SVB Asset Management Economic Report Q3 2014

Quarterly Economic Report 2014SVB Asset Management

Q3

2 SVB Asset Management | Quarterly Economic Report Q3 2014

Thoughts from the Desk 03

Overview 04

Domestic Economy 06

Special Topic: Fixed Income Markets 17

Markets & Performance 21

Global Economy 29

Portfolio Management Strategy 35

2SVB Asset Management | Quarterly Economic Report Q3 2014

Table of Contents

A confluence of external forces continues to help anchor interest rates despite rapid improvements in U.S. economic trends – a theme we expect to persist for some time.

On the positive side, we witnessed a sharp rebound from first quarter’s abysmal U.S. GDP performance which was largely attributed to severe weather in the winter months. The snapback appears broad-based with positive contributions from consumers and businesses. Asset price appreciation from housing and equity markets, strong hiring, a decline in the unemployment rate and stabilization in the participation rate should support recent upturns in consumer sentiment.

Factors keeping the Fed on the sidelines are: 1) core inflation that remains within the Fed’s tolerable range; 2) desire by certain policy makers to let inflation run ‘a little hot’ before tightening; 3) slowdown and geopolitical events in other major economies; and 4) more accommodative monetary policies by other central bankers.

Most notably, policy makers from the euro zone, China and Japan have embarked on a combination of slashing key rates (to negative territories in the euro zone), targeting reserve requirement ratios, expanding its monetary base, restarting asset purchase programs, and enlisting public support to enact additional unconventional tools to combat economic stagnation and deflation.

With this ongoing tug-of-war, interest rates across the curve moved aggressively upwards from intra-quarter lows before settling near their starting point. Market performance from a total return perspective saw increased price volatility offsetting income returns. With short-term rates near recent highs at quarter-end, income returns will be more favorable in absorbing future price fluctuations.

For our fixed-income investors, healthier corporate balance sheets and floor-like yields of risk-free investments justify a tilt towards an allocation to credits on a risk-adjusted basis. We continue to monitor credit trends and remain cautious about selective sectors and regions in which we have an underweight stance.

Ninh Chung, Head of Investment Strategy and Portfolio Management


A confluence of external forces continues to help anchor interest rates despite rapid improvements in U.S. economic trends – a theme we expect topersist for some time.

On the positive side, we witnessed a sharp rebound from first quarter’s abysmal U.S. GDP performance which was largely attributed to severe weather in the winter months. The snapback appears broad-based with positive contributions from consumers and businesses. Asset price appreciation from housing and equity markets, strong hiring, a decline in the unemployment rate and stabilization in the participation rate should support recent upturns in consumer sentiment.

Factors keeping the Fed on the sidelines are: 1) core inflation that remains within the Fed’s tolerable range; 2) desire by certain policy makers to let inflation run ‘a little hot’ before tightening; 3) slowdown and geopolitical events in other major economies; and 4) more accommodative monetary policies by other central bankers.

Most notably, policy makers from the euro zone, China and Japan have embarked on a combination of slashing key rates (to negative territories in the euro zone), targeting reserve requirement ratios, expanding its monetary base, restarting asset purchase programs, and enlisting public support to enact additional unconventional tools to combat economic stagnation and deflation.

With this ongoing tug-of-war, interest rates across the curve moved aggressively upwards from intra-quarter lows before settling near their starting point. Market performance from a total return perspective saw increased price volatility offsetting income returns. With short-term rates near recent highs at quarter-end, income returns will be more favorable in absorbing future price fluctuations.

For our fixed-income investors, healthier corporate balance sheets and floor-like yields of risk-free investments justify a tilt towards an allocation to credits on a risk-adjusted basis. We continue to monitor credit trends and remain cautious about selective sectors and regions in which we have an underweight stance.

Ninh Chung, Head of Investment Strategy and Portfolio Management


Thoughts from the Desk

4

Economic growth rebounded nicely in the second quarter thanks to a more confident consumer and an improved labor market. (p.7)

Consumers are feeling the effect of a strengthening economy as shown by improved sentiment and increased spending. (p.8)

The labor market has made considerable improvement and is poised to end the year on a strong note. (p. 9-10)

Activity continues in the housing sector. With more subdued price gains and a continued low rate environment, home affordability is still high by historical standards.(p.12-13)

Both current inflation and inflation expectations remain below the Fed’s targets.(p.14-15)

The new issuance market has been dominated by the U.S. government due to continued spending by the government and there is no lack of demand for the securities due primarily to Quantitative Easing. (p.18-20)

Despite ebbs and flows, new issuances is on an overall upward trend. (p.18-20)

As banks continue to strengthen their balance sheets, the need for short-term funding has declined and has contributed to lower rates on money market instruments. (p.18-20)

New regulations in the banking and financial sector should also help keep short-term interest rates relatively low for the next few years. (p.18-20)

Overview

SVB Asset Management | Quarterly Economic Report Q3 2014 4

Economic growth rebounded nicely in the second quarter thanks to a more confident consumer and an improved labor market.(p.7)

Consumers are feeling the effect of a strengthening economy as shown by improved sentiment and increased spending. (p.8)

The labor market has made considerable improvement and is poised to end the year on a strong note. (p. 9-10)

Activity continues in the housing sector. With more subdued price gains and a continued low rate environment, home affordability is still high by historical standards.(p.12-13)

Both current inflation and inflation expectations remain below the Fed’s targets.(p.14-15)

Domestic Economy

The new issuance market has been dominated by the U.S. government due to continued spending by the government and there is no lack of demand for the securities due primarily to Quantitative Easing. (p.18-20)

Despite ebbs and flows, new issuances is on an overall upward trend. (p.18-20)

As banks continue to strengthen their balance sheets, the need for short-term funding has declined and has contributed to lower rates on money market instruments. (p.18-20)

New regulations in the banking and financial sector should also help keep short-term interest rates relatively low for the next few years. (p.18-20)

Special Topic: Fixed Income Markets

Overview

SVB Asset Management | Quarterly Economic Report Q3 2014

5

Fund flows have been mixed due to market volatility stemming from Fed action and global growth uncertainties. (p.22)

Although we have seen a moderate widening of credit spreads, they continue to hover near all-time lows. (p.23)

Credit sectors continue to exhibit positive total returns as income returns have cushioned the impact of negative price performance over the past quarter. (p.24)

Sector returns continue to mirror credit risk taken as leveraged balance sheets pay a higher cost of funds whereas safe havens provide shelter but less yield. (p.25)

Europe: Disinflation is providing capacity for monetary easing and will allow the ECB to expand stimulus programs in the next six months. (p.31)

United Kingdom: Economic recovery is unaffected by Scotland with political uncertainties resolved. The improving employment situation will attract the BOE’s attention. (p.32)

China: Preparing for slower growth ahead with government officials hinting of the acceptance of a lower growth target in 2015. (p.33)

Japan: Discontinuous path to growth as the country is set to recover from a recent contraction subsequent to the tax implementation in April 2014. (p.34)


Overview

5

Fund flows have been mixed due to market volatility stemming from Fed action and global growth uncertainties. (p.22)

Although we have seen a moderate widening of credit spreads, they continue to hover near all-time lows. (p.23)

Credit sectors continue to exhibit positive total returns as income returns have cushioned the impact of negative price performance over the past quarter. (p.24)

Sector returns continue to mirror credit risk taken as leveraged balance sheets pay a higher cost of funds whereas safe havens provide shelter but less yield. (p.25)

Markets & Performance

Europe: Disinflation is providing capacity for monetary easing and will allow the ECB to expand stimulus programs in the next six months. (p.31)

United Kingdom: Economic recovery is unaffected by Scotland with political uncertainties resolved. The improving employment situation will attract the BOE’s attention. (p.32)

China: Preparing for slower growth ahead with government officials hinting of the acceptance of a lower growth target in 2015. (p.33)

Japan: Discontinuous path to growth as the country is set to recover from a recent contraction subsequent to the tax implementation in April 2014. (p.34)

Global Economy


Overview

SVB Asset Management

Domestic Economy

GDP Picking Up GDP

GDP and Components GDP Growth 4Q Average

Second quarter GDP came back strong at 4.6 percent after a weak start to the year in Q1 due to harsh weather conditions.

Momentum has picked up on a broad basis. The latest revision was driven by non-residential investment, exports and healthcare spending rather than personal consumption.

Corporate investment has shown a strong pick-up and should continue to boost the economy.

Expectations are for Q3 GDP to come in around 3 percent.

7

-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%

10.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

U.S. GDP Q-o-Q Trailing 4-Quarter Average

-3.0% -1.0% 1.0% 3.0% 5.0%

Government Res Investment Inventories Net Exports Bus Fixed Investment Personal consumption exp

Source: Bureau of Economic Analysis (BEA), Congressional Budget Office (CBO) and SVB Asset Management. Note: GDP values shown in legend are % change vs. prior quarter annualized.


GDP Picking Up GDP

GDP and Components GDP Growth 4Q Average

Second quarter GDP came back strong at 4.6 percent after a weak start to the year in Q1 due to harsh weather conditions.

Momentum has picked up on a broad basis. The latest revision was driven by non-residential investment, exports and healthcare spending rather than personal consumption.

