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Have you reviewed your core portfolio allocations recently?

Our solutions take an innovative and smart approach to traditional core investments for fixed-income and global asset allocations. They’re designed to help you build a smarter core in a transparent, tax-efficient, and cost-efficient way.

Considering Factors for Your Core Fixed Income Allocations
1

Performance

Have your investments outperformed or provided alpha?

 

According to Morningstar, trailing three-year annualized performance shows that 63% of intermediate-term investment grade actively managed mutual funds underperformed the Bloomberg Barclays Aggregate Bond Index.1

AGGE and AGGP seek to enhance returns with comparable levels of risk to the fixed income market by employing a momentum investment approach. Momentum investing seeks to capitalize on the persistence of ongoing trends in the market by dynamically allocating assets across U.S. fixed income sectors, overweighting the best performing sectors and underweighting the worst performing sectors.

Utilizing a momentum strategy provides the opportunity to potentially enhance returns to your core fixed income allocation. As seen below, even within investment grade fixed income, there persists a high variability of returns among sectors. Implementing a strategy with short-term (45 day) and long-term (90 day) momentum signals enables the strategies to dynamically allocate across all sectors. There is no assurance that the investment objectives will be met. The Funds volatility may materially exceed the volatility of the investment grade U.S. fixed-income securities market over the short and long term.

 

Sources: Morningstar as of 12/31/16. As industry standard to illustrate a meaningful time period a 10-year track record was utilized. You can not invest directly in an index. See appendix for index definitions. The above chart illustrates annual index returns ranked from highest to lowest.

SEE AGGE/AGGP PERFORMANCE  CLOSE
2

Diversification

Are your allocations truly diverse?

 

Consider different investment styles within fixed income to achieve a higher level of diversification.

Diversification comes in many forms, including holding different investment styles within the same asset class. The unique momentum investment approach that AGGE and AGGP employ may provide an element of diversification for your core bond allocations.

AGGE and AGGP serve as core portfolio solutions, providing exposure across a broad range of fixed income sectors for a clean, simple, and transparent portfolio.

 
SEE AGGE/AGGP DIVERSIFICATION  SEE AGGE/AGGP Diversification
3

Transparency

Do you know what you own?

 

Top active managers’ fund holdings can be complex derivatives, while some don’t even hold bonds as a majority of their top holdings.

Investors have access to daily ETF holdings on IQetfs.com, offering a level of daily transparency that many active fund managers may not provide.

 

Source: IndexIQ, as of 12/31/16. Holdings are subject to change

SEE AGGE/AGGP TRANSPARENCY  SEE AGGE/AGGP TRANSPARENCY
4

Cost Efficiency

Are your fund fees below or above average?

Average Expense Ratio:
Morningstar Intermediate-Term
Bond Category
0.83%2

Fees are a growing concern, especially with new fiduciary standards—most funds are not delivering alpha after fees.

AGGE and AGGP offer competitive expense ratios vs. active managers, who may be not be providing the expected alpha.

 

Source: Morningstar, as of 12/31/16. Average net expense ratio for the Morningstar Intermediate-Term Bond Category includes all share classes, based on the most recent prospectus date.

Average net expense ratio for the Morningstar Intermediate-Term Bond Category Class A is 0.86% and Class I is 0.56%.

*AGGE– Management fee: 0.25%; Management fee waiver: 0.05%; Other Expenses: 0.14%. AGGP– Management fee: 0.25%; Management fee waiver: 0.05%; Other Expenses: 0.15%. As stated in the Funds’ prospectuses, the Management Fee of 0.25% is expressed as a unitary fee to cover expenses incurred in connection with managing the portfolios. IndexIQ Advisors LLC has contractually agreed, until August 28, 2017, to waive a portion of its advisory fee, equal to 0.05% of average daily net assets.

SEE AGGE/AGGP COST EFFICIENCY  SEE AGGE/AGGP COST EFFICIENCY
5

Tax Efficiency

Do you own tax-efficient solutions?

2016 Capital Gains:
Morningstar Intermediate-Term
Bond Category
144/285
Number of funds distributing
capital gains
$0.09/share3
Average 2016 capital gain

Some active funds have embedded capital gains, which can result in tax consequences. Funds in the Morningstar Intermediate-Term Bond Category may distribute capital gains, with the average fund distributing a capital gain of $0.09 per share in 2016.

An ETF structure offers a tax-efficient solution for a portfolio by reducing or eliminating short-term capital gains on portfolio turnover, thus providing significant tax alpha.

 

Source: Morningstar, as of 12/31/16. Periods longer than one year are annualized. Past performance is no guarantee of future results. Neither New York Life Investment Management LLC, nor its affiliates or representatives provide tax, legal, or accounting advice. Please contact your own professionals.

