Fresno County Employees’ Retirement Association
February 3, 2016
The Notes and Disclosures following this presentation are an integral part of this presentation and must be read in connection with your review of this presentation. Grosvenor® and Grosvenor Capital Management® are proprietary trademarks of Grosvenor Capital Management, L.P. and its affiliated entities. This presentation has been prepared by Grosvenor Capital Management, L.P. (referred to herein as “GCM Grosvenor Public Markets”). ©2016 Grosvenor Capital Management, L.P. All rights reserved. Table of Contents
. Tab A Executive Summary and Overview of Capabilities
. Tab B FCERA Strategic Partnership: Hybrid Approach
. Tab C Program Implementation Plan
. Tab D Technology and Access to Information
› Client Web Portal › Risk Aggregator › Portfolio-Level Reports › Hedge Fund-Level Reports . Tab E Conclusion
. Appendices › Appendix 1 Detailed Project Plan › Appendix 2 Hedge Funds Investment Outlook › Appendix 3 Additional Information › Appendix 4 Biographies
2 Tab A Executive Summary and Overview of Capabilities FCERA Strategic Partnership: Executive Summary
. GCM Grosvenor is uniquely qualified to help FCERA implement the increase in its hedge fund allocation to 8% 1. Experience − We have been investing in hedge funds for 45 years − We manage $26.8 billion in hedge fund portfolios1 − We manage $17.9 billion in customized hedge fund portfolios1 2. Support – We provide wide-ranging advisory services in conjunction with a GCM Grosvenor-managed customized program 3. Resources – We have 470 employees focused exclusively on alternative investments, including hedge funds1 4. Benefits of scale – We provide clients improved economics and terms with managers by leveraging our scale and negotiating abilities 5. Track record – GCM Grosvenor has a demonstrable, audited track record2 . We propose to expand our relationship to a Strategic Partnership › We recommend a hybrid approach that utilizes a discretionary portfolio (GIP or a customized portfolio) and a non-discretionary direct portfolio, accompanied by a full suite of advisory services › We have full capabilities to implement and oversee an entire hedge fund program › All fee savings achieved through our Strategic Partnerships are passed through to the client, resulting in reduced fees for both the client’s discretionary portfolio and direct portfolio . Strategic Partnerships are our core competency › Our first such relationship began in 1994 › Relationships include public pension plans › We have experience collaborating with clients with this hybrid approach to expand their hedge fund programs and to develop their internal hedge fund capabilities › We have a detailed, established process for implementation and ongoing collaboration . Our role is complementary to that of your general consultant › Collaborate on exposures, risk and reporting
1 Data as of December 31, 2015. 3 Past performance is not necessarily indicative of future results. No assurance can be given that any investment will achieve its objectives or avoid significant losses.
4 GCM Grosvenor
We are one of the world’s largest and most diversified allocators to alternative investments.
Who we are Our guiding principles . We offer investors comprehensive investment solutions for public markets (hedge funds) and › Seek attractive risk-adjusted private markets (private equity, infrastructure and real estate) returns across asset classes › Leverage our size and . We are experienced investors with a proven performance track record industry relationships to benefit clients . We are a leader in customized investment programs tailored to meet specific client objectives › Provide innovative . We offer commingled funds with specialty exposures and structures investment solutions . Our advisory services include full investment, operational and infrastructure support › Deliver superior client service . Our client base includes some of the world’s largest pension funds, banks, corporations › Always act with integrity and sovereign wealth entities › Support our community . Our global locations include Chicago, New York, Los Angeles, London, Tokyo, Hong Kong and Seoul
1971 $50.4bn $442mm 470 76% 93% First year of Assets under Capital invested Employees AUM in Institutional investing management and committed (as of January 1, 2016) customized client client base alongside our portfolios clients1
Data as of September 30, 2015, unless otherwise indicated. 1 Includes investments and commitments to investments made by the firm, its affiliates, and employees and employees’ relatives. Past performance is not necessarily indicative of future results. No assurance can be given that any investment will achieve its objectives or avoid significant losses.
5 Comprehensive Alternative Investment Solutions
Business line Public markets Private markets
Investments . Hedge funds . Private equity, infrastructure and real estate
AUM . $27.0 billion . $23.4 billion
Investment . Customized investment programs . Customized investment programs capabilities . Multi-strategy portfolios . Commingled fund products . Single-strategy portfolios . Primary funds, secondaries, . Opportunistic/direct investments co-investments . Hedge fund seeding . Small, emerging and diverse managers . Small and diverse managers . Regionally targeted investment programs
Advisory services . Full hedge fund advisory solutions . Full private markets advisory solutions
Customized Commingled Commingled AUM AUM programs 36% 12%
Customized Customized AUM AUM 64% 88%
Data as of September 30, 2015. GCM Grosvenor provides public markets services through Grosvenor Capital Management, L.P. and private markets services through GCM Customized Fund Investment Group, L.P.
6 Customized Investments Public Markets
A hedge fund solutions provider Assets under management FCERA currently By portfolio type invests in GIP . 1994: First implemented solution . 1996: First customized portfolio
Customized funds represent more than 60% of our Multi-Client business Portfolios 36% . 85 customized portfolios . 63 relationships
Interactive and collaborative relationships Customized Portfolios . Tailored to the client’s goals, needs, and resources 64% . Clients leverage our core investment, operations, risk management, and structuring capabilities . Flexibility to evolve as the client’s governance, capabilities, and resources change . Broad knowledge-sharing platform . Comprehensive customized reporting program
Data as of December 31, 2015.
7 Strategic Partners: Custom and Direct Programs
Custom portfolio Strategic consultative relationships1 relationships 15 85 relationships portfolios Multi-manager portfolios Direct investments
. Commingled . Hedge fund 1 . Customized . Hedge fund 2 . 63 Hedge… fund 3 Fee paying Non-fee paying relationships
Advisory services 1. Program design 2. Operational infrastructure $17.9 bn 3. Due Diligence assets under 4. Structuring 5. Portfolio and risk management management 6. Technology solutions 7. Knowledge transfer 8. Transition services
1 Data as of December 31, 2015.
8 GCM Grosvenor Global Presence Main Offices1
London (9) New York (117) Investment Professionals (6) Investment Professionals (29) Tokyo (13) Investment Professionals (2)
Seoul (1) Chicago (307) Investment Professionals (1) Investment Professionals (55)
Los Angeles (6) Investment Professionals (4) Hong Kong (9) Investment Professionals (7)
Data as of January 1, 2016. 1 Additional investment professionals (6) and non-investment professionals (2) in other regional offices.
9 Actively Covered Hedge Funds Public Markets
By Strategy Hedge fund Invested Actively Total strategy hedge funds followed covered Credit 46 156 202 Relative value 11 89 100 Multi-strategy 8 49 57 Event driven 9 43 52 Equities 52 253 305 Macro / CTA 13 163 176 Commodities 6 93 99 Dedicated portfolio hedges 1 9 10 Total count 146 855 1001
By Region Geographic Invested Actively Total focus hedge funds followed covered U.S./Canada and Global 119 603 722 Europe 17 112 129 Asia 9 111 120 Other1 1 29 30 Total count 146 855 1001
Data as of October 1, 2015. Data updated quarterly. 1 “Other” may include: Latin America, Middle East, Africa and not assigned.
10 Multi-Track Due Diligence and Approval Process Public Markets
Initial due diligence Investment Committee decides Sourcing and initial due diligence whether to initiate full due diligence
Full due diligence and structuring Structuring decisions: Proposed hedge fund . Commingled funds . Separate accounts . Trades ideas/themes Investment Risk management Operational due diligence due diligence due diligence . Quantitative analysis . Quantitative analysis Operations Structuring and legal review . Qualitative analysis . Risk management . Background investigations . Structure investment . Reference checks governance . Operations personnel . Review legal documents . Systems review evaluation . Negotiate side letter . Risk limits and guidelines . Operational capabilities and agreements (as necessary) internal control review
Approval Public Markets Investment Committee (IC) Operations Committee (OC) . Dual-track process approval approval . Must pass both . CEO has veto authority
Approved hedge fund
11 The Four Core Investment/Operations Capabilities Hedge Funds (As of January 1, 2016)
Investment Risk management Operations Structuring
. Communication of outlook and . Risk management due diligence . Operational due diligence . Customized structuring of multi- opportunity set and monitoring . Portfolio compliance monitoring client and single-client Grosvenor portfolios . Identification of strategies and . Risk/exposure aggregation . Treasury and liquidity investment managers › Analytical tools management . Underlying fund structuring, including fee/term negotiation . Investment due diligence › Reporting . Fund accounting and fund . Portfolio construction › Stress testing / scenario analysis performance reporting . Assessment and negotiation of . Customization of risk reports direct investment terms . Monitoring portfolios and . Fund administration, parallel to investment managers . Third-party risk aggregation third-party administration . Implementation of regulatory assistance compliance processes to match . Portfolio implementation . Trade management and investment structure › Exception reporting settlement Investment Committee-3 Operations Committee-3
Research-35 Risk Management-7 Operational Due Diligence-14 Attorneys-82
Risk Management Compliance-8 Systems Development-141 Trade Management/Settlement-11
Portfolio Management-18 Treasury/Liquidity Management-9 Cross-Functional Teams Negotiate favorable fees/terms-73 Fund Finance-31 Media Research-3 Structuring with investment managers-64
1 Includes GCM Grosvenor Public Markets employees and consultants; data updated quarterly. 2 Burke Montgomery, General Counsel, is also counted under the Operations Committee. 3 Includes 1 professional from Portfolio Management, 2 from Research, and 4 from Operational Due Diligence. 4 Includes 2 attorneys from Legal and 4 professionals from Operational Due Diligence.
12 Preferential Economics and Terms Public Markets Our investment expertise, size and structuring skills enable the firm to create custom investment mandates and drive preferential terms, including improved fees.
GCM Grosvenor Public Markets-approved hedge funds
71% of AUM 29% of AUM
We select Separate accounts Commingled funds Commingled funds optimal means with underlying Direct investments with preferential terms with standard terms of access: managers
Reduced fees based Negotiated Custom mandates and structuring Our value-add: on investment size side letters
Benefits1
Targeted Favorable Improved fee exposure terms structures
Goal: Enhanced Performance2
1 Not all underlying funds provide all of these benefits, including preferential economics and terms. 2 No assurance can be given that any investment will achieve its objectives or avoid losses. References herein to “we”, “us”, and “our” are to GCM Grosvenor Public Markets. As of October 1, 2015; data updated quarterly. Additional information available upon request.
13 We Achieve Fee Savings for Our Clients Hedge Fund Programs: Select Portfolios1 (October 1, 2015) The Notes and Disclosures immediately below this analysis and the Notes and Disclosures following this presentation are an integral part of this analysis and must be read in order for you to properly evaluate this analysis, and understand its significant limitations.
. GCM Grosvenor Public Markets-advised capital 1-year potential fee savings analysis generally pays lower effective fees due to our: Lower effective fees versus standard fees › Negotiating expertise and industry leverage: Based on hedge fund gross annual return assumptions Preferential fees obtained through side letters and Gross ROR separate account structuring Select 0% or any › Scale: Lower fees based on the aggregate level of portfolio2 12% 10% 8% negative advised capital allocated to an investment manager Commingled multi- 57 bp 52 bp 51 bp 33 bp strategy portfolio . All fee savings are passed directly through to our Commingled 86 bp 81 bp 72 bp 22 bp clients equity portfolio Commingled 93 bp 96 bp 106 bp 61 bp credit portfolio Customized multi- 61 bp 58 bp 52 bp 38 bp strategy portfolio
1 The fee savings of the portfolios included in this report are not necessarily representative of fee savings of any other GCM Grosvenor Public Markets portfolios. 2 “Commingled multi-strategy portfolio” represents Grosvenor Institutional Partners, L.P., our flagship commingled multi-strategy portfolio; “Commingled equity portfolio” represents Grosvenor Enhanced Long/Short Equity Master Fund, Ltd., our flagship commingled long/short equity portfolio; “Commingled credit portfolio” represents Grosvenor Opportunistic Credit Master Fund IV, Ltd., our most recently created commingled credit portfolio; “Customized multi-strategy portfolio” represents our most recently created, fully-funded customized multi-strategy portfolio as of the date above. This information is provided to present the potentially lower effective fees that apply to GCM Grosvenor Public Markets-advised assets in certain Underlying Funds. The analysis is presented, and assumes certain gross return rates for the Underlying Funds, for illustrative purposes only; it is not intended to imply that any GCM Grosvenor Public Markets-advised assets will achieve a specific return or “fee savings” over any period. A number of assumptions were made in preparing this analysis, some of which are discussed in the slide following this presentation entitled “Fee Savings Notes and Disclosures”. Additional detail concerning the methodology used and assumptions made to calculate potential fee savings is available upon request.
