mutual fund broad diversification, distinctive, independent research...

Broad diversification, distinctive, independent research and progressive risk management in five core model portfolios that span the risk spectrum.

Mutual FundPortfoliosAsset Allocation

Morningstar Investment Services

Inside Our Investment ProcessEach portfolio is created using a continual, five-step process.

3 Capital Markets Assumptions Ibbotson Associates’ respected asset class research forms the building blocks of our portfolios—starting with real-world data on how asset classes perform over time.

3 Strategic and Dynamic Asset Allocation

In this step, we use Ibbotson research to develop an efficient asset allocation mix designed to maximize return for a given level of risk.

3 Manager Selection Our investment professionals meet personally with managers and evaluate their investment styles using a five-pillar system to identify the most appropriate strategies to include in our portfolios.

3 Portfolio Construction Each potential holding undergoes careful scrutiny— including risk and expense reviews—to help determine if it’s a good fit within a portfolio.

3 Ongoing Monitoring As markets change, so do our portfolios. Our investment team monitors them each day to stay well-positioned and risk-aware through the market’s ups and downs.

Ibbotson Asset AllocationIn investing, the essentials matter. That’s why we

start with research from our affiliate, Ibbotson

Associates—a leading authority on asset allocation—

to build our portfolios. Ibbotson Associates have

shown that the mix of assets in a portfolio can have

a greater impact on investment returns than

timing markets or picking stocks. Guided by this research,

we use Ibbotson’s risk and return forecasts to

develop a strategic asset allocation for our portfolios.

Morningstar DataWe think our independent approach sets us apart.

Once we’ve determined a portfolio’s asset allocation, we

sift through thousands of investments to identify

those which we think are worthwhile. Our research pro-

cess is backed by trusted data from our parent company,

Morningstar, Inc. From there, we evaluate each potential

holding using a proprietary methodology. Only those

with our highest conviction make it into your portfolio.

Active ManagementBecause markets are in constant motion, we don’t

take a ‘set it and forget it’ approach. We’re firm believ-

ers in active investing, and embrace an independent

approach by selecting flexible managers or lesser-known

boutique shops—seeking those with the potential

to deliver above-average risk-adjusted results over the

long term.

Face-to-Face ResearchBefore we invest in a fund, we want to understand

the people behind it. We meet one-on-one with

fund managers, asking detailed questions to uncover

how they make decisions. We look for those who

’eat their own cooking’ by investing their own personal

savings in the funds they oversee.

A range of core choices for every stage of your lifetime

Our investment team creates these diversified portfolios using a research-drivenprocess supported by independent fund analysis from Morningstar, Inc. and regular meetings with fund managers.

U.S. Stocks International Stocks Real Estate REITS Taxable Bonds Alternatives Short Term Reserves

Portfolios % Asset Allocation Goal

Aggressive Growth

Growth

Moderate Growth

Income & Growth

Conservative

Long-term capital appreciation. Designed to allow investors to participate fully in the growth the stock market can offer, the portfolio invests primarily in domestic and foreign equities.

Long-term capital appreciation. Allows investors to take advantage of the potential for stock market growth by investing primarily in domestic and foreign equities, while seeking to cushion equity market downturns with modest exposure to fixed-income securities.

Long-term growth with moderate volatility. Built with a focus on providing balanced and varied exposure by investing in both equity and fixed-income securities.

Moderate capital appreciation combined with current income. Combines the growth potential of equities with the balance that fixed-income securities can provide.

Protection from capital loss and a safeguard against inflation. Invested in fixed-income and equity securities, it’s best- suited for investors who value current income and stability over all else.

58 U.S. Stocks30 International Stocks5 Real Estate REITS0 Taxable Bonds5 Alternatives2 Short Term Reserves





Conservative Income & Growth

Moderate Growth

Growth Aggressive Growth

Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5

Active/Passive20 / 80






Moderate Growth


Ultra Short-Range Short-Range Mid-Range Long-Range


Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth



Asset Allocation Portfolios

Figures are based on a recent allocation, and are subject to change. Asset classes shown are Morningstar, Inc. category groups. Allocation of portfolios at the individual account level may vary.

Our model portfolios are designed to put your needs

front and center—where they belong. To select

a portfolio, talk to your financial advisor, who can help

you build a wealth strategy with your long-term

goals in mind.

We offer both taxable and tax-deferred (shown below)

portfolios for investors in non-qualified and qualif-

ied accounts. The taxable versions are designed to avoid

asset classes that are not tax efficient and will

invest in municipal bonds to earn tax-exempt income.

