Board of Administration of the Water and Power Employees’ Retirement Plan Real Estate Consultant RFP presentation
Wednesday, 24 February 2021
10.8 Agenda
1 PRESENTATION GOALS AND INTRODUCTIONS
2 OBSERVATIONS ON THE REAL ESTATE ENVIRONMENT
3 ALBOURNE OVERVIEW
4 CONCLUSION
10.9 2 Presentation Goals
I. Introduce Albourne’s WPERP client team
II. Discuss your opportunities in real estate today
III. Provide an overview of Albourne
IV. Outline Albourne’s capabilities to fulfill WPERP’s requirements and demonstrate our suitability as a partner for you
10.10 3 Albourne Proposed Client Team
Tom Cawkwell Global head of Private Markets Joined 2007
Heather Christopher Lead Consultant, Head of Albourne Real Estate Joined 2012
Christian Reel Back-up Consultant Joined 2013
James Kakoza Secondary Back-up Consultant Joined 2020
10.11 4 Albourne Proposed Client Team
Katarina Wadja Client Account Manager Joined 2018
Jonathan Lach Client Relationship Manager Joined 2010
10.12 5 Agenda
1 PRESENTATION GOALS AND INTRODUCTIONS
2 OBSERVATIONS ON THE REAL ESTATE ENVIRONMENT
3 ALBOURNE OVERVIEW
4 CONCLUSION
10.13 6 Current Themes in Real Estate
• Global pursuit of yield and returns Investors seeking higher returns are increasing their pursuit of real estate. The denominator effect is also driving real estate investment despite high levels of dry powder. • Inflation Concerns Inflation concerns are also likely to spur investment in real estate and other hard assets. • Government intervention continues Occurring from federal to municipal levels, including quantitative easing, TALF, suspensions of tenant evictions and mortgage foreclosures, mortgage forbearance, rent abatements, and tax collection delays. • Property types hit by COVID-19 Hotels, retail, parking, senior housing, and workforce housing are expected to face additional COVID-19 erosion though not as severe as that of 2020. Office is also anticipated to face some trouble as vacancies grow to levels at or above the prior market peaks as leases begin to mature, especially in urban areas. • Pricing opacity for real estate valuation Many managers have reduced cash flows for negatively impacted property types, but maintained cap rates. Transaction volume rallied in 4Q 2020, but did not prevent reduced 2020 year volume. • Property type demand continues to be driven by the pandemic Industrial, single-family housing, life science, data centers, and self storage are all anticipated to continue to benefit from strong demand further fueled by COVID-19 trends
10.14 7 Agenda
1 PRESENTATION GOALS AND INTRODUCTIONS
2 OBSERVATIONS ON THE REAL ESTATE ENVIRONMENT
3 ALBOURNE OVERVIEW
4 CONCLUSION
10.15 8 Albourne is your ideal RE consulting partner
"Our goal is to empower our clients to be the best investors that they can be.” Dr. John Claisse, Executive Committee Member
We are solely a non-discretionary investment consultant
• We do not manage money to help avoid conflicts • We do not take limited partner advisory council (“LPAC”) seats to help avoid conflicts • We charge the same fee to clients of a given service to help avoid having financial favorites
We consult solely on alternative asset classes
• To focus our research on complicated asset classes where performance dispersion is high • To develop specialized resources to better assess and advise on many aspects of these asset classes
10.16 9 Our Client Base
>300 Clients1 41 Public Pension Plans3
>$550bn Amount our clients have • Teacher Retirement System of Texas invested in alternatives2 • The Missouri Education Pension Trust • Utah Retirement Systems • South Carolina Retirement System
Clients by Type Institutions by Type Sovereign Wealth Fund 5% Financial Insurance Company Intermediary 29% 9% Endowment & Foundation 32% Institution 57% Public Pension Plan Corporate Pension 26% Plan Family Office 14% 28%
1 This is the aggregate number of client entities for the Albourne Group worldwide. Clients may be subscribed to multiple services. 2 This is a conservative aggregation of the estimated investments in alternatives (where known) of Albourne Group clients worldwide, using public sources where possible. All figures are as of 1 January 2021 3. The client list is a partial sampling of Albourne’s client universe. In accordance with the SEC’s requirement for an objective methodology for partial client lists, these clients are the four largest public pensions, using what Albourne believes to be their AUM in hedge funds as the criterion and omitting only those requesting anonymity. It is not known whether the listed clients approve or disapprove of the services provided by Albourne.
10.17 10 Our Colleagues
“We are very proud of our low staff turnover. No doubt our equity policy is a factor.” Meropi Stavrou, Head of HR
Analysts 1 Total Headcount 452 300 Portfolio Analysts 301 250 PM IDD Locations 200 Portfolio Analysts 38 11 Multi IDD Plus 29 Client Service Worldwide 150 HF/DB IDD 100 Owned by ODD Private Markets 50 2 100% Investment Due Diligence 44 employees Risk 0 Includes 11 multi asset
Partners 111 Year end Hedge Fund Partners’ average >12 Investment Due Diligence 38 Share and Option Holders Includes11 multi asset tenure years 80
Partners’ average 60 Operational Due Diligence 103 experience in >20 40 alternatives and years finance 20 Risk B2Y4 Back Office Analysts 12 0 B2Y Fees & Liquidity Analysts 13 89 Professional staff D&A5 Analysts 20 <5% turnover3 QDD Analysts 44 Year end
As at 12 October 2020 1. Headcount numbers are aggregated across all Albourne Group entities worldwide 2. Including the Albourne Employee Benefit Trust 3. Professional staff includes all analysts and all staff with a professional qualification, 3 year average 10.18 4. B2Y - Albourne’s Implementation Support Service 11 5. D&A – Albourne’s Data & Analytics Service Real Estate Due Diligence Team
“Through our global analyst team, we are able to lever knowledge across regions, styles, managers, terms, and relative value.” Christian Reel, Partner
• Six dedicated Real Estate IDD Analysts, 1 Multi-Asset IDD Analyst and 1 dedicated Real Estate ODD Analyst • Additional analysts drawn from 44-strong Private Markets IDD team when needed* • Multi-Asset class Analysts include 103 ODD, 38 Portfolio, 89 Risk
Heather Jaclynn Tim Christian Christopher Bernson Kominiarek Reel
Hannah Sarah Carmen Callaghan Ahlberg Lam**
Hitoshi Nagata***
As at 12 October 2020 *Private Markets IDD Analysts include members of the Private Equity and Real Assets teams **Real Estate ODD Analyst *** Multi-Asset IDD Analyst The map shows all Albourne offices, not necessarily where the Real Estate team is based
10.19 12 Real Estate Coverage
“We will cover any fund, anywhere -- from emerging to seasoned managers.” Tim Kominiarek, IDD Analyst
Private Credit Hedge Funds
Distressed Equity L / S Structured Credit
Asset Backed Sector Real Estate Relative Value
Long Only
10.20 13 Investment Due Diligence
“Our Real Estate IDD is thorough and supported by our proprietary database, tracking information gathered and conversations held with managers.” Jaclynn Bernson, IDD Analyst
Source Initial Review In-depth Review Monitor
▪ Scan Real Estate ▪ Review Albourne ▪ Examine key ▪ Update database universe for new legacy issues & for: opportunities daily information strengths - Monthly / via news, ▪ Initiate contact ▪ Conduct onsite quarterly data announcements, with managers meeting word of mouth - News in ▪ Review materials ▪ Hold additional periodicals ▪ Enter calls to answer opportunities into ▪ Screen against - Newsletters & questions Albourne peers memos database ▪ Complete report ▪ Hold initial call or - Quarterly ▪ Assign meeting & log ▪ Present to summary responsibilities notes Albourne ▪ Meet Top Pick Committee(s) IDD Ratings ▪ Screen strategy ▪ Begin report draft managers ▪ Refine report as periodically & log Analyst Assessment A to E needed notes Conviction level of 1 to 5, ▪ Publish in ▪ Update IDD reflects Analyst’s confidence database Report as needed in the level of transparency and how well the fund is known
* The above ratings are for illustrative purposes only.
10.21 14 Operational Due Diligence
“We produce a comprehensive suite of reports which represents the culmination of 20 years’ experience developing our proprietary ODD methodology.’’ Carmen Lam, Partner
Open-Ended Closed End Focus: Example Similarities and Differences ODD Section
Organization & Similar issues and concerns Governance: Firm Additional focus on competence of tax staff and structures, carry distribution and role, responsibilities and composition of Advisory Committees
Compliance & Same focus and importance. Regulation Identify and focus on unique Private Markets and Dodd-Frank registration and compliance/regulatory issues, including FCPA & pay-to-play
Systems & Same focus. Different strategies carry unique operating issues through their investments, e.g. royalty Instruments streams, whole loans, receivables
Custody & Assets often self custodied, which brings unique “existence risk” concerns Counterparty Servicing of assets can sometimes lead to third party relationships that present unique operational and misappropriation risks that need an appropriate control environment
Trade Operations Cash flows pervasively in Private Markets funds (capital calls, distributions, deal funding, investment income, etc). Focus more acutely on walking through the cash flow process and the various control points. Look for third party oversight over distributions and the calculation of carry split
Valuation Focus on manager’s internal process for valuations Assess valuation models and the appropriateness and consistency of techniques applied Interview valuation agents when used
10.22 15 Operational Risks
“Private Market strategies are fraught with unique operational risks and issues of conflict. Albourne has been helping educate investors on these risks for years.’’ Steven Taylor, Partner
Example Private Markets operational risks identified:
• Valuation: Fair valuation processes for private and illiquid investments • Fees/Expenses structures, including: • Monitoring and transaction fees • GP remuneration • Asset level expenses • Broken deal expenses • Fund pass-throughs • Operating Partners: Remuneration of captive operating partners/servicers • Reporting Practices: Non-standard reporting, including LPA accounting • Fund level: Financing arrangements and impact on risk and IRR reporting • GP Commitments: Structure and impact on assumed alignment of interests
10.23 16 Albourne Portfolio Advisory
“Albourne’s customized portfolio advisory service acts as an extension of client staff - whether Investment Analyst, Back or Middle Office Analyst or CIO*.” James Walsh, Head of Portfolio Group
• Asset Allocation (5A) • Manager Selection; • Strategy Outlook IDD, ODD & QDD • Portfolio Construction • Customized Investments Governance Phase • CashMonitoring Flow, • TermsDesign Review Phase • Process Review Commitment & • Fee Negotiation • Investment Policy Statement Liquidity Modeling • IC / Board Presentation • Risk Modeling • Benchmarking • Strategic & Tactical Planning • Engagement Planning • Monthly / Quarterly reporting • Ongoing IDD, ODD & QDD • PerformanceInvestment & Liquidity Phase • Fund Amendments & Issues • Portfolio Controller
*Albourne does not have discretionary authority or custody of its clients’ funds or securities.
10.24 17 Performance Measurement
“Albourne works closely with clients to establish an appropriate communication framework which is flexible with respect to the reporting content, frequency of meetings, calls and delivery of supporting materials.” Anita Kouzapa, Partner
Frequency & Deliverables Example Cash Flow Model
• Monthly: Client portfolio review and Portfolio NAV as % of Total Portfolio performance for liquid funds 35% • Quarterly: Client portfolio review and 30%
performance 25%
• Annually: Strategic review of client program 20%
• As Needed: Calls and meetings with analysts 15%
10%
5%
Reporting Content 0% Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1 2018 Q1 2018 Q1 2019 Q1 2020
• Flexible and customizable reporting Max (%) Med (%) Min (%) Target High (%) Target Low (%) • Facilities for benchmarking (IRR, DPI, TVPI and PME) For illustrative purposes. Past performance may not be indicative of future results. An investor is not guaranteed to make a profit or to avoid incurring a loss. • Includes Secondary sales and purchases, Liquidated Funds, Co-Investments • Illustration of history and trends over time
10.25 18 Agenda
1 PRESENTATION GOALS AND INTRODUCTIONS
2 OBSERVATIONS ON THE REAL ESTATE ENVIRONMENT
3 ALBOURNE OVERVIEW
4 CONCLUSION
10.26 19 Our Value Proposition
“We strive to be an invaluable resource for investors whether they are looking to expand, improve, or add exposure to the Real Estate asset class.” Heather Christopher, Head of Real Estate
We do not manage money, take LPAC seats, or take positions outside of Non-Discretionary Albourne. We charge the same fee to clients of a given service to avoid having financial favorites.
We cover the global universe of investment managers across the four Coverage quadrants, private and public, equity and credit, leveraging research and best practices developed by Albourne over 27 years.
We have practitioner and investor knowledge, which allows us to deeply Advice understand each Real Estate sector and its value drivers.
We utilize an efficient investment due diligence process that allows our Due Diligence team to focus on the most compelling market opportunities alongside on-the-ground operational due diligence.
Online tools and resources provide instant access to our research and Research distill knowledge in addition to direct access to analysts which is vital to understanding the complexities of the underlying strategies.
10.27 20 Appendix
10.28 21 Why Real Estate?
“Clarifying strategy classifications at the outset helps all sides understand the role that individual funds are expected to play in a portfolio.” Tom Cawkwell, Head of Private Markets
Liquid Real Estate Illiquid Real Estate
Investments in or backed by physical assets, predominantly commercial or residential uses Definition & Financial instruments that provide Durable, immobile, tangible Characteristics exposure to physical assets Finite in supply Useful to people Unique in location and composition
Diversification Diversification Typical benefits Yield Generation Return Enhancement to portfolio Return Enhancement Yield Generation Inflation Participation Inflation Participation
Viewed by many as falling between a fixed income and REITs and Real Estate-related stocks equity substitute have historically generated equity-like Core Real Estate tends to be more like Fixed Income due Risk & return returns to its current income and reduced volatility along with an Structured Credit has historically characteristics ability to participate in inflation generated fixed income-like returns Value-Added and Opportunistic Real Estate can have High volatility some Equity-like characteristics via their growth in value
* The above list is for illustrative purposes only and may not encompass all characteristics of Real Estate investing.
10.29 22 Real Estate Consulting Services
Service Key Attributes
• Understanding objectives and constraints Portfolio Advisory • Planning, strategy and portfolio level recommendations • Exposure and cash flow modelling Investment Due Diligence • Identifying the right GPs for the portfolio (IDD) • Validating the opportunity Operational Due Diligence • Assessing the compliance culture of the GP (ODD) • Reviewing fees and expenses, Valuation etc. • Onsite visits • Peer group and public equivalent benchmarking • Attribution analysis Quantitative Due Diligence • Granular fee reporting (QDD) & Implementation Support Services • LPA Amendment reviews • Capital Call/Distribution support • Online flexible service
Due diligence conducted on all investment structures: co-mingled funds, managed accounts and co-investment opportunities.
10.30 23 B2Y - Our Approach to Implementation Support
Albourne can almost provide A to Z mid and back office support services, but we don’t: • make the investment decision, sign off legal documents or • authorize capital movements. We offer fixed fee, non-discretionary services to support alternative investments.
Process Outsourced Outsourced Fee Review Back Office Middle Office* Negotiation Review of existing front Account statement Full-service project Albourne group fee and back office aggregation management of deal work discounts on some processes, resources & hedge funds Reconciled portfolio Coordinate external legal systems performance reporting review of fund documents Analysis of investor fee Best practice terms & recommended NAV reconciliation with Manage external counsel’s comparisons, gap custodian negotiations & drafting of changes* analysis & side letter Bespoke fee recommendations Cash flow & transaction negotiation assistance* logging Complete subscription Process mapping documents including AML Fee collection, Capital call & distribution pre- documentation aggregation and/or fee processing & confirmation Evaluate and advise on Assistance with fund amendments, reconciliation service Ongoing monitoring of fund implementing consents, notices etc. recommendations** manager communications Liquidity calendar
*This Service is not available in certain jurisdictions. Albourne manages client’s external counsel, ensuring terms are consistent with client defined requirements **Subject to Albourne's ability to provide the relevant service
10.31 24 Client Website: The Castle
Total transparency to data, tools and research online
Certificate No. ISMS.20.001
New Albourne App Portfolio News PM QDD Advanced Search Fund-level quantitative analysis News feed on your portfolio Fund due diligence search
Portfolio Controller FeeMometer Albourne TV Transaction tracking platform Fee analysis and comparison Analyst and Manager interviews Cash Flow Modelling Calendars Combined Harvester Propriety pacing model Upcoming meetings Excel Add-in for Albourne data
Not all tools and services are included in all client contracts. The ISO 27001 standard provides requirements for establishing,10.32 implementing, maintaining and continually improving an information security 25 management system, but it is not a standard for products or services. Portfolio Planning – Pacing Model
• Proprietary cash flow model provides in- depth forecasting and pacing solutions - Bayesian approach adapts to new information vs. classical models (e.g., Takahashi-Alexander), where cash flow forecasts are calculated beforehand - Predicts the full distribution of likely events, not just the central case - Considers and adapts to the economic environment - Flexible assumptions to account for distortions such as subscription line facilities
• Additional commitment optimizer solves for future commitments required in order to - Meet certain portfolio size over a certain time horizon - Apply target strategy allocations - Apply constraints on additional commitment pacing
10.33 26 Disclaimer
IMPORTANT NOTICE The information in this presentation (the “Information”) is for informational In each of Japan, Hong Kong, Singapore, Bermuda and Germany the purposes regarding the Albourne Group, which includes Albourne Partners Information is being furnished respectively by: Albourne Partners Japan Limited, Albourne America LLC, Albourne Partners (Canada) Limited, (authorised and regulated by Director of Kanto Local Financial Bureau, with Albourne Partners Japan, Albourne Partners (Asia) Limited, Albourne Partners reference number 544) subject to Japanese law; Albourne Partners (Asia) (Singapore) Pte. Ltd., Albourne Partners (Bermuda) Limited, Albourne Limited (regulated by the Securities and Futures Commission of Hong Kong Partners Deutschland AG, Albourne Partners (Cyprus) Limited and Albourne with Central Entity number AKX858) subject to Hong Kong law; Albourne Cyprus Limited (each an "Albourne Group Company" and collectively, the Partners (Singapore) Pte. Ltd. subject to Singapore law; Albourne Partners “Albourne Group”). The Information is an invitation communicated by the (Bermuda) Limited subject to Bermuda law and Albourne Partners relevant Albourne Group Company, as more fully described below, to Deutschland AG subject to German law, and in all cases, to persons whom the subscribe to such Albourne Group Company’s investment advisory services in relevant Albourne Group Company believes to be financially sophisticated, jurisdictions where such invitation is lawful and authorised. The Information high net worth and institutional investors capable of evaluating the merits and does not constitute an invitation, inducement, offer or solicitation in any risks of hedge funds, private equity funds and/or any other alternative jurisdiction to any person or entity to acquire or dispose of, or deal in, any investment securities (collectively, “Funds”). To the extent that the Information security, any interest in any fund, or to engage in any investment activity, nor is supplied in any jurisdiction other than the United States, Canada, the United does it constitute any form of investment, tax, legal or other advice. Kingdom, Japan, Hong Kong, Singapore, Bermuda or Germany, the relevant Albourne Group Company is Albourne Partners Limited and the Information is In the United States, the Information is being furnished, subject to United supplied subject to English law. States law, by Albourne America LLC (registered as an investment adviser with the United States Securities and Exchange Commission) to persons that If you are not the kind of investor described above in the jurisdictions listed Albourne America LLC believes to be an “Accredited Investor”, as that term is above, or if in your jurisdiction it would be unlawful for you to receive the defined in Regulation D under the Securities Act of 1933, and a “Qualified Information, the Information is not intended for your use. The Information and Purchaser”, as that term is defined in Section 2(a)(51) of the Investment the services provided by any Albourne Group Company is not provided to and Company Act of 1940. In Canada, the Information is being furnished, subject may not be used by any person or entity in any jurisdiction where the provision to Canadian law, by Albourne America LLC to persons that Albourne America or use thereof would be contrary to applicable laws, rules or regulations or LLC believes to be a “Permitted Client” within the meaning of the National where any Albourne Group Company is not authorized to provide such Instrument 31-103. In the United Kingdom, the Information is being furnished, Information or services. subject to English law, by Albourne Partners Limited (authorised and regulated In the United States, interests in Funds are made through private offerings by the Financial Conduct Authority with registered number 175725) to an pursuant to one or more exemptions provided under the United States investment professional, high net worth company or unincorporated Securities Act of 1933, as amended. You should carefully review the relevant association, high value trust or other person specified in articles 19 and 49 of offering documents before investing in any Funds. the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005.
