City of Fresno Retirement Systems Private Equity Concept and Framework
January 24, 2018
Don Stracke, CFA, CAIA, Senior Consultant Oliver Fadly, CAIA, Senior Research Analyst Michael Miranda, Senior Analyst
Private Equity Overview
Private Markets Research Process
Fully Integrated Research Process … Customized for Every Client
Portfolio Construction & Planning
Macro Viewpoints
Investment Pacing
Fund Diligence
Fund Monitoring
& Plan Reporting
Education & Special Projects
Clients
1. Portfolio Construction & Planning Private markets is not a ‘one size fits all’ investment class, it offers a broad range of strategies that can be customized based on specific investment objectives.
2. Macro Viewpoints What sub-sectors within private markets are most attractive today based on current market conditions?
3. Investment Pacing Based on portfolio objectives, current investments and macro conditions, what future commitments make sense?
4. Fund Diligence Rigorous quantitative and qualitative process centered around three key questions: what’s the universe of products available, which are the best and when will it be open?
5. Fund Monitoring & Plan Reporting Quarterly client plan reporting supported by dedicated reporting team; ongoing fund monitoring; frequent manager meetings; review and opine on fund changes, amendments, etc.
6. Education & Special Projects Quarterly market thoughts; webinars; whitepapers and original research; direct access to research team.
3
Private Markets Research Team
Neil Sheth Partner, Director of Alternatives Research
(23 years’ experience)
Berkshire Partners; M/C Ventures; General Atlantic; Morgan Stanley
BS, University of Pennsylvania
Joshua Ko Research Analyst
(2 years’ experience) Global Atlantic Financial Group
BS, Boston College
Sean Gill, CFA, CAIA Partner, Alternatives Client Strategy
(18 years’ experience)
Cook County State’s Attorney; Refco; Smith Barney
JD, Loyola University of Chicago; MBA, Notre Dame; BS, Georgetown
Private Equity Research Team
5
Real Assets Research Team Andrew Brett, CAIA
Research Consultant (10 years’ experience)
State Street BA, Union College
Michael Yang Research Consultant
(11 years’ experience) GID, Babson, AEW, UBS
MBA, Babson; BS, Boston College
Lily Fenn Research Analyst
(2 years’ experience) BA, St. Anselm College
*Timothy Bruce Partner, Director of Traditional Research
(10 years’ experience) Partners HC Investment Office
MBA, Chicago; BA, Brown University
* Traditional Research Team Members who help to cover REITs and other liquid real assets.
*Aidan Redmond Research Analyst
(6 years’ experience) Atlantic Trust
BS, Quinnipiac University
Brad Rowbotham, CAIA Research Analyst
(3 years’ experience) Merrill Lynch
BBA, Univ. Mass. Amherst
Jeffrey Roberts Director of Private Equity Research
(14 years’ experience) State Street; Lucent
MBA, Babson; BA, Franklin & Marshall
Chris Hill, CFA, CAIA Senior Research Consultant
(10 years’ experience) Entrust, LASERS, Lockheed Martin
MBA, MIT; BS, MS, Louisiana State University
Melissa Mendenhall Senior Research Consultant
(13 years’ experience) Panera; Dunkin’ Brands;
HarbourVest; Deutsche Bank MBA, Dartmouth; BS Lehigh
Eric Harnish Senior Research Consultant
(23 years’ experience) State Street
MBA, Dartmouth; BA, Duke University
Matt Ritter, CAIA Research Consultant (6 years’ experience)
GMO; Brooke Private Equity BS, Northeastern
William Elcock, CAIA Senior Research Analyst
(5 years’ experience) Holy Cross Investment Office
BA, Holy Cross
Oliver Fadly Senior Research Analyst
(6 years’ experience) State Street
BA, Bates College
Broad Coverage of Strategies Across Private Markets
Venture Capital & Growth Equity
North American Buyouts & Special Situations
Europe Buyouts & Special
Situations
Asia / EM Buyouts & Special
Situations
Distressed Investing & Opportunistic Credit
Mezzanine & Direct Lending
Multi-Managers (Primaries, Secondaries, Co-Investments)
Impact Investing (Cross Segment)
Core Real Estate (Privates & REITs)
North American Non-Core
Real Estate
Europe Non-Core
Real Estate
Asia / EM Non-Core
Real Estate
Energy
Global Infrastructure
Metals & Mining
Agriculture & Timber
Real Assets Debt
Emerging Manager, MFDB (Cross Segment)
Impact Investing (Cross Segment)
Private Equity Segmentation
Real Assets Segmentation
• Broad coverage of strategies – Over 2,000 funds tracked across private
markets strategies and over 800 manager meetings per year
– Average of 40 best idea funds become part of the Firm’s Focus Placement List (“FPL”) annually
• Each segment team is responsible
for answering four key questions: 1. What is our macro view of the sector? 2. What is the universe of firms with
products in the sector? 3. What are the best products? 4. When will the funds be in the market?
• Teams continually update their
views on each of the above questions
6
• NEPC’s diverse client base makes meaningful commitments to the asset class
– Over 140 clients with private equity and private credit investments – Over $3.0 billion of client commitments across private equity and private credit each year
Broad Coverage of Strategies Across Private Equity and Private Credit
7
Recommendations(1) by Strategy Recommendations by Geography Recommendations by Fund # Recommendations by Fund Size(2)
Vintage Year Recommendations by Strategy
(1) # of FPL funds in each category from 2007through mid-2017 (2) Fund size commitment thresholds: Small-Cap <$500MM; Mid-Cap >$500MM and <$1B; Large-Cap >$1B and <$5B; Mega-Cap >$5B
7%5%
20%
8%
14%
12%
11%
7%
16%
Venture Capital
Growth Equity
Buyouts
Special Situations &Turnarounds
Fund of Funds
Secondaries
Mezzanine Debt, VentureLending & Royalties
Direct Lending
Distressed Debt &Opportunistic Credit
33%
58%
5%
4%
Global
North America
Europe
Asia/Asia & RoW
10%
15%
21%
16%
8%
30%
Fund I
Fund II
Fund III
Fund IV
Fund V
Fund VI+
34%
22%
35%
9%
Small-Cap
Mid-Cap
Large-Cap
Mega-Cap
29
2119
12
30
20
26
23
30 29
21
0
5
10
15
20
25
30
35
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
# o
f FP
L Fu
nd
s
Venture Capital
Growth Equity
Buyouts
Special Situations & Turnarounds
Fund of Funds
Secondaries
Mezzanine Debt, Venture Lending & Royalties
Direct Lending
Distressed Debt & Opportunistic Credit
• NEPC’s diverse client base makes meaningful commitments to the asset class
– Over 140 clients with real estate and real asset investments – Over $1.5 billion of client commitments across real estate and real assets each year
Broad Coverage of Strategies Across Real Estate and Real Assets
8
Vintage Year Recommendations by Strategy
(1) # of FPL funds in each category from 2011 through 2016 (2) Fund size commitment thresholds: Small-Cap <$500MM; Mid-Cap >$500MM and <$1B; Large-Cap >$1B and <$5B; Mega-Cap >$5B
Recommendations by Geography Recommendations by Fund # Recommendations by Fund Size(2) Recommendations(1) by Strategy
NEPC at the Forefront of Private Market Opportunities
2008-2009 Leading up to, and as a result of the Global Financial Crisis, NEPC publishes whitepaper on instituting an opportunistic credit allocation and underwrites debtor-in-possession and PPIP strategies
2010-2011
2012-2013
2014
2015