14 Performance Relative to Peers Grosvenor Institutional Partners, L.P. (as of September 30, 2015)1
1 Grosvenor Institutional Partners, L.P. places in the second quartile for 1-year and 2-year performance periods ending September 30, 2015. GCMLP has provided this analysis to present the effective “ranking” of Grosvenor Institutional Partners, L.P. compared to a peer group of similar multi-strategy products selected by GCMLP. The peer group consists of all multi-strategy products offered by the largest 25 fund of hedge funds firms (as published by Institutional Investor’s Alpha magazine in March 2015 for AUM data as of December 2014) for which returns are available from MercerInsight through September 30, 2015 as of the report’s creation date (November 25, 2015). The universe is not an official or “standard” Mercer Universe, but a customized universe created for this purpose. For a detailed discussion of the methodology used to construct the peer group and the limitations of such methodology, please refer to the Notes and Disclosures that accompany this report. Past performance is not necessarily indicative of future results and the returns of any GCMLP-managed Fund could be volatile. Utilizing a different peer group or different period may produce different results.
15 Historical Net Performance Grosvenor Institutional Partners, L.P. (December 31, 2015)
Grosvenor Institutional Citigroup U.S. Three-Month HFRI Fund of Funds HFRX Global Hedge Partners, L.P. Treasury Bill Index Composite Index Fund Index 2000 15.64% 5.96% 4.07% 14.29% 2001 8.39% 4.09% 2.80% 8.67% 2002 2.48% 1.70% 1.02% 4.72% 2003 11.40% 1.07% 11.61% 13.39% 2004 7.22% 1.24% 6.86% 2.69% 2005 7.13% 3.00% 7.49% 2.72% 2006 9.77% 4.76% 10.39% 9.26% 2007 11.08% 4.74% 10.25% 4.23% 2008 -20.59% 1.80% -21.37% -23.25% 2009 14.23% 0.16% 11.47% 13.40% 2010 6.81% 0.13% 5.70% 5.19% 2011 -3.67% 0.08% -5.72% -8.87% 2012 8.63% 0.07% 4.79% 3.51% 2013 15.21% 0.05% 8.96% 6.72% 2014 1st Quarter 1.54% 0.01% 0.56% 1.11% 2nd Quarter 1.26% 0.01% 1.54% 0.65% 3rd Quarter -0.11% 0.01% 0.28% -0.57% 4th Quarter 0.58% 0.00% 0.95% -1.74% Year 3.30% 0.03% 3.37% -0.58% 2015 January -0.39% 0.00% 0.13% -0.29% February 1.58% 0.00% 1.69% 2.02% March 0.53% 0.00% 0.66% 0.33% April 0.16% 0.00% 0.25% 0.21% May 0.90% 0.00% 1.00% 0.26% June -0.48% 0.00% -1.04% -1.24% July 0.55% 0.00% 0.19% -0.03% August -1.45% 0.00% -2.00% -2.21% September -1.56% 0.00% -1.82% -2.07% October 0.64% 0.00% 0.86% 1.46% November 0.05% 0.00% 0.37% -0.72% December -0.59% 0.01% -0.61% -1.33% Year -0.09% 0.03% -0.36% -3.64% Since 01/2000 Cumulative Return 141.64% 32.78% 73.22% 56.41% Annualized Return 5.67% 1.79% 3.49% 2.84% Annualized Standard Deviation 4.34% 0.57% 5.09% 5.68% Data sources: Bloomberg, Hedge Fund Research, Inc. (HFR). Past performance is not necessarily indicative of future results, and the performance of the portfolio could be volatile.
16 Tab B FCERA Strategic Partnership: Hybrid Approach Evolution of Our Strategic Partnership
Our strategic partnership can evolve over a period of time prescribed by FCERA
• Direct investments Non-discretionary portfolio • In-house alternatives capabilities
• Commingled GIP investment • Reliance on alternatives strategic Discretionary portfolio partner
Time
The investment program will The partnership will include We have a detailed consist of a discretionary advisory services: implementation plan portfolio of hedge funds and 1. Program design . Program needs assessment non-discretionary direct 2. Operational infrastructure . Program design investments 3. Due diligence . Portfolio design 4. Structuring . Portfolio implementation 5. Portfolio and risk management . Portfolio management and 6. Technology solutions monitoring 7. Knowledge transfer . Program management and monitoring 8. Transition services Full implementation plan details appear in Tab C of this presentation.
For illustrative purposes only. No assurance can be given that any investment will achieve its objectives or avoid significant losses.
18 Alternatives Investment Program: Overview
We propose helping FCERA achieve its goals by:
. Providing discretionary investment services for a $150 million discretionary portfolio (GIP or customized)
. Providing full advisory services for a $150 million non-discretionary direct investment program
. Providing diversification across hedge fund strategies
. Providing access to core and tactical (niche and regional) investments
. Incorporating global investment exposure
. Accessing cost efficiencies for both FCERA’s discretionary and direct investment portfolios that GCM Grosvenor has achieved with hedge fund managers
19 FCERA Full Implementation Team
Relationship Primary contact: Lisa Kastigar, Director, Business Development, Chicago Secondary contact: Scott Pearson, Managing Director, Business Development, Chicago
Investments Operations
Risk Operational Due Legal / Investment Management Technology Management Diligence Structuring
David Richter, Andrew Preda Jennifer Stack, Ivaldo Basso, Girish Kashyap, Alok Mehta, CPA Senior Vice President, Ph.D. CPA J.D. Ph.D. Public Markets Investment Portfolio Management Head of Risk Management, Head of Investment Senior Vice President, Chief Technology Officer, Committee Chair, Managing Director Operations, Legal and Compliance Managing Director Head of Research, Managing Director Managing Director
Access to our full foundational resources Public Markets Investments (60) Operations and Client Services (358)
› Public Markets Investment Committee • Hedge Fund Operational Due Diligence (14) • Information Technology (44) › Portfolio Management • Trade Management / Settlement (11) • Media Research (3) › Research • Treasury and Liquidity Management (12) • Legal / Compliance (27) › Risk Management • Fund Finance (70) • Client Group (82) • Corporate Finance (17) • Human Resources, • Cross-Functional Structuring Team (7) Administration and Support (71)
Data as of January 1, 2016.
20 Hybrid Approach GCM Grosvenor Fee Illustration
Hedge fund program
Multi-manager portfolios Direct investments
. Commingled . Hedge fund 1 . Customized . Hedge fund 2 . Hedge fund 3 …
Grosvenor fee structure Fee paying Non-fee paying (non-discretionary advisory services)
Manager fee structure/term . Customized funds with targeted exposures benefits . Fee savings at underlying manager level . Other improved terms (liquidity, transparency, control provisions, etc.)
Grosvenor services Advisory Services 1. Program design 5. Portfolio and risk management 2. Operational infrastructure 6. Technology solutions 3. Due diligence 7. Knowledge transfer 4. Structuring 8. Transition services
21 Proposed Structure and Economic Efficiencies: Hedge Funds Example: $150 mm portfolio of hedge funds; $150 mm direct investments. Assuming 0% or negative returns.1 The Notes and Disclosures immediately below this analysis and the Notes and Disclosures are an integral part of this analysis and must be read in order for you to properly evaluate this analysis, and understand its significant limitations.
GCM Grosvenor-managed portfolio Direct investment portfolio • GIP or customized portfolio • Overseen by FCERA • Managed by GCM Grosvenor • Advised by GCM Grosvenor $150 million $150 million
At the GCM Grosvenor GCM Grosvenor fee: GCM Grosvenor fee: No additional fee charged for advisory portfolio level 83 bp = $1.245 mm $0 services on direct hedge fund investing.2 At the underlying Fee savings: Fee savings: GCM Grosvenor achieves fee hedge fund level 33 bp = ($0.495 mm)3 33 bp = ($0.495 mm)3,4 savings for clients on hedge funds in customized portfolios and clients’ direct investments. $1.245 mm fee paid to GCM Grosvenor - $0.495 mm fee savings on GCM Grosvenor- managed portfolio Clients may offset the fees they - $0.495 mm fee savings on direct portfolio Sliding scale: Effective fee at: pay to GCM Grosvenor and realize $0.255 mm or 8.5 bp GCM Grosvenor’s fee, less fee First $25 million 1.15% $75 million 0.98% a lower overall cost of ownership Next $25 million 1.00% $100 million 0.94% versus investing directly. savings on $300 mm invested Next $50 million 0.80% $150 million 0.83% Over $100 million 0.60% $250 million 0.75% Fee is subject to a 0.75% minimum. 1 Fee savings would be higher at higher rates of return. 2 No fee to GCM Grosvenor on assets being invested directly by the client. 3 Fee savings represented by our flagship multi-strategy portfolio, GIP as of October 1, 2015. FCERA is currently invested in GIP. This information is provided to present the potentially lower effective fees that apply to GCM Grosvenor-advised assets in certain Portfolio Funds. The analysis is presented, and assumes certain gross return rates for the Portfolio Funds, for illustrative purposes only; it is not intended to imply that any GCM Grosvenor-advised assets will achieve a specific return or “fee savings” over any period. A number of assumptions were made in preparing this analysis, some of which are discussed in the slide following this presentation entitled “Fee Savings Notes and Disclosures”. Additional detail concerning the methodology used and assumptions made to calculate potential fee savings is available upon request. 4 Assumes the client invests directly in a portfolio that is representative of GIP as of July 1, 2015. Note: This analysis does not include expenses (including third-party expenses) that would apply to both portfolios. Illustrative purposes only.
22 Advisory Services Public Markets Clients leverage our core investment, operations, legal/structuring and risk management capabilities through the following services: Hedge fund advisory services Our staff1
1. Program design We work with clients to design the framework of their hedge fund programs. We also help clients define 68 and document policy for overall programs, as well as individual portfolios. 2. Operational We help clients design and implement operational infrastructures for complete hedge fund programs. To infrastructure achieve operational goals, clients may: 1) build in-house capabilities, 2) leverage our administration service 111 offerings and/or 3) engage third-party service providers. 3. Due diligence Clients access our research, due diligence, and views of hedge fund managers and funds through our comprehensive Due Diligence Reports, which include findings from our investment, risk management and 115-1192 operational due diligence. Managers may be sourced by us or the client. Due diligence and monitoring may be conducted jointly with client staff. 4. Structuring We have substantial expertise negotiating advantageous terms with hedge funds that may include: lower effective fees, term improvements, separate accounts and/or other side letter provisions. Clients building 40 direct investment programs and customized portfolios can benefit from our negotiated terms. 5. Portfolio and risk We advise clients on constructing and managing customized portfolios. Clients may use our portfolio management management tools to manage their direct investment portfolios with the support of our Investment Team. 74 Our risk aggregation and analytical capabilities help clients measure, monitor and “stress test” the risk of all investments within their hedge fund programs.
6. Technology solutions We provide a comprehensive suite of technology solutions to assist clients in managing the hedge fund 663 investment process.
7. Knowledge transfer We offer formal education and training sessions for clients’ Boards and staff to develop in-house hedge 205 fund knowledge and capabilities.
8. Transition services We help clients manage the liquidation and transition of hedge fund portfolios previously managed by 107 other investment managers.
1 Certain staff members perform multiple tasks, and may be counted more than once. 2 Operational Due Diligence support includes internal full-time equivalents from members of our Private Markets Fund Finance, Legal and Information Services Teams, 3-5 full-time equivalents from external legal counsel, and 12-14 full-time equivalents from independent private investigation firms that conduct background investigations on prospective managers and funds on our behalf. 3 Includes GCM Grosvenor Public Markets employees and estimated count of on-site consultants. Data as of October 1, 2015. No assurance can be given that any investment will achieve its objectives or avoid significant losses.
