QuarterlyMarketOverview-March2015

INDEX

EQUITY

BROAD MARKET EQUITY

MSCI ACWI 2.44% 5.97% 11.35% 9.57%

S&P 500 0.95% 12.69% 16.09% 14.44%

Russell 3000 1.80% 12.37% 16.43% 14.71%

Russell 2000 4.32% 8.21% 16.27% 14.57%

INTERNATIONAL EQUITY

MSCI EAFE 5.00% (0.48%) 9.52% 6.64%

MSCI Europe 3.58% (4.42%) 10.02% 7.02%

MSCI Japan 10.34% 12.38% 9.60% 6.08%

MSCI EAFE Small Cap 5.64% (2.60%) 11.03% 9.15%

MSCI Emerging Markets 2.28% 0.79% 0.66% 2.08%

MSCI Emerging Markets Small Cap 3.62% 1.37% 3.80% 2.94%

ALTERNATIVE EQUITY

HFRI Equity Hedge 2.34% 3.03% 6.15% 4.71%

REAL ASSETS

S&P Global Property 4.51% 14.70% 12.51% 11.71%

DJ UBS Commodity (5.94%) (27.04%) (11.52%) (5.71%)

S&P North America Natural Resources (1.51%) (13.47%) 0.51% 3.86%

Gold Spot (0.10%) (7.81%) (10.81%) 1.23%

OPPORTUNISTIC

HFRI Fund of Funds Conservative 1.03% 2.85% 4.50% 3.11%

Barclays U.S. Corporate High Yield 2.52% 2.00% 7.46% 8.59%

Barclays Mortgage Backed Securities 1.06% 5.52% 2.54% 3.63%

S&P/LSTA Leveraged Loan Index 1.74% 2.15% 4.77% 4.98%

JP Morgan GBI-EM (3.95%) (11.14%) (3.86%) 0.74%

CORE FIXED INCOME

Barclays U.S. Aggregate Bond 1.61% 5.69% 3.10% 4.42%

Barclays U.S. Treasury 1.65% 5.36% 2.36% 4.01%

Barclays U.S. Credit 2.17% 6.69% 4.87% 6.22%

Barclays Municipal 1-10 Year 0.83% 3.86% 2.71% 5.10%

Citi 3-Month Treasury Bill 0.00% 0.00% 0.04% 0.05%

1-YEAR

RETURN

3-YEAR

RETURN

5-YEAR

RETURN

1ST QTR

RETURNMarket Commentary

OVERVIEW OF GLOBAL MARKETS

Source: Bloomberg, Morningstar, HFR. Returns over one year have been annualized.

QUARTERLY MARKET OVERVIEW

First Quarter 2015

12505 Park Potomac Avenue, Suite 400 | Potomac, MD 20854 | 301.770.6300

CONVERGENTWEALTH.COM

Weakening earnings helped keep U.S. large cap stocks in check during the first quarter. U.S. manufacturing activity, as well as corporate profits, have stalled thanks to the disruptive West coast port strike, harsh winter weather, difficulties within the energy segment, and the competitive pricing disadvantages of a stronger dollar. Relatively expensive domestic stock valuations have not helped either. U.S. equities are generally more richly priced than overseas markets, reflecting in part the large return disparity of the past few years.

Nevertheless, macro conditions largely remain supportive of U.S. stocks. Interest rates and inflation are low, while the economy (and corporate profits) should get back on track later this year. The benefits of lower energy prices and improving wages have yet to translate into higher consumer spending, but should do so as the weather warms up. U.S. valuations are certainly extended, but not egregiously so—supportive economic fundamentals and momentum can drive stocks higher during this leg of the bull market.

Overseas markets may be even better positioned, with more aggressive central bank actions allowing their economies to stabilize and stocks to bounce off cheaper valuations. Thus far in 2015, the performance tide has tilted toward international equities, and that trend might continue as the strengthening dollar provides a nice profit boost for overseas companies. Structural issues still need be worked out in Europe, Japan, and some emerging regions, but central banks are providing ample liquidity in the meantime.

