Red Rocks Capital Private Equity Perspectives – March 2015 Page 1 of 6 www.redrockscapital.com

MARCH 2015 - RED ROCKS CAPITAL PRIVATE EQUITY PERSPECTIVES Q4-2014 IN REVIEW Overview 2014 and the fourth quarter proved to be positive for listed private equity and its investors. Our outlook for private equity is positive as we enter 2015 as the markets continue to show an appetite for the underlying holdings of publicly-traded private equity names. We see a number of potential IPOs (Initial Public Offerings) on the horizon in both Europe and in the USA. Debt remains cheap and available on a global basis. At this juncture we do not see any financial crisis on the horizon. As we look forward, potential negatives include a competitive environment for deals and new capital deployment, global tensions related to Russia, instability caused by falling energy prices, and a market that may become overpriced in terms of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) multiples. Within the global private equity investment class, we have observed companies providing better disclosure, increased global analyst coverage, and significant interest from new clients. We believe that all of these items, when looked at collectively, continue to reinforce the desire for a liquid private equity product and suggest to us we are likely to see more private equity names going public in the future. Outlook We see a steady stream of new private investment opportunities as sidelined capital continues to be deployed. Additionally, we expect to see a broader reach into the developing markets and into Europe where assets prices have become less expensive than in the USA. We are alert to potential and significant interest in the energy space given recent commodity price action and we expect to see an ongoing stream of asset realizations (either strategic or as IPOs) as 2015 unfolds. All in all, we believe that 2015 is setting up to be a decent year for private equity and its investors. As always, we appreciate your continued support and interest in Red Rocks and the Listed Private Equity strategy. Mark Sunderhuse Co-Portfolio Manager

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PRIVATE EQUITY MANAGER PROFILE

Name: Melrose Industries PLC CEO: Simon Peckham Ticker: MRO LN Market Cap: 2,987.6m British Pounds http://www.melroseplc.net/

Overview and Strategy: Melrose buys good manufacturing businesses with strong fundamentals whose performance can be improved. Melrose finances its acquisitions using a low level of leverage, improves the businesses by a mixture of investment and changed management focus, sells them and returns the proceeds to shareholders. Businesses in the portfolio benefit from substantial investment and changed management focus in order to improve operational performance and drive growth. Melrose works with divisional managers to help improve margins and generate sustainable cash flows and profitable growth Businesses: Melrose holds two major businesses focusing primarily in the energy industry. Elster is a world leader in measuring and improving the flow of natural gas, electricity and water in more than 130 countries. Brush Turbogenerators is the world's largest independent manufacturer of electricity generating equipment for the power generation, industrial, oil & gas and offshore sectors.

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CHART OF THE MONTH According to a Preqin survey of private equity and venture capital fund managers, the appetite for private equity and venture capital investing increased over the past 12 months.

NOTABLE

Private Equity Experts Place a Bullish View for 2015 More than 2,000 private equity managers, including some of the most well-known funds are seeking capital in the market today. In an article for Wall Street Journal, Antoine Drean has stated that niche-focus and specialization would be one of the key trends this year. According to the polls conducted among more than 900 limited partner firms of Palico, 89 percent of investors believe that the future of private equity is increasing specialization. With really few competitors, investors are finding more and more promising opportunities in the niches. The year 2014 saw PE funds invest almost USD1 trillion over 5,305 deals, which is the highest total since 2007, according to data tracker PitchBook. With the accessibility of low-cost debt, extension of dry powder, and US economy’s relative optimism, private equity had experienced a great year in 2014. Contributing to a great volume of deal flow, indications therefore are positive for the year ahead. https://www.wallstreet.org/2015/02/private-equity-experts-place-a-bullish-view-for-2015/149242.html HgCapital plans sale of German care home chain Casa Reha HgCapital is planning a potential 300 million euro ($342 million) sale of nursing home operator Casa Reha as the consolidation of Germany's fragmented healthcare services sector continues apace. HgCapital is hoping to attract offers of about 10 times Casa Reha's operating earnings in the auction which will officially begin in late spring. Casa Reha operates 71 nursing homes with about 10,000 beds in Germany, making it one of the top five operators. http://www.reuters.com/article/2015/02/13/casareha-ma-idUSL5N0VN48W20150213