Corporate investment has shown a strong pick-up and should continue to boost the economy.

Expectations are for Q3 GDP to come in around 3 percent.

7

-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

10.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

U.S. GDP Q-o-Q Trailing 4-Quarter Average

-3.0%-1.0%1.0%3.0%5.0%

Government Res Investment Inventories Net Exports Bus Fixed Investment Personal consumption exp

Source: Bureau of Economic Analysis (BEA), Congressional Budget Office (CBO) and SVB Asset Management. Note: GDP values shown in legend are % change vs. prior quarter annualized.


Consumption Improved Outlook

Consumer sentiment, as shown by the University of Michigan index, continued its upward trend in the third quarter. September’s reading of 84.6 was at a 14-month high and reflected an improved outlook for the U.S. economy.

Retail sales have also picked up with August showing a 0.6 percent increase in purchases, the largest rise in four months. Consumer purchases increased 2.5 percent in Q2, up from 1.2 percent in Q1.

Stronger consumer spending has been directly attributable to a strengthening labor market. As employment and wage growth continue to strengthen, we should see this momentum persist.

8

40.0 50.0 60.0 70.0 80.0 90.0

100.0 110.0 120.0

Average

-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0%

$5.0

$10.0

$15.0

$20.0

$25.0

$250.0

$300.0

$350.0

$400.0

$450.0

$500.0

Vehi

cle

Sal

es (M

illio

ns)

Ret

ail &

Foo

d S

ervi

ces

Sal

es (B

illio

ns)

Ex Autos Vehicle Sales

Source: U.S. Bureau of Economic Analysis (BEA), Census.gov, University of Michigan / Thomson Reuters - Survey of Consumers, SVB Asset Management.


Consumption Improved Outlook Consumer Sentiment – University of Michigan

Retail & Food Services Sales Personal Consumption – % Change

Consumer sentiment, as shown by the University of Michigan index, continued its upward trend in the third quarter. September’s reading of 84.6 was at a 14-month high and reflected an improved outlook for the U.S. economy.

Retail sales have also picked up with August showing a 0.6 percent increase in purchases, the largest rise in four months.Consumer purchases increased 2.5 percent in Q2, up from 1.2 percent in Q1.

Stronger consumer spending has been directly attributable to a strengthening labor market. As employment and wage growth continue to strengthen, we should see this momentum persist.

8

40.050.060.070.080.090.0

100.0110.0 120.0

Average

-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%

$5.0

$10.0

$15.0

$20.0

$25.0

$250.0

$300.0

$350.0

$400.0

$450.0

$500.0

Vehi

cle

Sal

es (M

illio

ns)

Ret

ail &

Foo

d S

ervi

ces

Sal

es

(Bill

ions

)

Ex Autos Vehicle Sales

Source: U.S. Bureau of Economic Analysis (BEA), Census.gov, University of Michigan / Thomson Reuters - Survey of Consumers, SVB Asset Management.


Employment Gaining Steam

Monthly job growth has averaged 215K in the first eight months of the year.

The unemployment rate has been teetering around 6.1 percent for the past two months as the labor force participation rate stabilizes.

The Fed is monitoring developments in the labor markets closely as it considers a shift in monetary policy.

9

-15.0%

-5.0%

5.0%

15.0%

-1,000.0

-500.0

0.0

500.0

1,000.0

Thou

sand

s

Non-Farm Payroll (LHS) Unemployment Rate (RHS) U-6 (RHS)

0.0

5,000.0

10,000.0

-

50,000.0

100,000.0

150,000.0

Thou

sand

s

Thou

sand

s

Full Time Employment (LHS) Part Time for Economic Reasons (RHS)

Source: U.S. Bureau of Labor and Statistics (BLS), SVB Asset Management, National Bureau of Economic Research (NBER). Note: The underemployment rate U-6 defined as persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate they want and are available for a job and have looked for work in the past 12 months.


0.0 200.0 400.0 600.0 800.0

1000.0 1200.0 1400.0

Number of Workers Discouraged Not in Labor

Employment Gaining Steam Employment Landscape Full-Time vs. Part-Time

Monthly job growth has averaged 215K in the first eight months of the year.

The unemployment rate has been teetering around 6.1 percent for the past two months as the labor force participation rate stabilizes.

The Fed is monitoring developments in the labor markets closely as it considers a shift in monetary policy.

9

Discouraged Workers Not in Labor Force

-15.0%

-5.0%

5.0%

15.0%

-1,000.0

-500.0

0.0

500.0

1,000.0

Thou

sand

s

Non-Farm Payroll (LHS) Unemployment Rate (RHS) U-6 (RHS)

0.0

2,000.0

4,000.0

6,000.0

8,000.0

10,000.0

-

50,000.0

100,000.0

150,000.0

Thou

sand

s

Thou

sand

s

Full Time Employment (LHS) Part Time for Economic Reasons (RHS)

Source: U.S. Bureau of Labor and Statistics (BLS), SVB Asset Management, National Bureau of Economic Research (NBER). Note: The underemployment rate U-6 defined as persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate they want and are available for a job and have looked for work in the past 12 months.


0.0200.0400.0600.0800.0

1000.01200.01400.0

Number of Workers Discouraged Not in Labor Force

Employment Gaining Steam U.S. Labor Force Participation Rate Hires and Quits Remain Depressed

Average Hourly Earnings YoY With the Fed dropping the 6.5 percent threshold for the unemployment rate, it is now looking at a broader range of statistics including the labor force participation rate, the “quits” rate and wage growth.

At 62.8 percent, the labor force participation rate is the lowest in over 30 years and has held steady in that range for the last five months.

Wage growth has been soft; however, when adjusting for relatively low inflation, purchasing power appears to be better off. Despite soft nominal wage growth, purchasing power has been unchanged due to low inflation.

10

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Job Hire Rate

62.0%

63.0%

64.0%

65.0%

66.0%

67.0%

68.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%


Source: U.S. Bureau of Labor Statistics (BLS), SVB Asset Management.

Employment Gaining Steam U.S. Labor Force Participation Rate Hires and Quits Remain Depressed

Average Hourly Earnings YoY With the Fed dropping the 6.5 percent threshold for the unemployment rate, it is now looking at a broader range of statistics including the labor force participation rate, the “quits” rate and wage growth.

At 62.8 percent, the labor force participation rate is the lowest in over 30 years and has held steady in that range for the last five months.

Wage growth has been soft; however, when adjusting for relatively low inflation, purchasing power appears to be better off. Despite soft nominal wage growth, purchasing power has been unchanged due to low inflation.

10

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Job Hire Rate Job Quit Rate

62.0%

63.0%

64.0%

65.0%

66.0%

67.0%

68.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%


Source: U.S. Bureau of Labor Statistics (BLS), SVB Asset Management.

Personal Finances Trending Upwards

We have yet to see any meaningful trend in personal income growth; however, the savings rate as a percentage of disposable income has been on the rise.

The savings rate has risen from 4.1 percent at the end of the year to 5.4 percent in August as consumers strengthened their balance sheets.

Household net worth continues to rise, benefitting from job gains, higher home values and rising equity prices. In the second quarter, household net worth rose by almost $1.4 trillion.

11

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

Mon

thly

Per

cent

age

Cha

nge

0.0% 2.0% 4.0% 6.0% 8.0%

10.0% 12.0%


Source: U.S. Bureau of Economic Analysis (BEA), Federal Reserve, SVB Asset Management.

Personal Finances Trending Upwards Personal Income Personal Savings as % of Disposable Income

Household and Nonprofit Organizations Net Worth We have yet to see any meaningful trend in personal income growth; however, the savings rate as a percentage of disposable income has been on the rise.

The savings rate has risen from 4.1 percent at the end of the year to 5.4 percent in August as consumers strengthened their balance sheets.

Household net worth continues to rise, benefitting from job gains, higher home values and rising equity prices. In the second quarter, household net worth rose by almost $1.4 trillion.

11

$0.0

$20.0

$40.0

$60.0

$80.0

$100.0

Bill

ions

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

Mon

thly

Per

cent

age

Cha

nge

0.0%2.0%4.0%6.0%8.0%

10.0%12.0%


Source: U.S. Bureau of Economic Analysis (BEA), Federal Reserve, SVB Asset Management.

U.S. Housing Market Activity Persists

The housing sector appeared to have recovered from the first quarter slump as new home sales hit the highest level in over six years. New home sales rose 18 percent in August, while sales of existing homes fell 1.8 percent in the same month.

Housing starts experienced another volatile quarter with July rising 22.9 percent and August falling 14.4 percent. The number of multi-family starts has been increasing which means we should expect to see more volatility.

Home prices have given up their double-digit price increases, as shown by the S&P/Case-Shiller index, although prices are still on the rise with recent months showing 8-10 percent growth year-over-year.

12

0.0

100.0

200.0

300.0

400.0

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

Pop

ulat

ion

(Mill

ions

)

Hou

sing

Sta

rts (T

hous

ands

)

Housing Starts U.S. Population

0.0

5.0

10.0

15.0

3.0

5.0

7.0

9.0

Hom

e S

uppl

y (m

onth

s)

Hom

e S

ales

(Mill

ions

)

Total Sales (new & existing) Existing Home Supply


Source: National Association of Home Builders (NAHB), Census.gov, S&P, and SVB Asset Management.