About Morningstar Investment ServicesWe’re committed to helping financial advisors create better outcomes for investors like you.

Together, we offer the professional guidance and access to strategies that can help you achieve your goals. Our model portfolios are designed to be part of a long-term investing plan that helps meet your needs at each stage of your lifetime.

©2015 Morningstar Investment Services, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. All other marks are the property of the respective owners. Morningstar Investment Services, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. TAMP-200-010915

22 West Washington Street ChicagoIllinois 60602 USA

+1 877 626–3227 global.morningstar.com/mis [email protected]

Important InformationIt is important to note that investments in securities (e.g., mutual funds, exchange-traded funds, common stocks) involve risk and will not always be profitable.

Neither diversification nor asset allocation ensure a profit or guarantee against a loss. Morningstar Investment Services does not guar-antee that the results of its advice, recommendations, or the objectives of your portfolio will be achieved. Morningstar Investment Services does not guarantee that negative returns can or will be avoided in any of its portfolios. An investment made in a security may differ substantially from its historical performance and as a result, you may incur a loss. Past performan-ce is no guarantee of future results.

The Morningstar Managed Portfolios program (“Program”) is offered by Morningstar Investment Services and is intended for citizens or legal residents of the United States or its territories. This Program can only be offered by a registered investment advisor or investment advisor representative.

The Program includes various strategies available to individuals and institutions primarily through arrangements Morningstar Investment Services has with various unaffiliated registered investment advisors. Within the Program, Morningstar Invest-ment Services or its investment advisory affiliate provides discretionary investment advisory services.

In addition to the Program, Morningstar Investment Services also offers model portfolios to third-party advisory programs (“Advisory Program”) of financial institutions on a non-discretionary basis as a stra-tegist. Under a strategist arrangement, the Advisory Program has full discretion to invest the Advisory Program client accounts in accordance with the model or deviate from the model provided by Morningstar Investment Services.

Mutual FundPortfoliosRetirement Income


Designed for all stages of retirement, each model portfolio in the series follows a targeted, endowment-like approach to help support the shift from accumulating assets to spending them.

The Shift Into Retirement

Retirees often face a quandary—preserving wealth

while achieving the growth needed to sustain

future withdrawals. To help ease the shift into retire-

ment, the portfolios aim to strike a balance

between capital stability and growth by spreading

investments across a broad range of asset

classes. This helps support regular payouts without

courting some risks common to other income-

oriented strategies.

The Total Return Advantage

Many “income” strategies rely on high-yielding bonds,

dividend-paying stocks, or complex securities to

generate payouts. Investors often like this approach,

as it suggests income payments alone can fund

their spending—without dipping into principal. Yet such

income strategies can court excessive risks, with

the potential for jarring volatility. By contrast, a “total

return” approach aims to both generate income

and grow capital, helping retirees avoid the shortcom-

ings of singularly income-focused approaches.

Endowment-Like Approach

The portfolios adapt an approach widely used by

universities and philanthropic organizations, who invest

across a wide variety of asset classes to support

their future spending needs and reinvest the excess back

into the fund, reaping the benefits of compounding.

Like endowments, the portfolios invest not just in tradi-

tional stocks and bonds, but also in less traditional

strategies to help diversify and stabilize their returns

without forsaking the opportunity for growth.

Powerful Asset Class Research

In constructing the portfolios, we start with research

from our affiliate, Ibbotson Associates—a leading

authority on asset allocation. They’ve shown that the

mix of assets in a portfolio can have a greater

impact on investment returns than timing markets

or picking stocks, and they estimate the future

returns and volatility of every asset class we include

in the portfolios. This helps us set expectations

for the spending rate each portfolio will support, and

alter the mix of investments as needed.

Risk-managed portfolios for each stage of retirement

We created the Retirement Income series of portfolios to help deliver a mixof capital appreciation and income to support your spending needs as you move into retirement.

Inside the Retirement Income PortfoliosTo help meet the targeted spending goals, the Retirement Income portfolios invest in stock, bond, and alternative mutual funds, with each type of fund playing its own valuable role.

Stocks: Growth3 Stocks of companies large and small, the world over3 Emphasize undervalued, not just high-yielding, stocks3 Aim to responsibly compound portfolio value

Bonds: Stability3 Widely diversified across sectors, geographies3 Emphasize total return, not yield alone3 Aim to generate income, stabilize portfolio value

Alternatives: Manage Volatility3 Different than traditional stock or bond funds3 Returns less sensitive to broad market currents3 Aim to further diversify, cushion portfolios

Retirement Income Portfolios

Portfolios % Asset Allocation Goal

Retirement Income Long-Range Retirement IncomeMid-Range

Retirement IncomeShort-Range

Retirement IncomeUltra Short-Range

A steady rate of return driven by capital appreciation and income over 20 or more years. Aims to support a 4% annual distribution over this time horizon without fully depleting the account’s assets.

