Probitas Partners 2020 Institutional Investors Private Equity Survey December 2019 Table of Contents

Topic Page

. Survey Highlights 2

. Background and Appetite 3

. Sectors of Interest 10

. Geographies of Interest 19

. Middle-Market Buyouts 28

. Venture Capital 31

. Niche Sectors 33

. Structural Issues 40

. Investor Fears 45

. Summary 48

. Investors are still heavily focused on U.S. and European Middle-Market Buyouts, and U.S. Growth Capital. . Though many respondents felt that we are near or at the top of the market cycle, interest in Distressed Debt and Special Situations funds declined this year as the investment pace for these funds has slowed. . Though Asian-focused fundraising remains slow, respondents still expressed strong interest in China, even amid the U.S./China trade war. . Focus on investing in the U.K. was weak among Europeans, though interest in the U.K. was buoyed by Asian and North American investors. . Interest in Social Impact funds was weak, and Asian and North American respondents were much less focused on ESG than were European Investors. . Venture Capital interest increased slightly in this year’s survey – though the survey was completed before SoftBank was forced to rescue WeWork. . Few investors are targeting emerging markets, and those investors are heavily focused on emerging Asia. . The greatest fear of 64% of respondents was that we are at or near to the peak of the market cycle.

. After reaching an all-time high in 2017, global private equity fundraising fell in 2018 due to weakness in North America and Asia. . Year-to-date fundraising in 2019 has rebounded strongly due to commitments going to mega funds headquartered in the US – though a few of those funds invest globally. . Fundraising for Asian-focused vehicles has remained weak.

Chart I Commitments to Private Equity Partnerships

300

250

200

150 USD in billions

100

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

North America Europe Asia Rest of World

. 57% of respondents came from Funds-of-Funds, Insurance Companies or Endowments & Foundations, with another 16% coming from Public or Corporate Pension Plans. . Family office participation at 10% was significant.

Chart II Respondents by Institution I represent a:

Fund-of-Funds Manager 27%

Insurance Company

1% Endowment/Foundation

3% 17% Consultant/Advisor 5% Public Pension

Family Office 7%

Corporate Pension/ Private Pension 13% 8% Wealth Manager/Outsourced CIO

Bank 9% 10% Sovereign Wealth Fund

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. 52% of respondents were from North America while 27% were from Europe and 21% from Asia or Australia. . The bulk of respondents came from developed markets which are the major source of capital for private equity.

Chart III Respondents by Firm Headquarters My firm is headquartered in:

49% United States

Canada

Western Europe ex-UK

3% United Kingdom

Asia ex-Japan 4%

Japan 8% 23%

Australia 9% 4%

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. 53% of respondents were roughly at or over their target but are still looking to maintain or increase their allocations. . Only 2% of respondents were over their target and looking to decrease exposure. . 28% of respondents were under target and actively committing to reach it.

Chart IV Current and Target Private Equity Allocations As far as our current private equity allocation, we are:

Roughly at our target and are looking to 36 maintain that level of exposure 33

Under our target allocation and actively committing 28 to private equity to achieve that target 26

A fund-of-funds or consultant to which 15 the question does not apply 28

Roughly at our target but considering 15 increasing the target 9

Over our target and are looking to 2 reduce exposure to meet that target 1

2 Over our target but seeking to increase the target 1

0 Looking to reduce our target allocation or exit the asset class 0

2 Other 2

0 5 10 15 20 25 30 35 40

Percentage of Respondents (%)

2020 2019

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. Overwhelmingly, in 2020 respondents will simply target the best funds or managers currently in market – no other reason came close, which speaks to the dominating importance of producing superior returns in a crowded market. . European respondents felt even more strongly about this, with 58% simply targeting what they perceived to be the best funds. Chart V Drivers of Sector Investment Our sector investment focus in 2020 will be driven by (choose no more than two):

Our institution simply pursues the best funds 47 and managers available in the market A focus on those private equity sectors we believe will outperform 12 others in this vintage year Maintaining established relationships with fund 10 managers returning to market this year Our institution's need to diversify 10 its private equity portfolio Targeting funds that will provide 9 access to co-investments The strategies that our clients 8 have directed us to pursue Our need to deploy significant amounts 3 of capital allocated to private equity Our need to decrease exposure 0 to private equity

Other 1

0 10 20 30 40 50

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. Investors of various size responded to the survey – though this year’s respondents skewed larger compared to last year’s respondents. . Notably, 23% of respondents planned to invest $1 billion or more in the coming year.

Chart VI Private Equity Allocations For 2020, we or the clients we advise are looking to commit across all areas of private equity (in USD):

25 23 23 23 22 20 20 19

15 15 15 12 12

10 7 5 Percentage ofRespondents (%) 5 3 1

0 <$50 MM $50 MM– $151 MM– $251 MM– $501 MM– >$1 B Other $150 MM $250 MM $500 MM $1 B

2020 2019

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results; other responses were basically for respondents who had no target

. Most respondents were focused on evaluating re-ups with their current managers with a limited look at new relationships, which is similar to last year. . Asian respondents, many of whom have smaller legacy portfolios, were more focused on pursuing new relationships, with 58% of them stating that that was the case.