90

140

190

240

Case Shiller 20 City FHFA Purchase Median Home Price

U.S. Housing Market Activity Persists Home Sales & Supply

Housing Starts Home Prices – Indexed to 100

The housing sector appeared to have recovered from the first quarter slump as new home sales hit the highest level in over six years. New home sales rose 18 percent in August, while sales of existing homes fell 1.8 percent in the same month.

Housing starts experienced another volatile quarter with July rising 22.9 percent and August falling 14.4 percent. The number of multi-family starts has been increasing which means we should expect to see more volatility.

Home prices have given up their double-digit price increases, as shown by the S&P/Case-Shiller index, although prices are still on the rise with recent months showing 8-10 percent growth year-over-year.

12

0.0

100.0

200.0

300.0

400.0

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

Pop

ulat

ion

(Mill

ions

)

Hou

sing

Sta

rts (T

hous

ands

)

Housing Starts U.S. Population

0.0

5.0

10.0

15.0

3.0

5.0

7.0

9.0

Hom

e S

uppl

y (m

onth

s)

Hom

e S

ales

(Mill

ions

)

Total Sales (new & existing) Existing Home Supply


Source: National Association of Home Builders (NAHB), Census.gov, S&P, and SVB Asset Management.

90

140

190

240

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Case Shiller 20 City FHFA Purchase Median Home Price

U.S. Housing Market Activity Persists Homeownership Rate Housing Affordability Composite Index

Foreclosures vs. Mortgages Outstanding

13

Although housing affordability has been coming down this year, it is still high by historical standards. A continued low rate environment combined with stabilizing price gains is helping to support affordability.

The homeownership rate stands at 64.7 percent, down from its peak of 69.2 percent in 2004. Foreclosures as a percentage of total loans stand at 2.5 percent, down from a peak of 4.6 percent in 2010.

Homeownership has come down to a more sustainable level with mortgages outstanding and foreclosures following suit. The health of this sector is arguably stronger post-crisis as lending standards have been more stringent.

62.0%

64.0%

66.0%

68.0%

70.0%

0.0%

5.0%

10.0%

15.0%

0.0

100.0

200.0

300.0

Affo

rdab

ility

Inde

x

Housing Affordability 30 Year Fixed Mortgage Rates

0.0%

2.0%

4.0%

6.0%

$9.0

$10.0

$11.0

$12.0

Bill

ions

Mortgages Outstanding (LHS) Foreclosures (RHS)


Source: Census.gov, National Association of Realtors and SVB Asset Management.

U.S. Housing Market Activity Persists Homeownership Rate Housing Affordability Composite Index

Foreclosures vs. Mortgages Outstanding

13

Although housing affordability has been coming down this year, it is still high by historical standards. A continued low rate environment combined with stabilizing price gains is helping to support affordability.

The homeownership rate stands at 64.7 percent, down from its peak of 69.2 percent in 2004. Foreclosures as a percentage of total loans stand at 2.5 percent, down from a peak of 4.6 percent in 2010.

Homeownership has come down to a more sustainable level with mortgages outstanding and foreclosures following suit. The health of this sector is arguably stronger post-crisis as lending standards have been more stringent.

62.0%

64.0%

66.0%

68.0%

70.0%

0.0%

5.0%

10.0%

15.0%

0.0

100.0

200.0

300.0

Affo

rdab

ility

Inde

x

Housing Affordability 30 Year Fixed Mortgage Rates

0.0%

2.0%

4.0%

6.0%

$9.0

$10.0

$11.0

$12.0

Billi

ons

Mortgages Outstanding (LHS) Foreclosures (RHS)


Source: Census.gov, National Association of Realtors and SVB Asset Management.

Inflation Expectations Contained

14

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

% c

hang

e fro

m p

rior y

ear

Core PCE Fed Target Monetary Policy Threshold

-5.0%

0.0%

5.0%

10.0%

15.0%

% c

hang

e fro

m p

rior y

ear

CPI Ex Food & Energy CPI

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

% c

hang

e fro

m p

rior y

ear

PPI Ex Food & Energy PPI

Food & Bev. 2.6%Housing 2.6%Apparel less Footw ea -0.4%Transportation -0.4%Medical Care 2.1%Recreation 0.0%Educ. & Comm. 1.5%Other 1.6%

Less:Energy -2.6%Food 0.2%

41.5%

16.7%

14.9%

7.5%

7.0% 5.7% 2.6% 3.3%

Housing

Transportation Food & Bev.

Medical Care

Educ. & Comm. Recreation


Source: Census.gov and SVB Asset Management.

Inflation Expectations Contained Component Distribution Core PCE – % Change from Prior Year

Consumer Price Index – % Change from Prior Year Producer Price Index

14

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

% c

hang

e fro

m p

rior y

ear

Core PCE Fed Target Monetary Policy Threshold

-5.0%

0.0%

5.0%

10.0%

15.0%

% c

hang

e fro

m p

rior y

ear

CPI Ex Food & Energy CPI

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

% c

hang

e fro

m p

rior y

ear

PPI Ex Food & Energy PPI

41.5%

16.7%

14.9%

7.5%

7.0%

5.7%2.6% 3.3%

Housing

Transportation

Food & Bev.

Medical Care

Educ. & Comm.

Recreation

Apparel less footwear

Other


Source: Census.gov and SVB Asset Management.

CPI Components 12-month Change

Food & Bev. 2.6%Housing 2.6%Apparel less Footwear -0.4%Transportation -0.4%Medical Care 2.1%Recreation 0.0%Educ. & Comm. 1.5%Other 1.6%Headline CPI 1.7% Less:

Energy -2.6% Food 0.2%

Core CPI 1.7%

Inflation Expectations Contained Wage Growth – Average Hourly Earnings NYMEX Crude Oil Generic Futures Contract

Univ. of Michigan Survey of Inflation Expectations Core PCE remains below the Fed’s target of 2 percent and is currently at 1.5 percent.

Both CPI and PPI are back down to under 2 percent on a year-over-year basis after briefly rising above that level earlier in the year.

The Fed reiterates that longer-term inflation expectations remain stable and it will continue to monitor inflation developments carefully in search of evidence that inflation will move towards its target.

15

$0.0

$50.0

$100.0

$150.0

Pric

e pe

r bar

rel

Crude Oil

1.5%

2.5%

3.5%

4.5%

5.5%

1 Year Ahead 5-10 Year Ahead

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Ann

ual p

erce

ntag

e ch

ange


Source: U.S. Bureau of Labor Statistics (BLS), U.S. Energy Information Administration (EIA), University of Michigan / Thomson Reuters - Survey of Consumers and SVB Asset Management.

Inflation Expectations ContainedWage Growth – Average Hourly Earnings NYMEX Crude Oil Generic Futures Contract

Univ. of Michigan Survey of Inflation Expectations Core PCE remains below the Fed’s target of 2 percent and is currently at 1.5 percent.

Both CPI and PPI are back down to under 2 percent on a year-over-year basis after briefly rising above that level earlier in the year.

The Fed reiterates that longer-term inflation expectations remain stable and it will continue to monitor inflation developments carefully in search of evidence that inflation will move towards its target.

15

$0.0

$50.0

$100.0

$150.0

Pric

e pe

r bar

rel

Crude Oil

1.5%

2.5%

3.5%

4.5%

5.5%

1 Year Ahead 5-10 Year Ahead

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

Ann

ual p

erce

ntag

e ch

ange


Source: U.S. Bureau of Labor Statistics (BLS), U.S. Energy Information Administration (EIA), University of Michigan / Thomson Reuters - Survey of Consumers and SVB Asset Management.

FHFA’s efforts to rejuvenate the mortgage market has had fits and starts since the beginning of its effort in 2009. Although loan demand dropped earlier in 2014 due to higher interest rates, U.S. borrowers promptly increased their demand for mortgage loans in the recent quarter due to concerns over future higher interest rates.

Similarly, business loan demand has improved from the aftermath of the financial crisis, although the stronger demand was only enjoyed by a few selected banks.

After dramatic tightening of lending standards in 2008 and 2009, banks began to slowly relax their lending standards. The main causes of the loosening of lending standards includes more aggressive competition and the need to deploy more capital.

If the trend continues to be positive, the U.S. economy may just receive the boost it needs from the lending sector for further growth.


Lending Environment More Demand, Looser Reins

-40

10

60

-50

0

50

100

Prime Mortgages Business Loans

-80

-30

20

-100

-50

0

50

100

Mortgages Business Loans

Source: Bloomberg, Federal Reserve and SVB Asset Management.

Senior Loan Officer Survey Loan Demand FHFA’s efforts to rejuvenate the mortgage market has had fits and starts since the beginning of its effort in 2009. Although loan demand dropped earlier in 2014 due to higher interest rates, U.S. borrowers promptly increased their demand for mortgage loans in the recent quarter due to concerns over future higher interest rates.