A steady rate of return driven by capital appreciation and income over ten to 20 years. Aims to support a 5% annual distribution over this time horizon without fully depleting the account’s assets.

A steady rate of return driven by income with some potential for capital appreciation over two to 10 years. Aims to support a 6% annual distribution over this time horizon without fully depleting the account’s assets.

Capital preservation and a steady rate of return driven by income over one to five years. Aims to support a 7% annual distribution over this time horizon without fully depleting the account’s assets.






Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth



Figures are based on a recent allocation, and are subject to change. Asset classes shown are Morningstar, Inc. category groups. Allocation of portfolios at the individual account level may vary.


Each portfolio aims to support a targeted annual

distribution over the recommended time horizon while

striving to deliver capital preservation. To help

deliver consistent rates of return and downside pro-

tection, each portfolio may invest in mutual

funds spanning a broad range of market segments.

It’s important to note that in any given year, a portfolio’s

returns could be more or less than the target due to

market fluctuations. Average payouts over a longer time

horizon are more likely to achieve these objectives.

To select a portfolio, talk to your financial advisor, who

can help you build a wealth strategy focused on

your long-term goals.




Important Information It is important to note that investments insecurities (e.g., mutual funds, exchange-tradedfunds, common stocks) involve risk and willnot always be profitable.

Neither diversification nor asset allocation ensure a profit or guarantee against a loss. Morningstar Investment Services does not guar-antee that the results of its advice, recommendations, or the objectives of your portfolio will be achieved. Morningstar Investment Services does not guarantee that negative returns can or will be avoided in any of its portfolios. An investment made in a secur-ity may differ substantially from its historical performance and as a result, you may incur a loss. Past performance is no guarantee of future results.







Mutual FundPortfoliosAbsolute Return

Invested across global markets and sectors, the Absolute Return model portfolio emphasises a diverse range of alternative investments in pursuit of steady returns and low volatility.

How Absolute Return Works

The Absolute Return portfolio is designed to adapt

to all kinds of market environments, keeping a lid on

volatility and offering a level of downside protection.

Over a full market cycle, it seeks the moderate

returns of a 30% stock/70% bond portfolio—while

investing in alternatives to help minimize the

toll that inflation and rising interest rates can take

on returns.

A “go anywhere” portfolio, Absolute Return allows

fund managers to take advantage of market

opportunities to help compound returns over time.

The Power of Alternatives

‘Alternative’, or non-traditional, investments aren’t

only for the most sophisticated investors anymore. In fact,

we think they’re now an essential part of a modern

portfolio. Because they don’t typically move in lockstep

with other parts of a traditional portfolio, alternatives

offer the potential to boost overall portfolio returns

while reducing risk.

The Absolute Return portfolio combines traditional

and alternative mutual funds with low correlations to

each other and to the broad markets, offering

highly diversified exposure across geographies, sectors,

and time horizons.

Designed to adapt to shifts in the market

The Absolute Return portfolio uses a broad range of alternative investmentsto help deliver moderate, consistent returns whether the stock market is moving up or down.

Goals of Absolute Return: Diversify, Protect, GrowThe strategy is designed to capture opportunities in strong market environments—and provide downside protection in weaker ones.

Diversify3 Incorporate alternatives that may have lower

correlation to broader market cycles3 Invest in a wide range of global securities

and sectors

Protect3 Buffer against sharp volatility and drawdowns3 Help portfolios weather sudden bear markets

Grow3 Pursue timely opportunities free from traditional

benchmark constraints3 Risk-aware managers use distinctive strategies

to help add value

Research You Can Trust Only the investments we have the most confidence

in make it into the Absolute Return portfolio. Starting

with unbiased Morningstar, Inc. data, we use a

proprietary evaluation system to identify managers who

employ a prudent, repeatable investment process that

has yielded strong results over time.

Face-to-Face Investing

When we research a fund, we want to understand

the firm and the people behind it. We meet one-on-one

with fund managers to uncover how they make decisions.

We look for those who ‘eat their own cooking’ by

investing their own personal savings in the funds they

oversee. Then, we assemble the investments into

a portfolio—and manage it actively to ensure that it’s

positioned to help meet the goals we’ve set for it.