23 Consultants and GCM Grosvenor Complement One Another
General Consultant GCM Grosvenor Plan Level Alternatives Alternatives Capabilities Consulting Asset allocation advice Strategy and industry outlook Strategic Asset Internal infrastructure development Allocation Asset Management Asset-Liability Full alternatives Fund and manager due diligence Tactical Matching capabilities: Client-directed due diligence Asset investment Active portfolio management with tactical allocation shifts Allocation management and Asset allocation Implementing allocations within traditional advisory equity and fixed Risk aggregation income asset classes Fund, investment and manager monitoring Economics/Terms Structuring separate accounts with customized mandates with hedge fund managers Preferential economics and terms Consultants address plan- With its deep resources, we Fee-for-scale deals and benefits level goals, including believe GCM Grosvenor is best- Other Value Add asset allocation suited to address investment Education and knowledge transfer management and advisory services Risk management analytical tools and portfolio compliance testing for alternatives programs. Technology solutions development Back-office and administration services Tactical asset allocation Transparent, web-based reporting within alternatives is addressed by both entities.
24 Tab C Program Implementation Plan Program Implementation Timeline
Phase I Phase II Phase III Phase IV Phase V Phase VI
Program Program Program Needs Design Management Assessment and Monitoring
Portfolio Portfolio Portfolio Design Management Implementation and Monitoring
26 Phase I: Program Needs Assessment
Alternatives Investment Program I II III IV V VI
1. Assess investment goals 2. Assess operational goals 4. Establish program 3. Assess resource needs of alternatives program of alternatives program management structure
Assess self-sufficiency goals Identify program and Assess overall goals Assess operational needs (investment/operations) functional team leads at client
Identify human resources Identify program and Evaluate existing program Assess technology needs
needs functional team leads at
Processes Processes Processes Processes strategic partner
Perform gap analysis Assess reporting needs Identify training needs
Assess regulation, tax, legal environment1
. Investment goals . Operational goals . Self-sufficiency . Organizational › Asset/liability › Desired state goals and timeline structure of program matching . Resource › Current state management teams › Role of identification plan › Gap analysis › Roles alternatives › In-house, GCM rd › Key points of . Analysis of existing Grosvenor, or 3 contact program party › Communication
. Gap analysis vs › Timeline
Select outputs Select outputs Select outputs Select Select outputs Select goals . Training plan › Areas of need › Timeline
1 GCM Grosvenor does not provide legal or tax advice to any client. Each client should seek advice based on its particular circumstances from its independent legal or tax advisor.
27 Phase II: Program Design
Alternatives Investment Program I II III IV V VI
1. Establish investment 2. Document program 3. Define legal structure of 4. Design investment and policy for alternatives policies and procedures alternatives program operational infrastructure program
Determine/optimize asset Document investment policies Establish role of strategic Evaluate structural options allocation targets and procedures partner
Document operational Assess need for additional Define governance structure Create legal entities
policies and procedures in-house staff
Processes Processes Processes Processes Define investment objectives Evaluate and select third- and approach party service providers
. Investment policy . Policies and . Legal structures: . Implementation plan Includes allocation procedures pros and cons for infrastructure targets; governance › Overall . Finalized legal › Investment structure and investment alternatives structures › Operational objectives/approach program . Job descriptions (in- › Overall house staffing) alternatives program . Contracts finalized
with third-party
Select outputs Select outputs Select outputs Select Select outputs Select providers
28 Phase III: Portfolio Design
Alternatives Investment Program I II III IV V VI
1. Share strategy research, 2. Establish target ranges 3. Develop individual 4. Develop universe of by asset class within each asset class portfolio investment policy potential managers / funds
Share existing strategy Establish target allocation Define investment mandate Share manager / fund / research ranges and approach investment research
Document investment Assess need for additional Select strategies Core vs. satellite strategies
objectives and constraints due diligence
Processes Processes Processes Processes Funding timeline Manager meetings
. Strategy research By asset class, define: . Portfolio . Hedge fund research . Target allocation Investment Policy › Approved funds list ranges For each customized › Due diligence › Strategy and direct portfolio reports › Geography › Objectives . Client-directed due › Exposure › Constraints diligence . Core vs. satellite . Joint manager
strategies meetings
Select outputs Select outputs Select outputs Select outputs Select . Customized vs. direct portfolio . Funding timeline
29 Phase IV: Portfolio Implementation
Alternatives Investment Program I II III IV V VI
1. Propose portfolio 2. Implement portfolio 3. Initiate reporting
Select investments and Negotiate terms of Ensure information flow propose weightings investment
Prepare trade-related Deliver and train client on Evaluate proposed portfolio
documentation reporting
Processes Processes Processes Execute and verify cash Obtain client approval movements
. Final approved . Executed trade- . Portfolio reporting portfolio allocation related from: plan documentation › Investment › Subscription managers documents › Portfolio › Letters of companies direction › Administrator
› Side letter › Strategic partner
Select outputs Select Select outputs Select Select outputs Select agreements › Third-party risk aggregator, if applicable
30 Phase V: Portfolio Management and Monitoring
Alternatives Investment Program I II III IV V VI
1. Investment research and 2. Portfolio and risk 4. Reporting and client 3. Back office services monitoring management updates
Perform ongoing due Analyze investments at Provide ongoing updates and Calculate NAV of portfolios diligence portfolio and program-level reports to client
Assess opportunity set across Re-evaluate allocations based Implement approved Conduct regular calls and
strategies on opportunity and outlook allocations meetings with client
Processes Processes Processes Processes Test compliance with Monitor investments investment guidelines Manage cash and liquidity
. Due diligence reports . Portfolio and . Portfolio and . Portfolio and and investment program-level program NAV program update calls memoranda analysis by asset . Cash flow modeling › Performance class . Hedge fund . Fee and liquidity › Outlook monitoring . Proposed allocation analysis adjustments › Proposed › Monthly exposure . Audit and tax filings investments and risk reports . Report on . Third party service › “Watch Lists” compliance with
investment provider
Select outputs Select outputs Select outputs Select outputs Select . Joint manager calls / guidelines monitoring meetings
31 Phase VI: Program Management and Monitoring
Alternatives Investment Program I II III IV V VI
1. Provide program-level 2. Assess alternatives 3. Assess operational needs reporting program performance
Provide aggregated program- Assess achievement of Re-assess operational needs level reporting program objectives
Re-evaluate allocations and Re-assess technology and
investment policy reporting needs
Processes Processes Processes Prepare annual investment Re-assess human resources plan
. Program-level . Report on . Internal controls reporting compliance with and risk mitigation › Asset, strategy, investment plan geographic guidelines . Updated policies allocations . Strategic annual and procedures › Cash flow investment plan . Client hiring and modeling › Market outlook training plan
› Liquidity profile › Target allocation
Select outputs Select outputs Select Select outputs Select ranges › Investment opportunities › Cash flow modeling
32 Tab D Technology and Access to Information Technology and Access to Information Tab D
› Client Web Portal › Risk Aggregator › Portfolio-Level Reports › Hedge Fund-Level Reports
34 Client Service Philosophy
Our client service and information-sharing philosophy is focused on providing clients: . High level of transparency
. Opportunities for collaboration
. Customizable access to information
. Knowledge transfer / continuing education
. Regularly scheduled investment portfolio discussions
. An evolving relationship as client needs change
35 Ease of Access to Information
We offer clients portfolio, investment manager and industry information through an interactive, web-based environment.
Multiple applications High transparency and breadth of information provided
Account Subscription Rate of return Tax information information (when applicable) documents Investments Summary One-stop-shop for recent Confirmations performance, net capital Account balances (when applicable) activity, and current balance for each of your portfolio investments Portfolio Asset allocation Risk statistics Exposure information
Performance Performance Investments Portfolio Tool Liquidity analysis attribution commentary Offers transparency into portfolio-level, strategy-level, and hedge fund-level Hedge fund Investment due Performance Risk and performance and asset manager diligence reports attribution exposure allocation information information Operational due Performance diligence reports commentary
Documents Library Industry Market and Investment Strategy reviews Easy-to-access online information industry updates outlook repository of current and historical statements and other important documents Firm and misc. Client letters Special reports (firm and third party) information
36 Investments Summary Public Markets Client Web Portal
Link to Documents Library
Investments Summary . Snapshot of recent performance, current balance, and net capital activity for each portfolio . Offers transparency and convenience . Seamless navigation to portfolio tool and documents library
Sample – not intended to represent the returns of any particular portfolio.
37 Investments Portfolio Tool – Performance Public Markets Client Web Portal Access portfolio-level, strategy-level, and hedge fund-level performance and asset allocation information in a single convenient location.
Portfolio-level returns and reporting . Portfolio-level performance summary Holdings commentary . Access detailed portfolio-level . Qualitative performance performance and risk reports attribution side-by-side with quantitative performance of underlying holdings . Number of investment managers who have reported performance Hedge fund due diligence commentary . Access summary Due Diligence Reports, containing: Holdings details › Investment manager and hedge fund . Underlying holdings are overviews categorized by and may be › Return/risk statistics sorted by strategy, allocation › Research conclusions, including risks size, rate of return, and › Key personnel contribution to return › Performance and manager updates
Separate account indicator . Underlying holdings created Strategy-level ranking exclusively for GCM Grosvenor advised capital . Contribution to return strategy ranking . Rate of return strategy ranking
Sample – not intended to represent the returns of any particular portfolio.
38 Investment Due Diligence Reporting Public Markets We provide due diligence findings to clients in an extensive report that includes assessments by the Investment, Risk Management, and Operational Due Diligence Teams. Hedge fund due diligence Investment manager due diligence Quantitative due diligence
Investment due diligence Investment due diligence Investment due › Strengths › Manager overview diligence/risk management › Issues, weaknesses, and concerns › Products managed and AUM due diligence › Risks mitigated through our initiation › Investor base › Performance › Strategy overview › Investment personnel › Risk-adjusted performance › Risk and return objectives Operational due diligence › Exposure › Fund/manager facts › Investment strategy › Corporate ownership › AUM › Portfolio construction › Registrations › Instrument types and liquidity › Operations personnel Risk management due diligence › Biographies of key personnel › Risk management governance › Personnel compensation › Risk guidelines › Personnel turnover › Systems and reporting › Compliance › Portfolio liquidity › Personal trading › Leverage › Trade errors › Counterparty risk management › Maintenance and control of material non- public information Operational due diligence › Litigation › Historical performance › Regulatory examinations › Investor base › Safeguarding of cash and authorization of › Offshore fund directors cash movements › Counterparties and service providers › Trading operations and practices › Valuation › Systems and technology infrastructure › NAV calculation and review › Business continuity and disaster recovery › Taxation › Background check › Expenses › Operational capabilities and internal › Fund related documentation controls review › Governing document review Risk management, diversification and due diligence processes seek to mitigate, but cannot eliminate risk, nor do they imply low risk. No assurance can be given that any investment will achieve its objectives or avoid losses.
39 Investments Portfolio Tool – Allocation Public Markets Client Web Portal Access portfolio-level, strategy-level, and hedge fund-level asset allocation, capital activity, and balance information in a single convenient location.
Portfolio-level returns and reporting . Portfolio-level performance summary . Access detailed portfolio-level performance and risk reports Holdings details . Underlying holdings are categorized by and may be sorted by strategy, net capital activity, balance, and allocation Hedge fund due diligence . Access summary Due Diligence Reports, containing: › Investment manager and hedge fund overviews › Return/risk statistics › Research conclusions, including risks › Key personnel › Performance and manager updates
Separate account indicator . Underlying holdings created exclusively for GCM Grosvenor advised capital Strategy allocation . Portfolio-level strategy allocations Sample – not intended to represent the returns of any particular portfolio.
40 Documents Library Public Markets Client Web Portal Access investor and fund information, including performance statements, audited financial statements, tax information, and monthly and quarterly strategy commentary in a secure, easy-to-use format.
Link to return to Investments Summary
Filter options . Filter by fund, document type and delivered date
Download options . The site supports Excel and PDF formats . Files may be downloaded one at a time or in bulk
Sample – not intended to represent the returns of any particular portfolio.
