Plymouth County Retirement Association
March 24, 2020
Fund Evaluation Report
BOSTON CHICAGO LONDON MIAMI NEW YORK PORTLAND SAN DIEGO MEKETA.COM Plymouth Country Retirement Association
Agenda
Agenda
1. Estimated Retirement Association Performance
2. Coronavirus Update: First Quarter 2020
3. Recent Meketa Communications COVID-19 Update Effects on Private Equity COVID-19 Update Effects on Real Estate
4. Interim Update As of January 31, 2020
5. Private Equity Search Finalist Review
6. Disclaimer, Glossary, and Notes
2 of 93 Estimated Retirement Association Performance
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Estimated Retirement Association Performance
Estimated Aggregate Performance1
February2 QTD 1 YR 3 YR 5 YR 10 YR (%) (%) (%) (%) (%) (%) Total Retirement Association -4.1 -4.9 4.2 5.3 4.8 7.4 60% MSCI ACWI/40% Barclays Global Aggregate -4.6 -4.7 5.8 6.1 4.7 6.1 Policy Benchmark -4.2 -4.7 4.7 6.3 5.5 7.9 Benchmark Returns
February QTD 1 YR 3 YR 5 YR 10 YR (%) (%) (%) (%) (%) (%) Russell 3000 -8.2 -8.3 6.9 9.3 8.7 12.5 MSCI EAFE -9.0 -10.9 -0.6 3.9 2.0 4.8 MSCI Emerging Markets -5.3 -9.7 -1.9 4.9 2.7 3.2 Barclays Aggregate 1.8 3.8 11.7 5.0 3.6 3.9 Barclays TIPS 1.4 3.5 10.8 4.1 2.9 3.7 Barclays High Yield -1.4 -1.4 6.1 4.9 5.2 7.3 JPM GBI-EM Global Diversified -3.4 -4.7 3.7 3.9 2.0 2.1 S&P Global Natural Resources -11.3 -18.0 -13.6 0.0 -0.1 0.4 Estimated Total Fund Assets
Estimate Total Retirement Association $1,026,649,749
1 The February performance estimates are calculated using index returns as of February 29, 2020 for each asset class. No performance estimate was included for private equity, real estate, infrastructure, and private natural resources asset classes. 2 As of February 29, 2020
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Locations of Major Worldwide Cases1
1 Source: Johns Hopkins CSSE as of March 19, 2020.
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Virus Update COVID-19 has rapidly spread globally from its original outbreak in China, and is now materially impacting countries that were less prepared or more open to international travel, such as Europe. As of March 19, 2020, there were over 220,000 cases globally across 157 countries with 9,115 deaths. China (81,154) continues to represent the majority of confirmed cases, followed by Italy (35,713), Iran (18,407), Spain (15,014), and Germany (13,093). Italy, Iran, and Spain have experienced the fastest growth of new cases, while China is leveling off. In the US, cases are 9,415 across all states, with 150 deaths. As testing capacity increases, the case numbers are expected to dramatically increase. A number of countries have banned international travel, while some are imposing restrictions on gatherings including canceling all public events, suspending schools, and requiring the closing, or limited service, of restaurants and social meeting places The disruption comes not just from the supply side, when goods cannot be produced and shipped, but also from the demand side when consumers drastically curtail spending due to restrictions on movement and travel.
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2020 Market Returns1
Indices YTD
S&P 500 -25.1% MSCI EAFE -31.9% MSCI Emerging Markets -31.1% MSCI China -17.7% KOSPI Index (South Korea) -28.7% MSCI Italy -36.8% Bloomberg Barclays Aggregate -0.6% Bloomberg Barclays TIPS -3.9% Bloomberg Barclays High Yield -17.6%
Given uncertainty related to the ultimate impact of the virus on economic growth, company profitability, and societal norms, investors have sought perceived safe haven assets like US Treasuries. Stocks have experienced significant declines globally, particularly in areas like Italy where the virus is actively spreading.
1 Source: InvestorForce. Data is as of end of day March 19, 2020.
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S&P 500 Reaches Bear Market Levels1
Given all the uncertainty, US stocks declined from their recent peak into Bear Market (-20%) territory at the fastest pace in history. From the February 19 peak, the S&P 500 declined 29%, or 976 points, in a matter of 22 trading days.
1 Source: Bloomberg. Data is as of end of day March 19, 2020.
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2020 YTD Sector Returns1
0% -10% -9.2% -11.5% -20% -15.4% -16.4% -19.1% Return -30% -22.4% -26.6% -29.2% -29.1% -31.7% -40% -50% -60% -54.3%
The energy sector has experienced the largest declines given the fall in oil prices. Financials, materials, and industrials are all lower by around 30%, while defensive sectors like consumer staples and utilities experienced the lowest declines.
1 Source: Bloomberg as of March 19. 2020.
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VIX Index1
90
80
70
60
50
40
30
20
10
0
Consistent with the declines in US equities, expectations of short-term volatility, as measured by the VIX index, has traded to levels not seen since the 2008 Global Financial Crisis (GFC). The VIX Index recently reached 82.7, a level surpassing the pinnacle of volatility during the GFC showing the magnitude of investor fear. As investors continue to process the impacts of COVID-19 and further policy responses are announced, it is likely that volatility will remain elevated.
1 Source: Chicago Board of Exchange. Data is as of March 19. 2020.
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Oil Prices1
$160
$140
$120
$100
$80
$60 $ Per Barrel Per $ $40
$20
$0
Oil markets came under pressure as the virus started to impact global growth expectations, but prices deteriorated further when Saudi Arabia initiated a price war due to Russia’s decision to not participate in the proposed OPEC+ supply cuts. In a recent press conference, President Trump announced that he intends to build US oil reserves in an attempt to support the domestic industry and capitalize on lower oil prices. During the volatility and aggressive supplier actions, oil prices (as measured by West Texas Intermediate) traded below $21 dollars per barrel; a decline of over 55 percent since February 19, to reach levels not seen since 2001.
1 Source: Bloomberg. Represents 1st available futures contract. Data is as of March 19, 2020.
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US Yield Curve Declines1
100% NY FED Recession Probability
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
The US Treasury yield curve has declined materially since last year, driven by notable cuts in monetary policy rates impacting the shorter-dated maturities, and flight-to-quality flows, low inflation, and declining growth expectations driving longer-dated maturities. The shape of the yield curve has been one tool to forecast future recessions. Over the next twelve months the probability of a recession was 31% at the end of February and will go sharply higher at the end of March reading.
1 Source: Bloomberg. Data is as of March 19, 2020.
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Credit Spreads (High Yield & Investment Grade)1
Investment Grade OAS High Yield OAS 380 900
330 800
280 700
230 600 Basis Basis Points Basis Basis Points 180 500
130 400
80 300 3/12 3/13 3/14 3/15 3/16 3/17 3/18 3/19 3/20 3/11 3/12 3/13 3/14 3/15 3/16 3/17 3/18 3/19 3/20
Credit spreads (the spread between a comparable Treasury bond) for investment grade and high yield corporate debt have been expanding sharply as investors prefer perceived safe-haven bonds. Investment grade bonds have been holding up better than high yield bonds, which can have strong correlations with equity assets. Companies in the reeling energy sector, recently hurt by the decline in oil prices, issue a lot of high yield bonds, also contributing to the decline. Corporate debt issuance has more than doubled since 2008, which makes any deterioration in these assets likely to impact a significant number of investors in the future.
1 Source. Bloomberg. Data is as of March 19, 2020
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Policy Responses
Fiscal Monetary
United States $50 billion to states for virus related support, potential payroll tax Cut policy rates to zero, started $700 billion QE4, offering trillions in cut, anecdotal discussion of over $1.0 trillion direct to consumers repo market funding, restarted CPFF, PDCF, MMMF programs to potentially via cash payments, paid sick leave for hourly workers support lending and financing market, and expanded US dollar swap lines with foreign central banks Euro Area ------Targeted longer-term refinancing operations aimed at small and medium sized businesses, under more favorable pricing, and also additional QE until the end of the year Japan $20 billion in small business loans, direct funding program to stop Increase in QE purchases (ETFs, corporate bonds, and CP), and 0% virus spread among nursing homes and those affected by school interest loans to businesses hurt by virus closures, discussion of additional relief in the coming months China Tax cuts, low-interest business loans, extra payments to gov’t benefit Expanded repo facility, policy rate cuts, lowered reserve recipients requirements Canada $7.1 billion in loans to businesses to help with virus damage, Cut policy rates, expanded bond-buying and repos, lowered bank reserve requirements UK (BOE) Tax cut for retailers, small business cash grants, benefits for those Lowered policy rates and capital requirements for U.K. banks infected with virus, expanded access to gov’t benefits for self and un-employed Australia $11.4 billion, subsidies for impacted industries like tourism, one-time Policy rate cut, announced intention to pursue QE payment to gov’t benefit recipients
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Potential Economic Impacts
Supply Chain Disruptions: Factories closing, increased cost of stagnant inventory, and disrupted supply agreements. Reduced travel, tourism, and separation policies: Significant impact on service based economies.
Labor Force Impacts: Layoffs are extremely likely, across both service and manufacturing economies. Increased strains as workforce productivity declines throughout increased societal responsibilities (e.g. home schooling of children) and decreased functionality working from home. Illnesses from the disease will also reduce portions of the labor force temporarily.
Declines in Business and Consumer Sentiment: Sentiment drives investment and consumption, which leads to increased recessionary pressures if sentiment slips.
Wealth Effect: As financial markets decline and wealth deteriorates, consumer spending will be impacted.
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Looking Forward… There will definitely be economic impacts, and likely a recession. How deep will it be and how long will it last? The length of the virus and country responses will be key considerations. As of now, it is not clear the end is insight, however impacted countries are attempting to lay the groundwork to support a recovery. Central banks and governments are pledging support, but will it be enough? Based on initial market reactions to announced policies, the answer is no until the virus gets better contained. Expect heightened market volatility given the virus and previous high valuations. This has been a consistent theme over the last few weeks, and volatility is likely to remain elevated for some time. It is important to continue to have a long-term focus. History supports the argument that maintaining a long-term focus will ultimately prove positive for diversified portfolios.
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Implications for Clients Do not panic, investing is a long-term endeavor. The media sells headlines, not investment advice.
Image Source: Real Life Adventures by Gary Wise and Lance Aldrich (h/t Barry Ritholtz, The Big Picture).
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Global Equity Markets Have Powered Through Past Viral Outbreaks1
1 Sources: Centers for Disease Control and Prevention, RIMES, MSCI. As of 3/20/20. Disease labels are estimates of when the outbreak was first reported.
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Distribution of Annual S&P 500 Returns (1926-2020)
The 25% year-to-date decline in the S&P 500 would be the fifth largest in history if it ended the year at this level. With more than 8 months remaining in 2020, and trillions of dollars in fiscal and monetary stimulus being deployed, we expect asset prices to experience notable volatility over the near-term.
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Prior Drawdowns and Recoveries1
Peak-to-Trough Decline of the Recovery Approximate Period S&P 500 Date Time to Recovery
August 1929 to March 1933 -83% January 1945 15 years 5 months February 1966 to October 1966 -22% May 1967 1 year 3 months November 1968 to May 1970 -36% March 1972 3 years 4 months January 1973 to October 1974 -48% July 1980 7 years 6 months November 1980 to August 1982 -27% November 1982 2 years August 1987 to December 1987 -34% July 1989 1 year 11 months July 1990 to October 1990 -20% February 1991 7 months March 2000 to October 2002 -49% May 2007 7 years 2 months October 2007 to March 2009 -57% March 2013 5 years 5 months Average -42% 3 years 8 months
Markets are continuing to reprice amidst the uncertain impact of the virus on markets and global economy, which means this drawdown is still being defined in the context of history. That said, financial markets have experienced material declines with some frequency, and while some declines took a meaningful time to recover, markets did recover at some point. The current decline being experienced is severe by historical comparisons, however, it is still too early to tell how long a full recovery might take.
