Fund Review dgroup.com

Fu nd Review

Butterfield Asset Management Limited

Select Invest Fund: Growth Class

Quarter 1 2019

Objective

To offer a convenient vehicle for investing in an international portfolio of mutual funds or exchange traded funds, which are anticipated to provide the best opportunities for longterm capital growth and accumulated income across a range of risk tolerance classes.

Investment policy

The Fund seeks to invest in various weightings of three broad asset classes; Equities, Fixed Income and Alternatives. The Fund achieves this by allocating its assets to either the Butterfield Select Fund's Share Classes or mutual funds and ETF's that invest in Equities, Fixed Income and Alternatives. Investments will be made on long-term strategic basis and allow for a short to medium term tactical shifts in keeping with the overall objective of each class.

Key facts as at 31 March 2019

Currency Valuation Dealings Front end fee Units available Identifier Fiscal year end Minimum investment Total expense ratio Size of fund (millions) NAV per share

USD Weekly Thursday None Accumulation BSIFIGR BH 30 June USD 1,000 0.43% USD 2.89 USD 14.08

Lower return potential

Higher return potential

Risk profile Your time horizon

Lower risk

select

select

Select Fund: Equity Select Fund: Alternative Select Fund: Global Fixed Income

Higher risk

Positioning

Equity Bonds Alternative

Underweight

Neutral

Overweight

Average annual compound returns

Total returns Index returns

Quarter 11.22% 10.56%

Year to date 11.22% 10.56%

1 year 1.66% 3.44%

3 years 6.64% 8.90%

5 years 3.40% 5.70%

Fund review

The Equity class produced a quarterly return of 13.88%, net of fees, in Q1 of 2019. This was ahead of the 12.48% return of the MSCI World (Free) Index benchmark. Global equity markets performed strongly over the quarter and recovered much of the losses experienced in the fourth quarter of last year. The combination of growth stabilising in China and the Federal Reserve pivot to suggest no further rate rises this year has been positive and has lifted investor sentiment. Growth forecasts have continued to be revised down, led by Europe, but the US economy appears more resilient and is benefiting from a more positive housing outlook, after a period of weakness last year. The first quarter was a difficult one for active managers, but pleasingly seven out of our eight active managers managed to outperform their respective benchmarks. The American Century Global Growth fund was the best performing fund and returned 17%, 4.9% ahead of their benchmark. Performance was driven by good stock selection, particularly in the largest markets sectors of Health Care, Technology and Financials. Growth stocks again



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outperformed value stocks in the quarter and the Wellington Global Growth fund was also a beneficiary of this. The fund generated the majority of relative returns from stock selection, which is positive after a weaker year last year. US equity markets proved a difficult place for active managers; however the Lazard US Equity Concentrated fund performed well as large overweight holdings in the Technology sector did particularly well. Overall, the market had the best Q1 since 1987. The market has priced in a more optimistic outlook and we expect economic and earnings growth to pick up again in the second half of this year.

The Alternative Class returned 1.67% in Q1 of 2019, slightly behind the HFRX Global Index return of 2.60%. Hedge funds reduced risk exposure in Q4 last year, so broadly speaking, were not well positioned for the rally this year. However, they generally added market exposure during the quarter. The equities strategies drove performance over the period as they benefitted from a positive backdrop for global equities. Healthcare specialists were large drivers of performance within the portfolio and directional equities continued to perform well. Short biased credit managers struggled over the quarter as credit markets performed very well. Long volatility-oriented strategies also detracted from performance, as the repricing of volatility observed during January and February continued in March.

The Global Fixed Income Class produced a return of 4.01%, net of fees in Q1, which was above the 3.13% return for the fund's benchmark. The fund has been a beneficiary of the rally in risk assets, after a volatile end to 2018, as credit spreads tightened and inflation expectations rose. This led to increases in the value of the fund's corporate bonds and U.S. Treasury inflation protected securities. One of the key drivers of Fixed Income markets over the quarter was the change in communication from the Federal Reserve, after guiding markets that base rates were far from neutral throughout Q3 2018, which led to market turmoil, monetary

policy has again turned easy, with a pledge to refrain from further base rate increases in 2019 and a halt to the tightening of the balance sheet. Both of these actions are clearly good news for risk assets and will contain the rise in bond yields in the short term. Given this backdrop, U.S. bond yields continued to decline in Q1 as the prospect of additional interest rate increases by the Federal Reserve fell sharply. The yield on the US 2-year note ended the quarter at 2.26% falling by 71bps since the high in November, whilst the 10-year yield ended the quarter at 2.41% which led to an inversion of the U.S. yield curve at shorter maturities. Due to the relative accuracy the yield curve has had in predicting recessions in the past, the bond market appears to have positioned itself for a further decline in growth, however U.S. economic data does not concur as activity in Q1 may surprise markets. We originally expected the Federal Reserve to increase rates by another 50bps over the course of 2019 however, given the recent dovish tilt by the Fed, which was a sharp reversal of where policy was only a few months ago, rates should be on hold all year. But we continue to believe growth will stabilize placing pressure on policy makers by late 2019. We therefore continue to position the fund underweight interest rate risk to avoid capital losses and overweight corporate credit to benefit from the resumption of easy monetary policy.

Asset allocation

select

Select Fund: Equity Select Fund: Alternative Select Fund: Global Fixed Income

81% 14%

4%

Top 10 holdings

1selectBNY Mellon Long-Term Global Equity

2

American Century Global Growth

3

Wellington Global Opportunities

4

Lazard US Concentrated

5

MFS Global Equity

6

MFS US Value Fund

7

Artisan Value Fund

8

Schroders QEP Global Core

9

Wisdomtree Japan Hedged ETF

10 DBX MSCI Europe ETF

13.04% 11.60% 10.41% 10.11% 10.09%

6.99% 5.67% 4.73% 3.66% 2.62%

Benchmark composition

80% MSCI World (Free), 10% B of A Merrill Lynch 5-10 Yr US Gov/Corp AAA-A Rated, 10% HFRX Global Hedge Fund.

Contact us

Butterfield Asset Management Limited

Tel: (441) 299 3817

Fixed income allocation

Equity sector allocation select

select

Corporate US Government SAS Securitised/Collateralised Emerging Markets Cash

60% 21%

9% 7% 2% 1%

select

North America Europe developed Asia/Pacific UK Emerging markets

65% 15%

7% 8% 4%

Alternative strategy allocation select

select

Cash Equities Macro Relative value Quantitative Credit

39% 24% 15% 11%

9% 3%



select Past performance is not indicative of future performance. This document is for information purposes only and does not constitute an offer or solicitation of products or services where prohibited by

applicable law. Further, this document is not intended to provide specific investment, financial, accounting, legal or tax advice and no reliance should be placed on the information it provides. Butterfield Asset Management Limited and Butterfield Bank (Cayman) Limited are each wholly-owned subsidiaries of The Bank of N.T. Butterfield & Son Limited. Butterfield Asset Management Limited is licensed to conduct investment business by the Bermuda Monetary Authority. Registered office address: 65 Front Street, Hamilton HM12, Bermuda. Butterfield Bank (Cayman) Limited is licensed to conduct securities investment business by the Cayman Islands Monetary Authority. Registered office address: Butterfield Place, 12 Albert Panton Street, PO Box 705, Grand Cayman KY1-1107, Cayman Islands.

? 2019, The Bank of N.T. Butterfield & Son Limited / REV.24.04.19

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