Scaling thematic equity Scaling Thematic Equity Into a Multi-Asset Portfolio - PowerPoint Presentation

1. Scaling thematic equityScaling Thematic Equity Into a Multi-Asset Portfolio2023

2. Merrill DisclosureInvesting involves risk including possible loss of principal. Information is current as of the date of this material. Any opinions expressed herein are from a third party and are given in good faith, are subject to change without notice, and are considered correct as of the stated date of their issue. Merrill Lynch, Pierce, Fenner & Smith Incorporated is not a tax or legal advisor. Clients should consult a personal tax or legal advisor prior to making any tax or legal related investment decisions. Bank of America Corporation (“Bank of America”) is a financial holding company that, through its subsidiaries and affiliated companies, provides banking and investment products and other financial services . Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp.”). MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC and a wholly owned subsidiary of BofA Corp. Merrill Lynch Life Agency Inc. (“MLLA”) is a licensed insurance agency and a wholly owned subsidiary of BofA Corp. This material does not take into account a client’s particular investment objectives, financial situations, or needs and is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. There are important differences between brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties. It is important to understand the differences, particularly when determining which service or services to select. Nothing discussed or suggested in these materials should be construed as permission to supersede or circumvent any Bank of America, Merrill Lynch, Pierce, Fenner & Smith Incorporated policies, procedures, rules, and guidelines. Investment products offered through MLPF&S and insurance and annuity products offered through Merrill Lynch Life Agency Inc.: Are Note FDIC InsuredMay Lose ValueAre Not Bank GuaranteedAre Not Insured by Any Federal Government AgencyAre Not DepositsAre Not a Condition to Any Banking Service or ActivityMerrill Disclosure

3. Benefits of thematic equity Key LearningsShow the impact that scaling thematic equity in increasing intervals can have on a broader multi asset allocation portfolio.PurposeWe back tested three years of monthly data scaling thematic equity into the asset allocation portfolios at rising 10% increments of starting equity value. Scaling thematic equity at certain levels across risk profiles can provide diversification benefits without adding undue risk.ApproachFindingsBroad asset allocation models reflect the Blackrock ETF Allocation Models as of 11/15/2022. (Slide 7)Global X Equity Thematic Disruptors ETF Model Portfolio as of 12/2/2022. (Slide 3) DataThis slide deck outlines a key analysis Global X has conducted into scaling thematic equity into multi asset portfolios. The analysis and findings are also outlined in our blog, Conversational Alpha®: Scaling Equity into a Multi-Asset Portfolio.

4. Content Table of ContentsBenefits of Thematic EquityHow to scale in Thematic EquityAnalysis of results

5. Benefits of thematic equity Equity Thematic Disruptors ETF Model Portfolio Data as of 12/2/2022CNRGSPDR Kensho Clean Power ETF15.0%BUGGlobal X Cybersecurity ETF15.0%DRIVGlobal X Autonomous and EV ETF13.1%CLOUGlobal X Cloud Computing ETF11.4%SNSRGlobal X Internet of Things ETF9.7%MILNGlobal X Millennial Consumer ETF9.5%FINXGlobal X FinTech ETF8.9%PBEInvesco Dynamic Biotech & Genome ETF7.5%BOTZGlobal X Robotics & Artificial Intelligence ETF6.3%HEROGlobal X Video Games & Esports ETF3.6%Thematic Equity and the Equity Thematic Disruptors ModelThematic InvestingIdentifies macro-level trends and the investments that benefit from those trends. Provides exposure to structural themes that may be disrupting the broad market and is long term by nature.Can have low overlap and correlations with other growth-oriented strategies.

6. Benefits of thematic equity Scaling Benefit Based On Investor Risk ProfileLow RiskHigh RiskConservativePrimary goal is to preserve capital.AggressivePrimary goal is maximizing returns. Focus on diversification benefits of thematic equity.Thematic equity a small portion of overall equity. More mindful of the increased small and mid cap exposure. Focus on the high growth potential of thematic equity.Thematic equity a larger portion of overall equity. Higher levels of small and mid cap exposure more appropriate. ModeratePrimary goal is balance between reducing risks and maximizing returns.

7. Content Table of ContentsBenefits of Thematic EquityHow to scale in Thematic EquityAnalysis of results

8. Scaling thematic equity Portfolio Used For Asset AllocationAsset ClassTickerNameConservativeModerateAggressiveUS EquityIVViShares Core S&P 500 ETF9.13%23.49%30.15%US EquityESGUiShares ESG Aware MSCI USA ETF4.79%13.67%19.23%US EquityUSMViShares MSCI USA Min Vol Factor ETF0.00%2.01%2.54%US EquityHDViShares Core High Dividend ETF0.00%2.00%2.52%US EquityIJRiShares Core S&P Small Cap ETF0.00%1.95%2.46%US EquityIYEiShares US Energy ETF0.00%0.00%1.13%US EquityIFRAiShares US Infrastructure ETF0.00%1.01%1.02%International EquityEFViShares MSCI EAFE Value ETF1.93%5.40%7.43%International EquityEFGiShares MSCI EAFE Growth ETF1.85%5.18%7.13%International EquityEEMViShares MSCI Emerging Markets Min Vol Factor ETF1.48%4.02%5.58%Fixed IncomeGOVTiShares US Treasury Bond ETF25.46%12.45%6.29%IUSBiShares Core Total USD Bond Market ETF26.82%17.01%5.21%TIPiShares TIPS Bond ETF6.37%3.00%3.03%TLHiShares 10-20 Year Treasury Bond ETF0.96%1.96%1.98%ICVTiShares Convertible Bond ETF1.03%1.05%1.06%FALNiShares Fallen Angels USD Bond ETF2.54%2.59%0.00%MBBiShares MBS ETF7.51%0.00%0.00%LQDiShares iBoxx Investment Grade Corp Bond ETF3.42%0.00%0.00%SHYGiShares 0-5 Year High Yield Corp Bond ETF2.06%0.00%0.00%EMBiShares JP Morgan USD EM Markerts Bond ETF1.50%0.00%0.00%Cash &AlternativesCASHUSD Cash2.16%2.20%2.22%AlternativesCOMTiShares GSCI Cmd Dyn Roll Strategy ETF0.99%1.01%1.02%Conservative is based on the Blackrock 20% Equity, 80% Fixed Income Target Allocation ETF ModelModerate is based on the Blackrock 60% Equity, 40% Fixed Income Target Allocation ETF ModelAggressive is based on the Blackrock 80% Equity, 20% Fixed Income Target Allocation ETF ModelAs of 11/15/2022

