Asset allocation view | Manulife Investment Management

Foresight April 2020: key macro themes and market outlook

COVID-19: a painful disruption, but one that also creates long-term opportunities

The first few months of the year were dominated by COVID-19—a term that few had heard of coming into 2020. The world was ill prepared for the impact and scale of this pandemic, which has led to lockdowns and a still to be determined impact to global growth. The business of forecasting—difficult enough to get right in the best of times—became even more challenging in this climate, as containment efforts rendered traditional month-over-month and year-over-year comparisons largely meaningless, apart from crystalizing the fact that a significant economic contraction is already under way.

That said, as long-term investors who have navigated many episodes of stress, including the global financial crisis of 2007/2008 and the European sovereign debt crisis, we know that this too shall pass. Indeed, as of this writing, there are suggestions that the outbreak in several countries could have peaked, and that the global race to develop effective treatments and vaccines is in an advanced stage. Policy actions across the globe, both in terms of monetary and fiscal stimulus packages, should cushion the economic damage and pave the road to recovery.

As we’ve noted previously, history has shown us that a sharp market correction is usually followed by a rebound of a similar—if not greater—magnitude that unfolds over the following years, and the volatility of investment returns typically normalizes over time. While the seemingly endless stream of breaking news might tempt us into assessing everything through the prism of now, we believe it’s important for investors with longer investment horizons to retain a strategic view: The short-term view may be gloomy, but it doesn’t mean that the dark clouds will be a permanent feature of the picture.

It’s through this lens that we formulate our return forecasts for the various asset classes over the next five years. Our forecasts are derived from a wide number of sources, including input from our macroeconomic strategists who are embedded within the asset allocation team. While our long-term forecasts lean heavily on model-based valuation estimates, we believe that macroeconomic views play an important role in navigating evolving market conditions and in identifying short-term investment opportunities.

Chart of five-year asset class forecasts, expected returns in U.S. dollar terms, as of March 24, 2020. The asset allocation team’s expected five-year return for various asset classes are as follows: 5.5% for U.S. large cap; 8.7% for U.S. mid-cap, 8.2% for U.S. small cap; 9.4% for Canadian large cap; 8% for large cap equities in Europe, Africa and the Far East (also known as EAFE); 8.8% for EAFE small cap; 6.5% for world equities; 7.9% for European equities; 7.4% for Japan equities; 9.2% for equities in all Asian countries excluding Japan, 9.5% for emerging-market equity; 5% for U.S. real estate investment trusts, 6% for global infrastructure; 8.5% for global natural resources; 1.7% for U.S. investment-grade bonds, 7.6% for U.S. high-yield bonds; 6.4% for U.S. bank loans; 2% for U.S. Treasury inflation-protected security; 5.8% for emerging-market debt; and 0.1% for global bonds.

Key macro views

Short-term macroeconomic themes

We expect the COVID-19 shock to create the sharpest global economic contraction since the 1950s; however, we also believe the contraction will occur within a compressed timeframe and will be front loaded in nature. Unlike most past global recessions, the coming recession will be services led as opposed to manufacturing led, which will likely result in larger job losses.
While the contraction is likely to be the largest in modern economic history, we also expect the United States—and the global economy—to bounce back in the second half of the year. In our view, global markets will be more focused on the timing and the speed of the economic recovery than the weakness witnessed in Q2, which many will perceive as transitory. Although we harbor some concerns that the rebound is more likely to be delayed than arrive early, we believe a meaningful re-acceleration seems reasonable by year end.
Aggressive central bank action has reduced the likelihood of a credit crisis, although risks remain and should be closely monitored. We don’t expect the U.S. Federal Reserve (Fed) to pursue negative interest rates, but we believe that short-term interest rates will remain anchored at low levels for a multi-year period.
Announced fiscal measures are significant and we believe that they’ll be more effective at supporting the recovery as opposed to preventing an economic contraction from taking place in Q2. We believe this amount of global fiscal support will be a catalyst to increased inflation in the medium term and is likely to steepen the yield curve.
The recent sharp decline in oil prices is causing additional disruptions in the global economy and financial system. We believe this will be a more significant drag on global growth and markets than consensus currently recognizes.
Absent a second wave of the virus outbreak, we’re likely to see improvements in economic data out of Asia in the short term (even though the region will need to manage several long-term implications arising from the changes that occurred as a result of the outbreak). Meanwhile, we believe several developed markets with high levels of household debt (such as Australia and Canada) are at risk of experiencing a large-scale deleveraging, which could have negative implications for the residential real estate sector.