SEE AGGE/AGGP TAX EFFICIENCY  SEE AGGE/AGGP TAX EFFICIENCY

AGGE's Latest Performance

AGGP's Latest Performance

1. Morningstar, as of 12/31/16. Three-year period represents annualized return. Past performance is no guarantee of future results.
2. Source: Morningstar, as of 12/31/16. Average net expense ratio for the Morningstar Intermediate-Term Bond Category includes all share classes, based on the most recent prospectus date. Average net expense ratio for the Morningstar Intermediate-Term Bond Category Class A is 0.86% and Class I is 0.56%.
3. Morningstar, as of 12/31/16.

Asset allocation and diversification cannot assure a profit or protect against loss in a declining market.

Active management (also called active investing) refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index. Active management typically charges higher fees.

Alpha is a measure of performance on a risk-adjusted basis.

The Morningstar Intermediate-Term Bond Category includes portfolios that invest primarily in corporate and other investment-grade U.S. fixed income issues and typically have durations of 3.5 to 6.0 years. These portfolios are less sensitive to interest rates, and therefore are less volatile, than portfolios that have longer durations.

*AGGE: Management fee: 0.25%; Management fee waiver: 0.05%; Other Expenses: 0.14%. AGGP: Management fee: 0.25%; Management fee waiver: 0.05%; Other Expenses: 0.15%. As stated in the Funds’ prospectuses, the Management Fee of 0.25% is expressed as a unitary fee to cover expenses incurred in connection with managing the portfolios. IndexIQ Advisors LLC has contractually agreed, until August 28, 2017, to waive a portion of its advisory fee, equal to 0.05% of average daily net assets.

About Risk
AGGE and AGGP: As with all investments, there are certain risks of investing in the Funds. The Funds’ shares will change in value, and you could lose money by investing in the Funds. The Funds’ investment performance, because they are fund of funds, depends on the investment performance of the ETPs in which they invest.

Funds that invest in bonds are subject to interest rate risk and can lose principal value when interest rates rise. Bonds are also subject to credit risk, which is the possibility that the bond issuer may fail to pay interest and principal in a timely manner.

The principal risk of mortgage-backed securities is that the underlying debt may be prepaid ahead of schedule if interest rates fall, thereby reducing the value of the Funds’ investment. If interest rates rise, less of the debt may be prepaid and the Funds may lose money.

The value of the Funds’ investment in ETPs is based on stock market prices and the Funds could lose money due to stock market developments, the failure of an active trading market to develop, or exchange trading halts or de-listings.

The Funds will indirectly bear its proportionate share of the fees and expenses of the underlying ETFs in which it invests.

As new Funds, there can be no assurance that they will grow to or maintain an economically viable size, in which case they may experience greater tracking error to their Underlying Indexes than they otherwise would at higher asset levels, or they could ultimately liquidate.

AGGP: Securities of issuers based in countries with developing economies (emerging markets) may present market, credit, liquidity, legal, political, and other risks different from, or greater than, the risks of investing in developed foreign countries. Emerging markets are subject to greater market volatility than more developed markets.

High yield securities have speculative characteristics and present a greater risk of loss than higher quality debt securities. These securities can also be subject to greater price volatility.

Post-tax return (pre-liquidation): Reflects the maximum federal tax rates on the distributions at the time the distributions are reinvested. Calculation based on a few assumptions: 1. The investor does not sell the holding at the end of the time period. 2. Distributions are taxed at the highest federal tax rate prevailing and then reinvested. 3. State and local taxes are excluded. 4. Only the capital gains are adjusted for tax-exempt funds because the income from these funds is nontaxable. This data point follows the guidelines established by the SEC in the spring of 2001 for reporting after-tax performance. Besides tax-adjustment, this total return is also adjusted for the effects of sales loads per the SEC’s recommendation. (Morningstar Research Report, 24 October 2003).

The Barclays U.S. Aggregate Bond Index is a broad-based index that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasurys, government-related and corporate securities, mortgage-backed securities (agency fixed-rate and hybrid adjustable-rate mortgage pass-throughs), asset-backed securities, and commercial mortgage-backed securities, with maturities of at least one year.

The Barclays U.S. 1-3 Year Treasury Bond Index measures the performance of U.S. Treasury securities that have a remaining maturity of at least one year and less than three years.
The Barclays U.S. 3-10 Year Treasury Bond Index

The ICE U.S. Treasury 20+ Year Bond Index measures the performance of U.S. Treasury issued debt with minimum term to maturity greater than twenty years.

iBoxx USD Liquid Investment Grade Index measures the performance of 600 highly liquid investment grade corporate bonds.