Who is Absolute Return for?

Absolute return is well-suited to play a role in many

types of investors’ portfolios. For example, it may be used

as a core holding, creating a low-volatility anchor for

a portfolio with the potential for standalone downside

protection. For others, it can be can be used as a

satellite holding to help enhance overall diversification.

It may also appeal to conservative investors, includ-

ing those who are just entering the market. Finally, it can

help investors in retirement—who have less tolerance

for volatility or capital losses—make regular distributions

less disruptive.

To select a portfolio, talk to your financial advisor,

who can help you build a wealth strategy focused on


Neither diversification nor asset allocation ensure a profit or guarantee against a loss. This portfolio may not be suitable for all investors. In particular, it is not appropriate for short-term investments, and you could lose money by investing in it.

Inside the Absolute Return PortfolioTo help meet targeted risk and return objectives and maintain a low correlation to traditional stock and bond markets, the strategy uses funds that tend to fall into one of three categories:

3 Opportunistic Funds The managers of these funds invest across multiple asset classes. Each manager may employ a range of techniques as they seek to generate targeted levels of absolute, not relative, return.

3 Non-traditional Diversifiers These strategies focus on minimizing correlations to broad asset classes—particularly global stocks and bonds. To select them, we look carefully at funds’ historical correlations to the broad markets—and to each other.

3 Stabilizers Funds in this category tend to act as

“shock absorbers”. They are designed to minimize volatility and drawdowns relative to the U.S. fixed income or U.S. equity markets.



©2015 Morningstar Investment Services, Inc. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. All other marks are the property of the respective owners. Morningstar Investment Services, Inc. is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc. Please note that portfolio availability may vary by business relationship. Contact your financial advisor for details. TAMP-202-010915

Important InformationIt is important to note that investments insecurities (e.g., mutual funds, exchange-tradedfunds, common stocks) involve risk and willnot always be profitable.

Neither diversification nor asset allocation ensure a profit or guarantee against a loss. Morningstar Investment Services does not guar-antee that the results of its advice, recommendations, or the objectives of your portfolio will be achieved. Morningstar Investment Services does not guarantee that negative returns can or will be avoided in any of its portfolios. An investment made in a secur-ity may differ substantially from its historical performance and as a result, you may incur a loss. Past performance is no guarantee of future results.





Ibbotson PortfoliosActive/Passive


Active or passive management? We tap into the strengths of both approaches in five model portfolios that span the risk spectrum.

Ibbotson Asset Allocation

In investing, the essentials matter. Ibbotson

Associates—a leading authority on asset allocation—

starts with proprietary research showing that the mix

of assets in a portfolio can have a greater impact

on investment returns than timing markets or picking

stocks. Ibbotson uses risk and return forecasts as

a guide to develop a diversified strategic allocation for

each portfolio, including up to 19 asset classes.

Active Management

“Active” mutual fund managers seek to outperform a

benchmark. To select securities, they use both research

and their own experience as a guide. To build each

portfolio, Ibbotson Associates examine each fund’s hold-

ings and returns to determine how effective a mutual

fund manager may be. They also consider a manager’s

investment philosophy, process, and the strength

of their management team. Finally, they review costs,

ensuring that each fund’s fee appears reasonable

for the return potential they offer.

Passive Management

“Passive” investments seek to replicate the performance

of an index for a low fee, using exchange-traded

funds (ETFs) and/or indexed mutual funds. Because they

demand less research and analysis than actively

managed funds, they’re very cost-effective, with lower

portfolio turnover and more favorable tax consequences.

To build each portfolio, Ibbotson chooses passive

investments that closely track their asset class or bench-

mark index.

Getting the Most From Each Approach Ibbotson carefully monitors the overall risk level of a

portfolio when combining active and passive strategies.

They select actively managed funds in areas where a

skilled manager’s research and knowledge has the poten-

tial to boost performance, such as emerging markets

or small-cap stocks. In areas in which manager skill is

less likely to affect performance—such as government

bonds—they favor lower-cost passive investments.

Integrated strategies designed to offer you the best of both approaches

Our affiliate Ibbotson Associates manages each portfolio using active invest-ments to increase a portfolio’s potential for returns, and passive investments to help keep a portfolio diversified, low-cost, and tax-efficient.

Combining Active and PassiveIbbotson Associates uses actively managed funds to invest in asset classes in which

they think a manager can add value. Because active managers take on greater

risk in pursuit of greater return, the more aggressive the portfolio, the larger proportion

of actively managed funds it’s likely to hold.