Chart VII Manager Relationships During 2020, we would expect our primary focus to be:

Evaluating re-ups with current general partner relationships 54 with a limited look at new relationships 61

35 Actively pursuing relationships with new managers 27

5 Evaluating re-ups with current general partner relationships 6 Evaluating re-ups with current general partner 3 relationships, looking to decrease the number of relationships significantly 2 Pursuing separate accounts with 1 a smaller number of managers 1

1 Our 2020 commitments have already been completely allocated 0

1 Other 3

0 10 20 30 40 50 60 70

Percentage of Respondents (%)

2020 2019

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. U.S. Middle-Market Buyouts, U.S. Small-Market Buyouts, and U.S. Growth Capital Funds were the three sectors that garnered interest from more than 50% of respondents – though European Middle-Market Buyouts were close behind at 47%. . Interest in in Special Situations and Distressed Debt declined noticeably this year.

Chart VIII Private Equity Sectors of Interest During 2020, my firm or my clients, plan to focus most of our attention on investing in the following sectors (choose no more than seven):

U.S. Middle-Market Buyouts ($500 million to $2.5 billion) 74 U.S. Small-Market Buyouts (<$500 million) 53 Growth Capital Funds — U.S. 51 European Middle-Market Buyouts — Country or Region-Focused 47 U.S. Venture Capital 39 European Buyouts — Pan-European 38 U.S. Large Buyouts ($2.5 billion to $5 billion) 30 Asian Country-Focused Funds 29 Growth Capital Funds — Europe 29 Pan-Asian Funds 28 Special Situations Funds 24 Direct Lending/Credit Strategies 20 Mega Buyout Funds (>$5 billion or equivalent) 17 Infrastructure Funds 16 Asian Venture Capital 16 Secondary Funds 14 Distressed Debt Funds 12 European/Israeli Venture Capital 11 Restructuring Funds 8 Mezzanine Funds 8 Energy Funds 6 Social Impact Funds 6 Emerging Markets (ex-Asia) 6 0 10 20 30 40 50 60 70 80 Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. Mega-Buyout Funds were not a strong focus of interest broadly among limited partner investment staffs – but they are a core holding of many large investors who need to deploy capital in large amounts. . U.S. Venture Capital scored strongly this year as it did last year, and interest in Asian Venture continued to grow, overtaking European/Israeli Venture Capital. . For the first time, we asked about interest in Social Impact funds; they scored at the bottom of our main list, targeted by 6% of respondents. . Funds focused on Energy fell to a five-year low, attracting only 6% interest, and that was mainly from North American investors. . The table below lists those funds that attracted less than 5% of respondent support. . Funds Investing in Other General Partners, another new addition this year, were only of key interest to 1% of respondents.

Sectors Attracting Less Than 5% of Responses Fund Type Percent Cleantech/Green-Focused Funds 3 Other Niche Sectors 2 Fund-of-Funds 2 Mining Funds 1 Funds Investing in Other General Partners 1 Agriculture Funds 1 Timber Funds 0

. European respondents were more interested in European-focused funds – though U.S. Middle-Market Buyout, U.S. Small-Market Buyout and U.S. Growth Capital funds all scored strongly. . Special Situations funds also scored strongly among Europeans.

Chart IX Private Equity Sectors of Interest; European Respondents During 2020, my firm or my clients, plan to focus most of their attention on investing in the following sectors (choose no more than seven):

European Middle-Market Buyouts — Country or Region-Focused 79 U.S. Middle-Market Buyouts ($500 million to $2.5 billion) 71 European Buyouts — Pan-European 58 U.S. Small-Market Buyouts (<$500 million) 58 Growth Capital Funds — U.S. 54 Growth Capital Funds — Europe 54 Special Situations Funds 29 Asian Country-Focused Funds 29 U.S. Large Buyouts ($2.5 billion to $5 billion) 25 Pan-Asian Funds 25 U.S. Venture Capital 25 European/Israeli Venture Capital 21 Restructuring Funds 21 Direct Lending/Credit Strategies 17 Infrastructure Funds 13 Mega Buyout Funds (>$5 billion or equivalent) 13 Secondary Funds 8 Mezzanine Funds 8 Emerging Markets (ex-Asia) 8

0 10 20 30 40 50 60 70 80 90 Percentage of Respondents (%) Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. As detailed in the table below, there were more fund sectors that fell below the 5% interest hurdle in Europe, with significantly more funds sectors registering no interest. . Among European respondents, neither of the new categories of Social Impact Funds or Funds Investing in Other General Partners scored above 5%.