The Federal Reserve has indicated that the path toward higher interest rates will not only be gentle, but also shallow. In other words, the Fed will not only be patient in determining when to initiate a first rate hike, but will also strive not to become overly restrictive. As such, monetary policy can be expected to remain extremely accommodative for some time. Other central banks are easing further (the European Central Bank and Bank of Japan in particular are in the midst of massive stimulus programs). That has provided some relief to equity markets, and helped push interest rates back down, with the ten-year Treasury note trading below 2% while European and Japanese yields are near zero. These rate divergences have led to some wild swings in currencies.

We continue to favor equities over other asset classes, though there may be opportunities in the energy sector. Bonds continue to have a place in the portfolio as a stable income component and diversifier, but their upside appears limited.

Return

HISTORICAL MARKET RETURNS

Sources: Bloomberg, HFR, Morningstar

TRAILING PERIOD RETURNS THROUGH Q1 2015

U.S. stocks have been the primary beneficiary of Fed liquidity policies over the past several years, well-outpacing other major asset classes. Perhaps that trend reverses course going forward, as other central banks are now becoming more aggressive.

GROWTH OF $1 OVER PAST FIVE YEARS

U.S. stocks are up more than 200% since the 2009 lows (on a price basis). Non-U.S. equities have not been able to keep up. Core bonds, meanwhile, have hit a lull, a byproduct of their low yields.

ANNUAL RETURNS 2010 - 2014

U.S. stocks have been the clear winner the past few years, buoyed by Fed-driven liquidity and relatively sound underlying fundamentals. International diversification has not been particularly helpful.

FIVE-YEAR ANNUAL RISK VS. RETURN

2008 (a dismal year for capital markets) has dropped out of the five-year look-back performance. As a result, domestic stocks are now showing outsized five-year return numbers well into double-digits.

Barclays U.S. Aggregate Bond

S&P 500 Russell 2000

MSCI EAFE

Barclays US Corporate High Yield

MSCI Emerging Markets

DJ UBS Commodity

S&P Global Property

HFRI Equity HedgeHFRI FoF

Conservative

-8%

-4%

0%

4%

8%

12%

16%

0% 5% 10% 15% 20%

Risk (Standard Deviation)

Fixed Income

Equity

Real Assets

Hedge FundsR

eturn

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15


S&P 500

MSCI EAFE

MSCI EM

-5%

0%

5%

10%

15%

20%

Q1 2015 1 YR 3 YR 5 YR 10YR

Barclays U.S. Aggregate Bond S&P 500 MSCI EAFE MSCI Emerging Markets

-20%

-10%

0%

10%

20%

30%

40%

2010 2011 2012 2013 2014


S&P 500

MSCI EAFE

MSCI Emerging Markets

2 | CONVERGENTWEALTH.COM

Country/Region 2013 2014 2015 est

2016

est 2013 2014 2015 est 2016 est 2013 2014 Current 2015 est 2016 est 2013 2014 Current 2015 est 2016 est

North America

United States 2.2% 2.4% 2.9% 2.9% 1.5% 0.8% 0.2% 2.2% 0.1% 0.0% 0.0% 0.4% 1.2% 3.0% 2.2% 1.9% 2.1% 2.3%

Europe

Eurozone (0.4%) 0.9% 1.3% 1.6% 0.8% (0.2%) 0.0% 1.2% 0.1% 0.0% -0.2% -0.2% -0.4% 1.9% 0.5% 0.2% 0.2% 0.3%

UK 1.7% 2.8% 2.6% 2.3% 2.0% 0.5% 0.4% 1.7% 0.3% 0.4% 0.4% 0.3% 0.5% 3.0% 1.8% 1.6% 1.7% 1.9%

Asia

Japan 1.6% (0.0%) 1.0% 1.4% 1.6% 2.4% 0.9% 1.3% 0.1% 0.0% 0.0% 0.0% 0.0% 0.7% 0.3% 0.3% 0.4% 0.5%

China 7.7% 7.4% 7.0% 6.7% 2.5% 1.5% 1.5% 2.2% 4.1% 3.5% 3.1% 3.2% 3.5% 4.8% 3.7% 3.7% 3.8% 3.9%

INFLATION

(Year-over-Year % Change)

3-MONTH INTEREST RATES

(Year-End)

10-YEAR INTEREST RATES

(Year-End)

REAL GDP

(Year-over-Year % Change)

GLOBAL ECONOMIC DATA

GDP VS. INFLATION: YEARLY % CHANGES

Sources: Bloomberg, Bureau of Economic Analysis

Most regions of the world are exhibiting a slower pace of economic growth than normal. Inflation has not been a concern, and most major central banks are in easing modes to support business activity.

