Nationwide ® Guided Portfolio Strategies (GPS) Client Guide

Help make diversified
investing simpler
Nationwide Guided Portfolio Strategies (GPS)
®
• Not a deposit • Not FDIC or NCUSIF insured • Not guaranteed by the institution • Not insured by any federal government agency • May lose value
Because the Nationwide® Guided Portfolio Strategies (GPS) models are only available within a
variable annuity, it’s important that you understand some basic information about them.
When determining whether a variable annuity is suitable for you, please note that variable annuities
are long-term, tax-deferred investments designed for retirement and may fluctuate in value. They’re
a contract between you and an insurance company that allows you to create a fixed or variable
stream of income through a process called annuitization. They also provide a variable rate of return
based on the performance of the underlying investments. Please remember that annuities have
limitations and investing in them involves market risk, including the possible loss of principal.
What features do variable annuities offer?
Lifetime income — a stream of income you can’t outlive; accessed either through annuitization
or systematic withdrawals
Death benefits — the payment that the annuitant’s beneficiaries or estate receives when the
annuitant dies
Tax deferral — the potential for your investment to accumulate faster than taxable investments
because you don’t pay taxes on gains until you take a withdrawal
Investment choices — access to a wide range of professionally managed investment options
only available with annuities
What limitations do annuities have?
If you decide to take your money out early, you may face fees called surrender charges. If you’re
not yet 59 1/2 , you may also have to pay an additional 10% tax penalty on top of ordinary income
taxes. If a death benefit is available and you take an early withdrawal, the amount of your death
benefit and the contract value will be reduced.
You should also know that annuities contain guarantees and protections that are subject to the
issuing insurance company’s ability to pay for them. But these guarantees don’t apply to the
performance of the underlying investment options, which are subject to investment risk, including
possible loss of your principal.
How much do annuities cost?
Because of the unique features your annuity can contain, the fees and charges will vary. They may
include mortality expense, administrative fees, contract fees and the expense of your investment
options. You can get more specific information about fees from your advisor.
2
Diversification
made simple
As market swings have led to unpredictable gains and losses, many investors are looking more
closely at the outcomes they want to achieve from their portfolios and using diversified asset
classes as part of a strategy to help manage risk.
Choosing among the wide range of investments available in the market can be confusing, and
so can putting them to work effectively in your portfolio.
With Nationwide® Guided Portfolio Strategies (GPS), we’ve created simplified portfolios
by blending together different fund managers and investment strategies. One choice
allows you to bring a well-diversified mix of asset classes and strategies to your variable
annuity portfolio.
Four different ways to help manage risk
Nationwide GPS offers four models, which blend different asset classes together with a
portfolio of traditional funds to help you reach your investment goals.
GPS Model
Investment Goals
Capital Preservation Model
• Offers potential downside protection from market shifts
• Generate income
Growth & Income Model
• Investment growth
• Generate income
Capital Appreciation Model
• Investment growth
Enhanced Growth & Income
• Investment growth
• Generate income
• Offers higher exposure to alternatives
There is no guarantee that the GPS model will achieve the desired outcome, and the use of divesification and
asset allocation as part of an overall investment strategy does not assure a profit or protect against loss in a
declining market.
Plus, there’s no additional cost for the Nationwide GPS models. That makes it even easier
to bring a sophisticated approach to increasing diversification and help to manage risk.
While including alternative asset classes in your investment mix can help you diversify
your portfolio, investing in them also involves special risks that you should know about.
Alternative investments may be highly speculative and leveraged or may use various hedging
techniques, like options and derivatives. This could increase losses, and there is no guarantee
that the hedging strategy or derivative exposure will perform as intended.
3
Managing risk with a diversified mix
Investing in alternative asset classes and strategies can help enhance portfolio diversification because
they tend to perform differently than traditional investments under similar market conditions. That can
help capture gains or reduce the impact a downturn can have on a traditional stock or bond portfolio. Of
course, it's important to remember that diversification doesn't ensure a profit or protect against losses.