10.34 27 Disclaimer
No part of the Information in this presentation is intended as an offer to sell or To the extent that any of the Information contains information obtained from a solicitation to buy any security or as a recommendation of any firm, Fund or third parties, (a) the Albourne Group makes no representations or warranties, security. You should be aware that any offer to sell, or solicitation to buy, express or implied, as to the accuracy or completeness of such information in interests in any such Funds may be unlawful in certain states or jurisdictions. this presentation; and (b) the Albourne Group and all third party contributors disclaim all liability for any loss or damage which may arise directly or There can be no assurance or guarantee that the Albourne Group’s indirectly from any use of or reliance upon any such data, forecasts or performance record or any Albourne Group Company’s performance record opinions or the Information generally. will be achievable in future. There is no assurance that any client of an Albourne Group Company will necessarily achieve its investment objective or This document has been supplied free of charge and shall not form part of the that such client will make any profit, or will be able to avoid incurring losses. services provided under any service agreement you may have with any Funds are speculative, involve a high degree of risk, and are illiquid: you could relevant Albourne Group Company. lose all or a substantial amount of any investment you make in such Funds. Potential conflict of interest: Each Albourne Group Company advises clients Furthermore, such Funds are not subject to all the same regulatory that are affiliates with or are connected with the management company of requirements as are mutual funds; may involve complex tax structures and hedge funds, private equity funds, real estate or real asset funds that are the delays in the distribution of important tax information; often charge higher fees subject of its research reports, which may create an incentive for the Company than mutual funds and such fees may offset the Funds’ trading profits; may to favour the management company in its reports. The Albourne Group takes have a limited operating history; may be highly volatile; and there may not be a reasonable steps to manage potential conflicts of interest that may arise from secondary market for interests in such Funds. There may be restrictions on such relationships. In appropriate cases, the relevant Albourne Group redemptions and transfer of interests in such Funds, and such interests may Company will decline to act for one or more potential or existing clients. otherwise be illiquid. Such Funds may also be highly leveraged and may have a fund manager with total investment and/or trading authority over the Fund. It © 2021 Albourne Partners Limited. All rights reserved. ‘Albourne’ ® is a should also be noted that, in the case of hedge funds, there may be a single registered trade mark of Albourne Partners Limited and is used under licence adviser applying generally similar trading programs with the potential for a lack by its subsidiaries. of diversification and concomitantly higher risk; hedge funds may also effect a substantial portion of trades on foreign exchanges, which have higher trading costs. On the other hand, private equity, real estate, real asset and/or other private market funds may have a limited number of holdings and concomitantly higher risk. You are solely responsible for reviewing any Fund, the qualifications of its manager, its offering documents and any statements made by a Fund or its manager and for performing such additional due diligence as you may deem appropriate, including consulting your own legal, tax and compliance advisers.
10.35 28 February 24, 2021
Water and Power Employees’ Retirement Plan
Real Estate Consultant Interview
Avery Robinson, Senior Vice President Co-Manager of the Real Assets Team
Barbara Bernard, Senior Vice President
Jan Mende, Senior Vice President
10.36 Agenda
● Callan Overview ● Real Estate Research and Consulting Process ● Closing Comments ● Appendix
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 2 10.37 Callan Overview
10.38 An Overview of Callan Focus, experience, resources
Independent & Focused Experienced Fully Resourced
– Established in 1973 – Over 400 fund sponsor clients – Over 195 employees – Investment consulting is primary representing $2.8 trillion in assets – 60 CFA / CAIAFRM Charterholders focus – Client-focused consultants and 16 CFA / CAIA/FRM candidates – 100% employee-owned averaging 7 retainer clients each – Over 65 advanced degrees – – Third generation of private Consultant tenure averages – Over 95 specialists 12 years Callan / 19 years industry ownership – Proprietary systems and databases – – 99 current owner-employees Retainer client tenure averages 12 years
1973 1990 2007 2017 2018 Ed Callan and Transitioned ownership Third generation of employee Formalized leadership Jim Callahan assumed the associates founded to employees while owners transitioned to senior succession plan by promoting role of president and Millie company remaining an independent management positions, and Greg Allen to chief executive Viqueira became head of consulting firm Greg Allen became president officer and Ron Peyton to fund sponsor consulting executive chairman
● As of September 30, 2020
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 4 10.39 Real Assets Consulting Group
400 Manager research meetings conducted each year
9 Dedicated team members for real estate and real assets 40 Searches and evaluations conducted each year
10 Published research pieces each year
15 Average years of experience Proposed WPERP consulting team in bold
● Bernie Bazile, CAIA ● Sally Haskins ● Aaron Quach ● Barbara Bernard ● Munir Iman ● Avery Robinson, CAIA ● Jonathan Gould, CAIA ● Jan Mende ● Lauren Sertich, CAIA
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 5 10.40 Real Assets Consulting Client Base
● Our most active clients represent approximately $159 billion of real assets investment exposure. ● Clients tend to be larger plans with complex real assets portfolios requiring a specialist consultant. ● To ensure a high level of client service, we pursue deliberate growth in our client base and our team, typically adding one to two new clients per year.
Representative Clients
Alameda County Employees’ Retirement Association Massachusetts Pension Reserve Investment Management Board* Arkansas Public Employees’ Retirement System New York State Teachers’ Retirement System Alaska Retirement Management Board Nevada Public Employees’ Retirement System California Public Employees’ Retirement System* Public Employees’ Retirement System of Mississippi California State Teachers Retirement System* Public Employee Retirement System of Idaho Chicago Teachers Pension Fund State of Idaho Endowment Fund Investment Board City of Milwaukee Employees’ Retirement System State of Idaho Board of Land Commissioners Cook County and Forest Preserve Pension Funds State Teachers’ Retirement System of Ohio* Marin County Employees’ Retirement Association State Universities Retirement System of Illinois *Denotes project clients Washington State Investment Board*
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 6 10.41 Callan’s Commitment to Diversity Callan’s Inclusion Committee
● Callan founder, Ed Callan, founded Progress Trust, the first multi- ● Callan hosts an annual workshop for emerging firms focusing on manager asset management firm committed to promoting diversity industry best practices ● Our Inclusion Committee engages and reports on the progress of ● Callan has taken an active role in helping other public pension diversity and inclusion initiatives throughout Callan and the plans expand their minority, woman and disabled-owned investment management industry investments
Callan has supported many organizations as part of our commitment to diversity, including:
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 7 10.42
Real Estate Research and Consulting Process
10.43 Callan’s Investment Consulting Process Investment Philosophy Since every institutional investor has a distinct set of circumstances, we approach each client with an open mind. We strive to build off the strengths already embedded in a client’s program without taking a “one-size-fits-all” position.
Strategic Planning Plan Implementation
Asset allocation/liability policy Manager / fund review and search Investment structure analysis Dedicated real estate / private equity Investment policy / guidelines Custodian / recordkeeper review Manager structure Fee / cost analysis Service provider evaluation
Research & Education Monitoring & Evaluation
Callan Institute Risk-adjusted returns Research papers Risk / reward analysis “Callan College” Pure style groups Custom education sessions Portfolio characteristics Attribution
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 9 10.44 The Team Actively Identifies Global Opportunities 300+ Meetings Per Year, Including On-sites and International Due Diligence
Number of Searches & $ Millions Evaluations Allocated Strategy 2015-2020 2015 – 2020 Active Across the Risk Spectrum, Core 41 $4,882 Strategy and Vehicle Type Value-Added 59 $5,440 REIT 3 $790 Opportunistic 24 $3,080 Significant International Due Global/Intl. REIT 5 $890 Diligence Activity International 15 $2,025 19 International Due Diligence Trips and Debt 28 $4,564 97 International Manager On-site Meetings in the Last Five Years Infrastructure 26 $2,706 Timber 3 $75 Agriculture 8 $770 Proactive Approach to Due Diligence, Specialty 7 $905 Term Negotiations and Ongoing Fund of Fund 2 $105 Monitoring of the Manager Universe Total 221 $26,232
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 10 10.45 Real Assets Search Activity Callan has a long-term view on real asset investing, and extensive sector data Number of Searches
50 Fund of Fund Specialty Agriculture 40 Timber Infrastructure 30 Debt International Global/Intl. REIT 20 Opportunistic REIT Value-Added 10 Core/Core Plus
0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 11 10.46 Callan Real Estate Due Diligence Process
Screening » Initial Analysis » Quantitative Analysis » Advanced Review » Final Due Diligence
Maximize Develop investment thesis Quantitative validation of Qualitative validation of Present formal investable universe for targeted strategy investment thesis investment thesis recommendation
– Develop global fund – Collect & review of – Performance – Onsite meeting(s) with – Real Assets Team universe offering materials attribution analysis senior team Review
– Formulate key – Meet senior – Historical fund – Assess firm, team, – Alternatives Review
screening criteria investment team sensitivity analysis process and terms Committee
– Proactive manager – Peer group – Prior fund operating – Legal, regulatory & – Deliver final due outreach & meetings benchmarking metrics review compliance review diligence report
Global Forward Fund Offering Historical Performance Draft Diligence Final Diligence Report / Calendar Factsheet Attribution Analysis Report Recommendation
● Callan would work with Staff to follow this process in evaluating RFP responses, starting with the Quantitative Analysis step.
12 10.47 Recent Real Estate Due Diligence Diverse Mix of Geography and Style – Bolded Funds Managed by WPERP Managers
● Abacus Multi-Family Partners V ● Cabot Industrial Value Fund VI ● JP Morgan Strategic Property Fund
● AEW Core Property Fund ● CBRE Strategic Partners U.S. Value 9 ● JP Morgan US Real Estate Core Mezzanine Debt Fund ● AEW Partners Fund IX ● Clarion Gables Multifamily Trust ● LaSalle Income & Growth Fund VIII ● AEW US Value Investors ● Clarion Partners Lion Industrial Trust ● Lone Star Fund XI ● Almanac Realty Securities VIII ● Crow Holdings Capital IX ● Long Wharf Fund V ● Angelo Gordon Realty Value Fund X ● DivcoWest Fund VI ● Longpoint Realty Partners II ● Angelo Gordon Core Plus Fund IV ● Everwest US Property Fund ● Newport Capital III ● Artemis RE Debt Separate Account ● Exeter Europe Core Industrial Fund ● Penwood Select Industrial Partners VI ● Blackstone BioMed Core+ Fund ● Exeter Europe Logistics Fund IV ● PRISA and PRISA II ● Blackstone Europe Fund VI ● Exeter Industrial Value Fund V ● Prologis USLF ● Blackstone Real Estate Debt ● Fairfield U.S. Multifamily Core Plus Strategies IV Fund ● Starwood Fund XII
● Blackstone Strategic Partners Real ● Harrison Street Core Property Fund ● Torchlight Debt Fund VI and VII Estate VII ● Heitman Value Partners V ● USAA Eagle Real Estate ● Brookfield Premier Property Partners ● Invesco Core Real Estate ● Westbrook Real Estate Fund XI ● Brookfield RE Finance Fund VI
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 13 10.48 WPERP Initial Portfolio Observations
● Pacing permitted, increase Core allocation to further orient the portfolio to income producing properties.
● Larger allocations to fewer Core managers would reduce fees and simplify the administration of the portfolio.
● Overall, the property type allocations are favorable with the underweight to office and retail, and overweight to residential. Consider a greater underweight to office and an overweight to industrial, a sector with the strongest demand outlook.
● Peers have moved away from using the NCREIF NPI index to ODCE to reflect the use of leverage.
● Consider adding Core international exposure to the Core Portfolio-many good options.
● Consider creating a Non-Core Portfolio by combining Value- Add and Opportunistic strategies – Allows more flexibility in creating a higher yielding strategy – Allocation should reflect return objective of fund
● Diversification across strategies and vintage years is an important risk management tool.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 14 10.49 Diverse Manager Programs Experience and Initiatives
● Our Real Assets team consults to several public pension plans with diverse manager initiatives (i.e. New York State Teachers, Chicago Teachers, State Universities Retirement System of Illinois, Alameda County, etc.).
● We have assisted clients with the development of structured diverse manager programs from scratch, as well as implementing modifications and expansions to continue to ensure that the objectives of the programs are achieved.
● We have experience with aiding our clients with various approaches to obtaining diverse manager exposure including Fund-of-Fund programs, direct programs and combinations.
● Additionally, some clients do not have formal diverse manager programs (or their broader formal diverse manager programs don’t include real estate). We’ve accommodated clients by identifying and recommending diverse managers in the spirit of their goals.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 15 10.50 Real Estate Indicator Analysis Developed Based on Client Discussions
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 16 10.51 Closing Comments
10.52 Transition Process Callan has successfully transitioned relationships from other real asset consultants ● The initial meeting is typically with the first several weeks of signing a contract. At this time we will have already provided staff with a checklist of all the information Callan needs to transition the relationship to Callan’s reporting platform. We will focus on developing an understanding of WPERP. – Organization – Goals and objectives with respect to the real estate program – The Staff’s point of view with regard to portfolio construction, risk and return – Operational issues, concerns and reporting needs ● Simultaneously, we will collect all the necessary information to start the performance measurement process. An analyst will be assigned to the account and will work with the consulting team to create a performance report customized to the needs of the Plan; a dry run of the last quarter’s report, where possible, will ensure the process runs smoothly for the first official meeting. ● Our real assets team will review existing documentation including investment policies, any recently completed strategies and pacing studies. We will conduct a detailed review of the real estate program and provide a “fresh” look to develop a strategic plan and portfolio structure. We will work with WPERP on an iterative basis to discuss initial output and observations. Once the review is finalized, the analysis is then provided and presented to the appropriate representatives of WPERP for review, discussion and approval. ● The Callan team will then make recommendations regarding the need for any new managers to be hired as replacements or to fill any identified gaps as determined in the initial manager structure evaluation. Policy changes will be identified and recommended as part of the strategic review.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 18 10.53 Transition Process Checklist Callan has successfully transitioned relationships from other real estate consultants ● Existing Managers Custodian – Contact information—name, address, phone – Contact information—name, address, phone number, email number, email – Contract—electronic or hard copy – A letter from the plan authorizing the custodian(s) – Fund type (separate account, commingled, mutual to work with Callan and provide monthly fund) statements including holdings, market values, – Asset class/style assignment/specific guidelines transactions, and returns. and/or contractual terms Prior Consultants – Benchmark(s) – Contact information—name, address, phone – Inception date number, email – A letter from the plan to each manager authorizing – A letter from the Plan advising them of Callan’s them to work with Callan role and the need to transfer historical data. We will then follow up with them to discuss what we ● Total Fund need. – A copy of the last formal Asset/Liability Study (hard – A copy of the last performance report provided. copy or electronic) This is important for historical data verification. – Current and Historical Target Asset Allocation – Current and Historical Target Benchmark Staff Personnel/Board – Contact information—name, address, phone ● Copy of Current Policy, Strategy, and number, email Guidelines Statement – Reporting requirements for Staff and Board—who/ where to send reports, research, client letters, etc. – Billing contact
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 19 10.54 Sample Work Plan for WPERP
Q4 Q1 Q2 Q3 2021 2022 2022 2022 Strategic Planning
Investment Policy Review
Investment Policy Statement Updates
Strategic Plan and Pacing Study
Other Items Identified in the Transition Phase Plan Implementation
Review of Existing Managers
Pipeline and Planning Calls
Manager Searches and Evaluations (TBC)
Board Meetings (TBC) Monitoring & Evaluation
Collect Historical Data from Managers
Collect Data from Prior Consultant / Custodian
Quarterly Performance and Market Reviews
Meetings with Staff
Continuous Qualitative Review Research & Education “Callan College”
Regional Workshops
National Client Conference
Research Papers and Publications
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 20 10.55 Why Hire Callan?
client’s Client Focused By understanding the evolution of each investment program and using a disciplined process, we enable clients to make optimal long term decisions based on Consulting Model their unique circumstances.
Proprietary Data and Research is a career at Callan. Callan continually reinvests in our professionals, proprietary data, and performance and risk management services rather than Research outsourcing them to third party providers.