U.S. LEADING ECONOMIC INDICATORS AND MANUFACTURING

The Conference Board's index of U.S. leading economic indicators continues to trend upward while manufacturing activity is well into expansionary territory (above 50), suggesting the economic recovery should stay on track.

PROJECTED ECONOMIC GROWTH, INFLATION, AND INTEREST RATES AS OF MARCH 31, 2015


2.4%

0.9%

2.8%

0.0%

7.4%

0.8%

-0.2%

0.5%

2.4%

1.5%

-2% 0% 2% 4% 6% 8%

U.S.

Eurozone

U.K.

Japan

China

Real GDP

Inflation

20

40

60

80

100

120

140

20

30

40

50

60

70

80

Jan-70 Jan-80 Jan-90 Jan-00 Jan-10

Recession

ISM Manufacturing Index (left scale)

U.S. Leading Economic Indicators (right scale)

GLOBAL ECONOMIC TRENDS

GDP YEAR-OVER-YEAR GROWTH

Sources: Bloomberg, Morningstar, Bureau of Economic Analysis

Europe's economy is experiencing a bit of a revival and bouncing out of recession territory, while the U.S. is stuck in neutral and struggling to sustain a better than 2% year-over-year rate.

TEN-YEAR GOVERNMENT BOND YIELDS

A sharp drop in European yields has helped send fund flows toward U.S. Treasuries, keeping a lid on domestic rates despite expectations that the Fed will start to tighten monetary policy later this year.

0%

1%

2%

3%

4%

5%

Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

United States

Europe

Japan

INFLATION (YEAR-OVER-YEAR)

Declining energy prices have helped drive down inflation across the globe. While deflation seems less of an outright threat with Europe on the mend, a lack of inflation should allow global central banks leeway in keeping stimulus policies in place.

UNEMPLOYMENT

The U.S. labor market posted its strongest year of job growth in the past 15 years, and the unemployment rate has fallen to a post-recession low at 5.5%.

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14

United States

Eurozone

Japan

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%


United States

Europe

Japan

0%

2%

4%

6%

8%

10%

12%


United States

Europe

Japan


U.S. ECONOMIC TRENDS

U.S. REAL GDP QUARTERLY ANNUALIZED % CHANGE

Sources: Bloomberg, Morningstar

The U.S. economy is going through another winter soft patch, with real GDP slowing to a tepid 2.2% rate in the fourth quarter. A reacceleration is expected as severe weather and the West Coast port shutdown are in the rearview mirror.

U.S. HOUSING STARTS AND NEW HOME SALES

The housing market is moving forward in fits and starts, but generally trending in the right direction. A pick-up in activity is expected this spring and summer, thanks in part to improving job growth and wages.

APPRECIATION VS. U.S. DOLLAR OVER PAST THREE YEARS COMMODITY PRICES

Crude oil might be starting to carve out a bottom, as producers cut back on investment in future supply. The strong U.S. dollar, which was up another 10% in Q1, has contributed to further commodity losses.

0

500

1000

1500

2000

2500


U.S. Housing Starts (in 000s)

New Home Sales (in 000s)

-40%

-30%

-20%

-10%

0%

10%

20%

30%

Mar-12 Mar-13 Mar-14 Mar-15

Euro

Japanese Yen

U.S. Dollar Spot

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

100

300

500

700

900

1100

1300

1500

1700

1900

10

30

50

70

90

110

130

150

170

190


Crude Oil U.S. (WTI Midland) (left scale)

Gold Spot $/oz (right scale)