Sectors Attracting Less Than 5% of Responses Fund Type Percent Asian Venture Capital 4 Cleantech/Green-Focused Funds 4 Distressed Debt Funds 4 Social Impact Funds 4 Agriculture Funds 0 Energy Funds 0 Fund-of-Funds 0 Funds Investing in Other General Partners 0 Mining Funds 0 Shariah-Compliant Funds 0 Timber Funds 0 Other Niche Sectors 0

. The leading sector of interest among Asian respondents was U.S. Middle-Market Buyout funds, with Asian Country-Focused funds, European Middle-Market Funds and Pan-Asian funds all tied for 2nd place with 53% of respondents. . Infrastructure funds scored strongly among Asian investors as more of them include infrastructure in private equity allocations. Chart X Private Equity Sectors of Interest; Asian Respondents During 2020, my firm or my clients plan to focus most of their attention on investing in the following sectors (choose no more than seven):

U.S. Middle-Market Buyouts ($500 million to $2.5 billion) 63 Asian Country-Focused Funds 53 European Middle-Market Buyouts — Country or Region-Focused 53 Pan-Asian Funds 53 European Buyouts — Pan-European 42 U.S. Large Buyouts ($2.5 billion to $5 billion) 37 U.S. Venture Capital 26 Infrastructure Funds 26 U.S. Small-Market Buyouts (<$500 million) 26 Mega Buyout Funds (>$5 billion or equivalent) 26 Growth Capital Funds — U.S. 21 Direct Lending/Credit Strategies 16 Asian Venture Capital 16 Mezzanine Funds 16 Growth Capital Funds — Europe 11 Secondary Funds 11 Special Situations Funds 5 Fund-of-Funds 5 Distressed Debt Funds 5 Social Impact Funds 5 European/Israeli Venture Capital 5 Emerging Markets (ex-Asia) 5 Agriculture Funds 5 Other Niche Sectors 11 0 10 20 30 40 50 60 70

Percentage of Respondents (%) Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results Confidential and Trade Secret © 2019 Probitas Partners 14 Private Equity Sectors of Interest: Asian Respondents

. Asian Venture Capital funds scored relatively strongly among Asian respondents while Special Situations funds were not highly ranked. . Social Impact funds just made the 5% cut-off. . Among Asian respondents, several niche sectors scored no interest at all, including Funds Investing in Other General Partners and Energy Funds.

Sectors Attracting Less Than 5% of Responses Fund Type Percent

Cleantech/Green-Focused Funds 0 Energy Funds 0 Funds Investing In Other General Partners 0 Mining Funds 0 Restructuring Funds 0 Shariah-Compliant Funds 0 Timber Funds 0

. Funds focused on North America took the top four spots for North American respondents. . European Country-focused and Pan-European funds were also of strong interest to North Americans.

Chart XI Private Equity Sectors of Interest; North American Respondents During 2020, my firm or my clients plan to focus most of their attention on investing in the following sectors (choose no more than seven):

U.S. Middle-Market Buyouts ($500 million to $2.5 billion) 81 U.S. Small-Market Buyouts (<$500 million) 62 Growth Capital Funds — U.S. 62 U.S. Venture Capital 51 Special Situations Funds 30 U.S. Large Buyouts ($2.5 billion to $5 billion) 30 European Middle-Market Buyouts — Country or Region-Focused 28 European Buyouts — Pan-European 26 Direct Lending/Credit Strategies 23 Growth Capital Funds — Europe 23 Asian Venture Capital 21 Distressed Debt Funds 19 Pan-Asian Funds 19 Asian Country-Focused Funds 19 Secondary Funds 19 Mega Buyout Funds (>$5 billion or equivalent) 15 Infrastructure Funds 13 Energy Funds 11 European/Israeli Venture Capital 9 Social Impact Funds 6 0 10 20 30 40 50 60 70 80 90 Percentage of Respondents (%) Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. Asian Venture Capital funds were much more highly ranked by North Americans than by Europeans. . There were several fund types that did not reach the 5% hurdle, and interest in Emerging Markets (ex-Asia) was weakest among North American respondents. . As with European and Asian respondents, North Americans did not express strong interest in Funds Investing in Other General Partners.

Sectors Attracting Less Than 5% of Responses Fund Type Percent

Cleantech/Green-Focused Funds 4 Emerging Markets (ex-Asia) 4 Mezzanine Funds 4 Restructuring Funds 4 Fund-of-Funds 2 Funds Investing in Other General Partners 2 Mining Funds 2 Agriculture Funds 0 Shariah-Compliant Funds 0 Timber Funds 0 Other Niche Sectors 0

. There were more categories to choose from in the 2020 survey, but the results show a heavy concentration of interest in U.S. focused funds. . Notably, the market is even more focused on U.S. Middle-Market Buyouts now, with 74% of respondents targeting them compared to 49% in 2007. . As far as distressed investing, interest in Distressed Debt fell from 30% in 2007 to 12% this year, with Special Situations becoming the leading distressed sector, attracting 24% of 2020 respondents. . Though only the 8th ranked strategy in 2020, 29% of respondents this year were targeting Asian Country-focused funds, and 28% targeted Pan-Asian funds.