NEPC publishes consulting industry’s first whitepaper on Direct Lending opportunity and begins to evaluate US and Europe-focused managers
NEPC underwrites initial Asian-focused manager
As a result of the dislocation in the energy sector, NEPC underwrites an energy-focused lending manager
NEPC underwrites initial managers in US and Europe
• Subsequent to the financial crisis, NEPC was an early proponent of direct lending strategies arising from the dislocation in the traditional lending market for middle market companies
• As a result of our leadership in this segment, we put significant capital to work with negotiated fee savings in the funds we perceived as best of breed:
NEPC Scale Results in Meaningful Fee Savings for Clients
10
Manager
Standard Management
Fee NEPC Clients
Standard Carried Interest NEPC Clients
US Managers
Manager A 1.75% 1.50% 20.0% 15.0%
Manager B 1.35% 1.15% 10.0% 10.0%
Manager C 1.75% 1.00% 20.0% 10.0%
European Managers
Manager A Fund I 1.25% 0.75% 10.0% 10.0%
Manager A Fund II 1.50% 1.25% 15.0% 12.5%
Manager B 1.50% 1.05% 20.0% 15.0%
Manager C 1.50% 1.25% 20.0% 20.0%
Manager D 1.50% 1.125% 20.0% 15.0%
Manager E 0.95% 0.80% 10.0% 10.0%
Manager F 1.00% 0.75% 10.0% 10.0%
Asian Managers
Manager A - Initial Investors 2.00% 1.00% 20.0% 10.0%
Manager A - Subsequent Investors 2.00% 1.75% 20.0% 15.0%
Multi-Step, Consensus-Driven Private Markets Fund Diligence Process…
Sourcing Managers sourced through existing relationships (NEPC’s and Clients’), proactive outreach, open-door policy
Stage 1: Initial Review
Meet with manager, review materials, assess strategy viability, discuss preliminary concerns or issues to address
Stage 2: Detailed Review
Review and analyze track record attribution, request completion of detailed questionnaires, refine view on areas for additional diligence
Stage 3: Full Due Diligence Hold onsite diligence meeting with manager, conduct in-depth reference calls, drill into key issues relevant to ultimate decision, complete formal investment memo and diligence checklist
Recommend FPL Funds Approved by NEPC’s firm-wide, multi-disciplinary Alternative Assets Committee; implement recommendations in client portfolios
Equates to Both a Top Down and Bottom Up Approach to Fund Targeting
Fund Comparative Analysis/Targeting/Diligence Fund Investment Memos
Macro Analysis Market Surveys and White Papers
12
• Examples from the annual planning and pacing analysis are shown below
• The goal is to determine annual investments based on macro conditions, plan strategic objectives, and existing investments
Sample Private Markets Pacing Plan and Analysis Slides
Commitments Drawdowns and Distributions Sub-strategy Allocations
General Plan Assumptions Existing Plan Investments Plan Projections General Plan Assumptions
Total Plan Assets $7,008 Plan Return Assumptions 2016 2017 2018Target Investment Return % 7.00% 7.00% 7.00%
Total Private Equity & Private Debt Assets $554 Contributions % 0.00% 0.00% 0.00%Private Equity\ Capital to be Funded $1,002 Payouts % -1.25% -1.25% -1.25%Total Private Equity & Private Debt Exposure $1,555 Expenses % 0.00% 0.00% 0.00%
Reserve for Expenses % 0.00% 0.00% 0.00%Total Private Equity & Private Debt Assets / Total Plan Assets 7.9% Net Growth Rate % 5.75% 5.75% 5.75%Total Private Equity & Private Debt Exposure / Total Plan Assets 22.2%Target Private Equity & Private Debt Allocation % (Current Target) 10.0% Plan Data as of: 9/30/2015
Private Equity & Private Debt Data as of: 9/30/2015
Total Projected Plan Assets
Actual Projected2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Total Plan Net Growth Rate 15.7% 4.5% (4.2%) 5.7% 5.8% 5.7% 5.8% 5.7% 5.7% 5.8% 5.7% 5.7% 5.8%
Total Plan Beginning NAV $6,048 $6,995 $7,313 $7,008 $7,411 $7,837 $8,288 $8,764 $9,268 $9,801 $10,365 $10,961 $11,591Yearly Net Growth $947 $318 ($305) $403 $426 $451 $477 $504 $533 $564 $596 $630 $666Total Plan Ending NAV $6,995 $7,313 $7,008 $7,411 $7,837 $8,288 $8,764 $9,268 $9,801 $10,365 $10,961 $11,591 $12,257
Target PE & PD Allocation 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%Target PE & PD NAV $700 $731 $701 $741 $784 $829 $876 $927 $980 $1,036 $1,096 $1,159 $1,226
Total Projected Plan Assets and Target Private Equity & Private Debt AllocationProjectedActual
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Total Plan Ending NAV Target PE & PD NAV
Private Equity & Private Debt NAVs and ExposuresCurrent Capital Total % of
Valuation to be Current TotalInvestment Strategy (NAV) Funded Exposure ExposureBuyouts $59.7 $54.3 $113.9 7%Co-Investments $19.1 $133.3 $152.4 10%Direct Lending $131.3 $153.0 $284.2 18%Distressed $138.4 $73.8 $212.2 14%Energy $4.4 $119.8 $124.3 8%Fund of Funds $6.0 $44.3 $50.2 3%Growth Equity $61.8 $175.6 $237.5 15%Mezzanine $10.4 $9.7 $20.1 1%Secondaries $111.5 $207.6 $319.1 21%Venture $11.0 $30.2 $41.2 3%Total / Wtd. Avg. $553.5 $1,001.5 $1,555.1 100%
Private Equity & Private Debt Investments by Vintage Year
Vintage Year CommitmentPaid In Capital
Capital to be Funded
Cumulative Distributed
Current Valuation (NAV) Total Value Net Benefit Call Ratio DPI Ratio TVPI Ratio
1997 $37 $35 ($0) $47 $0 $47 $12 96% 1.34 1.341998 $60 $60 $0 $32 $0 $33 ($27) 99% 0.55 0.551999 $57 $52 ($0) $44 $0 $44 ($9) 93% 0.84 0.842000 $129 $126 $1 $127 $1 $128 $1 98% 1.01 1.012001 $30 $26 $0 $12 $0 $12 ($14) 87% 0.47 0.472002 $0 $0 $0 $0 $0 $0 $0 NA NA NA2003 $0 $0 $0 $0 $0 $0 $0 NA NA NA2004 $30 $30 $0 $10 $1 $12 ($19) 100% 0.35 0.392005 $20 $20 $0 $10 $5 $15 ($5) 100% 0.48 0.742006 $0 $0 $0 $0 $0 $0 $0 NA NA NA2007 $0 $0 $0 $0 $0 $0 $0 NA NA NA2008 $0 $0 $0 $0 $0 $0 $0 NA NA NA2009 $40 $31 $9 $24 $23 $47 $16 77% 0.79 1.532010 $0 $0 $0 $0 $0 $0 $0 NA NA NA2011 $137 $108 $29 $32 $101 $134 $25 79% 0.30 1.242012 $53 $33 $20 $17 $26 $43 $10 62% 0.53 1.312013 $240 $172 $68 $19 $178 $197 $25 72% 0.11 1.152014 $646 $182 $464 $11 $172 $184 $2 28% 0.06 1.012015 $460 $49 $411 $4 $46 $50 $0 11% 0.08 1.02Total Private Equity $1,938 $924 $1,002 $391 $554 $944 $18 48% 0.42 1.02Total Open End/Liquid $0
7%
10%
18%
14%8%
3%
15%
1%
21%
3%
Private Equity Portfolio ExposureBuyouts
Co-Investments
Direct Lending
Distressed
Energy
Fund of Funds
Growth Equity
Mezzanine
Secondaries
Venture
Private Equity & Private Debt Plan Projections
Actual ProjectedYear 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Private Equity & Private Debt NAV $234 $398 $554 $1,065 $1,204 $1,209 $1,138 $1,072 $1,023 $1,063 $1,072 $1,151 $1,282Uncalled Capital Commitments $286 $614 $1,002 $601 $374 $244 $170 $242 $345 $443 $500 $530 $544PE & PD NAV + Uncalled Capital Commitments $520 $1,012 $1,555 $1,666 $1,579 $1,453 $1,308 $1,314 $1,368 $1,506 $1,571 $1,681 $1,826
Target PE & PD NAV $700 $731 $701 $741 $784 $829 $876 $927 $980 $1,036 $1,096 $1,159 $1,226Over-Commitment Pace 1.4x 1.4x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40x 1.40xTarget PE & PD Over Allocation $979 $1,024 $981 $1,038 $1,097 $1,160 $1,227 $1,298 $1,372 $1,451 $1,534 $1,623 $1,716
Beginning Plan NAV $6,048 $6,995 $7,313 $7,008 $7,411 $7,837 $8,288 $8,764 $9,268 $9,801 $10,365 $10,961 $11,591Yearly Return $947 $318 ($305) $403 $426 $451 $477 $504 $533 $564 $596 $630 $666Ending Plan NAV $6,995 $7,313 $7,008 $7,411 $7,837 $8,288 $8,764 $9,268 $9,801 $10,365 $10,961 $11,591 $12,257