12/31/12 12/31/13 12/31/14 3/31/15

Euro (in U.S. dollars) 1.3193 1.3743 1.2098 1.0731

Japanese Yen (per USD) 86.75 105.31 119.78 120.13

U.S. Dollar Index (DXY) 79.77 80.04 90.27 98.36

EXCHANGE RATES FOR MAJOR CURRENCIES

Currency

0%

1%

2%

3%

4%

Yield

One Year Ago

Prior Quarter

Current

2YR 5YR 10YR 30YR

Maturity

FIXED INCOME

U.S. TREASURIES YIELD CURVE

Sources: Bloomberg, Morningstar

Spreads between Treasuries and low quality corporate bonds remain relatively narrow despite some concern about the energy sector. Still, the overall credit risk climate is low with an expectation of few defaults.

U.S. T-BILL, INFLATION, AND FEDERAL FUND YIELDSU.S. HISTORICAL BOND YIELDS

FIXED INCOME PERFORMANCE

The ten-year Treasury note ended the quarter yielding 1.9%, down meaningfully from its 2.2% yield at the start of the year. Despite anticipation of the Fed's interest rate lift-off, ECB-driven historically low yields in Europe are keeping a lid on U.S. rates.

Attention has turned to when and how fast the Fed will raise short-term rates (expected to start later this year). This is in contrast to other major central banks, which are initiating additional easing policies.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%


Barclays U.S. Corporate High Yield

Barclays U.S. Credit

U.S. Ten-Year Note

-2%

-1%

0%

1%

2%

3%

4%

5%

6%


CPI

U.S. Ten-Year Note

3-Mo T-Bills

Fed Funds


1.6% 1.6%2.2%

1.1%1.7%

2.5%

-4.0%

5.7% 5.4%

6.7%5.5%

2.1% 2.0%

-11.1%-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Barclays U.S.Aggregate

Bond

Barclays U.S.Treasury Index

Barclays U.S.Credit Index

Barclays MBSIndex

S&P/LSTALeveragedLoan Index

Barclays U.S.Corporate High

Yield

JP MorganGBI-EM

Q1 2015 One-Year

U.S. core bonds continue to benefit from declining global yields, and posted strong first quarter returns. However, non-core segments, such as bank debt, high yield bonds, and emerging market debt, continue to struggle.

LARGE CAP VS. SMALL CAP: GROWTH OF $1 OVER PAST FIVE YEARS

U.S. small caps have more or less kept pace with large caps during the current bull market. While there are concerns that they are relatively expensive compared to larger companies, small caps are also less sensitive to the rising dollar's impact on exports.

U.S. EQUITY

Sources: Bloomberg, Standard & Poor's, Morningstar

Q1 2015 PERFORMANCE: VALUE VS. GROWTH

U.S. large cap value stocks were the laggard during the quarter, weighed down by energy and technology companies. The growth index benefitted from strength in the health care sector.

The energy sector continued to trail other market segments, though financials and utilities posted lackluster quarterly returns as well. The health care sector has been the big winner over the past year.

1700

1750

1800

1850

1900

1950

2000

2050

2100

2150

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15

European Central Bank

cuts rates

Sunni militants take over parts of northern Iraq

Argentina defaults on its

bonds

President Obama

approves airstrikes in

Iraq

Alibaba begins trading

Scottish voters elect to stay with the

U.K.

Ebola infections in Texas health care workers

Fed ends bond-

purchase programs

Republicanstake

Congress

OPECmaintains production

quotas

Switzerland abandons currency

cap

ECB announcesQE program

Eurozoneextends Greek bailout

ONE-YEAR PERFORMANCE: S&P 500 INDEX

Core

Value

GrowthCore

Value

Growth

Core

Value

Growth

-5%

0%

5%

10%

Large Cap Small Cap International

Q1 2015 S&P 500 INDEX: PERFORMANCE BY SECTOR

11.1%

4.1%

5.0%

18.1%

8.7%

26.2%

9.9%

-11.1%

16.5%

18.2%

12.7%

-5.2%

1.6%

1.0%

0.6%

-0.9%

6.5%

-2.1%

-2.9%

1.0%

4.8%

1.0%

-15% -10% -5% 0% 5% 10% 15% 20% 25% 30%

Utilities

Telecom Svcs

Materials

Info. Technology

Industrials

Health Care

Financials

Energy

Consumer Staples

Cons. Discretionary

S&P 500 IndexQ1 2015

One-Year


The S&P 500 has posted gains in nine consecutive quarters, finishing the first quarter of 2015 up 1%. Over the past twelve months, the index is still up double digits, posting a 12.7% return.