1 Source: Charles Schwab and Bloomberg.
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Implications for Clients Be prepared to rebalance and take advantage of the age-old wisdom “buy low, sell high”. Diversification works. The latest decline was an example of a flight to quality.
Performance YTD (through March 19, 2020)
S&P 500 ACWI (ex. US) Aggregate Bond Index Balanced Portfolio1 -25.1% -31.9% -0.6% -18.5%
Meketa will continue to monitor the situation and communicate frequently. The situation is fluid and the economic impact is uncertain at this stage. Please feel free to reach out to your consultant and client team with any questions. We would be glad to assist with performance estimates, memorandums, or phone calls.
1 Source: InvestorForce. Balanced Portfolio represents 60% MSCI ACWI and 40% Bloomberg Barclays Global Aggregate.
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Disclaimers
These materials are intended solely for the recipient and may contain information that is not suitable for all investors. This presentation is provided by Meketa Investment Group (“Meketa”) for informational purposes only and no statement is to be construed as a solicitation or offer to buy or sell a security, or the rendering of personalized investment advice. There is no agreement or understanding that Meketa will provide individual advice to any advisory client in receipt of this document. There can be no assurance the views and opinions expressed herein will come to pass. Any data and/or graphics presented herein is obtained from what are considered reliable sources; however, its delivery does not warrant that the information contained is correct. Any reference to a market index is included for illustrative purposes only, as an index is not a security in which an investment can be made and are provided for informational purposes only. For additional information about Meketa, please consult the Firm’s Form ADV disclosure documents, the most recent versions of which are available on the SEC’s Investment Adviser Public Disclosure website (www.adviserinfo.sec.gov) and may otherwise be made available upon written request.
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Recent Meketa Communications
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MEMORANDUM
TO: All Clients FROM: Meketa Investment Group DATE: March 17, 2020 RE: COVID-19 Update: Effects on Private Equity
Over the past few weeks, you have received several updates from Meketa related to the COVID-19 pandemic and its impact on the markets. Here, we focus on some of the implications specific to private equity investments. In general, we believe that the current stock market correction reflects a dramatic change in the global business climate that will have a meaningful impact on private equity portfolios. However, it will take months before company valuations reported to private market investors reflect this impact.
Private Equity Exposures & Risks Private equity companies are exposed to similar risks as publicly-traded companies. As such, it is reasonable to expect that the current setback in global economic growth will create challenges for many businesses held in private equity portfolios. Structurally, there are some differences between public and private portfolios, however. The latter tend to have lower exposure to financials (banks and insurance companies); greater exposure to information technology via venture and growth equity strategies; and greater exposure to smaller companies. Industry sectors that may show relative strength in this downturn may be technology, life sciences, and healthcare; conversely, sectors that may underperform are financials, consumer, retail, and energy (discussed later). Smaller companies, based on some early manager reports, may be somewhat less affected by global supply chain disruptions and drops in non-US demand for products and services. However, smaller companies may also be less resilient and more vulnerable to a general economic downturn. Exposures to geographies affected first by the pandemic, such as China, South Korea, and Italy tend to be small for most private equity portfolios, in the range of 5% to 10% combined. However, the situation in North America – where 60% to 70% of most private equity portfolios is invested – is still evolving and the potential impact on investments here remains difficult to assess at this point. As with any market dislocation, there will both winners and losers at the individual asset level. Conversations with private equity managers in recent weeks have revealed some companies benefitting from recent events (e.g., those enabling remote conferencing and transacting), some with immediate negative impacts (e.g., travel–related), and many with no immediate impact – but an expectation for negative impacts in the near term. With respect to timing, managers expect second quarter 2020 results to be meaningfully impacted across most of their portfolio companies and a resumption of normal business activity to take another one-to-two quarters after that.
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Individual companies that might be more vulnerable in the current environment include those with greater financial leverage, significant consumer-facing exposure, and those with greater exposure to supply chain and logistics challenges – as is also the case with publicly-traded companies. Just before the global financial crisis (“GFC”), in 2007, the average leverage ratio (net debt/EBITDA) for the private equity markets was near 6x and the average equity contribution was near 30%;. By 2019, purchase multiples on deals rose from roughly 10.0x to 11.5x, but with a similar leverage ratios (~6x), larger equity contributions (~40%), and stronger growth rates. With the increased likelihood of a recession to occur in 2020 comes an increased likelihood of breached debt covenants. However, we have just been through another easy lending period, with roughly three-fourths of all new loans in recent years being covenant-lite. As the current crisis unfolds, a number of buyout managers have looked to secure liquidity and – as a matter of policy – drawn down credit facilities where possible at each of their portfolio companies. The same managers have begun contingency planning for a potentially rough second quarter and beyond. With the exception of those companies facing a near term debt maturity, there is likely to be sufficient flexibility in most capital structures to avoid near term technical defaults and allow for a sufficient runway to recovery – if there is a return more normalized economic activity in the next few quarters.
Energy Sector As Meketa has previously discussed, a crisis developed in the oil markets recently when Russia surprisingly decided not to participate in production cuts proposed by Saudi Arabia and OPEC. This ultimately led to a decline in global oil prices as Saudi Arabia launched an all-out price war. Saudi Arabian oil officials proposed production cuts to help stem the decline in oil prices amidst the expected negative demand shock due to weakness resulting from COVID-19. With prices already lower by roughly 30%, the decision by Russia to not participate in the cuts prompted Saudi Arabia to increase production while simultaneously reducing prices to key customers in an effort to take market share away from Russia. In the wake of the announcements, the price of West Texas Intermediate (WTI) crude oil declined by over 30% to trade near $30 per barrel, where it has generally held since. Concerns about US producers’ abilities to maintain profitability or just remain solvent at such low price levels is being heavily assessed by financial markets. A broad review of public market performance for oil and gas exploration and production (“E&P”) companies reveals price declines for companies in excess of 60% year-to-date. Additionally, as a number of oil producers over the last few years have been issuing debt, including US shale producers, market participants expect an increase in defaults and even bankruptcies. A significant re-pricing of assets has occurred across the entire value chain in the energy sector. While E&P companies will take a direct hit from lower oil prices, midstream and service companies will also suffer from lower volumes and drilling activity.
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Denominator Effect & Transaction Volume The private equity asset valuation process works with a multi-month lag – relative to stock market movements – in reflecting both increases and decreases in value. Until the first quarter 2020 valuations are reported beginning in mid-May, private equity allocations will certainly appear to increase in proportion relative to those of other asset classes, and – in some cases – take them above target ranges. This is the so-called “Denominator Effect” that institutions have experienced during similar stock market corrections in the past. A related issue is an expected slowdown in private equity deal activity. As with any period of uncertainty, deal makers are reluctant to act until they have more visibility about future prospects. This slowdown is compounded somewhat by managers not being able to meet with company management teams and recent bumps in financing costs. It is reasonable to expect that a slowdown in capital calls and distributions will potentially mirror a slowdown in deal activity. As we look at our own client private equity contribution and distribution data from the GFC, we see that all cash flows were down meaningfully during the period, with activity beginning to decline in 2008 (the Lehman Brothers bankruptcy was in September) and significantly slowing in the first quarter of 2009. Activity slowly recovered over the following two years. Distributions were more meaningfully impacted than contributions, which remained more stable, leading to significantly higher than average net outflows over the period, as managers sought to put money to work at more attractive valuations. During past periods of market dislocation we have observed a meaningful “expectations gap” between buyers and sellers on price. Sellers are mentally anchored to the most recent valuation of their asset and buyers are reluctant to give up valuable liquidity in a period when it hard to price risk and additional deterioration is unknown. This is starting to happen today; a number of managers have reported that transactions are slowing down and it may take months before buyer and seller expectations again converge. We have yet to observe a meaningful amount of forced selling. Many private equity programs include strategies that will buy opportunistically (distressed debt, deep value buyout, and turnaround strategies), but at the core of most programs are buyout strategies that depend on having reasonable earnings visibility in order to transact. As discussed earlier, the private equity markets have enjoyed “covenant-lite” financing for the past few years, which may help to delay distress for a number of private equity-owned businesses. In just the past two weeks, however, the financing market for private equity has changed meaningfully. According to some buyout managers, the markets are only “selectively open,” meaning that some deals will still get done, but most that were slated for late March will be delayed. Rates for new deals are expected to be higher and the amount of leverage supported will be lower. While banks will be more conservative in their lending, they are better-capitalized today than they were in the GFC.
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2020 Program Strategy & Pacing Private equity allocations are made to benefit from – among other things – sacrificing liquidity and enabling long-term value creation plans of the managers. Each fund commitment contemplates a ten-year horizon. As ever, we feel that consistent deployment of capital is critical to reaping all of the benefits of a private equity allocation. Historically, the performance of private equity vintage years following stock market corrections has been strong. The 2008, 2009, and 2010 vintage year net IRR returns for private equity are 15%, 20%, and 17%, respectively, as of September 2019. In spite of this strong observed performance, we don’t recommend any attempt to increase capital deployment in 2020 beyond previously decided plans. Established private equity programs with commitments made to the past few vintage years will likely have significant capital available for 2020 and 2021 opportunities. In fact, recent vintage funds were categorized by fairly aggressive fundraising with respect to timing and fund size, such that many of them should have ample capital for a few years to come. In addition to this dry powder, private equity programs that employ managers with strong resources and a long operating history have an additional line of defense. Managers today report being in close communication with the management teams of portfolio companies, focusing on supply chain management, as well as the potential need to secure additional liquidity with lenders and control costs. Meketa Investment Group will continue to monitor economic activity and the capital markets, and their specific effects on private equity investments. An immediate focus for us will be a review of pacing study assumptions for the upcoming year and the consideration of potential revisions, based on declines in the public markets and an expected drop in transaction volume. We recommend clients not make significant near-term asset allocation changes based solely on perceived over allocation to private equity due to the valuation timing difference between public and private asset classes. Our core approach to private equity deployment should not change in 2020. As ever, we will seek consistent exposure across vintage years, commitments to strategies that can be opportunistic, and managers with experience in market cycles, and teams that have exhibited discipline with pricing and leverage, as well as with skill with company operations. Lastly, please know that we remain available to our clients. Meketa will provide periodic updates to you as the impacts of COVID-19 ripple through the world economy. In the meantime, please feel free to reach out to us at any time. Stay safe and stay healthy!
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MEMORANDUM
TO: Meketa Clients FROM: Meketa Investment Group DATE: March 17, 2020 RE: COVID-19 Update: Effects on Real Estate
Over the past few weeks, you have received several updates from Meketa related to the COVID-19 pandemic and its impact on the markets. Here, we focus on some of the implications specific to the institutional real estate asset class. Goethe wrote, “Enjoy when you can, endure when you must.” After enjoying an unprecedented bull market, we are now in an uncertain and dynamic environment, and endurance is required. Commercial real estate is historically a long duration asset. Keeping that in mind provides ballast to our perspective and guides our decision making. While private real estate typically experiences the fallout of negative economic events on a lagged basis, we may not see this effect to the extent we have in the past. Each day brings fresh news of closings (MGM hotels and casinos in Las Vegas, bars and restaurants in many major cities) and social distancing guidelines that immediately and materially reduce people’s visitation to and interaction with commercial spaces. Combine these immediate changes in real estate usage with a sustained and material impact on the broader US economy and we should expect repercussions to the commercial real estate sector, specifically to valuations, during the next 6 to 12 months. The flow through of performance and valuation impairments may occur more quickly still, given the integration of various technologies and data-enabled platforms into commercial real estate investing, valuation, and reporting since the global financial crisis. Within multi-strategy portfolios, it is important to focus attention on the amount of leverage utilized in non-core transactions, as this will magnify the changes in net asset value compared to core properties. Notwithstanding the lowering of base interest rates, the lending markets have not stabilized, and illiquid securities such as commercial mortgages may not be easily re-financed. Similarly, real estate debt funds, which have been leveraged to enhance return, will also show larger volatility as their NAVs are re-marked. Very few property types and locations are fully immune to the negative economic conditions currently unfolding. While the duration of leases matters, and sectors with shorter lease terms will feel the pain much more quickly than those with longer lease terms, public policy and guidance in this pandemic environment is having disruptive impact irrespective of lease term or structure. Indeed, the most vulnerable real estate to the COVID-related demand disruption are the more discretionary social spots like restaurants, movie theaters, and gyms that are now closing or subject to restricted hours of operation. Hotels are experiencing real time impact from widespread travel restrictions, group business cancellations, and a drop in leisure demand.