PE & PD Percent of Total Plan AssetsPrivate Equity & Private Debt NAV 3.3% 5.4% 7.9% 14.4% 15.4% 14.6% 13.0% 11.6% 10.4% 10.3% 9.8% 9.9% 10.5%Private Equity & Private Debt Uncalled Capital Comm 4.1% 8.4% 14.3% 8.1% 4.8% 2.9% 1.9% 2.6% 3.5% 4.3% 4.6% 4.6% 4.4%NAV + Uncalled Capital Commitments 7.4% 13.8% 22.2% 22.5% 20.1% 17.5% 14.9% 14.2% 14.0% 14.5% 14.3% 14.5% 14.9%
Target Private Equity & Private Debt Allocation 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
Actual
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
$1,200.0
$1,400.0
$1,600.0
$1,800.0
$2,000.0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Existing PE & PD Investments NAV New PE & PD Investments NAV Existing PE & PD Investments Uncalled Capital New PE & PD Investments Uncalled Capital Target PE & PD NAV Target PE & PD Over Allocation
Projected
Private Equity & Private Debt Commitments by Vintage Year
Private Equity & Private Debt Commitments by Vintage Year
Actual More Certain Less CertainYear 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Total Commitments $240 $646 $460 $80 $80 $80 $80 $250 $325 $375 $375 $375 $375
Target PE & PD Allocation (%) 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%Projected PE & PD NAV / Total Plan Assets 3% 5% 8% 14% 15% 15% 13% 12% 10% 10% 10% 10% 10%
Actual
$240
$646
$460
$80 $80 $80 $80
$250 $325
$375 $375 $375 $375 3%
5%
8%
14%
15%15%
13%
12%
10% 10%10% 10%
10%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
$0
$100
$200
$300
$400
$500
$600
$700
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Pro
ject
ed P
riva
te E
quit
y N
AV
/ P
lan
Ass
ets
Pri
vate
Mar
ket F
un
d C
omm
itm
ent T
arge
ts
Total Commitments Projected PE & PD NAV / Total Plan Assets Target PE & PD Allocation (%)
Projected
Private Equity & Private Debt Projected Drawdowns and Distributions
ProjectedYear 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025PE & PD Drawdowns ($481) ($306) ($210) ($154) ($178) ($222) ($277) ($319) ($345) ($361)
PE & PD Distributions $195 $281 $348 $386 $399 $399 $371 $367 $364 $369
PE & PD Net Cash Flow ($286) ($25) $138 $232 $221 $177 $94 $48 $19 $7
($600.0)
($500.0)
($400.0)
($300.0)
($200.0)
($100.0)
$0.0
$100.0
$200.0
$300.0
$400.0
$500.02016 2017 2018 2019 2020 2021 2022 2023 2024 2025
PE & PD Drawdowns PE & PD Distributions PE & PD Net Cash Flow
Projected
Private Equity Allocation by NAV
Private Equity Allocation by NAV + Uncalled Capital Commitments
Actual Projected
Actual Projected
0% 0%11% 8% 8% 9% 9% 10% 10% 11% 12% 13% 14%
0% 0%
3% 11% 13% 14% 15% 15% 14% 13% 11% 9% 8%
0% 0%
24%22% 19% 14% 10% 7% 8% 11% 14% 15% 15%
0% 0%
25%2% 2% 3% 3% 4% 4% 4% 4% 5% 5%
0% 0%
1%
13% 14% 16% 16% 16% 14% 12% 9% 8% 7%
0% 0%
1%1% 1% 1% 1% 2% 3% 4% 5% 6% 6%
0% 0%
11% 17% 18% 17% 15% 13% 11% 10% 10% 10% 10%
0% 0%
0%
19% 16% 16% 15% 17% 21% 23% 26% 27% 26%
0% 0%
2%
2% 3% 3% 4% 4% 4% 4% 4% 4% 4%
0% 0%
0%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
0% 0%
20%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
0% 0%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
0% 0%
2% 1% 1% 1% 1% 2% 3% 4% 5% 6% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Buyout Co-Investments Direct Lending Distressed Energy Fund of Funds Growth Equity Infrastructure Mezzanine Open End/Liquid Secondaries Special Situations/Turnaround Venture
0% 0%7% 8% 8% 9% 10% 11% 12% 13% 14% 14% 15%
0% 0%
10% 12% 13% 13% 14% 13% 12% 11% 9% 8% 7%
0% 0%
18% 16% 15% 12% 9% 7% 8% 10% 12% 12% 12%
0% 0%
14% 15% 14% 14% 14% 16% 19% 20% 22% 22% 22%
0% 0%
14% 15% 14% 14% 14% 16% 19% 20% 22% 22% 22%
0% 0%
8% 8% 9% 10% 11% 12%10% 8% 6% 6% 6%
0% 0%
15% 15% 15% 15% 16% 15% 13% 11% 9% 8% 8%
0% 0%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
0% 0%
1% 1% 1% 2% 2% 4% 5% 7% 8% 8% 8%
0% 0%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
0% 0%
21% 19% 18% 17% 16% 13% 11% 10% 10% 10% 10%
0% 0%
0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
0% 0%
3% 2% 3% 3% 4% 4% 4% 5% 5% 6% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025Buyout Co-Investments Direct Lending Distressed Energy Fund of Funds Growth Equity Infrastructure Mezzanine Open End/Liquid Secondaries Special Situations/Turnaround Venture
13
• Quarterly client plan reporting – 10 person alternatives reporting team – Program summary, history and performance – Focus on quality
• Ongoing fund monitoring – Frequent manager meetings / notes access – Review and opine on fund changes,
amendments, etc.
• Education and special projects – Quarterly market thoughts – Webinars and conferences – Whitepapers and original research – Direct access to research team
Customized Client Service Approach
Quarterly Client Plan Reporting Education and Special Projects
Ongoing Fund Monitoring
14
• NEPC believes that private market investments play an important role as part of an overall investment plan
– Low correlation to stocks and bonds – Diversification benefits – Wide spectrum of strategies to meet
risk and return goals – Potential to enhance overall portfolio
returns
• We have completed an array of education materials
– Actions for Clients – Market Surveys – Investment Due Diligence Reports – White Papers – Market Chatter
Private Markets Education
YOU DEMAND MORE. So do we.SM
NEPC is driven by a love for investing and consulting
and serving clients without divided loyalties
Providing innovative investment strategies and customized research solutions from professionals grounded in integrity. Attracting and retaining the best investment talent in order to deliver investment advice and insight to meet unique client needs and be the Consultant of Choice.
Focused Placement List Performance
Private Equity and Private Debt Overview Private Equity & Private Debt Performance Overview
18
NEPC FPL Funds Per Strategy
NEPC FPL Recommendations Per Strategy NEPC FPL Recommendations Per Strategy & Vintage
NEPC FPL Funds Per Geographic Focus
NEPC FPL Recommendations Per Geography NEPC FPL Recommendations Per Geography & Vintage
NEPC FPL Funds Per Fund Number
NEPC FPL Recommendations Per Fund Number NEPC FPL Recommendations Per Fund Number & Vintage
31%
59%
6%4%
Global
North America
Europe
Asia/Asia & RoW
28
24
11 12
21
31
24 24
28
34
26
17
0
5
10
15
20
25
30
35
40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
# o
f F
PL
Fu
nd
s
Global
North America
Europe
Asia/Asia & RoW
10%
15%
20%
16%
8%
31%
Fund I
Fund II
Fund III
Fund IV
Fund V
Fund VI+
28
24
11 12
21
31
24 24
28
34
26
17
0
5
10
15
20
25
30
35
40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
# o
f F
PL
Fu
nd
s
Fund I
Fund II
Fund III
Fund IV
Fund V
Fund VI+
6%5%
21%
8%
15%
12%
11%
7%
15%
Venture Capital
Growth Equity
Buyouts
Special Situations &Turnarounds
Fund of Funds
Secondaries
Mezzanine Debt, VentureLending & Royalties
Direct Lending
Distressed Debt &Opportunistic Credit
28
24
11 12
21
31
24 24
28
34
26
17
0
5
10
15
20
25
30
35
40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
# o
f F
PL
Fu
nd
s
Venture Capital
Growth Equity
Buyouts
Special Situations &Turnarounds
Fund of Funds
Secondaries
Mezzanine Debt, VentureLending & Royalties
Direct Lending
Distressed Debt &Opportunistic Credit