$0.80

$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

$2.20


S&P 500

Russell 2000

S&P 500 Index

Price 1169.4 1408.5 1872.3 2067.9

Dividend Yield 1.9% 1.9% 1.9% 2.0%

P/E Ratio (Trailing Operating Earnings) 17.7 14.4 17.2 18.4

Trailing 12-Month Operating Earnings $66.1 $98.1 $108.9 $112.4

Trailing Yr-over-Yr Earnings Growth 53.8% 12.8% 10.7% 3.3%

U.S. Yields

Three-Month T-Bill Yield 0.1% 0.1% 0.0% 0.0%

Ten-Year Treasury Yield 3.8% 2.2% 2.6% 1.9%

Barclays US Credit Yield 4.2% 3.2% 3.0% 2.8%

5 YEARS

AGO

3 YEARS

AGO

1 YEAR

AGO CURRENTSTATISTIC

Volatility remains relatively tame and below historical averages, despite gyrations in oil prices. As the Fed starts to normalize interest rates, an increase in volatility would not be unexpected.

0

10

20

30

40

50

60

70

80

90

100


CBOE S&P 500 ImpliedCorrelation Index

CBOE Volatility Index(VIX)

U.S. EQUITY

VOLATILITY AND CORRELATIONS


The price-earnings (P/E) ratio based on trailing 12-month earnings from continued operations is slightly above its historical average. U.S. stocks, while not in bubble territory, are getting more expensive and portend lower returns going forward.

Earnings are stalling, thanks to the disruptive West coast port strike, harsh winter weather, and difficulties within the energy segment. That said, a slowly improving economy suggests profits should get back on track later this year.

S&P 500 METRICS

S&P 500 PRICE AND EARNINGS

Given robust growth in U.S. corporate earnings over the past five years, stock market valuations have not gotten out of hand despite significant appreciation in prices. Low inflation and interest rates also support higher valuations.

S&P 500 P/E RATIO

0

5

10

15

20

25

30

35

Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14

S&P 500 P/E Ratio (based on trailing earnings from cont. operations)

Historical average S&P P/E ratio (since 1900)

-

25

50

75

100

0

500

1000

1500

2000

Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05 Dec-08 Dec-11 Dec-14

S&P 500 Price (left scale)

S&P 500 Trailing 12-mo Earnings (right scale)


29.5 29.0

26.0

23.221.7 21.2

20.3 20.0 19.6 19.5 18.8 18.3 18.217.3

15.2

12.7 12.7

10.5 10.2

4.9

0

5

10

15

20

25

30

35

GLOBAL EQUITY

TRAILING ONE-YEAR GLOBAL EQUITY RETURNS

Sources: Bloomberg, Standard & Poor's, Morningstar, MSCI

GLOBAL STOCK MARKET CAPITALIZATION

Global equity market capitalization shifted dramatically away from Japan in the late 1990s. More recently, the market capitalization of emerging market countries has increased.

(28.4%)

(24.9%)

(7.4%)

(6.3%)

(5.8%)

(5.5%)

(5.5%)

(4.9%)

(2.0%)

(0.5%)

0.7%

0.8%

4.2%

8.2%

12.4%

12.7%

13.2%

15.3%

20.7%

24.4%

-30% -20% -10% 0% 10% 20% 30%

Brazil

Russia

France

Mexico

Australia

UK

Canada

Korea

Germany

MSCI EAFE

Switzerland

MSCI EM

South Africa

US Small Cap

Japan

US Large Cap

Taiwan

Hong Kong

India

China

United States41%

Europe25%

Japan23%

Other Developed

7%

Emerging4%

United States50%

Europe22%

Japan9%

Other Developed

9%

Emerging10%

GLOBAL P/E RATIOS

U.S. stocks have been some of the top performers over the past year, while Europe's larger markets have suffered. That may reverse going forward, as overseas markets benefit from aggressive central banks and currency-driven competitive advantages.