Longer-term strategic views

With markets significantly off their early Q1 highs, our return expectations, particularly within equity markets, have increased since our last publication. Although stock prices have fallen, valuations are far from inexpensive —in many cases, a lot closer to fair value, in our view. Furthermore, as we expect some re-expansion, investors are likely going to need to be willing to accept higher levels of volatility in the equity markets in order to achieve more robust returns.
Within fixed income, our expectations for government bonds remain in the low single digits across the globe. We see credit—both investment grade (IG) and non-IG—as being a quite attractive alternative and the risk more moderate in relation to equities.
We expect the extraordinary easing measures announced by global central banks in the first quarter of 2020—including a return to the effective lower bound of central bank policy rates—to be maintained for several years. Indeed, we don’t expect global central banks to be able to raise interest rates over the next five years, as key conditions for higher interest rates are unlikely to be met.
We’ve long believed that search for yield is a key investment theme that will dominate the financial markets. It’s now likely to be even more prominent in the midst of extremely low interest rates. We continue to favor asset classes that provide positive carry, such as emerging-market (EM) debt.
We believe the economic shock brought about by the COVID-19 outbreak will likely be deflationary in the near term but the combination of substantial monetary and fiscal packages will likely generate higher inflation expectations in the medium term. This is likely to lead to steeper global yield curves over the five-year forecast horizon. This represents a change in our view—prior to the outbreak, we believed that the curve would remain fairly flat over the strategic horizon.
We believe U.S. dollar (USD) strength is approaching its peak and expect the currency to weaken over the forecast horizon. The Fed’s efforts to address issues relating to the global shortage of the USD (and therefore USD liquidity) should also curb the currency’s strength. A weaker greenback should provide some mild to moderate support to several key non-U.S. asset classes such as EMs and other developed-market equities and bonds.
Growth in China, the world’s second-largest economy, is likely to continue to structurally decelerate, creating downside pressure on global trade activity on a long-term basis and weigh on global manufacturing activity. In our view, the combination of rising global tariffs and the shutting of borders—in the midst of COVID-19—will reduce globalization efforts and threaten global supply chains. That said, for both valuation and carry reasons, we continue to view EMs favorably over our forecast horizon.