9. Scaling thematic equity Scaling Impact on Broader Allocation Example – ConservativeThematic Equity as % of Starting Equity without an Equity Adjustment to maintain Asset Allocation0%10%20%30%40%50%60%70%80%90%100%Thematic Equity0.0%1.9%3.8%5.8%7.7%9.6%11.5%13.4%15.3%17.3%19.2%Remaining Equity19.2%18.8%18.4%18.1%17.7%17.3%17.0%16.6%16.2%15.9%15.5%Total Equity19.2%20.7%22.3%23.8%25.4%26.9%28.5%30.0%31.6%33.1%34.7%Fixed Income 77.7%76.2%74.7%73.2%71.7%70.2%68.7%67.2%65.8%64.3%62.8%Cash & Commodities3.2%3.1%3.0%3.0%2.9%2.9%2.8%2.7%2.7%2.6%2.6%Thematic Equity as % of Starting Equity with Equity Adjustment to maintain Asset Allocation0%10%20%30%40%50%60%70%80%90%100%Thematic Equity0.0%1.9%3.8%5.8%7.7%9.6%11.5%13.4%15.3%17.3%19.2%Remaining Equity19.2%17.3%15.3%13.4%11.5%9.6%7.7%5.8%3.8%1.9%0.0%Total Equity19.2%19.2%19.2%19.2%19.2%19.2%19.2%19.2%19.2%19.2%19.2%Fixed Income 77.7%77.7%77.7%77.7%77.7%77.7%77.7%77.7%77.7%77.7%77.7%Cash & Commodities3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.2%3.2%Relevant when combining two portfoliosRelevant when combining multiple sleeve focused portfolios

10. Content Table of ContentsBenefits of Thematic EquityHow to scale in Thematic EquityAnalysis of results

11. Analysis of results Scaling Impact on Standard Deviation & Tracking ErrorScaling of thematic as % of starting equity0%10%20%30%40%50%60%70%80%90%100%% of Total Portfolio0.0%1.9%3.8%5.8%7.7%9.6%11.5%13.4%15.3%17.3%19.2%Scaling of thematic as % of starting equity0%10%20%30%40%50%60%70%80%90%100%% of Total Portfolio0.0%7.9%15.8%23.8%31.7%39.6%47.5%55.4%63.4%71.3%79.2%Appropriate level of thematic equityAppropriate level of thematic equity

12. Chapter Title Nature of Thematic EquityAll CapThematic equity is all cap growth focused and provides exposure to themes in different phases of adoption. DiverseThematic equity is unconstrained by arbitrary sector definitions and provides exposure to a diverse range of themes.GlobalThematic equity provides global exposures to regions at the forefront of innovation in key areas.

13. Analysis of results Scaling Impact on Size ExposuresConservative – With Equity AdjustmentScale of Thematic*0%10%20%30%40%50%60%70%80%90%100%Large83.679.274.770.265.761.256.852.347.843.338.8Mid16.317.619.020.421.723.124.525.927.228.630.0Small0.13.26.49.512.615.618.821.925.028.231.3Conservative - No Equity AdjustmentScale of Thematic*0%10%20%30%40%50%60%70%80%90%100%Large83.679.475.972.870.167.665.563.561.860.258.8Mid16.317.518.619.620.421.221.822.422.923.423.9Small0.13.05.57.69.511.212.714.115.216.317.3Aggressive - With Equity AdjustmentScale of Thematic*0%10%20%30%40%50%60%70%80%90%100%Large79.975.871.667.563.459.355.251.046.942.838.8Mid16.217.619.020.321.723.124.525.827.228.630.0Small4.06.79.512.214.917.620.423.125.828.531.3Aggressive - No Equity AdjustmentScale of Thematic*0%10%20%30%40%50%60%70%80%90%100%Large79.975.871.968.364.661.257.954.751.748.745.8Mid16.217.518.820.121.322.423.624.625.726.727.6Small4.06.79.211.714.116.318.620.722.824.726.6With Equity Adjustment:Maintains the initial Asset Allocation.Thematic Equity becomes the entire equity exposure.Has a larger impact on the size distribution.No Equity Adjustment: Inclusion of Thematic Equity increases the level of equity in the portfolio. Has less impact on the underlying equity composition.*Scale of thematic equity as a % of starting equitySize data as of 11/28/2022

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