Integrated Approach There are distinct advantages for clients who work with consultants that have to Consulting knowledge produced by the synergy of a broad client base.
Independent and Callan is independent, well into its third generation of employee ownership, and is Focused solely focused on serving the needs of institutional investors.
Callan has no long-term debt and is a financially strong company. Our revenue growth Financial Strength has averaged 6% for the past several years.
All of the aforementioned are valueless if they do not come together in an experience that is empowering for our clients. We stress accessibility and approachability, knowing People that our clients derive great comfort from working directly with the resources and subject matter experts throughout our organization.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 21 10.56 Appendix
10.57 Organization Chart
Callan was founded as an employee-owned investment consulting firm in 1973. Ever since, we have empowered institutional clients with creative, customized investment solutions that are uniquely backed by proprietary research, exclusive data, ongoing education and decision support. Today, Callan advises on over $2.5 trillion in total assets, which makes us among the largest independently owned investment consulting firms in the U.S. We use a client-focused consulting model to serve public and private pension plan sponsors, nonprofits, operating funds, smaller investment consulting firms, investment managers, and financial intermediaries. For more information, please visit www.callan.com.
Board of Directors Compliance Ann De Luce
Executive Chairman – Ron Peyton CEO, Chief Research Officer – Greg Allen
Management Committee
President – Jim Callahan, CFA CEO, Chief Research Officer – Greg Allen
Fund Sponsor Specialist Independent Investment Trust Advisory Institutional Technology and Callan Research, Consulting Group Consulting Areas Adviser Group Research Group Consulting Group Operations Education, & Corporate Millie Viqueira Eric Davison Butch Cliff, CFA Mark Andersen Anne Maloney Denise Steele Inga Sweet
Atlanta Consulting Trust, Custody Securities Global Manager Research Client Report Services Callan Institute Elizabeth Hood, CFA Lending Amy Jones Allie Banuelos Barb Gerraty Virgilio “Bo” Abesamis Mark Stahl, CFA Chicago Consulting Analytical Solutions Published Research
Ann O’Bradovich Brendan Egan Nicole Silva Capital Markets Research Defined Contribution Marketing and Database/ Measurement Denver Consulting Consulting Jay Kloepfer Communications Development Janet Becker-Wold, CFA Greg Ungerman, CFA Julia Moriarty, CFA Elizabeth Anathan Alpay Soyoguz, CFA New Jersey Consulting Legal Millie Viqueira Real Assets Consulting Information Technology Jennifer Gallo Sally Haskins Wally Meerschaert Portland Consulting Finance Avery Robinson Joel Schwarz Greg DeForrest, CFA Shalaka Kachare Process Development Human Resources San Francisco Consulting Alternatives Consulting Trevor Boult Rosanna Sangalang Greg DeForrest, CFA Pete Keliuotis, CFA
As of September 23, 2020
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 23 10.58 Biographies
Avery A. Robinson, CAIA, is a Senior Vice President and Co-Manager of Callan's Real Assets Consulting group. He has overall responsibility for real assets consulting services and oversees research and implementation of real estate, timber, infrastructure, and agricultural asset classes. He oversees all investment due diligence for real assets and is a member of Callan’s Emerging Manager Committee. He is responsible for strategic planning, implementation, and performance oversight of plan sponsor clients' real assets portfolios. Avery heads research coverage for core open-end funds and emerging managers. He is a member of Callan’s Management Committee and a shareholder of the firm.
Avery joined Callan in April of 2008. Before joining Callan, he was employed with the Real Estate Equity Group at Principal Global Investors as an Asset Manager.
Avery received his MBA and BS in Engineering from the University of Iowa and has earned the right to use the CAIA designation.
Sally Haskins is a Senior Vice President and Co-Manager of Callan's Real Assets Consulting group. She has overall responsibility for real assets consulting services and oversees research and implementation of real estate, timber, infrastructure, and agricultural asset classes. She oversees all investment due diligence for real assets and is a member of Callan’s Alternative Investment Committee. She is responsible for strategic planning, implementation, and performance oversight of plan sponsor clients' real assets portfolios. She heads manager due diligence and strategy research for agriculture investment products. Sally is a member of Callan’s Management Committee and is a shareholder of the firm. Sally joined Callan in 2010 from ING Clarion Partners where she was a Director in the Marketing and Client Service Group. Prior to joining ING Clarion, Sally enjoyed a 15 year career with Russell Investments and Institutional Property Consultants, Inc. (IPC). While at Russell and IPC, Sally held multiple positions including real estate consulting, real estate manager research, and portfolio management. She was Head of Property, Asia Pacific for Russell in Sydney, AU where she launched a global real estate opportunity fund of funds for Australian superannuation plans, conducted manager research on Asian real estate strategies, and was the portfolio manager for the Russell Australian Property Fund which invested in listed property trusts. Sally started her real estate career in 1989 at the State Teachers Retirement System of Ohio as an acquisitions analyst. Sally received an MS in Real Estate Appraisal and Investment from the University of Wisconsin-Madison and a BA (Magna cum Laude and Phi Beta Kappa) from St. Olaf College.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 24 10.59 Biographies
Barbara Bernard is a Senior Vice President in Callan's Real Assets Consulting group. She is responsible for strategic planning, implementation, and performance oversight of plan sponsor clients' real assets portfolios. Her role includes the evaluation of managers and their respective real estate products for plan sponsor clients. This due diligence process includes meeting and coordinating with investment managers regarding various strategies, investment processes, track records and organizational structures. Barbara leads Callan’s research efforts for real estate office and retail sectors, as well as, real estate debt and U.S. opportunistic strategies.
Prior to joining Callan in 2017, Barbara was a portfolio manager at CCM U.S. LLC, a real estate investment firm. She has also held investment management and development roles at J.P. Morgan, LaSalle Partners and Spaulding & Slye. She is an accomplished investment professional with a proven track record of investing, managing, valuing, selling and financing complex real estate portfolios on behalf of institutional investors. She has broad experience with major and alternative property types across U.S. markets, and global real estate private equity fund investing.
Barbara received an M.B.A. from the Kellogg Graduate School of Management, Northwestern University and a B.S. from West Virginia University. She is a member of Urban Land Institute.
Jan Mende is a Senior Vice President in Callan's Real Assets Consulting group. She is responsible for strategic planning, implementation, and performance oversight of plan sponsor clients' real assets portfolios. Her role includes the evaluation of managers and their respective real estate products for plan sponsor clients. This due diligence process includes meeting and coordinating with investment managers regarding various strategies, investment processes, track records and organizational structures. Jan focuses on infrastructure, Asian real estate research, and U.S. value added strategies Prior to joining Callan in 2017, she was head of client relations at Capital Dynamics, a global private assets manager. She also held investment management roles at that firm in London, Switzerland, and New York where she was a portfolio manager for a real estate fund of funds and advised clients on global infrastructure portfolio construction and commitment planning. Jan earned an M.B.A. with a major in real estate and a Master of International Studies with a major in East Asian Studies and Japanese language from the Wharton School & The Lauder Institute, University of Pennsylvania. She also holds a B.A. from the College of William & Mary.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 25 10.60 Biographies
Lauren Sertich, CAIA ,is a Senior Vice President in Callan's Real Assets Consulting group. She is responsible for strategic planning, implementation, and performance oversight of plan sponsor clients' real assets portfolios. Her role includes the evaluation of managers and their respective real estate products for plan sponsor clients. This due diligence process includes meeting and coordinating with investment managers regarding various strategies, investment processes, track records and organizational structures. Lauren heads research of global real estate securities, U.S. value add, and timber strategies. She is a shareholder of the firm.
Lauren joined Callan in October of 2008 as an analyst in the Client Report Services group, where she was responsible for calculating investment returns and generating monthly and quarterly performance reports. Prior to joining Callan, Lauren was an equity research assistant for the media and entertainment sector at Cowen and Company, LLC.
Lauren earned a BA in Environmental Studies from Dartmouth College, where she was a member of the field hockey team. She has earned the right to use the CAIA designation.
Jonathan Gould, CAIA, is a Senior Vice President in Callan's Real Assets Consulting group. He is responsible for conducting intensive due diligence evaluations of investment managers and their respective real estate and real assets products on behalf of plan sponsor clients. This due diligence process includes meeting and coordinating with investment advisors regarding various strategies, investment processes, track records, and organizational structures. Jonathan leads Callan's research efforts for European real estate, industrial real estate, apartments, and infrastructure. He is a shareholder with the firm.
Jonathan joined Callan in June of 2010 as an analyst in the Client Report Services group, where he was responsible for calculating investment returns and generating monthly and quarterly performance reports. Prior to joining Callan, Jonathan worked at YouTube as an operations analyst. Before that, he worked at MarketWatch.com tracking website analytics.
Jonathan earned a BS in Economics from the University of Colorado at Boulder and has earned the right to use the CAIA designation.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 26 10.61 Biographies
Bernie Bazile, CAIA, is a vice president in Callan's Real Assets Consulting group. She is responsible for strategic planning, implementation, and performance oversight of plan sponsor clients' real assets portfolios. Her role includes the evaluation of managers and their respective real estate products for plan sponsor clients. This due diligence process includes meeting and coordinating with investment managers regarding various strategies, investment processes, track records, and organizational structures.
Bernie joined Callan in September 2020 from Juniper Square where she was a strategic account director and industry principal. Prior to Juniper Square, Bernie was a capital markets consultant for 8Focus LLC. She also held private fund capital raising and institutional client service roles at Triton Pacific Capital, J.P. Morgan, and Commonfund. Bernie started her career at Cambridge Associates and gained experience in real estate research with CBRE Econometric Advisors.
Bernie earned a BA in economics from Tufts University and has earned the right to use the Chartered Alternative Investment Analyst® designation.
Munir Iman is an assistant vice president in Callan's Real Assets Consulting group. Munir's role includes supporting the real assets consulting group, collecting information on various real asset products, and tracking new real estate fund offerings. He participates in core/core plus real estate research and leads research for Latin America real estate. He is a shareholder of the firm.
Munir joined Callan in 2011 as an analyst in the Client Report Services group, where he was responsible for investment portfolio reconciliation and ongoing performance measurement reports. Prior to Callan, Munir’s investment industry experience included an internship at Concert Global in San Jose, where he assisted the accountants creating statistical reports used by the company's advisers.
Munir graduated from Santa Clara University with a BS in finance and was a member of the rugby team.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 27 10.62 Biographies
Aaron Quach is a senior analyst in Callan’s Real Assets Consulting group. Aaron’s role includes supporting senior members of the group with evaluation of managers and their respective real estate products for plan sponsor clients. This due diligence process includes meeting and coordinating with investment managers regarding various strategies, investment processes, track records, and organizational structures. Aaron is also responsible for collecting data from investment managers on various products and general real assets research. He is a member of Callan’s ESG Committee.
Aaron joined Callan in 2018 as an analyst in the Client Report Services group, where he was responsible for calculating investment returns and generating monthly and quarterly performance reports. Prior to Callan, Aaron worked for JPMorgan Chase Bank.
Aaron earned an MS in finance from Saint Mary’s College of California and a BS in business finance from San Francisco State University.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 28 10.63 Specialized Team for Monitoring
35+ Year commitment to performance measurement Empowers clients with performance measurement, database, and investment analytics 25 Dedicated performance analysts – Proprietary data 3 Analytical solutions experts – Innovative analytical tools 6 Investment database specialists – Customized, flexible, accurate reporting 10 Programmers/system analysts
Allie Banuelos Perry Jurow Alpay Soyoguz, CFA Amit Bansal Ed Kunzman Denise Steele Stacy Chang Matt Loster Fionnuala Wright Brendan Egan Paul McGurk State Universities Retirement System Knowledge. Experience. Integrity. 29 10.64 Callan Institute Events Upcoming Conferences, Workshops, and Webinars
Recent & Upcoming Webinars On-Demand Webinars
Visit our website for On-Demand webinar options at https://www.callan.com/on-demand-webinars/ Our most recent webinar covered strategies in A Fresh Look at Fixed Income alternatives. March 2021
2021 DC Survey “Callan College” February 2021 Introduction to Investments for Institutional Investors This program familiarizes institutional investor trustees Register at callan.com/callan-institute-events and staff and asset management advisers with basic investment theory, terminology, and practices. It lasts one- and-a-half days and is designed for individuals with less than two years of experience with asset-management oversight and/or support responsibilities. “Research, education, and dialogue are more important than ever in these extraordinary Alternative Investments for Institutional Investors times, which is why I’m pleased to announce Alternative investments like private equity, hedge funds, that we are adding more webinars, and we plan and real estate can play a key role in any portfolio. In this to expand our events to include roundtables one-day session, Callan experts will provide instruction about the importance of allocations to alternatives, and and other interactive digital offerings.” how to integrate, evaluate, and monitor them.
Barb Gerraty Program dates and registration can be found at Director, Callan Institute callan.com/callan-institute-events
State Universities Retirement System Knowledge. Experience. Integrity. 30 10.65 Published Research Highlights from 2020
How DC Plans Can Harness Callan’s 2020-2029 Capital DC Plan Data for Better An Introduction to Our New 2020 DC Trends Survey Market Assumptions Outcomes Hedge Fund Peer Group
Recent Blog Posts
Additional Reading Local Plus our blog Presence for Trigger Funds: contains a wide Private Equity Trends quarterly newsletter Multinational Here’s What array of posts Active vs. Passive quarterly charts Managers in You Need to related to the Capital Market Review quarterly newsletter China Know pandemic Monthly Updates to the Periodic Table Market Pulse Flipbook quarterly markets update Fanglue Zhou Catherine Beard Real Assets Reporter quarterly newsletter
State Universities Retirement System Knowledge. Experience. Integrity. 31 10.66 Disclaimers
Information contained herein is the confidential and proprietary information of Callan and should not be used other than by the intended recipient for its intended purpose or disseminated to any other person without Callan’s permission.
This report was prepared by Callan for use by a specific client and should not be used by anyone other than the intended recipient for its intended purpose. The content of this report is based on the particular needs of such client and may not be applicable to the specific facts and circumstances of any other individual or entity.
Certain information herein has been compiled by Callan and is based on information provided by a variety of sources believed to be reliable for which Callan has not necessarily verified the accuracy or completeness of or updated.
This content is for informational purposes only and should not be construed as legal or tax advice on any matter. Any decision you make on the basis of this content is your sole responsibility. You should consult with legal and tax advisers before applying any of this information to your particular situation.
This content may consist of statements of opinion, which are made as of the date they are expressed and are not statements of fact.
Reference to or inclusion in this report of any product, service or entity should not be construed as a recommendation, approval, affiliation or endorsement of such product, service or entity by Callan.
Knowledge. Experience. Integrity. Water and Power Employees’ Retirement System 32 10.67 Presentation to the Water and Power Employees’ Retirement Plan
February 24, 2021
BOSTON CHICAGO LONDON MIAMI NEW YORK PORTLAND SAN DIEGO MEKETA.COM 10.68 Water and Power Employees’ Retirement Plan Our Team
Christy Fields David Glickman Managing Principal Executive Vice President
29 years of industry experience 50 years of industry experience Joined the firm in 2019 as part of the merger between Meketa Joined the firm in 2019 as part of the merger between Meketa and Pension Consulting Alliance (PCA), Joined PCA in 1998, and Pension Consulting Alliance (PCA), Joined PCA in 2009 Shareholder Real Estate Consultant focusing on commercial real estate debt Serves as a consultant and Head of Real Estate Portfolio and equity for pension and retirement system clients Solutions Member of Meketa’s Private Markets Research Committee Chair of Meketa’s Diversity Leadership Committee, and BA in English from University of Illinois-Chicago member of Meketa’s Board of Directors, Investment Policy, Private Markets Policy and Research Committees MBA from Yale University’s School of Management; BA from Cornell University
MEKETA INVESTMENT GROUP 2 10.69 Water and Power Employees’ Retirement Plan Table of Contents
1. Firm Overview 2. Approach to Due Diligence 3. Portfolio Management & Reporting 4. Summary 5. Appendix
MEKETA INVESTMENT GROUP 3 10.70 Firm Overview
10.71 Water and Power Employees’ Retirement Plan Firm Overview: Competitive Advantages
Consistent and controlled growth over our 42-year history, which has provided our clients with stability and success in achieving their goals.
100% independently owned by senior members of the firm, so we control our future.
We have no internal products and seek to minimize any conflicts of interest, which allows our clients to trust our research and recommendations.
Public fund experts who can share our insights, best practices and lessons learned from our decades of experience.
Customized investment solutions tailored to the specific needs of the Water and Power Employees’ Retirement Plan.
High-touch client service philosophy.
We have been investing in Real Estate since 1989.
Proactively source investments and maintain a robust pipeline.
* Meketa merged with Pension Consulting Alliance (PCA) on March 15, 2019. PCA began providing real estate consulting services in 1989.
MEKETA INVESTMENT GROUP 5 10.72 Water and Power Employees’ Retirement Plan Firm Overview: Real Estate Best Practices for Large Public and Taft-Hartley Pension Plans
Experience working for Boards, with Staff and other consultants.
Engagement with various stakeholders, including unions.
Environmental, Social and Governance experience.
Fiduciary blocking and tackling.
Separate account structuring and monitoring.
As of December 31, 2020. The above clients are representative only and not an endorsement by any client listed. It is not known whether the clients listed approve of Meketa or the services we provide.
MEKETA INVESTMENT GROUP 6 10.73 Water and Power Employees’ Retirement Plan Firm Overview: Real Estate Services
Broad array of service models to meet the needs of investors seeking access to real estate investments
Non-Discretionary Enhanced Portfolio Discretionary Asset Strategic Advisory Special Projects Advisory Monitoring Management
Complete solution for Meketa augments client One-time or periodic On-going or one-time fund Complete solution for program implementation staff in program assignments to achieve reviews: outsourced private market implementation specific goals program Client directs policy and Fee calculations approves investment Carry calculation Meketa and client
ETAILS selections collaborate on policy and
D Policy verifications plan Valuation reviews
Full-service solution Supplement existing Limited-term projects Supplement existing Full-service solution resources resources Retain decision authority Supplement existing Meketa resources & Mandate tailored to needs resources Meet heightened oversight performance Meketa resources & needs performance Respond to shifting Scope customized for each Fast decisions and best initiatives project Ensure manager access compliance with legal DVANTAGES Rapid turnaround once Transfer fiduciary
A requirements goals are set responsibility
Suite of available services covers all aspects of portfolio construction and monitoring.