Table outlining the asset allocation team’s short and long-term view of various fixed-income assets. The team’s thoughts on U.S. government bonds in the short-term: “On one hand, we believe weakness in both the United States and the global economy will last longer than current consensus estimates suggest, which should keep interest rates low. That said, although the Fed and U.S. government are providing significant support and liquidity to the economy, the risk of solvency issues remains, and cascading credit events could emerge should the economy remain closed for many more months.” Their thoughts on U.S. government bonds in the long term: “While we expect the Fed to keep the front end of the U.S. Treasury curve low, the introduction of significant fiscal measures and the potential corresponding rise in inflation expectations mean longer-duration Treasuries will weaken the appeal of this asset class.” The team’s short term views on emerging-market debt: “We expect most, if not all, major EM central banks to continue with monetary easing in a significant manner. In our view, Asia in particular is likely to benefit in the very short term from a resumption of activity in China. Stability in the USD and a mild to moderate resumption in risk appetite will create a short- and near-term pocket of strength for this asset class. However, we’re concerned that global growth—despite stabilizing—could remain at very depressed levels, and recent USD appreciation will strain the asset class for some time, even as we expect some of it to be unwound. While we have a positive view of the asset class, these factors do place a cap on return expectations and outlook.” The team’s long-term view on emerging-market debt: “The quality of EM debt has been improving on a structural basis, and we view the asset class as a higher-quality credit relative to U.S. HY and loans; we also favor the carry available in this asset class. Within the group, we expect local currency sovereign debt to provide slightly better returns than USD-denominated EM debt. Broadly speaking, we believe EM debt stands out from a total return perspective and will benefit from the gradual softening of the USD over this period.” The team’s short-term views on European government bonds: “We expect European short-term sovereign yields to remain at current levels or to move lower in the near term. Given that economic conditions in Europe are in a weaker state than the United States, it’s likely that we could see a higher number of corporate defaults in Europe.” Their long-term view of European government bonds: “We find the Japanification of Europe (i.e., sustained deflationary pressure and weak demographics) problematic and expect the region’s central banks to keep interest rates low for a longer period than most of the developed markets.” The team’s short-term views on Canada government bonds: “We expect investment returns in this asset class to remain lower than their U.S. counterparts because of smaller yield differentials between them. We also expect the COVID-19 outbreak to have a deeper and more pronounced economic impact in Canada than the United States, given the country’s relatively higher debt level and the comparatively lower savings rate of Canadian households.” Their long-term view on Canada government bonds: “In our view, Canadian fixed income could benefit from a stronger Canadian dollar (CAD) (in the form of enhanced currency returns), but it’s likely to be offset by negative price returns. We expect U.S. IG bonds to marginally outperform Canadian fixed income in part because of the larger valuation reset that’s already taken place in that segment.” The team’s short-term view of Japan government bonds: “In the short term, we expect minimal movement on the rates front since the Bank of Japan’s yield curve control mechanism places a cap on any upside movement in yield. The strengthening Japanese yen—partly a result of its reputation as a safe haven amid uncertainty—is a modest source of upside potential for this asset class.” Their long-term view of Japan government bonds: “We expect interest rates in Japan to remain at or near 0% for the next few years, subject to some volatility. Inflationary pressure in the country is likely to remain negligible throughout our five-year forecast period, and total return in this asset class is likely to be relatively muted.” The team’s short-term view of global credit: “Investment grade corporate bonds are very attractively priced relative to sovereign bonds, especially against the context of central bank buying programs. We think high yield bonds may look more compelling than some equities as the asset class has more negativity priced into current levels.” The team’s long-term view of global credit: “We view HY and leveraged loans more favorably than U.S. IG bonds. In our view, HY should benefit from the relatively benign interest-rate environment, and the recent COVID-19-induced valuation reset makes the segment more attractive than it was even six months ago. We remain cautious on certain sectors of the high yield market—energy as an example —but believe there’s good room to run within the segment over the upcoming five years.”

xpected five-year returns for U.S. investment grade bonds is broken down as the following: income return, 2.2%; price return, -0.5%; expected total return, 1.7%. Expected total return in Canadian dollar terms, 1.1%. Expected total return in euro terms, 0.8%. Expected total return in British pound terms, 0.1%. Expected five-year returns for Canada investment grade bonds is broken as the following: income return, 2%; price return, -0.8%; currency return, 0.7% expected total return, 1.9%. Expected total return in Canadian dollar terms, 1.3%. Expected total return in euro terms, 1%. Expected total return in British pound terms, 0.3%. Expected five-year returns for U.S. high-yield is broken down as the following: income return, 7.5%; price return, 0.1%; expected total return, 7.6%. Expected total return in Canadian dollar terms, 6.8%. Expected total return in euro terms, 6.6%. Expected total return in British pound terms, 5.9%. Expected five-year returns for U.S. bank loans is broken down as the following: income return, 6.25; price return, 0.2%; expected total return, 6.4%. Expected total return in Canadian dollar terms, 5.7%. Expected total return in euro terms, 5.4%. Expected total return in British pound terms, 4.7%. Expected five-year returns for U.S. Treasury inflation-protected securities is broken down as the following: income return, 0.5%; price return, 1.4%, expected total return, 2%. Expected total return in Canadian dollar terms, 1.3%. Expected total return in euro terms, 1%. Expected total return in British pound terms, 0.3%. Expected five-year returns for emerging-market debt is broken down as the following: income return, 6.1; price return, -0.4%; currency return, 0.2%; expected total return, 5.8%. Expected total return in Canadian dollar terms, 5.1%. Expected total return in euro terms, 4.8%. Expected total return in British pound terms, 4.1%. Expected five-year returns for Asia investment grade bonds is broken as the following: income return, 2.5%; price return, -0.6%; currency return, -0.6%; expected total return, 1.3%. Expected total return in Canadian dollar terms, 0.6%. Expected total return in euro terms, 0.4%. Expected total return in British pound terms, 0.3%. Expected five-year returns for the multiverse is broken as the following: income return, 1.5%; price return, -0.4%; currency return, 1%; expected total return, 2.1%. Expected total return in Canadian dollar terms, 1.4%. Expected total return in euro terms, 1.2%. Expected total return in British pound terms, 0.5%.