Similarly, business loan demand has improved from the aftermath of the financial crisis, although the strongerdemand was only enjoyed by a few selected banks.

After dramatic tightening of lending standards in 2008 and 2009, banks began to slowly relax their lending standards.The main causes of the loosening of lending standardsincludes more aggressive competition and the need todeploy more capital.

If the trend continues to be positive, the U.S. economy mayjust receive the boost it needs from the lending sector for further growth.

Senior Loan Officer Survey Lending Standards


Lending Environment More Demand, Looser Reins

-40-20020406080

-40-20

020406080

Prime Mortgages Business Loans

Tightening Standards

RelaxingStandards

-80

-30

20

-100

-50

0

50

100

Mortgages Business Loans

StrongerDemand

WeakerDemand

Source: Bloomberg, Federal Reserve and SVB Asset Management.


Special Topic: Fixed Income Markets

Fixed Income Markets Outstanding and New Issuance Public Sector

Private Sector Total New Issuance

The Fed’s bond programs fueled demand for public sector securities thus pushing issuance and outstandings upwards.

Outstanding ABS securities peaked right before the recession and have only stabilized in recent quarters. Subsequent to the recession, ABS have become a less important funding vehicle for banks. Banks are flush with deposits and discouraged from using ABS funding due to changes in accounting treatment from off-balance sheet to on-balance sheet.

New issuances dropped in 2008 in reaction to the crisis and have picked up since, but the trend remains choppy due to differing opinions of when Fed will raise rates and other macroeconomic factors.

18

$0.0

$10.0

$20.0

$30.0

Trill

ions

Municipal Treasury Mortgage Federal Agency

$0.0

$5.0

$10.0

$15.0

Trill

ions

Corporate Money Markets Asset-Backed

$0.0

$2.0

$4.0

$6.0

$8.0

Trill

ions

Total New Issuance


Source: Securities Industry and Financial Markets Association (SIFMA), and SVB Asset Management.

Fixed Income Market Money Market InstrumentsOutstanding

Yield Curve: Then and Now Money Market Instrument Yields

Money market instruments outstanding have declined since the recession as QE lowered borrowing costs and issuers extended maturities to lock in advantageous longer term financing.

Corporate balance sheets have mended since the end of the last recession, with many healthier than their pre-recession condition. Consequently, short-term debt and demand for short-term funding has declined.

The decline in issuance of short-term debt, combined with easy monetary policy and cash-heavy corporate balance sheets, contributed to a drop in yields in the money market space as demand continues to outpace supply.

19

$0.0

$0.5

$1.0

$1.5

$2.0

Trill

ions

CP (Non-ABCP) ABCP

0.0%

2.0%

4.0%

6.0%

Yiel

ds

270 Day A1/P1/F1 CP 270 Day A1/P1/F1 ABCP

0.0%

2.0%

4.0%

6.0%

Yiel

d

US Treasuries 04/01/14 US Treasuries 01/01/07


Source: Securities Industry and Financial Markets Association (SIFMA), Bloomberg, and SVB Asset Management.

Money Fund Assets and Average 7-Day Yields A recent inflow into money market mutual funds assets began to decline from their peak, albeit at a higher level from pre-2007 average, even as investors adapted to the new low yield environment.

A recent inflow into money market mutual funds increased demand for money market instruments while supply was dwindling, exacerbating the fall in short-term rates and leaving them at the current levels.

Nevertheless, money market mutual funds remain an attractive vehicle for cash management, despite the historically low yield environment.

Maturity profiles of money market mutual funds had been volatile as uncertainty in the short-term funding markets persists and regulatory restrictions increase.

As money market mutual funds adapt to recent regulation changes within the extended two-year implementation deadline, there will be continued pressure on money market fund assets and short-term rates.

Weighted Average Maturities (WAM) are expected to remain short to enhance resiliency to interest-rate spikes and maintain liquidity access.

Money Fund Maturity Profiles


Fixed Income Markets Money Market Mutual Funds

0.0%

2.0%

4.0%

6.0%

$0.0

$1.0

$2.0

$3.0

$4.0

Yiel

d

Trill

ions

Money Fund Assets (LHS) Average 7-Day Yields (RHS)

30

35

40

45

50

Day

s

MMF Average WAMs

Source: Crane Data LLC, and SVB Asset Management.

Markets & PerformanceSVB Asset Management

Fund Flows Uncertainty Led to Mixed Results

In the last two months, there have been net outflows in both equity and bond funds as investors sought to lock in returns from the recent market volatility.

Equity stock returns have picked up toward the end of the quarter, despite stagnant inflows to equity funds.

Expect net new flows into both equity and bond funds as the market anticipates the Federal Reserve will raise the Fed Funds rate sometime in 2015.

Money market fund inflows are trending lower due to low yields and recent announcement of new SEC regulations.

22

-$40.0

-$20.0

$0.0

$20.0

$40.0

Billi

ons

Total Equity Total Bond

-20.0%

-10.0%

0.0%

10.0%

20.0%

-40.0

-20.0

0.0

20.0

40.0

Net New Cash Flow (LHS)

$2.4

$2.5

$2.5

$2.6

$2.6

$2.7

MMF

Source: Bloomberg , Investment Company Institute, MSCI, and SVB Asset Management.


Fund Flows Uncertainty Led to Mixed Results Equity Flows & Stock Performance

Net New Fund Flows Money Market Fund Flows

In the last two months, there have been net outflows in both equity and bond funds as investors sought to lock in returns from the recent market volatility.

Equity stock returns have picked up toward the end of the quarter, despite stagnant inflows to equity funds.

Expect net new flows into both equity and bond funds as the market anticipates the Federal Reserve will raise the Fed Funds rate sometime in 2015.

Money market fund inflows are trending lower due to low yields and recent announcement of new SEC regulations.

22

-$40.0

-$20.0

$0.0

$20.0

$40.0

Bill

ions

Total Equity Total Bond

-20.0%

-10.0%

0.0%

10.0%

20.0%

-40.0

-20.0

0.0

20.0

40.0

Bill

ions

Net New Cash Flow (LHS) Total Return on Equities (RHS)

$2.4

$2.5

$2.5

$2.6

$2.6

$2.7

$Tril

lions

MMF AUM

Source: Bloomberg , Investment Company Institute, MSCI, and SVB Asset Management.


Bond Sector Spreads Reversion In The Far Future

23

Spread Performance by Asset Class New corporate debt issuances have been targeted for M&A activities, shareholder buybacks and dividend distributions.

Year to date, the surge in debt-funded M&A activity had pushed corporate debt levels higher. Increased leverage typically results in wider credit spreads.

Credit spreads have widened modestly relative to last quarter. However, spreads continue to be below historical averages due to tremendous liquidity in the market.

Source: Bloomberg, BoAML , Barcap Live, Citigroup and SVB Asset Management.


Bond Sector Spreads Reversion In The Far Future

23

Spread Performance by Asset Class

New corporate debt issuances have been targeted for M&A activities, shareholder buybacks and dividend distributions.

Year to date, the surge in debt-funded M&A activity had pushed corporate debt levels higher. Increased leverage typically results in wider credit spreads.

Credit spreads have widened modestly relative to last quarter. However, spreads continue to be below historical averages due to tremendous liquidity in the market.

Source: Bloomberg, BoAML , Barcap Live, Citigroup and SVB Asset Management.


Market Returns Income Cushion

24

-0.74 -1.22 -1.19

-1.58 -0.32

-0.98 -0.94

-1.31 -0.36

-0.95 -0.85

-1.24 -0.76

-1.61 -1.14

-1.27 -2.05

-2.56 -2.18

-1.66 -0.67

1.17 1.65

1.86 2.29

1.02 1.74

1.64 2.22

1.28 1.90

1.75 2.07

1.37 2.66

2.13 2.36

3.01 3.61

3.26 2.91

1.93

0.43 0.43

0.67 0.72 0.70 0.76

0.70 0.91 0.92 0.95

0.91 0.84

0.61 1.04

0.99 1.08

0.96 1.05 1.09

1.24 1.27

-3.00 -2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00

US Treasury US Agency Healthcare

Consumer Cyclical ABS

Technology & Electronics Consumer Non-Cyclical

Financial Services Automotive

Capital Goods Energy

Basic Industry MBS

Utility Banking

Insurance Media

Real Estate CMBS

Services Telecommunications

YTD Index Returns % (as of 9/30/14)

Total Return % YTD Income Return % YTD Price Return % YTD

Source: Bloomberg, BoAML and SVB Asset Management.