The degree to which two different types of investments perform relative to each other is called
correlation. For example, if stock markets decline, certain investments may move in the opposite
direction (negative correlation) or may not decline as much (lower correlation). Historically, alternative
investments have had low correlations to traditional investments.
When you’re diversifying a portfolio,
understanding the impacts of correlation is key
to helping you manage the overall volatility
of your portfolio. By taking on more kinds of
specific risks, you may increase the chances of
noncorrelated returns and therefore lower the
overall volatility of a portfolio.
Investments that are noncorrelated, or have an
inverse relationship, can help capture gains or
reduce the impact a downturn can have on a
traditional stock or bond portfolio.
1.0
ASSET CORRELATION
If one goes up, so
does the other.
0.0
ASSET CORRELATION
No relationship
-1.0
ASSET CORRELATION
If one goes up,
the other goes down.
• Alternative asset classes and strategies can be thought of as portfolio diversifiers
• They are investments with sources of potential returns that have different risk exposures
• If stock markets decline, certain alternative asset classes may move in the opposite direction (negative
correlation) or at least not decline as much (lower correlation) as traditional asset classes
4
Moving in a positive direction
Using index performance data from a recent 20-year period of market history, the chart below illustrates
how adding exposure to nontraditional investments in portfolios of traditional investments helped lower
risk and/or improve returns during this period.
HOW TO READ THIS CHART: Risk is measured from left to right (lower to higher risk), while return is
measured top to bottom (higher to lower return). An effective strategy will seek higher returns with lower
exposure to risk — in other words, up and to the left.
Adding exposure to diversified asset classes may help you capture higher or comparable returns
while lowering risk.
Annualized return and standard deviation for hypothetical strategies using a blend of traditional and nontraditional asset
classes, 1996-2015.
8%
Annualized return
50/40/10
7%
30/60/10
30+60+10 40+60
40/40/20
40+
20
+
40
70+
30
70+
10
+
20
60+
40
50+50+
40+10 50
70/20/10
70/30
60/40
50/50
40/60
6%
5%
4%
5%
6%
7%
8%
9%
10%
11%
Risk (annualized standard deviation)
Conservative
Aggressive
Equities
Fixed Income
Alternatives
PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. This
illustration is not indicative of actual performance of the Nationwide Guided Portfolio Strategies models and there is no
guarantee investors will achieve similar results. Index performance during the period from 1996 through 2015 was used to
represent performance of the different asset classes used by these strategies in this illustration. Indexes are unmanaged and
have been provided for comparison purposes only. Index performance does not include fees or expenses, which if included
would have resulted in lower returns. Individuals cannot invest directly in an index. See Page 6 for a description of how
performance for this illustration was calculated and for definitions of the indexes used.
5
How model performance
was calculated
For the illustration of traditional and nontraditional model portfolio performance on page 5, annualized
returns and standard deviation for the period 1996 through 2015 were calculated. Index performance was
used to represent the different traditional and nontraditional asset classes included in the models. The
table below lists the indexes used for each asset class, along with their annualized return and standard
deviation for the 20-year period:
Asset class
Index
Annualized return
(1996-2015)
Annualized standard
deviation
(1996-2015)
Equities
S&P 500® Index
8.19%
15.29%
Fixed Income
Barclays U.S.
Aggregate
Bond Index
5.34%
3.46%
Alternatives
HFRI Fund Weighted
Composite
7.66%
6.95%
Performance for these indexes represents past performance for the period indicated and does not
guarantee future results. Moreover, index performance is not indicative of actual performance clients
achieve through investment in the GPS model holdings. No fees or expenses are reflected in the returns
shown. Actual performance would be lower if the fees and expenses of the variable product or the
actual funds were included. Indexes are not managed and clients cannot invest directly in an index.
Index definitions
S&P 500 Index: An unmanaged, market capitalization-weighted index of 500 stocks of leading
large-cap U.S. companies in leading industries; gives a broad look at the U.S. equities market
and those companies' stock price performance.
