The RPAG Scoop | December 2023

Welcome back to our monthly RPAG Scoop where we give you the latest and upcoming information in the retirement industry. As we are approaching this holiday season, let us unwrap some knowledge for you and bestow some frosty tips in this month's edition! Take advantage of being an RPAG member with exclusive discounts, RFP Express, and marketing content and hear chilling insights to the market with our Chief Investment Officer. Following our updates, get a Mid Cap Value update from American Century and observations of Equity Markets with PIMCO.

Listen up! Our Chief Investment Officer, Jeff Elvander, has some unique insight to provide from the investment world. He will let you know how we are finishing up the year and where we are headed. U.S. Equity is finishing strong, and now even fixed income is positive. It seems like nothing can go wrong, with the Fed seemingly done with rate hikes and recession fears easing; however, now is the time to take heed of the "Jesus Jones" moment. The "magnificent seven" have been the market return drivers over the last 5-6 years and now represent over a quarter of the market. U.S. index concentration is growing, which is a risk many indices and even index TDF investors are exposed to. Actively managed funds will play a greater role in diversifying portfolio now more than ever. The times are a changing!

U.S. Mid Cap Value Update with Peter Hardy (20:53)
Senior Client Portfolio Manager for American Century Investments, Peter Hardy, is helping you sleigh those goals this holiday season with the U.S. Mid Cap Value strategy! According to Peter, their Mid Cap Value has had a consistent portfolio growth over time, and that it due to their diligent strategy. They have one of the lowest risk profiles of any manager in the Mid Cap Value space, a-symmetry in their up and down market capture (resulting in compelling alpha, low risk, and high risk adjusted returns). American Century Investments feel that it is ideal for participants due to its lower risk and diversification benefits, especially when put against the gross side of the lineup.

Equity Market Observations with PIMCO's Equity Strategist (27:03)
PIMCO's Equity Strategist Raji Manasseh tells us their equity market observations that they have seen in 2023 and an investment idea that may be a bit contrarian. Similarly to our CIO, Raji discusses the "Magnificent Seven" which includes Apple, Microsoft, Amazon, Tesla, Alphabet (Google), Meta, and Invidia. The question is: should they dominate the US Equity Market the way that they are? They are important businesses, but how pricey should they be and what is the valuation of those companies? Combined, they explained over 80% of the equity market return, which is a historical high. The only other time that this has come even close was in 2007 and 1999. This tends to indicate a more fragile market. By size or market cap, they would be the third largest country in the world behind the US and China's equity market. Historically in periods of higher interest rates and higher inflation, value stocks tend to do well. At PIMCO, they have 4-5 different equity strategies that are systematic called RAE (Research Affiliates Equity). By being systematic, the strategies are disciplined and diversified, but they're also consistent, meaning 89-97% of every 5-year rolling period for their US Large Cap Value, US Small Cap Value, and their emerging market strategies have been successful. The entire RAE suite seeks to generate top-quartile performance at bottom-quartile fees.

As we conclude this edition of The RPAG Scoop, remember that you have an abundance of resources at your fingertips as an RPAG member, and our support staff is always ready to help you with whatever you need. Keep an eye out for our next edition, coming to you on January 8!

________________________________________