Private Equity and Private Debt Overview Private Equity & Private Debt Performance Overview
19
NEPC FPL Funds Per Fund Size
NEPC FPL Recommendations Per Fund Size NEPC FPL Recommendations Per Fund Size & Vintage
NEPC FPL Funds Per Year of AAC Approval
NEPC FPL Recommendations Per Strategy & AAC Approval Year
32%
23%
36%
9%
Small-Cap
Mid-Cap
Large-Cap
Mega-Cap
27
19
912
21
31
24 24
28
34
26
17
0
5
10
15
20
25
30
35
40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
# o
f F
PL
Fu
nd
s
Small-Cap
Mid-Cap
Large-Cap
Mega-Cap
28
2119
12
31
19
2623
30 29
35
3
0
5
10
15
20
25
30
35
40
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
# o
f F
PL
Fu
nd
s
Venture Capital
Growth Equity
Buyouts
Special Situations & Turnarounds
Fund of Funds
Secondaries
Mezzanine Debt, Venture Lending & Royalties
Direct Lending
Distressed Debt & Opportunistic Credit
Private Equity Performance
Private Equity Performance Analysis Private Equity & Private Debt Performance Overview
21
NEPC FPL Median Performance by Fund Vintage
Net TVPI Net DPI Net IRR
Fund Vintage
# ofFunds
NEPCMedian
CA/ThomsonOne Median
Fund Vintage
# ofFunds
NEPCMedian
CA/ThomsonOne Median
Fund Vintage
# ofFunds
NEPCMedian
CA/ThomsonOne Median
2007 16 1.50x 1.55x 2007 16 0.92x 0.83x 2007 16 8.3% 9.5%2008 11 1.51x 1.48x 2008 11 1.09x 0.61x 2008 11 12.8% 10.3%2009 3 1.50x 1.48x 2009 3 0.98x 0.45x 2009 3 15.7% 11.4%2010 8 1.48x 1.47x 2010 8 0.45x 0.36x 2010 8 12.9% 13.8%2011 14 1.36x 1.33x 2011 14 0.35x 0.17x 2011 14 13.0% 11.7%2012 19 1.31x 1.23x 2012 19 0.23x 0.09x 2012 19 14.3% 11.6%2013 15 1.24x 1.13x 2013 15 0.14x 0.00x 2013 15 13.7% 8.3%
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
1.4x
1.6x
1.8x
2007 2008 2009 2010 2011 2012 2013
NEPC Median CA/Thomson One Median
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
1.2x
2007 2008 2009 2010 2011 2012 2013
NEPC Median CA/Thomson One Median
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2007 2008 2009 2010 2011 2012 2013
NEPC Median CA/Thomson One Median
Private Equity Performance Analysis Private Equity & Private Debt Performance Overview
22
NEPC FPL Quartile Analysis
Net TVPI Net DPI Net IRR
Fund Vintage# of Funds
Benchmarked First Second Third Fourth Fund Vintage# of Funds
Benchmarked First Second Third Fourth Fund Vintage# of Funds
Benchmarked First Second Third Fourth
2007 16 6% 44% 25% 25% 2007 16 19% 50% 25% 6% 2007 16 6% 13% 56% 25%2008 11 18% 36% 36% 9% 2008 11 18% 18% 36% 27% 2008 11 18% 27% 55% 0%2009 3 0% 33% 33% 33% 2009 3 0% 33% 33% 33% 2009 3 33% 33% 0% 33%2010 8 0% 38% 25% 38% 2010 8 13% 63% 0% 25% 2010 8 0% 25% 50% 25%2011 14 29% 36% 14% 21% 2011 14 57% 21% 21% 0% 2011 14 29% 21% 29% 21%2012 19 47% 37% 16% 0% 2012 19 58% 26% 5% 11% 2012 19 32% 53% 5% 11%2013 15 40% 27% 13% 20% 2013 15 47% 13% 27% 13% 2013 15 33% 40% 13% 13%2014 20 - - - - 2014 20 - - - - 2014 20 - - - -2015 20 - - - - 2015 20 - - - - 2015 20 - - - -2016 28 - - - - 2016 28 - - - - 2016 28 - - - -2017 18 - - - - 2017 18 - - - - 2017 18 - - - -2018 15 - - - - 2018 15 - - - - 2018 15 - - - -
16
11
3
8
14
19
15
20 20
28
18
15
0
5
10
15
20
25
30
# o
f F
PL
Fu
nd
s
1st Quartile 2nd Quartile3rd Quartile 4th QuartileToo Young to Benchmark
16
11
3
8
14
19
15
20 20
28
18
15
0
5
10
15
20
25
30
# o
f F
PL
Fu
nd
s
1st Quartile 2nd Quartile3rd Quartile 4th QuartileToo Young to Benchmark
16
11
3
8
14
19
15
20 20
28
18
15
0
5
10
15
20
25
30
# o
f F
PL
Fu
nd
s
1st Quartile 2nd Quartile3rd Quartile 4th QuartileToo Young to Benchmark
Private Equity Performance Analysis Private Equity & Private Debt Performance Overview
23
NEPC FPL Quartile Analysis (100%)
Net TVPI Net DPI Net IRR Overall Performance
Fund Vintage# of Funds
Benchmarked First Second Third Fourth Fund Vintage# of Funds
Benchmarked First Second Third Fourth Fund Vintage# of Funds
Benchmarked First Second Third FourthPerformance
Metrics First Second Third Fourth
2007 16 6% 44% 25% 25% 2007 16 19% 50% 25% 6% 2007 16 6% 13% 56% 25% Net TVPI 26% 36% 21% 17%2008 11 18% 36% 36% 9% 2008 11 18% 18% 36% 27% 2008 11 18% 27% 55% 0% Net DPI 37% 30% 20% 13%2009 3 0% 33% 33% 33% 2009 3 0% 33% 33% 33% 2009 3 33% 33% 0% 33% Net IRR 22% 31% 30% 16%2010 8 0% 38% 25% 38% 2010 8 13% 63% 0% 25% 2010 8 0% 25% 50% 25%2011 14 29% 36% 14% 21% 2011 14 57% 21% 21% 0% 2011 14 29% 21% 29% 21%2012 19 47% 37% 16% 0% 2012 19 58% 26% 5% 11% 2012 19 32% 53% 5% 11%2013 15 40% 27% 13% 20% 2013 15 47% 13% 27% 13% 2013 15 33% 40% 13% 13%Total 86 26% 36% 21% 17% Total 86 37% 30% 20% 13% Total 86 22% 31% 30% 16%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Net TVPI Net DPI Net IRR
1st Quartile 2nd Quartile3rd Quartile 4th Quartile
Private Equity Performance Analysis Private Equity & Private Debt Performance Overview
24
NEPC FPL Quartile Analysis Per Strategy
Net TVPI Net DPI Net IRR
FundStrategy
# of FundsBenchmarked First Second Third Fourth
FundStrategy
# of FundsBenchmarked First Second Third Fourth
FundStrategy
# of FundsBenchmarked First Second Third Fourth
Venture Capital 5 0% 20% 40% 40% Venture Capital 5 0% 40% 20% 40% Venture Capital 5 0% 20% 40% 40%Growth Equity 5 0% 40% 20% 40% Growth Equity 5 0% 60% 40% 0% Growth Equity 5 0% 40% 20% 40%
Buyouts 24 33% 38% 21% 8% Buyouts 24 33% 29% 17% 21% Buyouts 24 25% 33% 25% 17%Special Situations 7 43% 29% 14% 14% Special Situations 7 43% 29% 29% 0% Special Situations 7 29% 43% 14% 14%
Fund of Funds 23 26% 39% 22% 13% Fund of Funds 23 61% 30% 0% 9% Fund of Funds 23 35% 26% 30% 9%Secondaries 22 23% 36% 18% 23% Secondaries 22 32% 23% 36% 9% Secondaries 22 14% 32% 41% 14%
5 5
24
7
23 22
0
5
10
15
20
25
30
# o
f F
PL
Fu
nd
s B
en
chm
ark
ed
5 5
24
7
23 22
0
5
10
15
20
25
30
# o
f F
PL
Fu
nd
s B
en
chm
ark
ed
5 5
24
7
23 22
0
5
10
15
20
25
30
# o
f F
PL
Fu
nd
s B
en
chm
ark
ed
Private Equity Performance Analysis Private Equity & Private Debt Performance Overview
25
NEPC FPL Quartile Analysis Per Fund Geographic Focus
Net TVPI Net DPI Net IRR
FundStrategy
# of FundsBenchmarked First Second Third Fourth
FundStrategy
# of FundsBenchmarked First Second Third Fourth
FundStrategy
# of FundsBenchmarked First Second Third Fourth
Global 32 19% 34% 22% 25% Global 32 25% 41% 25% 9% Global 32 9% 38% 38% 16%North America 50 28% 38% 22% 12% North America 50 44% 24% 18% 14% North America 50 28% 30% 26% 16%
Europe 1 0% 0% 0% 100% Europe 1 0% 100% 0% 0% Europe 1 0% 0% 0% 100%Asia/Asia & RoW 3 67% 33% 0% 0% Asia/Asia & RoW 3 67% 0% 0% 33% Asia/Asia & RoW 3 67% 0% 33% 0%
32
50
13
0
10
20
30
40
50
60
Global North America Europe Asia/Asia & RoW
# o
f F
PL
Fu
nd
s B
en
chm
ark
ed
32
50
13
0
10
20
30
40
50
60
Global North America Europe Asia/Asia & RoW
# o
f F
PL
Fu
nd
s B
en
chm
ark
ed
32
50
13
0
10
20
30
40
50
60
Global North America Europe Asia/Asia & RoW
# o
f F
PL
Fu
nd
s B
en
chm
ark
ed
Private Equity Education
• Private Equity is a source of investment capital provided by institutions and high net worth individuals for the purposes of acquiring interests in companies and/or products
• Its role in a portfolio is as a return enhancer, with the premium earned over other investment options serving to compensate for the liquidity risk
• Large investable universe – Over $400 billion raised annually across strategies in each of the last three years – Over $3 trillion in assets under management, including portfolio value and un-invested capital
