ABOUT THE SURVEY The CFA Institute 2015 Global

ABOUT THE SURVEY The CFA Institute 2015 Global Market Sentiment Survey was created to seek input from CFA Institute members and to gather feedback on market sentiment, performance, and market integrity issues and to further our mission of promoting ethical and trustworthy investment markets. METHODOLOGY An online survey was conducted from 14 to 28 October 2014. All CFA Institute members globally (119, 817) were invited to participate in the survey; 5, 259 responded, for an overall response rate of 4% and a margin of error of ± 1. 3%. The CFA Institute Global Market Sentiment Survey is part of the Future of Finance initiative, a longterm global effort to shape a trustworthy, forward-thinking financial industry that better serves society. The initiative provides the tools to motivate and empower the world of finance to promote fairness, improved understanding, and personal integrity. Its success is driven by ongoing input from an advisory council of prominent global leaders and others in the financial community.

CONTENTS 1 Market Predictions 2 Economic Outlook 3 Employment Prospects 4 Trust in Practitioners 5 Market Integrity 6 Market Structure 7 The Way Forward: Implications for Action 8 Respondent Profile

1 MARKET PREDICTIONS The United States and China remain the top picks for equity market performance in the coming year, as was the case in the 2014 survey. Top Picks for Equity Market Performance:

MARKET PREDICTIONS

Euro. Stoxx 50 (SX 5 E) – As of 31 December 2015 MARKET PREDICTIONS 40% Indicates Netherlands responses. Global Average for Predicted Close: 3, 283 26% 14% 9 39 -4 00 40 00 -4 19 9 0% 9 38 00 -3 79 36 00 -3 -3 00 34 99 9 9 59 9 32 00 -3 19 30 00 -3 -2 00 28 39 9 9 1% 99 9 26 00 -2 79 9 59 -2 00 24 22 00 -2 39 9 0% 9 19 -2 00 20 1% 2% 42 5% 4% 0% 6%

S&P 500 (SPX) – As of 31 December 2015 MARKET PREDICTIONS 23% 17% Indicates Netherlands responses. 16% Global Average for Predicted Close: 2, 066 11% 9% 8% 7% 5% 2% 1% 9 23 50 -2 39 9 -2 00 23 -2 50 22 0% 34 9 29 9 00 22 -2 50 21 -2 19 24 9 9 21 00 -2 09 20 50 -2 -2 00 20 14 9 9 04 9 19 50 -1 99 9 19 00 -1 94 9 89 18 50 -1 84 -1 00 18 17 50 -1 79 9 0% Note: Total percentage may not add up to 100% due to rounding

MARKET Nikkei 225 (NKY) – As of 31 December 2015 PREDICTIONS 34% Indicates Netherlands responses. Global Average for Predicted Close: 16, 428 20% 16% 10% 7% 6% 3% 9 99 19 49 19 19 50 000 19 0% 9 99 18 5 00 -1 84 18 0 00 -1 17 050 89 99 9 17 17 00 0 - 17 99 16 050 16 49 9 9 49 00 16 050 15 0 - 15 16 99 49 15 000 15 9 9 0% 9 99 14 0 - 50 14 1% 0 - 1% 9 49 00 0 - 14 99 14 13 50 0 - 13 49 13 000 13 9 0% 1% Note: Total percentage may not add up to 100% due to rounding

MARKET US Treasury 30 -year yield (%) – As of 31 December 2015 PREDICTIONS 31% Indicates Netherlands responses. 22% Global Average for Predicted Close: 3. 46% 18% 10% 6% 5. 5 - 5. 9. 4 -5 25 5. 0% 74 0% 24 0% 5 - 9. 9 -4 75 5 - 4. 74 0% 4. 25 -4 . 4 9 24 4. 4 - 9. 9 -3 75 3. 74 53. 25 -3 . 4 9 24 3. 3 - 9. 9 -2 75 2. 74 52. 9. 4 -2 25 2. 2% 1% 0% 24 0% 2 - -1 75 1. . 7 -1 50 1. . 9 4 9. 4 -1 25 1. 1 - 0% 9 0% 24 0% 1% 4% 4. 4%

Crude Oil Brent ($US/bbl) – As of 31 December 2015 MARKET PREDICTIONS 30% Indicates Netherlands responses. Global Average for Predicted Close: 91 14% 15% 11% 12% 8% 5% 3% 0% 65 -69 2% 0% 70 -74 75 -79 80 -84 85 -89 90 -94 95 -99 100 -104 105 -109 110 -114 115 -119