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Looking further out, social distancing may accelerate the work-from-home and e-commerce trends, putting further pressure on brick and mortar retail and office demand. Prolonged supply chain interruption may even impact the darling industrial sector. Meketa expects a pronounced slowdown in new single family residential mortgage originations despite the low rates, as credit committees go into lockdown, if they have not already. Shelter in place will equal rent in place. On the disposition side, the window for attractive exits has closed and it is uncertain when new crossing prices will be established. Investment managers will need to adjust their models accordingly. Maintaining liquidity and continuity of tenant income is priority one. Those investors with business models anchored in core/core-plus strategies and other conservative investment approaches are better positioned to weather this crisis. Conservative leverage, ample reserves, a focus on high-quality assets and markets, an absence of speculative development, and a focus on durable lease income will all work to bolster a portfolio’s resilience. Partners with strong fiduciary mindsets, deep resources and a long operating history offer an additional line of defense. As always, Meketa encourages investors to remain focused on the long-term, avoid hasty asset allocation decisions based on temporary asset values and be prepared to be opportunistic. Disruptions create opportunities, and investors who look forward and position themselves to take advantage of the likely opportunities will enjoy superior investment performance. Some of these may include the secondary market to acquire interests from involuntary sellers, debt securities that can be purchased at meaningful discounts to par, and certain REIT shares, both preferred and common, whose trading prices are significantly below replacement costs and whose management and balance sheets are time tested and deep Meketa will continue to provide regular updates on our views of the markets as they relate to commercial real estate investments. In the interim, if we can offer any assistance or guidance, please reach out. Most importantly, stay safe and stay healthy!
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Interim Update As of January 31, 2020
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Summary | As of January 31, 2020
Asset Class Net Performance Summary
Market Value % of 1 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs Inception Inception ($) Portfolio (%) (%) (%) (%) (%) (%) Date
_ Total Retirement Association 1,071,878,321 100.0 -0.9 10.5 7.4 6.3 8.0 7.8 Nov-89 60% MSCI ACWI / 40% Barclays Global Aggregate -0.2 12.4 8.5 6.3 6.7 6.7 Nov-89 Custom Benchmark - Policy Benchmark (Net) -0.5 10.9 8.4 7.0 8.5 -- Nov-89 Domestic Equity Assets 273,448,276 25.5 -0.5 18.0 12.2 -- -- 13.4 Jan-16 Russell 3000 -0.1 20.5 13.8 11.8 13.8 13.8 Jan-16 International Developed Market Equity Assets 80,973,180 7.6 -3.2 8.0 6.1 -- -- 5.6 Jan-16 MSCI EAFE -2.1 12.1 7.8 5.1 5.8 6.6 Jan-16 International Emerging Market Equity Assets 116,586,983 10.9 -4.5 4.3 6.8 -- -- 8.1 Jan-16 MSCI Emerging Markets -4.7 3.8 7.9 4.5 3.8 9.9 Jan-16 Global Equity Assets 107,614,307 10.0 -2.1 12.2 ------3.0 Feb-18 MSCI ACWI -1.1 16.0 11.0 8.5 9.1 3.6 Feb-18 Core Fixed Income 92,222,878 8.6 1.4 8.8 4.2 -- -- 4.1 Jan-16 75% Bbg Barclays Aggregate/25% Bbg Barclays US TIPs 1-10 year 1.8 9.0 4.2 2.8 3.5 3.9 Jan-16 Value Added Fixed Income 107,436,104 10.0 0.6 7.4 5.4 -- -- 7.1 Jan-16 Custom Benchmark (1) 0.8 9.1 5.7 -- -- 7.5 Jan-16 Hedge Funds (2) 63,716,127 5.9 -0.1 14.4 6.0 4.3 -- 4.8 Feb-10 HFRI Fund of Funds Composite Index 0.3 6.0 3.6 2.4 2.9 2.9 Feb-10 Real Estate (3) 103,135,756 9.6 0.1 9.6 6.8 -- -- 5.9 Jan-16 80% NCREIF ODCE / 20% Wilshire REIT 0.2 7.0 7.4 -- -- 7.5 Jan-16 Private Equity (4) 62,998,421 5.9 0.0 7.1 7.7 -- -- 4.6 Jan-16 Cambridge Associates FoF Composite 1Q Lag 0.0 7.8 12.9 11.0 12.2 10.6 Jan-16 Real Assets (5) 53,969,451 5.0 0.0 6.0 2.5 -- -- -0.5 Jan-16 CPI + 3% 0.4 5.5 5.0 5.0 4.8 5.1 Jan-16 Cash and Cash Equivalent 9,776,838 0.9
XXXXX (1) The custom benchmark is comprised of 25% BBgBarc US High Yield/ 25% Credit Suisse Leveraged Loans/ 25% JP Morgan EMBI Global diversified/ 25% BBgBarc Multiverse TR (2) The data for EntrustPermal Special Opportunities Evergreen Fund and Entrust Special Opportunities Fund III are based on December 31, 2019 market value, adjusted for subsequent cash flows. (3) The market value and performance is one quarter lagged. (4) The market value and performance is one quarter lagged. (5) The market value and performance is one quarter lagged.
32 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Trailing Net Performance Market Value % of % of 1 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs Inception Inception ($) Portfolio Sector (%) (%) (%) (%) (%) (%) Date
_ Total Retirement Association 1,071,878,321 100.0 -- -0.9 10.5 7.4 6.3 8.0 7.8 Nov-89 60% MSCI ACWI / 40% Barclays Global Aggregate -0.2 12.4 8.5 6.3 6.7 6.7 Nov-89 Custom Benchmark - Policy Benchmark (Net) -0.5 10.9 8.4 7.0 8.5 -- Nov-89
Domestic Equity Assets 273,448,276 25.5 25.5 -0.5 18.0 12.2 -- -- 13.4 Jan-16 Russell 3000 -0.1 20.5 13.8 11.8 13.8 13.8 Jan-16
Rhumbline Russell 1000 Value 48,942,950 4.6 17.9 -2.1 14.8 8.5 8.6 -- 10.0 Apr-13 Russell 1000 Value -2.2 14.9 8.6 8.7 11.9 10.2 Apr-13
Rhumbline Russell 1000 Growth 51,200,204 4.8 18.7 2.2 27.9 20.0 15.4 15.9 16.1 Jul-09 Russell 1000 Growth 2.2 27.9 20.0 15.5 16.0 16.2 Jul-09
Fisher Midcap Value 47,398,075 4.4 17.3 -0.7 18.0 11.1 10.6 13.0 7.9 Apr-07 Russell MidCap Value -1.9 13.0 6.8 7.5 12.5 7.0 Apr-07
Boston Company Small Cap Growth 56,217,755 5.2 20.6 4.6 26.0 19.3 15.5 15.6 15.5 Aug-09 Russell 2000 Growth -1.1 13.9 11.5 9.6 13.4 13.5 Aug-09
LMCG Small Cap Value 69,689,292 6.5 25.5 -4.8 8.7 3.0 7.5 -- 7.7 Mar-11 Russell 2000 Value -5.4 4.4 3.1 6.7 10.3 7.8 Mar-11
33 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Market Value % of % of 1 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs Inception Inception ($) Portfolio Sector (%) (%) (%) (%) (%) (%) Date
_ International Developed Market Equity Assets 80,973,180 7.6 7.6 -3.2 8.0 6.1 -- -- 5.6 Jan-16 MSCI EAFE -2.1 12.1 7.8 5.1 5.8 6.6 Jan-16
KBI Master Account 21,583,144 2.0 26.7 -2.8 6.1 4.4 2.1 4.2 3.5 Jul-05 MSCI EAFE -2.1 12.1 7.8 5.1 5.8 4.7 Jul-05
HGK TS International Equity 23,342,115 2.2 28.8 -3.1 12.7 9.8 7.4 -- 6.6 Feb-11 MSCI EAFE -2.1 12.1 7.8 5.1 5.8 4.4 Feb-11
Copper Rock International Small Cap 36,047,921 3.4 44.5 -3.6 7.9 ------3.7 Nov-17 MSCI EAFE Small Cap -2.9 12.3 8.6 8.2 8.5 1.1 Nov-17
International Emerging Market Equity Assets 116,586,983 10.9 10.9 -4.5 4.3 6.8 -- -- 8.1 Jan-16 MSCI Emerging Markets -4.7 3.8 7.9 4.5 3.8 9.9 Jan-16
LMCG Emerging Markets 49,200,617 4.6 42.2 -6.1 -0.9 4.9 1.1 -- 1.1 Sep-13 MSCI Emerging Markets -4.7 3.8 7.9 4.5 3.8 3.6 Sep-13
ABS Emerging Markets 28,728,668 2.7 24.6 -2.8 8.2 ------13.9 Dec-18 MSCI Emerging Markets -4.7 3.8 7.9 4.5 3.8 8.4 Dec-18
Copper Rock Emerging Markets Small Cap 11,064,161 1.0 9.5 -2.6 6.8 ------9.3 Dec-18 MSCI Emerging Markets Small Cap -4.0 1.6 3.7 1.8 2.9 4.6 Dec-18
Driehaus Emerging Markets Growth 27,593,537 2.6 23.7 -3.9 ------9.8 Mar-19 MSCI Emerging Markets -4.7 3.8 7.9 4.5 3.8 3.6 Mar-19
34 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Market Value % of % of 1 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs Inception Inception ($) Portfolio Sector (%) (%) (%) (%) (%) (%) Date
_ Global Equity Assets 107,614,307 10.0 10.0 -2.1 12.2 ------3.0 Feb-18 MSCI ACWI -1.1 16.0 11.0 8.5 9.1 3.6 Feb-18
First Eagle Global Value Fund 20,649,861 1.9 19.2 -2.6 9.2 ------1.6 Feb-18 MSCI ACWI -1.1 16.0 11.0 8.5 9.1 3.6 Feb-18
Kopernik Global All Cap Fund 18,153,036 1.7 16.9 -4.6 -2.5 ------4.7 Feb-18 MSCI ACWI -1.1 16.0 11.0 8.5 9.1 3.6 Feb-18