• Two components of private equity/private debt return:
– Capital Appreciation: Derived from an increase in the value of an asset between acquisition and sale
– Current Income: Derived from portfolio company operations, loans and leases
• Investment diversification – Not fully correlated with public equities – Access to smaller companies and wider range of strategies
Private Equity Overview
Source: Preqin. Fundraising and market size data as of December 31, 2016
Private Equity & Private Debt Overview & Education
27
How private equity is different from public equity
28
• Daily liquidity
• Invested immediately
• Daily valuations
• Market pricing
• Fees as a % of NAV
• Regulated reporting
• Benchmark managed
• Some activism
• Illiquid, 10+ year closed funds
• Invested over time
• Quarterly valuations
• Estimated fair value
• Fees as % of commitment
• Transparency varies
• Managed for alpha
• Active value creation
Public Equity Private Equity
Private Equity & Private Debt Overview & Education
Mechanics of Investing in Private Equity
Fund Manager
Limited Partner
Fund General Partner or Managing Member
Portfolio Company
Capital Calls
Distributions
Investment
Realization
Portfolio Company
Portfolio Company
Portfolio Company
Carried
Interest
Man
agem
ent Fees
Limited Partner
Limited Partner
Limited Partner
29
Private Equity & Private Debt Overview & Education
• Private equity managers have multiple levers to create value: – Buying low and selling high (multiple arbitrage) – Growing EBITDA (through organic revenue growth, cost cutting and making acquisitions) – Using leverage
• Portfolio investments are made throughout the capital structure of
target companies
• Returns are generated through capital appreciation and current income – Capital appreciation is realized through the eventual sale of a company – Current income is derived from portfolio company operations, loans and leases, with
loans typically structured to have rate adjustments and equity kickers
• Leverage can amplify (positively and negatively) returns from current income and capital appreciation
Private Equity Economic Return Drivers Private Equity & Private Debt Overview & Education
30
Spectrum of Private Equity Strategies
Asset Class Strategy Focus Typical Return Targets
Venture Early stage innovative / disruptive companies 15% - 20% IRR, 2.0x TVPI
Growth Equity Expansion Capital for small, growing businesses 15% - 20% IRR, 1.7x TVPI
Buyouts Investments to restructure or expand established companies 17% – 20% IRR, 1.8x TVPI
Special Situations
Investments in mature businesses that may be profitable or unprofitable 15% – 20% IRR, 1.8x TVPI
Mezzanine Subordinated debt to grow or restructure companies 8% -12% IRR, 1.4x TVPI
Opportunistic Credit
Investment strategy involving various credit-linked opportunities 13% - 17% IRR, 1.3x-1.8x TVPI
Direct Lending Primarily floating rate senior and/or unitranche
(senior and subordinated debt in one instrument) debt capital used for various situations
8% - 12% IRR, 1.3x-1.5x TVPI
Distressed Debt Companies with Bad Balance sheets 10% - 20% IRR, 1.7x TVPI
Secondaries Exchange of Limited Partnership interest in established PE partnerships 10% - 15% IRR, 1.5x TVPI
Energy E&P, transmission, storage, etc. of energy sources 10% - 20% IRR, 1.8x TVPI
Private Equity is not a ‘one size fits all’ investment class
It offers a broad range of strategies (and risk/return profiles) that can be customized based on specific investment objectives
Illustrative Sub-Asset Class Return Targets
31
Private Equity & Private Debt Overview & Education
Private Equity Fund Structures
• Annual Management Fee – Charged as a percentage of commitment (fixed fee) during the investment period – Charged as a percentage of net invested capital or NAV after the investment period – Generally 1.5%-2.0% fee rates
• Fund Expenses
– One-time fund formation and ongoing administrative and operating costs – Can add another 0.3%-1.0% to annual expenses
• Preferred Return
– Rate of return LPs need to achieve before GP can earn carried interest – Typically computed on amounts invested and amounts paid for fees to the GP – Generally 8%, but can vary by strategy and manager clout
• Carried Interest
– Performance fee paid to the fund manager for profits generated on investments – Paid only on realized investments (not on unrealized gains) – Generally 20% of realized investment gain – Can be lower for lower return strategies or higher for “premium” managers
Fund manager fees for private equity are higher and more complex than public equity funds
33
Private Equity & Private Debt Overview & Education
Typical Closed-End Fund Lifecycle
• Fundraising, (0 – 2 years) – The time period that is used by the manager to raise sufficient funds for the strategy
– Limited Partners make an initial “Commitment” to the fund
• Investing (years 1 – 5) – This is time period that managers use to source investment opportunities. The Fund will
make investments during the “Investment Period,” generally the first four or five years of a fund’s life
– Business plans are put into place as the manager seeks to add value. If an investment does not meet expectations the managers will take steps to mitigate the impact of losses
– Current income may be paid out during the Investment Period (depending on the strategy), though early distributions may be recalled
– Limited Partners fund their initial commitments as capital is called over time
• Harvesting (years 4 – 8) – The time period that managers use to exit the investments through one-off asset sales,
portfolio company sales, IPOs, and other exit opportunities
– The proceeds of the realizations are distributed to the fund’s investors according to a pre-determined schedule, or distribution waterfall, which includes the payment of carried interest to the manager (if applicable)
• Liquidating (years 7 – 12) – The manager uses this time to exit the remaining investments in the portfolio
– If the fund life is extended beyond its initial term (as stated in fund legal documents), management fees may be negotiated lower
34
Private Equity & Private Debt Overview & Education
-24%
-16%
-8%
0%
8%
16%
24%
32%
-200%
-150%
-100%
-50%
0%
50%
100%
150%
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Net
IR
R
Per
cen
t of
Com
mit
men
t
Year
Example of Market Value Exposure and Net IRR from One PE Fund
Remaining NAV Net IRR
• Cash flow pattern of investing in private equity
– Years 1-3 returns are negative, little income is generated, management fees are collected on committed (not invested) base, business plans established but improvements not yet impacting valuations
– Years 3-5 returns flatten out and gradually turn positive as notable improvement in company financials justify valuation increases, debt refinancing may generate distributions and some income is received
– Years 5-10 returns spike as many assets are sold and accumulated increases in value are reflected, and income is received
– Years 11-13 flatten out as residual assets are liquidated
– All years combined leads to what has been termed the “J-Curve.”