Table showing five-year return forecast for developed market equities in U.S. dollar terms, as of March 24, 2020. Expected five-year returns for U.S. large cap is broken down as the following: income return, 1.8%; nominal gdp/growth, 5.2%; valuation, -1.4%; expected total return, 5.5%. Expected total return in Canadian dollar terms, 4.8%. Expected total return in euro terms, 4.6%. Expected total return in British pound terms, 3.8%. Expected five-year returns for U.S. mid cap is broken down as the following: income return, 1.7%; nominal gdp/growth, 5.5%; valuation, 1.4%; expected total return, 8.7%. Expected total return in Canadian dollar terms, 7.9%. Expected total return in euro terms, 7.7%. Expected total return in British pound terms, 6.9%. Expected five-year returns for U.S. small cap is broken down as the following: income return, 1.7%; nominal gdp/growth, 5.1%; valuation, 1.4%; expected total return, 8.2%. Expected total return in Canadian dollar terms, 7.5%. Expected total return in euro terms, 7.2%. Expected total return in British pound terms, 6.5%. Expected five-year returns for Canada large cap is broken down as the following: income return, 3.1%; nominal gdp/growth, 3.7%; valuation, 1.8%; currency returns (against the U.S. dollar) is 0.7%. Expected total return is U.S. dollar terms is 9.4%. Expected total return in Canadian dollar terms, 8.7%. Expected total return in euro terms, 8.4%. Expected total return in British pound terms, 7.6%. Expected five-year returns for Canada small cap is broken down as the following: income return, 2.7%; nominal gdp/growth, 4.1%; valuation, 2.7%; currency returns (against the U.S. dollar) is 0.7%. Expected total return is U.S. dollar terms is 10.3%. Expected total return in Canadian dollar terms, 9.6%. Expected total return in euro terms, 9.3%. Expected total return in British pound terms, 8.6%. Expected five-year returns for Europe, Africa and Far East large cap is broken down as the following: income return, 3.3%; nominal gdp/growth, 2.6%; valuation, 1.2%; currency returns (against the U.S. dollar) is 0.8%. Expected total return is U.S. dollar terms is 8%. Expected total return in Canadian dollar terms, 7.2%. Expected total return in euro terms, 7%. Expected total return in British pound terms, 6.2%. Expected five-year returns for Europe, Africa and Far East small cap is broken down as the following: income return, 2.6%; nominal gdp/growth, 3.2%; valuation, 2%; currency returns (against the U.S. dollar) is 0.8%. Expected total return is U.S. dollar terms is 8.8%. Expected total return in Canadian dollar terms, 8.2%. Expected total return in euro terms, 7.8%. Expected total return in British pound terms, 7%. Expected five-year returns for world equities is broken down as the following: income return, 2.4%; nominal gdp/growth, 4.3%; valuation, -0.5%; currency returns (against the U.S. dollar) is 0.3%. Total return is U.S. dollar terms is 6.5%. Expected total return in Canadian dollar terms, 5.8%. Expected total return in euro terms, 5.5%. Expected total return in British pound terms, 4.8%. Expected five-year returns for Europe equities is broken down as the following: income return, 3.6%; nominal gdp/growth, 2.8%; valuation, 0.4%; currency returns (against the U.S. dollar) is 1%. Expected total return is U.S. dollar terms is 7.9%. Expected total return in Canadian dollar terms, 7.2%. Expected total return in euro terms, 6.9%. Expected total return in British pound terms, 6.2%. Expected five-year returns for Japan equities is broken down as the following: income return, 2.3%; nominal gdp/growth, 1.3%; valuation, 3.1%; currency returns (against the U.S. dollar) is 0.5%. Expected total return is U.S. dollar terms is 7.4%. Expected total return in Canadian dollar terms, 6.7%. Expected total return in euro terms, 6.4%. Expected total return in British pound terms, 5.7%.