1995 2015

The P/E ratios illustrated below are based on trailing 12-month earnings as of March 31, 2015. Stock markets in many emerging market regions are considered to be cheap on both an absolute and relative basis. Developed stock market valuations are getting stretched but not yet considered to be in bubble territory.

INTERNATIONAL EQUITY


Sources: Bloomberg, Standard & Poor's, Morningstar, MSCI

Buoyed by central bank easing and a stabilization of economic fundamentals, overseas equity markets generated much better returns in the first quarter of 2015 than U.S. stocks, especially in local currency terms.

Some emerging markets are doing better than others. Oil producing and exporting countries (including several Latin American countries) struggled in the first quarter, while oil-importing countries (such as India and China) tended to perform much better.

Q1 2015 PERFORMANCE: EMERGING MARKETSQ1 2015 PERFORMANCE: GLOBAL MARKETS

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

$2.25


S&P 500

MSCI EAFE

MSCI Europe

MSCI Japan

MSCI EM

FIVE-YEAR ANNUALIZED RISK VS. RETURN

0.9%

5.0%

3.6%

10.3%

2.3%

11.0%11.7%

10.4%

4.9%

0%

5%

10%

15%

S&P 500 MSCI EAFE EUROPE JAPAN MSCI EM

USD Local Currency

2.3%

-2.9%

3.6%

5.3%

-9.5%

1.9%

4.9%

0.9%

5.5% 5.7%

1.3%

5.1%

-10%

-5%

0%

5%

10%

MSCI EM MSCIFRONTIER

MSCI EMSMALL CAP

ASIA LATINAMERICA

EUROPE

USD Local Currency


MSCI EAFE MSCI Europe

MSCI Japan

MSCI EM

S&P 500

Barclays Aggregate Bond Index

MSCI EAFE Small Cap

MSCI AC Asia Ex-Japan

0%

2%

4%

6%

8%

10%

12%

14%

16%

0% 5% 10% 15% 20%

Ret

urn

Risk

International

U.S.

HEDGE FUNDS


Sources: Bloomberg, Standard & Poor's, Morningstar, HFR

FIVE-YEAR ANNUALIZED RISK VS. RETURN

HEDGE FUND PERFORMANCE

3.4%

3.4%

9.5%

5.4%

1.1%

3.5%

3.0%

-0.9%

-3.6%

1.4%

5.7%

12.7%

1.7%

2.4%

3.4%

2.5%

2.0%

1.7%

2.3%

1.0%

0.6%

2.1%

1.6%

0.9%

-5% 0% 5% 10% 15%

Relative Value Arbitrage

Merger Arbitrage

Macro Index

Fund of Funds Composite

Event-Driven

Equity Market Neutral

Equity Hedge

Emerging Markets

Distressed Securities

Convertible Arbitrage


S&P 500

Q1 2015

One-Year

Equity Hedge Convertible Arb.

Equity Market Neutral

Event-Driven

S&P 500

Emerging Markets

Distressed Securities

Fund of Funds Composite

Relative Value Arbitrage

Macro Index


0%

2%

4%

6%

8%

10%

12%

14%

16%

0% 5% 10% 15%

Ret

urn

Risk

Long-Only Strategies

Hedge Fund Strategies

$0.75

$1.00

$1.25

$1.50

$1.75

$2.00

$2.25


HFRI FoF Composite

HFRI Equity Hedge

S&P 500

Barclays Aggregate Bond Index


Hedge fund indices were generally positive in the first quarter of 2015, with macro continuing to be a strong performer thanks to diverging global central bank policies, interest rates, and currencies.

Hedge funds generated returns are not solely driven by market beta and typically experience less volatility than long-only equities. They have also lagged in the recent market cycle phase, which started in conjunction with massive stimulus policies.

With varying strategies and exposures, hedge funds can produce an array of risk/return profiles. However, one element tends to be consistent: most strategies exhibit lower volatility than long-only equities.