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Our Annual Private Equity Hiring Frenzy Link For young bankers, the recruiting race is an important step on a journey to becoming a Wall Street tycoon. They are only in their early to mid-20s, but some young bankers on Wall Street are the most sought-after financiers around, with lucrative pay packages dangling before them. Many had expected this process to start in early March, or late February at the earliest. But by early February, some of the biggest firms had already extended offers for the summer of 2016. http://dealbook.nytimes.com/2015/02/10/private-equity-firms-in-a-frenzied-race-to-hire-young-investment-bankers/ FOMO (Fear of Missing Out) in the ‘Private IPO’ Market Is Fueling Valuations Bill Gurley warns of the risks of public-market investors moving into private companies. It is the infectious Fear Of Missing Out (FOMO), according to Gurley and other venture capitalists, that has created a flotilla of billion-dollar startups with ever-soaring valuations and mixed financials. According to The Wall Street Journal’s Billion Dollar Startup Club, there are now at least 73 private technology companies worth more than $1 billion dollars, versus 41 a year ago. Gurley is worried that mutual fund investors, new to venture capital, are chasing returns by investing in these tech-IPO’s, but are not properly weighing risk and realizing that these companies are not guaranteed home runs. http://blogs.wsj.com/digits/2015/02/20/bill-gurley-fomo-in-the-private-ipo-market-fuels-valuations/ From the Private Equity Operational Improvement Playbook – Procurement Private equity firms excel at lowering costs―on labor, direct expenses, as well as general business needs like IT hardware and health benefits. CoreTrust’s Scott Miller provides examples of some of the best practices from private equity for optimizing procurement, including: strategic review of operations, development of metrics and analytics, centralizing and standardizing processes and commodity items, using contract management tools, and thinking about total cost of ownership rather than just the best price. http://www.procurementleaders.com/blog/my-blog--guest-blog/2015/02/12/eight-best-practices-from-private-equity Sale of Cogent to Greenhill Yields 20x Return for Cogent’s Outside Backers Cogent, one of the largest advisors to the secondary private equity market, was acquired by Greenhill & Co in a $97.6 million deal in early February. The new Greenhill Cogent will compete with other active advisers in the market, including UBS, Park Hill Group, Evercore, Credit Suisse, Campbell Lutyens, and Setter Capital. “This is a great outcome for the firm, its investors and the team,” said Cogent co-founder Scott Myers, who left the firm a few years ago and formed specialty investment bank Hycroft. “It is also an outstanding acquisition for Greenhill. When we started this business in 2001 we thought it would be a small business. Total secondary deal volume was only around $1.2 billion. Now it is $40 billion and rising.” https://www.pehub.com/2015/02/sale-of-cogent-to-greenhill-yields-20x-return-for-cogents-outside-backers/ The Impact of Private Equity on Airline Profitability Airline stocks have been on a tear and overall industry profitability is at record levels. According to Rick Schifter, a senior adviser to private equity firm TPG, it is no coincidence that the CEOs of the three largest airlines today rose to prominence while their companies were controlled by private-equity firms. Following airline deregulation in 1978, many airline executives were motivated by growth over profits—which led to overcapacity and rampant price competition – and were reluctant to shed the inefficiencies which were vestiges of a regulated industry. When this mind-set changed to a focus on net income and not the number of planes, the supply of airline seats was finally balanced with demand. Private equity provided capital to the industry when the public markets were not prepared to do so, whether to help carriers emerge from Chapter 11 (Continental and America West), to start up a new business ( JetBlue in 1999), to strengthen the regional jet model (Republic Airways in 1998), and to transform a business model ( Spirit Airlines in 2006). http://www.wsj.com/articles/rick-schifter-why-airlines-are-flying-high-1423009403 Consolidation Coming to Social Fitness Market Under Armour has acquired MyFitnessPal, a San Francisco-based service for letting users track and share calorie intake and other health and wellness data, for $475 million. MyFitnessPal was founded in 2005, but last year raised $18 million in its first round of outside funding from Kleiner Perkins Caufield & Byers and Accel Partners. Under Armour also recently acquired Endomondo, a Denmark-based social fitness network, for around $85 million. Endomondo had raised VC funding from Seed Capital Partners. http://fortune.com/2015/02/04/under-armour-social-fitness/

