Investing in Alternatives. Help optimize your portfolio with non-traditional solutions.

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1 Investing in Alternatives. Help optimize your portfolio with non-traditional solutions.

2 Eagle Strategies LLC is an investment adviser registered with the Securities and Exchange Commission and is notice filed with appropriate state securities authorities. It is an indirect wholly owned subsidiary of New York Life Insurance Company. It is not a broker-dealer or an insurance company and does not offer insurance products or brokerage services. Registration with the SEC does not imply a certain level of skill or training. This material is not a solicitation nor recommendation for either the purchase or sale of any security product.

3 Table of Contents The evolution of non-traditional investing...02 What are non-traditional investments?...03 Key benefits Why Eagle Strategies?...07 INVESTING IN ALTERNATIVES 1

4 The evolution of non-traditional investing. The traditional portfolio mix of only stocks and bonds is increasingly becoming a thing of the past. The 2008 financial crisis and subsequent economic and market uncertainty have prompted investors to consider a much wider range of investments as part of their core investment strategy. The hunt for diversification, yield, and higher returns in a low-rate, slow-growth environment has increased the demand for non-traditional investments. As such, these solutions are quickly becoming a key component of a diversified portfolio. However, non-traditional investments are not appropriate for everyone. It is important to understand the strategies employed and the risks of these investments. 2 INVESTING IN ALTERNATIVES

5 What are non-traditional investments? Non-traditional investments employ strategies that can provide different risk and return exposures than investors can obtain through traditional investments in stocks and bonds. For that reason, they can become diversification tools to help investors achieve their financial objectives. There are many types of alternative strategies, and no two are alike. Examples of two popular types of non-traditional investments include hedged equity, an approach that can more fully leverage a manager s investment research skill, and multialternative, an approach that can access several types of non-traditional strategies in one investment. While each non-traditional strategy varies, it may differ from traditional investments in the following ways: Some are absolute return-oriented, so they are not managed relative to a stated index or benchmark. Short selling is used to invest in securities with a negative research outlook. Leverage (borrowing) may be used to potentially increase returns. Derivatives may be used more frequently for efficient portfolio management. Once limited to institutions and high-net-worth investors, alternative investments are now available to retail investors through liquid alternatives. Liquid alternatives are essentially alternative strategies accessed through traditional vehicles, such as mutual funds and/or ETFs. These types of securities are designed to provide the investment benefits of alternatives the potential for risk reduction, return enhancement, and more complete diversification coupled with the advantages of a fund structure: lower investment minimums, lower fees, enhanced liquidity, and greater transparency than traditional hedge funds. I N V E S T I N G I N A LT E R N A T I V E S 3

6 Key benefits. Because non-traditional strategies may not always move in tandem with the broad equity and fixed-income market they may potentially provide benefits outside of traditional investments. As a result, they may help in three different ways: 01 Achieve a higher level of portfolio diversification. Based on monthly returns from Morningstar Direct for 15 years from 12/31/1999 to 12/31/2014 Investing in Assets with Low Correlation to Stocks and Bonds May Enhance Portfolio Diversification When non-traditional strategies are added to a traditional portfolio of stocks, bonds, and cash, they may help investors achieve broader portfolio diversification as well as potentially create more efficient portfolios 1 due to their expected low, or even negative, correlation with traditional assets. Exposure to different and uncorrelated assets in a portfolio can result in enhanced diversification. Diversification does not assure a profit or protect against loss in a declining market. REITs Commodities Hedged Equity Multistrategy Barclays US Government/Credit Russell 1000 Total Return About Risk. All investments are subject to market risk and fluctuate in value. Alternative investments are speculative, entail substantial risk, and are not suitable for all clients. They are intended for experienced and sophisticated investors who are willing to bear the high economic risks of the investment. If a security sold short increases in price, an investor may have to cover its short position at a higher price than the short sale price, resulting in a loss. Because the loss on a short sale arises from increases in the value of the security sold short, such loss is theoretically unlimited. When borrowing a security for delivery to a buyer, an investor also may be required to pay a premium and other transaction costs, which would increase the cost of the security sold short. Options and futures contracts have the risks of unlimited losses of the underlying holdings, due to unanticipated market movements and failure to correctly predict the direction of securities prices, interest rates, and currency exchange rates. An investment in options is not suitable for all investors. Investments in absolute-return strategies are not intended to outperform stocks and bonds during strong market rallies. Investments in derivatives often involve leverage, which may increase the volatility of the investment and may result in a loss. For REITS, property values may fall due to increasing vacancies, declining rents resulting from economic, legal, tax, political or technological developments, lack of liquidity, limited diversification and sensitivity to certain economic factors such as interest rate changes and market recessions. Low Diversification HIGHLY CORRELATED ( ) MODERATELY HIGH (0.7-.9) MODERATE ( ) LOW ( ) High Diversification NEGATIVELY CORRELATED (<0.0) Source: Morningstar Direct 12/31/1999 to 12/31/2014. This table shows the correlations of various alternative investment strategies to stocks and bonds, as measured by several indices including the Russell Total Return, Barclays US Government/Credit, Bloomberg Commodity Index - Total Return, Dow Jones US Select Real Estate Securities Index, HFRX Equity Hedge, and HFRX Global Hedge Fund. For more information on the indexes refer to the section titled Definitions at the end of this document. Measured on a scale of -1.0 to +1.0, a correlation of +1.0 means move investments move in perfect tandem with each other, whereas -1.0 means that one investment will move by an equal amount in the opposite direction from the other. Past performance is no guarantee of future results. An investment cannot be made directly into an index. 4 INVESTING IN ALTERNATIVES