MARKET Comex Gold ($US/t oz) – As of 31 December 2015 PREDICTIONS 37% Indicates Netherlands responses. 27% Global Average for Predicted Close: 1, 216 17% 11% 4% 9 9 59 15 00 -1 -1 00 14 -1 00 13 49 9 39 9 29 12 00 -1 19 -1 00 11 -1 00 10 90 0 - 09 99 9 89 0 - 9 1% 0% 80 3%

2 2015 Expected Global and Local GDP Growth Rates ECONOMIC OUTLOOK (Top 2 responses by market) Chart Title Global Growth Rate Local Growth 7. 0% 6. 2% 5. 8% 6. 0% 4. 0% 3. 1% 3. 0% 2% 2. 3% 2. 2% 1. 6% 1. 8% 2. 2% 2. 3% 1. 9% 1. 8% 2. 2% 2% 1. 7%1. 6% 2. 4% 2. 6% 2. 1% 2. 3% 2. 1% 1. 6% 1. 2% 1. 0% 0. 9% 0. 5% 0. 3% Brazil France Japan Switzerland Netherlands South Africa Australia Canada UK USA Singapore Hong Kong India 0. 0% China POSITIVE GLOBAL FACTORS: CENTRAL BANK POLICIES, JOB CREATION, AND CONSUMPTION 2. 6% Germany Investment professionals surveyed are cautious about prospects for global economic growth in 2015. 5. 0%

ECONOMIC Biggest Positive Impact on Your Local Market in 2015 OUTLOOK (Top 2 responses by market) Political Stability in Home Market Chart Title Progress of Recovery in Europe Progress of Recovery in China 100% 90% 87% 80% 84% 87% 85% 82% 77% 76% 70% 68% 67% 63% 87% 80% 81% 85% 88% 87% 82% 80% 77% 69% 82% 77% 73% 83% 79% 60% 52% 50% 40% 30% 20% France Brazil Netherlands Switzerland Japan Australia Singapore Hong Kong Canada Germany UK South Africa USA China 0% India 10%

ECONOMIC OUTLOOK Biggest Risk to Global Markets in 2015 *Both responses shown when top choices are within margin of error. GLOBAL RISKS Although the world economy is expected to grow, optimism is tempered by concerns about the potential for continued weakness in developed economies as well as the ongoing effects of political instability.

ECONOMIC OUTLOOK Biggest Risk to Your Local Market in 2015 *Both responses shown when top choices are within margin of error. LOCAL RISKS Of the CFA Institute members surveyed, 57% said that attempts by central banks to end quantitative easing will have a negative impact on their local market, down from 68% last year. 51% forecast the effect of energy prices caused by global unrest in Ukraine and the Middle East will negatively impact their local market.

ECONOMIC OUTLOOK UNDERESTIMATED RISKS Michael H/Getty Images 1. Political risks, including secessionist and nationalistic movements (35%) 2. Demographic trend of aging populations (20%)

3 EMPLOYMENT PROSPECTS Opportunities for investment professionals in India and China brighten. Local Market Employment Outlook

4 TRUST IN PRACTITIONERS Factors Contributing Most to Lack of Trust in the Finance Industry Lack of Ethical Culture within Financial Firms Poor Government Regulation and Enforcement Market Micro Structure I don’t think there is lack of trust in the finance industry Other

Firm-level Action Most Needed to Improve Investor Trust and Confidence (Top 2 Responses by Market) Better Alignment of Compensation with Investor Objectives Zero Tolerance Policy by Top Management for Ethical Breaches Increased Adherence to Ethical Codes & Standards

5 MARKET INTEGRITY Most Underestimated Risk to Global Markets Political risks, including secessionist and nationalistic movements 28% OF MEMBERS HAVE A POSITIVE OUTLOOK ON MARKET INTEGRITY, UP FROM 21% IN 2014. Members rank the most serious issues facing global markets as market fraud, such as insider trading (25%—similar to last year), and the integrity of financial reporting (24%). Impact from the demographic trend of aging populations Pension plan shortfalls and low levels of retirement savings Data privacy and cyber threats Climate change and environmental issues Other

Perspective on Integrity of Global Capital Markets Be Better in 2015 than 2014 Will Be. Will. Better in 2015 than 2014 50% 45% 39% 29% 30% 28% 27% 26% 24% 23% 21% 20% 19% Canada 32% Germany 35% USA 40% Hong Kong 40% 20% Singapore Australia Switzerland South Africa UK France Japan Netherlands Brazil India 0% China 10%

Ranking of Most Serious Ethical Issue Facing Local Market in Coming Year Misaligned incentives of investment management services Mis-selling by financial advisers Market trading practices Integrity of financial reporting Market fraud Disclosure/use of financial derivatives Note: Total percentage may not add up to 100% due to rounding