Market Returns Income Cushion

24

-0.74-1.22-1.19

-1.58-0.32

-0.98-0.94

-1.31-0.36

-0.95-0.85

-1.24-0.76

-1.61-1.14

-1.27-2.05

-2.56-2.18

-1.66-0.67

1.171.65

1.862.29

1.021.74

1.642.22

1.281.90

1.752.07

1.372.66

2.132.36

3.013.61

3.262.91

1.93

0.430.43

0.670.720.700.76

0.700.910.920.95

0.910.84

0.611.04

0.991.08

0.961.051.09

1.241.27

-3.00 -2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00

US Treasury US Agency Healthcare

Consumer Cyclical ABS

Technology & Electronics Consumer Non-Cyclical

Financial Services Automotive

Capital Goods Energy

Basic Industry MBS

UtilityBanking

InsuranceMedia

Real Estate CMBS

ServicesTelecommunications

YTD Index Returns % (as of 9/30/14)

Total Return % YTD Income Return % YTD Price Return % YTD



Sector Heat Map Index Returns


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD* Telecommunications 2.16 5.11 6.50 4.17 11.45 3.48 2.44 2.49 1.00 1.27 Services 2.58 5.16 6.08 7.66 10.82 3.82 1.81 2.23 1.46 1.24 CMBS 2.06 4.71 6.20 -0.29 16.31 5.65 3.12 3.51 0.94 1.09 Insurance 2.04 4.09 6.83 -2.55 14.29 5.22 1.99 3.06 1.45 1.08 Real Estate 1.90 5.18 5.86 -7.12 26.55 6.47 1.36 6.24 1.73 1.05 Utility 1.89 4.71 6.48 3.91 8.45 4.33 2.47 2.47 1.09 1.04 Banking 1.94 4.56 5.34 -2.66 13.62 4.81 0.66 6.38 1.82 0.99 Media 1.50 5.01 5.97 0.79 9.47 3.59 2.14 1.64 1.01 0.96 Capital Goods 1.87 4.37 6.77 3.89 9.53 3.84 2.29 1.80 1.00 0.95 Automotive 1.86 4.34 5.68 -3.76 18.44 4.17 2.12 2.95 1.25 0.92 Financial Services 1.97 4.74 5.75 -8.06 10.73 4.65 2.27 3.09 1.51 0.91 Energy 1.94 4.51 6.67 4.40 9.15 3.58 2.84 2.11 0.93 0.91 Basic Industry 1.94 4.32 6.86 0.99 9.74 3.96 2.33 2.03 1.01 0.84

Technology & Electronics 1.83 4.58 6.64 5.52 7.66 3.33 1.82 1.48 0.56 0.76

Consumer Cyclical 1.90 4.64 7.03 5.43 6.71 3.35 2.31 1.30 0.77 0.72

Consumer Non-Cyclical 1.76 4.37 6.45 3.66 8.36 3.75 2.17 1.50 0.74 0.70

ABS 2.60 4.73 4.84 -1.22 13.78 3.35 1.49 1.88 0.78 0.70 Healthcare 2.18 4.63 6.59 2.98 9.85 3.52 2.54 1.66 0.93 0.67 MBS 2.15 4.64 6.95 5.27 5.98 5.42 3.15 1.61 0.91 0.61 US Agency 1.72 4.46 7.12 7.78 2.23 2.68 1.60 0.89 0.43 0.43 US Treasury 1.67 3.96 7.32 6.61 0.78 2.35 1.55 0.43 0.36 0.43 Yearly Average 1.97 4.61 6.38 1.78 10.66 4.06 2.12 2.42 1.03 0.87

Source: Bloomberg, BoAML and SVB Asset Management. * As of 9/30/14

Sector Heat Map Index Returns


2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD* Telecommunications 2.16 5.11 6.50 4.17 11.45 3.48 2.44 2.49 1.00 1.27

Services 2.58 5.16 6.08 7.66 10.82 3.82 1.81 2.23 1.46 1.24

CMBS 2.06 4.71 6.20 -0.29 16.31 5.65 3.12 3.51 0.94 1.09

Insurance 2.04 4.09 6.83 -2.55 14.29 5.22 1.99 3.06 1.45 1.08

Real Estate 1.90 5.18 5.86 -7.12 26.55 6.47 1.36 6.24 1.73 1.05

Utility 1.89 4.71 6.48 3.91 8.45 4.33 2.47 2.47 1.09 1.04

Banking 1.94 4.56 5.34 -2.66 13.62 4.81 0.66 6.38 1.82 0.99

Media 1.50 5.01 5.97 0.79 9.47 3.59 2.14 1.64 1.01 0.96

Capital Goods 1.87 4.37 6.77 3.89 9.53 3.84 2.29 1.80 1.00 0.95

Automotive 1.86 4.34 5.68 -3.76 18.44 4.17 2.12 2.95 1.25 0.92

Financial Services 1.97 4.74 5.75 -8.06 10.73 4.65 2.27 3.09 1.51 0.91

Energy 1.94 4.51 6.67 4.40 9.15 3.58 2.84 2.11 0.93 0.91

Basic Industry 1.94 4.32 6.86 0.99 9.74 3.96 2.33 2.03 1.01 0.84

Technology & Electronics 1.83 4.58 6.64 5.52 7.66 3.33 1.82 1.48 0.56 0.76

Consumer Cyclical 1.90 4.64 7.03 5.43 6.71 3.35 2.31 1.30 0.77 0.72

Consumer Non-Cyclical 1.76 4.37 6.45 3.66 8.36 3.75 2.17 1.50 0.74 0.70

ABS 2.60 4.73 4.84 -1.22 13.78 3.35 1.49 1.88 0.78 0.70

Healthcare 2.18 4.63 6.59 2.98 9.85 3.52 2.54 1.66 0.93 0.67

MBS 2.15 4.64 6.95 5.27 5.98 5.42 3.15 1.61 0.91 0.61

US Agency 1.72 4.46 7.12 7.78 2.23 2.68 1.60 0.89 0.43 0.43

US Treasury 1.67 3.96 7.32 6.61 0.78 2.35 1.55 0.43 0.36 0.43

Yearly Average 1.97 4.61 6.38 1.78 10.66 4.06 2.12 2.42 1.03 0.87

Source: Bloomberg, BoAML and SVB Asset Management. * As of 9/30/14

Telecommunications have shown the best total return in the index 2014 YTD.

Returns mirror the credit risk undertaken in the sector as intense competition within the sector and required capital expenditures will pressure the profit margins from the current high levels.

In general, leverage metrics have increased due to industry consolidation, although levels should normalize eventually in the longer run.

European and emerging markets are expected to remain stressed as technology adaption such as smartphones and mobile data business model lags the rest of developed market.

Sector has been underperforming with continued event risk from M&A activities and industry restructuring.

This is balanced by stronger underlying fundamentals with lighter patent expiration, anticipation of pipeline successes and tapering impacts from ACA.

Pricing pressure continues from developed countries, including Europe, Japan. Favorable demographics a tailwind. Divestitures and reshaping of companies will continue.

Neutral on the sector as selected companies remain on their shareholder return maximization strategies, while others remain cash-flow rich with stable credit fundamentals.

Performance YTD Returns vs. Credit Outlook

26

-1.5%

-0.5%

0.5%

1.5%

Telecommunications Price Return YTD Income Return YTD

-2.0%

-1.0%

0.0%

1.0%

2.0%

Healthcare Price Return YTD Income Return YTD



Best Performing Sector YTD based on Total Return Weakest Performing Sector YTD based on Total Return

Telecommunications Healthcare

Telecommunications have shown the best total return in the index 2014 YTD.

Returns mirror the credit risk undertaken in the sector as intense competition within the sector and required capital expenditures will pressure the profit margins from the current high levels.

In general, leverage metrics have increased due to industry consolidation, although levels should normalize eventually in the longer run.

European and emerging markets are expected to remain stressed as technology adaption such as smartphones and mobile data business model lags the rest of developed market.

Sector has been underperforming with continued event risk from M&A activities and industry restructuring.

This is balanced by stronger underlying fundamentals with lighter patent expiration, anticipation of pipeline successes and tapering impacts from ACA.

Pricing pressure continues from developed countries, including Europe, Japan. Favorable demographics a tailwind. Divestitures and reshaping of companies will continue.

Neutral on the sector as selected companies remain on their shareholder return maximization strategies, while others remain cash-flow rich with stable credit fundamentals.


26

-1.5%

-0.5%

0.5%

1.5%

Telecommunications

Price Return YTD Income Return YTD Total Return YTD Excess Return YTD

-2.0%

-1.0%

0.0%

1.0%

2.0%

HealthcarePrice Return YTD Income Return YTD Total Return YTD Excess Return YTD




27

Top Sector Based on Credit Outlook Weakest Sector Based on Credit Outlook

Automotive European Banking

Positive outlook as global demand recovers due to aging automobiles and increased consumer awareness for better fuel economy and product offerings. Sector will benefit from both volume and margins improvements.

Balance sheets of automakers have strengthened considerably from the aftermath of the financial crisis, with certain issuers enjoying assistance from respective sovereigns, be it in the form of direct support or via economic policies.

As there are limited opportunities in the automotive sector for the IG universe, Auto ABS could be a good alternative.

European banking is likely to be the major mover in Banking.

Tethering economic conditions provides a weak background for the banks, limiting the profitability in this sector.

Balance sheets have been weakened, and further hampered by litigation expenses and increased regulatory scrutiny.

Although new regulations are expected to result in a healthier sector in the longer run, short-term expectations are muted as banks compete for capital and returns.

Opportunities remain in this sector as there are selected names with strong credit fundamentals and sufficient diversification in other geographies to mitigate general weaknesses in the region.

