www.BeaconPointe.com

OUTSOURCE CIO VS. TRADITIONALCONSULTING: BEST PRACTICES FORCHOOSING A CONSULTANT

2020 AOA CONFERENCE

MIKE BRELLER, SENIOR INVESTMENT CONSULTANT

MICHAEL DOW, CFA, CPA, CHIEF INVESTMENT OFFICER

BEACON POINTE ADVISORS

PRESENTER BIOS

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Mike BrellerManaging DirectorSenior Investment ConsultantInvestment Committee Member

Experience: 20+ yearsCapital Research & Management Company, The American Funds

Education & CredentialsBoise State University BBA FinanceMagna Cum Laude

Involvement• Former President of the Financial

Management Association, Boise State University

• Vice Chair, Trustee, Irvine Public Schools Foundation

Michael Dow, CFA, CPAChief Investment OfficerChairman of the Investment Committee

Direct Investor Experience: 25+ yearsUBS Global Assessment Management

Head of U.S. Core Plus BondsHead of Global Sovereign ResearchHead of Emerging Market Corporate Debt

PIMCOPortfolio Manager – Investment Grade

Corporates Investment Strategy Group – Monetary Policy

Education & CredentialsUniversity of Chicago MBAUniversity of Illinois BS Accounting

Involvement• Adjunct Professor of graduate-level

Quantitative Finance (University of Illinois)

TODAY’S PRESENTATION AGENDA

SELECTING ACONSULTANT

DEFINING THEDIFFERENT SERVICE

OFFERINGS

DIFFERENTIATINGOCIO AND

TRADITIONAL

FACTORS TO CONSIDERWHEN EVALUATING

CONSULTANTS

Q&A

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CAREFUL CONSIDERATIONS TO EVALUATE: SELECTING A CONSULTANT

FIRM

• Firm/Ownership Structure• E&F Experience• Location• Service Model• Conflicts of Interest

PEOPLE•Qualifications• Availability for Meetings• Team Stability• Resources/Staffing

PHILOSOPHY & PROCESS

• Long term Investment Horizon• Investor-led, Disciplined and Repeatable• Proven Ability to Select and Monitor Managers• Risk Management Focus

OPERATIONS• Transition Management• Portfolio Monitoring• Custodial & Trading Support • Reporting

FEES• Advisory Fees•Underlying Manager Fees•Miscellaneous/Other Fees

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INVESTMENT CONSULTING SERVICE MODELS

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OCIO

(Discretionary)

TRADITIONAL(Non-Discretionary)

HYBRID

DIFFERENTIATING THE SERVICE MODELS

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CONSULTING SERVICESOCIO

(Discretionary) TRADITIONAL

(Non-Discretionary)

• Investment Policy Development and Review

• Creation of a Custom Asset Allocation Plan

• Recommendations of Portfolio Investments

• Hiring/Termination of Investment Managers & Execution of Portfolio Trades

• Apply Dynamic Asset Allocation – Cyclical Adjustments

BENEFITS OF THE OCIO MODEL

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An OCIO Services Platform is a full discretionary investment solution for institutions that allows decision-makers and staff to focus on high-level policy decisions.

Focus your time and energy on students and your organization's mission

Delegate investment decisions to a dedicated team of

investment professionals

Rely on professional staff for custodial interaction and trade

execution

This allows you to:

Reasons asset owners consider an OCIO Service Model:

Lack of internal and personnel

resources

Need for additional

investment and operational

oversight

Insufficient risk management

tools

Speed of implementation

and decision making

BENEFITS OF THE TRADITIONAL MODEL

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A Non-Discretionary Services Platform provides professional asset allocation and investment recommendations while client maintains final investment authority.

This allows you to:

Reasons asset owners consider a Non-Discretionary Service Model:

Hands-on management and control over

portfolio

Reduced fee schedule for services

Lower minimum required investment

Portfolio clarity & visibility

Maintain fiduciary oversight to investment

selection process

Make the final investment decisions

Retain full responsibility of custodial interaction and

trading

CASE STUDY: A CIO’S PERSPECTIVE ON INVESTMENT DISCRETION

IN THE CURRENT MARKET ENVIRONMENT

ELEMENTS OF THE PORTFOLIO CONSTRUCTION PROCESS

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Cyclical Asset Allocation Assessment:

What’s “CHEAP” vs. “RICH”?

Long Term Capital Market Assumptions: What assets have the best

long-term risk-adjusted returns?

Cyclical Macroeconomic Analysis:

What is the outlook for economic growth, monetary

policy and risk taking?

Manager Selection and Termination

Manager Selection and Monitoring:

Who can best fulfill the asset allocation objectives?

ONE VERSION OF AN EFFECTIVE INVESTMENT PROCESS

OngoingActive Investment Manager Review

CIO / Investment Committee Oversight and Risk Monitoring

Quarterly

Macroeconomic Analysis

Disciplined and repeatable portfolio construction process.• Highly experienced investors on the Investment Committee…• …focused on the drivers of investment risk and return• The asset allocation process identifies opportunities – and manages risk • “Fill the buckets” with best in class investment managers

GOAL: produce robust investment solutions that perform throughout the market cycle