Investment Due Cash Education Strategic Planning Reporting Sourcing Diligence Management Policy Commitment Investment Legal & Enhanced Monitoring Development Pacing Selection Negotiations Monitoring
MEKETA INVESTMENT GROUP 7 10.74 Water and Power Employees’ Retirement Plan Firm Overview: Challenges
Importance of Governance
Prudent decision-making is critical to the long-term success of any retirement plan. Given the uniqueness and complexity of the fund, the stakes are higher. By developing strong governance policies before assets are moved, we can increase the likelihood of making sound investment decisions, therefore increasing the likelihood of long-term success. Good process today makes better decisions tomorrow.
Implementation Investment Policy Statement Investment Beliefs
Goals
MEKETA INVESTMENT GROUP 8 10.75 Water and Power Employees’ Retirement Plan Firm Overview: Responsible Contractor Policies
Emphasize the “Double Bottom-Line” Where Possible: We seek and support world-class managers that can earn competitive returns with fair labor practices. Meketa clients invest over $35 Billion in managers that have Responsible Contractor Policies. Examples include:
REAL ESTATE FUNDS AFL-CIO BIT Fund WCP Special Core Plus American Core Realty AFL-CIO HIT Fund Multi-Employer Property Trust Torchlight Debt Opportunity Fund VI, L.P. ASB Allegiance Real Estate Fund ULLICO Accounts J and W JP Morgan Strategic Property GID Investment Advisors Washington Capital Management** Pacific Urban Intercontinental US REIF Bentall GreenOak TA Realty Core Property Fund * GI Partners Gerding Edlen II, III, & IV** Miller Capital Advisory AEW Partners VI & VII** First Washington Realty GEM Realty Fund IV, V, VI Hines Interests NREA INDURE Canyon Capital Normandy RE III & IV* Berkeley Partners Rockwood Capital**
* Indicates Meketa was influential in the firm’s adoption of its FIRST Responsible Contractor Policy. ** Indicates Meketa was influential in improving an existing Responsible Contractor Policy and/or improving its execution. As of November 2020.
MEKETA INVESTMENT GROUP 9 10.76 Water and Power Employees’ Retirement Plan Firm Overview: Investment Resources
47 Private Markets professionals, including 10 Real Estate-focused professionals, across all offices.
Christy Fields John Haggerty, CFA Tim Atkinson Lisa Bacon, CAIA Mary Bates Gustavo Bikkesbakker
Judy Chambers Gerald Chew, CAIA Jess Downer, CFA Tad Fergusson, CFA David Glickman Steve Hartt, CAIA
Peter King Molly LeStage Ethan Samson, JD Todd Silverman, CFA, CAIA Danny Chan, CFA Jed Constantino
Abigail Fischer Aleem Naqvi, CFA Esther Lho Derek Proctor Karen Reeves Adam Toczylowski, CFA
MEKETA INVESTMENT GROUP 10 10.77 Water and Power Employees’ Retirement Plan Firm Overview: Private Markets Team
Private Markets Policy Committee
John Haggerty, CFA* Stephen McCourt, CFA Peter Woolley, CFA, CLU, ChFC Frank Benham, CFA, CAIA Managing Principal Managing Principal Managing Principal Managing Principal
Judy Chambers* Christy Fields* Alan Spatrick, CFA Jess Downer, CFA* Managing Principal Managing Principal Managing Principal Managing Principal
PRIVATE MARKETS DUE DILIGENCE TEAMS
REAL ASSETS PRIVATE EQUITY PRIVATE DEBT REAL ESTATE (Infrastructure and Natural Resources)
Todd Silverman, CFA, CAIA* Judy Chambers* Timothy Atkinson* Lisa Bacon, CAIA Gerald Chew, CAIA Christy Fields David Glickman Managing Principal Managing Principal Managing Principal Managing Principal Managing Principal Managing Principal Executive Vice President
Molly LeStage* John Haggerty, CFA* Mary Bates Judy Chambers* Adam Toczylowski, CFA Peter King Karen Reeves Managing Principal Managing Principal Managing Principal Managing Principal Managing Principal Executive Vice President Principal
Steven Hartt, CAIA* Jess Downer, CFA* Todd Silverman, CFA, CAIA* Danny Chan, CFA* Steven Hartt, CAIA* Esther Lho Derek Proctor Managing Principal Managing Principal Managing Principal Vice President Managing Principal Vice President Vice President
Tad Fergusson, CFA* Timothy Atkinson* Jed Constantino* John Haggerty, CFA* Jed Constantino* Abigail Fischer Jess Downer, CFA* Managing Principal Managing Principal Vice President Managing Principal Vice President Associate Managing Principal
Gustavo Bikkesbakker Ethan Samson, JD Molly LeStage* Luke Riela, CFA* Aleem Naqvi, CFA* Steve Hartt, CAIA* John Haggerty, CFA* Managing Principal Managing Principal Managing Principal Vice President Assistant Vice President Managing Principal Managing Principal
Jed Constantino* Danny Chan, CFA* John Haggerty, CFA* Vice President Vice President Managing Principal
Luke Riela, CFA* Andrew Gilboard* Tad Fergusson, CFA* Vice President Assistant Vice President Managing Principal INVESTMENT OPERATIONS & TECHNOLOGY & LEGAL ASSOCIATES ADMINISTRATION DEVELOPMENT Aleem Naqvi, CFA* Luke Riela, CFA* Assistant Vice President Vice President
Andrew Gilboard* Operations IT Ops / Net Infrastructure Inside Counsel Assistant Vice President (7 Professionals) (7 professionals) Investment Associates (2 Professionals) (6 Professionals) + Investment Software Administration Outside Counsel & Support (4 Professional) ( 4 Professionals)
* Denotes an individual with multiple roles among asset classes. As of January 2021.
MEKETA INVESTMENT GROUP 11 10.78 Water and Power Employees’ Retirement Plan Firm Overview: Corporate Diversity & ESG
Community Stewardship and Social Responsibility
The Corporate Responsibility Committee was created in 2009 and is led by Managing Principal John Haggerty with the support of seven additional senior professionals across different functions of the firm. Corporate Diversity ESG Investment Management ∙ Meketa is committed to corporate diversity. ∙ Diversity within Investment Manager Selection Women or minorities comprise: – Emerging and Diverse Manager Committee – 58% of our employees; – As of December 31, 2019, Meketa’s clients had – 29% of our leadership team; and approximately $29 billion invested with approximately 45 emerging and diverse 45% of our shareholders. – managers.
∙ 28% of our employees are multi-lingual, ∙ ESG Disclosure and Rating speaking 23 different languages or dialects ∙ Promote ESG ∙ Community Relations & Volunteerism – Responsible Contractor Policy – Guidelines & Restrictions
As a signatory of the United Nations-backed Principles for Responsible Investment Initiative (UNPRI), Meketa has joined a network of international investors working together to put the six Principles of Responsible investing into practice.
As of December 31, 2020.
MEKETA INVESTMENT GROUP 12 10.79 Water and Power Employees’ Retirement Plan Firm Overview: Diversity and Inclusion
Experience assisting numerous clients in establishing emerging and diverse manager programs as well as targeted investment programs across asset classes. Meketa regularly holds Emerging Manager Days across our various offices to ensure broadest coverage of emerging and diverse managers across asset classes. Below are samples of clients with whom we have worked to initiate new, emerging and diverse manager initiatives: California Public Employees’ Retirement System California State Teachers’ Retirement System City of Baltimore Employees’ & Elected Officials’ Retirement Systems City of Hartford Municipal Employees’ Retirement Fund Maryland State Retirement and Pension System New York State Common Retirement Fund Meketa proactively encourages MWDBE manager participation in RFIs/RFPs. We participate in leading industry organizations such as AAAIM, NAA, NAIC, NASP, GCM Grosvenor, PEWIN, and the Toigo Foundation.
MEKETA INVESTMENT GROUP 13 10.80 Water and Power Employees’ Retirement Plan Firm Overview: Firm Diversity
Total Employees Meketa is an equal opportunity employer and affirmatively seeks diversity in the workforce.
We recruit qualified applicants and advance employees without regard to race, religious creed, color, national origin, ancestry, sex, physical or mental disability, age, marital status, veteran status, sexual orientation, or any other category protected by law.
Today, we are a large, diverse, global institutional investment Investment Professionals consulting firm, and more than half of our 209 total employees are women or minorities.
Over the last three years, over 50% of the firm’s new hires were women or minorities.
Additionally, over 30% of our employees are multi-lingual, speaking 26 different languages or dialects. Operations We are proud of our success over this time period, and we remain committed to further enhancing our firm’s diversity initiatives in the future.
Male Female or Minority
Female Minority As of December 31, 2020.
MEKETA INVESTMENT GROUP 14 10.81 Water and Power Employees’ Retirement Plan Firm Overview: Firm Diversity
Shareholders Research has confirmed that diversity of thought results in better organizational decision-making. Meketa continues to enhance our firm’s focus on diversity.
As of December 31, 2020, Meketa Investment Group was 100% independently owned by 60 senior professionals who have direct equity ownership. 27 of our 60 owners, or 45%, are women or minorities.
Of the 33 professionals who have become shareholders in the last three years (2018-2020), 16 (or 48%) of the new owners are women or Senior Management minorities.
Male Female or Minority
Female Minority As of December 31, 2020.
MEKETA INVESTMENT GROUP 15 10.82 Water and Power Employees’ Retirement Plan Firm Overview: ESG Services
• Fully implement ESG Philosophy. • Portfolio Monitoring. • ESG Key Performance Indicators. • Climate Risk Assessment. Actualize • Investment Manager Engagement. • Collaborative Institutional investor Engagement with Governments. Alignment • Engage with Companies.
• Investment Policy. Hone • Investment Manager Selection. • Investment Manager Monitoring. Your Strategy • Proxy Voting Policy. • Climate risk insights for Strategic Asset Allocation.
• ESG Education. Build • Investment Beliefs. Your Foundation • Purposeful ESG Strategic Incorporation.
MEKETA INVESTMENT GROUP 16 10.83 Water and Power Employees’ Retirement Plan Firm Overview: Operational Due Diligence
Operational Risk Area Examples*
Accounting and Trade Operations Business and Organization Cash and Treasury Management
• Segregation of duties • Ownership • Collateral management • Shadow accounting • Committee structure • Cash and liquidity management • Third party administration oversight • Financial stability • Financing • Expense allocation and cash controls • Employee turnover • Investor base; including internal investment
Compliance and Legal Information Technology Service Providers
• Governance • Systems and applications • Due diligence and selection • Reporting • Data security and control • Ongoing monitoring and review • Testing • Disaster recovery and business • Measurement of services vs. SLA • Training and education continuity • Counterparty risk management • Policy review • Cybersecurity
Valuation
• Policy • Approach • Oversight • Approval • Monitoring • Independence * Not an exhaustive list.
MEKETA INVESTMENT GROUP 17 10.84 Approach to Due Diligence
10.85 Water and Power Employees’ Retirement Plan Approach to Due Diligence
We apply a rigorous review process to identify and evaluate the highest quality managers
Investment PPM Execute Sourcing Review Phase I Phase II Phase III Documents
GP completes our Broad outreach to Initial Review of Office meetings Legal review and Negotiation of legal comprehensive GPs, including those investment with General additional due documentation not actively opportunity Partners “Due Diligence diligence fundraising Questionnaire”
Extensive Anonymous Construct analysis Reference “Investment Negotiation of side Scoring for review checks Memorandum” letter providing specific developed investor rights
On-site inspections PMRC Establish PM PM Review communication, sub- sub- banking & accounting committee committee relationships b/w Review Review Extensive GP and Client evaluation of firm’s investment track record Recommendation
Not Not Advanced Advanced PMRC Not Review Advanced
Not Advanced
MEKETA INVESTMENT GROUP 19 10.86 Water and Power Employees’ Retirement Plan Approach to Due Diligence
Program Implementation
Partnership Program Investment Risk Due Design Preferences Management Diligence
Consider all sectors. Specialized, niche strategies. Top managers with a strong Identify client-specific risks and alignment of interest. evaluate risk-adjusted return. Seek a risk-return portfolio balance Distinguish between “beta” and that meets expectations. “alpha” opportunities. Generally independently-managed Evaluate strategy or asset-specific organizations. risks. Diversify by strategy, region, Seek repeatable value creation vintage, risk profile. models; preference for in-house Avoidance of “asset gatherers”, Assess sponsor-related risks, capabilities. emphasis on more focused including capacity, ESG practices, Enhance Investment Policy organizations. and political and/or reputational Statement and update Strategic Avoid excessive use of leverage. risks. Plans. Operational resources. Price discipline (low basis) with Incorporate Environmental, Social, realistic underwriting. Focus on ESG best practices and and Governance (ESG) best process implementation. practices.
Our due diligence efforts are designed to make informed inferences in reviewing offerings on behalf of our clients in context with the clients’ overall investment objectives and risk tolerances.
MEKETA INVESTMENT GROUP 20 10.87 Water and Power Employees’ Retirement Plan Approach to Due Diligence: Real Estate Due Diligence Is Unique
Real Estate investing is a resource intensive endeavor, due to the high degree of technical and industry specialization within the asset class.
Macro Sensitivities
Property- Financing Type Models Nuances Return Drivers
Fund Firm Structures Cultures
Joint Venture Partnerships
Our due diligence efforts are specialized and focused on the specific nuances of the asset class.
MEKETA INVESTMENT GROUP 21 10.88 Water and Power Employees’ Retirement Plan Approach to Due Diligence: Investment Philosophy
Tenets Meketa Real Estate Track Record Inception (2008) through June 30, 2020 Manager selection and access is critical to attractive risk-adjusted returns. Hundreds of investments marketed each year; robust resources and process required for best selection. Managers use a variety of strategies to generate top-quartile performance. Consistent deployment of capital annually; successful market timing is improbable.
Investment Theses
Value Less Efficient Reputational First Tactical Creation Markets Advantages Mover Opportunities
Asset enhancements Small market Sourcing networks Workforce housing Distressed assets
Vertical integration Fragmentation Sector specialization Industrial Core market cycles
Operational improvements Niche sectors Diversity of thought Digital real estate Secondaries
1 Meketa Real Estate is the aggregate net return for real estate funds made on a discretionary or effectively discretionary basis. For the first year of the track record, investments were non-discretionary, but effectively discretionary. Inception Net IRR is net of partnership fees and net of Meketa fees. These are calculated by Meketa based on reconciled manager provided cash flows and market values. The market values for certain partnerships were either estimated or cash-flow adjusted from prior manager reported market values. Public and private open-ended real estate investments are excluded. 2 Cambridge Associates real estate benchmark data is as of 6/30/2020; represents the vintage year returns for All Real Estate funds and all regions. 3 NCREIF ODCE Equal Weighted (Net) benchmark data is as of 6/30/2020. Past Performance is not indicative of future performance.
MEKETA INVESTMENT GROUP 22 10.89 Water and Power Employees’ Retirement Plan Approach to Due Diligence: Investments
Meketa typically reviews over 130 real estate opportunities in a given year. Of these, we select a “best ideas” portfolio from approximately 20 approved investments per year on average.
Value Less Efficient Reputational First Tactical Creation Markets Advantages Mover Opportunities
FPA MULTIFAMILY
* All trademarks are the property of their respective owners.
MEKETA INVESTMENT GROUP 23 10.90 Portfolio Management & Reporting
10.91 Water and Power Employees’ Retirement Plan Portfolio Management & Reporting: Investment Operations Team
Operations Kellie Kane Managing Principal Chief Operating Officer
IT Operations / Investment Performance Reporting Back Office Operational Network Infrastructure Analysts and Analytics Investment Operations Due Diligence Colleen Smiley Emily Agnew, CFA Brad Walker Susan Brumbaugh Mark Jackman Investment Operations Manager of Director of Technology Manager of Perf. Analytics Investment Operations Manager Manager Operational Business Risk
+6 Professionals General Consulting General Consulting Fund Coordination +19 Professionals +23 Professionals +5 Professionals Investment Software Private Markets Enhanced Monitoring & Support +6 Professionals +2 Professionals John McCue Private Markets Analysts Data Integrity Investment Software Research Operations & Support Manager +2 Professionals +3 Professionals +9 Professionals Onboarding +3 Professionals +1 Professional
As of January 2021.
MEKETA INVESTMENT GROUP 25 10.92 Water and Power Employees’ Retirement Plan Portfolio Management & Reporting: Back office
Overview Dedicated and integrated operations personnel work closely with the Real Estate due diligence team members to provide seamless, daily support of: Program Monitoring & Review Cash Flow Coordination Legal Review Private markets operations experience has resulted in customized and refined work flow processes and in-house technology solutions. Utilize the full Vantage Software platform: Integrated system including Fund Accounting, Deal Manager, and Insight. A robust, customized solution for deal flow tracking, portfolio monitoring, and cash flow transfer execution, covering both due diligence investment activity. Enhanced reporting capabilities and data tracking, including unfunded balances, industry and sector level data, and customized transaction matrices.
MEKETA INVESTMENT GROUP 26 10.93 Water and Power Employees’ Retirement Plan Portfolio Management & Reporting: Investment Operations Overview
Program Monitoring & Review GPs are assigned to Private Markets Investment and Operations staff for continuous monitoring, covering over 800 partnerships and 14,000 documents annually: Includes daily document storage of financial statements, K-1s, and reports on a secure server. Operations and Investment staff prepare quarterly private markets program evaluations. Fund amendments, accounting, and legal compliance are actively monitored. Use of Vantage Fund Accounting system for various operations functions: Customized to meet client needs and build in-house reporting packages. Cash Flow Coordination Cash flows are managed internally, via Vantage Fund Accounting with a rigorous multi-step verification and approval process. Proactive coordination and communication seamlessly integrates cash flows to and from managers, along with foreign exchange and stock distribution processing. All cash flow transfers are confirmed and reconciled with General Partners and the custodian bank. Wire instructions and account numbers are monitored closely for changes to enhance security and execution, by a staff of 13 Operations and Investment Associates.