41 Technology and Access to Information Tab D
› Client Web Portal › Risk Aggregator › Portfolio-Level Reports › Hedge Fund-Level Reports
42 GCM Grosvenor Public Markets Risk Aggregator Overview (1 of 3) The Risk Aggregator is a comprehensive reporting solution for our clients’ entire hedge fund portfolio. The Risk Aggregator utilizes exposure data, return data and liquidity data.
Risk management, diversification and due diligence processes seek to mitigate, but cannot eliminate risk, nor do they imply low risk. ALL DATA CONTAINED HEREIN IS FOR ILLUSTRATIVE PURPOSES ONLY. RETURNS, IF PRESENTED, ARE NOT INTENDED TO REPRESENT THE PERFORMANCE OF ANY PORTFOLIO.
43 GCM Grosvenor Public Markets Risk Aggregator Overview (2 of 3)
. Standard reporting suite includes: › Returns: Trailing returns; contribution to return; peak-to-trough drawdown; positive and negative months › Statistics: Volatility; Sharpe ratio; Sortino ratio; alpha; VaR › Sensitivities (stress tests): Single-factor equity and credit moves; historical financial shocks; factor-based and exposure- based simulation
ALL DATA CONTAINED HEREIN IS FOR ILLUSTRATIVE PURPOSES ONLY. RETURNS, IF PRESENTED, ARE NOT INTENDED TO REPRESENT THE PERFORMANCE OF ANY PORTFOLIO.
44 GCM Grosvenor Public Markets Risk Aggregator Overview (3 of 3)
. Standard reporting suite includes (continued): › Correlation: Betas and correlations to market indices; correlation matrix › Exposure: Capital and notional; long and short; region; equity sector; strategy; geography; trends › Liquidity profile
ALL DATA CONTAINED HEREIN IS FOR ILLUSTRATIVE PURPOSES ONLY. RETURNS, IF PRESENTED, ARE NOT INTENDED TO REPRESENT THE PERFORMANCE OF ANY PORTFOLIO.
45 GCM Grosvenor Public Markets Risk Aggregator End result By receiving full reporting, clients can spend time on what really matters – analyzing the results.
. Clients receive full reporting either monthly, quarterly, semi-annually or annually . Clients can: › Analyze the results independently › Work with the Risk Management Team to understand, with full transparency, how each statistic and simulation in the report is generated › Work with the Portfolio Management Team to discuss and analyze results
Example: Once a client receives their strategy allocation they can work with the Portfolio Management Team to rebalance allocations across their hedge fund portfolio
ALL DATA CONTAINED HEREIN IS FOR ILLUSTRATIVE PURPOSES ONLY. RETURNS, IF PRESENTED, ARE NOT INTENDED TO REPRESENT THE PERFORMANCE OF ANY PORTFOLIO.
46 Technology and Access to Information Tab D
› Client Web Portal › Risk Aggregator › Portfolio-Level Reports › Hedge Fund-Level Reports
47 Portfolio-Level Risk Management Public Markets The Risk Management Team compares the results of portfolio optimizations to our target strategy allocations and customized stress tests.
Portfolio optimization seeks to identify the “best” Multi-factor model stress testing provides another portfolio, subject to constraints tool to evaluate portfolio construction . “Best” must be specified. Examples include: Multi-factor model shocks › Highest Sharpe / Sortino ratio › Highest return Models › Highest Omega ratio return estimates . Possible constraints include: given up and › Compliance with strategy target allocations down shock › Limits to concentration factor moves › Limits to downside standard deviation Historical scenario analysis › Limits to historical drawdowns . Optimization has limitations. Examples include: › Reliance on historical data and recent trends › Difficult to incorporate important qualitative information Reviews hypothetical › Cannot capture subtleties of trade-offs between risk and performance over return historical periods We believe incorporating our forward-looking of market stress strategy views, expressed through our target strategy allocations, can help us produce higher quality results
No assurance can be given that the risk management process will achieve its objective or that any investment will avoid significant losses. Past performance is not necessarily indicative of future results, and the performance of an investment could be volatile. For illustrative purposes only.
48 Grosvenor Portfolio Analytics Public Markets A suite of reports to analyze and stress test portfolios.
Allocation Summary Position Size Target Report Liquidity Report VaR Contribution Summarizes allocations by Highlights funds that are Can accommodate various Highlights funds with a high strategy and sub-strategy above or below the target liquidity assumptions VaR contribution allocation
Historical Stress Tests Risk Statistics and Sensitivities Risk-Based Allocation Report Risk Aggregation Models the portfolio’s Summarizes sensitivities to risk Applies forward-looking (Customized Funds Only) performance in historical factors, changes in VaR, and assumptions to estimate key Summarizes exposure, stressed market conditions risk-adjusted performance portfolio statistics performance and risk statistics for the client’s entire portfolio
Risk management, diversification and due diligence processes seek to mitigate, but cannot eliminate risk, nor do they imply low risk. No assurance can be given that any investment will achieve its objectives or avoid losses.
49 Technology and Access to Information Tab D
› Client Web Portal › Risk Aggregator › Portfolio-Level Reports › Hedge Fund-Level Reports
50 Hedge Fund-Level Risk Management Portfolio Fund Portal: Overview1 The Notes and Disclosures following this presentation are an integral part of this presentation and must be read in connection with your review of this presentation The Portfolio Fund Portal allows us to access hedge fund overviews, exposure summaries, historical exposure summaries, financial shocks scenario analysis, and risk summaries. Hedge fund overview . General fund information . Monthly performance . Distribution of monthly performance . Risk/return characteristics . Exposure summary . Summary of terms
Historical Risk/Return Characteristics
XX.XX XX.XX XXX.XX X.XX -X.XX X.XX XX.XX XX.XX X.XX X.XX X.XX X.XX XX.XX X.XX X.XX X.XX X.XX X.XX -X.XX X.XX
XX.XX X.XX XX.XX X.XX X.XX X.XX XX.XX XX.XX X.XX X.XX X.XX X.XX XX.XX X.XX X.XX X.XX X.XX X.XX X.XX X.XX
-X.XX X.XX X.XX X.XX -X.XX -X.XX XX.XX X.XX X.XX X.XX -X.XX X.XX X.XX X.XX X.XX -X.XX X.XX -X.XX -X.XX X.XX
1 Sample Portfolio Fund Portal is provided for illustrative purposes only and is not intended to be representative of an actual Portfolio Fund Portal. Risk management, diversification and due diligence processes seek to mitigate, but cannot eliminate risk, nor do they imply low risk.
51 Hedge Fund Analytics Public Markets The Risk Management Team has developed a broad suite of analytical tools to evaluate existing and potential investments with managers. Many of these tools are similarly used to analyze our portfolios.
Quantitative overview Risk statistics and sensitivities Historical stress tests Summarizes key facts, Analyzes sensitivities to risk Models performance in historical performance, and factors, changes in VaR, and historical stressed market risk-adjusted performance risk-adjusted performance conditions
Peer report Exposure Evaluates performance Shows exposures by strategy, sub- relative to strategy peers strategy, sector, and geography
Risk management, diversification and due diligence processes seek to mitigate, but cannot eliminate risk, nor do they imply low risk. No assurance can be given that any investment will achieve its objectives or avoid losses.
52 Tab E Conclusion Conclusion
. GCM Grosvenor and FCERA have had a successful working relationship since 2009
. We are excited about the opportunity to enter into a Strategic Partnership, extending our existing relationship
. Working with GCM Grosvenor allows FCERA to leverage our global team, resources, experience, technology, structuring expertise and scale benefits at no additional fee for the non-discretionary direct portfolio
. We have defined and established, proven processes in place that allow ease in implementation with respect to the Strategic Partnership
. We have a demonstrable track record as well as a history of success working with large, global investors in a strategic partnership
54 Appendix 1 Detailed Project Plan I. Program Needs Assessment
Alternatives Investment Program I II III IV V VI Task Team involved Sub-task
1. Assess investment . Investment Committee(s) A. Assess client's alternative investment goals goals of alternatives . Investment Teams i. Risk/return profile, liquidity profile, constraints, etc. program B. Evaluate existing investment portfolio (traditional and alternatives, if relevant) i. Identify areas of risk and opportunity C. Understand client's exposure needs by asset class, strategy, region, liquidity, etc. D. Assess regulation, legal and tax requirements1 E. Discuss transition of legacy portfolios, where applicable 2. Assess operational . Finance A. Assess client's needs for: goals . Information Technology i. Operations . Client Services a) Portfolio valuation b) Cash management c) Investment implementation d) Foreign currency and market hedging e) Administration services ii. Technology and reporting a) Manager / fund research database b) Allocation planning and analytic tools, risk aggregation c) Report and document center; customized reporting B. Determine whether to: i. Build/use in-house capabilities ii. Leverage strategic partner iii. Outsource to third-party service providers 3. Assess resource needs . All teams A. Determine client's desired level of involvement and self-sufficiency based on desired level i. Investment of self-sufficiency ii. Operational B. Determine time frame for self-sufficiency C. Assess client's current staff level D. Determine timeline for hiring and building in-house team E. Assess education needs, including training programs 4. Establish program . All teams A. Identify program and functional team leads at client and strategic partner management i. Roles structure ii. Key points of contact iii. Communication
1 GCM Grosvenor does not provide legal or tax advice to any client. Each client should seek advice based on its particular circumstances from its independent legal or tax advisor.
56 II. Program Design
Alternatives Investment Program (Page 1 of 2) I II III IV V VI
Task Team involved Sub-task
1. Establish investment . Investment Committee(s) A. Determine target asset allocation within alternatives program policy . Investment Teams i. Perform optimization analysis . Legal a) Mean variance analysis b) CVaR analysis c) Stress analysis ii. Determine target asset allocation: iii. Establish investment policy for overall alternatives program iv. Governance structure a) Roles and responsibilities b) Determine process for selecting and/or terminating investment managers c) Determine process for approving/rejecting investments v. Program attributes a) Target return objectives and benchmarks b) Permissible / non-permissible strategies, geographies and investments c) Target ranges for hedge funds d) Investment and risk parameters e) Cash flow requirements 2. Develop policies and . All teams A. Develop policies and procedures for overall alternatives program procedures i. Investment policies and procedures a) Manager / fund selection and monitoring procedures b) Investment c) Risk management d) Reporting requirements e) Selection of third-party service providers ii. Operational policies and procedures a) Valuation policy b) Cash investment and management c) Selection of third-party service providers
57 II. Program Design
Alternatives Investment Program (Page 2 of 2) I II III IV V VI
Task Team involved Sub-task
3. Define the legal . Legal A. Evaluate operational, legal, tax and regulatory requirements structure of B. Assess implications of proposed/pending regulatory changes alternatives program1 C. Evaluate potential legal structures by asset class D. Select most appropriate structures E. Draft and finalize legal entity (entities) documentation F. Make filings with appropriate jurisdictions to form and register legal entity (entities)
4. Define investment and . Finance A. Establish role of strategic partner operational . Information Technology B. Assess need for additional in-house staff infrastructure . Client Services C. Evaluate and select third-party service providers i. Administrator ii. Custodian iii. Auditor iv. Legal counsel v. Tax advisors vi. Risk aggregator D. Negotiate and execute contracts with third-party service providers E. Develop implementation plan and timeline for investment and operational infrastructure
1 GCM Grosvenor does not provide legal or tax advice to any client. Each client should seek advice based on its particular circumstances from its independent legal or tax advisor.
58 III. Portfolio Design
Alternatives Investment Program I II III IV V VI
Task Team involved Sub-task
1. Share strategy . Investment Committee A. Share strategy research by asset class research . Investment Teams i. Macroeconomic and market outlook ii. Insights gained from ongoing conversations with investment managers iii. Strategy white papers B. Select strategies based on exposure needs and market opportunities 2. Establish target ranges . Investment Committee A. Establish strategy, geography and exposure ranges by asset class within each asset class . Investment Teams B. Identify core and satellite strategies C. Determine initial program / portfolio size and expected growth D. Determine initial allocation ranges for customized and direct investment portfolios and expected evolution over time 3. Develop portfolio . Investment Committee A. Define investment objective, strategy and approach of each portfolio investment policy . Investment Teams B. Document performance objectives and portfolio constraints . Legal i. Objectives: target return, benchmark, volatility, beta, etc. ii. Constraints: target number of investments, maximum/minimum allocations by strategy and investment, risk limits, leverage parameters, liquidity profile, etc. 4. Develop universe of . Investment Committee A. Provide insights on manager universe potential managers / . Investment Teams i. Share Due Diligence Reports on approved hedge funds funds / investments ii. Share insights on actively tracked manager / fund universe for each portfolio B. Assess need for additional due diligence C. Conduct due diligence on client-directed funds and managers D. Arrange joint manager due diligence meetings, if applicable E. Develop a list of potential funds / investments for each portfolio (customized vs. direct) F. Determine appropriate legal structure of underlying investments1
1 GCM Grosvenor does not provide legal or tax advice to any client. Each client should seek advice based on its particular circumstances from its independent legal or tax advisor.