Table I Institutional Investors Focus of Attention Among Private Equity Sectors Top Five Responses 2007 2020 Sector % Targeting Sector % Targeting U.S. Middle-Market Buyouts ($500 U.S. Middle Market Buyouts 49% 74% million to $2.5 billion) U.S. Small-Market Buyouts (<$500 European Middle Market Buyouts 42% 53% million) U.S. Venture Capital 34% Growth Capital Funds — U.S. 51%

European Middle-Market Buyouts — Distressed Debt 30% 47% Country or Region Focused

Asian Funds 25% U.S. Venture Capital 39%

. As to be expected, respondents were heavily focused on the three key markets of North America, Western Europe and Asia. . Over the last four years interest in Latin America and Sub-Saharan Africa declined notably, though it has never been truly strong.

Chart XII Private Equity Geographical Focus During 2019, my firm anticipates that the three primary areas of geographical focus for our programs will be:

100 95

80 80

40 Percentage ofRespondents (%) 20

6 4 2 1 0 1 0 North America Western Asia Central and Latin Emerging Sub-Saharan MENA Other Europe Eastern Europe America Markets Africa Globally

Source: Probitas Partners' Private Equity Institutional Investor Trends for 2020 Survey

. The Nordic Region, Germany and the U.K. led investor interest in specific private equity markets in Europe. . Interest in Southern and Central Europe remains weak, and interest in Eastern Europe has never been strong.

Chart XIII Most Attractive European Markets For European country/regionally-focused funds, we find the most attractive markets to be (choose no more than three):

58 Nordic Region 52 36 Germany 44 36 United Kingdom 41 23 Netherlands 16 17 France 16 8 Spain 9 4 Italy 6 Central Europe (Poland, Czech 1 Republic, Hungary, etc.) 0 Eastern Europe (Russia, 1 Ukraine, Georgia, etc.) 0

Only invest via 16 Pan-European funds 19 1 Only invest via fund-of-funds 1 12 Do not invest in Europe 13

0 10 20 30 40 50 60

Percentage of Respondents (%)

2020 2019

. With the Brexit situation, the U.K. has become less popular among other Europeans, where it ranks 4th among European respondent interest behind the Netherlands. . The position of the U.K. in the overall survey was bolstered by Asian investors, 56% of whom are targeting the U.K. in 2020. . We also received interesting comments from a couple of investors on their views of the European market: . "The current dislocation of [the] U.K. is a great opportunity to increase our exposure." - U.S. Fund of Funds . "We see Europe as a low growth environment, and so focus on managers who can find specific good opportunities." - Canadian Public Pension

. China is the most targeted private equity market by investors, both among overall and Asian respondents alike. . Interest among Asian respondents in Japan and Australia is likely overstated to a degree due to the relatively large number of respondents from those countries.

Chart XIV Most Attractive Asian Markets For Asian focused funds, we find the most attractive markets to be (choose no more than three):

54 China 63 30 Japan 58 26 Southeast Asia 21 17 India 11 13 South Korea 5 8 Australia 21 4 Vietnam 11 4 Indonesia 5 0 Taiwan 0

13 Only invest via Pan-Asian funds 5 2 Only invest via global funds 5 1 Only invest via fund-of-funds 0 20 Do not invest in Asia 5 0 10 20 30 40 50 60 70

Percentage of Respondents (%)

Overall Respondents Asian Respondents

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. Table II at the bottom of the page highlights differences in investor interest between 2007 and 2020. . Only recently has Southeast Asia overtaken interest in India, not only because the focus on Southeast Asia has increased over the last three or four years, but also because the numbers of respondents targeting India has fallen, this year catching the attention of only 17% of investors. . Even with the ongoing trade-war between China and the U.S., 52% of North American respondents targeted China. . That overall sentiment was not unanimous among respondents as this comment makes clear: "Will avoid China at all costs" - U.S. Wealth Manager

Table II Which Geographies in Asia Are of the Most Interest?

Top Four Responses 2007 2020

Country/Region % Targeting Country/Region % Targeting

China 28% China 54%

India 28% Japan 30%

Japan 25% Southeast Asia 26%

We do not invest in Asia 25% We do not invest in Asia 20%

Source: Probitas Partners' Private Equity Investor Trends for 2007 Survey and 2020 Survey

. Emerging Asia dominated investor interest, taking the six top spots in the rankings, though interest in India-focused and Pan-Asian funds declined from last year. . The percentage of respondents saying that they did not invest in emerging markets declined slightly to 31%.

Chart XV Most Attractive Emerging Markets Which emerging markets does your firm find most attractive (choose no more than four):

China 51 46 India 26 33 Southeast Asia 22 18 South Korea 16 12 Pan-Asia 15 20 Vietnam 12 7 Brazil 9 9 Indonesia 9 8 Central Europe (Poland, Czech Republic, Hungary, etc.) 5 4 Mexico 4 2 Pan-Latin America 2 6 Colombia 2 1

Only invest via emerging market funds-of-funds 1 1 Only invest via global emerging market funds 0 4 Other 4 0 Do not invest in emerging markets 31 36 0 5 10 15 20 25 30 35 40 45 50 55 Percentage of Respondents (%) 2020 2019 Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. No country or region in Africa garnered the interest of more than 1% of respondents, while additionally the number of investors targeting Sub-Saharan Africa fell from 4% in 2019 to 1% in 2020. . As detailed below, there were many more countries or regions that were not targeted by any respondents going into 2020.