MEKETA INVESTMENT GROUP 27 10.94 Water and Power Employees’ Retirement Plan Portfolio Management & Reporting: Reporting
Private Markets Reporting
We provide comprehensive reports for our clients: Detailed investment performance, diversification analysis, and qualitative review. Quarterly, semi-annual and annual reports by Private Markets sector. Timely oral presentations from our Consultants and Private Markets staff.
Meketa provides General Partner cash flows and reports and timely news information available 24/7 in our secure, password-protected client access point on our client portal.
MEKETA INVESTMENT GROUP 28 10.95 Water and Power Employees’ Retirement Plan Portfolio Management & Reporting: Technology Platform
Private Markets Insight Portal We offer a sophisticated portal that allows clients to perform customized portfolio analysis and access critical information.
Portfolio Performance ∙ Calculate cumulative and periodic cash flow, valuation, performance multiples and IRRs, not only for a single portfolio, but in aggregate, across all of the Program’s portfolios. ∙ View statistics by vintage year, strategy, region, or general partner, and customize selections to determine value drivers and diversification. ∙ Export to Excel. Cash Flow Detail ∙ View individual cash flows for the portfolio or specific partnerships customizable by date. ∙ View cumulative net cash flow detail graphically. ∙ Export to Excel. Documents ∙ View and filter documents by document type and year. ∙ Download the documents for offline viewing, which include: – General Partner Financial Statements – Meketa Investment Memoranda – General Partner Quarterly Reports – Meketa Quarterly Client Reports – General Partner Capital Account Statements – Limited Partnership Agreements – Subscription Documents
MEKETA INVESTMENT GROUP 29 10.96 Water and Power Employees’ Retirement Plan Portfolio Management & Reporting: Technology Platform
Private Markets Research Portal We offer clients direct access to research produced by our private markets team in an easy-to- navigate environment to explore rich analysis of hundreds of Private Market investment opportunities launched each year. Fund Details ∙ Summary information, such as Asset Class, Strategy, Sub-strategy designations, target geographic market, fund size, and currency. ∙ Summary legal terms and strategy summary.
Proprietary Research ∙ Meketa-produced research report (“Phase I Review”) for each fund opportunity. ∙ Notes written by our team for each meeting taken (when available). ∙ Investment Memoranda, 50 to 80 pages in length, summarizing full due diligence (when available).
Deep Environment ∙ Over 600 new funds logged each year with Phase I Reviews available. ∙ Notes from over 500 meetings taken each year with fund managers.
MEKETA INVESTMENT GROUP 30 10.97 Summary
10.98 Water and Power Employees’ Retirement Plan Summary
Partnership We are an investment advisor, 100% independent and fully aligned with the success of our client’s portfolios.
Public Pension Plan Experience Meketa is a trusted advisor to some of the most sophisticated US public pension plans.
Resources Team of dedicated real estate advisory experts, with the support of a full private markets investment and operations team, plus support from the broader firm, including subject matter experts.
Due Diligence Expertise With over 24 years of real estate advisory experience on average, our client service team is practitioners, and is designed to provide exceptional support and creative solutions tailored to the Retirement Plan’s portfolios.
MEKETA INVESTMENT GROUP 32 10.99 Water and Power Employees’ Retirement Plan Summary
Thank you for the opportunity to meet with you and present our capabilities.
We are excited about the prospect of serving the Water and Power Employees’ Retirement Plan and believe we would be a great fit for your organization.
It would be an honor and a privilege to serve as your Real Estate consultant.
MEKETA INVESTMENT GROUP 33 10.100 Appendix
10.101 Water and Power Employees’ Retirement Plan Appendix: Biographies
Christy Fields – Managing Principal Ms. Fields has 29 years of industry experience and serves as a consultant and Head of Real Estate Portfolio Solutions. Ms. Fields has extensive experience and in structuring and analyzing real estate transactions, developing investment strategy, analyzing manager fees and performance, evaluating manager reporting practices, and supervising and negotiating workouts on behalf of her clients. Ms. Fields joined the firm in 2019 as part of the merger between Meketa and Pension Consulting Alliance (PCA) and is a member of the firm’s Board of Directors, Investment Policy, and Private Markets Policy and Research Committees. Prior to joining PCA, Ms. Fields was a Senior Consultant with PriceWaterhouseCoopers’ (PwC) Real Estate Consulting Services Group based out of Honolulu where she specialized in real estate investment analysis, lease negotiations, property and small business appraisal, property level acquisition due diligence, and tourism and master planning studies. While at PwC, Ms. Fields was actively involved in several large RTC restructurings, including the 1,000+ asset Circle K portfolio. Ms. Fields received her Bachelor of Arts from Cornell University’s School of Hotel Administration and her Master of Business Administration from Yale University’s School of Management. Ms. Fields is an active member of numerous industry organizations and has participated as a speaker at Pension Real Estate Association (PREA), Private Equity Real Estate (PERE), National Council of Real Estate Investment Fiduciaries (NCREIF), Urban Land Institute (ULI), and several emerging manager conferences.
David Glickman – Executive Vice President Mr. Glickman joined the firm in 2019 as part of the merger between Meketa and Pension Consulting Alliance (PCA). With 50 years of institutional investing experience in the US and Europe, Mr. Glickman serves as a real estate consultant and focuses on commercial real estate debt and equity for pension and retirement system clients. From 2001 2005, Mr. Glickman was a Partner and Investment Committee Member of Apollo Real Estate Advisors, a sponsor of opportunistic comingled funds. From 1998 1999, he was Vice Chairman of Advisory Research, Inc., a registered investment advisor specializing in small cap value equity stocks and taxable and tax exempt fixed income securities. From 1994 1998, he was Chairman, CEO, and CIO of Ambassador Apartments, Inc. (NYSE: AAH), a public, value added REIT, whose IPO he led and which merged with AIMCO (NYSE:AIV) in 1998. From 1972 1992, he was Executive Vice President and Member of the Board of Directors and Investment Committee of Heitman Financial and President of Heitman Advisory Corporation, a Registered Investment Advisor, specializing in core real estate asset management for institutional investors in separate accounts and comingled funds. He founded Ambassador Capital Management, Inc., a registered investment advisor in 1991, specializing in publicly traded real estate related securities. Mr. Glickman is a Guest Lecturer in Real Estate at the Kellogg School of Management at Northwestern University. He has been an Illinois and Nevada licensed real estate broker, a Director/Trustee of the National Multifamily Housing Council (NMHC), Pension Real Estate Association (PREA), National Association of Real Estate Investment Trusts (NAREIT), F.W. Parker School, and the Menomonee Boys and Girls Club. He is a Trustee of the Hospice Giving Foundation of Monterey County and the Carmel International Film Festival. He is also on the Advisory Board of Institutional Real Estate, Inc. Mr. Glickman received his Bachelor of Arts in English from the University of Illinois Chicago.
MEKETA INVESTMENT GROUP 35 10.102 Water and Power Employees’ Retirement Plan Contact
CHICAGO One E Wacker Drive NEW YORK CITY Suite 1210 BOSTON 48 Wall Street, 11th Floor Chicago, IL 60601 80 University Avenue New York, NY 10005 LONDON Tel: 312.474.0900 Westwood, MA 02090 Tel: 212.918.4783 25 Green Street Tel: 781.471.3500 London W1K 7AX PORTLAND Tel: +44 (0)20.3841.6255 2175 NW Raleigh Street Suite 300A Portland, OR 97210 Tel: 503.226.1050
SALT LAKE CITY MIAMI LOS ANGELES 5200 Blue Lagoon Drive Suite 120 Miami, FL 33126 Tel: 305.341.2900
SANDIEGO 5796 Armada Drive, Suite 110 Carlsbad, CA 92008 Tel: 760.795.3450
HOUSTON
Offices Main Satellite
MEKETA INVESTMENT GROUP 36 10.103 StepStone Real Estate Presentation to Water & Power Employees’ Retirement Plan (“WPERP”)
FEBRUARY 2021 | CONFIDENTIAL
10.104 Disclosure
This document is meant only to provide a broad overview for discussion purposes. All information provided here is subject to change. This document is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation for any security, or as an offer to provide advisory or other services by StepStone Group LP, StepStone Group Real Assets LP, StepStone Group Real Estate LP, StepStone Conversus LLC, Swiss Capital Alternative Investments AG and StepStone Group Europe Alternative Investments Limited or their subsidiaries or affiliates (collectively, “StepStone”) in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this document should not be construed as financial or investment advice on any subject matter. StepStone expressly disclaims all liability in respect to actions taken based on any or all of the information in this document. This document is confidential and solely for the use of StepStone and the existing and potential clients of StepStone to whom it has been delivered, where permitted. By accepting delivery of this presentation, each recipient undertakes not to reproduce or distribute this presentation in whole or in part, nor to disclose any of its contents (except to its professional advisors), without the prior written consent of StepStone. While some information used in the presentation has been obtained from various published and unpublished sources considered to be reliable, StepStone does not guarantee its accuracy or completeness and accepts no liability for any direct or consequential losses arising from its use. Thus, all such information is subject to independent verification by prospective investors. The presentation is being made based on the understanding that each recipient has sufficient knowledge and experience to evaluate the merits and risks of investing in private market products. All expressions of opinion are intended solely as general market commentary and do not constitute investment advice or a guarantee of returns. All expressions of opinion are as of the date of this document, are subject to change without notice and may differ from views held by other businesses of StepStone. All valuations are based on current values calculated in accordance with StepStone’s Valuation Policies and may include both realized and unrealized investments. Due to the inherent uncertainty of valuation, the stated value may differ significantly from the value that would have been used had a ready market existed for all of the portfolio investments, and the difference could be material. The long-term value of these investments may be lesser or greater than the valuations provided. StepStone Group LP, its affiliates and employees are not in the business of providing tax, legal or accounting advice. Any tax-related statements contained in these materials are provided for illustration purposes only and cannot be relied upon for the purpose of avoiding tax penalties. Any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. Prospective investors should inform themselves and take appropriate advice as to any applicable legal requirements and any applicable taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments. Each prospective investor is urged to discuss any prospective investment with its legal, tax and regulatory advisors in order to make an independent determination of the suitability and consequences of such an investment. An investment involves a number of risks and there are conflicts of interest. Please refer to the risks and conflicts disclosed herein. Each of StepStone Group LP, StepStone Group Real Assets LP, StepStone Group Real Estate LP and StepStone Conversus LLC is an investment adviser registered with the Securities and Exchange Commission (“SEC”). StepStone Group Europe LLP is authorized and regulated by the Financial Conduct Authority, firm reference number 551580. StepStone Group Europe Alternative Investments Limited (“SGEAIL”) is an SEC Registered Investment Advisor and an Alternative Investment Fund Manager authorized by the Central Bank of Ireland and Swiss Capital Alternative Investments AG (“SCAI”) is an SEC Exempt Reporting Adviser and is licensed in Switzerland as an Asset Manager for Collective Investment Schemes by the Swiss Financial Markets Authority FINMA. Such registrations do not imply a certain level of skill or training and no inference to the contrary should be made. In relation to Switzerland only, this document may qualify as "advertising" in terms of Art. 68 of the Swiss Financial Services Act (FinSA). To the extent that financial instruments mentioned herein are offered to investors by SCAI, the prospectus/offering document and key information document (if applicable) of such financial instrument(s) can be obtained free of charge from SCAI or from the GP or investment manager of the relevant collective investment scheme(s). Further information about SCAI is available in the SCAI Information Booklet which is available from SCAI free of charge. All data is as of February 2021 unless otherwise noted. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. ACTUAL PERFORMANCE10.105 MAY VARY. Agenda
I. StepStone Real Estate Overview
II. StepStone Real Estate Capabilities
III. WPERP & StepStone Real Estate Relationship
• Appendix: Due Diligence Process
• Appendix: StepStone Real Estate Team Biographies
10.106 With You Today
JAY MORGAN, PARTNER, CLEVELAND Mr. Morgan is a member of the real estate team and focuses on various investment and portfolio management activities, and real estate market research. Prior to StepStone, Mr. Morgan was with Courtland Partners where he was the consultant to several state and sovereign pension plans, director of research, portfolio manager for the fund-of-funds platform and a member of the investment committee. Before that, he was a partner and head of research at Hartland & Co. Mr. Morgan received an MBA from Case Western Reserve University and a BS from Denison University.
MARGARET MCKNIGHT, PARTNER, SAN FRANCISCO Ms. McKnight is a member of the real estate team and focuses on various investment and portfolio management activities. Ms. McKnight spent more than a decade at Carlyle’s Metropolitan Real Estate, where she served as the co-Chief Investment Officer and was the fund head for Metropolitan’s Global Funds series. She was a Consultant with Cambridge Associates and held various roles with JP Morgan. Ms. McKnight sits on the Investment Committee for Sutter Health, the fifth largest US non-profit community-based healthcare provider and the Real Assets Investment Subcommittee for Swarthmore College. She recently served as a Senior Advisor to Juniper Square, focused on Capital Markets applications of their investment management software. Ms. McKnight graduated with high honors from Swarthmore College and earned an MBA from New York University.
THOMAS HESTER, MANAGING DIRECTOR, SAN FRANCISCO Mr. Hester is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Hester was a senior vice president at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. Previously, Mr. Hester was director of accounting and financial reporting and chief compliance officer at Mesa West Capital, and CFO at Somera Capital Management, both real estate investment managers. Mr. Hester previously held principal positions at the McMahan Group and Westwood Consulting Group and was a senior manager at Kenneth Leventhal & Company/Ernst & Young. Mr. Hester is a current member of the NCREIF PREA Reporting Standards Council. Mr. Hester received a BS from San Diego University and attended the University of California, Los Angeles, John E. Anderson Graduate School of Management.