59 IV. Portfolio Implementation
Alternatives Investment Program I II III IV V VI
Task Team involved Sub-task
1. Construct initial . Investment Committee A. Select investments for each portfolio (customized and direct) portfolio and finalize . Investment Teams B. Propose investment allocation weightings based on: allocations i. Top-down inputs ii. Bottom-up inputs C. Perform quantitative and qualitative risk assessment D. Test portfolio against objectives and constraints E. Perform cash flow modeling F. Obtain approval from client, if applicable, for investment allocations
2. Implement portfolio . Investment Teams A. Negotiate terms of underlying investments with managers on behalf of client allocations . Finance B. Seek preferential terms, where possible . Legal C. Implement investments i. Prepare and negotiate trade-related documentation (e.g., subscription documents, letters of direction and customized side letters) ii. Track funding deadlines for investments iii. Implement portfolio hedge trades (currency and exposure), if applicable D. Perform treasury/cash functions i. Execute and verify cash movements ii. Manage short-term cash holdings, credit facilities and banking relationships 3. Initiate reporting . Investment Teams A. Ensure information flow from: . Client Services i. Investment managers . Information Technology ii. Portfolio companies iii. Administrator iv. Strategic partner v. Third-party risk aggregator, if applicable B. Deliver monthly client reporting package C. Train client on content of performance and risk reports
60 V. Portfolio Management and Monitoring
Alternatives Investment Program (Page 1 of 2) I II III IV V VI
Task Team involved Sub-task
1. Investment research . Investment Committee Due diligence is performed on an going basis for both existing and prospective investments. and monitoring . Investment Teams A. Assess opportunity set across all strategies B. Evaluate opportunities with potential investment managers C. Monitor underlying investments (monthly, quarterly, annually, ongoing) i. Analyze monthly performance, exposure and risk reporting ii. Frequent calls/meetings with managers, including on-site visits iii. Conduct peer analyses iv. Maintain "Watch Lists“ for hedge funds and managers D. Facilitate client relationships with managers through joint calls / meetings 2. Portfolio and risk . Investment Teams The following tasks will be performed for individual portfolios and in aggregate at the hedge fund management . Risk Management program level. . Finance A. Perform analysis of investments, incorporating ongoing due diligence results i. Perform quantitative assessment: 1. Stress testing 2. Exposure analysis 3. Historical financial shocks analysis 4. Risk-based allocations ii. Rebalance, as necessary 1. Add/remove hedge funds 2. Modify hedge fund allocations B. Reevaluate allocations / weightings of strategies based on opportunity set and outlook i. Core and satellite strategies ii. Direct and customized portfolio allocations C. Test compliance with investment guidelines
61 V. Portfolio Management and Monitoring
Alternatives Investment Program (Page 2 of 2) I II III IV V VI
Task Team involved Sub-task
3. Back office services . Finance A. Accounting, portfolio valuation and investment performance reporting i. Record valuations for investments and validate holdings ii. Calculate the net asset value of the portfolios iii. Provide aggregated performance reporting and consolidated financial reporting by asset class iv. Assist with audit and tax filings (as appropriate)1 B. Trade management and settlement i. Prepare and negotiate trade-related documentation for investments (e.g., subscription documents, redemption notices, letter of direction and customized side letters) ii. Monitor and analyze fees and liquidity of investments iii. Track subscription / redemption deadlines iv. Monitor settlement of redemption proceeds from hedge funds investments C. Treasury and liquidity management i. Execute and verify cash movements ii. Perform cash flow monitoring and forecasting iii. Manage banking relationships, including credit facilities D. Monitor third-party service providers E. Manage proxy voting and amendment processes with investment managers 4. Reporting and client . Investment Teams A. Provide ongoing reporting and updates to client Board and staff updates . Client Services B. Conduct regular (monthly/quarterly) calls or meetings with client Board and staff . Information Technology C. Provide access to web-based technology i. Due diligence ii. Regular reporting iii. Specialty reports
1 GCM Grosvenor does not provide legal or tax advice to any client. Each client should seek advice based on its particular circumstances from its independent legal or tax advisor.
62 VI. Program Management and Monitoring
Alternatives Investment Program I II III IV V VI
Task Team involved Sub-task
1. Provide program-level . Investment Teams A. Provided aggregated alternatives program reporting in the following areas: reporting . Client Services i. Asset, strategy and geographic allocation . Information Technology ii. Risk and exposure iii. Cash flow modeling iv. Liquidity profile
2. Review performance . Investment Committee A. Assess whether the alternatives program achieved its objectives of alternatives . Investment Teams B. Test compliance with investment guidelines program and prepare C. Reevaluate sizing of allocations annual investment D. Conduct quarterly / annual meetings to review investment performance and discuss program plan outlook E. Prepare strategic annual investment plan i. Market outlook ii. Target allocation ranges iii. Investment opportunities iv. Cash flow planning F. Modify investment policy, if needed 3. Review operational . Finance A. Operations needs . Information Technology i. Review policies and procedures (annually) . Client Services ii. Evaluate third-party service providers iii. Evaluate internal controls and risk mitigation iv. Reevaluate goals to: a) Build/use in-house capabilities b) Leverage strategic partner c) Outsource to third-party service provider(s) B. Technology and reporting i. Reassess need for customized reporting ii. Reevaluate goals to: a) Build/use in-house capabilities b) Leverage strategic partner c) Outsource to third-party service provider(s) C. Human resources i. Reassess client’s current staff level ii. Reassess client needs for training iii. Review roles of program and functional team leads at client and strategic partner
63 Education of Client Board and Staff Alternatives Investment Program (Page 1 of 2)
Task Team involved Sub-task
1. Develop a customized . Client Services A. Determine the participants training program i. Client's Board ii. Client's staff B. Determine the approach i. Educational sessions ii. Internships iii. Joint manager meetings C. Decide on the location (strategic partner’s office and/or client's office)
2. Participate in . All Teams A. Select educational topics educational sessions i. Hedge fund industry ii. Hedge fund strategies iii. Investment due diligence iv. Operational due diligence v. Risk management due diligence vi. Risk management analyses vii. Portfolio construction and management viii.Performance and risk terminology ix. Finance x. Hedge fund regulation B. Select session type i. Lectures ii. Interactive lectures iii. Case studies
64 Education of Client Board and Staff Alternatives Investment Program (Page 2 of 2)
Task Team involved Sub-task
3. Participate in . All teams A. Observe and participate in the day-to-day activities of strategic partner’s investment and operations internships professionals
4. Participate in joint . Investment Teams A. Participate in conference calls with investment managers manager meetings B. Attend meetings with investment managers (limited basis) i. Strategic partner's office ii. Investment manager's office
5. Access research . Investment Teams A. Due Diligence Reports and Investment Memoranda reports and market . Client Services B. "White Papers" on industry topics and investment opportunities commentary . Information Technology C. Reports and analytics on portfolio and program attribution/exposure D. Monthly / quarterly letters that review market and strategy performance and discuss strategy outlook E. Additional reports that detail: i. Accounting and regulatory developments ii. Current macroeconomic environment iii. Investment outlook and opportunities iv. Recent firm initiatives v. Ongoing developments within the alternatives industry
65 Appendix 2 Hedge Funds Investment Outlook Mixed Global Macroeconomic Climate (January 2016) Public Markets Positive (“Bullish”) Factors Negative (“Bearish”) Factors
+ Ongoing U.S. recovery - U.S. Fed hikes interest rates, initiating “gradual” tightening cycle › U.S. labor market is resilient; unemployment rate at 5.0%1 - Global growth concerns leading to higher volatility in China, › U.S. service sector activity is expanding emerging markets and energy/commodity markets › Acceleration in housing starts and pace of house price gains › Wide-ranging slump in commodity prices + Continued expansionary monetary policies › Plunging oil prices harming net oil-exporting economies in emerging markets, such as Venezuela and Brazil › Japan: maintained annual asset-purchase program of ¥80 trillion; BOJ/GPIF/Japan-Post increasing equity allocations - Stress in energy- and commodity-linked high-yield credit contributing to overall weakness in credit markets › China: PBOC lowered benchmark lending and deposit interest rates and required reserve ratios; allowing yuan to weaken - Periodic illiquidity in fixed income, currency and credit markets due along with persisting depreciation pressures after winning entry to reduced role of banks in market-making activities into IMF’s basket of reserve currencies - Geopolitical risks globally; heightened threat of terrorism › Europe: ECB continued its QE program, targeting €60 billion in - Fragile macroeconomic climate monthly asset purchases into 2017; cut deposit rate further into › Japan: low inflation expected to weigh on economic recovery negative territory to help fight low inflation › China: contracting manufacturing sector and exports; + Increasing growth in Europe, especially Portugal and Spain rebalancing of economy away from industry and toward services + Lower oil prices benefiting consumers and net oil-importing › Europe: long-term borrowing costs surge after weaker-than- economies, such as India and China expected stimulus measures; low inflation and high + Record high global M&A volume; surpassed $4.9 trillion in 2015 unemployment persist + World leaders agree on first ever climate agreement to lower › Brazil: deepening recession, accelerating inflation and rising greenhouse gas emissions unemployment amid major political turmoil - Potential for slowing U.S. economic momentum › Slowdown in manufacturing activity › Volatile currency rates and lower oil prices and a strong U.S. dollar may hurt companies’ earnings growth and capex
Sources: Bloomberg, Financial Times, The Wall Street Journal, Dealogic. 1 U.S. seasonally-adjusted unemployment rate as of November 30, 2015.
67 Diverging Global Policies (January 2016) Public Markets Monetary and fiscal policies are diverging, as some governments increase accommodative measures, while others maintain current policies or pull back.
U.S. Europe Japan . The U.S. Federal Reserve (Fed) raised the . The European Central Bank (ECB) . The Bank of Japan (BOJ) maintained federal funds rate at its December meeting extended its quantitative easing program annual asset purchases of ¥80 trillion; by a quarter of a percentage point to by six months until March 2017 or beyond, announced it will start buying between 0.25% and 0.50% targeting €60 billion in monthly asset government bonds with longer . Fed Chair Yellen cited a “considerable purchases of municipal bonds in addition remaining maturity dates improvement” in the U.S. labor market and to standard government debt . The government plans to raise the said policymakers are “reasonably . ECB policymakers lowered the deposit rate minimum wage and prepare an extra confident” inflation will move toward the to a record low -0.3% to help fight low spending package to boost recovery bank’s 2% objective over the medium term inflation . Additional consumption tax increase . The Fed made clear the rate hike was the . Global central banks, including many in delayed until April 2017 beginning of a “gradual” tightening cycle; Europe and Asia, have cut rates over 140 . Government and quasi-sovereign next move will depend on data times in 2015 institutions increasing equity allocations India . The Reserve Bank of India (RBI) has cut its benchmark lending rate four times in 2015; now at 6.75% China . The RBI eased overseas loan rules for local Indian . The People’s Bank of China (PBOC) has companies, allowing them to borrow from long-term cut benchmark interest rates and lenders (e.g., pension funds, insurance companies, lowered banks’ required reserve ratios sovereign wealth funds) six times since November 2014 . Prime Minister Modi outlined infrastructure projects . The IMF announced it will add China’s and tax reforms to stimulate investment and yuan to its basket of global reserve Governments’ economic growth currencies that compose the Special Accommodative Policies Drawing Rights (effective Oct. 2016) Increase . PBOC continues to implement financial Brazil and regulatory reforms (i.e., exchange- Mixed . To fight inflation, the central bank has raised the rate reforms) benchmark Selic rate several times to 14.25% Pull back . The central bank set a timeframe to bring inflation back to its 4.5% target in 2017; the bank raised its 2016 and 2017 inflation forecasts to 6.2% and 4.8%, respectively
Sources: Bloomberg, Financial Times, The Wall Street Journal.