Active/Passive 20/80




Active/Passive 95/5

Portfolios

More Active

Less Active

Less Passive

More Passive

3Conservative Portfolios: Greater amounts of passive index funds3Aggressive Portfolios: Greater amount of active funds

For illustrative purposes only.

Portfolios % A P Asset Allocation Goal

Active/Passive95/5

Active/Passive80/20

Active/Passive60/40

Active/Passive40/60

Active/Passive20/80

Long-term capital appreciation. Designed to allow investors to participate fully in the growth the stock market can offer, the portfolio invests primarily in domestic and foreign equities.

Long-term capital appreciation. Allows investors to take advantage of the potential for stock market growth by investing primarily in domestic and foreign equities.

Long-term growth with moderate volatility. Built with a focus on providing balanced and varied exposure by investing in both equity and fixed-income securities.

Moderate capital appreciation combined with current income. Combines the growth potential of equities with the balance that fixed-income securities can provide.

Protection from capital loss and a safeguard against inflation. Invested in fixed-income and equity securities, it’s best- suited for investors who value current income and stability over all else.

52 37 15 U.S. Stocks29 24 5 International Stocks6 6 – Real Estate REITS2 2 – Taxable Bonds9 6 3 Alternatives2 – 2 Short Term Reserves

44 29 15 U.S. Stocks24 20 4 International Stocks5 5 – Real Estate REITS17 10 7 Taxable Bonds8 5 3 Alternatives2 – 2 Short Term Reserves

37 22 15 U.S. Stocks16 13 3 International Stocks3 3 – Real Estate REITS36 18 18 Taxable Bonds6 4 2 Alternatives2 – 2 Short Term Reserves

27 15 12 U.S. Stocks10 8 2 International Stocks2 2 – Real Estate REITS56 24 32 Taxable Bonds2 – 2 Alternatives3 – 3 Short Term Reserves

14 7 7 U.S. Stocks5 5 – International Stocks– – – Real Estate REITS71 27 44 Taxable Bonds2 – 2 Alternatives8 – 8 Short Term Reserves


Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth




Moderate Growth


Momentum20/80

Momentum 40/60

Momentum60/40

Momentum 80/20

Momentum 95/5







Moderate Growth



Active/Passive Portfolios(Tax-Deferred)

Note that the passive portion of a portfolio may be invested in a combination of indexed mutual funds and ETFs, or simply indexed mutual funds, depending on custodial arrangement.Weightings are subject to change. Figures are based on a recent allocation, and are subject to change. Asset classes shown are Morningstar, Inc. category groups. Allocations of portfolios at the individual account level my vary.

A Active P Passive

Equity / Fixed Income


Each model portfolio is carefully designed to put your

needs front and center—where they belong. We

think your portfolio should be working for you no matter

what investment approach or style is in favor at

any given time. That’s why they’re broadly diversified

across asset classes, managers, and investment styles.

To select a portfolio, talk to your financial advisor,

who can help you build a wealth strategy focused on





Important InformationIt is important to note that investments in securities (e.g., mutual funds, exchange-traded funds, common stocks) involve risk and will not always be profitable.

ETFs, like all investments, carry certain risks that may adversely affect their net asset value, market price, and/or performance. An ETF’s net asset value (NAV) will fluctuate in response to market activity. Because ETFs are traded through- out the day and the price is determined by market forces, the market price you pay for an ETF may be more or less than the net asset value. Because ETFs are not actively managed, their value may be affected by a general decline in the U.S. market segments relating to their underlyingindexes. Similarly, an imperfect match between an ETF’s holdings and those of its underlying index may cause its performance to not match the performance of its underlying index. Like other concentrated investments, an ETF with concentrated holdings may be more vulnerable to specific economic, political, or regulatory events than an ETF that mirrors the general U.S. market.

Neither diversification nor asset allocation ensure a profit or guarantee against a loss. Neither Morningstar Investment Services nor Ibbotson Associates guarantee that the results of its advice, recommendations, or the objectives of your portfolio will be achieved. Neither Morningstar Investment Services nor Ibbotson Associates guarantee that negative returns can or will be avoided in any of its portfolios.

An investment made in a security may differ substantially from its historical performance and as a result, you may incur a loss. Past perform-ance is no guarantee of future results.


Both Morningstar Investment Services and Ibboston Associates are registered investment advisers and wholly-owned subsidiaries of Morningstar, Inc. Ibbotson Associates manages the Active/Passive portfolios, and serves as a sub-advisor to the Program.





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