Table showing five-year return forecast for Asia and emerging-market equities in U.S. dollar terms, as of March 24, 2020 Expected five-year returns for emerging-market equities is broken down as the following: income return, 2.6%; nominal gdp/growth, 5.4%; valuation, 1.4%. Expected total return is U.S. dollar terms is 9.5%. Expected total return in Canadian dollar terms, 8.8%. Expected total return in euro terms, 8.5%. Expected total return in British pound terms, 7.8%. Expected five-year returns for Latin America equities is broken down as the following: income return, 3.1%; nominal gdp/growth, 5.6%; valuation, 1.4%; currency returns (against the U.S. dollar) is 1%. Expected total return is U.S. dollar terms is 11.3%. Expected total return in Canadian dollar terms, 10.6%. Expected total return in euro terms, 10.3%. Expected total return in British pound terms, 9.6%. Expected five-year returns for Brazil equities is broken down as the following: income return, 3.2%; nominal gdp/growth, 6%; valuation, -0.2%; currency returns (against the U.S. dollar) is 1.2%. Expected total return is U.S. dollar terms is 10.3%. Expected total return in Canadian dollar terms, 9.5%. Expected total return in euro terms, 9.3%. Expected total return in British pound terms, 8.5%. Expected five-year returns for all-countries Asia excluding Japan is broken down as the following: income return, 2.7%; nominal gdp/growth, 5.1%; valuation, 1.3%. Expected total return is U.S. dollar terms is 9.3%. Expected total return in Canadian dollar terms, 8.5%. Expected total return in euro terms, 8.3%. Expected total return in British pound terms, 7.5%. Expected five-year returns for India equities is broken down as the following: income return, 1.3%; nominal gdp/growth, 8.1%; valuation, 0.8%; currency returns (against the U.S. dollar) is -0.5%. Expected total return is U.S. dollar terms is 9.6%. Expected total return in Canadian dollar terms, 8.9%. Expected total return in euro terms, 8.6%. Expected total return in British pound terms, 7.9%. Expected five-year returns for China equities is broken down as the following: income return, 2.0%; nominal gdp/growth, 5.3%; valuation, 0.9%; currency returns (against the U.S. dollar) is -1%. Expected total return is U.S. dollar terms is 7.3%. Expected total return in Canadian dollar terms, 6.6%. Expected total return in euro terms, 6.3%. Expected total return in British pound terms, 5.6%. Expected five-year returns for Hong Kong equities is broken down as the following: income return, 3.2%; nominal gdp/growth, 3.3%; valuation, 2.3%. Expected total return is U.S. dollar terms is 8.8%. Expected total return in Canadian dollar terms, 8.1%. Expected total return in euro terms, 7.9%. Expected total return in British pound terms, 7.1%. Expected five-year returns for Taiwan equities is broken down as the following: income return, 3.6%; nominal gdp/growth, 2.7%; valuation, 0.3%; currency returns (against the U.S. dollar) is 0.8%. Expected total return is U.S. dollar terms is 7.4%. Expected total return in Canadian dollar terms, 6.7%. Expected total return in euro terms, 6.4%. Expected total return in British pound terms, 5.7%. Expected five-year returns for S. Korea equities is broken down as the following: income return, 2.3%; nominal gdp/growth, 4.8%; valuation, 1.9%; currency returns (against the U.S. dollar) is 1.3%. Expected total return is U.S. dollar terms is 10.5%. Expected total return in Canadian dollar terms, 9.8%. Expected total return in euro terms, 9.5%. Expected total return in British pound terms, 8.8%. Expected five-year returns for Singapore equities is broken down as the following: income return, 4.3%; nominal gdp/growth, 3.7%; valuation, 3.3%; currency returns (against the U.S. dollar) is 1.3%. Expected total return is U.S. dollar terms is 12.8%. Expected total return in Canadian dollar terms, 12.1%. Expected total return in euro terms, 11.8%. Expected total return in British pound terms, 11.0%.