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

Banking Price Return YTD Income Return YTD

-1.5%

-0.5%

0.5%

1.5%

2.5%

Automotive

Hun

dred

s

Price Return YTD Income Return YTD




27

Top Sector Based on Credit Outlook Weakest Sector Based on Credit Outlook

Automotive European Banking

Positive outlook as global demand recovers due to aging automobiles and increased consumer awareness for better fuel economy and product offerings. Sector will benefit from both volume and margins improvements.

Balance sheets of automakers have strengthened considerably from the aftermath of the financial crisis, with certain issuers enjoying assistance from respective sovereigns, be it in the form of direct support or via economic policies.

As there are limited opportunities in the automotive sector for the IG universe, Auto ABS could be a good alternative.

European banking is likely to be the major mover in Banking.

Tethering economic conditions provides a weak background for the banks, limiting the profitability in this sector.

Balance sheets have been weakened, and further hampered by litigation expenses andincreased regulatory scrutiny.

Although new regulations are expected to result in a healthier sector in the longer run, short-term expectations are muted as banks compete for capital and returns.

Opportunities remain in this sector as there are selected names with strong credit fundamentals and sufficient diversification in other geographies to mitigate general weaknesses in the region.

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

Banking


-1.5%

-0.5%

0.5%

1.5%

2.5%

Automotive

Hun

dred

s




Ticker Q3 2014 2013 2012 2011 2010 2009 2008 2007 Short Benchmarks 3-month Treasury Bill G0O1 0.010 0.073 0.111 0.103 0.126 0.207 2.057 5.004 3-month Citi/Salomon CD SBMMCD3 0.203 0.204 0.307 0.289 0.310 0.822 3.442 5.448 6-month Treasury Bill G0O2 0.042 0.180 0.171 0.268 0.365 0.579 3.582 5.607 6-month Cit/Salomon CD SBMMCD6 0.069 0.272 0.488 0.389 0.437 1.611 3.756 5.459 1-yr Treasury Bill G0O3 0.085 0.277 0.204 0.496 0.792 0.813 4.746 5.948 Treasury 1-3 yr Treasury G1O2 0.033 0.358 0.434 1.554 2.348 0.785 6.609 7.317 3-5 yr Treasury G2O2 0.177 -0.913 1.577 6.229 5.695 -0.672 12.153 9.836

Corporate/Govt (A Rated and Above)

1-3 yr Corp/Govt B1A0 0.028 0.705 1.478 1.562 2.818 3.835 4.693 6.872 3-5 yr Corp/Govt B2A0 -0.192 -0.158 3.817 5.415 6.231 6.400 4.577 7.846 Agencies 1-3 yr Agencies G1P0 0.065 .0.424 0.847 1.536 2.338 2.189 7.034 6.735 3-5 yr Agencies G2P0 -0.136 -0.531 2.588 5.290 4.900 3.223 8.971 8.261 Municipals - Tax Exempt 1-3 yr Pre-refunded U1AF 0.063 0.807 0.520 1.800 0.923 3.189 5.875 4.710 3-7 yr Pre-refunded U2AF 0.583 0.952 1.539 4.951 2.087 5.345 7.992 5.390 Auto Asset Backed Securities

ABS, Autos, Fixed Rate, (1.45 yrs) R0U0 0.024 0.802 2.291 1.689 3.077 14.845 -0.682 5.723

Other Indices** Dow Jones Industrial Average INDU 0.512 23.591 7.257 5.544 11.023 3.116 -33.762 6.432 S&P 500 SPX -1.702 26.390 13.405 2.110 12.783 23.454 -38.486 3.530 NASD CCMP -0.802 34.198 15.906 -1.799 16.910 43.888 -40.541 9.812 MSCI World Index MXWO -4.307 21.478 13.184 -7.615 9.262 27.283 -42.081 7.093 CRB Index (Commodities) CRY -9.116 -5.837 -3.372 -8.264 15.430 23.563 -39.450 16.679

Benchmark Performance

Investment Performance Where’s the Horsepower?


Source: Bloomberg, BoAML, Morgan Stanley. * Past performance is not a guarantee of future results. ** Annualized returns

Ticker Q3 2014 2013 2012 2011 2010 2009 2008 2007 Short Benchmarks3-month Treasury Bill G0O1 0.010 0.073 0.111 0.103 0.126 0.207 2.057 5.0043-month Citi/Salomon CD SBMMCD3 0.203 0.204 0.307 0.289 0.310 0.822 3.442 5.4486-month Treasury Bill G0O2 0.042 0.180 0.171 0.268 0.365 0.579 3.582 5.6076-month Cit/Salomon CD SBMMCD6 0.069 0.272 0.488 0.389 0.437 1.611 3.756 5.4591-yr Treasury Bill G0O3 0.085 0.277 0.204 0.496 0.792 0.813 4.746 5.948Treasury1-3 yr Treasury G1O2 0.033 0.358 0.434 1.554 2.348 0.785 6.609 7.3173-5 yr Treasury G2O2 0.177 -0.913 1.577 6.229 5.695 -0.672 12.153 9.836Corporate/Govt (A Rated and Above)1-3 yr Corp/Govt B1A0 0.028 0.705 1.478 1.562 2.818 3.835 4.693 6.872 3-5 yr Corp/Govt B2A0 -0.192 -0.158 3.817 5.415 6.231 6.400 4.577 7.846 Agencies1-3 yr Agencies G1P0 0.065 .0.424 0.847 1.536 2.338 2.189 7.034 6.7353-5 yr Agencies G2P0 -0.136 -0.531 2.588 5.290 4.900 3.223 8.971 8.261Municipals - Tax Exempt 1-3 yr Pre-refunded U1AF 0.063 0.807 0.520 1.800 0.923 3.189 5.875 4.7103-7 yr Pre-refunded U2AF 0.583 0.952 1.539 4.951 2.087 5.345 7.992 5.390Auto Asset Backed SecuritiesABS, Autos, Fixed Rate, (1.45 yrs) R0U0 0.024 0.802 2.291 1.689 3.077 14.845 -0.682 5.723Other Indices** Dow Jones Industrial Average INDU 0.512 23.591 7.257 5.544 11.023 3.116 -33.762 6.432S&P 500 SPX -1.702 26.390 13.405 2.110 12.783 23.454 -38.486 3.530 NASD CCMP -0.802 34.198 15.906 -1.799 16.910 43.888 -40.541 9.812MSCI World Index MXWO -4.307 21.478 13.184 -7.615 9.262 27.283 -42.081 7.093CRB Index (Commodities) CRY -9.116 -5.837 -3.372 -8.264 15.430 23.563 -39.450 16.679

Benchmark Performance

Investment Performance Where’s the Horsepower?


Source: Bloomberg, BoAML, Morgan Stanley. * Past performance is not a guarantee of future results. ** Annualized returns


Global Economy

Central Banks Disinflation


United States United Kingdom Eurozone China Japan

Central Bank

Benchmark Rate (as of 9/30/14) 0-0.25% 0.5% 0.05% 6.0% 0.1%

Current Policy

Easing Complete asset purchase

program by end of October. Sustain balance sheet size until after rate hikes begin.

Neutral Seven of nine members voted to hold rate steady. Maintain

purchased assets.

Easing Negative deposit rate. Begin

purchases of covered bonds & non financial private sector

loans via ABS.

Easing Targeted reserve requirement

ratio cuts; RMB500 billion September cash injection via

banks. Repo rate cut. Below benchmark

supplemental lending rates.

Easing Expand monetary base

to JPY270 trillion by end of 2014 via asset purchases;

expansion commitment until inflation steadies at 2 percent.

Inflation

Unemployment 6.1% 6.2% 11.5% 4.1% 3.8%

Analysis Moderate inflation will keep

Fed from raising rates until Q2 2015.

Gradual interest rate hikes to begin December 2014-January

2015.

Frail demand causing disinflation; asset purchases to

increase.

Downside risk to 7.5% GDP target will impel rate cuts.

Asset purchases to continue into 2015; reaching inflation target may take at least 18

months.

1.6%

0.0% 1.0% 2.0%

1.5%

0.0% 1.0% 2.0%

0.3%

0.0% 1.0% 2.0%

2.0%

0.0% 2.0%

1.25%

0.00% 1.00% 2.00%

Sources: Federal Reserve, European Central Bank, Bank of England, People’s Bank of China, Bank of Japan, Bloomberg and SVB Asset Management.


Benchmark Rate(as of 9/30/14) 0-0.25% 0.5% 0.05% 6.0% 0.1%

Current Policy

EasingComplete asset purchase

program by end of October. Sustain balance sheet size until after rate

hikes begin.

NeutralSeven of nine members

voted to hold rate steady. Maintain purchased

assets.

EasingNegative deposit rate.

Begin purchases of covered bonds & non financial private sector

loans via ABS.

EasingTargeted reserve

requirement ratio cuts; RMB500 billion

September cash injection via banks. Repo rate cut.

Below benchmark supplemental lending

rates.

EasingExpand monetary baseto JPY270 trillion by end

of 2014 via asset purchases; expansion

commitment until inflation steadies at 2 percent.

Inflation

Unemployment 6.1% 6.2% 11.5% 4.1% 3.8%

AnalysisModerate inflation will keep Fed from raising rates until Q2 2015.