Sectors Attracting 1% or Fewer of Total Responses in 2020 Fund Type 2019 2020 South Africa 1% 0% Turkey 1% 0% Peru 1% 0% Nigeria 1% 0% Middle East/North Africa 1% 0%

Eastern Europe (Russia, Ukraine, Georgia, etc.) 2% 0% Russia 2% 0% Chile 1% 1% Sub-Saharan Africa 4% 1%

. As it has been in the past, the anticipation of strong long-term economic growth in a few emerging markets is the biggest driver of interest, while a desire to diversify their portfolio to reduce correlation also has an impact.

Chart XVI Interest in Emerging Market Private Equity Our interest in emerging market private equity is driven by (check all that apply):

Strong long-term economic growth 41 in a number of these countries

Desire to diversify our private equity portfolio by geography to 26 achieve benefits of lack of corellation

We are less interested in emarging markets in general than in 18 exposure to a few specific countries with large opportunities

Lower forcast returns in the established markets of private equity 5 make this sector relatively more attractive

As an institutional investor from an emerging market, we are 2 looking to support our home markets

Other 8

We do not invest in emerging markets 33

0 10 20 30 40 50

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. 50% of respondents felt the risk/return tradeoff in developed markets was more attractive while 41% were uncomfortable with political, currency or economic risks in emerging markets.

Chart XVII Disinterest in Emerging Market Private Equity For those not interested in emerging markets, we are not interested because (check all that apply):

We find the risk/return profile in developed 50 markets more attractive

We are uncomfortable with the degree of political, 41 currency, or economic risk in emerging markets

We are not staffed properly to perform due diligence on these markets that basically offer emerging 36 manager risk as well as emerging markets risks These markets are not developed enough and it is difficult to find experience 21 managers with strong track records As an organization, we are satisfied to get emerging markets exposure through 14 publicly-traded securities Our private equity program is new and we are focused on building exposure in 7 our core, home markets before diversifying

Other 7

0 10 20 30 40 50 60

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. There is a heavy focus on strategies looking to generate returns through operational improvements, including buy-and-build and industry-focused funds, which continues the trend over the last decade. . Unlike Europe, regionally-focused funds are not heavily favored as a key differentiator.

Chart XVIII Most Attractive U.S. Middle-Market Strategies Which of these sectors/strategies in the U.S. middle market does your firm find most appealing (check all that apply):

Funds focused on operational improvements heavily staffed 70 with professionals with operating backgrounds

Funds focused on buy-and-build strategies 62 Funds focused on single industries 57 (i.e., energy, retail, healthcare, media) Funds focused on growth companies, often 35 investing without majority control

Restructuring/turnaround funds 24

Regionally-focused funds 19

Strategy is irrelevant, a demonstrable superior 21 track record is my primary concern

We do not invest in the U.S. middle market 7

We only invest via funds-of-funds 1

Other 1

0 10 20 30 40 50 60 70 80

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. As it was last year, Healthcare and Technology focused buyout and growth capital funds were the strongest area of focus. . Energy-focused funds, which five years ago were targeted by 30% of respondents, have continued to decline, with only 8% of investors targeting them this year.

Chart XIX Interest in Industry-Focused Funds As far as funds focused on single industries, we are most interested in (choose no more than three):

Healthcare 65

Technology 60

Industrials 19

Financial services 17

Retail/Consumer 14

Media/Telecommunications 13

Energy 8

Agribusiness 6

Industry is irrelevant, we simply focus on the best managers 25

We do not invest in industry-focused funds 6

Other 0

0 10 20 30 40 50 60 70

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. There are very different sector strategies within energy investing as detailed below. . Recently, interest in renewable energy has climbed notably while other areas fell. . Investors outside North America are much less interested in energy, with 57% of Asian respondents and 67% of European investors saying they don’t invest in energy.

Chart XX Interest in Sectors within Energy In the energy sector, we are most interested in (choose no more than three):

Midstream oil & gas funds 23

Renewable energy funds 21

Energy/power infrastructure funds 16

Upstream oil & gas funds 15

Oilfield services 7

Diversified funds with broad mandates 6

Distressed energy funds 6

Energy debt funds 5

We do not invest in funds focused on energy 46

Other 6

0 10 20 30 40 50

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. Early-stage venture was the strongest focus of respondents and this year there was notably less focus on niche industry sectors. . 33% of last year’s respondents stated that they did not invest in venture capital, a number that fell to 25% this year.