Quarterly

Asset Allocation Analysis

Cyclical Macro Outlook

Asset Class Valuation Analysis

Market Behavior Factors Asset Class Current FINAL Cyclical

Current FINAL Cyclical -

BENCHMARK

Current FINAL Cyclical - Strategic

Current FINAL Cyclical - Prior

Cyclical

Current FINAL (Alts Adj) Cyclical -

BENCHMARK+Alts

Equity 58.00% -2.00% 2.00% 1.00% 6.72%

US Equity 34.50% 1.32% 2.50% -2.50% 6.75%

US Large Cap 28.00% -0.73% 1.00% 1.00% 3.65%

US Large Cap Core 10.00% -0.75% 0.00% 1.50% 0.57%

US Large Cap Value 9.50% 0.41% 0.50% -0.50% 1.77%

US Large Cap Growth 8.50% -0.39% 0.50% 0.00% 1.31%

US Mid Cap 4.00% 1.04% 1.00% -2.00% 1.40%

US Small Cap 2.50% 1.02% 0.50% -1.50% 1.69%

International Equity 23.50% -3.32% -0.50% 3.50% -0.03%

Int'l Equity Developed Growth 8.00% -1.37% -0.50% 1.25% -0.22%

Int'l Equity Developed All/Value 10.50% -1.43% 0.00% 3.75% 0.04%

Emerging Markets 5.00% -0.52% 0.00% -1.50% 0.15%

Fixed Income 28.00% -12.00% -2.00% -4.50% -6.72%

US Fixed Income 11.00% -4.90% -2.00% -16.50% -2.58%

US Core OR Muni Bonds 11.00% -4.90% -2.00% -12.50% -2.95%

US Long Duration 0.00% 0.00% 0.00% 0.00%

US Short Term 0.00% 0.00% -2.00% 0.00%

US TIPs 0.00% 0.00% 0.00% 0.00%

US High Yield Corporate 0.00% 0.00% -2.00% 0.37%

Global Fixed Income 17.00% -7.10% 0.00% 12.00% -4.14%

Global Developed Bonds 14.00% -8.80% -3.00% 14.00% -6.00%

Global Emerging Market Bonds 3.00% 1.70% 3.00% -2.00% 1.86%

Alternatives 14.00% 14.00% 0.00% 3.50% 0.00%

Private Equity 4.00% 0.00% 1.00% 0.00%

US Core Real Estate 2.50% 0.00% 0.00% 0.00%

US Value Added Real Estate 2.50% 0.00% 0.00% 0.00%

Event Driven Hedge Funds 0.00% 0.00% -1.50% 0.00%

Long/Short Hedge Funds 2.00% 0.00% 1.00% 0.00%

Commodities 0.00% 0.00% 0.00% 0.00%

Private Credit 3.00% 0.00% 3.00% 0.00%

Cash 0.00% 0.00% 0.00% 0.00% 0.00%

Best in ClassTRADITIONAL

Investment ManagersTraditional

Best in ClassALTERNATIVE

Investment ManagersTraditional

Optimal Portfolio Construction

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WHAT IS DRIVING INVESTMENT RETURNS?

12NOTE: the components of our proprietary BPA GloCapVol Index include volatility of US equities, US interest rates, Chinese Equities, Chinese currency, US BBB Corporate Credit Spreads, US Dollar, Commodities, and EM Corporate Spreads.

Increasing Capital Market Volatility

Transitional Global Monetary Policy

Trade Policy Uncertainty

Monetary Policy

Trade Policy

Volatility

Q4 2018 AND ASSET ALLOCATION DECISION

Decision making – in real time

• The S&P 500 drops 19.8% during the 4Q2018• There was a fair amount of “panic” in the market• Valuations moved to an attractive level given our

view of the Federal Reserve• The decision to add to equity risk was difficult for

many during this period

GOAL: to ACT when the market gives you opportunities

Underweight

Overweight

Overweight

Neutral Neutral

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S&P 500 drops nearly 20% during 4Q18.

S&P 500 Price/Earnings Ratio approaches a 1 StdDev move below long-term average…

FACTORS TO CONSIDER: EVALUATING A CONSULTANT

✦ A fiduciary duty

✦ Experienced investors with proven risk-taking capabilities

✦ A sound macro and asset allocation process that produces results

✦ Impact investing options (SRI & ESG capabilities)

✦ Resources and access to best ideas

✦ Timeliness of execution

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THANK YOU!

Mike BrellerSenior Investment Consultant

Institutional Consulting ServicesMBreller@beaconpointe.com

(949) 718-1602

Michael Dow, CFA, CPA Chief Investment Officer

Investment Committee ChairmanMDow@beaconpointe.com

(949) 500-8485

Please contact us with any questions or if you’d like a sample RFP.

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The Beacon Pointe Family of Companies (“Beacon Pointe”) includes Beacon Pointe Advisors, LLC (“BPA”) and Beacon Pointe Wealth Advisors, LLC (“BPWA”). BPA and BPWA are investmentadvisers registered with the United States Securities and Exchange Commissions (“SEC”). BPA and BPWA are separate entities but affiliated companies.

The information set forth herein is confidential and is for the sole use of our clients and prospective clients, and only in connection with the purposes for which it is presented. By acceptingdelivery of the information, the intended recipient agrees that: a) the information set forth and the methodologies utilized herein are proprietary to the Beacon Pointe Family of Companies, and b)no part hereof will be reproduced, reprinted, disseminated, displayed, or utilized for any reason other than the purposes expressed by the client and BPA or BPWA without the prior writtenconsent of BPA or BPWA.

Opinions expressed herein are subject to change without notice. BPA & BPWA have exercised all reasonable professional care in preparing this information. The information has been obtainedfrom sources we believe to be reliable; however, BPA & BPWA have not independently verified, or attested to, the accuracy or authenticity of the information. BPA & BPWA shall not be liable tocustomers or anyone else for the inaccuracy or non-authenticity of the information or for any errors of omission in content regardless of the cause of such inaccuracy, non-authenticity, error, oromission, except to the extent arising from the sole gross negligence of BPA or BPWA. In no event shall BPA or BPWA be liable for consequential damages.

Thank you for your continued confidence in Beacon Pointe.

GENERAL DISCLOSURES