Issue link: https://resources.envestnet.com/i/1527492
18 | Envestnet | PMC Investment Methodology Guide FOR ONE-ON-ONE USE WITH A CLIENT'S FINANCIAL ADVISOR ONLY CIO Support and Investment Consulting Services Supplementary research features, including institutional-quality research, due diligence, consulting, and high-conviction investment solutions are available to enterprises and their advisors that opt for this premium PMC service. Non-PMC Premium Portfolio Attributes In addition to a research status, SMAs, strategist portfolios, mutual funds, and ETFs also may receive one or more portfolio attributes that help provide further insight into the strategy's additional due diligence, level of conviction, or oversight. PMC/QRG Managed Portfolios that are managed by PMC or QRG receive the research status of "Approved-Qualitative" with the "PMC Managed" or "QRG Managed" portfolio attribute, as PMC/QRG actively manages these products and is confident in their investment methodologies. Because all PMC/ QRG managed strategies and funds are designated as "Approved," they do not undergo the same approval process and analysis that non- proprietary strategies do. Oversight of these portfolios lies with PMC/ QRG's Investment Committee. These portfolios follow PMC's asset allocation methodology. Third-party investment vehicles, including mutual funds, indexed mutual funds, ETFs, SMAs, and strategist portfolios separately receive an "Approved" research status as a component piece. ESG, Impact Themes The Sustainable Investing team identifies third-party Mutual Funds, ETFs, SMAs, and Strategists that pursue sustainable investing as a primary objective of the strategy. Envestnet PMC licenses data from Morningstar and also collects some information directly from managers to inform this process. These portfolios receive the "ESG" or one or more "Impact Theme" portfolio attributes along with the "Available," "Approved- Quantitative," "Approved-Qualitative", or "Select" research status. The five "Impact Theme" categories are "Climate", "Conservation", "Diversity", "Community", and "Wellness." When a portfolio receives the "ESG" or "Impact Theme" portfolio attributes, and also receives the "Approved- Qualitative" or "Select" research status, the portfolio undergoes an additional layer of PMC due diligence to explicitly evaluate the ESG or impact approach. Factor-Based The Approved List includes factor- based ETFs and MFs that pass the criteria of PMC's quantitative approval process. These approved MFs and ETFs are passively managed and track non-traditional indices that are constructed using risk factors such as value, quality, and momentum. This ranking methodology screens ETFs and MFs based on five criteria, calculates a weighted-average score of three performance dimensions (tracking error, liquidity, and cost), and then ranks them within their respective peer groups. factor-based ETFs receive the "Approved-Quantitative" research status and the "quantitiative active" portfolio attribute. Emerging Strategy Emerging strategies with this attribute carry a research status of Approved- Qualitative. These portfolios do not meet the Research Team's typical baseline criteria of $100 million in vehicle assets and three years of performance history, but have passed our Emerging Strategy Framework (ESF) and our qualitative due diligence process. Given the higher risk associated with newer and smaller portfolios, the strategy's approval is conditional and can be revoked for a number of reasons, including but not limited to: asset deterioration, faltering performance, significant changes in investment personnel, mandate change, or other material developments. The PMC Research Team monitors these strategies through frequent reviews, which can include statistical analysis, site visits, and qualitative assessments of managers' ability to execute their strategies. If the portfolio reaches $100 million in vehicle AUM and three