Chart XXI Most Attractive Venture Capital Sectors In venture capital, we focus on funds active in the following sectors or stages (choose all that apply):

Technology only funds 24 Life Science only funds 24 Funds investing in multiple sectors 22 Fintech only funds 8 Artificial Intelligence only funds 5 Digital Media/Internet only funds 2 Cleantech only funds 2 Venture debt funds 2

Multi-stage 35 Late stage 36 Mid-stage 37 Early stage 59 Seed stage 21 MicroVC funds 12

We are focused solely on historic returns 2 We only invest via fund-of-funds 3 We do not invest in venture capital 25

0 10 20 30 40 50 60 70

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. The bulk of the survey responses were gathered after WeWork pulled its IPO, but before it was restructured by Softbank. . It is not possible to know whether WeWork’s restructuring might have had an impact on the survey results. . There were distinct differences in responses by investors in different geographic regions; for example, 39% of Europeans said they did not invest in Venture Capital. . Endowments and Foundations have long been supporters of Venture Capital, which continues to hold true as only 8% of them stated that they did not invest in the sector. . One comment left by a respondent gives more insight as to why several investors are not interested in the sector: . "We don't invest because it's difficult to access the top funds that you would need to be in, and we can't invest large enough amounts of capital to make a difference in our overall portfolio" - Canadian Public Pension

. Special Situations and Restructuring/Turnaround funds led respondent interest this year as they did last year. . Many LPs are concerned about the slow investment pace of distressed debt funds that they have backed in the recent past and are concerned about the ability of distressed debt for control funds to gain control in what is a very competitive market. Chart XXII Distressed Investments Within the distressed private equity sector, we are most interested in (choose no more than two):

Special situations funds (usually combining debt and equity, often invests in stressed 42 companies)

Restructuring/turnaround funds 41 (focused on equity, not debt)

Distressed debt for control 25 funds (loan-to-own)

Opportunistic credit (mispriced debt, 16 small loan portfolios, etc.)

Distressed debt: active/ non-control funds 11 (often hold through restructuring)

Distressed debt trading funds 2

Distressed debt hedge funds 1

We do not invest in this sector 25

0 5 10 15 20 25 30 35 40 45

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. Since the Great Financial Crisis (“GFC”), investors have become more active in secondaries directly, either in selling positions from their portfolios or buying partnership positions. . As a result, interest in investing in specialist secondary funds has declined, though interest is still significant. Chart XXIII Secondary Market Investments In the secondary market, my firm (choose all that apply):

Has sold or is considering selling funds in our 44 portfolio for portfolio management purposes

Actively purchases direct positions 35 in funds in the secondary market

Actively invests in secondary funds 33

Actively invests in general partner led secondaries 30

Actively purchases direct positions in 15 companies in the secondary market

Provides advice to clients on secondaries 10

Is not active in secondaries in any manner 27

0 10 20 30 40 50

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. Over the last three- or four-years activity in general partner (“GP”) led secondaries has soared, with a focus on GPs generating liquidity for current investors, most often as part the process of raising a new fund. . There are concerns with certain investors, however, that these processes are burdened with potential conflicts of interest between the GP and selling investors. . Purchase prices in the secondary market are now quite high, with its impact explained by a comment from one of the respondents: . "Still see it as a seller's market - as a buyer or investor, the returns would only work because of the leverage used, in many cases" - Canadian Public Pension

. Investor interest in co-investments has increased steadily since the GFC, especially among large investors who can commit greater resources; 65% of larger investors have active internal or outsourced co-investment programs. . Very few respondents are active in direct investing.

Chart XXIV Directs and Co-Investments Regarding directs and co-investments, my firm (choose all that apply):

52 Has an active internal co-investment program 55

Only co-invests with fund managers with whom 24 it already has a relationship 13

18 Only opportunistically pursues co-investments 26

11 Invests directly in companies 13

Requires or prefers a co-investment as a 10 means of diligencing a new fund manager 10

Provides advice to clients on co-investments or 9 direct investments 13

6 Has an outsourced co-investment program 10

Does not invest in co-investments 20 nor directly invests in companies 10

0 10 20 30 40 50 60

Percentage of Respondents (%)

All Respondents Large Investors

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results Note: "Large Investors" denotes those survey resondents who plan to commit $500 million or more to private equity in 2019

. Many investors are interested in first-time funds but are most focused on spin-out groups with attributable track records. . Few investors look to sponsor first-time funds.

Chart XXV First-Time Funds As far as first-time funds are concerned, my firm (check all that apply):

Focuses on "spin outs" where the team has significant experience working 82 together

Focuses on groups with attributable track records 74

Is willing to look at a team of experienced investors coming together for 47 the first time

Focuses on firms that have invested together as a fund-less sponsor or through separate accounts 42 before launching a third-party fund

Is attracted to teams pursuing niche strategies that present compelling 41 investment opportunities

Pursues co-investment opportunities as a fund launches as a preferred 20 method of performing due diligence

Looks to act as a sponsor for first-time funds, providing early capital 9 commitments or working capital

Does not invest in first-time funds in any form 7

0 10 20 30 40 50 60 70 80 90

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. There is significant interest in Opportunistic Credit, Mezzanine and Diversified Debt Funds both overall and within private equity allocations. . Investments in private credit are made from various portfolio allocations, with specific private debt allocations being the most important for pure-play debt managers.

