Spruce Launches Laurel “Machine Learning” Driven ETF Portfolios for Investors and Financial Advisors

STAMFORD, Conn., April 16, 2019 /PRNewswire/ — Spruce Investment Advisors, an asset
manager and outsourced investment office for family offices, charitable institutions, registered
investment advisors and institutions, today announced the launch of two machine learning driven
portfolios that are comprised of various US sectors and Emerging Market countries using
exchange traded funds (“ETFs”). Named by Spruce as “Laurel,” the Laurel separate account ETF
portfolios aim to combine the low cost and ease of use of ETFs with machine learning
technologies to create defensive portfolios designed to adapt to changing market conditions.

Spruce’s Laurel portfolios aim to capture most of the S&P 500 or emerging market upside
while avoiding larger future market declines. Laurel’s signal processing technology analyzes ETF
behavior in an effort to identify when markets, countries or sectors are behaving normally (i.e.
“fair weather”) and likely to generate positive future returns, and conversely when those same
markets are behaving abnormally (i.e. “foul weather”) and more likely to lead to losses. When
the Laurel’s self-learning optimizer cannot find enough fair weather sectors or countries, it
allocates to cash.

Laurel portfolios are designed to be simple, transparent, and liquid, do not have gates or side
pockets, do not use leverage or derivatives, and do not charge incentive fees. The underlying
ETFs are available on most custodial platforms and offer daily transparency and monthly
detailed performance reporting.

“We are excited about the machine learning technology behind our Laurel portfolios and the
defensive approach we feel it can provide to passive ETFs,” said John Bailey, Founder and
Managing Partner of Spruce Investment Advisors. “Given the lateness of the current business
cycle, rising market complexity, and the growing impact of algorithmic trading on market
volatility, we feel creating an “early warning” system gives equity investors a crucial tool to grow
assets while proactively managing portfolio risk.”

Mr. Bailey continued, “In our view the highest value-add for these portfolios is designed to
come during times of significant market stress, a characteristic that Spruce believes makes
Laurel portfolios timely for today’s aging bull market.”

The Laurel portfolios do not forecast returns, screen for sales or valuations, or predict earnings
growth. Rather, Laurel holdings are determined independently based on the fair weather or
foul weather behavior of each sector or country, including price action, relative volatility, and
timescale analysis. Spruce believes ETFs exhibiting fair weather behavior are more likely to
generate positive returns, while foul weather is likely to underperform cash and result in losses.

For example, the Laurel portfolios’ application of signal processing and machine learning
technologies may detect increasingly volatile behavior in an energy sector ETF that, based
upon analysis of various risk metrics, is expected to have future losses. To avoid potential future
loss, the energy ETF exposure would be avoided or liquidated in favor of normally behaving
sectors favored by the model, e.g. healthcare. As fewer normally behaving ETFs are found, the
Laurel portfolio construction process increases cash holdings. A similar portfolio construction
process is applied to our emerging markets Laurel portfolios.

About Spruce Investment Advisors
Based in Stamford, CT, Spruce Investment Advisors, LLC, is an asset manager and outsourced
investment office for family offices, charities, registered investment advisers and institutions.
Since 2001, Spruce has focused on ETFs as well as alternative investments including hedge
funds, private equity, and private real assets. For more information,

This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any
interest in any investment vehicle, and should not be relied on as such. Nor does this
document, disclose the risks or terms of an investment in any investment vehicle managed by
Spruce or any of its affiliates. The opinions, estimates, and investment strategies and views
expressed in this document are based upon current market conditions and/or data and
information provided by unaffiliated third parties—and are subject to change without notice.
Certain information herein constitutes “forward looking statements.” Actual events or
performance may differ materially from those contemplated by such forward-looking

Spruce relies on one or more unaffiliated technology providers to perform data processing
steps in an effort to generate target portfolio exposures for various ETFs utilizing proprietary
tools and techniques. Although targets are provided to Spruce by the technology providers
Spruce has complete discretion in managing the Laurel portfolios. ETFs are publicly traded
unit investment trusts, open-end funds or depository receipts that seek to track the
performance and dividend yield of specific indexes or companies in related industries. These
indexes are often either broad-based, sector, style-based, or international. However, ETF
shareholders are generally subject to the same risk as holders of the underlying securities they
are designed to track. ETFs are also subject to certain additional risks, including, without
limitation, potential liquidity risks, the risk that their prices may not correlate perfectly with
changes in the prices of the underlying securities they are designed to track, and the risk of
trading in an ETF halting due to market conditions or other reasons, based on the policies of
the exchange upon which the ETF trades. Generally, each shareholder of an ETF bears a pro
rata portion of the ETF’s expenses, including management fees. Accordingly, Spruce clients also
indirectly bear similar expenses when investing in an ETF. A client’s actual return will be
reduced by the advisory fees and any other expenses incurred by Spruce in the management of
an investment advisory account. There can be no assurances that Spruce or our Laurel
portfolios will achieve their investment objectives. Any changes to the relationship with our
unaf􀁾liated technology providers or our access or the market for ETFs could have a material
impact on client performance and the Laurel portfolios.

These materials are not intended for distribution to, or use by, any person or entity in any
jurisdiction or country where such distribution or use is contrary to local law or regulation.
Distribution of this information to any person other than the person to whom this information
was originally delivered and to such person’s advisors is unauthorized and any reproduction of
these materials, in whole or in part, or the disclosure of any of the contents, without the prior
written consent of Spruce Investment Advisors, LLC in each such instance is prohibited.
This material contains certain forward looking statements, expected or target returns, opinions
and projections that are based on the assumptions and judgments of Spruce a with respect to,
among other things, future economic, competitive and market conditions and future business
decisions, all of which are dif􀁾cult or impossible to predict accurately and many of which are
beyond the control of Spruces. Other events which were not taken into account in formulating
such projections, targets or estimates may occur and may significantly affect the returns or
performance of any Client managed by Spruce. Because of the significant uncertainties
inherent in these assumptions and judgments, you should not place undue reliance on these
forward looking statements, nor should you regard the inclusion of these statements as a
representation by Spruce that it will achieve any strategy, objectives or other plans. For the
avoidance of doubt, any such forward looking statements, opinions, expected returns,
assumptions and/or judgments made by Spruce may not prove to be accurate or correct.
Disclosure Required Under IRS Circular 230: Spruce Investment Advisors, LLC does not offer tax
advice and any information contained in this communication, including any attachments, was
not intended or written to be used, and cannot be used, for the purpose of avoiding federal tax-

related penalties or promoting, marketing or recommending to another party any transaction
or matter addressed herein. The Investment Manager and its advisors will continue to test,
evaluate and add new models, as a result of which the existing models may be modified from
time to time. Any modification of the models or strategies will not be subject to any
requirement that investors receive notice of the change or that they consent to it. There can be
no assurance as to the effects (positive or negative) of any modification on the strategies
performance. Furthermore, because predictive models are usually constructed based on
historical data supplied by third parties, the success of relying on such models may depend
heavily on the accuracy and reliability of the supplied historical data.
SOURCE Spruce Investment Advisors
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