CONFIDENTIAL | 4 10.107 I. STEPSTONE REAL ESTATE OVERVIEW
10.108 Attractive Fit with Mandate
StepStone Real Estate (“SRE”) has been providing advisory consulting services to WPERP since 2008; during this time, the Plan has outperformed its benchmark by 110 bps1, and we believe SRE is best-positioned to serve the Plan's investment objectives
EXPERIENCED DEDICATED TO COMPETITIVE COMMITMENT TO ADVISOR CLIENT SERVICE TECHNOLOGY PLATFORMS DIVERSITY & INCLUSION
• $96 billion of AUA, 80% US • Client-first culture with • Omni: Client performance • Dedicated senior team public pension plans2 emphasis on customized analytics & reporting system members and firm-wide • Capital commitments of over solutions • SPI™: Fund and manager committees with robust $13 billion to 50+ funds in • SRE professionals have database that tracks over guidelines and measurement both 2019 and 2020, and experience advising public 6,780 real estate funds and tools to drive outcomes over $8 billion to 50 funds in plans on investment policy, 2,750 GPs • Most full-time employees 2018 design and implementation own stock in the company
The referenced indices/benchmarks are shown for general market comparisons and are not meant to represent any particular fund. An investor cannot directly invest in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Past performance is not necessarily indicative of future results and there can be no assurance that the investment will achieve comparable results or avoid substantial losses. 1. Net performance figures for the 10 years ending September 30, 2020. The Plan's real estate performance is benchmarked against the NCREIF+50 index. See slide 22 for additional detail. CONFIDENTIAL | 6 2. AUA figures are as of September 30, 2020. Reflects final data for the prior period (June 30, 2020), adjusted10.109 for new client account activity through September 30, 2020. Does not include post- period investment or valuation activity. Commitment to Diversity & Inclusion
STEPSTONE’S KEY PROGRAMS & INITIATIVES KEY DIVERSITY & INCLUSION STATISTICS
DIVERSITY & INCLUSION STEPSTONE GROUP PARTNERSHIPS RECRUITMENT FEMALE PROFESSIONALS OUTREACH EXPANDED BENEFITS 39% 37% 19% KEY PROGRAMS & INITIATIVES JUNIOR LEVEL MID LEVEL SENIOR LEVEL
OVERALL STEPSTONE PROFESSIONALS MENTORING STEPSTONE DIVERSITY & SPONSORSHIP & INCLUSION PROGRAMS NETWORK 34% 34% 49% FEMALE MINORITIES OF EMPLOYEES ARE DIVERSE1
EXPANDED BENEFITS 2 • Paid parental leave STEPSTONE REAL ESTATE
• Paid travel for newborns and caretakers FEMALE PROFESSIONALS • Paid shipping of breast milk 21% 16% • Wellness rooms JUNIOR LEVEL MID & SENIOR LEVEL • Paid volunteer time off
STEPSTONE SPONSORSHIP PROGRAM OVERALL SRE PROFESSIONALS • Pairs promising mid-level women and minorities with a senior level partner 37% 22% 43% • Provides external coaching focused on management 1 and leadership FEMALE MINORITIES OF EMPLOYEES ARE DIVERSE
As of September 30, 2020. Employees considered minority based on location (Asia offices excludes Asian, São Paulo office excludes Latin Americans). CONFIDENTIAL | 7 1. Defined as minority and / or female. 10.110 2. Figures include Margaret McKnight, who joined SRE in November 2020. Global Presence with Deep Relationships
SRE has dedicated team members in 9 of StepStone’s 19 offices around the world, with 5 offices in North America, 2 in Europe and 2 in Asia, overseeing real estate investments for sophisticated institutional investors globally; over 200 StepStone professionals are based in California
AMERICAS EMEA ASIA-PACIFIC SRE Offices (SRE Professionals / StepStone Professionals)
LONDON (14 / 46) TORONTO (1 / 11) DUBLIN CLEVELAND (17) LUXEMBOURG (4 / 2) BEIJING (2 / 17) NEW YORK (12 / 89) ZURICH TOKYO SAN FRANCISCO (10) ROME SEOUL (1 / 3) CHARLOTTE LA JOLLA (6 / 194) HONG KONG
LIMA
SÃO PAULO PERTH SYDNEY
It is not known whether the listed clients approve or disapprove of StepStone or its services. Inclusion of a client on this list does not imply that the client endorses or recommends StepStone. Logos in CONFIDENTIAL | 8 color denote recent win. 10.111 Experienced Team with Diverse Skill Set
STEPSTONE REAL ESTATE TEAM MEMBER BACKGROUNDS
PARTNERS AVERAGE 20+ YEARS EXPERIENCE AS REAL ESTATE PRIVATE EQUITY & FINANCE PROFESSIONALS. THE THREE FOUNDING PARTNERS HAVE WORKED TOGETHER FOR ~15 YEARS
It is not known whether the firms listed above approve or disapprove of StepStone members. Inclusion of a firm does not imply that the firm endorses or recommends StepStone. CONFIDENTIAL | 9 10.112 StepStone Real Estate Professionals
64–MEMBER TEAM: 43 INVESTMENT-FOCUSED* | 24 SUPPORT PROFESSIONALS & SAN FRANCISCO NEW YORK LONDON CLEVELAND BEIJING SEOUL SENIOR ADVISORS | 300+ SHARED SERVICE PROFESIONALS
PARTNERS: 8
JEFF GILLER JOSH CLEVELAND BRENDAN MACDONALD KIERAN FARRELLY Head of SRE Partner, Head of EMEA Partner & COO Partner, Head of Market Research
MARGARET MCKNIGHT JAY MORGAN DEV SUBHASH JOHN WATERS Partner, Head of Investments RESEARCH & INVESTMENTS: 35* ALEX ABRAMS TOM HESTER ANDREW MITRO JEREMY GOLDBERG RICHARD LOWE LAIA MASSAGUE ROBERT MURPHY POOJA PATEL Managing Director Managing Director Managing Director Principal Principal Principal Principal Principal
ANJA RITCHIE MARC RIVITZ RANDY WANG* JOHN HONG* JEREMY COBIN ALEC DARBYSHIRE COLIN DONNELLY DREW IADANZA Principal Principal Principal Senior Vice President Vice President Vice President Vice President Vice President GERT-JAN ALANA KARMEINSKY GRAY LAYDEN JUSTIN THIBAULT IAIN GLEN OMAR HAMANI JAMES MAINA SERENA MANDRILE BREUKINK MOLES Vice President Vice President Senior Associate Senior Associate Senior Associate Senior Associate Senior Associate Senior Associate LEE SINGER TOM THORPE RUQING ZHOU* GRANT PALMER LYDIA COLIN CORY HARLESS DANIEL MARATI JACK WIERMAN Senior Associate Senior Associate Senior Associate Associate Senior Analyst Senior Analyst Senior Analyst Senior Analyst OMOLARA OYEDEJI GARRETT WINTER EMILY YU Analyst Analyst Analyst
SENIOR ADVISORS: 2 STEVE NOVICK BILL KRAUCH Senior Advisor Senior Advisor CONFIDENTIAL | 10 As of February 2021. 10.113 * Shared StepStone resource specifically allocated to SRE. StepStone Real Estate Professionals (continued)
DUBLIN SAN FRANCISCO NEW YORK CLEVELAND LA JOLLA TORONTO LUXEMBOURG
INVESTOR RELATIONS: 4 DAMI ALADE JULIE LIMPACH STEELE SUTPHIN ASHLEY HENRY Vice President Vice President Senior Analyst Analyst
PORTFOLIO ANALYTICS & REPORTING: 16
SUSAN YELIN CODY GROTH* THOMAS REDMOND* KRISTEN MOORE* ANDERSON SOUZA* GREG SEIFERT* IGOR MAJIC* ANGIE TAYLOR Managing Director Director Director Vice President Vice President Vice President Senior Associate Senior Associate
BRANDON D’AMICO* SHAAN COWASJEE* KYLE LEIMBACH* DUKE BECKER* JENNIFER NGUYEN SIDA OUYANG RAZIEL MORENO* RYAN REED Associate Associate Associate Senior Analyst Senior Analyst Senior Analyst Senior Analyst Analyst
LEGAL & COMPLIANCE: 4
JEREMY MATZ* MATT LAMBERT SIMON JOLY IAN McMAHON Partner, Head of Tax Deputy SRE General Counsel Legal Counsel Senior Tax Advisor
FINANCE & ADMINISTRATION: 13 SHEILA GIBSON* CHRISTOPHER GEORGESON DAN WOLNIK DEVIN MINKOFF* KATERINA KIOUSI PATRICIA KLEVE KATIE BADAR Partner, Head of Fund Director of Finance Director of Finance Director Controller Controller Senior Accounting Manager Accounting
BRITTANY BENNETT DAWN TANDO ALICE LIEU BRIAN FINTZ JEFF TORRESCANO JOANNA HUANG* Accounting Manager Accounting Manager Accounting Manager Senior Fund Accountant Senior Fund Accountant Accountant
SUPPORT PLATFORM INTEGRATED GLOBAL PRESENCE 300+ Professionals Americas, EMEA, Asia, & Australia
PORTFOLIO ANALYTICS OPERATIONAL DUE RISK MANAGEMENT INVESTOR RELATIONS ESG FINANCE LEGAL & REPORTING DILIGENCE
CONFIDENTIAL | 11 As of February 2021. 10.114 * Shared StepStone resource specifically allocated to SRE. II. STEPSTONE REAL ESTATE CAPABILITIES
10.115 Customized Advisory Solutions
Primary commitments to funds set the foundation of a strategic asset allocation plan, which can then be enhanced with secondaries
SOLUTIONS TAILORED TO THE SPECIFIC NEEDS OF EACH CLIENT
Strategic Asset Allocation Portfolio Pacing Sourcing Encourage collaboration on designing & Develop the right strategy & commitment Proactive sourcing process & in-depth implementing strategic, forward-looking pace to achieve targeted allocation & evaluation helps ensure successful deal portfolio allocations maintain a self-funding portfolio execution & customized portfolio solutions
Manager Selection Due Diligence Pipeline Identifying, measuring & assessing all relevant Conduct meetings & calls with GPs annually Utilize a research-intensive investment approach operational risk exposure & ESG considerations building a robust pipeline of investment identifying managers with differentiated approaches for each investment opportunity opportunities or who we believe to be best positioned to outperform the market
UNDERPINNED WITH SOPHISTICATED TECHNOLOGY SYSTEMS AND ANALYTICAL TOOLS
OMNI SPI Client reporting and performance measurement Manager / Fund research due diligence • Portfolio analytics • Performance & benchmarking • Performance measurement & analysis • Fund attributes & terms • Monitoring & reporting • Meeting notes, fund summaries, CONFIDENTIAL | 13 10.116 DD reports Real Estate Specialized Coverage
SRE’s team is organized into specialized teams to ensure comprehensive coverage of the real estate market across fund investments and secondaries in order to enhance sourcing and underwriting capabilities
SRE INVESTMENT TEAM MEMBER LOCATIONS
EUROPE 14
SECTOR NORTH ASIA RESEARCH & AMERICA PACIFIC ANALYSIS 26 3*
DUE DILIGENCE & INVESTMENT ANALYSIS PROACTIVE INVESTMENT SPECIALIZED SECTOR COVERAGE SOURCING
LARGE CAP MEDIUM / SMALL CAP CORE / CORE PLUS CREDIT NORTH AMERICA VA / OPPORTUNISTIC VA / OPPORTUNISTIC
LARGE CAP MEDIUM / SMALL CAP CORE / CORE PLUS CREDIT EUROPE VA / OPPORTUNISTIC VA / OPPORTUNISTIC
REST OF WORLD ASIA LATIN AMERICA
As of February 2021. CONFIDENTIAL | 14 * Shared StepStone resource specifically allocated to SRE. 10.117 Fund Advisory Experience
SRE has advised clients and recommended $115B+ of client capital commitments to over 600 funds since 2000
STRATEGY GEOGRAPHY 1% 5% 5% 11% Opportunistic 15% North America 36% Value-Add Europe Core / Core+ 24% Real Estate Credit Asia Pacific Multimanager Latin America 24% 78%
By amount approved. Europe includes MENA.
REAL ESTATE PRIMARY ACTIVITY
INITIAL REVIEW 1,800+ Funds $2,275B+ FURTHER REVIEW 700+ Funds Capital Screened & DILIGENCE 3,900+ 1,100+ FINAL DUE 640+ Funds DILIGENCE Meetings GPs
APPROVED 600+ Funds
All data as of September 30, 2020. Reflects total primary fund investments screened since 2000. CONFIDENTIAL | 15 10.118 Data-Driven Investment Decisions
StepStone leverages its proprietary suite of integrated data and technology solutions to enhance the investment process; WPERP has uninterrupted access to these platforms
STEPSTONE’S INVESTMENT PROCESS: DATA SCIENCE & ENGINEERING
PACING Forecast portfolio cash flow and determine future investment allocations to create a plan for reaching target allocation, anticipate liquidity needs, and assist with cash management and planning
SPI™ Comprehensive access to due diligence and research, including fund summaries, investment memos, track record analysis, and benchmarks
OMNI In-depth analysis on portfolio and underlying investments: J- curve and cash flow analysis, time period analysis, and PME analysis
CONFIDENTIAL | 16 10.119 Real Estate Investment Committees
REAL ESTATE PRIVATE EQUITY REAL ESTATE PRIVATE DEBT
FUNDS IC FUNDS IC
• Jeff Giller (Chair) • Margaret McKnight • Jeff Giller (SRE, Chair) • John Bohill (Private Debt)
• Dev Subhash • Jay Morgan • Josh Cleveland (SRE) • David Jeffrey (Private Equity) • Meinard Wysern (Private • Kieran Farrelly • Andrew Mitro • Andrew Mitro (SRE) Debt) • Josh Cleveland / Brendan • Tom Hester • Tom Hester (SRE) MacDonald / John Waters1
ACTIVE INVESTMENTS IC FUNDS IC
• Jeff Giller (Chair) • Josh Cleveland • Jeff Giller (SRE, Chair) • John Bohill (Private Debt)
• Brendan MacDonald • Dev Subhash • Josh Cleveland (SRE) • David Jeffrey (Private Equity) • Meinard Wysern (Private • John Waters • Andrew Mitro (SRE) Debt)
OBSERVERS OBSERVERS
• Tom Keck (StepStone Head of Research) • Dev Subhash (SRE) • Laia Massague (SRE)
DECISIONS ARE MADE BY TWO-THIRDS MAJORITY CONSENT
Bold text denotes proposed WPERP lead advisor. CONFIDENTIAL | 17 1. Collectively hold a single seat on a four-month rotational basis. 10.120 III. WPERP & STEPSTONE REAL ESTATE RELATIONSHIP
10.121 Proposed WPERP Team
SECONDARY ROLE YEARS OF INVESTMENT CLIENT PORTFOLIO INVESTMENT DUE MANAGER PRIMARY ROLE EXPERIENCE COMMITTEE MANAGER CONSTRUCTION DILIGENCE RESEARCH
JAY MORGAN Co-Portfolio Partner 29 Manager P P P US
TOM HESTER Co-Portfolio Managing Director 35 Manager P P P P P US
JAMES MAINA Portfolio Senior Associate 7 Management P P P US Support
SUPPORT PLATFORM INTEGRATED GLOBAL PRESENCE 300+ Professionals Americas, EMEA, Asia, & Australia
PORTFOLIO ANALYTICS & INVESTOR RELATIONS ASSET MANAGEMENT RESEARCH / DUE DILIGENCE LEGAL / RISK MANAGEMENT FINANCE / ACCOUNTING REPORTING (4 SRE Professionals) (4 SRE Professionals) (41 SRE Professionals*) (3 SRE Professionals) (10 SRE Professionals) (5 SRE Professionals)
As of February 2021. CONFIDENTIAL | 19 * Includes three shared StepStone resources based in Asia that are specifically allocated to SRE. 10.122 WPERP & StepStone Relationship
StepStone views WPERP as an important, strategic client and would be pleased to continue providing integrated services across real estate and private equity
HISTORICAL COLLABORATIVE PARTNERSHIP APPROACH
• Integrated client across real estate & private • WPERP is a subscriber to StepStone’s SPI™ equity database, featuring information on 33,000 funds (over 6,780 dedicated to real estate) • SRE’s predecessor firm, Courtland Partners, began advising WPERP in 2008 • Access provides the WPERP staff with GP profiles, meeting notes, market analysis and • StepStone became WPERP’s private equity the perspectives of StepStone’s global team advisor in 2018
STEPSTONE VIEWS WPERP AS A KEY CLIENT RELATIONSHIP
CONFIDENTIAL | 20 10.123 Benefits of the StepStone Relationship
StepStone is able to offer an integrated suite of services to WPERP across multiple asset classes at no incremental cost
FUNDS MARKET MAPS GLOBAL SCALE MONITORING & ESG SECONDARIES RESEARCH REPORTS PRIVATE MARKETS REPORTING DIVERSITY & INCLUSION CO-INVESTMENTS INVESTMENT MEMOS SPECIALIZED SECTORS SPI™ COMMUNITY
INVESTMENT RESEARC H INVESTMENT ADDITIONAL RESPONSIBLE STRATEGY CAPABILITIES SOURCING SERVICES INVESTING
Active investor across Deep market With a global footprint StepStone combines StepStone utilizes all investment intelligence coupled and focused investment strategic clarity and responsible investing strategies; provides with thorough teams, StepStone can tactical flexibility to practices in the StepStone meaningful investment analysis generate a help deliver additional investment process insights into GPs, their promotes the creation comprehensive pipeline services to clients such and is strongly portfolios, return of complex private for all investment as our monitoring & committed to having a prospects and direct market portfolios strategies within private reporting services and well-rounded, assets markets SPI™ research platform inclusive workplace
CONFIDENTIAL | 21 10.124 SRE Has Advised on 10 Years of WPERP Outperformance
CORE MANAGERS VS. ODCE INDEX • SRE has overseen over $1.8 billion of commitments to 24 15% 14.5% real estate managers
• These commitments have resulted in 110 bps of 10% 7.7% outperformance relative to the Plan’s benchmark 6.1% 5.0% 5% 4.1% • Five of seven core managers, representing over 72% of core 3.5% 2.9% NAV, have outperformed the ODCE Index1 0% • The majority of non-core commitments have resulted in 1st Prologis FPA Core Plus Harrison Prudential Invesco Core JP Morgan Jamestown Targeted US Fund III Street Core PRISA Real Estate- Strategic Premier and 2nd quartile performance relative to peers Logistics Fund Property Fund USA Property FundProperty Fund 3Yr Net ODCE 3 Yr Net
TOTAL REAL ESTATE PORTFOLIO NET RETURNS VS. PLAN BENCHMARK QUARTILE RANKING OF NON-CORE COMMITMENTS2
15% 40% 13.3% 34.2% 32.8% 11.0% 9.6% 9.9% 30% 10% 7.8% 7.5% 6.8% 20.9% 5.9% 5.6% 20% 5% 12.0%
10%
0% 3 Years 5 Years 10 Years 0% WPERP Gross Performance WPERP Net Performance ODCENCREIF Index + 50 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile
All data as of September 30, 2020. The referenced indices are shown for general market comparisons and are not meant to represent any particular fund. An investor cannot directly invest in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Past performance is not necessarily indicative of future results and there can be no assurance that the investment will achieve comparable results or avoid substantial losses. CONFIDENTIAL | 22 1. Does not include REIT accounts or core-plus investments held less than three years. 10.125 2. Utilizes the Private iQ Real Estate Benchmarks (Global) – Net IRR. Consistent Value-Add Advisory Performance
SRE has provided measurable, value-add services to WPERP since 2008; selected case studies below
2008 MESA WEST REAL ESTATE INCOME FUND II • SRE was early in identifying the defensive attractiveness of income-focused private debt funds and best-in-class managers
• WPERP’s first commitment provided a 13.3% net IRR, comprised primarily of current income
2011 DRA GROWTH & INCOME FUND VII • In 2007, SRE identified DRA Advisors as a value-add equity manager, capable of generating exceptional income returns
• WPERP’s first commitment has generated a 21.1% net IRR to date, with roughly half the return comprised of current income
2014 PROLOGIS TARGETED US LOGISTICS FUND • SRE identified and capitalized early on the rapid, structural changes in retail supply chains towards logistics and the best managers in the sector
• This high-conviction industry leader has generated significant equity value, producing 16.1% net IRR to date for WPERP, with only 21% leverage
2018 TORCHLIGHT DEBT OPPORTUNITY FUND VI • Backed by the strength and breadth of its platform, SRE routinely negotiates proprietary fee breaks with best-in-class managers
• Negotiating both early-mover and commitment aggregation management fee discounts, SRE has reduced WPERP’s annual management fees payable from 1.50% to 1.128%
Performance figures as of September 30, 2020. Past performance is not necessarily indicative of future results and there can be no assurance that the investment will achieve comparable CONFIDENTIAL | 23 results or avoid substantial losses. 10.126 APPENDIX: DUE DILIGENCE PROCESS
10.127 Investment Process Overview
StepStone’s global reach, extensive research, and analysis power our investment process
PHASE INPUT ACTION OUTPUT SOURCING RESEARCH VERTICAL ASSIGNED INITIAL REVIEW INITIAL REVIEW
DEAL/STRATEGY TEAM DISCUSSION SPI™ Market Maps Research Reports
EVALUATION INVESTMENT SUMMARY FURTHER REVIEW GP MEETING
INVESTMENT COMMITTEE DISCUSSION Fund Summary IC Briefing
9,000 1.1x 8,000 DUE DILIGENCE -1,684 7,000 0.3x 2,085 3.5x 1.7x 570 -702 3.3x 6,000 -0.9x -0.2x FORMAL DUE DILIGENCE -0.4x 5,000 3,187 4,000
US$ millionsUS$ in 0.6x 3,000 6,472 1.0x 1,161 2,000 1,000 1,855 BUSINESS, OPERATIONAL & LEGAL DUE DILIGENCE 0 Invested Revenue EBITDA Market GP Acquisition Post- Total Excluded Realized Capital Growth Margin EBITDA EBITDA Leverage Acquisition Value Deals Track (25%) Expansion Multiple Multiple (45%) Leveraging Record (69%) Expansion Contraction (-36%) (12%) (-15%) ONSITE MEETING DIR Analysis Track Record Analysis INVESTMENT COMMITTEE DISCUSSION Due Diligence Questionnaire
EXECUTION INVESTMENT MEMO/ ANALYSIS TO INVESTOR FINAL APPROVAL LEGAL DOCUMENTS ONGOING LEGAL NEGOTIATIONS/ INVESTMENT CLOSE
Investment Investment Memo Analysis
For illustrative purposes only and does not constitute investment recommendations; process may differ by strategy. CONFIDENTIAL | 25 10.128 Due Diligence Overview
StepStone utilizes the power of its global platform, extensive research and database-enabled analysis to support our investment process
FOCUS DESIRED ATTRIBUTES STEPSTONE ANALYSIS
TEAM / PLATFORM • Length and quality of relevant experience • Spend time getting to know firm management
• Team cohesiveness and integrity of leadership • Extensive reference calls (on and off list)
• Network: ability to source deals and add value • Detailed review of legacy portfolio responsibilities
• Capacity: AUM per partner, board responsibilities • Gauge ability to deploy capital effectively
STRATEGY • Competitive advantages for attractive market opportunity • StepStone proprietary market research
• Evidence of proprietary deal access • StepStone periodic industry reviews
• Clear evidence of future sustainability • Extensive reference calls (on and off list)
• Consistent investment style with ability to adapt to changing market conditions
PERFORMANCE • Length and attribution of track record • StepStone proprietary analysis
• Consistent outperformance • Benchmarking
• Low loss ratio • Reviews of case studies
• Expertise across markets, property types, deal size
STRUCTURE • Appropriate legal documentation of firm and fund entities • StepStone thorough legal due diligence review
• Fair and compelling economic incentives • Identify checks & balances, policies & procedures
• Clean record of outstanding claims and litigation • Identify “deal killers” in advance of negotiations
CONFIDENTIAL | 26 10.129 APPENDIX: STEPSTONE REAL ESTATE TEAM BIOGRAPHIES
10.130 ADVISORY & INVESTMENT TEAM
10.131 Biographies
JEFF GILLER, PARTNER, HEAD OF STEPSTONE REAL ESTATE, SAN FRANCISCO Mr. Giller leads StepStone’s global real estate activities. He is also involved in the firm’s diversity initiative, as well as various investment and management activities. Prior to StepStone, Mr. Giller was a founder, managing partner and the chief investment officer at Clairvue Capital Partners, a real estate manager which integrated with StepStone to establish StepStone Real Estate. Before that he was a managing principal and chief investment officer at Liquid Realty Partners, an investment manager focused on real estate secondaries. Mr. Giller has also held senior positions in other real estate private equity investment firms in the US and Europe such as JER Partners and Somera Capital Management. Mr. Giller received an AB from the University of California at Berkley and an MBA from the University of Virginia.