Table outlining the asset allocation team’s short and long-term view of alternatives/real assets. The team’s thoughts on U.S. real estate investment trusts in the short-term: “U.S. REITs have been significantly impacted in the recent market dislocation. In our view, the outlook for the sector remains fairly uncertain given unknowns such as rent collection and recovery after being effectively shut down as part of the COVID-19 containment measures. Fundamentals are expected to be weak in the short term as landlords look to work with their tenants to agree on a way forward—a development that could lead to reduced income.” Their thoughts on U.S. real estate investment trusts in the long term: “REITs are certainly at more compelling valuations and we expect a rebound to take place over the coming five years. While we expect yields offered by the asset class to be superior relative to many IG bonds, the anticipated recovery will likely vary according to asset type with segments such as Industrial and multi-family residences outpacing retail, lodging, and senior housing. As a result, returns may be choppy, and we could see reductions in dividends.” The team’s thoughts on global natural resources in the short-term: “With oil at historic lows and not expected to move significantly off these levels in the short term, we’re avoiding this space at the moment. Energy is attractive, but we’re looking for clearer signs that oil inventories are falling—as production cuts occur and storage declines—to become more positive on the asset class. We’re positive on gold as a safe haven investment during this period of volatility.” Their thoughts on U.S. real estate investment trusts in the long term: “We expect a strong rebound in oil prices over the five-year horizon, which should provide a boost to the asset class; however, there still remains tension between Russia and the Middle East that may temper this rise Significant fiscal and monetary stimulus may increase not only economic activity but also inflation in the longer term, which could be very beneficial for global natural resources, especially if supply doesn’t increase substantially.” The team’s thoughts on hard assets (real estate in the United States and Canada) in the short-term: “While we tend not to make significant shifts in this asset class in the short term due to liquidity issues, it’s worth noting that hard assets in the United States and Canada have been fairly resilient amid the current market turmoil. That said, the asset class is also facing uncertainties: for instance, within direct real estate, rent collection may be delayed as a result of the temporary lockdown.” Their thoughts on hard assets (real estate in the United States and Canada) in the long term: “Commercial real estate isn't immune to significant economic shocks, but we believe private real estate can provide several benefits within a diversified portfolio that should become increasingly apparent during an economic downturn, such as the one we're in. We continue to have a favorable view of the asset class as the characteristics of income generation, return stability, and low correlation with other asset classes continue to appeal. In our view, fundamentals within the hard assets space should rebound post-COVID-19.”

Table showing five-year return forecast for alternatives/real assets in U.S. dollar terms, as of March 24, 2020 Expected five-year returns for U.S. real estate investment trusts is broken down as the following: income return, 4%; nominal gdp/growth, 1.8%; valuation, -0.8%; Expected total return is U.S. dollar terms is 5.1%. Expected total return in Canadian dollar terms, 4.4%. Expected total return in euro terms, 4.1%. Expected total return in British pound terms, 3.4%. Expected five-year returns for global natural resources is broken down as the following: income return, 4.6%; nominal gdp/growth, 3.7%; valuation, 0%; currency returns (against the U.S. dollar) is 0.2%. Expected total return is U.S. dollar terms is 8.5%. Expected total return in Canadian dollar terms, 7.7%. Expected total return in euro terms, 7.5%. Expected total return in British pound terms, 6.7%. Expected five-year returns for global listed infrastructure is broken down as the following: income return, 3.4%; nominal gdp/growth, 3.4%; valuation, -1%; currency returns (against the U.S. dollar) is 0.3%. Expected total return is U.S. dollar terms is 6%. Expected total return in Canadian dollar terms, 5.3%. Expected total return in euro terms, 5%. Expected total return in British pound terms, 4.3%. Expected five-year returns for commodities is broken down as the following: collateral, 0.5%; nominal gdp/growth, 1.1%; inflation, 1.9%; roll yield, 0.3%; and diversification, 1%. Expected total return is U.S. dollar terms is 4.8%.

