy Review | Data as of 03/31/2017
ABOUT OUR FIRM
Palladiem LLC is an independent,
independent employee owned asset management firm that manages global,
global multi
multi‐asset
asset class investment strategies,
strategies
with an emphasis on alternative investments and active risk management. Palladiem’s investment team has 30+ years experience
working with high profile institutional clients in the public and corporate pension fund markets, as well as high‐net‐worth individuals.
The cornerstone of Palladiem’s investment process was developed nearly 30 years ago. Refined and revised over time, this process has
been implemented at both a major wire‐house and managed account provider.
PORTFOLIO MANAGEMENT TEAM
Donald Robinson
CEO & Co‐CIO
33 years industry experience
David Feldman
President & Co‐CIO
32 years industry experience
Joseph J. Scavetti, Jr.
Chief Operating Officer
24 years industry experience
Jacqueline Dewey
Director Managed Account Services
23 years industry experience
Disclosures: The statements contained herein are based upon the opinions of Palladiem LLC (Palladiem) and the data available at the
time of publication and are subject to change at any time without notice. This communication does not constitute investment advice
and is for informational purposes only, is not intended to meet the objectives or suitability requirements of any specific individual or
account, and does not provide a guarantee that the investment objective of any model will be met. An investor should assess his/her
/
own investment needs based on his/her own financial circumstances and investment objectives. Neither the information nor any
opinions expressed herein should be construed as a solicitation or a recommendation by Palladiem or its affiliates to buy or sell any
securities or investments or hire any specific manager. The information contained herein has been obtained from sources that are
believed to be reliable.
It is important to remember that there are risks inherent in any investment and that there is no assurance that any investment, asset class, style or index will provide positive performance over time. Diversification and strategic asset allocation do not guarantee a profit or protect against a loss in declining markets. Past performance is not a guarantee of future results. For more information about P ll di
Palladiem, as well as its products, fees and services, please refer to Palladiem’s Form ADV Part 2, which may be obtained through your ll it
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ADV P t 2 hi h
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financial advisor or by writing to Palladiem: 7 Great Valley Parkway, Suite 295, Malvern, PA 19355 or by calling (888) 886‐4122.
For more information contact us:
Palladiem, LLC|7 Great Valley Parkway, Suite 295 |Malvern, PA 19355
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888‐886‐4122 | [email protected] | www.palladiem.com
©2017 Palladiem LLC. Palladiem has sole discretion to change allocations to styles and vehicles at any time. All investments are subject to risk, including the loss of principal. For additional information, please refer to the Disclosures at the end of this report.
Palladiem LLC is a Registered Investment Adviser. 2