The “J-Curve” of private equity cash flows and returns
35
-150%
-100%
-50%
0%
50%
100%
150%
200%
0 1 2 3 4 5 6 7 8 9 10 11 12 13
Per
cen
t of
Com
mit
men
t
Year
Example of Cumulative Cash Flows from One PE Fund
Contributions Distributions Net Cash Flows
Private Equity & Private Debt Overview & Education
Portfolio Implementation
• In constructing a private markets portfolio there are several key considerations that impact the allocation
Investment Framework and Planning: Building a Private Equity Program Private Equity & Private Debt Overview & Education
Decision Implementation Considerations
Investment Objectives
• Committee will develop an Investment Policy with goals and guidelines around return objectives, current income and/or capital appreciation, risk and volatility tolerances, liquidity requirements and performance benchmarks
• Target allocation will determine commitment pace at a high level • Annual Investment Plan will determine size of private equity commitments
and investment strategy and manager selection based on environment and opportunities available
Investment Thesis • Short Term Investment Objective • Long-Term Objective • Opportunistic Objective
Investment Strategy
• Strategy diversification will impact returns and can mitigate the “J-Curve” while managing macro-economic risk
• Manager selection has a dramatic impact upon returns; diversification across managers will mitigate idiosyncratic manager risk
Market Opportunity / Vintage Year
Considerations
• Vintage year diversification is critical to the program’s success • Mitigate vintage year risk through commitment pacing • Acquisition / dispositions should be spread over vintage years by manager
or by you and should be considered relative to perceived market opportunity
37
Closed-End Fund Strategies: Outperformance vs. Concentration Risk
Multi-manager Funds
– Provide significant diversification
– 10-20 underlying fund investments over two to four years
– Good for investors seeking diversification while making few or infrequent investments
– Considerations include double fees and limited ability to outperform
Diversified Funds
– Provide good diversification – 10-15 investments directly
into companies in various industries over four to five years
– Good for investors seeking some diversification and ability to outperform
– Considerations include manager-centric risk and vintage year risk
Focused Funds
– Offer the maximum likelihood of outperforming
– 8-12 investments in very specific geographic areas / industry sectors over four to five years
– One layer of fees – Considerations include
limited diversification, manager-centric risk and vintage year risk
Mean Target Fund
Return
Outperformance
Underperformance
Dispersion of Expected
Fund Returns
Expected Dispersion of Returns for Different Fund Types
38
Private Equity & Private Debt Overview & Education
Pacing Plan Process and Case Study
General Plan Assumptions
Total Plan Assets $1,870 Plan Return Assumptions 2017 2018 2019Target Investment Return % 6.7% 6.7% 6.7%
Total Private Equity Assets $191 Contributions % 12.9% 11.6% 6.9%Private Equity Capital to be Funded $170 Payouts % (8.7%) (8.0%) (7.4%)Total Private Equity Exposure $361 Expenses % 0.4% 0.3% 0.1%
Reserve for Expenses % 0.0% 0.0% 0.0%Total Private Equity Assets / Total Plan Assets 10.2% Net Growth Rate % 11.2% 10.6% 6.3%Total Private Equity Exposure / Total Plan Assets 19.3%Target Private Equity Allocation % (Current Target) 12.0% Plan Data as of: 11/30/2016
Private Equity Data as of: 9/30/2016
Total Projected Plan Assets
Actual Projected2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Total Plan Net Growth Rate 15.0% 9.3% 10.3% 11.2% 10.6% 6.3% 5.4% 4.9% 4.5% 4.5% 4.5% 4.5% 4.5%
Total Plan Beginning NAV $1,349 $1,552 $1,696 $1,870 $2,081 $2,301 $2,446 $2,577 $2,703 $2,824 $2,951 $3,084 $3,223Yearly Net Growth $203 $145 $174 $210 $221 $144 $131 $126 $122 $127 $133 $139 $145Total Plan Ending NAV $1,552 $1,696 $1,870 $2,081 $2,301 $2,446 $2,577 $2,703 $2,824 $2,951 $3,084 $3,223 $3,368
Target Private Equity Allocation 10.0% 10.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0%Target Private Equity NAV $155 $170 $224 $250 $276 $293 $309 $324 $339 $354 $370 $387 $404
Total Projected Plan Assets and Target Private Equity AllocationProjectedActual
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026Total Plan Ending NAV Target Private Equity NAV
• Key model inputs include total plan assets, components of net growth rate, and target allocation
General Plan Assumptions
40
• 10.2% current NAV
• 19.3% total exposure (NAV + Unfunded)
• 12.0% target allocation
• Net plan growth derived from target investment return plus contributions, less payouts and expenses
• Existing private equity and private debt investments are entered into the model by strategy and vintage year
– Current exposures create a baseline of existing allocations – Provides context for expected cash flows of existing commitments
Existing Commitments
Private Equity NAVs and Exposures
Current Capital Total % ofValuation to be Current Total
(NAV) Funded Exposure Exposure$46.7 $42.7 $89.4 25%$3.3 $16.9 $20.2 6%$24.8 $3.5 $28.2 8%$20.5 $15.3 $35.9 10%$40.3 $31.8 $72.1 20%$0.9 $0.1 $0.9 0%$5.3 $1.2 $6.6 2%$35.6 $32.4 $68.0 19%$1.4 $16.1 $17.5 5%$11.8 $10.2 $22.0 6%
$190.6 $170.3 $360.8 100%
Private Equity Investments by Vintage Year
Vintage Year Commitment Paid In Capital
Capital to be Funded
Cumulative Distributed
Current Valuation (NAV) Total Value Net Benefit Call Ratio DPI Ratio TVPI Ratio
2009 $60.0 $50.0 $10.0 $41.2 $29.1 $70.3 $20.2 83% 0.82x 1.41x2010 $5.0 $4.8 $0.3 $4.0 $4.0 $8.0 $3.2 95% 0.84x 1.68x2011 $82.0 $70.6 $11.4 $33.1 $66.1 $99.2 $28.6 86% 0.47x 1.41x2012 $37.5 $28.7 $8.8 $6.0 $31.8 $37.7 $9.0 77% 0.21x 1.31x2013 $45.6 $29.1 $16.5 $2.7 $29.2 $31.9 $2.9 64% 0.09x 1.10x2014 $39.6 $15.9 $23.6 $0.0 $17.8 $17.8 $1.9 40% 0.00x 1.12x2015 $55.0 $10.7 $44.3 $0.3 $10.3 $10.6 ($0.2) 20% 0.03x 0.99x2016 $58.0 $2.5 $55.5 $0.0 $2.2 $2.2 ($0.3) 4% 0.00x 0.88x
Total Private Equity $382.6 $212.4 $170.3 $87.3 $190.6 $277.9 $65.4 56% 0.41x 1.31x
Growth EquityMezzanine
Co-InvestmentsDistressed
EnergyFund of Funds
Investment StrategyBuyouts
SecondariesSpecial Situations
VentureTotal / Weighted Average
25%
5%
8%
10%20%0%2%
19%
5%6%
Private Equity Portfolio Exposure
Buyouts
Co-Investments
Distressed
Energy
Fund of Funds
Growth Equity
Mezzanine
Secondaries
Special Situations
Venture
Current exposure
modeled by vintage and
strategy
41
• Through an iterative process, annual investments are modeled based on macro conditions, plan strategic objectives, and existing investments assumptions…
Commitment Pacing
Private Equity Commitments by Vintage Year
Private Equity Commitments by Vintage Year
Actual More Certain Less CertainYear 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026Total Commitments $40 $55 $58 $75 $70 $70 $80 $80 $90 $100 $100 $100 $100
Actual
$40
$55 $58
$75 $70 $70$80 $80
$90$100 $100 $100 $100
$0
$20
$40
$60
$80
$100
$120
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Total Commitments
Projected
42
• …giving rise to longer term plan projections
Private Equity and Private Debt Plan Projections
43
Red line is the 12% target PE & PD allocation based on projected plan total NAV; Black dashed line is the 1.5x over-commitment. Goal is to keep private markets NAV (green bar) plus uncalled capital commitments (blue bar), between red line and black dashed line.
Private Equity Plan Projections
Actual ProjectedYear 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Private Equity NAV $120 $169 $191 $257 $282 $305 $323 $336 $350 $368 $367 $379 $397Uncalled Capital Commitments $134 $139 $170 $156 $147 $137 $140 $143 $154 $168 $177 $182 $184Private Equity NAV + Uncalled Capital Commitments $255 $308 $361 $413 $429 $442 $463 $479 $503 $536 $544 $560 $581
Target Private Equity NAV $155 $170 $224 $250 $276 $293 $309 $324 $339 $354 $370 $387 $404Over-Commitment Pace 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50x 1.50xTarget Private Equity Over Allocation $233 $254 $337 $375 $414 $440 $464 $486 $508 $531 $555 $580 $606
Private Equity Percent of Total Plan AssetsPrivate Equity NAV 7.8% 10.0% 10.2% 12.4% 12.3% 12.5% 12.5% 12.4% 12.4% 12.5% 11.9% 11.7% 11.8%Private Equity Uncalled Capital Commitments 8.7% 8.2% 9.1% 7.5% 6.4% 5.6% 5.4% 5.3% 5.4% 5.7% 5.7% 5.6% 5.5%NAV + Uncalled Capital Commitments 16.4% 18.1% 19.3% 19.9% 18.6% 18.1% 18.0% 17.7% 17.8% 18.2% 17.6% 17.4% 17.3%
Target Private Equity Allocation 10.0% 10.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0%
Actual
$0.0
$100.0
$200.0
$300.0
$400.0
$500.0
$600.0
$700.0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026Existing PE Investments NAV New PE Investments NAV Existing PE Investments Uncalled Capital New PE Investments Uncalled Capital Target Private Equity NAV Target Private Equity Over Allocation
Projected
• Client began committing to Private Equity in 2009 and today has a diversified program
– Early commitments centered on secondaries, distressed and fund of funds – Later commitments have pivoted toward more direct exposures
Historical Commitments by Strategy – Sample Private Equity Program
Private Equity Commitments by Vintage Year
Private Equity Commitments by Vintage Year
Actual Actual Actual Actual Actual Actual More Certain Less CertainYear 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026Buyouts $20 $10 $10 $10 $30 $40 $14 $14 $16 $16 $18 $20 $20 $20 $20Special Situations $18 $15 $7 $7 $8 $8 $9 $10 $10 $10 $10Co-Investments $10 $10 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Distressed $15 $25 $0 $11 $11 $12 $12 $14 $15 $15 $15 $15Energy $22 $11 $10 $0 $7 $7 $8 $8 $9 $10 $10 $10 $10Fund of Funds $9 $30 $20 $10 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Growth Equity $1 $10 $11 $11 $12 $12 $14 $15 $15 $15 $15Mezzanine $10 $0 $4 $4 $4 $4 $5 $5 $5 $5 $5Secondaries $25 $15 $25 $15 $0 $11 $11 $12 $12 $14 $15 $15 $15 $15Venture $5 $8 $8 $3 $10 $7 $7 $8 $8 $9 $10 $10 $10 $10Total Commitments $60 $5 $82 $38 $46 $40 $55 $58 $75 $70 $70 $80 $80 $90 $100 $100 $100 $100
$20
$10 $10 $10
$30$18
$10
$10
$15
$25
$22
$11
$10
$9 $30
$20
$10
$1
$10
$25
$15
$25
$15
$5
$8
$8
$3
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2009 2010 2011 2012 2013 2014 2015 2016Buyouts Special Situations Co-Investments Distressed Energy Fund of Funds Growth Equity Mezzanine Secondaries Venture
44
Portfolio Implementation Case Study
• The client is a ~$200 million foundation which started with a 12% target to private equity and private debt in aggregate, which recently increased to 20%
• The client initiated its private equity program in 2007 with its first secondary fund commitment and its private debt program in 2008 with its first distressed debt commitment
• The client has made commitments in the $5 to $10 million range since the initiation of the program, beginning with secondary funds, which tend to get capital put to work quickly due to the fact that they are buying into existing portfolios of assets. For that reason, they also tend to begin distributing cash more quickly
• In 2013, the client took advantage of the dislocation in the credit market and made an opportunistic commitment to two senior lending funds
• While the portfolio is not yet mature enough to generate sufficient distributions to cover its capital calls, it has been in positive territory since its second year
Client Case Study
Annual Commitments by Strategy
Sample only. Past performance is no guarantee of future results.