Barclays U.S. MBS Index measures the performance of investment grade fixed-rate mortgage-backed pass-through securities of GNMA, FNMA and FHLMC.

iBoxx USD Liquid High Yield Index is a rules-based index consisting of liquid U.S. dollar-denominated high yield bonds for sale in the United States.

JP Morgan EMBI Global Core Index tracks total returns for traded external debt instruments in the emerging markets.

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Think differently about your core global allocations
1

Manager Diversification

Are you invested in a top fund?

 

The top 10 funds, based on assets under management, in the Morningstar World Allocation Category account for 81% of the category assets1,2 In 2015, the variance of returns between the top and bottom performer of this group was almost 8%3. The top performers are difficult to predict, and investing in just one of the top funds may not provide the level of alpha or diversification your portfolios need.

10 is better than 1. Manager selection can be challenging to execute with a high degree of confidence and consistency. A well diversified portfolio may decrease the risks associated with choosing a single manager. QGTA offers exposure to the leading 10 global allocation actively managed mutual funds (“the Leaders”) in the Morningstar World Allocation Category. QGTA attempts to replicate the performance and risk characteristics of these Leaders, providing investors with access to equity and bond exposures across all Leaders rather than just one.

Follow the Leaders with QGTA
IndexIQ uses a systematic, rules-based investment processes for annual selection of the Leaders Series.*
step 1
Global Allocation Mutual Fund Universe
Identify all mutual funds classified in a particular investment strategy by an unaffiliated third party. To be eligible for potential inclusion:
  • Each fund will have a minimum of two years of performance results.
  • Each fund will have an investment objective consistent with the objective of the leaders.
step 2
Criteria Score
Eligible funds assigned Criteria Scores, based upon their rankings on Fund Performance and Fund Size.

Composite Score
Each fund’s Criteria Score aggregated to create Composite Scores with these weights:
 
step 3
Top 10 Ranked Funds: Leaders Series*
The 10 funds with the highest Composite Scores that also meet the fund eligibility requirements consitute the Leaders.
STEP 1
Global Allocation Mutual Fund Universe
Identify all mutual funds classified in a particular investment strategy by an unaffiliated third party. To be eligible for potential inclusion:
  • Each fund will have a minimum of two years of performance results.
  • Each fund will have an investment objective consistent with the objective of the leaders.
STEP 2
Criteria Score
Eligible funds assigned Criteria Scores, based upon their rankings on Fund Performance and Fund Size.

Composite Score
Each fund’s Criteria Score aggregated to create Composite Scores with these weights:
 
STEP 3
Top 10 Ranked Funds: Leaders Series*
The 10 funds with the highest Composite Scores that also meet the fund eligibility requirements consitute the Leaders.
 
blackrock global
allocation
GMO Benchmark
Free Allocation
Columbia Global
Opportunities
Old Westbury
Strategic Opportunities
MFS Global
Total Return
First Eagle
Global
IVA
Worldwide
JPMorgan Global
Allocation
Oppenheimer
Global Allocation
Thrivent Partner
Worldwide

*See the IQ Leaders GTAA Index methodology here.

SEE QGTA MANAGER DIVERSIFICATION  CLOSE
2

Transparency

Do you know what you own?

 

Active fund managers may be using complex derivatives to achieve exposures across various asset classes. In addition, actively managed mutual funds report their holdings on a quarterly or semiannual basis, whereas ETF holdings are reported daily.

Investors have access to daily ETF holdings on IQetfs.com, offering a greater degree of daily financial transparency that many active fund managers may not provide.

 

Source: IndexIQ, as of 12/31/16. Holdings are subject to change.

SEE QGTA TRANSPARENCY  SEE QGTA TRANSPARENCY
3

Cost Efficiency

Are your fund fees below or above average?

Average Expense Ratio:
Morningstar World
Allocation Category
1.32%
 
Total Annual Fund Expenses
QGTA
0.55%

Fees are a growing concern, especially with new fiduciary standards—high fees charged by active managers can erode portfolio returns.4

QGTA offers a competitive expense ratio relative to both the Leaders and the average expenses of the Morningstar World Allocation Category.

 

Source: Morningstar, as of 12/31/16. Average expense ratio for the Morningstar World Allocation Category includes all share classes, based on themost recent prospectus date. Average expense ratio for the Morningstar World Allocation Category Class A is 1.29%, and Class I is 1.01%.

*Figure calculated utilizing institutional share classes where available. If no institutional share class was available, the lowest ratio among available share classes was used.

SEE QGTA COST EFFICIENCY  SEE QGTA COST EFFICIENCY
4

Tax Efficiency

Do you own tax-efficient solutions?