Lee Munder Global Multi-Cap Strategy 30,651,145 2.9 28.5 -2.8 11.3 ------3.6 Mar-18 MSCI ACWI -1.1 16.0 11.0 8.5 9.1 6.1 Mar-18
Wellington Durable Enterprises, L.P. 38,160,264 3.6 35.5 0.1 23.6 ------13.4 Mar-18 MSCI ACWI -1.1 16.0 11.0 8.5 9.1 6.1 Mar-18
Core Fixed Income 92,222,878 8.6 8.6 1.4 8.8 4.2 -- -- 4.1 Jan-16 75% Bbg Barclays Aggregate/25% Bbg Barclays US TIPs 1-10 1.8 9.0 4.2 2.8 3.5 3.9 Jan-16 year
IR&M Core Bonds 56,419,765 5.3 61.2 1.9 9.4 4.3 2.9 3.8 4.3 Nov-04 75% Bbg Barclays Aggregate/25% Bbg Barclays US TIPs 1-10 1.8 9.0 4.2 2.8 3.5 4.1 Nov-04 year
Lord Abbett Short Duration Credit Trust II 35,803,113 3.3 38.8 0.7 ------2.2 Aug-19 BBgBarc US Credit 1-3 Yr TR 0.6 4.9 2.9 2.3 2.3 2.2 Aug-19
35 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Market Value % of % of 1 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs Inception Inception ($) Portfolio Sector (%) (%) (%) (%) (%) (%) Date
_ Value Added Fixed Income 107,436,104 10.0 10.0 0.6 7.4 5.4 -- -- 7.1 Jan-16 Custom Benchmark 0.8 9.1 5.7 -- -- 7.5 Jan-16
Eaton Vance High Yield 22,395,150 2.1 20.8 -0.2 9.0 5.4 5.5 7.3 6.9 Apr-06 ICE BofAML US High Yield TR 0.0 9.4 5.9 6.0 7.3 7.3 Apr-06
THL Bank Loan Select Fund 22,114,359 2.1 20.6 0.5 5.7 4.2 4.8 -- 5.4 Sep-10 Credit Suisse Leveraged Loans 0.5 6.3 4.5 4.6 5.0 4.9 Sep-10
Franklin Templeton Emerging Market Bonds 21,361,244 2.0 19.9 0.5 7.1 6.2 6.2 5.8 6.9 May-06 JP Morgan EMBI Global Diversified 1.5 11.9 6.7 6.4 7.0 7.4 May-06
Manulife Strategic Fixed Income 31,135,350 2.9 29.0 1.0 ------3.7 Jul-19 BBgBarc Multiverse TR 1.2 6.6 4.4 2.8 2.8 2.5 Jul-19
Mesirow High Yield 10,430,000 1.0 9.7 1.0 ------4.3 Aug-19 BBgBarc US Corporate High Yield TR 0.0 9.4 5.9 6.0 7.4 3.4 Aug-19
Hedge Funds 63,716,127 5.9 5.9 -0.1 14.4 6.0 4.3 -- 4.8 Feb-10 HFRI Fund of Funds Composite Index 0.3 6.0 3.6 2.4 2.9 2.9 Feb-10
ABS Offshore SPC - Global Segregated Portfolio 22,997,651 2.1 36.1 0.0 11.1 6.3 4.0 -- 5.5 Aug-10 HFRI Fund of Funds Composite Index 0.3 6.0 3.6 2.4 2.9 3.1 Aug-10
Entrust Special Opportunities Fund III, Ltd. 24,755,440 2.3 38.9 0.0 16.8 7.6 -- -- 11.6 Oct-16 HFRI Fund of Funds Composite Index 0.3 6.0 3.6 2.4 2.9 3.9 Oct-16
Old Farm Partners Master Fund, L.P. 5,011,882 0.5 7.9 -1.0 3.1 ------0.2 Oct-18 HFRI Fund of Funds Composite Index 0.3 6.0 3.6 2.4 2.9 2.5 Oct-18
EnTrustPermal Special Opportunities Evergreen Fund, 10,951,154 1.0 17.2 0.0 25.3 ------24.9 Jan-19 Ltd. HFRI Fund of Funds Composite Index 0.3 6.0 3.6 2.4 2.9 8.0 Jan-19
Note: The data for EntrustPermal Special Opportunities Evergreen Fund and Entrust Special Opportunities Fund III are based on December 31, 2019 market value, adjusted for subsequent cash flows.
36 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Market Value % of % of 1 Mo 1 Yr 3 Yrs 5 Yrs 10 Yrs Inception Inception ($) Portfolio Sector (%) (%) (%) (%) (%) (%) Date
_ Real Estate 103,135,756 9.6 9.6 0.1 9.6 6.8 -- -- 5.9 Jan-16 80% NCREIF ODCE / 20% Wilshire REIT 0.2 7.0 7.4 -- -- 7.5 Jan-16
Core Real Estate 66,732,095 6.2 64.7 0.1 7.8 7.3 -- -- 7.3 Jan-16 NCREIF-ODCE 0.0 5.3 7.1 9.0 11.4 7.4 Jan-16
TA Realty Core Property Fund, L.P. 38,706,398 3.6 58.0 0.0 9.8 ------10.9 Apr-18 NCREIF ODCE 0.0 5.3 7.1 9.0 11.4 6.2 Apr-18
JPMorgan Strategic Property 28,025,697 2.6 42.0 0.3 ------3.1 Apr-19 NCREIF-ODCE 0.0 5.3 7.1 9.0 11.4 3.9 Apr-19
Non-Core Real Estate 36,403,661 3.4 35.3 0.0 13.3 3.9 -- -- 0.9 Jan-16
Private Equity 62,998,421 5.9 5.9 0.0 7.1 7.7 -- -- 4.6 Jan-16 Cambridge Associates FoF Composite 1Q Lag 0.0 7.8 12.9 11.0 12.2 10.6 Jan-16
Private Equity 55,520,273 5.2 88.1 0.0 8.0 6.3 -- -- 3.2 Jan-16
Venture Capital 7,478,149 0.7 11.9 0.0 2.6 11.8 -- -- 9.0 Jan-16
Real Assets 53,969,451 5.0 5.0 0.0 6.0 2.5 -- -- -0.5 Jan-16 CPI + 3% 0.4 5.5 5.0 5.0 4.8 5.1 Jan-16
IFM Global Infrastructure 23,219,643 2.2 43.0 -0.1 14.4 ------13.0 Oct-18 CPI+5% (1q Lagged) 0.6 6.8 ------6.7 Oct-18
Cash and Cash Equivalent 9,776,838 0.9 0.9
Cash 9,776,838 0.9 100.0
XXXXX
37 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Allocation vs. Target Current Current Within IPS Policy Policy Range Balance Allocation Range?
_ Domestic Equity $273,448,276 26% 26% 21% - 36% Yes International Developed Market Equity $80,973,180 8% 6% 1% - 16% Yes International Emerging Market Equity $116,586,983 11% 10% 5% - 20% Yes Global Equity $107,614,307 10% 10% 5% - 20% Yes Core Bonds $92,222,878 9% 9% 4% - 14% Yes Value-Added Fixed Income $107,436,104 10% 6% 2% - 12% Yes Private Equity $62,998,421 6% 13% 4% - 18% Yes Real Estate $103,135,756 10% 10% 5% - 15% Yes Real Assets $53,969,451 5% 6% 2% - 10% Yes Hedge Fund of Funds $63,716,127 6% 4% 2% - 8% Yes Cash $9,776,838 1% 0% 0% - 3% Yes Total $1,071,878,321 100% 100%
XXXXX
Current Current Within IPS Policy Policy Range Balance Allocation Range?
_ Total Equity $705,337,295 66% 69% 60% - 80% Yes Total Fixed Income $199,658,981 19% 15% 5% - 25% Yes Total Real Assets and Real Estate $157,105,207 15% 16% 13% - 19% Yes Cash $9,776,838 1% 0% 0% - 3% Yes
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38 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
39 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Annual Investment Expense Analysis As Of January 31, 2020 Name Fee Schedule Market Value Estimated Fee Value Estimated Fee
Domestic Equity Assets $273,448,276 0.05% of First 25.0 Mil, Rhumbline Russell 1000 Value 0.04% of Next 25.0 Mil, $48,942,950 $22,077 0.05% 0.03% Thereafter 0.05% of First 25.0 Mil, Rhumbline Russell 1000 Growth 0.04% of Next 25.0 Mil, $51,200,204 $22,860 0.04% 0.03% Thereafter 0.80% of First 25.0 Mil, Fisher Midcap Value 0.75% of Next 25.0 Mil, $47,398,075 $367,986 0.78% 0.67% Thereafter Boston Company Small Cap Growth 0.45% of Assets $56,217,755 $252,980 0.45% LMCG Small Cap Value 0.90% of Assets $69,689,292 $627,204 0.90% International Developed Market Equity Assets $80,973,180 KBI Master Account 0.65% of Assets $21,583,144 $140,290 0.65% HGK TS International Equity 1.00% of Assets $23,342,115 $233,421 1.00% Copper Rock International Small Cap 0.85% of Assets $36,047,921 $306,407 0.85% International Emerging Market Equity Assets $116,586,983 LMCG Emerging Markets 0.64% of Assets $49,200,617 $314,884 0.64% 0.35% Management Fee and 10% ABS Emerging Markets $28,728,668 Performance/Incentive Fee. Copper Rock Emerging Markets Small Cap 0.85% of Assets $11,064,161 $94,045 0.85% Driehaus Emerging Markets Growth 0.55% of Assets $27,593,537 $151,764 0.55%
40 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Name Fee Schedule Market Value Estimated Fee Value Estimated Fee
Global Equity Assets $107,614,307 First Eagle Global Value Fund 0.75% of Assets $20,649,861 $154,874 0.75% 0.80% of First 50.0 Mil, 0.75% of Next 150.0 Mil, Kopernik Global All Cap Fund $18,153,036 $145,224 0.80% 0.70% of Next 250.0 Mil, 0.65% of Next 350.0 Mil Lee Munder Global Multi-Cap Strategy 0.45% of Assets $30,651,145 $137,930 0.45% Wellington Durable Enterprises, L.P. 0.60% of Assets $38,160,264 $228,962 0.60% Core Fixed Income $92,222,878 0.25% of First 50.0 Mil, IR&M Core Bonds 0.20% of Next 50.0 Mil, $56,419,765 $137,840 0.24% 0.15% Thereafter Lord Abbett Short Duration Credit Trust II 0.19% of Assets $35,803,113 $68,026 0.19% Value Added Fixed Income $107,436,104 Eaton Vance High Yield 0.42% of Assets $22,395,150 $94,060 0.42% THL Bank Loan Select Fund 0.40% of Assets $22,114,359 $88,457 0.40% Franklin Templeton Emerging Market Bonds 0.99% of Assets $21,361,244 $211,476 0.99% Manulife Strategic Fixed Income 0.40% of Assets $31,135,350 $124,541 0.40% Mesirow High Yield 0.40% of Assets $10,430,000 $41,720 0.40%
XXXXX
41 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020 Note: The value is based on September 30, 2019 FMV.
42 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Note: The value is based on September 30, 2019 FMV.
Note: The value for IFM Global Infrastructure and JPMorgan Strategic Property is as of January 31, 2020.