Table showing five-year return forecast for hard assets in U.S. dollar terms, as of March 24, 2020 Expected five-year returns for global farmland is between 8%–10%; historical standard deviation is over the period is expected to be 4.5. Expected five-year returns for global timberland is between 6%–9%; historical standard deviation is over the period is expected to be 6.6. Expected five-year returns for U.S. commercial real estate is between 6%–8%; historical standard deviation is over the period is expected to be 7.6. Expected five-year returns for Canadian commercial real estate is between 6%–8%; historical standard deviation is over the period is expected to be 3.5. Expected five-year returns for U.S. infrastructure is between 9%–14%.

Index definitions

Cambridge Associates LLC Infrastructure Index
The Cambridge Associates LLC Infrastructure Index is a horizon calculation based on data compiled from 93 infrastructure funds, including fully liquidated partnerships, formed between 1993 and 2015.

MSCI/REALPAC Canada Quarterly Property Fund Index
The MSCI/REALPAC Canada Quarterly Property Fund Index tracks unlisted open-end real estate funds operating in Canada. The index measures the investment performance at the property and fund level.

NCREIF Farmland Index
The NCREIF Farmland Index is a quarterly time series composite return measure of investment performance of a large pool of individual farmland properties acquired in the private market for investment purposes only.

NCREIF Timberland Index The NCREIF Timberland Index is a quarterly time series composite return measure of investment performance of a large pool of individual U.S. timber properties acquired in the private market for investment purposes only.

NFI–ODCE
The NCREIF Fund Index–Open-End Diversified Core Equity (NFI–ODCE) is a fund-level capitalization-weighted, time-weighted return index that includes property investments at ownership share, cash balances, and leverage.

It is not possible to invest directly in an index.

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Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than 150 years of financial stewardship to partner with clients across our institutional, retail, and retirement businesses globally. Our specialist approach to money management includes the highly differentiated strategies of our fixed-income, specialized equity, multi-asset solutions, and private markets teams—along with access to specialized, unaffiliated asset managers from around the world through our multimanager model.

These materials have not been reviewed by, are not registered with any securities or other regulatory authority, and may, where appropriate, be distributed by the following Manulife entities in their respective jurisdictions. Additional information about Manulife Investment Management may be found at www.manulifeim.com/institutional

Australia: Hancock Natural Resource Group Australasia Pty Limited., Manulife Investment Management (Hong Kong) Limited. Brazil: Hancock Asset Management Brasil Ltda. Canada: Manulife Investment Management Limited, Manulife Investment Management Distributors Inc., Manulife Investment Management (North America) Limited, Manulife Investment Management Private Markets (Canada) Corp. China: Manulife Overseas Investment Fund Management (Shanghai) Limited Company. European Economic Area and United Kingdom: Manulife Investment Management (Europe) Ltd. which is authorised and regulated by the Financial Conduct Authority, Manulife Investment Management (Ireland) Ltd. which is authorised and regulated by the Central Bank of Ireland Hong Kong: Manulife Investment Management (Hong Kong) Limited. Indonesia: PT Manulife Aset Manajemen Indonesia. Japan: Manulife Investment Management (Japan) Limited. Malaysia: Manulife Investment Management (M) Berhad (formerly known as Manulife Asset Management Services Berhad) 200801033087 (834424-U) Philippines: Manulife Asset Management and Trust Corporation. Singapore: Manulife Investment Management (Singapore) Pte. Ltd. (Company Registration No. 200709952G) South Korea: Manulife Investment Management (Hong Kong) Limited. Switzerland: Manulife IM (Switzerland) LLC. Taiwan: Manulife Investment Management (Taiwan) Co. Ltd. United States: John Hancock Investment Management LLC, Manulife Investment Management (US) LLC, Manulife Investment Management Private Markets (US) LLC and Hancock Natural Resource Group, Inc. Vietnam: Manulife Investment Fund Management (Vietnam) Company Limited.

Manulife Investment Management, the Stylized M Design, and Manulife Investment Management & Stylized M Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its affiliates under license.

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