68 Strategic and Tactical Investment Focus (January 2016) Public Markets
Strategic allocation Tactical allocation
Credit . Corporate and structured credit, including both long- Opportunistic . Opportunities related to the deleveraging of the biased and long/short approaches credit European financial sector . Investments that seek to exploit asset class . Emerging market stressed and distressed credit dislocations and arbitrage potential pricing . Energy sector-related opportunities in negotiated anomalies and public credit . Stressed and distressed underlying securities . Aircraft-based leasing strategy . Complex, idiosyncratic and event-driven investments Specialized . Activist equities Equity . Globally-focused, hedged equity investments across equity . European (including southern Europe) equities regions and sectors . Financial equities . Seek low correlation among managers through . Energy equities a mix of generalists and specialists that employ . Healthcare and biotechnology equities various styles and exposure biases . Fundamental research-oriented approach Special . Equity-related opportunities including: Activist situations equity investments in U.S. community / regional Relative value & . Flexible mandates across strategies banks; pre-IPO equities multi-strategy . Niche strategy exposures (e.g., converts, capital . Distressed credit investments in several industries structure arbitrage) such as media/advertising, and insurance . Lower beta and correlation; less market dependence . Portfolio of solar power plant projects . Tactical portfolio taking advantage of political Macro & . Low correlation; seek downside loss mitigation regime changes in Argentina commodities . Highly liquid and flexible; diversified by style, asset class and instrument Event driven . Event driven equity (e.g., spin-offs, restructurings, . Includes emerging market macro strategies M&A, recapitalizations) Relative value . Fixed income, FX, and equity volatility arbitrage
Our strategic allocations are implemented through core allocations Our portfolio construction is enhanced through focused tactical to alternative credit and hedged equity strategies, complemented investments designed to capture niche and/or timely market with allocations to diversifying and lesser correlated strategies. opportunities.
All investments discussed herein are subject to certain risks and a summary of these risks are set forth in the disclosures following this presentation.
69 Investment Focus – Four Primary Themes (January 2016) Public Markets In the current environment, we are finding select attractive opportunities in certain strategies, sectors and regions through our global presence and access to top-tier investment managers. Lesser-correlated Niche equities Opportunistic credit Special situations Relative Value Low net exposure equities Long/short credit Orphaned and complex public equities › Specialty finance Long volatility strategies Opportunities due to higher dispersion Increased dispersion within the asset › Equities lacking traditional buyer among share prices, sectors and regions class › Focus on fixed income, FX, and equity bases markets Appropriate in uncertain › Ability to profit from shorting select Niche equity themes that provide Negative duration investments macroeconomic environment with overvalued sub sectors exposure to under-appreciated lower growth expectations › Long/short agency mortgage Deleveraging of financial sector economic trends strategies Regional/sector-specific › Regional and community banks › Seek to produce positive returns if Regulatory and legal reforms have › Private equity pre-IPO investments U.S. rates rise Opportunities in sectors undergoing resulted in secular shifts and relatively rapid changes (e.g., health deleveraging in U.S. and European Investments that seek to benefit from Macro care, financial services, energy) financial sectors secular changes in the energy sector Opportunities from policy divergence Regional opportunities Emerging markets distressed Activist equity in undervalued blue- by central banks › Select southern European companies chips › Increased volatility and reduced that remain out-of-favor with Growing supply of stressed/distressed › Select mid- and large-caps with strong correlations in global rate and investors corporate credit opportunities cash flow and defensive business currency markets › China, Japan and other Asian regions › Companies in out-of-favor countries models with positive yield / positive cash flow Commodities Event driven and catalyst driven situations Solar power plant investments Opportunities arising from commodity- Energy sector dislocations Tactical trades that seek to take Merger arbitrage with spreads at advantage of political regime changes specific supply factors attractive levels in select deals Opportunities due to the decline in the in Argentina › Tactical, short-biased trading › Heightened environment for price of oil/ other commodities and the opportunities in power and corporate activity Investments in international agriculture, driven by weather development of renewables arbitration and litigation finance › Select long and short opportunities in the energy sector amid the dislocation
These opinions represent our good-faith expectations concerning future actions, events or conditions, and should not be viewed as indications of whether particular actions, events or conditions will occur. No assurance can be given that any investment will achieve its objective or avoid significant losses.
70 Appendix 3 Additional Information Performance Relative to Benchmark Index As of December 31, 2015
Trailing: 3-year 4-year 5-year Annualized rate of return comparison HFRI Fund of Funds Composite Index USD1 3.92% 4.14% 2.09% Grosvenor Institutional Partners, L.P.2 5.94% 6.61% 4.47%
Alpha vs. S&P 500 Index comparison HFRI Fund of Funds Composite Index USD1 0.11% 0.32% -1.12% Grosvenor Institutional Partners, L.P.2 2.23% 2.86% 1.12%
Maximum drawdown comparison HFRI Fund of Funds Composite Index USD1 -4.60% -4.60% -7.67% Grosvenor Institutional Partners, L.P.2 -2.98% -2.98% -6.75%
. A return highlighted in blue indicates that GIP outperformed the respective index over that period.
. The performance of the HFRI FoF Composite Index equally weights the returns of over 800 fund of funds. Data provided through 12/31/2015.
1 For the 1-year performance period ending December 31, 2015, the HFRI FoF Composite Index annualized rate of return was -0.34%, alpha vs. S&P 500 was -0.77%, and maximum drawdown was -4.60%. For the 2-year performance period ending December 31, 2015, the HFRI FoF Composite Index annualized rate of return was 1.49%, alpha vs. S&P 500 was -0.20%, and maximum drawdown was -4.60%. 2 For the 1-year performance period ending December 31, 2015, the Grosvenor Institutional Partners, L.P. annualized rate of return was -0.09%, alpha vs. S&P 500 was -0.48%, and maximum drawdown was -2.98%. For the 2-year performance period ending December 31, 2015, the Grosvenor Institutional Partners, L.P. annualized rate of return was 1.59%, alpha vs. S&P 500 was 0.10%, and maximum drawdown was -2.98%. Data sources: Bloomberg; Hedge Fund Research, Inc. (HFR). Past performance is not necessarily indicative of future results, and the performance of any index or fund could be volatile. No assurance can be given that any investment product will achieve its objectives or avoid significant losses.
72 The Value of Strategy and Manager Selection Grosvenor Institutional Partners (“GIP”) (as of December 31, 2015) Based on the outlined methodology, we find that GIP, our flagship multi-strategy portfolio, exhibits both strategy and manager selection outperformance over the majority of measured time periods.
Trailing period outperformance (annualized) Since 1 Year 3 Year 5 Year 7 Year 01/2003 Benefits from strategy selection ❶ GIP strategy -0.09 5.94% 4.47% 6.14% 4.98% asset weighted ❷ GIP strategy – -1.69% 4.46% 3.37% 5.08% 4.14% equal weighted Outperformed Outperformance +1.60% +1.48% +1.10% +1.06% +0.84% in all cases
Benefits from manager selection ❸ GIP strategy -1.69% 4.46% 3.37% 5.08% 4.14% Equal weighted ❹ HFR strategy – -3.48% 0.51% -0.83% 1.18% 1.09% Equal weighted Outperformed Outperformance +1.79% +3.95% +4.20% +3.90% +3.04% in all cases
Past performance is not necessarily indicative of future results and the returns of a portfolio may be volatile. Additional information on our methodology and its limitations is available upon request. Utilizing a different trailing period may produce different results.
73 Understanding Hedge Fund Program Costs Cost Analysis of a Customized FoF Portfolio, Consultant, and Hybrid Approach The Notes and Disclosures immediately below this analysis and the Notes and Disclosures following this presentation are an integral part of this analysis and must be read in order for you to properly evaluate this analysis, and understand its significant limitations. . The following table details the potential economic impact for a $300 million hedge fund program and illustrates the cost advantages of splitting a hedge fund allocation between a customized portfolio and a direct portfolio.1 Customized FoF Portfolio Direct Program with Assistance of Consultant Hybrid Approach with FoF Customized Direct AUM $300,000,000 $300,000,000 $150,000,000 $150,000,000 Consulting Fee 0.00% 0.25% 0.00% 0.00% Management Fee 0.75% 0.00% 0.83% 0.00% Internal Staff Requirements 0.00% 0.20% 0.00% 0.00% Third-Party Administration and Custody2 0.04% 0.07% 0.04% 0.04% Risk Management (Risk Aggregation and Reporting) 0.00% 0.0567% 0.00% 0.00% Legal Document and Side Letter Review 0.00% 0.0667% 0.00% 0.00% Organization Costs and Third-Party Expenses 0.045% 0.00% 0.045% 0.045% Management Fee Savings (assumed 8% gross ROR)3 -0.42% 0.00% -0.42% -0.42% Performance Fee Savings (assumed 8% gross ROR)4 -0.21% 0.00% -0.21% -0.21% Sub-total -- -- 0.285% -0.545% Estimated Economic Cost After Fee Savings 0.21% 0.64% -0.26% . Assuming a portfolio with assets of $300 million, our analysis indicates the direct approach would be approximately 43 bps per annum more expensive than a customized approach and about 90 bps per annum more expensive than a hybrid approach. . Note: Costs for a “Customized FoF Account” are based upon GCM Grosvenor’s standard fee schedule and actual costs incurred in managing customized portfolios for its clients. Costs for a “Direct Program with the Assistance of Consultant” are estimated based upon GCM Grosvenor’s industry knowledge and experience. 1 A number of assumptions were made in conducting this comparison and analysis. Additional information about these assumptions is available upon request. “Direct Program with Assistance of Consultant” refers to the costs of investing directly in hedge funds with the assistance of a consultant. “Customized FoF Portfolio” refers to the costs of investing in a portfolio specifically created by a FoF for an individual client. “Hybrid Approach with FoF” refers to the total costs of investing in a portfolio specifically created by a FoF for an individual client and investing directly in hedge funds with the assistance of the FoF’s advisory services. 2 Administration costs of approximately 4 basis points could be avoided at the client’s discretion if they invest through a FoF customized account and rely on a FoF’s operational capabilities. 3 The Weighted Average Management Fee savings for all GCM Grosvenor-approved managers as of 1/1/15 is approximately 42bps. 4 The Weighted Average Performance Fee savings for all GCM Grosvenor-approved managers as of 1/1/15 is approximately 21bps at 8% assumed ROR, 18bps at 10% ROR, 23bps at assumed 12% ROR, and 0bps at assumed 0% or negative ROR. This information is provided to present the potentially lower effective fees that apply to GCM Grosvenor Public Markets-advised assets in certain underlying funds. The analysis is presented, and assumes certain gross return rates for the underlying funds, for illustrative purposes only; it is not intended to imply that any GCM Grosvenor Public Markets-advised assets will achieve a specific return or “fee savings” over any period. A number of assumptions were made in preparing this analysis, some of which are discussed in the slide following this presentation entitled “Fee Savings Notes and Disclosures”. Additional detail concerning the methodology used and assumptions made to calculate potential fee savings is available upon request.
74 Strategic Partnerships: Legal Structuring Sample Legal Structures
. We will work collaboratively with clients to manage both GCM Grosvenor-managed and direct investments. . We have experience working with clients that have utilized a variety of structural options and we are flexible with regards to client preference.
Recommended approach
GCM Grosvenor Client
GIP Direct SPV
A B C D E F G H GCM Grosvenor-managed Direct
For illustrative purposes only.
75 Appendix 4 Biographies Biographies
Lisa A. Kastigar, Director, Business Development Ms. Kastigar shares responsibility for business development, client service and consultant relations. Prior to joining GCM Grosvenor, she was the Director of Research at Marco Consulting Group, where she guided asset allocation studies, research and investment manager due diligence. A subset of her responsibilities was leading fund of hedge funds research, which included client education, due diligence, on-going monitoring, and reporting. She also worked at the Federal Reserve Bank of Chicago and at the Financial Services Authority in London as a financial markets regulatory policy economist. She began her career in the financial industry working on the trading floors of the derivatives exchanges in Chicago, specifically the Chicago Mercantile Exchange and the Chicago Board of Trade. Ms. Kastigar received her Bachelor of Science in Business Economics from Marquette University and her Master of Business Administration from the University of Chicago Booth School of Business.