43 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Cash Flow Summary Month Ending January 31, 2020 Beginning Ending Contributions Withdrawals Net Cash Flow Market Value Market Value
_ 1921 Realty, Inc $756,654 $0 $0 $0 $756,654 ABS Emerging Markets $29,555,459 $0 $0 $0 $28,728,668 ABS Offshore SPC - Global Segregated Portfolio $23,003,236 $0 $0 $0 $22,997,651 AEW Partners Real Estate VIII $13,098,256 $0 $0 $0 $13,098,256 Ascend Ventures II $56,191 $0 $0 $0 $56,191 Ascent Ventures IV $39,655 $0 $0 $0 $39,655 Ascent Ventures V $4,446,415 $0 $0 $0 $4,446,415 Audax Mezzanine Debt IV $3,408,142 $41,665 -$86,160 -$44,495 $3,363,647 Basalt Infrastructure Partners II $8,243,140 $0 $0 $0 $8,243,140 Boston Company Small Cap Growth $53,739,763 $0 $0 $0 $56,217,755 BTG Pactual Global Timberland Resources $2,923,821 $0 $0 $0 $2,923,821 Carlyle Realty Partners VIII $3,788,957 $1,091,511 -$241,950 $849,561 $4,638,518 Cash $14,349,817 $0 -$4,572,978 -$4,572,978 $9,776,838 Copper Rock Emerging Markets Small Cap $11,348,489 $0 $0 $0 $11,064,161 Copper Rock International Small Cap $37,362,266 $0 $0 $0 $36,047,921 DN Partners II, LP $1,616,217 $0 $0 $0 $1,616,217 Driehaus Emerging Markets Growth $28,698,980 $0 $0 $0 $27,593,537 DSF Capital Partners IV $98 $0 $0 $0 $98 DSF Multi-Family Real Estate Fund III $16,157,462 $0 -$215,699 -$215,699 $15,941,764 Eaton Vance High Yield $22,432,066 $0 $0 $0 $22,395,150 Entrust Special Opportunities Fund III, Ltd. $24,755,440 $0 $0 $0 $24,755,440 EnTrustPermal Special Opportunities Evergreen Fund, Ltd. $10,951,154 $0 $0 $0 $10,951,154
44 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Beginning Ending Contributions Withdrawals Net Cash Flow Market Value Market Value
_ Euro Choice V Programme $4,333,763 $0 -$152,171 -$152,171 $4,181,593 First Eagle Global Value Fund $21,199,077 $0 $0 $0 $20,649,861 Fisher Midcap Value $47,711,864 $0 $0 $0 $47,398,075 Franklin Templeton Emerging Market Bonds $21,244,622 $0 $0 $0 $21,361,244 FS Equity Partners VIII, L.P. $1,126,647 $577,522 $0 $577,522 $1,704,169 Global Infrastructure Partners III $8,333,344 $83,799 $0 $83,799 $8,417,143 Global Infrastructure Partners IV, L.P. $87,500 $47,756 $0 $47,756 $135,256 Globespan Capital V $2,935,888 $0 $0 $0 $2,935,888 HarbourVest Partners Co-Investment V $1,610,563 $0 $0 $0 $1,610,563 HGK TS International Equity $24,067,228 $0 $0 $0 $23,342,115 IFM Global Infrastructure $23,245,365 $0 $0 $0 $23,219,643 IR&M Core Bonds $59,341,593 $0 -$4,000,000 -$4,000,000 $56,419,765 Ironsides Direct Investment Fund V, L.P. $12,968,873 $0 -$1,630,205 -$1,630,205 $11,338,668 JP Morgan Global Maritime Investment $6,191,285 $0 $0 $0 $6,191,285 JPMorgan Strategic Property $27,981,550 $0 -$68,576 -$68,576 $28,025,697 KBI Master Account $22,198,072 $0 $0 $0 $21,583,144 Kopernik Global All Cap Fund $19,031,959 $0 $0 $0 $18,153,036 Landmark Equity Partners XIV $962,041 $0 -$2,301 -$2,301 $959,740 Lee Munder Global Multi-Cap Strategy $31,533,429 $0 $0 $0 $30,651,145 Leeds Equity Partners IV $10,391 $0 $0 $0 $10,391 Leeds Equity Partners V $2,471,347 $0 $0 $0 $2,471,347 Lexington Capital Partners VII $2,333,102 $0 -$74,296 -$74,296 $2,258,806 LLR Equity Partners V, LP. $6,703,450 $0 $0 $0 $6,703,450 LMCG Emerging Markets $52,407,174 $0 $0 $0 $49,200,617 LMCG Small Cap Value $73,133,356 $0 $0 $0 $69,689,292
45 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Beginning Ending Contributions Withdrawals Net Cash Flow Market Value Market Value
_ Lord Abbett Short Duration Credit Trust II $35,562,130 $0 $0 $0 $35,803,113 Manulife Strategic Fixed Income $30,832,559 $0 -$27,050 -$27,050 $31,135,350 Mesirow Financial Capital Partners IX, LP $223,973 $0 $0 $0 $223,973 Mesirow Financial International Real Estate Fund I $1,835,684 $0 $0 $0 $1,835,684 Mesirow High Yield $10,330,000 $0 $0 $0 $10,430,000 New Boston Institutional Fund, LP VII $50,066 $0 $0 $0 $50,066 Old Farm Partners Master Fund, L.P. $5,060,669 $0 $0 $0 $5,011,882 Rhumbline Russell 1000 Growth $50,076,414 $0 $0 $0 $51,200,204 Rhumbline Russell 1000 Value $50,018,215 $0 $0 $0 $48,942,950 Ridgemont Equity Partners III, L.P. $1,400,121 $0 $0 $0 $1,400,121 RIMCO Royalty Partners, LP $1 $0 $0 $0 $1 Rockpoint Real Estate Fund VI, L.P. $82,621 $0 $0 $0 $82,621 Siguler Guff Distressed Opportunities Fund III, LP $975,597 $0 -$26,834 -$26,834 $948,763 Summit Partners Growth Equity Fund IX $9,097,279 $69,000 $0 $69,000 $9,166,279 TA Realty Core Property Fund, L.P. $28,706,398 $10,000,000 $0 $10,000,000 $38,706,398 THL Bank Loan Select Fund $22,001,948 $0 $0 $0 $22,114,359 Timbervest Partners III, LP $4,839,163 $0 $0 $0 $4,839,163 TRG Growth Partnership II $1,141,155 $0 $0 $0 $1,141,155 Trilantic Capital Partners VI, L.P. $2,669,904 $0 $0 $0 $2,669,904 Wellington Durable Enterprises, L.P. $38,110,590 $0 $0 $0 $38,160,264 Wellspring Capital Partners VI $3,751,486 $0 $0 $0 $3,751,486 Total $1,080,661,134 $11,911,253 -$11,098,220 $813,033 $1,071,878,321
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46 of 93 Plymouth County Retirement Association
Summary | As of January 31, 2020
Cash Flow Summary From July 2019 through January 31, 2020 Beginning Ending Contributions Withdrawals Net Cash Flow Market Value Market Value
_ 1921 Realty, Inc $765,556 $0 $0 $0 $756,654 ABS Emerging Markets $22,422,766 $5,000,000 $0 $5,000,000 $28,728,668 ABS Offshore SPC - Global Segregated Portfolio $21,514,775 $0 $0 $0 $22,997,651 AEW Partners Real Estate VIII $11,012,598 $3,252,825 -$1,994,272 $1,258,553 $13,098,256 Ascend Ventures II $61,532 $0 $0 $0 $56,191 Ascent Ventures IV $40,167 $0 $0 $0 $39,655 Ascent Ventures V $4,255,389 $50,000 $0 $50,000 $4,446,415 Audax Mezzanine Debt IV $3,103,932 $1,171,607 -$1,092,677 $78,930 $3,363,647 Basalt Infrastructure Partners II $5,469,850 $2,271,469 $0 $2,271,469 $8,243,140 Boston Company Small Cap Growth $51,214,556 $0 $0 $0 $56,217,755 BTG Pactual Global Timberland Resources $3,043,232 $0 $0 $0 $2,923,821 Carlyle Realty Partners VIII $1,465,438 $2,655,009 -$284,427 $2,370,582 $4,638,518 Cash $40,405,258 $3,215,338 -$33,843,758 -$30,628,420 $9,776,838 Charles River Partnership XI $145,052 $0 -$536,096 -$536,096 -- Copper Rock Emerging Markets Small Cap $10,832,352 $0 $0 $0 $11,064,161 Copper Rock International Small Cap $35,792,398 $0 -$55,100 -$55,100 $36,047,921 DN Partners II, LP $1,627,979 $13,807 $0 $13,807 $1,616,217 Driehaus Emerging Markets Growth $26,275,510 $0 $0 $0 $27,593,537 DSF Capital Partners IV $16,359 $0 -$7,315 -$7,315 $98 DSF Multi-Family Real Estate Fund III $15,518,437 $0 -$599,747 -$599,747 $15,941,764 Eaton Vance High Yield $21,563,131 $0 $0 $0 $22,395,150 Entrust Special Opportunities Fund III, Ltd. $27,352,278 $0 -$3,178,036 -$3,178,036 $24,755,440 EnTrustPermal Special Opportunities Evergreen Fund, Ltd. $6,456,658 $3,517,648 $0 $3,517,648 $10,951,154
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Summary | As of January 31, 2020
Beginning Ending Contributions Withdrawals Net Cash Flow Market Value Market Value
_ Euro Choice V Programme $5,000,943 $0 -$394,193 -$394,193 $4,181,593 First Eagle Global Value Fund $20,044,401 $0 $0 $0 $20,649,861 Fisher Midcap Value $44,076,162 $0 $0 $0 $47,398,075 Franklin Templeton Emerging Market Bonds $32,440,950 $0 -$11,500,000 -$11,500,000 $21,361,244 FS Equity Partners VIII, L.P. -- $1,681,191 $0 $1,681,191 $1,704,169 Global Infrastructure Partners III $8,260,304 $551,026 -$485,363 $65,663 $8,417,143 Global Infrastructure Partners IV, L.P. -- $135,256 $0 $135,256 $135,256 Globespan Capital V $2,593,945 $0 $0 $0 $2,935,888 HarbourVest Partners Co-Investment V $1,200,000 $600,000 $0 $600,000 $1,610,563 HGK TS International Equity $30,036,727 $0 -$9,060,399 -$9,060,399 $23,342,115 IFM Global Infrastructure $21,795,049 $0 -$180,908 -$180,908 $23,219,643 Invesco Equity Real Estate Securities Trust $770,593 $0 -$797,320 -$797,320 -- IR&M Core Bonds $57,979,181 $0 -$4,000,000 -$4,000,000 $56,419,765 Ironsides Direct Investment Fund V, L.P. $7,437,168 $4,704,659 -$1,652,556 $3,052,103 $11,338,668 JP Morgan Global Maritime Investment $6,344,048 $0 $0 $0 $6,191,285 JPMorgan Strategic Property $27,296,193 $0 -$133,638 -$133,638 $28,025,697 KBI Master Account $50,117,909 $0 -$30,000,000 -$30,000,000 $21,583,144 Kopernik Global All Cap Fund $19,022,074 $0 $0 $0 $18,153,036 Landmark Equity Partners XIV $1,028,077 $12,105 -$110,491 -$98,386 $959,740 Lee Munder Global Multi-Cap Strategy $28,938,564 $0 $0 $0 $30,651,145 Leeds Equity Partners IV $10,302 $0 $0 $0 $10,391 Leeds Equity Partners V $2,135,786 $0 $0 $0 $2,471,347 Lexington Capital Partners VII $2,605,676 $0 -$416,684 -$416,684 $2,258,806 LLR Equity Partners V, LP. $4,543,057 $2,640,000 -$651,575 $1,988,425 $6,703,450 LMCG Emerging Markets $49,501,232 $0 $0 $0 $49,200,617 LMCG Small Cap Value $66,855,958 $0 $0 $0 $69,689,292
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Summary | As of January 31, 2020
Beginning Ending Contributions Withdrawals Net Cash Flow Market Value Market Value
_ Lord Abbett Short Duration Credit Trust II $0 $35,000,000 $0 $35,000,000 $35,803,113 Manulife Strategic Fixed Income $0 $30,000,000 -$48,816 $29,951,184 $31,135,350 Mesirow Financial Capital Partners IX, LP $223,454 $0 $0 $0 $223,973 Mesirow Financial International Real Estate Fund I $2,189,009 $0 -$374,142 -$374,142 $1,835,684 Mesirow High Yield -- $10,000,000 $0 $10,000,000 $10,430,000 New Boston Institutional Fund, LP VII $124,296 $0 -$91,190 -$91,190 $50,066 Old Farm Partners Master Fund, L.P. $4,971,102 $0 $0 $0 $5,011,882 PRISA I $1,751,815 $0 -$2,187,349 -$2,187,349 -- Rhumbline Russell 1000 Growth $34,576,782 $10,999,118 $0 $10,999,118 $51,200,204 Rhumbline Russell 1000 Value $35,648,319 $10,996,747 $0 $10,996,747 $48,942,950 Ridgemont Equity Partners III, L.P. -- $1,400,121 $0 $1,400,121 $1,400,121 RIMCO Royalty Partners, LP $1 $0 $0 $0 $1 Rockpoint Real Estate Fund VI, L.P. -- $82,621 $0 $82,621 $82,621 Siguler Guff Distressed Opportunities Fund III, LP $922,575 $0 -$65,233 -$65,233 $948,763 Summit Partners Growth Equity Fund IX $7,835,948 $1,341,000 -$1,754,151 -$413,151 $9,166,279 TA Realty Core Property Fund, L.P. $27,153,280 $10,337,300 -$337,300 $10,000,000 $38,706,398 THL Bank Loan Select Fund $36,273,500 $0 -$15,005,673 -$15,005,673 $22,114,359 Timbervest Partners III, LP $5,147,941 $0 -$377,229 -$377,229 $4,839,163 TRG Growth Partnership II $1,181,037 $0 $0 $0 $1,141,155 Trilantic Capital Partners VI, L.P. $2,404,343 $361,585 -$92,040 $269,545 $2,669,904 Wellington Durable Enterprises, L.P. $35,151,979 $0 $0 $0 $38,160,264 Wellspring Capital Partners VI $3,169,101 $703,927 $0 $703,927 $3,751,486 Total $999,113,986 $142,694,359 -$121,307,679 $21,386,680 $1,071,878,321
XXXXX
49 of 93 Private Equity Search Finalist Review
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Private Equity Search Finalist Review
Background As of January 31, 2020, the Association has $63.0 million, or 6% of total assets, invested in private equity. To reach and maintain the 13% target to private equity, Meketa recommends the Retirement Association commit an average of $36 million per year. As you know, we feel that consistent deployment of capital is critical to reaping all of the benefits of a private equity allocation. Historically, the performance of private equity vintage years following stock market corrections has been strong. At the February meeting, Meketa Investment Group reviewed proposals from private equity managers. The Board selected the following five firms as finalists: Summit Capital Partners, LLR Partners, Kohlberg & Company, Altaris Capital Partners, and Waud Capital Partners. The finalists are reviewed on the following pages.