Chart XXVI Credit In the credit sector, my firm:

100

34 80 39 46 48

60 9 87 10 10 5 11 11 3 7 4 40 4 2 7 19 23 18

20 30 2 Percentage ofRespondents (%) 19 19 4 20 2 4 0 3 1 Mezzanine Senior Debt Diversified Debt Funds BDCs/Publicly Listed Opportunistic Credit

Invests as part of our Invests as part of Invests as part of our fixed income allocation private equity allocation our private debt allocation Invests from some other allocation Is considering investing in this sector Does not invest in the sector at all

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results Note: Some sectors total greater than 100% of respondents as a few investors had multiple responses

. Many of these sectors attract investments from general real asset allocations or more targeted allocations such as infrastructure or timber, but there are respondents who invest in certain sectors through private equity allocations. . Infrastructure is the area of most interest while timber is the least.

Chart XXVII Real Assets In the real asset sector, my firm:

100

80 50 60 71 70 71 69 60

40 3

6 23 34 11 5 12 20 17 17 12 Percentage ofRespondents (%) 15 16 11 10 7 10 0 4 Oil & Gas Infrastructure Metals & Mining Agricultural Farmland Timber Ships or Aircraft Invests as part of Invests but not as part of Is considering investing Does not invest private equity allocation private equity allocation in this sector in the sector at all Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results Note: Some sectors total greater than 100% of respondents as a few investors had multiple responses

Chart XXVIII Issues Regarding Fund Structure The issues we focus on most when investing or advising a client as far as terms or structure of a fund are (choose no more than four):

Level of general partner financial 56 commitment to the fund Distribution of carried interest between 51 the senior investment professionals Overall level of management fees 49

Cap on fund size 48

Carry distribution waterfalls 34 Structure or inclusion of a 33 key man provision Level of carried interest 32

Issues of transparency and disclosure 31 Sharing of carry and/or investment decision making 29 with a third-party sponsor Ownership allocations of the management company by 24 senior staff Transaction fee splits 21

Outside ownership of the management company 19 Structure or inclusion of a 19 no-fault divorce clause Inclusion of a strong Environmental, 16 Social and Governance policy The structure of a long-term subscription credit line, if 12 included Strict adherence to the ILPA Principles 4

0 10 20 30 40 50 60

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results Confidential and Trade Secret © 2019 Probitas Partners 40 Key Fund Structure Issues: Differences by Headquarters of Respondents

Chart XXIX Issues Regarding Fund Structure: European Respondents vs. Asian Respondents The issues we focus on most when investing or advising a client as far as terms or structure of a fund are (choose no more than four):

56 Cap on fund size 47 Level of general partner financial 55 commitment to the fund 53 50 Overall level of management fees 53 46 Structure or inclusion of a key man clause 29 Distribution of carried interest between 46 the senior investment professionals 41 45 Carry distribution waterfalls 18 Inclusion of a strong Environmental, 36 Social and Governance (ESG) policy 0 Sharing of carry, profits and/or investment decision 36 making with a third party sponsor 35 Ownership allocations of the management company 32 by senior staff 29 27 Issues of transparency and disclosure 41 27 Level of carried interest 41 Structure or inclusion of a 18 no-fault divorce clause 0 18 Transaction fee splits 6 14 Outside ownership of the management company 12 The structure of a long-term subscription credit line, 9 if included 6 0 Strict adherence to the ILPA Principles 0

0 10 20 30 40 50 60

Percentage of Respondents (%)

European Respondents Asian Respondents

. Among respondents overall, alignment of interest was the major concern as evidenced by the number of respondents focused on the level of manager’s financial commitment to the fund. . However, there were distinct differences on investor’s focus depending on where they were from; Chart XXIX in the previous slide provides details on the differences between European and Asian investors. . Interestingly, one area of particular interest is the inclusion of a strong ESG policy: . It is ranked 14th among pre-identified issues among overall respondents (Chart XXVII) with only 16% of respondents focused on it among their targeted concerns. . However, there were large differences in responses on ESG importance geographically by firm headquarters: . European respondents: 36% . North American respondents: 12% . Asian respondents: 0%

. The increased aggressive use of subscription credit lines by certain fund managers has caused greater attention on the use of fund-level leverage. . Many investors understand the usefulness of subscription credit lines in managing drawdowns but prefer their use to be moderate.

Chart XXX Fund-level Leverage As far as fund-level leverage is concerned (please answer all as appropriate):

As far as subscription credit lines, we prefer their use to be very 44 moderate

For private equity funds, we do not invest in vehicles that are 34 levered, except for the use of subscription credit lines

The use of subscription credit lines by a fund manager is irrelevant 13 to our due diligence process

For private debt debt funds, we do not invest in vehicles that are 5 levered

For private debt funds, we prefer vehicles that are levered 4

0 10 20 30 40 50

Percentage of Respondents (%)

Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. As is evident from the numbers, many investors use multiple databases or tools. . Cambridge and PREQIN are the market leaders across most geographies, though Pitchbook has a number of adherents in North America; PME usage is increasing across all geographies. . APER, Bison and PERACS were also listed but did not generate more than 5% usage for any geography. Chart XXXI Benchmarking As far as fund performance benchmarking, we use the following databases or tools in different fund geographies (please choose all that apply): 80