Bradley H. Meyers, CPA, Public Markets Investment Committee Member, Head of Portfolio Management, Managing Director Mr. Meyers is a member of the Public Markets Investment Committee, Head of Public Markets Portfolio Management and serves on the Global Investment Council. Mr. Meyers is also a member of the Public Markets Seeding and Special Opportunities Investment Committees. Mr. Meyers is responsible for overseeing the portfolio management process and approves portfolio allocations prior to implementation. Before his role as Head of Portfolio Management, Mr. Meyers was a Vice President on the Research Team with a focus on credit and arbitrage strategies. Prior to joining GCM Grosvenor, from 1999 to 2001, he worked as a Financial Analyst for Merrill Lynch in the Mergers & Acquisitions Group. From 1997 to 1999, he worked as an Associate for PricewaterhouseCoopers, LLP. Mr. Meyers received his Bachelor of Science in Accountancy from the University of Illinois at Urbana-Champaign in 1997 and his Master of Business Administration from the University of Chicago Booth School of Business, with a concentration in Finance, in 2003. Mr. Meyers is a Certified Public Accountant.
Scott W. Pearson, Managing Director, Business Development Mr. Pearson shares responsibility for business development and client service. Mr. Pearson also manages the strategy for the firm’s alternative investment solutions business. Prior to joining GCM Grosvenor, Mr. Pearson spent five years in the multi-strategy hedge fund industry and was a Managing Director at Deephaven Capital Management L.L.C, a multi-billion dollar manager of credit, event, equity, and volatility strategies. Preceding his involvement in hedge funds, Mr. Pearson was a Vice President at Goldman Sachs where he was active in sales and trading of domestic and international shares, derivatives, and convertibles. Before entering the private sector, Mr. Pearson served for six years as an officer in the United States Marine Corps. Mr. Pearson graduated with his Bachelor of Arts from The Citadel in 1991. He has also completed the Advanced Risk Management Program at The Wharton School, University of Pennsylvania in 2008.
77 Biographies
Andrew T. Preda, Senior Vice President, Portfolio Management Mr. Preda serves as a Portfolio Manager on portfolios of various strategy mandates, on multi-strategy portfolios as well as other specialized strategies and custom mandates. Mr. Preda leads activities related to the construction, implementation and monitoring of portfolios. Prior to joining GCM Grosvenor, from 2004 to 2007, Mr. Preda was a Vice President and Underwriting Team Leader at Madison Capital Funding, L.L.C., a Chicago-based provider of leveraged capital products for private equity sponsors. Mr. Preda was responsible for structuring, underwriting, negotiating, closing, and managing both Madison-led transactions and participation transactions. From 1998 to 2004, Mr. Preda was in the Mergers & Acquisitions Group of Banc One Capital Markets, where he focused on providing investment banking advisory services to the bank's middle market and large corporate clients. From 1993 to 1998, he was a Relationship Manager with the Market Commercial Banking Subsidiary at American National Bank and Trust Company of Chicago. Mr. Preda received his Bachelor of Arts in Political Science from the University of Michigan in 1993 and his Master of Business Administration from the University of Chicago Booth School of Business in 2003.
David S. Richter, CPA, Public Markets Investment Committee Chair, Head of Research, Managing Director Mr. Richter is Chair of the Public Markets Investment Committee, Director of Public Markets Investments, Head of Public Markets Research, and serves on the Global Investment Council. Mr. Richter is also a member of the Special Opportunities Investment Committee. Mr. Richter approves portfolio allocations and shares responsibility for the evaluation, selection, and monitoring of various investment strategies and investment managers. Prior to joining GCM Grosvenor, from 1994 through 2002, he was the Founder and Managing Partner of Chicago-based Waveland Capital Management, L.P., a U.S. long/short equity hedge fund. From 1988 to 1994, Mr. Richter was a Vice President of JMB Realty Corporation in the Corporate Acquisitions Group. Prior to 1988, Mr. Richter was a Manager of KPMG Peat Marwick. He graduated summa cum laude with his Bachelor of Science in Accountancy from the University of Illinois at Urbana- Champaign in 1983. Mr. Richter is a Certified Public Accountant and received the national AICPA Elijah Watt Sells Award from the American Institute of CPA’s for his scores on the Uniform CPA Examination.
78 Fee Savings – Public Markets Notes and Disclosures (October 1, 2015)
Grosvenor has presented you with an analysis of potential fee savings of investing in a Grosvenor Fund. Please consider the following when reviewing this analysis: 1. Grosvenor-advised assets may obtain a potentially lower effective fee on assets managed by a particular Investment Manager by investing in a Portfolio Fund managed by such Investment Manager that has been specifically created for investment by Grosvenor-advised assets (a “Grosvenor Separate Account”). As further described in #2 below, Grosvenor has compared the fees borne in a Grosvenor Separate Account to the fees borne in another commingled fund managed by the same Investment Manager pursuant to the same or similar mandate (“Manager’s Commingled Fund”). In cases where the Investment Manager does not manage a commingled fund pursuant to the same or similar mandate, another commingled fund managed by the Investment Manager may be used for comparison purposes. The Grosvenor Separate Account may differ from the relevant Manager’s Commingled Fund in material respects, including, but not limited to: risk/return profile, investor liquidity and investment mandate and guidelines. The Grosvenor Separate Account may incur operating expenses (excluding the impact of management and performance fees) that exceed those paid by investors in the Manager’s Commingled Fund. 2. For Portfolio Funds that are Grosvenor Separate Accounts, Grosvenor has compared the fee rates borne by Grosvenor Separate Accounts to the maximum fee that an investor would bear in the Manager’s Commingled Fund. For Portfolio Funds other than Grosvenor Separate Accounts, Grosvenor has compared the fee rates borne by Grosvenor-advised assets to the maximum fee that an investor would bear in the same Portfolio Fund (or share class) in which such Grosvenor-advised assets invest. 3. The analysis may include investments in vehicles designed to participate in a specific investment theme (which may represent a single investment or group of related investments) (a “Direct Opportunity”). In such cases, the analysis compares the fee terms of a Direct Opportunity to the maximum fee terms of a commingled fund managed by the same Investment Manager that manages such Direct Opportunity that may or may not participate in such Direct Opportunity. The Direct Opportunity materially differs from a commingled fund in numerous material respects, including investment mandate and guidelines, risk/return profile, concentration, type of investment services provided, and liquidity. 4. Grosvenor has conducted this analysis using fee rates based on the amount of Grosvenor-advised assets allocated as of the date above. Because of timing differences between investments/redemptions in Portfolio Funds, and the date on which the fee rate is reset to reflect such investments/redemptions, this analysis may include rates not currently being received by Grosvenor-advised assets. 5. In order to demonstrate potential fee savings relating to incentive compensation, this analysis assumes, for illustrative purposes only, certain gross return rates for the Portfolio Funds; it is not intended to imply that any Portfolio Fund or portfolio of Portfolio Funds will achieve a specific return over any performance period; there can be no assurance that a Portfolio Fund or portfolio of Portfolio Funds will achieve its investment objective or avoid significant losses. In presenting potential fee savings for a portfolio of Portfolio Funds, this analysis assumes that each Portfolio Fund in such portfolio experienced the same gross return, which is unlikely to occur. In assessing the impact of certain hurdle rates and/or preferred returns, this analysis assumes the following rates of return (“Assumed Benchmark Returns”): › 1-month LIBOR (annual return) = 3.10% › 3-month LIBOR (annual return) = 3.13% › S&P 500 Index (annual return) = 8.87% The annual returns are based on the actual compound annual return of each figure from January 1, 1993 through October 1, 2015. The actual returns for LIBOR and/or S&P 500 Index likely will differ from the Assumed Benchmark Returns and such difference will affect this analysis (perhaps materially). This analysis does not account for any correlation between the Assumed Benchmark Returns and those achieved by the Portfolio Funds; it is likely that Portfolio Funds will have some correlation with the LIBOR and/or S&P 500 Index and such correlation could have a material impact on the fees paid to the Investment Managers and thus on the fee savings realized. 6. The more successful Investment Managers may not agree to potentially favorable fee structures. As of October 1, 2015, approximately 73% of Portfolio Funds in which Grosvenor Funds invest (representing approximately 71% of the aggregate AUM of such Grosvenor Funds), excluding Portfolio Funds that have been terminated by Grosvenor, provide potential fee savings. No assurance can be given that Grosvenor-advised assets will invest in any Portfolio Fund that provides potential fee savings. 7. Additional detail concerning the methodology used and assumptions made to calculate potential fee savings in the foregoing analysis is available upon request. Data is as of the date above.
79 Grosvenor Institutional Partners, L.P. Notes and Disclosures
In reviewing this presentation, you should consider the following: The Fund commenced operations on January 1, 2000. Unless otherwise indicated in this presentation, returns are calculated net of all fees, expenses and profit participations borne by all investors in the Fund. Certain investors in the Fund are not subject to advisory fees, and the inclusion of such investors’ accounts in the returns presented will result in such returns being higher than if such accounts were not included. Furthermore, since the fee rates applicable to investors vary, inclusion of investor accounts that are subject to lower effective fees in the returns presented will result in such returns being higher than the returns that would be achieved by particular fee paying investors subject to higher effective fees over the same time period. Additional details relating to the methodology used in calculating returns and returns calculated net of specific fee rates are available upon request. To the extent that this presentation sets forth returns achieved by a particular investor in the Fund, such returns are calculated net of the actual fees and expenses borne by such investor. To the extent returns are presented net of a particular investment level, such returns are pro forma returns based on the gross returns of the Fund, adjusted to reflect the deduction of: (i) actual expenses of the Fund; and (ii) the fee rate, calculated based on the fee scale below, that would apply to the assumed investment size set forth in the presentation. Actual fee rates and actual fees will vary depending on the size of the account. However, the fee rate applied to calculate the pro forma returns presented does not account for any change in investment size, and the resulting change in fee rates and fees, that would occur due to the performance of the Fund during the period presented. Grosvenor will, upon request, provide you with pro forma returns reflecting different fee rates. Returns prior to July 2011 are based on the following sliding fee scale: first $10 million USD: 1.40%; next $15 million USD: 1.20%; next $25 million USD: 1.00%; next $50 million USD: 0.80%; over $100 million USD: 0.60%. Fee is subject to a 0.75% minimum. Returns from August 2011 through March 2013 are based on the following sliding fee scale: first $25 million USD: 1.25%; next $25 million USD: 1.00%; next $50 million USD: 0.80%; over $100 million USD: 0.60%. Fee is subject to a 0.75% minimum. Returns from April 2013 through the present are based on the following sliding fee scale: first $25 million USD: 1.15%; next $25 million USD: 1.00%; next $50 million USD: 0.80%; over $100 million USD: 0.60%. Fee is subject to a 0.75% minimum. Figures for 2000-2014 are derived from books and records of the Fund that have been audited by the Fund’s independent public accountants. Figures for 2015 are estimated based on unaudited books and records of the Fund.
80 Performance Relative to Peers Notes and Disclosures (Grosvenor Institutional Partners)
Grosvenor Capital Management, L.P. (“GCMLP”) has used the following methodology to construct a universe of comparable products (the “Peer Group”) presented in this peer performance report: 1. On an annual basis, GCMLP provides a list of the “top 25 fund of hedge fund firms” as published by Institutional Investor’s Alpha (the “Peer Firms”) to Mercer. The current list was prepared in March 2015 for a ranking as of December 31, 2014. 2. GCMLP then instructs Mercer to prepare the Peer Group, which consists of all funds categorized by Mercer as “multi-strategy” managed by all Peer Firms that report to the Mercer Global Investment Manager Database. 22 out of 25 Peer Firms currently report data relating to one or more multi-strategy funds to Mercer. 3. In response the instructions provided by GCMLP in #2 above, Mercer has prepared a universe of multi-strategy funds managed by the Peer Firms (together, the “Peer Funds”). Any Peer Fund that has not reported for the performance period presented in this peer performance report is excluded. This exclusion has resulted in a final Peer Group for this peer performance report of 29 Peer Funds. The universe is not an official or “standard” Mercer Universe, but a customized universe created by GCMLP. GCMLP has compared a specific fund or composite managed by Grosvenor (the “GCMLP Fund”) to the Peer Group in order to effectively provide a “ranking” of the GCMLP Fund compared to the Peer Group. All products in the Peer Group are reported net of fees and expenses but Mercer does not require a consistent methodology be used to calculate “net” returns. As such, the returns of each Peer Fund may be computed using different methodologies (e.g., net of all fees paid by all investors, using an assumed “pro forma” fee, or the returns of an “initial” investor in such fund). The methodology GCMLP has used to calculate its net returns are included in the fund-specific notes and disclosures that accompany this piece. GCMLP has selected the periods shown. Grosvenor Institutional Partners, L.P. places in the second quartile for 1-year and 2-year, and top quartile for 3-year, 4-year and 5-year performance periods ending September 30, 2015. Grosvenor Institutional Partners, Ltd. places in the second quartile for 1-year and 2-year, and top quartile for 3-year, 4-year and 5-year performance periods ending September 30, 2015. Utilizing a different peer group or different period may produce different results. Additional information about the methodology used and performance information for different time periods is available upon request. Past performance is not necessarily indicative of future results and the returns of any GCMLP Fund could be volatile.