JOSH CLEVELAND, PARTNER, HEAD OF EMEA, LONDON Mr. Cleveland is a member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. Prior to StepStone, Mr. Cleveland was a partner at Clairvue Capital Partners, a real estate investment manager which integrated with StepStone to establish StepStone Real Estate. At Clairvue, Mr. Cleveland focused on originating and executing investments in the US and Europe. Before Clairvue, he was a director at Liquid Realty Partners, an investment manager focused on real estate private equity secondaries. He has also served as a vice president at Capital Dynamics, a Swiss-based private equity manager, and worked in the debt capital markets divisions of Credit Suisse First Boston and Bank of America. Mr. Cleveland received a BA from the University of South Carolina.
BRENDAN MACDONALD, PARTNER, CHIEF OPERATING OFFICER, SAN FRANCISCO Mr. MacDonald is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. MacDonald was a founding partner at Clairvue Capital Partners, a real estate investment manager which integrated with StepStone to establish StepStone Real Estate. At Clairvue, he was an investment committee member and sourced, underwrote, and managed investments in the US, Europe, and Latin America. Before Clairvue, he was a director at Liquid Realty Partners, an investment manager focused on real estate private equity secondaries. Mr. MacDonald received a BS from Indiana University and an MBA from Harvard Business School.
KIERAN FARRELLY, PARTNER, HEAD OF MARKET RESEARCH, LONDON Mr. Farrelly is a member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. Prior to StepStone, Mr. Farrelly was a principal at the Townsend Group and a director at CBRE Global Investment Partners where he focused on client portfolio management and investment activity including primaries, secondaries and programmatic ventures. Previously, Mr. Farrelly was a research analyst with M&G Real Estate. Mr. Farrelly received a PhD in Real Estate and Planning from the University of Reading, a master’s in Economics from the University of Warwick, and is a CFA charter holder. CONFIDENTIAL | 29 10.132 Biographies
MARGARET MCKNIGHT, PARTNER, SAN FRANCISCO Ms. McKnight is a member of the real estate team and focuses on various investment and portfolio management activities. Ms. McKnight spent more than a decade at Carlyle’s Metropolitan Real Estate, where she served as the co-Chief Investment Officer and was the fund head for Metropolitan’s Global Funds series. She was a Consultant with Cambridge Associates and held various roles with JP Morgan. Ms. McKnight sits on the Investment Committee for Sutter Health, the fifth largest US non-profit community-based healthcare provider and the Real Assets Investment Subcommittee for Swarthmore College. She recently served as a Senior Advisor to Juniper Square, focused on Capital Markets applications of their investment management software. Ms. McKnight graduated with high honors from Swarthmore College and earned an MBA from New York University.
JAY MORGAN, PARTNER, CLEVELAND Mr. Morgan is a member of the real estate team and focuses on various investment and portfolio management activities, and real estate market research. Prior to StepStone, Mr. Morgan was with Courtland Partners where he was the consultant to several state and sovereign pension plans, director of research, portfolio manager for the fund-of-funds platform and a member of the investment committee. Before that, he was a partner and head of research at Hartland & Co. Mr. Morgan received an MBA from Case Western Reserve University and a BS from Denison University.
DEV SUBHASH, PARTNER, NEW YORK Mr. Subhash is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Subhash was regional portfolio manager for Cohen & Steers Global Realty Partners, a real estate investment manager that focused on private real estate funds and co-investments. Before that he was co-portfolio manager for Citi Real Estate Partners, where he sourced, underwrote, and managed investments in private real estate funds. He has also served as a vice president for global product development at Citi Alternative Investments and worked in corporate strategy roles for Citigroup. Mr. Subhash received a BA from Johns Hopkins University.
JOHN WATERS, PARTNER, HEAD OF INVESTMENTS, SAN FRANCISCO Mr. Waters is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Waters was a vice president at Clairvue Capital Partners, a real estate investment manager which integrated with StepStone to establish StepStone Real Estate. At Clairvue, Mr. Waters focused on sourcing, underwriting and managing investments in the US and Europe. Prior to Clairvue, Mr. Waters was an acquisitions associate at Starwood Capital Group, a leading global private equity firm, where he focused on underwriting investments for the firm’s opportunity and debt funds. Before that he spent over two years as an analyst in the real estate investment banking group at Banc of America Securities, working on a variety of M&A transactions. Mr. Waters received a BBA from the University of Georgia. CONFIDENTIAL | 30 10.133 Biographies
STEVEN NOVICK, SENIOR ADVISOR, CLEVELAND Mr. Novick is a member of the real estate team and is also involved in various management, client relations, and investment and portfolio management activities. Prior to StepStone, Mr. Novick was managing principal at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. Previously, Mr. Novick was a partner with an investment management firm based in Philadelphia. He has also held several senior positions in real estate over a 40-year career. Mr. Novick received a BS from Long Island University and a CPM from the Institute of Real Estate Management.
BILL KRAUCH, SENIOR ADVISOR, SAN FRANCISCO Mr. Krauch is a senior advisor to the StepStone Real Estate team focused on business development initiatives. Prior to StepStone, Mr. Krauch has held senior level executive positions with TCW Realty Advisors, ING Clarion, Bentall Kennedy and as Senior Advisor to Paladin Realty. Responsibilities have included leadership positions in acquisitions, asset and portfolio management, marketing client relations, product development, investment committees, and operating/management committees. Mr. Krauch received a BS in Business from the University of California, Los Angeles.
ALEX ABRAMS, MANAGING DIRECTOR, NEW YORK Mr. Abrams is a member of the real estate team and focuses on acquisitions and sourcing. Prior to StepStone, Mr. Abrams was a principal at GCM Grosvenor, where he focused on business development for its real estate primary funds and co-investment businesses (previously part of Credit Suisse as the Customized Fund Investment Group). Before that he was an associate attorney at Goodwin Procter and Orrick where he focused on private real estate investments and fund formation. Mr. Abrams received a JD from Boston College Law School and a BA from the University of Pennsylvania.
THOMAS HESTER, MANAGING DIRECTOR, SAN FRANCISCO Mr. Hester is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Hester was a senior vice president at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. Previously, Mr. Hester was director of accounting and financial reporting and chief compliance officer at Mesa West Capital, and CFO at Somera Capital Management, both real estate investment managers. Mr. Hester previously held principal positions at the McMahan Group and Westwood Consulting Group and was a senior manager at Kenneth Leventhal & Company/Ernst & Young. Mr. Hester is a current member of the NCREIF PREA Reporting Standards Council. Mr. Hester received a BS from San Diego University and attended the University of California, Los Angeles, John E. Anderson Graduate School of Management. CONFIDENTIAL | 31 10.134 Biographies
ANDREW MITRO, MANAGING DIRECTOR, CLEVELAND Mr. Mitro is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Mitro was a senior vice president at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. Mr. Mitro was responsible for providing investment consulting services to Courtland clients and has significant experience working with clients based outside the United States. Mr. Mitro received an MBA from Case Western Reserve University and a BA from Ohio State University.
JEREMY GOLDBERG, PRINCIPAL, CLEVELAND Mr. Goldberg is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Goldberg was a senior vice president at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. Prior to Courtland, Mr. Goldberg led the corporate finance and investor relations efforts for Associated Estates Realty Corporation, a publicly traded multifamily REIT. Before that, he spent over 12 years in the banking industry, working in a variety of roles. Mr. Goldberg received an MBA from Case Western Reserve University and a bachelor’s degree from the University of Michigan.
RICHARD LOWE, PRINCIPAL, LONDON Mr. Lowe is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Lowe was a Vice President in the Ares Real Estate Group, where he focused on European real estate equity. Prior to joining Ares in 2013, Mr. Lowe was an Associate at AREA Property Partners. Previously, Mr. Lowe was a Business Assurance Executive at BDO LLP. Mr. Lowe received a M.Eng. from the University of Bristol in Aerospace Engineering and is an ICAEW Chartered Accountant (ACA).
LAIA MASSAGUE, PRINCIPAL, LONDON Ms. Massague is a member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. Prior to StepStone, Ms. Massague worked with the real estate finance fund at GAM International where she was responsible for the conception, structure and execution of real estate investments across the UK and Europe. Before that she was a vice president in real estate debt advisory at the Blackstone Group. Ms. Massague received an MBA from the Wharton School at the University of Pennsylvania and a dual BS from MIT.
CONFIDENTIAL | 32 10.135 Biographies
ROBERT MURPHY, PRINCIPAL, LONDON Mr. Murphy is a member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. Prior to StepStone, Mr. Murphy was an assistant vice president at Partners Group, a private markets investment manager. Before that he was an executive in Ernst & Young’s real estate corporate finance team. Before Ernst & Young, Mr. Murphy worked as an investment analyst at the Irish National Pensions Reserve Fund. Mr. Murphy received a master’s degree in finance from the University College Dublin and is a CFA charter holder.
POOJA PATEL, PRINCIPAL, LONDON Ms. Patel is a member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. She is also involved in the firm’s ESG initiative. Prior to StepStone, Ms. Patel worked in the Corporate Development Group at AT&T where she was involved in strategic projects, including acquisitions and divestitures, across the company's business lines. Previously, Ms. Patel spent three years working in investment banking at Houlihan Lokey where she helped execute M&A, financing and restructuring engagements for clients in real estate and a number of different industries. Ms. Patel received an MBA from Harvard Business School and a BS from the Wharton School at the University of Pennsylvania.
ANJA RITCHIE, PRINCIPAL, LONDON Mrs. Ritchie is a member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. Prior to joining StepStone, Mrs. Ritchie worked at Cara Investment GmbH, a Germany-based family office, where she was responsible for the firm’s Private Equity and Real Estate fund selection. Prior to joining Cara Investment GmbH in 2013, she was a Senior Analyst Alternative Investments at Bank of Oklahoma after starting her career at ClearRidge, a boutique corporate advisory firm in the United States. Mrs. Ritchie holds a master’s degree in Management from HHL-Leipzig Graduate School of Management and a bachelor’s degree in International Business Administration from the European University Viadrina. She is also a CAIA charterholder.
MARC RIVITZ, PRINCIPAL, CLEVELAND Mr. Rivitz is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Rivitz was senior vice president at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. At Courtland, Mr. Rivitz led the firm’s Latin American and timber practices and was the portfolio manager for the fund-of- funds platform. Previously, he was the capital markets manager for investment sales at the Trammell Crow Company (now CBRE), focused on the Mid-Atlantic region. Before that, Mr. Rivitz worked at Tishman Speyer Properties in São Paulo, Brazil. Mr. Rivitz received an International MBA from the University of Chicago and a BA from Cornell University.
CONFIDENTIAL | 33 10.136 Biographies
RANDY WANG, PRINCIPAL, BEIJING Mr. Wang is a member of the real estate team as well as the private equity team, focusing on co-investments, private equity and venture capital managers, and real estate investments across the Asia-Pacific. Prior to StepStone, Mr. Wang was an investment analyst at CloudAlpha Capital Management, a TMT-focused equities fund. Before that he was in the Investment Banking division at Morgan Stanley New York, covering the natural resources and basic materials sectors. Mr. Wang graduated cum laude from Princeton University.
JOHN HONG, SENIOR VICE PRESIDENT, SEOUL Mr. Hong is a member of the Asia team, focusing on investments and business development primarily in South Korea. Prior to joining StepStone, Mr. Hong was a vice president at IGIS Asset Management Co., Ltd., where he focused on real estate, acquisition and asset management. Before that, Mr. Hong was a senior executive at Mapletree Korea Management Co., Ltd., where he was responsible for asset management of the Korea portfolio. Mr. Hong received a BS in mathematics with a minor in physics from the College of William and Mary.
JEREMY COBIN, VICE PRESIDENT, NEW YORK Mr. Cobin is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Cobin worked at Portfolio Advisors where he focused on real estate fund investments, secondaries and co-investments. Previously, Mr. Cobin worked at Savills and Eastdil Secured where he contributed to a variety of investment advisory transactions. Before that he was a member of the capital markets intelligence group at Thomson Financial. Mr. Cobin received an AB from Dartmouth College.
ALEC DARBYSHIRE, VICE PRESIDENT, SAN FRANCISCO Mr. Darbyshire is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Darbyshire worked at Wells Fargo, where he focused on underwriting and structuring real estate debt across geographies and asset classes. Previously, he spent time in the asset management group at W.P. Carey and was a Senior Asset Manager focusing on direct real estate investments at Morgan Stanley. Mr. Darbyshire received a BA from the University of Virginia.
CONFIDENTIAL | 34 10.137 Biographies
COLIN DONNELLY, VICE PRESIDENT, SAN FRANCISCO Mr. Donnelly is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Donnelly was a senior investment associate at RealtyShares. Before that, Mr. Donnelly was the marketplace director at IfOnly, a technology platform for incredible experiences. Previously, Mr. Donnelly worked at Binswanger Management Corporation in Philadelphia focusing on commercial real estate in New Jersey and Pennsylvania. Mr. Donnelly received a BS in economics from the Wharton School of business at the University of Pennsylvania.
DREW IADANZA, VICE PRESIDENT, SAN FRANCISCO Mr. Iadanza is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Iadanza was a vice president at Pebb Capital Management where he focused on underwriting and structuring real estate acquisitions across geographies and asset classes. Previously, Mr. Iadanza was an analyst at the Baupost Group within their private investment valuation team. Before that, Mr. Iadanza was a senior consultant within PwC’s financial services asset management vertical. Mr. Iadanza received a BS in business administration from Stonehill College and an MS in real estate finance and development from Georgetown University.
GRAY LAYDEN, VICE PRESIDENT, SAN FRANCISCO Mr. Layden is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Layden worked as an analyst in the US Real Estate Group at Goldman Sachs, where he focused on acquisitions underwriting and structured finance for a variety of product types. Mr. Layden received a BS from the University of Virginia.
JUSTIN THIBAULT, VICE PRESIDENT, CLEVELAND Mr. Thibault is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Thibault was a consultant at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. Previously, Mr. Thibault was employed with Charles Schwab & Co., Inc. as a senior consultant, where he provided an array of portfolio management and investment services to the firm’s high net worth clientele. Mr. Thibault received a BS from Indiana University and is a CFA charter holder.
CONFIDENTIAL | 35 10.138 Biographies
GERT-JAN BREUKINK, SENIOR ASSOCIATE, LONDON Mr. Breukink is member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. Prior to StepStone, Mr. Breukink worked as an associate as well as an analyst with European acquisitions at Heitman, a global real estate investment management firm with $36B in assets under management. Before that he was a real estate private equity intern with Orange Capital Partners. Mr. Breukink received a BSc from Erasmus University Rotterdam and completed the corporate finance and private equity program at the London Business school.
IAIN GLEN, SENIOR ASSOCIATE, LONDON Mr. Glen is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to joining StepStone, Mr. Glen worked at Tyndaris Real Estate, where he was responsible for the management of the fund’s European real estate debt investments. Prior to joining Tyndaris in 2017, he was an associate at Hudson Advisors (Lone Star Funds) and begun his career in RBS’ Real Estate Restructuring department. Mr. Glen holds a MA (Hons) from the University of St. Andrews in international relations and philosophy.
OMAR HAMANI, SENIOR ASSOCIATE, NEW YORK Mr. Hamani is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Hamani was an associate in the real estate consulting group at Deloitte Transactions and Business Analytics, LLP. Before that, Mr. Hamani worked as an associate with the investment banking and capital markets group at The Greenwich Group International. Mr. Hamani received an MS in Real Estate Finance & Investment from New York University and an MS in finance from Laval University. Mr. Hamani is also a CFA charter holder.