6 MARKET STRUCTURE Globally Effective Risk Oversight Wanted. Globally, 28% of members indicated that improved regulation and oversight of global systemic risk is the regulatory or industry action most needed in the coming year to help improve investor trust and market integrity. REGULATORY REFORMS ARE NEEDED TO PREVENT FUTURE FINANCIAL CRISES 68% cited need for better bank board risk management 68% called for a requirement that banks impair troubled credit holdings on a more consistent and timely basis 67% cited increased coordination of monitoring systemic risk 66% better risk disclosure

MARKET STRUCTURE Regulatory or Industry Actions Most Needed in the Coming Year to Help Improve Investor Trust and Market Integrity Improved auditing practice and standards Improved corporate governance practices Improved enforcement of existing laws and regulations Improved market trading rules on transparency and frequency of trades Improved regulation and oversight of global systemic risk Improved transparency of financial reporting and other corporate disclosures Note: Total percentage may not add up to 100% due to rounding

7 THE WAY FORWARD: IMPLICATIONS FOR ACTION OUR FINDINGS SHOW THAT THE MOST IMPORTANT AREAS FOR REGULATORS TO ADDRESS ARE: • • Improved regulation and oversight of global systemic risk Improved transparency of financial reporting and other corporate disclosures globally Improved enforcement of existing laws and regulations at the local level Improved corporate governance practices locally OUR FINDINGS SHOW THAT THE MOST IMPORTANT AREAS FOR FIRMS TO FOCUS ON ARE: • • • Better alignment of compensation with investor objectives Zero-tolerance policy by top management for ethical breaches Increased adherence to ethical codes and standards

8 RESPONDENT PROFILE REGIONAL RESPONSE 52% AMERICAS (AMER) 30% EUROPE, MIDDLE EAST AND AFRICA (EMEA) 18% ASIA PACIFIC (APAC) PRIMARY INVESTMENT PRACTICE (TOP 5) JOB FUNCTIONS (TOP 5) EQUITIES 33% FIXED INCOME 17% PRIVATE 4% DERIVATIVES 4% REAL ESTATE 3% PORTFOLIO MANAGER 20% RESEARCH ANALYST 12% CONSULTANT 6% FINANCIAL ADVISER 6% CHIEF-LEVEL EXECUTIVE 6% TOP MARKETS 1, 956 572 264 143 139 138 131 123 111 108 102 94 79 USA CANADA UK CHINA INDIA GERMANY SWITZERLAND SOUTH AFRICA FRANCE HONG KONG AUSTRALIA NETHERLANDS SINGAPORE JAPAN BRAZIL YEARS WORKING IN THE INVESTMENT INDUSTRY 3% NOT APPLICABLE 21% > 20 YEARS 14% 16– 20 YEARS 12% ≤ 5 YEARS 33% 6– 10 YEARS 17% 11– 15 YEARS NOTE: TOTAL PERCENTAGE MAY NOT ADD UP TO 100% DUE TO ROUNDING

RESOURCES Improving Regulation and Shareholder Rights Financial Reporting Disclosures: Investor Perspectives on Transparency, Trust, Proxy Access in the United States: Revisiting the Proposed and Volume SEC Rule Disclosure Initiative: Proposed Amendments to IAS 1, a comment letter to the Non-Preemptive Share Issues in Asia: Role of Regulation in Investor Protection International Accounting Standards Board Review of and Comment on SEC Strategic Plan: Fiscal Years 2014– 2018, a Proposed Statement of Financial Accounting Concepts, a comment letter to the US SEC Financial Accounting Standards Board ESMA Market Abuse Regulation Delegated Acts (ESMA/2014/808), a comment Improving Enforcement letter to the European Securities and Markets Authority Redress in Retail Investment Markets: International Perspectives and Best Practices Removal of Certain Reference to Credit Ratings and Amendment to the Issuer Diversification Requirement in the Money Market Fund Rule, a comment letter Investment Firm Best Practices to the US SEC CFA Institute continues to administer and update the GIPS standards to provide best practices for investment performance reporting. Reducing Global Systemic Risk CFA Institute cosponsors the Systemic Risk Council to address systemic issues. The Asset Manager Code of Professional Conduct now has 1, 000+ firms that claim compliance, with assets under management of more than US$8 trillion. Financial Reporting Transparency Financial Crisis Insights on Bank Performance Reporting, Part 1 and Part 2 Investment professionals can share the Statement of Investor Rights with clients to show their commitment to aligned incentives. Forward-Looking Information: A Necessary Consideration in the SEC’s Review on Disclosure Effectiveness

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