Goldman Sachs Investment Outlook Performance Summary (2013‑2016)

Exhibit 21: Historical Total Returns vs. ISG’s 2013 Outlook 5-Year Prospective Total Returns Our 5-year return forecasts have so far been relatively accurate for the bulk of assets in our diversified model portfolio, but we have not been right across the board. % Annualized 20 mw 5-Year Annualized Projected Return—As of December 31, 2012 Actual Annualized Returns—Since December 31, 2012 15 14 Nn 18 10-Year Muni 1-10 S&P 500 Treasuries US High Yield = Hedge Funds Data through December 31, 2016. Note: Rounded to the nearest whole integer. Source: Investment Strategy Group, Datastream. Japanese 15 14 1 1 a 4 ; 10 6 8 f 2 5 5 4 4 = ad al 2 “5 Emerging Market EAFE Equity EMEquity(US$) Euro Stoxx 50 US Banks Equity Local Debt have also been relatively accurate for the bulk of assets in our diversified model portfolio. In Exhibit 21, we compare the five-year annualized expected total returns published in our 2013 Outlook to what transpired over the last four years. Our forecasts for 1) fixed income returns including both investment grade and high yield, 2) hedge fund returns, and 3) EAFE equity returns were close to the mark. Directionally, we were also right about US equity returns but off in terms of magnitude. We were also struck by how close our US bank sector return forecasts were to the realized returns—approximately a quarter of which were realized after the November election. This observation has reinforced our belief in one of the pillars of our investment philosophy: having the appropriate horizon for various strategies is critical to long-term success. Not surprisingly, we have not been right across the board. We underestimated Japanese equity returns by 11.4 percentage points on an annualized basis and we overestimated emerging market equity and emerging market local debt returns, by sizable 13.5 and 12.1 percentage points, respectively, on an annualized basis. Japanese equities realized an annualized 18% return and EM equity and local debt realized negative returns, at -2% and -5% annualized, respectively. While our forecasts were off the mark, our emerging market investment recommendations were on the mark. In mid-2013, we recommended clients reduce their strategic allocation to emerging market assets. Even though we had forecast expected returns that were nearly double those of US equities, we became Investment Management Division Insight Emerging Markets: As the Tide Goes Out = _ “It’s only when the tide goes out that you learn who's been swimming naked.” Warren Buffett, 1982 Letter to Berkshire Hathaway Shareholders 22 | Goldman Sachs | JANUARY 2017 HOUSE_OVERSIGHT_014555