Gradual interest rate hikes to begin December 2014-

January 2015.

Frail demand causing disinflation; asset

purchases to increase.

Downside risk to 7.5% GDP target will impel rate

cuts.

Asset purchases to continue into 2015;

reaching inflation target may take at least 18

months.

1.6%

0.0% 1.0% 2.0%

1.5%

0.0% 1.0% 2.0%

0.3%

0.0% 1.0% 2.0%

2.0%

0.0% 1.0% 2.0% 3.0%

1.25%

0.00% 1.00% 2.00%

Sources: Federal Reserve, European Central Bank, Bank of England, People’s Bank of China, Bank of Japan, Bloomberg and SVB Asset Management.

Europe Scope To Ease

The European Central Bank (ECB) cut policy interest rates at its September meeting and announced an expansion of its balance sheet through purchases of covered bonds and non financial private sector loans in the form of asset-backed securities.

The ECB’s September actions helped lessen a stubbornly strong euro that has contributed to sub-2 percent inflation.

A weaker euro and easing financial conditions will nurture fragile growth. Exports may help keep industrial production growth positive, though frail imports and a strong current account surplus are still lifting the euro.


1.20

1.30

1.40

1.50

1.60

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

Source: Eurostat, Bloomberg and SVB Asset Management.

Europe Scope To Ease Euro

Inflation Euro Zone Trade Balance

The European Central Bank (ECB) cut policy interest rates at its September meeting and announced an expansion of its balance sheet through purchases of covered bonds and non financial private sector loans in the form of asset-backed securities.

The ECB’s September actions helped lessen a stubbornly strong euro that has contributed to sub-2 percent inflation.

A weaker euro and easing financial conditions will nurture fragile growth. Exports may help keep industrial production growth positive, though frail imports and a strong current account surplus are still lifting the euro.


€ 1.20

€ 1.30

€ 1.40

€ 1.50

€ 1.60

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%

Cha

nge

Year

ove

r Yea

r

-10.00 €

-5.00 €

0.00 €

5.00 €

10.00 €

15.00 €

20.00 €

Bill

ions

Source: Eurostat, Bloomberg and SVB Asset Management.

United Kingdom Positive Momentum Intact

The conclusion of the Scotland referendum refocuses attention on strengthening economic conditions in the UK, underpinned by constructive labor, housing and pricing conditions.

Inflation has remained below the Bank of England’s 2 percent target, helped most recently by a strong pound sterling. The pound’s strength will endure after Scotland’s avowal to the UK.

Home prices have risen for 18 consecutive months, with double digit increases over the past five months, abetted by a brisk labor market.


Cla

iman

t Cou

nt

-20.0% -15.0% -10.0% -5.0% 0.0% 5.0%

10.0% 15.0%

Cha

nge

Year

ove

r Yea

r

0.0%

1.0%

2.0%

3.0%

4.0%

Cha

nge

Year

ove

r Yea

r

Source: UK Office for National Statistics, Bloomberg and SVB Asset Management.

United Kingdom Positive Momentum Intact Unemployment Claims

Nationwide Housing Prices Core Consumer Price Index

The conclusion of the Scotland referendum refocuses attention on strengthening economic conditions in the UK, underpinned by constructive labor, housing and pricing conditions.

Inflation has remained below the Bank of England’s 2 percent target, helped most recently by a strong pound sterling. The pound’s strength will endure after Scotland’s avowal to the UK.

Home prices have risen for 18 consecutive months, with double digit increases over the past five months, abetted by a brisk labor market.


Cla

iman

t Cou

nt

-20.0%-15.0%-10.0%-5.0%0.0%5.0%

10.0%15.0%

Cha

nge

Year

ove

r Yea

r

0.0%

1.0%

2.0%

3.0%

4.0%

Cha

nge

Year

ove

r Yea

r

Source: UK Office for National Statistics, Bloomberg and SVB Asset Management.

China Gliding Lower Monthly New Loans

Average Price Change – Newly Built Residential Buildings (70 Cities) Consumer Price Index

September comments by Chinese Premier Li and Finance Minister Lou suggest reservations in attaining 2014’s 7.5 percent GDP growth target and preparing for a lower growth target in 2015.

The People’s Bank of China injected RMB500 billion (USD$81 billion) through the five largest banks in the nation to help spur lending.

Interest rate cuts are forthcoming, as the housing market cools and inflation remains below a 3.5 percent target.


-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

Cha

nge

Year

ove

r Yea

r

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Cha

nge

Year

ove

r Yea

r

¥0.0

¥500.0

¥1,000.0

¥1,500.0

Bill

ions

Source: National Bureau of Statistics of China, Bloomberg and SVB Asset Management.

China Gliding Lower Monthly New Loans

Average Price Change – Newly Built Residential Buildings (70 Cities) Consumer Price Index

September comments by Chinese Premier Li and Finance Minister Lou suggest reservations in attaining 2014’s 7.5 percent GDP growth target and preparing for a lower growth target in 2015.

The People’s Bank of China injected RMB500 billion (USD$81 billion) through the five largest banks in the nation to help spur lending.

Interest rate cuts are forthcoming, as the housing market cools and inflation remains below a 3.5 percent target.


-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

11.0%

Cha

nge

Year

ove

r Yea

r

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

Cha

nge

Year

ove

r Yea

r

¥0.0

¥500.0

¥1,000.0

¥1,500.0

Bill

ions

Source: National Bureau of Statistics of China, Bloomberg and SVB Asset Management.

Japan Resuming Marginal Growth Real GDP Retail Trade

Jobs to Applicants Second quarter GDP fell as the government hiked the sales tax from 5 percent to 8 percent in April. Consumers spent heavily leading up to the tax implementation, creating a large swing in activity from the first quarter. Retail sales will normalize over the rest of 2014.

The Bank of Japan (BOJ) sees the economic recovery trend intact despite the second quarter slowdown, with expectations for private consumption to remain positive.

A moderate labor market will be supportive for growth to resume over the next year. While a sales tax increase to 10 percent is scheduled for October 2015, planned economic policy changes championed by Prime Minister Shinzo Abe and fiscal policy proposals, including corporate tax-rate cut, should prevent a protracted economic decline.


-4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0%

Qua

rter

ove

r Qua

rter

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

Cha

nge

Mon

th o

ver

Mon

th

0.4

0.6

0.8

1

1.2

1.4

>1 =

Fav

orab

le

Con

ditio

ns

Source: Bank of Japan, India Central Statistical Organisation, Bloomberg and SVB Asset Management.

Japan Resuming Marginal Growth Real GDP Retail Trade

Jobs to Applicants Second quarter GDP fell as the government hiked the sales tax from 5 percent to 8 percent in April. Consumers spent heavily leading up to the tax implementation, creating a large swing in activity from the first quarter. Retail sales will normalize over the rest of 2014.

The Bank of Japan (BOJ) sees the economic recovery trend intact despite the second quarter slowdown, with expectations for private consumption to remain positive.

A moderate labor market will be supportive for growth to resume over the next year. While a sales tax increase to 10 percent is scheduled for October2015, planned economic policy changes championed by Prime Minister Shinzo Abe and fiscal policy proposals, including corporate tax-rate cut, should prevent a protracted economic decline.


-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%3.0%

Qua

rter

ove

r Qua

rter

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

Cha

nge

Mon

th o

ver M

onth

0.4

0.6

0.8

1

1.2

1.4

>1 =

Fav

orab

le C

ondi

tions

Source: Bank of Japan, India Central Statistical Organisation, Bloomberg and SVB Asset Management.

Portfolio Management StrategySVB Asset Management

Portfolio Strategy Tying It All Back

Short duration benchmark

(3 & 6 month)

Intermediate duration benchmark (1 Yr)

Long duration benchmark

(2 Yr+)

Duration Targets

Longer than benchmark

Neutral to benchmark

Shorter than benchmark

Sector Overweights Financials, Commercial Paper, MMFs

Financials, Industrials, Commercial Paper, ABS

Short Maturity Financials, Long Maturity Industrials,

ABS

Sector Underweights Treasuries, Agencies, Industrials Treasuries & Agencies Treasuries


2014 Portfolio Strategy Outlook

We anticipate that FOMC will continue the tapering of Treasury and mortgage-backed security purchases, bringing an end to the large scale asset purchases (LSAP) by the end of the year.

As we head into year-end, market views will shift focus from tapering to predicting the timing of the first federal funds rate hike.

Strong credit fundamentals continue to benefit the corporate bond market with potential softening as companies continue to re-lever.

There is strong institutional demand for corporate bonds even in a rising interest rate environment.

Source: SVB Asset Management.

Portfolio Strategy Tying It All Back

Short duration benchmark

(3 & 6 month)

Intermediate duration benchmark (1 Yr)

Long duration benchmark

(2 Yr+)

Duration Targets Longer than benchmark Neutral to benchmark Shorter than benchmark

Sector Overweights Financials, Commercial Paper, MMFs

Financials, Industrials, Commercial Paper, ABS

Short Maturity Financials, Long Maturity Industrials,

ABS

Sector Underweights Treasuries, Agencies, Industrials Treasuries & Agencies Treasuries


2014 Portfolio Strategy Outlook

We anticipate that FOMC will continue the tapering of Treasury and mortgage-backed security purchases, bringing an end to the large scale asset purchases (LSAP) by the end of the year.

