Public Equities

1.

Equity markets are generally correlated and exhibit particularly high correlation during periods of market stress. In other words, historically when the S&P 500 experienced a downturn, most other equity markets were similarly negative and did not provide the expected diversification benefit.

2.

Alpha (a manager's excess returns over the market benchmark) is variable and can be significant in certain markets. But we believe beta ultimately drives returns. In this context, we use beta as a shorthand to refer to the passive performance of a market benchmark, rather than the pure statistical definition. In our experience over the past 20 years, decisions regarding beta (i.e., which market to invest in) have mattered more than decisions regarding alpha (i.e., which manager to invest in for any given market), and we believe that will continue to be the case going forward.

3.

The S&P 500 is a uniquely representative index that covers approximately 80% of the U.S. equity market cap and includes some of the largest multinational companies in the world. With an estimated 40% of revenues coming from outside the U.S., the S&P 500 inherently provides global economic exposure.

4.

Alpha is hard to come by when investing in large cap U.S. equities (S&P 500). This makes sense intuitively - U.S. equity markets are among the deepest, most widely researched, and most transparent markets in the world. In U.S. large cap equities, it is particularly difficult to find a research advantage, and it is therefore incredibly difficult to generate consistent alpha.