Chart 6: What is your outlook on fixed income performance and flows versus equities? 52% 50% 40% 30% 24% 20% 16% 10% ! om 0% 0% Weaker FI performance Weaker Fl and Equity Flat Fl performance & Stronger Fl and Equity Stronger FI & flows / Stronger performance & flows flows / Flat equity performance & flows — performance & flows / equity performance & performance & flows Weaker equity flows performance & flows Source: BofA Merrill Lynch Global Research Active vs passive outlook — passive to continue to gain share Given the ongoing shift to passive investing from active, we polled the audience to see where they think the share split between the two styles eventually settles. Currently the share split is roughly 70% active and 30% passive which was the least popular answer (10%) when asked “do you see improving cyclical demand for active management, despite structural headwinds, and if so where do you think active/passive share settles?” Most investors do see improving cyclical demand for active management and think passive will eventually control 40% of the market (50%) while 40% of respondents do not see improving trends for active and that passive will eventually capture 50% of the market. Chart 7: Do you see improving demand for active & where do you think active/passive share settles? 60% 50% 40% 30% 20% 0% Yes, but structural will persist, with No, and structural will persist, with share Yes, with the share settling near the share heading to 60% active /40% heading to 50% active / 50% passive current 70% active / 30% passive passive Source: BofA Merrill Lynch Global Research M&A activity likely to rise Given a recent pickup in M&A and pressures within the industry that will likely continue the trend, including rising regulatory costs, some fee pressure, and active outflows, we asked investors their outlook for M&A in the sector. We found that the majority think Bankof America a 2016 Future of Financials Conference | 17 November 2016 5 Merrill Lynch HOUSE_OVERSIGHT