2016 Capital Gains:
Morningstar World
Allocation Category
$0.31/share
Average 2016 capital gain

Some active funds have embedded capital gains, which can result in tax consequences. Funds in the Morningstar World Allocation Category may distribute capital gains, with the average fund distributing a capital gain of $0.31 per share in 2016.5

Because of its ETF structure, QGTA offers a tax-efficient solution for portfolios. The ETF structure may reduce or eliminate short-term capital gains on portfolio turnover, thus providing significant tax alpha.

 

Source: Morningstar, as of 12/31/16. Periods longer than one year are annualized. Past performance is no guarantee of future results. Neither New York Life Investment Management LLC, nor its affiliates or representatives provide tax, legal, or accounting advice. Please contact your own professionals.

SEE QGTA TAX EFFICIENCY  SEE QGTA TAX EFFICIENCY

QGTA's Latest Performance

1. Data includes all share classes and is based on percentage of assets under management.
2. Morningstar, as of 12/31/16.
3. Performance calculations are for the oldest share classes of each fund.
4. Morningstar, as of 12/31/16. Average expense ratio for the Morningstar World Allocation Category includes all share classes, based on themost recent prospectus date. Average expense ratio for the Morningstar World Allocation Category Class A is 1.29%, and Class I is 1.01%.
5. Morningstar, as of 12/31/16.

Asset allocation and diversification cannot assure a profit or protect against loss in a declining market.

Active management (also called active investing) refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming an investment benchmark index. Active management typically charges higher fees.

Alpha is a measure of performance on a risk-adjusted basis.

The Morningstar World Allocation Category includes portfolios that seek to provide both capital appreciation and income by investing in three major areas: stocks, bonds, and cash. While these portfolios do explore the whole world, most of them focus on the U.S., Canada, Japan, and the larger markets in Europe. They should have less than 50% of their assets in emerging markets. These portfolios typically have at least 10% of assets in bonds, less than 70% of assets in stocks, and at least 40% of assets in non-U.S. stocks or bonds.

About Risk
As with all investments, there are certain risks of investing in the Fund. The Fund’s shares will change in value, and you could lose money by investing in the Fund.

The Fund’s investment performance, because it is a fund of funds, depends on the investment performance of the ETPs in which it invests.

Funds that invest in bonds are subject to interest-rate risk and can lose principal value when interest rates rise. Bonds are also subject to credit risk, in which the bond issuer may fail to pay interest and principal in a timely manner. Floating rate funds are generally considered to have speculative characteristics that involve default risk of principal and interest, collateral impairment, borrower industry concentration, and limited liquidity. High-yield securities (junk bonds) have speculative characteristics and present a greater risk of loss than higher-quality debt securities. These securities can also be subject to greater price volatility.

Foreign securities can be subject to greater risks than U.S. investments, including currency fluctuations, less liquid trading markets, greater price volatility, political and economic instability, less publicly available information, and changes in tax or currency laws or monetary policy. These risks are likely to be greater for emerging markets than in developed markets.

The principal risk of mortgage-related securities is that the underlying debt may be prepaid ahead of schedule, if interest rates fall, thereby reducing the value of the Fund’s investment. If interest rates rise, less of the debt may be prepaid, and the Fund may lose money.

Short positions introduce more risk to the Fund than long positions (purchases) because the maximum sustainable loss on a security purchased (held long) is limited to the amount paid for the security plus the transaction costs, whereas there is no maximum attainable price of the shorted security. Therefore, in theory, securities sold short have unlimited downside potential.

The Underlying Index may not be successful in replicating the performance of its target strategies. The Fund seeks to track the performance of the largest global allocation mutual funds; such funds may underperform peer funds in the future. Although the Fund attempts to track the performance of its Underlying Index, the Fund may not be able to duplicate its exact composition or return for any number of reasons.

As a new Fund, there can be no assurance that it will grow to or maintain an economically viable size, in which case, it may experience greater tracking error to its Underlying Index than it otherwise would at higher asset levels or it could ultimately liquidate.

Post-tax return (pre-liquidation): Reflects the maximum federal tax rates on the distributions at the time the distributions are reinvested. Calculation based on a few assumptions:
1. The investor does not sell the holding at the end of the time period.
2. Distributions are taxed at the highest federal tax rate prevailing and then reinvested.
3. State and local taxes are excluded.
4. Only the capital gains are adjusted for tax-exempt funds because the income from these funds is nontaxable. This data point follows the guidelines established by the SEC in the spring of 2001 for reporting after-tax performance. Besides tax-adjustment, this total return is also adjusted for the effects of sales loads per the SEC’s recommendation (Morningstar Research Report, 24 October 2003).

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