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Private Equity Firm TA Associates Buys Wealth Manager NorthStar TA Associates has agreed to buy a majority share of NorthStar Financial Services Group. NorthStar, which provides wealth management services to financial advisors, employs about 700 people and has about $275 billion of assets under administration and management. The company provides services such as accounting, compliance, asset management, printing and marketing. The deal will not only provide capital to finance acquisitions, but it will also bring TA’s knowledge of the financial services space and mergers and acquisitions activity in the space. Financial terms were not disclosed. http://www.omaha.com/money/boston-private-equity-firm-to-get-major-share-of-omaha/article_9a88ff81-d52c-535f-b2be-0b636c428aec.html Sharing Economy – Renting Legos and Other Toys via Pley Pley, a LEGO® subscription service known as the Netflix for LEGO, has secured $10 million in Series B funding. Pley was co-founded in 2013 by Ranan Lachman who saw an opportunity to provide parents with access to shared toys at an affordable price. The company plans to expand to other educational toys and family products in the future. To date, more than 50,000 families have purchased Pley subscriptions and more than 350,000 packages have been shipped from Pley's Santa Clara warehouse where each LEGO set is automatically inspected, cleaned and sanitized between shipments. http://finance.yahoo.com/news/pley-secures-10-million-series-170000902.html GrubHub Makes Major Move in Restaurant Delivery Wars Private equity-backed GrubHub wants to corner the restaurant delivery business. It already offers infrastructure products that live inside the restaurant (OrderHub) and for delivery drivers (DeliveryHub), and believes that using its own drivers will make the automation easier, and make the customer experience better. “There is economy of scale in the volume of deliveries,” explains Bill Gurley, a venture capitalist and GrubHub board member. “The more volume you have, the more economical you can be.” The pricing also would be designed to put pressure on rivals like Google and Amazon, which seem interested on entering every single type of on-demand delivery space. http://fortune.com/2015/02/05/grubhub-restaurant-delivery/ The Future of Private Equity is “Permanent Capital” Via Public Markets Fortress, the first major US private equity firm to get a listing on the US stock exchange, is bulking up on permanent capital, with about $6 billion gathered in the past three years. “We are way ahead of the crowd,” said Wesley Edens, who runs Fortress’s private equity business. “If you ask our big competitors what they are most focused on, I bet they’ll say permanent capital,” he said, referring to the public vehicles. Public investment vehicles, such as REITs, raise money by selling shares, which are then traded on an exchange and can be bought by anyone. Unlike the private funds, which typically must return investors’ capital after about a decade, these vehicles don’t have to return it at a given date, which is why they’re sometimes called permanent capital. If investors want to cash out, they simply sell the shares. http://www.bloomberg.com/news/articles/2015-02-17/fortress-sees-salvation-in-stock-market-as-funds-shelved

About Red Rocks Capital Founded in 2003, Red Rocks Capital is the largest U.S.-based asset management firm focusing exclusively on liquid private equity, with approximately $1.4 billion in assets for advisor-sold mutual funds and variable annuities for institutions and investors. The Red Rocks Capital liquid private equity portfolio gives investors access to an asset class that has historically had high barriers to entry due to investor qualification, long lock-up periods, and high initial investment minimums. Based in Golden, CO, Red Rocks Capital was one of the first U.S. asset managers to offer access to private equity in a ’40 act structure.

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IMPORTANT DISCLOSURES

While every effort has been taken in the preparation of this document, Red Rocks Capital makes no representation to the accuracy or completeness of this research nor any statements or forecasts within this document. Listed Private Equity Companies are subject to various risks depending on their underlying investments, which could include, but are not limited to, additional liquidity risk, industry risk, non-U.S. security risk, currency risk, credit risk, managed portfolio risk and derivatives risk (derivatives risk is the risk that the value of the Listed Private Equity Companies derivative investments will fall because of pricing difficulties or lack of correlation with the underlying investment. There are inherent risks in investing in private equity companies, which encompass financial institutions or vehicles whose principal business is to invest in and lend capital to privately held companies. Generally, little public information exists for private and thinly traded companies and there is a risk that investors may not be able to make a fully informed investment decision. Listed Private Equity Companies may have relatively concentrated investment portfolios, consisting of a relatively small number of holdings. A consequence of this limited number of investments is that the aggregate returns realized may be adversely impacted by the poor performance of a small number of investments, or even a single investment, particularly if a company experiences the need to write down the value of an investment. The information presented is for illustrative and educational purposes only. You should not assume that an investment in the securities mentioned was or would be profitable in the future. This information is not a recommendation to buy or sell. Past performance does not guarantee future results. For private equity companies mentioned in this document, as of January 31, 2015: Red Rocks Capital holds positions with the following firms:

Melrose Industries PLC (MRO LN)

HgCapital Trust PLC (HGT LN) Through Pantheon International Participations, PLC (PINR LN)

Accel Partners

TPG Capital Red Rocks Capital has no positions or affiliations with the following firms:

Kleiner Perkins Caufield & Byers

Fortress Investment Group (FIG)

Greenhill & Co

Seed Capital Partners

TA Associates