60 58

48 46 43 44 44

40 33 32 31 31

22 20 20 19 20 17 16 14 15 Percentage ofRespondents (%) 11 7 7 6 5 5 5 5 4 2 2 2 2 4 0 Cambridge PREQIN Pitchbook Public Market Burgiss Hamilton Lane State Street AVCJ Associates Equivalent analysis North America Europe Asia Other Emerging Markets Source: Probitas Partners' Private Equity Investor Trends: 2019 Survey Results Confidential and Trade Secret © 2019 Probitas Partners 44 Key Investor Fears

Chart XXXII Greatest Fears Regarding the Private Equity Market Our three greatest fears regarding the private equity market at the moment are:

The current private equity market feels like we are at the top of the cycle 64

Too much money is pursuing too few attractive opportunities across all areas of private equity 54 Purchase price multiples in middle-market buyouts are too highand threaten future returns 48 Purchase price mulitples in large-market buyouts and megabuyouts are too high and threaten future returns 33 Large firms in the market are becoming generalized asset managers and are moving away from key investment strengths 20 The trend towards long-lived subscription lines is increasing risk and distorting reported IRR 17 The trend of external parties investing in private equity management companies is increasing the potential for conflicts of interests 15 Too much money pursuing too few experienced private equity professionals in the hot emerging markets 14 Management fee levels on large funds are destroying alignment of interest between fund managers and investors 12

Another technology bubble is in the process of forming 12

Generational transitions at a number of long-lived firms are generating concern about those firm's future success 12 Increased competition among limited partners is limiting my access to co-investments 10 Access to top quartile venture capital managers is impossible without previous relationships, and new managers are unattractive 10 Fees being paid to general partners over a fund's life are not being properly documented or disclosed 9 We do not have adequate staff in place to deal with issues in my current portfolio 7 The number of funds in our portfolio is too large for our firm to effectively monitor 6

0 10 20 30 40 50 60 70

Percentage of Respondents (%) Source: Probitas Partners' Private Equity Investor Trends: 2020 Survey Results

. There is a definite shift in concerns from our pre-GFC survey to this year, with fear we are at the top of a cycle as the leading concern. . Though investors are heavily focused on middle-market buyouts in the U.S. and Europe, they are also very concerned that purchase price multiples are too high.

Table III: What Keeps You Up At Night? Top Five Responses: 2007 2020 Issue % Issue %

Management fee levels and transaction fees on large The current private equity market feels like we are at the funds are destroying alignment of interest between fund 51% top of the cycle 64% managers and investors

The amount of leverage in the buyout market is Too much money is pursuing too few attractive unsustainable, and over the next 2 years credit problems 48% opportunities across all areas of private equity 54% will hurt performance of recent vintage funds

Purchase price multiples in middle-market buyouts are There is too much money available in the large buyout 39% too high and threaten future returns 48% market and that will dramatically impact future returns

Private equity is most effective as a niche market and Purchase price multiples in large-market and mega- too much money is being raised in all sectors of private 35% buyouts are too high and threaten future returns 33% equity

Large firms in the market are becoming generalized Recapitalizations are boosting IRRs temporarily, but 30% asset managers and are moving away from key 20% adding to fund risk by re-levering companies investment strengths

Source: Probitas Partners' Private Equity Investor Trends for 2007 Survey and 2020 Survey

. Chart XXXII on Slide 45 only lists those responses that collected 5% interest from investors . There were differences in investor concerns by geography and fund type: . North American’s were most worried that we were at the top of the market cycle, with 77% mentioning it. . European and Asian respondents were more focused on the fact that they felt that there was too much money in the market, with 73% of Europeans and 63% of Asians feeling that way. . The biggest fear of insurance companies was that purchase price multiples for middle market buyouts were too high, with 65% of them targeting that fear. . 83% of endowments and foundations felt that we were at the top of the market cycle.

. Though the largest fear among investors is that we are at or near the top of the market cycle, they are still very interested in private equity, with no one looking to decrease their exposure. That is largely because investors feel that potential risks and returns are still attractive compared to other asset classes. . Though many investors are wary of where we are in the market cycle, there is no consensus on what may trigger a market downturn, though political risks as well as pure economic risks are of concern. . In the past, distressed debt and special situations funds were looked at as a hedge for market down cycles, but many investors are more wary due to the extreme actions taken by central banks during the last market downturn. Evidenced by the current lack of interest for these strategies, investors are much more concerned that future government actions will mitigate against strong returns in the coming cycle, especially at the large end of the market. . Though there is a strong interest in Middle-Market Buyouts globally, investor’s third largest fear currently is that Middle-Market purchase price multiples are too high. . Investors’ are also concerned that reported purchase price multiples are in many cases being aggressively adjusted in order to seem more conservative and feel multiples overall are increasingly understated. . In discussions with smaller limited partners, there is a growing feeling that their interests are no longer aligned with large limited partners on a number of issues as their concerns and investment strategies continue to diverge.

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