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Manager Candidates
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Summit Partners
Summit Partners
Summit Partners
Firm Location Boston, MA Firm Inception 1984 Strategy Name Venture Capital Strategy Inception 1999 Assets Under Management (Strategy) $1.8 billion Asset Under Management (Firm) $28 billion
Organization Summit Partners is a global manager founded in 1984 by professionals who previously worked at TA Associates, to pursue a similar growth equity strategy. In 1999, the Firm began its venture capital fund series and has raised $ 1.8 billion through four funds. The Firm also manages a debt fund series. Summit went through a smooth succession plan in 2001 and more recently in 2015 refined its leadership structure by adding a CEO and COO title. Over the last three decades, Summit has raised and managed over $28 billion in committed capital ($1.8 billion in venture). The Firm has invested in more than 500 companies in technology, healthcare, and life sciences. Summit maintains offices in Boston, Menlo Park, London, and Luxembourg
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Summit Partners
Summit Capital Partners
Investment Team Summit has a large team of over 100 investment professionals globally, with an addition of over 100 employees focused on operations. Of the 100 investment professionals, 14 are solely dedicated to this fund series (4 MDs, 1 Principal, 2 VPs, and 7 Associates). The Firm is led by a CEO and COO, as well as 27 Managing Directors who average over 18 years of industry experience and 14 years with the Firm. Summit has a strong promote from within culture, with nearly half of the Firm’s Managing Directors, Principals, and Vice Presidents beginning their Summit tenure as an Associate. The investment professionals are separated into three sector specific teams that are assisted by a post- acquisition operational team.
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Summit Partners
Summit Partners Venture Capital Fund V Investment Terms
Summit Partners Venture Capital Fund V
Partnership Name Summit Partners Venture Capital Fund V
Investment Strategy/Focus Venture Capital
Geographic Focus North America
Vintage Year 2020
Fund Size $900 million
Anticipated Final Closing June 16, 2020
Fees / Expenses:
Based on committed capital for the following: 1.0% in Year 1, 1.85% in Management Fee Year 2, 2.0% in Years 3-6, 90% of prior year fee’s thereafter
Preferred Return 0%
Carried Interest / Performance Fee 20%, increasing to 25% after a 2.0x DPI
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Summit Partners
Summit Partners Venture Capital Fund V Investment Strategy
The Fund will target companies at an inflection point in their evolution. These companies will be category- leaders with durable business models and a history of rapid growth and free cash flow generation. The Fund will focus on the technology, healthcare, and life sciences sectors. Investments will be between $10 million and $60 million for both minority and majority positions. The Fund’s capital will typically be used to support strategic growth initiatives, fund acquisition strategies, and provide liquidity for existing owners. Companies are typically founder-led at the time of investment. The team will be very hands-on post-investment and apply the team’s sector expertise, domain knowledge, and network to enhance value.
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Summit Partners
Summit Capital Partners Historical Track Record (as of September 30, 2019)
Invested Realized Unrealized Total Gross Net Year of First Capital Value Value Value IRR IRR Peer Quartile Investment ($ mm) ($ mm) ($ mm) ($ mm) (%) (%) Median1 (%) Ranking
Fund II 2006 310.0 809.3 55.9 865.3 32.3 19.1 5.2 1st
Fund III 2012 627.4 780.1 547.0 1,327.1 25.6 17.3 14.8 2nd
Fund IV 2016 456.9 452.5 376.5 829.0 41.7 40.6 14.5 1st
In 2016, the Association committed $10.0 million to Summit Growth Equity IX, a similar strategy focused on more mature companies. Since inception as of September 30, 2019, Summit Growth Equity IX has produced a net IRR of 32.4% for the Association.
1 Cambridge Associates All Buyout, U.S. Private Equity Benchmark. 57 of 93 Plymouth County Retirement Association
Summit Partners
Summit Partners Venture Capital Fund V Status Update
Summit Partners Venture Capital Fund V will hold a final close on June 16, 2020.
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Summit Partners
Relative Strengths & Potential Weaknesses
Summit Partners Venture Capital Fund V
Reputable manager with the support of the greater Summit platform Relative Strengths Attractive historical performance Strong sourcing initiatives Small solely-dedicated team Potential Weaknesses Some potential conflicts of interest with other Summit-managed funds
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LLR Partners
LLR Partners Overview
LLR Partners
Firm Location Philadelphia, PA Firm Inception 1999 Ownership Structure Employee-owned Strategy Name Middle Market Buyout
Strategy Inception 1999
Assets Under Management (Strategy) $3.6 billion
Asset Under Management (Firm) $3.6 billion
Organization LLR Partners was founded in 1999 by Seth Lehr, Ira Lubert, and Howard Ross in 1999 and has raised approximately $3.6 billion in capital commitments across five prior funds. Since inception, Mr. Lubert has been a part-time member of LLR. The firm has executed a single strategy since inception, making over 100 investments in addition to 150 add-on acquisitions. The partners have created a collaborative, “one-firm” mentality that avoids individual deal attribution. Messrs. Lehr, Lubert, and Ross formed LLR with a vision of building a growth capital like business in Philadelphia, driven by the thesis that the city of Philadelphia was under served by private equity firms.
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LLR Partners
LLR Partners
Investment Team LLR Partners currently has a team of 67 employees, of which 25 are investment professionals. The team is led by nine partners who have an average of 18.5 years of experience and an average tenure of 16 years at LLR. The investment team is structured by sector with each sector overseen by at least two Partners. There are no deal specific financial incentives for the sector teams. LLR Partners has experienced relatively low turnover, with senior professionals only leaving to pursue different strategy or stage investing. LLR also has an active internship program, which was established nine years ago to recruit Analysts out of undergraduate school.
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LLR Partners
LLR Equity Partners Fund VI Investment Terms
LLR Equity Partners Fund VI
Partnership Name LLR Investors Fund
Partnership Type Delaware Limited Partnership
Investment Strategy/Focus Middle market buyout
Geographic Focus North America
Vintage Year 2020
Fund Size $1.4 billion
Anticipated Final Closing July 1, 2020
Total Term Ten years
Fees / Expenses:
Management Fee 2% on committed during the investment period; 1.75% on invested capital thereafter
Preferred Return 8%
Carried Interest / Performance Fee 20%
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LLR Partners
LLR Equity Partners Fund VI Investment Strategy
LLR V will continue the firm’s strategy of investing in lower middle market growth oriented companies in the U.S. through a flexible investment approach of buyout or minority control. Given LLR’s flexibility as both a buyout and minority investor the team is able to consider a wider range of potential companies. The Fund will target companies with $10 million to $75 million of revenue and enterprise values less than $100 million. Companies will most likely be within the healthcare and technology sectors, with this being a more narrow focus than prior funds. LLR believes lower middle market companies grown organically and through acquisition will be attractive to both strategic and financial buyers throughout market cycles. Post-acquisition, LLR will focus on helping companies achieve growth organically, through add on acquisitions, or through some combination of the two. LLR’s investment professionals will be supported by the Firm’s Value Creation Team, comprised of subject matter experts focused on helping to drive portfolio company growth.
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LLR Partners
LLR Historical Track Record (as of September 30, 2019)
Number of Invested Realized Unrealized Total Gross Net Year of First Investment Capital Value Value Value IRR IRR Peer Quartile Investment s ($ mm) ($ mm) ($ mm) ($ mm) (%) (%) Median1 (%) Ranking 1st Fund I 1999 23 233.5 642.8 0.0 642.8 29.8 21.8 8.6
Fund II 2004 16 358.0 773.4 6.3 779.6 17.6 12.2 11.2 2nd
Fund III 2008 22 732.1 1,615.9 178.0 1,793.9 22.6 15.4 14.0 2nd
Fund IV 2013 24 820.6 1,014.2 1,046.8 2,061.0 31.3 27.9 15.0 1st
Fund V 2017 17 664.6 42.9 743.4 786.3 17.2 7.9 18.1 3rd
The Association committed $12.0 million to LLR Fund V in 2017.
1 Cambridge Associates All Buyout, U.S. Private Equity Benchmark. 64 of 93 Plymouth County Retirement Association
LLR Partners
LLR Equity Partners Fund VI Status Update
LLR Equity Partners Fund VI anticipates having a final close on July 1, 2020.
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LLR Partners
Relative Strengths & Potential Weaknesses
LLR Equity Partners Fund VI
Cohesive and stable senior team that has extensive experience executing a single strategy LLR’s flexible approach may help attract fast-growing portfolio companies with existing owners who do Relative Strengths not wish to relinquish economic control of their business Attractive historical performance Consistent strategy, with little drift into larger deals High loss ratios above 20% in the first two funds Potential Weaknesses Fund V is currently tracking in the third quartile
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Kohlberg & Company
Kohlberg & Company Overview
Kohlberg & Company
Firm Location Mount Kisco, New York Firm Inception 1987
Ownership Structure Employee Owned1 Strategy Name Middle Market Buyout
Strategy Inception 1987
Assets Under Management (Strategy) $15 billion
Asset Under Management (Firm) $15 billion
Organization Kohlberg was founded by Jerome and James Kohlberg in 1987 after they left KKR, where Jerome was a founding partner. Since 2008, Sam Frieder and Gordon Woodward have led Kohlberg as Managing Partner and Chief Investment Officer, respectively. James Kohlberg maintains a passive Chairman role. In 2018, Kohlberg sold an 11% share of the firm to Blackstone, who is a passive investor. Kohlberg & Company executes a single fund series and has no intentions of expanding into new strategies. Since inception, the Manager has completed 76 platform investments and 179 add-on acquisitions, with total transaction value of $15 billion.