81 Grosvenor Capital Management, L.P. Notes and Disclosures
This presentation is being provided by Grosvenor Capital Management, L.P. (“GCM Grosvenor Public Markets”) and/or GCM Customized Fund Investment Group, L.P. (“GCM Grosvenor Private Markets,” and together with GCM Grosvenor Public Markets and their affiliates, “GCM Grosvenor”). GCM Grosvenor Public Markets and its predecessors have been managing hedge fund investment portfolios on behalf of clients since 1971. GCM Grosvenor Private Markets, whose predecessors have been managing private equity, real estate, and infrastructure investment portfolios since 1999, 2002, and 2003, respectively, is the successor entity to the Customized Fund Investment Group that was previously a business unit within the asset management division of Credit Suisse Group AG (“Credit Suisse”). On January 2, 2014, GCM Grosvenor Private Markets acquired certain clients and assets, and hired certain employees previously associated with the Customized Fund Investment Group from affiliates of Credit Suisse. Data and other information related to GCM Grosvenor Private Markets for periods prior to January 2, 2014 relate to predecessors of GCM Grosvenor Private Markets. While GCM Grosvenor Public Markets and GCM Grosvenor Private Markets share certain operational infrastructure, each has its own investment team and investment process. GCM Grosvenor has implemented information barriers between the investment teams of GCM Grosvenor Public Markets and GCM Grosvenor Private Markets that prevent the sharing of certain investment information between the two business units. Additionally, neither GCM Grosvenor Public Markets nor GCM Grosvenor Private Markets is under any obligation to share with the other business unit (or the clients of the other business unit) any investment opportunities it identifies. The information contained in this presentation (“GCM Information”) relates to GCM Grosvenor Public Markets to one or more investment vehicles/accounts managed or advised by GCM Grosvenor Public Markets (the “GCM Public Market Funds”) and/or to one or more investment vehicles/accounts (“Underlying Funds”) managed or advised by third-party investment management firms (“Investment Managers”). GCM Information is general in nature and does not take into account any investor’s particular circumstances. GCM Information is neither an offer to sell, nor a solicitation of an offer to buy, an interest in any GCM Public Markets Fund. Any offer to sell or solicitation of an offer to buy an interest in a GCM Public Markets Fund must be accompanied by such GCM Public Markets Fund’s current confidential offering or risk disclosure document (“Fund Document”). All GCM Information is subject in its entirety to information in the applicable Fund Document. Please read the applicable Fund Document carefully before investing. A summary of certain risks and special considerations relating to an investment in a GCM Public Markets Fund is set forth below. A more detailed summary of these risks is included in Part 2A of Grosvenor Capital Management, L.P.’s SEC Form ADV (available at: http://www.adviserinfo.sec.gov). Except as specifically agreed, neither GCM Grosvenor nor any of its affiliates act as agent/broker for prospective investors. An investor must rely on its own examination in identifying and assessing the merits and risks of investing in a GCM Public Markets Fund or Underlying Fund (together, “Investment Products”). Each GCM Public Markets Fund invests, directly or indirectly, substantially all of its assets in Underlying Funds. Regulatory Status – neither the GCM Public Markets Funds nor interests in the GCM Public Markets Funds have been registered under any federal or state securities laws, including the Investment Company Act of 1940, and interests in GCM Public Markets Funds are sold in reliance on exemptions from the registration requirements of such laws. Investors will not receive the protections of such laws. Market Risks- generally, the risks that economic and market conditions and factors may materially adversely affect the value of a GCM Public Markets Fund’s investments. Strategy Risks- generally, the risks associated with the possible failure of the asset allocation methodology, investment strategies, or techniques used by GCM Grosvenor Public Markets or an Investment Manager. GCM Public Markets Funds and Underlying Funds may use leverage, and while the use of leverage increases the opportunities for gain, it also increases the risks of volatility and loss. The fees and expenses charged by GCM Public Markets Funds and Underlying Funds may offset the trading profits of such funds. Manager Risks- generally, the risks associated with investments with Investment Managers. Structural and Operational Risks- generally, the risks arising from the organizational structure and operative terms of the relevant GCM Public Markets Fund and the Underlying Funds. Valuation Risks- generally, the risks relating to GCM Grosvenor Public Markets’ reliance on Investment Managers to value the financial instruments in the Underlying Funds they manage. Institutional Risks- generally, the risks that a GCM Public Markets Fund could incur losses due to failures of counterparties and other financial institutions. Tax Risks- generally, the tax risks and special tax considerations arising from the operation of and investment in pooled investment vehicles. GCM Public Markets Funds will not be able to prepare their returns in time for investors to file their returns without requesting an extension of time to file. An Underlying Fund may, in an effort to minimize taxation, take certain tax positions and/or use certain tax structures that may in the future be disallowed or reversed, which could result in material tax expenses to such Underlying Fund. In addition, GCM Grosvenor Public Markets, its related persons, and the Investment Managers are subject to certain actual and potential conflicts of interest in making investment decisions for the GCM Public Markets Funds and Underlying Funds, as the case may be. An investment in an Underlying Fund may be subject to similar and/or substantial additional risks and an investor should carefully review an Underlying Fund’s risk disclosure document prior to investing. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND THE PERFORMANCE OF EACH INVESTMENT PRODUCT COULD BE VOLATILE. AN INVESTMENT IN AN INVESTMENT PRODUCT IS SPECULATIVE AND INVOLVES SUBSTANTIAL RISK (INCLUDING THE POSSIBLE LOSS OF THE ENTIRE INVESTMENT). NO ASSURANCE CAN BE GIVEN THAT ANY INVESTMENT PRODUCT WILL ACHIEVE ITS OBJECTIVES OR AVOID SIGNIFICANT LOSSES.
82 Grosvenor Capital Management, L.P. Notes and Disclosures (continued)
By your acceptance of GCM Information, you understand, acknowledge, and agree that GCM Information is confidential and proprietary, and you may not copy, transmit or distribute GCM Information, or any data or other information contained therein, or authorize such actions by others, without GCM Grosvenor’s express prior written consent, except that you may share GCM Information with your professional advisors. If you are a professional financial adviser, you may share GCM Information with those of your clients that you reasonably determine to be eligible to invest in the relevant Investment Product (GCM Grosvenor assumes no responsibility with respect to GCM Information shared that is presented in a format different from this presentation). Any violation of the above may constitute a breach of contract and applicable copyright laws. In addition, you (i) acknowledge that you may receive material nonpublic information relating to particular securities or other financial instruments and/or the issuers thereof; (ii) acknowledge that you are aware that applicable securities laws prohibit any person who has received material, nonpublic information regarding particular securities and/or an the issuer thereof from (a) purchasing or selling such securities or other securities of such issuer or (b) communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities or other securities of such issuer; and (iii) agree to comply in all material respects with such securities laws. You also agree that GCM Information may have specific restrictions attached to it (e.g. standstill, non-circumvent or non- solicitation restrictions) and agrees to abide by any such restrictions of which it is informed. GCM Grosvenor and its affiliates have not independently verified third-party information included in GCM Information and makes no representation or warranty as to its accuracy or completeness. The information and opinions expressed are as of the date set forth therein. GCM Information may not include the most recent month of performance data of Investment Products; such performance, if omitted, is available upon request. Interpretation of the performance statistics (including statistical methods), if used, is subject to certain inherent limitations. GCM Grosvenor Public Markets does not believe that an appropriate absolute return benchmark currently exists and provides index data for illustrative purposes only. Except as expressly otherwise provided, the figures for each index are presented in U.S. dollars. The figures for any index include the reinvestment of dividends or interest income and may include “estimated” figures in circumstances where “final” figures are not yet available. Indices shown are unmanaged and are not subject to fees and expenses typically associated with investment vehicles/accounts. Certain indices may not be “investable.” GCM Grosvenor Public Markets considers numerous factors in evaluating and selecting Investment Managers, and GCM Grosvenor Public Markets may use some or all of the processes described herein when conducting due diligence on an Underlying Fund or Investment Manager. Investors in an Investment Product ordinarily have very limited rights to redeem or transfer interests in such Investment Product. Interests in an Investment Product will not be listed on an exchange and it is not expected that there will be a secondary market for interests. In addition, the liquidity of a GCM Public Markets Fund depends on its ability to withdraw/redeem capital from the Underlying Funds in which it invests, which is often limited due to withdrawal/redemption restrictions. Assets under management include all subscriptions to, and are reduced by all redemptions from, a GCM Public Markets Fund effected in conjunction with the close of business as of the date indicated. GCM Grosvenor’s employee count includes employees of its affiliates. GCM Grosvenor Public Markets may classify Underlying Funds as pursuing particular “strategies” or “sub-strategies” (collectively, “strategies”) using its reasonable discretion; GCM Grosvenor Public Markets may classify an Underlying Fund in a certain strategy even though it may not invest all of its assets in such strategy. If returns of a particular strategy or Underlying Fund are presented, such returns are presented net of any fees and expenses charged by the relevant Underlying Fund(s), but do not reflect the fees and expenses charged by the relevant GCM Public Markets Fund to its investors/participants. GCM Information may contain exposure information that GCM Grosvenor Public Markets has estimated on a “look through” basis based upon: (i) the most recent, but not necessarily current, exposure information provided by Investment Managers, or (ii) a GCM Grosvenor Public Markets estimate, which is inherently imprecise. GCM Grosvenor employs certain conventions and methodologies in providing GCM Information that may differ from those used by other investment managers. GCM Information does not make any recommendations regarding specific securities, investment strategies, industries or sectors. Risk management, diversification and due diligence processes seek to mitigate, but cannot eliminate risk, nor do they imply low risk. To the extent GCM Information contains “forward-looking” statements, such statements represent GCM Grosvenor Public Market’s good-faith expectations concerning future actions, events or conditions, and can never be viewed as indications of whether particular actions, events or conditions will occur. Additional information is available upon request. This presentation may include information included in certain reports that are designed for the sole purpose of assisting GCM Grosvenor personnel in (i) monitoring the performance, risk characteristics, and other matters relating to the GCM Public Market Funds and (ii) evaluating, selecting and monitoring Investment Managers and the Underlying Funds (“Portfolio Management Reports”). Portfolio Management Reports are designed for GCM Grosvenor's internal use as analytical tools and are not intended to be promotional in nature. Portfolio Management Reports are not necessarily prepared in accordance with regulatory requirements or standards applicable to communications with investors or prospective investors in GCM Public Market Funds because, in many cases, compliance with such requirements or standards would compromise the usefulness of such reports as analytical tools. In certain cases, GCM Grosvenor provides Portfolio Management Reports to parties outside the GCM Grosvenor organization who wish to gain additional insight into GCM Grosvenor’s investment process by examining the types of analytical tools GCM Grosvenor utilizes in implementing that process. Recipients of Portfolio Management Reports (or of information included therein) should understand that the sole purpose of providing these reports to them is to enable them to gain a better understanding of GCM Grosvenor’s investment process. Grosvenor® and Grosvenor Capital Management® are proprietary trademarks of GCM Grosvenor and its affiliated entities. ©2016 Grosvenor Capital Management, L.P. All rights reserved. Neither GCM Grosvenor nor any of its affiliates acts as agent/broker for any Underlying Fund.
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