Private Equity and Private Debt Commitments by Vintage Year ($Millions)
Private Equity and Private Debt Commitments by Vintage Year ($Millions)
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015Venture $4
Growth Equity $4
Buyouts $4
Special Situations/Turnaround $4
Secondaries $2 $5 $3 $3 $5
Direct Lending $8
Opportunistic Credit $2
Distressed $4 $6 $4
Mezzanine $5 $5
Total Commitments $2 $9 $5 $6 $7 $8 $17 $5 $9
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2007 2008 2009 2010 2011 2012 2013 2014 2015
Venture Growth Equity Buyouts Special Situations/Turnaround Secondaries Direct Lending Opportunistic Credit Distressed Mezzanine
Performance Since Program Inception
Private Equity Performance ($Millions)
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015Cumulative Commitments $2 $7 $7 $7 $14 $18 $25 $30 $34
Cumulative Funded ($0) ($1) ($2) ($3) ($5) ($9) ($11) ($15) ($17)
Cumulative Distributions $0 $0 $0 $1 $1 $3 $4 $6 $8
NAV $0 $1 $3 $5 $6 $10 $12 $18 $16
Total Value $0 $1 $3 $5 $7 $12 $16 $24 $24
Total Value/Paid in Capital Multiple 1.0x 0.9x 1.6x 1.8x 1.4x 1.4x 1.5x 1.6x 1.4x
Private Debt Performance ($Millions)
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015Cumulative Commitments $0 $4 $9 $15 $15 $19 $29 $29 $34
Cumulative Funded ($1) ($2) ($4) ($7) ($9) ($13) ($19) ($25)
Cumulative Distributions $0 $0 $0 $1 $2 $4 $6 $10
NAV $1 $3 $5 $7 $10 $12 $18 $19
Total Value $1 $3 $5 $8 $11 $16 $24 $29
Total Value/Paid in Capital Multiple NA 1.2x 1.4x 1.3x 1.2x 1.2x 1.3x 1.3x 1.2x
Sample only. Past performance is no guarantee of future results.
Historical Private Equity and Private Debt Pacing
Historical Private Equity and Private Debt Pacing
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015
Private Equity NAV $0 $1 $3 $5 $6 $10 $12 $18 $16PE Uncalled Capital Commitments $2 $3 $2 $1 $6 $13 $11 $13 $14PE NAV + Uncalled Capital Commitments $2 $4 $5 $6 $12 $23 $23 $30 $29
Private Debt NAV $0 $1 $3 $5 $7 $10 $12 $18 $19PD Uncalled Capital Commitments $0 $3 $7 $11 $9 $23 $11 $6 $8Private Debt NAV + Uncalled Capital Commitments $0 $4 $10 $16 $16 $33 $23 $24 $27
Total PE and PD NAV $1 $2 $6 $10 $13 $19 $24 $36 $35Total PE and PD Uncalled Capital Commitments $2 $6 $9 $12 $15 $37 $23 $18 $22PE and PD NAV + Uncalled Capital Commitments $2 $8 $15 $22 $28 $56 $47 $54 $56
Target PE and PD NAV $26 $19 $21 $23 $22 $27 $29 $28 $45Over-Commitment Pace 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x 1.5x 1.5xTarget PE and PD Over Allocation $39 $28 $32 $34 $33 $41 $44 $43 $67
Target PE and PD Allocation 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 12.0% 20.0%
$0
$10
$20
$30
$40
$50
$60
$70
$80
Private Equity NAV PE Uncalled Capital Commitments Private Debt NAV PD Uncalled Capital Commitments Target PE and PD NAV Target PE and PD Over Allocation2007 2008 2009 2010 2011 2012 2013 2014 2015
Sample only. Past performance is no guarantee of future results.
Private Equity Cash Flows
Private Equity Drawdowns and Distributions
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015Private Equity Drawdowns ($0.4) ($1.1) ($0.5) ($0.9) ($2.2) ($3.7) ($2.0) ($3.8) ($2.8)Private Equity Distributions $0.0 $0.1 $0.1 $0.4 $0.7 $1.1 $1.5 $2.0 $1.8Cumulative Net Cash Flow ($0.3) ($1.4) ($1.5) ($0.9) ($2.0) ($4.0) ($3.0) ($2.3) ($2.8)
($5)
($4)
($3)
($2)
($1)
$0
$1
$2
$32007 2008 2009 2010 2011 2012 2013 2014 2015
Private Equity Drawdowns Private Equity Distributions Cumulative Net Cash Flow
Sample only. Past performance is no guarantee of future results.
Private Debt Cash Flows
Private Debt Drawdowns and Distributions
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015Private Debt Drawdowns ($0.3) ($1.0) ($1.2) ($1.6) ($2.9) ($2.4) ($3.8) ($5.9) ($5.9)Private Debt Distributions $0.0 $0.0 $0.0 $0.1 $0.4 $1.0 $2.7 $2.3 $4.0Cumulative Net Cash Flow($0.3) ($1.3) ($2.2) ($2.7) ($4.0) ($3.9) ($2.5) ($4.8) ($5.5)
($8)
($6)
($4)
($2)
$0
$2
$4
$62007 2008 2009 2010 2011 2012 2013 2014 2015
Private Debt Drawdowns Private Debt Distributions Private Debt Net Cash Flow
Sample only. Past performance is no guarantee of future results.
J-Curve of a $5 Million Commitment to a 2008 Vintage Secondary Fund
Sample only. Past performance is no guarantee of future results.
Private Equity Drawdowns and Distributions
-$1.2
-$1.0
-$0.8
-$0.6
-$0.4
-$0.2
$0.0
$0.2
$0.4
$0.6
$0.82008 2009 2010 2011 2012 2013 2014 2015
Drawdowns Distributions Cumulative Net Cash flow
J-Curve Examples
How One NEPC Client Avoided A Return Drag While Launching A Private Equity Program
This client started a Private Equity and Debt program in 2009. The overall portfolio did not suffer any performance drag, due in large part to an early emphasis on Mezzanine Debt Funds whose portfolio paid immediate income, Secondary P/E Funds that bought mature investments at a discount, and Distressed Opportunity Funds that did both (bought income-paying investments at a discount): ($ in Millions)Year 2009 2010 2011 2012 2013 2014 2015Year of Buildout 1 2 3 4 5 6 7
Total Plan Asset Value ("TPAV") 948$ 1,150$ 1,171$ 1,299$ 1,351$ 1,518$ 1,645$ Private Equity/Debt Asset Value 11$ 16$ 25$ 62$ 79$ 114$ 139$
Actual PE Market Value as a % of the Total Plan 1.1% 1.4% 2.1% 4.8% 5.9% 7.5% 8.5%
1 Year PE Return 18.6% 11.1% 9.3% 15.5% 12.9% 14.4% 11.6%1 Year Ex-PE Return 17.6% 12.9% (0.7%) 12.3% 10.9% 3.2% (1.2%)1 Year Total Plan Return 17.6% 12.9% (0.5%) 12.5% 11.0% 4.0% (0.1%)
PE Benefit (Drag) in basis points 1 (3) 21 15 12 85 108
Compounded Value (With PE) 100 118 133 132 149 165 172 171Compounded Value (Ex-PE) 100 118 133 132 148 164 169 167
Hypothetical Private Equity Return Drag Assuming No J-Curve Mitigation
If we assume that the Private Equity Program suffers J-Curve issues in its early years, and the rest of the portfolio earns exactly 7.5%, then the PE Program might be a net drag on total performance for the first several years:
Return Drag of a PE Program With J-Curve Impacts on a 7.5% Return Portfolio($ in Millions)Year 2009 2010 2011 2012 2013 2014 2015Year of Buildout 1 2 3 4 5 6 7
Actual PE Market Value / Total Plan Asset Value 1.1% 1.4% 2.1% 4.8% 5.9% 7.5% 8.5%
1 Year PE Return (30.0%) (20.0%) (5.0%) 5.0% 8.0% 10.0% 10.0%1 Year Ex-PE Return 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%1 Year Total Plan Return 7.1% 7.1% 7.2% 7.4% 7.5% 7.7% 7.7%
PE Benefit (Drag) in basis points (42) (38) (27) (12) 3 19 21
Compounded Value (With PE) 100 107 115 123 132 142 153 165Compounded Value (Ex-PE) 100 108 116 124 134 144 154 166
Appendix: Glossary
• Carried Interest - The share of profits that the fund manager is due once it has returned the cost of investment to investors
• Commitment - Every investor in a private equity fund commits to investing a specified sum of money in the fund partnership over a specified period of time. The fund records this as the limited partnership’s capital commitment. The sum of capital commitments is equal to the size of the fund
• DPI – A ratio of the amount of capital distributed (D) to investors over the amount of capital called from (or Paid In by) investors
• EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization. Commonly used as a proxy for annual cash flow and often used as the denominator in a ratio to express the valuation of a company (TEV/EBITDA)
• IRR - a time-weighted return expressed as a percentage. IRR uses the present sum of cash drawdowns (money invested), the present value of distributions (money returned from investments) and the current value of unrealized investments
• Management fee – This is the annual fee paid to the general partner. It is typically a percentage of limited partner commitments to the fund and is meant to cover the basic costs of running and administering a fund.