Barclays U.S. Aggregate Bond Index: An unmanaged, market value-weighted index of
investment-grade, fixed-rate debt issues (including government, corporate, asset-backed,
and mortgage-backed securities with maturities of one year or more) that is generally
representative of the bond market as a whole.
Hedge Fund Research, Inc. (HFRI) Fund Weighted Composite: An equal-weighted index of over
2,200 domestic and international funds that invest in alternative asset classes and have at least
$50 million in assets under management or have been actively trading for at least 12 months. The
risks of investing in this type of index may include liquidity risk and potential tax consequences.
6
Go your own way
The four Nationwide GPS models, shown on the following pages, offer a range of options from capital
preservation to enhanced growth and income. These portfolio combinations are based on their potential
to achieve specific investment outcomes.
The models are static with fixed allocations to an index-based traditional asset allocation portfolio — all
GPS models use the NVIT Investor Destinations Funds as a foundation, except for our most aggressive
model. The models also include a mix of actively managed strategies from the options below:
Nationwide GPS fund guide
NVIT Investor Destinations
Moderately Conservative
Fund — Class II
Morgan Stanley UIF Global Real
Estate Portfolio — Class II
Mainstay VP Convertible
Portfolio — Service 2 Class
NVIT Investor Destinations
Moderate Fund — Class II
Morgan Stanley UIF Emerging
Markets Debt Portfolio — Class II
NVIT Multi Sector Bond
Fund — Class I
NVIT Investor Destinations
Moderately Aggressive
Fund — Class II
Eaton Vance VT Floating-Rate
Income Fund
Van Eck VIPT Global Hard Assets
Fund — Initial Class
Lazard Retirement Emerging
Markets Equity Portfolio —
Service Shares
Templeton Global Bond VIP
Fund — Class II
Guggenheim VF Global Managed
Futures Strategy
Morgan Stanley UIF Global
Infrastructure Portfolio — Class II
Western Asset Variable Global High
Yield Bond Portfolio — Class II
Merger Fund VL
To help maintain strategic allocations of the Nationwide GPS models over time, you should select to
rebalance your portfolio quarterly, semi-annually or annually.
In your discussions with your financial professional, you may decide that one of the Nationwide GPS
model allocations is appropriate for your investment objectives. Or, you can use a Nationwide GPS
model as a starting point for building a different allocation mix that may be more suitable for your goals.
Keep in mind that Nationwide GPS models are not considered investment advice, nor are they intended
to be the only basis for your investment decisions.
7
GPS model portfolio allocations
as of May 1, 2016
Traditional Asset Allocation
NVIT Investor Destinations Moderately Conservative Fund — Class II5, 8
NVIT Investor Destinations Moderate Fund — Class II5, 8
NVIT Investor Destinations Moderately Aggressive Fund — Class II5, 8
Equity
Emerging Markets Equity
Lazard Retirement Emerging Markets Equity Portfolio — Service Shares1, 8
Global Infrastructure
Morgan Stanley UIF Global Infrastructure Portfolio — Class II1, 3
Global Real Estate
Morgan Stanley UIF Global Real Estate Portfolio — Class II1, 3, 7
Convertibles
Mainstay VP Convertible Portfolio — Service 2 Class3,6
Fixed Income
Emerging Market Bond
Morgan Stanley UIF Emerging Markets Debt Portfolio — Class II1, 6
Floating Rate Bond
Eaton Vance VT Floating-Rate Income Fund3, 6
Global Bond
Templeton Global Bond VIP Fund — Class II1, 6
High Yield Bond
Western Asset Variable Global High Yield Bond Portfolio — Class II1, 2, 3, 6
Multi Sector Bond
NVIT Multi Sector Bond Fund — Class I2, 6
Alternatives
Managed Futures
Guggenheim VF Global Managed Futures Strategy3, 9
Market Neutral
Merger Fund VL3, 9
Natural Resources
Van Eck VIPT Global Hard Assets Fund — Initial Class1, 3, 8
TOTAL
Blended Model Expense Ratio
Capital
Preservation Model
Growth &
Income Model
Capital
Appreciation Model
Enhanced Growth &
Income Model
60+13+6542 60+10+76543 60+10+84735 14+10+1511854
5%
4% 2%
5%
4% 3%
3%
7%5%
5%
5%
60%
60%
10%
8%
15%
10%
10%
14%
5%
8%
7%
4% 5%
5%
4%
6%
13%
5%
7%
6%
60%
3% 5%
8%
11%
10%
60%
—
—
—
—
60%
—
—
—
—
60%
—
—
4%
4%
11%
—
—
3%
10%
6%
10%
10%
14%
5%
5%
3%
6%
8%
15%
5%
—
—
5%
13%
7%
—
10%
2%
3%
—
5%
—
—
—
5%
5%
5%
3%
8%
5%
—
—
4%
—
5%
7%
8%
100%
100%
100%
100%
0.97%
1.00%
0.99%
1.20%
Fund-specific disclosures
The Nationwide GPS models include underlying funds that are selected to meet each model's mandate
(conservative, moderate, aggressive, etc.). We've included descriptions of each type of fund used below
and we've also numbered them in the models themselves on the previous pages so you can better
understand the risks associated with them, as well as any trade restrictions, if applicable.