7 Non-traditional strategies that have low correlation to the broad equity market have demonstrated stronger performance than the Russell 1000 index in the last three largest drawdown periods. Multi-Horizon Report: Cumulative Return 01/1999 to 12/ Manage volatility in declining markets. Non-traditional strategies may employ strategies that allow them to benefit in declining markets. As the charts to the right illustrate, non-traditional investment strategies have generally had an easier ride during three recent market declines. Past performance is no guarantee of future results. 03 Historically have enhanced risk-adjusted returns. Managers with more tools in their tool kit have the flexibility to capitalize on a greater number of opportunities, which may increase their ability to deliver competitive absolute returns to investors. A traditional portfolio uses stocks to drive total return and bonds to mitigate equity risk and provide deflation protection. Such a portfolio, however, does not fully capture the investment opportunity set or maximize the potential for improvement in return or reduction of risk. Non-traditional strategies, also known as diversifying strategies, can aid portfolio construction by being unique, dynamic, and reducing correlations to traditional allocations, which can help provide downside protection. By embracing allocations to these strategies, an investor can help improve the return opportunities and risk reduction beyond the basic allocation of stocks and bonds. Obviously, these are hypothetical examples and past performance is not indicative of future results. The portion of a portfolio that is allocated to non-traditional investments is dependent on a number of factors. These include one s investment goals, risk tolerance, time horizon, and need for liquidity Return % October 2007 to March 2009 August 2000 to October 2002 December 1999 to March 2000 Bloomberg Commodity Index - Total Return HFRX Global Hedge Fund (USD) HFRX Equity Hedge Dow Jones US Select Real Estate Securities Index (RESI) Russell Total Return Source: Factset, based on monthly returns of the 15-year period ending 12/31/2014. For more information on the indices presented above, refer to the section entitled Additional information at the end of this document. Past performance is no guarantee of future results. An investment cannot be made directly into an index. A drawdown is the peak to trough decline during a specific record period of an investment The Benefits of Adding Diversifying Strategies to a Traditional Portfolio 2 Using diversifying strategies can help improve risk-adjusted returns over a traditional portfolio Risk - Standard Deviation % Includes Diversifying Strategies Traditional Portfolio of Stocks and Bonds Source: Fund Evaluation Group, see Additional information at the end of this document. INVESTING IN ALTERNATIVES 5

8 6 INVESTING IN ALTERNATIVES

9 Why Eagle Strategies? Eagle Strategies offers a broad array of nontraditional solutions for your investing goals.* Investors seeking to diversify and enhance a traditional portfolio may want to consider non-traditional solutions as part of their core investment strategy. Eagle Strategies partners with several investment managers that employ non-traditional strategies as part of their overall investment process, ranging from long/short strategies to investments in real assets. These strategies are managed by each individual investment manager. Multi-alternative Real Assets Hedged Equity Brinker Crystal I Absolute Return Brinker Crystal II Diversified Income Uniplan REIT Uniplan High Income Total Return Morningstar Absolute Return Wilshire Diversified Alternatives Cohen and Steers Realty Total Return Salient MLP To learn more about how non-traditional solutions can benefit your portfolio, please contact your Financial Advisor or visit our website, to find an advisor in your area. All managers are strategists on the Lifetime Wealth Portfolios Platform offered by Eagle Strategies (LLC (Eagle). The strategists create and update a model portfolio and either self-execute the strategy or deliver the model portfolio to Envestnet Asset Management, Inc. (Envestnet) for implementation. An investor should refer to his/her Investment Management Agreement as well as the Disclosure Brochure for each of the firms noted above for complete information on their respective roles and responsibilities. The managers, Envestnet and Eagle are all registered investment advisers with the Securities and Exchange Commission and are not affiliated companies. All investments involve risk including the potential loss of principal. *As of 1/31/2016 INVESTING IN ALTERNATIVES 7