As we head into year-end, market views will shift focus from tapering to predicting the timing of the first federal funds rate hike.

Strong credit fundamentals continue to benefit the corporate bond market with potential softening as companies continue to re-lever.

There is strong institutional demand for corporate bonds even in a rising interest rate environment.

Source: SVB Asset Management.

Treasuries & Agencies Corporate Bonds: Finance Sector Corporate Bonds Industrial Sector ABS

We anticipate a gradual rise of rates into year-end.

Bullet Agency spreads widened a few basis points and are trading approximately 5 basis points over comparable Treasuries.

Callable Agencies started to look attractive in the 3rd quarter. We prefer 2-year callable Agencies that are trading at a slight discount dollar price. The current spread is approximately 5 basis points over bullet Agencies which is a pick up of 10 basis points over comparable Treasuries.

End of 3rd quarter 2014 Approximate Yields: 2 Yr Treasury: ~0.60% 2 Yr Bullet Agency: ~0.65% 2 Yr Callable Agency: ~.70%

Finance Sector including banks and brokers currently offer the best value as both regulators and the industry are incentivized to build capital. Additionally, earnings continue to be strong.

Active new issue market and very strong and liquid secondary market. For the first half of 2014, Finance new issues are approximately 40 percent of new issuances.

In the short end, Financial companies account for approximately 35 percent of issues outstanding.

End of 3rd quarter 2014 spreads/yields: 2 Yr A/A2 Finance: ~+35 / ~0.90 % 2 Yr A-/A3 Finance: ~+55 / ~1.05 %

Industrials continue to have strong balance sheets and positive earnings.

Due to lack of supply in the short end and strong balance sheets, spreads over Treasuries are currently tight.

We favor longer industrials for price performance stability.

End of 3rd quarter 2014 spreads/yields: 2 Yr A/A2 Industrials: ~+15 / ~0.75 % 2 Yr A-/A3 Industrials: ~+30 / ~0.85 %

Strong fundamentals for the Auto and Credit Card ABS sectors.

Very stable spreads.

Active new issuances and secondary markets.

We favor Prime Auto ABS with duration of two years and under and Credit Card ABS with duration between half a year to one year. We like the soft-bullet maturity structure of Credit Card ABS as it offers the ability to receive principal back similar to a corporate bond.

End of 3rd quarter 2014 spreads/yields: 2 Yr Auto & Credit Card ABS Spread: Swaps ~+15 to 20 / ~.95 to 1%


Portfolio Strategy Sector Overview

Source: SVB Asset Management and Bloomberg. Past performance is not a guarantee of future results. The above is not to be construed as a recommendation for your particular portfolio.

Treasuries & Agencies Corporate Bonds: Finance Sector Corporate Bonds Industrial Sector ABS

We anticipate a gradual rise of rates into year-end.

Bullet Agency spreads widened a few basis points and are trading approximately 5 basis points over comparable Treasuries.

Callable Agencies started to look attractive in the 3rd quarter. We prefer 2-year callable Agencies that are trading at a slight discount dollar price. The current spread is approximately 5 basis points over bullet Agencies which is a pick up of 10 basis points over comparable Treasuries.

End of 3rd quarter 2014 Approximate Yields:

2 Yr Treasury: ~0.60%2 Yr Bullet Agency: ~0.65%2 Yr Callable Agency: ~.70%

Finance Sector including banks and brokers currently offer the best value as both regulators and the industry are incentivized to build capital. Additionally, earnings continue to be strong.

Active new issue market and very strong and liquid secondary market. For the first half of 2014, Finance new issues are approximately 40 percent of new issuances.

In the short end, Financial companiesaccount for approximately 35 percent of issues outstanding.

End of 3rd quarter 2014 spreads/yields:

2 Yr A/A2 Finance: ~+35 / ~0.90 %

2 Yr A-/A3 Finance: ~+55 / ~1.05 %

Industrials continue to have strong balance sheets and positive earnings.

Due to lack of supply in the short end and strong balance sheets, spreads over Treasuries are currently tight.

We favor longer industrials for price performance stability.


2 Yr A/A2 Industrials: ~+15 / ~0.75 %

2 Yr A-/A3 Industrials: ~+30 / ~0.85 %

Strong fundamentals for the Auto and Credit Card ABS sectors.

Very stable spreads.

Active new issuances and secondary markets.

We favor Prime Auto ABS with duration of two years and under and Credit Card ABS with duration between half a year to one year. We like the soft-bullet maturity structure of Credit Card ABS as it offers the ability to receive principal back similar to a corporate bond.


2 Yr Auto & Credit Card ABS Spread: Swaps ~+15 to 20 / ~.95 to 1%


Portfolio Strategy Sector Overview

Source: SVB Asset Management and Bloomberg. Past performance is not a guarantee of future results. The above is not to be construed as a recommendation for your particular portfolio.

Portfolio Strategy Security Selection


0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

- 0.5 1.0 1.5 2.0 2.5 3.0 Years

A-/A3 or better Corporate Bonds

Bonds Treasury

18 Month A-/A3 Financial

2 Year Aa2 Industrial

There are pockets of opportunity within the IG universe with minimal credit risk — for example, an 18-month A3 Financial that is priced above similar risk bonds. In contrast, investors are expected to pay more or enjoy less yield from a 2-year Aa2 industrial-rated bond that is priced closer to Treasuries given its mid-AA rating. Investors would need to balance sector diversification against other factors such as duration risk, supply metrics and volatility in order to make the right security selection.

Source: Bloomberg and SVB Asset Management.

Portfolio Strategy Security Selection


0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

- 0.5 1.0 1.5 2.0 2.5 3.0 Years

A-/A3 or better Corporate Bonds

Bonds Treasury

18 Month A-/A3 Financial

2 Year Aa2 Industrial

There are pockets of opportunity within the IG universe with minimal credit risk — for example, an 18-month A3 Financial that is priced above similar risk bonds.In contrast, investors are expected to pay more or enjoy less yield from a 2-year Aa2 industrial-rated bond that is priced closer to Treasuries given its mid-AA rating. Investors would need to balance sector diversification against other factors such as duration risk, supply metrics and volatility in order to make the right security selection.

Source: Bloomberg and SVB Asset Management.

Our Team

39

Head of Credit Research

Melina Hadiwono, CFA [email protected]

Portfolio Managers

Eric Souza [email protected] Paula Solanes [email protected] Renuka Kumar, CFA [email protected] Jose Sevilla [email protected]

Credit and Risk

Sook Kuan Loh, CFA [email protected] Tim Lee, CFA [email protected] Kyle Balough [email protected]

Silicon Valley Bank Partners

Maria Menard Priyanka Raju Girish Mallya

Head of Investment Strategy and Portfolio Management

Ninh Chung [email protected]


President, SVB Asset Management

Lauri Moss [email protected]

Our Team


Portfolio Managers

Eric Souza [email protected]

Paula Solanes [email protected]

Renuka Kumar, CFA [email protected]

Jose Sevilla [email protected]

President, SVB Asset Management

Lauri Moss [email protected]

Head of Investment Strategy and Portfolio Management

Ninh Chung [email protected]

Head of Credit Research

Melina Hadiwono, CFA [email protected]

Credit and Risk

Sook Kuan Loh, CFA [email protected]

Tim Lee, CFA [email protected]

Kyle Balough [email protected]

Silicon Valley Bank Partners

Maria Menard Priyanka Raju Girish Mallya

This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.

All material presented, unless specifically indicated otherwise, is under copyright to SVB Asset Management and its affiliates and is for informational purposes only. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of SVB Asset Management. All trademarks, service marks and logos used in this material are trademarks or service marks or registered trademarks of SVB Financial Group or one of its affiliates or other entities.

©2014 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group, and Silicon Valley Bank are registered trademarks. SVB Asset Management, a registered investment advisor, is a non-bank affiliate of Silicon Valley Bank and member of SVB Financial Group. Products offered by SVB Asset Management are not FDIC insured, are not deposits or other obligations of Silicon Valley Bank, and may lose value. B_SAM-14-13676 Rev. 10-14-2014.


This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that webelieve to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax,investment, legal or other advice nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision.Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.

All material presented, unless specifically indicated otherwise, is under copyright to SVB Asset Management and its affiliates and is for informational purposes only. None of the material, nor itscontent, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of SVB Asset Management. All trademarks,service marks and logos used in this material are trademarks or service marks or registered trademarks of SVB Financial Group or one of its affiliates or other entities.

©2014 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group, and Silicon Valley Bank areregistered trademarks. SVB Asset Management, a registered investment advisor, is a non-bank affiliate of Silicon Valley Bank and member of SVB Financial Group. Products offered by SVB AssetManagement are not FDIC insured, are not deposits or other obligations of Silicon Valley Bank, and may lose value. B_SAM-14-13676 Rev. 10-15-2014.



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Economy & Finance

SVB Asset Management Economic Report Q3 2014