International/emerging markets funds: Funds that invest internationally involve risks not associated
with investing solely in the United States, such as currency fluctuation, political risk, differences in
accounting and the limited availability of information.
1
High-yield funds: Funds that invest in high-yield securities are subject to greater credit risk, liquidity
risk and price fluctuations than funds that invest in higher-quality securities. The prices of high-yield
bonds tend to be more sensitive to adverse economic and business conditions than are higher-rated
corporate bonds. Increased volatility may reduce the market value of high-yield bonds. They are also
subject to the claims-paying ability of the issuing company.
2
Nondiversified funds: Funds that invest in a concentrated sector or focus on a relatively small
number of securities may be subject to greater volatility than a more diversified investment.
3
Government funds: While the funds invest primarily in the securities of the U.S. government and its
agencies, the values are not guaranteed by these entities.
4
Fund-of-funds: Designed to provide diversification and asset allocation across several types of
investments and asset classes, primarily by investing in underlying funds. Therefore, in addition to
the expenses of the portfolio, you are indirectly paying a proportionate share of the applicable fees
and expenses of the underlying funds.
5
Bond funds: These funds have the same interest rate, inflation and credit risks associated with the
underlying bonds owned by the fund. Interest rate risk is the possibility of a change in the value of
a bond due to changing interest rates. Inflation risk arises from the decline in value of cash flows due
to loss of purchasing power. Credit risk is the potential loss on an investment based on the bond
issuer's failure to repay on the amount borrowed.
6
Real estate funds: Funds that focus on real estate investing are sensitive to economic and business
cycles, changing demographic patterns and government actions.
7
Commodities/natural resource funds: Specific uncertainties associated with commodities investing
include changes in supply-and-demand relationships due to environmental, economic and political
factors, which may cause increased volatility and decreased liquidity.
8
May provide less-common return patterns than traditional equity or fixed income. These funds
incorporate investment strategies that may increase or decrease volatility due to the fund's use of
options or futures. Leveraged exposure can result in accelerated losses as well as accelerated gains,
depending on how the market moves.
9
10
Talk with your investment professional today to
learn how Nationwide Guided Portfolio Strategies
may help you make diversified investing simpler.
11
Variable products are sold by prospectus. Both the product prospectus and underlying fund
prospectuses can be obtained by writing to Nationwide Life Insurance Company, P.O. Box 182021,
Columbus, OH 43218-2021. Before investing, make sure you carefully consider the fund’s
investment objectives, risks, charges and expenses. The product prospectus and underlying fund
prospectuses contain this and other important information. You should read the prospectuses carefully
before investing.
The Nationwide Guided Portfolio Strategies (GPS) models are only available through select Nationwide
variable annuities. The underlying investment options are not publicly traded mutual funds and cannot
be purchased directly by the public.
The general distributor is Nationwide Investment Services Corporation, member FINRA.
Nationwide, the Nationwide N and Eagle and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company.
© 2016 Nationwide
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