1 Blackstone Strategic Capital Holdings owns an 11.11% passive share of the company. 67 of 93 Plymouth County Retirement Association
Kohlberg & Company
Kohlberg & Company
Investment Team Kohlberg operates out of a single office in Mount Kisco, New York, with no plans to expand into other cities. The team is comprised of 55 employees, including 28 investment professionals (ten Partners, two Principals, three Vice Presidents, and additional Associates) who are supported by an operating partner team of 11 sector experts. The team is well-experienced, long tenured, and largely home grown. All of the Partners have been at the firm at least 10 years, with an average tenure of 19 years at Kohlberg. Kohlberg will rely on the operating partners throughout the life of each investment, from initial due diligence to the monitoring of strategy implementation.
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Kohlberg & Company
Kohlberg Investors Fund IX Investment Terms
Kohlberg & Company
Partnership Name Kohlberg Investors IX
Partnership Type Delaware Limited Partnership
Investment Strategy/Focus Middle Market Buyout
Geographic Focus United States
Vintage Year 2020
Fund Size $3.0 billion
Anticipated Final Closing June 2020
Total Term Ten years
Fees / Expenses:
1.9% on committed capital during investment period; 1.0% on invested Management Fee capital thereafter
Preferred Return 8%
Carried Interest / Performance Fee 20%
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Kohlberg & Company
Kohlberg Investors Fund IX Investment Strategy
Kohlberg Investors Fund IX will continue the strategy of its predecessor funds, making control investments in middle market companies within the United States. The Fund will focus on companies within industrial, consumer, business services, healthcare services, and financial services, with an expected even split between industrial/consumer and services. Since Fund V, Kohlberg has exclusively executed a thesis driven strategy through its White Paper Program. Partners and operating partners generate white papers based on current trends that they identify within their respective sectors and form an investment thesis around it. The team will then source deals that are backed by a paper’s thesis. The Fund will look for underperforming companies with strategic deficiencies instead of operational deficiencies in order to avoid risks associated with the need for significant capital expenditure. Fund IX anticipates making four investments per year of $75 million to $300 million of equity per deal. Companies will have enterprise values of $200 million to $1.25 billion and an EBITDA range of $25 million to $150 million.
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Kohlberg & Company
Kohlberg & Company1 Track Record (as of September 30, 2019)
Number of Invested Realized Unrealized Total Gross Net Peer Vintage Investment Capital Value Value Value IRR IRR Median2 Quartile Year s ($ mm) ($ mm) ($ mm) ($ mm) (%) (%) (%) Ranking
Fund VI 2007 13 1,291.3 2,703.2 6.5 2,709.6 22.9 16.3 12.7 1st
Fund VII 2012 14 1,561.4 2,225.7 752.9 2,978.5 23.0 17.0 16.3 2nd
Fund VIII 2017 12 1,905.5 171.4 2,120.8 2,292.2 18.9 18.0 11.4 2nd
1 Kohlberg & Company underwent a leadership change prior to Fund VI. As such, the previous track record is less relevant to this current offering. 2 Cambridge Associates All Buyout, U.S. Private Equity Benchmark. 71 of 93 Plymouth County Retirement Association
Kohlberg & Company
Kohlberg Investors Fund IX Status Update
Kohlberg Investors IX will have its next close at the end of March 2020 and anticipates accepting commitments on a rolling basis until the end of June 2020.
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Kohlberg & Company
Relative Strengths & Potential Weaknesses
Kohlberg Investors Fund IX
Long-tenured senior team with deep investment experience. The partners have been with Kohlberg for an average of 19 years. Flexible strategy and resources allow the fund to maintain optionality throughout economic cycles. Relative Strengths Strong research-focused White Paper Program to help source and back investments. Very low loss ratios across the past three funds, with an aggregate 0.4% ratio. Strong ESG program Although losses have been very low, two of the past three funds have generated less than top quartile performance. Potential Weaknesses Effectively 15% of the economics go to passive entities (Blackstone and James Kohlberg), leaving less economics shared with the investment team.
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Altaris Capital Partners
Altaris Capital Partners Overview
Altaris Capital Partners
Firm Location New York, NY Firm Inception 2002 Ownership Structure Employee owned Strategy Name Middle market Buyout
Strategy Inception 2003
Assets Under Management (Strategy) $2.5 billion
Asset Under Management (Firm) $2.5 billion
Organization Altaris was founded in 2003 after spinning out from Merrill Lynch, where it was originally formed as a captive private equity vehicle, after Merrill Lynch decided to exit the direct PE business. Altaris has raised $2.5 billion of commitments across four prior funds and two Constellation branded co- investment funds, investing alongside the Altaris main funds in larger sized transactions. The Firm is currently managed by two of the co-founding partners, Daniel Tully and George Aitken-Davies. The third co-founder, Michael Kluger retired in 2016 and transitioned to a senior advisor role. The Firm manages a single strategy, which includes the primary funds as well as two co-invest funds.
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Altaris Capital Partners
Altaris Capital Partners
Investment Team Altaris is led by four managing directors, including the two co-founders that remain active in the business, all of whom have worked together for at least the past 10 years The investment team includes ten professionals in total, including one principal, one vice president, one senior associate, and four associates. The team is also assisted by eight operations and back office employees. Altaris will leverage their operating network of 21 healthcare experts who may be engaged for portfolio company management and monitoring. Altaris has been a relatively stable organization with minimal turnover at the senior level. A managing director left to move back to Europe for family reasons, while a vice president left in 2018 on mutual terms due to future outlook.
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Altaris Capital Partners
Altaris Health Partners Fund V Investment Terms
Altaris Health Partners Fund V
Partnership Name Altaris Health Partners Fund V
Partnership Type Delaware Limited Partnership
Investment Strategy/Focus Middle market Buyout
Geographic Focus North America
Vintage Year 2020
Fund Size $2.5 billion
Anticipated Final Closing Q1 2020
Total Term Ten years
Fees / Expenses:
2.0% on committed capital during the investment period, 2.0% on Management Fee invested capital thereafter
Preferred Return 8%
Carried Interest / Performance Fee 20%
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Altaris Capital Partners
Altaris Health Partners Fund V Investment Strategy
Altaris will continue to focus on growth-oriented buyout investments in the healthcare sector. The Fund will focus on businesses which Altaris believes address the needs of the healthcare system by improving patient outcomes, increasing system efficiency, reducing costs, and aligning stakeholder incentives. The Fund will focus on four core industry sectors: pharmaceutical, medical device and diagnostics, payors and insurance, and provider services. Companies will drive value and efficiency within the healthcare system. Once an investment is made, Altaris will look to recruit senior management professionals, make add on acquisitions, improve sales and marketing functions, and assist with financing initiatives. The Fund will target approximately 8-10 equity investments of $100 million and $500 million. The Fund will target larger deals than previous funds, believing that larger companies currently offer a better risk/reward profile. The Fund will primarily target companies within the United States, with a maximum of 20% non-US exposure that will be used for Western Europe.
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Altaris Capital Partners
Altaris Capital Partners Historical Track Record (as of September 30, 2019)
Invested Realized Unrealized Total Net Year of First Capital Value Value Value IRR Peer Median1 Quartile Investment ($ mm) ($ mm) ($ mm) ($ mm) (%) (%) Ranking
Fund I 2004 279 666 0 666 13.1 11.0 2nd
Fund II 2008 344 1,142 75 1,217 27.5 14.2 1st
Fund III 2013 461 347 659 1,006 30.3 15.0 1st
Constellation III 2016 127 8 192 200 19.1 10.4 1st
Fund IV 2017 481 0 603 603 19.9 11.4 2nd
Constellation IV 2017 68 0 98 98 19.4 11.4 2nd
1 Cambridge Associates All Buyout, U.S. Private Equity Benchmark. 78 of 93 Plymouth County Retirement Association
Altaris Capital Partners
Altaris Health Partners Fund V Status Update
Altaris Health Partners Fund V expects to have a final close at the end of Q1 2020 but has indicated potential flexibility into the second quarter for approved but pending commitments.
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Altaris Capital Partners
Relative Strengths & Potential Weaknesses
Altaris Health Partners Fund V
Strong leadership from the two active co-founders. Ability to acquire businesses at attractive entry multiples Relative Strengths Attractive historical performance Tailwinds from the expanding Healthcare sector Relatively small investment team size Potential Weaknesses Significant increase in fund size
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Waud Capital Partners V
Waud Capital Partners Overview
Waud Capital Partners V
Firm Location Chicago, IL Firm Inception 1993 Ownership Structure 100% owned by Reeve Waud Strategy Name Lower Middle Market Buyout
Strategy Inception 1993
Assets Under Management (Strategy) $3.2 billion
Asset Under Management (Firm) $3.2 billion
Organization Waud Capital Partners was founded in 1993 by Reeve Waud, who was joined by Partners Matt Clary (joined firm in 2004) and David Neighbours (2003), in addition to Justin DuPere (2013) and Chris Graber (re-joined 2010), who were recently promoted to Partners. Reeve Waud is the sole owner of the management company, with no intention to dilute in the near future. The firm is headquartered in Chicago, IL and executes a single strategy. The team raised its first fund in 199 with $115 million in commitments, largely from Mr. Waud’s friends and family. Waud Capital Partners has since raised three additional institutional funds.
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Waud Capital Partners V
Waud Capital Investment Team
Waud Capital currently has approximately 60 professionals, including around 20 investment professionals. The investment team is comprised of 5 Partners, 7 Principals/VPs, and 8 Associates. The investment team is supported by 5 Operating Partners and 13 Ecosystem Professionals (5 in Human Capital, 5 in Business Development, 1 in Business Intelligence, a CCO, and a CMO) in addition to 6 finance and 2 investor relations professionals. No upcoming departures or retirements are expected, and Reeve Waud has no intention of cutting back on his heavy involvement in the day-to-day operations.
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Waud Capital Partners V
Waud Capital Partners V Investment Terms
Waud Capital Partners V
Partnership Name Waud Capital Partners V
Partnership Type Delaware Limited Partnership
Investment Strategy/Focus Lower Middle Market Buyout
Geographic Focus North America
Vintage Year 2019
Fund Size $1.5 billion
Anticipated Final Closing Q2 2020
Total Term Ten years
Fees / Expenses:
2.0% of committed capital during the investment period; 2.0% on Management Fee invested capital thereafter
Preferred Return 8%
Carried Interest / Performance Fee 20%
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Waud Capital Partners V
Waud Capital Investment Strategy
WCP V will continue Waud’s strategy of investing in middle-market companies with the opportunity for growth both organically and through add-on acquisitions. The Firm will seek to partner with executives to pursue opportunities specifically in the healthcare services and business services sectors. Waud Capital will continue to use a three phase value creation approach including identifying value dislocations, improve infrastructure and human capital, and then focus on growth and operational improvements. WCP structures equity investments in the form of participating preferred equity securities. Such securities provide WCP the protection of a senior security with a liquidity preference over other equity investors. Target companies will typically have EBITDA of $8 million to $20 million and require an equity investment of $50 million to $150 million, which will typically be phased in over time. The Fund is expected to make 12 to 14 platform investments at a slightly larger size than in prior funds historically
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Waud Capital Partners V
Waud Capital Historical Track Record (as of September 30, 2019)
Invested Total Net Vintage Capital Value IRR Peer Quartile Year ($ mm) ($ mm) (%) Median1 (%) Ranking
Fund I 1999 69 159 7.0 9 3rd
Fund II 2005 215 667 14.0 8 1st
Fund III 2011 381 838 18.0 15 2nd
Fund IV 2017 682 750 4.0 11 4th
1 Cambridge Associates All Buyout, U.S. Private Equity Benchmark. 85 of 93 Plymouth County Retirement Association
Waud Capital Partners V
Waud Capital Partners V Status Update
WCP V has closed on approximately $1.0 billion and anticipates having a final close in Q2 2020.