Index as of 03/31/15

S&P Global Property Index 4.51% 14.70% 11.71% 7.85%

DJ UBS Commodity Index (5.94%) (27.04%) (5.71%) (3.56%)

Gold Spot ($/oz) (0.10%) (7.81%) 1.23% 10.70%

Crude Oil U.S. (WTI Midland) (3.59%) (47.94%) (10.63%) (1.46%)

S&P 500 0.95% 12.69% 14.46% 8.01%

1-Year

ReturnQuarter

5-Year

Return

10-Year

Return

Compound Annual Return 7.85% (3.56%) 10.70% 8.01%

Risk (Standard Deviation) 21.05% 18.09% 19.25% 14.76%

Correlation to S&P 500 0.85 0.52 0.07 1.00

Sharpe Ratio (3% Riskfree) 0.23 (0.36) 0.40 0.34

Gold Spot

($/oz) S&P 500

S&P Global

Property Index

DJ UBS

Commodity

IndexStatistic as of 03/31/15

REAL ASSETS

REAL ASSETS INDEX PERIODIC RETURNS


GROWTH OF $1 OVER PAST TEN YEARS

Q1 2015 PERFORMANCE: DJ UBS COMMODITY SUB-INDEX RETURNS

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5


Gold Spot ($/oz)

S&P Global Property Index

DJ UBS Commodity Index

S&P 500

Real assets generally provide a portfolio with several potential benefits, including a hedge against inflation, longer-term diversification from stocks and bonds, and in certain segments, relatively higher income yields.

REAL ASSETS INDEX TEN-YEAR RISK/RETURN STATISTICS

-36.1%

-10.4%

-13.5%

-7.6%

-28.3%

-46.6%

-51.8%

-29.0%

-27.0%

-13.7%

1.3%

-9.8%

-5.3%

-8.2%

-8.2%

-11.9%

-8.8%

-5.9%

-60% -50% -40% -30% -20% -10% 0% 10%

Softs

Precious Metals

Livestock

Industrial Metals

Grains

Energy

Crude Oil

Agriculture

DJ UBS Commodity Q1 2015

One-Year

Commodities continued their precipitous drop, extending fourth quarter losses on further declines in the energy complex. Precious metals posted marginal gains in the first quarter, the only commodity segment to do so.


DISCLOSURE

Past Performance Is No Guarantee Of Future Performance. Any opinions expressed are current only as of the time made and are subject to change without notice. This report may include estimates, projections or other forward looking statements, however, due to numerous factors, actual events may differ substantially from those presented. The graphs and tables making up this report have been based on unaudited, third-party data and performance information provided to us by one or more commercial databases. Additionally, please be aware that past performance is not a guide to the future performance of any manager or strategy, and that the performance results and historical information provided displayed herein may have been adversely or favorably impacted by events and economic conditions that will not prevail in the future. Therefore, caution must be used in inferring that these results are indicative of the future performance of any strategy, index, fund, manager or group of managers. All performance numbers shown herein are net of actual fees and expenses and include the reinvestment of dividends an d other income, as reported by the manager and/or by the commercial databases involved. While we believe this information to be reliable, Convergent Wealth Advisors bears no responsibility whatsoever for any errors or omissions. Index benchmarks contained in this report are provided so that performance can be compared with the performance of well-known and widely recognized indices. The volatility of these indices may be materially different from that of the fund. You cannot invest directly in an index. Index results assume the re-investment of all dividends and interest. Moreover, the information provided is not intended to be, and should not be construed as, investment, legal or tax advice. Nothing contained herein should be construed as a recommendation or advice to purchase or sell any security, investment, or portfolio allocation. Any investment advice provided by Convergent is client specific based on each clients' risk tolerance and investment objectives. This presentation is not meant as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any client's accounts should or would be handled, as appropriate investment decisions depend upon the client's specific investment objectives.

Non-deposit investment products are not FDIC insured, are not deposits or other obligations of Convergent Wealth Advisors, are not guaranteed by Convergent Wealth Advisors and involve investment risks, including the possible loss of principal.


QuarterlyMarketOverview-March2015

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