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Memo on New Mountain Capital Fund V, L.P. Motion That the Nebraska Investment Council (the Council) for the Defined Benefit Plans and Cash Balance Benefit Plans make a $50 million commitment to New Mountain Partners V, L.P. (Fund V) subject to completion of a legal review and satisfactory agreement of terms. Background New Mountain Capital, LLC (NMC or New Mountain) is a New York-based private equity investment firm. In addition to its New York operations, there is also a San Francisco office. The firm was founded in 1999 by Steven Klinsky. It operates as an upper middle market North American buy out investor. The Council is a limited partner in two New Mountain funds. The Council committed $25 million to New Mountain Partners III, L.P. (Fund III) in 2007 and committed $30 million to New Mountain Partners IV, L.P. (Fund IV) in 2014.

Council Staff (Staff) conducted an analysis of Fund V’s investment opportunity. The analysis included various attributes of NMC, its funds, investment staff, strategy and process, performance, and, finally, terms and conditions. Staff utilized due diligence materials provided by Aon Hewitt (Aon) and NMC. Staff also reviewed the private placement memorandum for Fund V. Staff participated in two conference calls with one NMC executive to discuss Fund V. Business  New Mountain has grown to include 123 staff members. This number includes 77 investment professionals which an increase from 60 at the time of the Council’s commitment to Fund IV.  The leadership team includes 20 Managing Directors, 17 Senior Advisors, 13 Directors and 7 Vice Presidents. Carry is shared by much of the firm’s staff. Investment Staff  New Mountain’s senior investment staff has a decided background, with 14 of 20 Managing Directors having investment banking experience.  17 professionals have prior experience as corporate CEOs, operating executives, chief information officers, management consultants, investigative journalists or in government service. Investment Strategy and Process  New Mountain uses a top down approach to identify highly attractive and undervalued sectors. NMC will then work to identify the “best of breed” companies inside these desirable sectors. They seek to complete management in a non-auction fashion.  The fund size for Fund III is $5.1 billion and $4.1 billion for Fund IV. Fund V is targeting $5.0 billion in total commitments.  NMC focuses on sectors it describes as defensive growth in nature. These sectors will be somewhat “acyclical” that grow despite general macroeconomic conditions. These sectors will have high barriers of entry, strong cash flow and a high return on assets.  New Mountain attempts to add 4-5 portfolio companies for the fund per year. NMC likes target companies with $300-500 million in enterprise value (EV). These are typically market leading companies with strong cash flow and good management.  NMC is a generalist firm but is planning to invest Fund V in six main areas: healthcare services, specialty distribution, information and data, defensive growth consumer/product, software and technology enabled business services, along with regulatory compliance and cybersecurity.  New Mountain uses a low level of leverage. This goes along with New Mountain’s low risk approach to investing, which focuses on business building - growth of revenue and EBITDA. Performance  Through 12/31/16, Fund III has a 1.8x net multiple and 12.8% Net IRR and Fund IV has a 1.3x net multiple and 24.0% Net IRR. Terms and Conditions  is 1.75% during investment period (5 years), with a 1.00% post investment period step down.  is 20% with an 8% Preferred Return.