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Waud Capital Partners V
Relative Strengths & Potential Weaknesses
Waud Capital Partners V
WCP has demonstrated an ability to effectively invest throughout economic cycles The Firm has created a strong buy and build strategy that benefits from partnering with strong Relative Strengths executives and slow deployment of capital. Disciplined with purchase prices, with a weighted average entry multiple of 7.2x EBITDA in WCP IV. Strong alignment of interest with a $75 million GP commitment WCP’s team appears to have a very strong leader/founder that dominates team decisions and economics, causing some concern regarding the effectiveness of the rest of the team. Potential Weaknesses Returns in Fund II and Fund III have been largely driven by a single investment. Prior performance has been mixed overall.
87 of 93 Plymouth County Retirement Association
Summary
Summary To reach and maintain the 13% target to private equity, Meketa recommends the Retirement Association commit an average of $36 million per year, targeting approximately three new commitments. Summit Capital Partners, LLR Partners, Kohlberg & Company, Altaris Capital Partners, and Waud Capital Partners are all reasonable options.
88 of 93 Disclaimer, Glossary, and Notes
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WE HAVE PREPARED THIS REPORT (THIS “REPORT”) FOR THE SOLE BENEFIT OF THE INTENDED RECIPIENT (THE “RECIPIENT”). SIGNIFICANT EVENTS MAY OCCUR (OR HAVE OCCURRED) AFTER THE DATE OF THIS REPORT AND THAT IT IS NOT OUR FUNCTION OR RESPONSIBILITY TO UPDATE THIS REPORT. ANY OPINIONS OR RECOMMENDATIONS PRESENTED HEREIN REPRESENT OUR GOOD FAITH VIEWS AS OF THE DATE OF THIS REPORT AND ARE SUBJECT TO CHANGE AT ANY TIME. ALL INVESTMENTS INVOLVE RISK. THERE CAN BE NO GUARANTEE THAT THE STRATEGIES, TACTICS, AND METHODS DISCUSSED HERE WILL BE SUCCESSFUL. INFORMATION USED TO PREPARE THIS REPORT WAS OBTAINED FROM INVESTMENT MANAGERS, CUSTODIANS, AND OTHER EXTERNAL SOURCES. WHILE WE HAVE EXERCISED REASONABLE CARE IN PREPARING THIS REPORT, WE CANNOT GUARANTEE THE ACCURACY OF ALL SOURCE INFORMATION CONTAINED HEREIN. CERTAIN INFORMATION CONTAINED IN THIS REPORT MAY CONSTITUTE “FORWARD - LOOKING STATEMENTS,” WHICH CAN BE IDENTIFIED BY THE USE OF TERMINOLOGY SUCH AS “MAY,” “WILL,” “SHOULD,” “EXPECT,” “AIM”, “ANTICIPATE,” “TARGET,” “PROJECT,” “ESTIMATE,” “INTEND,” “CONTINUE” OR “BELIEVE,” OR THE NEGATIVES THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY. ANY FORWARD-LOOKING STATEMENTS, FORECASTS, PROJECTIONS, VALUATIONS, OR RESULTS IN THIS PRESENTATION ARE BASED UPON CURRENT ASSUMPTIONS. CHANGES TO ANY ASSUMPTIONS MAY HAVE A MATERIAL IMPACT ON FORWARD - LOOKING STATEMENTS, FORECASTS, PROJECTIONS, VALUATIONS, OR RESULTS. ACTUAL RESULTS MAY THEREFORE BE MATERIALLY DIFFERENT FROM ANY FORECASTS, PROJECTIONS, VALUATIONS, OR RESULTS IN THIS PRESENTATION. PERFORMANCE DATA CONTAINED HEREIN REPRESENT PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
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Credit Risk: Refers to the risk that the issuer of a fixed income security may default (i.e., the issuer will be unable to make timely principal and/or interest payments on the security.) Duration: Measure of the sensitivity of the price of a bond to a change in its yield to maturity. Duration summarizes, in a single number, the characteristics that cause bond prices to change in response to a change in interest rates. For example, the price of a bond with a duration of three years will rise by approximately 3% for each 1% decrease in its yield to maturity. Conversely, the price will decrease 3% for each 1% increase in the bond’s yield. Price changes for two different bonds can be compared using duration. A bond with a duration of six years will exhibit twice the percentage price change of a bond with a three-year duration. The actual calculation of a bond’s duration is somewhat complicated, but the idea behind the calculation is straightforward. The first step is to measure the time interval until receipt for each cash flow (coupon and principal payments) from a bond. The second step is to compute a weighted average of these time intervals. Each time interval is measured by the present value of that cash flow. This weighted average is the duration of the bond measured in years. Information Ratio: This statistic is a measure of the consistency of a portfolio’s performance relative to a benchmark. It is calculated by subtracting the benchmark return from the portfolio return (excess return), and dividing the resulting excess return by the standard deviation (volatility) of this excess return. A positive information ratio indicates outperformance versus the benchmark, and the higher the information ratio, the more consistent the outperformance. Jensen’s Alpha: A measure of the average return of a portfolio or investment in excess of what is predicted by its beta or “market” risk. Portfolio Return- [Risk Free Rate+Beta*(market return-Risk Free Rate)]. Market Capitalization: For a firm, market capitalization is the total market value of outstanding common stock. For a portfolio, market capitalization is the sum of the capitalization of each company weighted by the ratio of holdings in that company to total portfolio holdings; thus it is a weighted-average capitalization. Meketa Investment Group considers the largest 65% of the broad domestic equity market as large capitalization, the next 25% of the market as medium capitalization, and the smallest 10% of stocks as small capitalization. Market Weighted: Stocks in many indices are weighted based on the total market capitalization of the issue. Thus, the individual returns of higher market-capitalization issues will more heavily influence an index’s return than the returns of the smaller market-capitalization issues in the index. Maturity: The date on which a loan, bond, mortgage, or other debt/security becomes due and is to be paid off. Prepayment Risk: The risk that prepayments will increase (homeowners will prepay all or part of their mortgage) when mortgage interest rates decline; hence, investors’ monies will be returned to them in a lower interest rate environment. Also, the risk that prepayments will slow down when mortgage interest rates rise; hence, investors will not have as much money as previously anticipated in a higher interest rate environment. A prepayment is any payment in excess of the scheduled mortgage payment. Price-Book Value (P/B) Ratio: The current market price of a stock divided by its book value per share. Meketa Investment Group calculates P/B as the current price divided by Compustat's quarterly common equity. Common equity includes common stock, capital surplus, retained earnings, and treasury stock adjusted for both common and nonredeemable preferred stock. Similar to high P/E stocks, stocks with high P/B’s tend to be riskier investments.
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Price-Earnings (P/E) Ratio: A stock’s market price divided by its current or estimated future earnings. Lower P/E ratios often characterize stocks in low growth or mature industries, stocks in groups that have fallen out of favor, or stocks of established blue chip companies with long records of stable earnings and regular dividends. Sometimes a company that has good fundamentals may be viewed unfavorably by the market if it is an industry that is temporarily out of favor. Or a business may have experienced financial problems causing investors to be skeptical about is future. Either of these situations would result in lower relative P/E ratios. Some stocks exhibit above-average sales and earnings growth or expectations for above average growth. Consequently, investors are willing to pay more for these companies’ earnings, which results in elevated P/E ratios. In other words, investors will pay more for shares of companies whose profits, in their opinion, are expected to increase faster than average. Because future events are in no way assured, high P/E stocks tend to be riskier and more volatile investments. Meketa Investment Group calculates P/E as the current price divided by the I/B/E/S consensus of twelve-month forecast earnings per share. Quality Rating: The rank assigned a security by such rating services as Fitch, Moody’s, and Standard & Poor’s. The rating may be determined by such factors as (1) the likelihood of fulfillment of dividend, income, and principal payment of obligations; (2) the nature and provisions of the issue; and (3) the security’s relative position in the event of liquidation of the company. Bonds assigned the top four grades (AAA, AA, A, BBB) are considered investment grade because they are eligible bank investments as determined by the controller of the currency. Sharpe Ratio: A commonly used measure of risk-adjusted return. It is calculated by subtracting the risk-free return (usually three-month Treasury bill) from the portfolio return and dividing the resulting excess return by the portfolio’s total risk level (standard deviation). The result is a measure of return per unit of total risk taken. The higher the Sharpe ratio, the better the fund’s historical risk adjusted performance. SI: Since Inception STIF Account: Short-term investment fund at a custodian bank that invests in cash-equivalent instruments. It is generally used to safely invest the excess cash held by portfolio managers. Standard Deviation: A measure of the total risk of an asset or a portfolio. Standard deviation measures the dispersion of a set of numbers around a central point (e.g., the average return). If the standard deviation is small, the distribution is concentrated within a narrow range of values. For a normal distribution, about two thirds of the observations will fall within one standard deviation of the mean, and 95% of the observations will fall within two standard deviations of the mean. Style: The description of the type of approach and strategy utilized by an investment manager to manage funds. For example, the style for equities is determined by portfolio characteristics such as price-to-book value, price-to-earnings ratio, and dividend yield. Equity styles include growth, value, and core. Tracking Error: A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark, as defined by the difference in standard deviation.
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Yield to Maturity: The yield, or return, provided by a bond to its maturity date; determined by a mathematical process, usually requiring the use of a “basis book.” For example, a 5% bond pays $5 a year interest on each $100 par value. To figure its current yield, divide $5 by $95—the market price of the bond—and you get 5.26%. Assume that the same bond is due to mature in five years. On the maturity date, the issuer is pledged to pay $100 for the bond that can be bought now for $95. In other words, the bond is selling at a discount of 5% below par value. To figure yield to maturity, a simple and approximate method is to divide 5% by the five years to maturity, which equals 1% pro rata yearly. Add that 1% to the 5.26% current yield, and the yield to maturity is roughly 6.26%.
5% (discount) 1% pro rata, plus = = 6.26% (yield to maturity) 5 (yrs. to maturity) 5.26% (current yield)
Yield to Worst: The lowest potential yield that can be received on a bond without the issuer actually defaulting. The yield to worst is calculated by making worst-case scenario assumptions on the issue by calculating the returns that would be received if provisions, including prepayment, call, or sinking fund, are used by the issuer. NCREIF Property Index (NPI): Measures unleveraged investment performance of a very large pool of individual commercial real estate properties acquired in the private market by tax-exempt institutional investors for investment purposes only. The NPI index is capitalization-weighted for a quarterly time series composite total rate of return. NCREIF Fund Index - Open End Diversified Core Equity (NFI-ODCE): Measures the investment performance of 28 open-end commingled funds pursuing a core investment strategy that reflects funds' leverage and cash positions. The NFI-ODCE index is equal-weighted and is reported gross and net of fees for a quarterly time series composite total rate of return.
Sources: Investment Terminology, International Foundation of Employee Benefit Plans, 1999. The Handbook of Fixed Income Securities, Fabozzi, Frank J., 1991
The Russell Indices®, TM, SM are trademarks/service marks of the Frank Russell Company. Throughout this report, numbers may not sum due to rounding. Returns for periods greater than one year are annualized throughout this report. Values shown are in millions of dollars, unless noted otherwise.
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