10 Additional information. Alpha measures an investment s risk-adjusted performance and is expressed as an annualized percentage. Barclays U.S. Government/Credit Index is a broad-based index composed of all bonds that are of investment grade with at least one year until maturity. Beta is a measure of historical volatility relative to an appropriate index based on its investment objective. A beta greater than 1.00 indicates volatility greater than the benchmark s. Commodities are represented by the Bloomberg Commodity Total Return Index, an index made up of 22 exchange-traded futures on physical commodities, which are weighted to account for economic significance and market liquidity. Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices. Hedged Equity is represented by the HFRX Equity Hedge Index, an index focused on equity hedge strategies that maintain positions both long and short in primarily equity and equity derivative securities. Multistrategy is represented by the HFRX Global Hedge Fund Index, an index designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies, including but not limited to convertible arbitrage, distressed securities, equity hedge, equity market neutral, event drive, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. REITs are represented by the Dow Jones U.S. Select Real Estate Securities Index (RESI) which is comprised of equity real estate investment trusts (REITs) and real estate operating companies (REOCs) traded in the U.S. Russell 1000 Total Return Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the U.S. market. The Russell 1000 Index is constructed to provide a comprehensive and unbiased barometer for the large-cap segment and is completely reconstituted annually to ensure new and growing equities are reflected. Standard Deviation measures how widely dispersed an investment s returns have been over a specified period of time. A high standard deviation indicates that the range is wide, implying greater potential for volatility. An investment cannot be made directly into an index. Note: 1. An efficient portfolio offers the highest expected return for a defined level of risk, or the lowest risk for a given level of expected return. Portfolios that lie outside an efficient frontier are sub-optimal, because they do not provide enough return for the level of risk, or because they have a higher level of risk for the defined rate of return. 8 INVESTING IN ALTERNATIVES

11 Note: 2. The efficient frontier analysis presented in the chart shows a traditional portfolio that contains stocks and bonds compared to a portfolio that contains stocks, bonds, and diversifying strategies. The benefit of adding diversifying strategies to a traditional portfolio is a shift on the efficient frontier. In other words, adding diversifying strategies to a traditional portfolio has the potential for an increase in expected return while reducing expected standard deviation. The expected return and standard deviation ranges used in the analysis are estimates based on historical information for the indices over a 10-year period and do not represent actual portfolios offered by Eagle Strategies or its affiliates. Below are the asset class and allocation assumptions that drive the hypothetical portfolios that make up the portfolios along the efficient frontier analysis. Denotes Allocation without Diversifying Strategies Denotes Allocation with Diversifying Strategies Cash US Large Cap US Small Cap International Developed Equity Emerging Markets Equity Core Bonds TIPS High Yield Bonds Public Real Estate Commodities Absolute Return Expected Return Expected Standard Deviation Cash Russell 1000 Russell 2000 MSCI EAFE MSCI EAFE Emerging Market Barclays US Aggregate Barclays US Treasury TIPS Barclays US Corporate High Yield FTSE NAREIT All Equity DJ UBS Commodity HFRI Fund of Funds Conservative Index Portfolio % 3.56% 5.95% 5.96% 5% 5% 14% 12% 0% 0% 4% 4% 1% 1% 54% 52% 16% 15% 6% 6% 0% 3% 0% 1% 0% 1% Portfolio % 4.66% 8.19% 8.28% 4% 4% 20% 17% 2% 2% 8% 8% 3% 3% 44% 40% 11% 10% 8% 8% 0% 4% 0% 2% 0% 2% Portfolio % 5.55% 10.76% 10.80% 4% 4% 24% 22% 3% 3% 15% 13% 5% 5% 32% 28% 8% 7% 9% 9% 0% 5% 0% 2% 0% 2% Portfolio % 6.27% 13.16% 12.90% 3% 3% 30% 25% 4% 4% 18% 16% 7% 7% 22% 19% 6% 4% 10% 9% 0% 6% 0% 3% 0% 4% Portfolio % 6.85% 15.43% 14.96% 2% 2% 33% 28% 7% 5% 20% 19% 10% 9% 16% 11% 4% 3% 8% 7% 0% 9% 0% 3% 0% 4% Portfolio % 7.27% 17.69% 16.84% 2% 2% 35% 31% 8% 6% 25% 22% 13% 12% 8% 7% 3% 1% 6% 6% 0% 7% 0% 3% 0% 3% Portfolio % 7.77% 20.53% 19.01% 1% 1% 39% 34% 10% 7% 26% 25% 18% 15% 0% 0% 0% 0% 6% 6% 0% 7% 0% 3% 0% 2% INVESTING IN ALTERNATIVES 9

12 Eagle Strategies LLC (Eagle) is an investment adviser registered with the Securities and Exchange Commission and is notice filed with appropriate state securities authorities. Registration with the SEC does not imply a certain level of skill or training. Eagle is an indirect wholly owned subsidiary of New York Life Insurance Company. Eagle is not a broker-dealer or an insurance company and does not offer insurance products or brokerage services. Eagle Strategies LLC 51 Madison Avenue New York, NY ES.ThAlt.4Q15 SMRU# Exp: 8/31/2016

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