• Preferred return – Minimum returned distributed to the limited partners until the time when the general partner is eligible to deduct carried interest. The preferred return ensures that the general partner shares in the profits of the partnership only after investments have performed well
• TVPI - A ratio of the Total Value (TV) of all distributions and current net asset value over the amount of capital called from (or Paid In by) investors
• TEV/EBITDA – common valuation metric for companies, expressed as a ratio of the Total Enterprise Value over an annual EBITDA amount
Private Equity Glossary
57
Private Equity & Private Debt Overview & Education
Appendix: Detailed Investment Strategy Information
Spectrum of Private Equity Investment Strategies
Private Equity Investment Style / Overview Investment Strategy Sector Exposure Considerations
Venture Capital • Return driver: appreciation • Expected IRR: 15%-20% • Expected TVPI: 2.0x • Time Horizon: 6-10 years
Minority equity investments in startup businesses that are perceived to have
significant growth potential
Technology Software Biotech
Healthcare Consumer CleanTech
• Vintage year is important • Access to the highest quality
managers is paramount • Risk of failure is high
Growth Equity • Return driver: appreciation • Expected IRR: 15%-20% • Expected TVPI: 2.0x • Time Horizon: 3-6 years
Minority expansion capital for small, growing businesses that are generating cash flow and profits. Generally, these
investments have less exposure to technology and leverage risk
Diversified Business Services
Technology Healthcare Industrial Consumer
• Execution risk is high • Lack of control positions
Buyouts • Return driver: appreciation • Expected IRR: 17%-20% • Expected TVPI: 2.0x • Time Horizon: 4-6 years
Investments in established companies that require capital to expand and/or
restructure
Diversified Business Services
Technology Healthcare Industrial Consumer
• Generally high leverage • Operational control is key to
execution
Special Situations • Return driver: appreciation and
income • Expected IRR: 17%-20% • Expected TVPI: 2.0x • Time Horizon: 3-6 years
Investments in mature businesses that may be profitable or unprofitable.
Investments are often in the equity of the acquired business.
Diversified Business Services
Technology Healthcare Industrial Consumer
• Operational control is key to execution
• Businesses may have more going concern risk than buyouts
59
Private Equity & Private Debt Overview & Education
Spectrum of Private Equity Multi-Manager Investment Strategies
Private Equity Investment Style / Overview Investment Strategy
Sector Exposure Considerations
Co-Investments • Return driver: appreciation and
income • Expected IRR: 14%-16% • Expected TVPI Multiple: 1.8x-
2.0x • Time Horizon: 5-7 years
Investments in established companies that require capital to expand and/or
restructure
Highly diversified across underlying deals and
managers
• Generally high leverage • Co-Investors will not typically
have much oversight for investments
Secondary Fund of Funds • Return driver: appreciation • Expected IRR: 14%-18% • Expected TVPI Multiple: 1.5x • Time Horizon: 2-3 years
Private equity interests are generally purchased at a discount of NAV from motivated owners of private equity
interests. The interests purchased are generally venture and buyout fund
and/or company interests with limited exposure to unfunded capital
commitments
Highly diversified across underlying managers
• Limited alpha producing opportunities
• Most value is generated at time of purchase through discounts and underwriting quality
• Long lived funds due to diversification
Primary Fund of Funds • Return driver: appreciation • Expected IRR: 10%-16% • Expected TVPI Multiple: 1.6x-
1.8xx • Time Horizon: 5-10 years
Investments as LP commitments to underlying funds diversified across vintage, strategy, and geography
Highly diversified across underlying managers
• Limited alpha producing opportunities
• Long lived funds due to diversification
• Passive investments • Lower fees minimize impact of
double layer
60
Private Equity & Private Debt Overview & Education
Spectrum of Private Debt Investment Strategies
Private Debt Investment Style / Overview Investment Strategy
Sector Exposure Considerations
Mezzanine • Return driver: current income
and appreciation • Expected IRR: 14%-16% • Expected TVPI Multiple: 1.6x-
1.7x • Time Horizon: 5-7 years
Primarily fixed rate subordinated (the level of financing senior to equity and below senior debt) debt obligations
made to non-investment grade borrowers to effect buyout, M&A or
other growth strategies
Companies in a variety of industries that are backed by
Private Equity Managers (Sponsored)
or not backed by a Private Equity Manager
(Sponsor-less)
• Fund economics play a role in returns
• Manager has limited recourse due to subordinated position in capital structure
Opportunistic Credit • Return driver: current income
and appreciation • Expected IRR: 13%-17% • Expected TVPI Multiple: 1.3x-
1.8x • Time Horizon: 1-4 years
Investment strategy involving various credit-linked opportunities such as
distressed debt, performing and non-performing loans, structured products
(CLOs, CDOs), hard assets
Diversified exposure through various access points.
Instruments include publicly traded debt securities, private debt, trade claims, mortgage debt, common and preferred stock and commercial paper
• Thematic • Esoteric investments
Distressed (Control) • Return driver: appreciation and
income • Expected IRR: 15%-17% • Expected TVPI: 1.3x-1.8x • Time Horizon: 3-6 years
Debt investments with the intent to take equity control of companies that
have typically defaulted on debt obligations and are in need of financial
and operational restructuring.
Diversified • Window of opportunity tends to be short lived
Distressed Debt (non-control) • Return driver: appreciation • Expected IRR: 13%-17% • Expected TVPI Multiple: 1.3x-
1.8x • Time Horizon: 1-4 years
Debt investments in companies that have typically defaulted on debt
obligations and are in need of financial and operational restructuring.
Diversified exposure through various access points. Securities
can include common and preferred shares, bank debt,
trade claims (goods owed) and corporate bonds
• Vintage year is important • Window of opportunity
tends to be short lived
Direct Lending • Return driver: income • Expected IRR: 8%-12% • Expected TVPI Multiple: 1.3x-
1.5x • Time Horizon: 2-4 years
Primarily floating rate senior and/or unitranche (senior and subordinated debt in one instrument) debt capital
used for various situations: facilitating changes in ownership through
leveraged buyouts or recapitalizations, financing acquisitions, or enabling
growth
Companies in a variety of industries that are backed by
Private Equity Managers (Sponsored)
or not backed by a Private Equity Manager
(Sponsor-less)
• Fund economics play a role in returns
• Vintage year is important • Floating rates, shorter
holding periods
61
Private Equity & Private Debt Overview & Education
Appendix: Alternative Investment Disclaimer
It is important to note the following characteristics of many non-traditional investment strategies including hedge funds and private equity:
1. Performance can be volatile and investors could lose all or a substantial portion of their investment
2. Leverage and other speculative practices may increase the risk of loss 3. Past performance may be revised due to the revaluation of investments 4. These investments can be illiquid, and investors may be subject to lock-ups or lengthy
redemption terms 5. A secondary market may not be available for all funds, and any sales that occur may
take place at a discount to value 6. These funds are not subject to the same regulatory requirements as registered
investment vehicles 7. Managers are not required to provide periodic pricing or valuation information to
investors 8. These funds may have complex tax structures and delays in distributing important tax
information 9. These funds often charge high fees 10. Limited partnership agreements often give the manager authority to trade in securities,
markets or currencies that are not within the manager’s realm of expertise or contemplated investment strategy
Alternative Investment Disclaimer
63
Private Equity & Private Debt Overview & Education