ALANA KARMEINSKY MOLES, SENIOR ASSOCIATE, LONDON Ms. Karmeinsky is a member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. Prior to StepStone, Ms. Karmeinsky was an investment banking associate director at UBS in London, where she worked on the real estate, lodging & leisure, and the financial institutions group teams. Ms. Karmeinsky helped execute M&A and financing deals for clients across the EMEA region. Previously, Ms. Karmeinsky interned at UBS in London and Zurich, at Arthur D. Little Strategy Consulting in Madrid and at Google in Dublin. Ms. Karmeinsky received a BBA from ESADE University in Barcelona and attended Babson College in Boston as an exchange student. Ms. Karmeinsky also received a certificate from Cornell University in hotel real estate investments and asset management. CONFIDENTIAL | 36 10.139 Biographies
JAMES MAINA, SENIOR ASSOCIATE, NEW YORK Mr. Maina is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to joining StepStone full time, Mr. Maina was an intern for the firm, supporting the real estate and investor relations teams. Before that he was a real estate financial analyst Intern at University of Virginia Foundation in Charlottesville, Virginia and an investment banking summer analyst at Akemi Capital in New York. Mr. Maina received a BS from the University of Virginia.
SERENA MANDRILE, SENIOR ASSOCIATE, LONDON Ms. Mandrile is a member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. Prior to StepStone, Ms. Mandrile was an equity research associate at Morgan Stanley, where she performed fundamental analysis on the largest European listed property companies. Before that she worked as a business development intern for Sorin Group SRL, a medical device company. Ms. Mandrile received a BS from Universita degli Studi di Torino and her MS from ESCP Europe.
LEE SINGER, SENIOR ASSOCIATE, NEW YORK Mr. Singer is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Singer was an investment analyst at the Cornell University Investment Office, where he assisted in managing the university’s endowment and conducting due diligence on prospective private equity, resource-related and real estate managers. Mr. Singer received a BA from Cornell University.
TOM THORPE, SENIOR ASSOCIATE, LONDON Mr. Thorpe is a member of the real estate team and focuses on various investment and portfolio management activities, particularly in the European markets. Prior to StepStone, Mr. Thorpe was an Equity Research Associate at Evercore ISI, where he covered the global automotive space since 2016. Mr. Thorpe received a MA (Hons) degree in Economics with Finance from the University of Edinburgh.
CONFIDENTIAL | 37 10.140 Biographies
RUQING ZHOU, SENIOR ASSOCIATE, BEIJING Ms. Zhou is a member of the real estate team. Prior to joining StepStone, Ms. Zhou was an analyst senior at BDA Partners, a boutique investment bank specializing on cross-border M&A transactions, where she gained transactional experience in the education, consumer, and industrial sectors and conducted valuations for private equity and venture capital firms. Ms. Zhou received a Master’s degree in finance from the Massachusetts Institute of Technology.
GRANT PALMER, ASSOCIATE, CLEVELAND Mr. Palmer is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Palmer was a senior analyst at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. Previously, he was a relationship management associate at Glenmede Trust Company. Mr. Palmer received a BBA from Cleveland State University.
LYDIA COLIN, SENIOR ANALYST, NEW YORK Ms. Colin is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to working at StepStone, Ms. Colin held internships at Espalier Ventures in London, UK as well as Colliers International in San Francisco USA. Ms. Colin received her BA in Political Science from Newcastle University and her MSc in Real Estate Finance and Investment from New York University.
CORY HARLESS, SENIOR ANALYST, CLEVELAND Mr. Harless is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Harless worked as a commercial real estate tax manager for Ryan, LLC. Before that, Mr. Harless was an intern for Wells Fargo Wealth Management. Mr. Harless received a BA in finance from Miami University.
CONFIDENTIAL | 38 10.141 Biographies
DANIEL MARATI, SENIOR ANALYST, LONDON Mr. Marati is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Marati worked as an Acquisitions and Asset Management Analyst at Rubenstein Partners, a vertically integrated real estate private equity fund, with focus on transitional office properties across the eastern United States. Mr. Marati received a BS from The Wharton School, University of Pennsylvania.
JACK WIERMAN, SENIOR ANALYST, NEW YORK Mr. Wierman is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to StepStone, Mr. Wierman was a treasury intern for the Virginia Tech Foundation. Before that, Mr. Wierman was a summer analyst for StepStone in the New York office. Mr. Wierman received a BS in real estate with a concentration in finance from Virginia Tech.
OMOLARA OYEDEJI, ANALYST, LONDON Ms. Oyedeji is a member of the real estate team. She is also involved in the firm’s responsible investment initiative. Prior to joining the firm full time, Ms. Oyedeji was an intern at StepStone supporting the real estate, private equity and infrastructure and real assets teams. Ms. Oyedeji received her BSc Honours in Geology from the University of Plymouth and studied for an MSc at the University of Exeter.
GARRET WINTER, ANALYST, CLEVELAND Mr. Winter is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to working at StepStone, Mr. Winter was a summer analyst at KeyBank Real Estate Capital in their Dallas office. Prior to that, Mr. Winter served as an intern for Winfire Capital in metro Detroit. Mr. Winter received his BA in economics from the Weatherhead School of Management at Case Western Reserve University.
CONFIDENTIAL | 39 10.142 Biographies
EMILY YU, ANALYST, SAN FRANCISCO Ms. Yu is a member of the real estate team and focuses on various investment and portfolio management activities. Prior to joining StepStone, Ms. Yu worked as summer analyst at the Office of Investments for Hines in New York and Houston. She also worked with Cushman & Wakefield for the Capital Markets team based in Shanghai. Ms. Yu recently graduated from the University of Pennsylvania with a BA in Economics and Political Science.
CONFIDENTIAL | 40 10.143 INVESTOR RELATIONS
10.144 Biographies
DAMI ALADE, VICE PRESIDENT, TORONTO Ms. Alade is a member of the real estate team and focuses on investor relations and business development. Prior to StepStone, Ms. Alade was an associate in business development and client relationship management at the Carlyle Group where she was involved in fundraising and client management for the firm’s multi-manager real estate business. Before that she was an associate director in the private funds group at UBS Investment Bank, where she advised financial sponsors on fundraising strategy, competitive positioning and marketing, and managed fundraises across US, Europe and sub-Saharan Africa. Ms. Alade received a BA, summa cum laude, from Howard University.
JULIE LIMPACH, VICE PRESIDENT, CLEVELAND Ms. Limpach is a member of the real estate team and focuses on investor relations. Prior to StepStone, Ms. Limpach was the compliance and corporate communications coordinator at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. Previously, Ms. Limpach was an equity sales assistant at FTN Equity Capital Markets Corp, where she managed its Institutional sales and sales traders teams, organized non-deal road shows, and served as the corporate management liaison during conferences. Prior to FTN, she was the media relations coordinator for at the Cleveland Museum of Art. Ms. Limpach received a BA from the University of Akron.a
STEELE SUTPHIN, SENIOR ANALYST, NEW YORK Ms. Sutphin is a member of the real estate team and focuses on business development. Prior to StepStone, Ms. Sutphin was an investor relations associate at Scopia Capital Management where she was involved in client reporting and management. Before that she was an investor relations associate at The Edison Group where she supported fundraising and roadshows for publicly- traded companies. Ms. Sutphin received a BBA in finance from Southern Methodist University.
ASHLEY HENRY, ANALYST, NEW YORK Ms. Henry is a member of the real estate team and focuses on business development. Prior to StepStone, Ms. Henry worked as a receptionist for Skadden, Arps, Slate, Meagher & Flom LLP. Ms. Henry received a BA in communications from the College of New Rochelle.
CONFIDENTIAL | 42 10.145 PORTFOLIO ANALYTICS & REPORTING
10.146 Biographies
SUSAN YELIN, MANAGING DIRECTOR, CLEVELAND Ms. Yelin is a member of the real estate team and focuses on performance measurement and reporting. Prior to StepStone, Ms. Yelin was director of performance measurement reporting at Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. She has over 30 years of finance reporting and accounting experience. Ms. Yelin received an MBA from the University of Washington and a BBA from National Taiwan University.
ANGIE TAYLOR, SENIOR ASSOCIATE, CLEVELAND
Ms. Taylor is a member of the real estate team and focuses on performance measurement and reporting. Prior to StepStone, Ms. Taylor was an Analyst with Courtland Partners, Ltd., an international real estate advisory firm which integrated with StepStone Real Estate. Ms. Taylor was responsible for performance measurement reporting and other reporting duties. Previously, Ms. Taylor was an Accountant for Goodwill of North Georgia and a Project /Grant Accountant for Axios Foundation. Ms. Taylor received her BS in Accounting from David N. Myers College, MBA from Keller School of Management and her JD from Cleveland Marshall College of Law.
JENNIFER NGUYEN, SENIOR ANALYST, CLEVELAND Ms. Nguyen is a member of the real estate team and focuses on portfolio analytics and reporting. Prior to StepStone, Ms. Nguyen was and internal audit intern and team lead at the Cleveland Metropolitan Schools District where she collected, examined and analyzed data to identify risks and assess performance and compliance issues. At StepStone, Ms. Nguyen is responsible for monitoring real estate investment performance, validating data provided by investment fund managers, and reporting to institutional investors. Ms. Nguyen received a BS from John Carroll University and is currently pursuing her MBA at Cleveland State University.
CONFIDENTIAL | 44 10.147 Biographies
SIDA OUYANG, SENIOR ANALYST, CLEVELAND Mr. Ouyang is a member of the real estate team and focuses on portfolio analytics and reporting. Mr. Ouyang is responsible for monitoring real estate investment performance, validating data provided by investment fund managers, and reporting to institutional investors. Prior to StepStone, Mr. Ouyang was an intern with Diebold Nixdorf, a financial self-service, security, and software corporation for the global financial, retail and commercial markets. Mr. Ouyang received a BBA from Kent State University. .
RYAN REED, ANALYST, CLEVELAND Mr. Reed is a member of the real estate team and focuses on portfolio analytics and reporting. Prior to joining StepStone, Mr. Reed was a financial advising intern with Northwestern Mutual. Mr. Reed received a BBA from Kent State University. .
CONFIDENTIAL | 45 10.148 Risks and Other Considerations
Risks Associated with Investments. Identifying attractive investment opportunities and the right underlying fund managers is difficult and involves a high degree of uncertainty. There is no assurance that the investments will be profitable and there is a substantial risk that losses and expenses will exceed income and gains.
Restrictions on Transfer and Withdrawal; Illiquidity of Interests; Interests Not Registered. The investment is highly illiquid and subject to transfer restrictions and should only be acquired by an investor able to commit its funds for a significant period of time and to bear the risk inherent in such investment, with no certainty of return. Interests in the investment have not been and will not be registered under the laws of any jurisdiction. Investment has not been recommended by any securities commission or regulatory authority. Furthermore, the aforementioned authorities have not confirmed the accuracy or determined the adequacy of this document.
Limited Diversification of Investments. The investment opportunity does not have fixed guidelines for diversification and may make a limited number of investments.
Reliance on Third Parties. StepStone will require, and rely upon, the services of a variety of third parties, including but not limited to attorneys, accountants, brokers, custodians, consultants and other agents and failure by any of these third parties to perform their duties could have a material adverse effect on the investment.
Reliance on Managers. The investment will be highly dependent on the capabilities of the managers.
Risk Associated with Portfolio Companies. The environment in which the investors directly or indirectly invests will sometimes involve a high degree of business and financial risk. StepStone generally will not seek control over the management of the portfolio companies in which investments are made, and the success of each investment generally will depend on the ability and success of the management of the portfolio company.
Uncertainty Due to Public Health Crisis. A public health crisis, such as the recent outbreak of the COVID-19 global pandemic, can have unpredictable and adverse impacts on global, national and local economies, which can, in turn, negatively impact StepStone and its investment performance. Disruptions to commercial activity (such as the imposition of quarantines or travel restrictions) or, more generally, a failure to contain or effectively manage a public health crisis, have the ability to adversely impact the businesses of StepStone’s investments. In addition, such disruptions can negatively impact the ability of StepStone’s personnel to effectively identify, monitor, operate and dispose of investments. Finally, the outbreak of COVID-19 has contributed to, and could continue to contribute to, extreme volatility in financial markets. Such volatility could adversely affect StepStone’s ability to raise funds, find financing or identify potential purchasers of its investments, all of which could have material and adverse impact on StepStone’s performance. The impact of a public health crisis such as COVID-19 (or any future pandemic, epidemic or outbreak of a contagious disease) is difficult to predict and presents material uncertainty and risk with respect to StepStone’s performance.
Taxation. An investment involves numerous tax risks. Please consult with your independent tax advisor.
Conflicts of Interest. Conflicts of interest may arise between StepStone and investors. Certain potential conflicts of interest are described below; however, they are by no means exhaustive. There can be no assurance that any particular conflict of interest will be resolved in favor of an investor.
Allocation of Investment Opportunities. StepStone currently makes investments, and in the future will make investments, for separate accounts having overlapping investment objectives. In making investments for separate accounts, these accounts may be in competition for investment opportunities.
Existing Relationships. StepStone and its principals have long-term relationships with many private equity managers. StepStone clients may seek to invest in the pooled investment vehicles and/or the portfolio companies managed by those managers.
Carried Interest. In those instances where StepStone and/or the underlying portfolio fund managers receive carried interest over and above their basic management fees, receipt of carried interest could create an incentive for StepStone and the portfolio fund managers to make investments that are riskier or more speculative than would otherwise be the case. StepStone does not receive any carried interest with respect to advice provided to, or investments made on behalf, of its advisory clients.
Other Activities. Employees of StepStone are not required to devote all of their time to the investment and may spend a substantial portion of their time on matters other than the investment.
Material, Non-Public Information. From time to time, StepStone may come into possession of material, non-public information that would limit their ability to buy and sell investments. 10.149 stepstonegroup.com Partnering for Success: The Townsend Group
Water and Power Employees’ Retirement Plan
February 2021
The Townsend Group, an Aon Company Cleveland | Chicago | San Francisco | Toronto | London | Hong Kong 10.150 The entire contents of this presentation are CONFIDENTIAL and are intended for the sole and limited use of the Qualified Purchaser to whom it is distributed. Table of Contents
• INTRODUCTION • ORGANIZATIONAL OVERVIEW • REAL ESTATE TEAM OVERVIEW • REAL ESTATE PHILOSOPHY & WORKING WITH TOWNSEND • REAL ESTATE DUE DILIGENCE PROCESS • SUMMARY • APPENDIX
10.151 Introduction
10.152 The Townsend Group: Presenters for WPERP
Chae Hong (Proposed WPERP Client Team Lead): Chae Hong is a Partner in the Townsend Group’s Advisory practice and based in San Francisco. He leads real estate consulting relationships for a select number of retainer and project clients. He joined the predecessor firm (Aon) in 2010 and has over 20 years of real estate industry experience. His experience includes real estate market research, manager research, direct property underwriting, and has consulted or advised on over $10 billion of institutional real estate. Mr. Hong has also sourced and performed due diligence on core, value added, and opportunistic real estate opportunities both domestically and internationally. He has held senior positions with notable firms such as Callan Associates, Cliffwater and RREEF. He holds a B.A. and M.B.A. degree from the University of California, Los Angeles.
Townsend/Aon Experience: 10 years Industry Experience: 21 years
Jack Koch: Jack Koch is a Partner of The Townsend Group and Head of Townsend’s Global Advisory Services. Additionally, Mr. Koch is the lead Partner and primary relationship manager for a number of the firm’s Advisory Consulting clients, which include U.S. and international public pension plans, taxable investors, and foundations. Mr. Koch has extensive portfolio level experience in the creation and implementation of real asset investment policies, strategies and guidelines. His experience also includes provision and advice on real asset program structuring across a broad range of risk/return objectives; manager selection and due diligence; and performance analytics and monitoring. Prior to joining The Townsend Group, Mr. Koch worked for National City Bank within the Structured Finance Group. His responsibilities included the analysis and ultimate buy recommendations on financing opportunities in the syndicated loan market. Mr. Koch has also spent a considerable amount of time living and working in Latin America while employed with a leading global retailer. Mr. Koch is an Advisory Board member and contributor to several real estate associations, a member of the PREA, and a frequent speaker and moderator at industry and client conferences. Mr. Koch received an MBA from The Weatherhead School of Management at Case Western Reserve University and BA from Lafayette College.
Townsend/Aon Experience: 14 years Industry Experience: 17 years
10.153 4 The Townsend Group: Proposed WPERP Client Support Team
Jack Dowd, CFA: Jack Dowd, CFA is an Associate in the Townsend Group’s Advisory practice and based in San Francisco. His responsibilities include strategic and investment planning, portfolio analytics, investment recommendations, and performance reporting for Townsend's West Coast clients. Other responsibilities include manager due diligence, modeling exercises, and project research. Prior to his time at Townsend, Mr. Dowd spent 5 years with the Capital Group where he provided equity management and research support for Retail, Institutional, and Private Client portfolio managers. Prior to Capital Group, Mr. Dowd spent 3 years with First American Financial where he worked as a member the Investment Group which managed the fixed income investment portfolio for the company. Mr. Dowd graduated with a Bachelor of Arts in Business Administration with an emphasis in Accounting from the Opus College of Business at the University of St. Thomas in St. Paul, Minnesota.
Townsend/Aon Tenure: 2 years Industry Experience: 10 years
Richard Ferguson: Richard Ferguson joined Townsend in October of 2019 and currently serves as an Analyst within the Advisory Solutions team. Richard’s responsibilities include participating in analysis and monitoring of client real asset fund managers. Prior to joining the Townsend Group in 2019, Richard was a Real Estate Accountant with Crosspoint Realty Services for two years, providing financial statement analysis and monthly reporting to the property management firm’s clients. Richard holds a B.S. in Finance and Accounting from the Whitman School of Management at Syracuse University.
Townsend/Aon Tenure: 1 years Industry Experience: 2 years
Kirloes Gerges (Backup Consultant): Kirloes is a Partner with The Townsend Group, where he is responsible for real estate research and manager due diligence on a variety of core and non-core managers. Kirloes provides core open-end coverage for the real estate group and supports Aon Hewitt’s retainer and project clients. Prior to joining Aon Hewitt, Kirloes held several senior level roles at Citco Fund Services, JP Morgan, and Citi Alternative Investments where he was responsible for overseeing/executing all phases of fund administration and reporting. Kirloes holds a Bachelor of Arts in Economics from Rutgers University, a Master of Business Administration with a concentration in Finance from Seton Hall University and a Post Graduate Certificate in Real Estate Finance and Investment from New York University.
Townsend/Aon Tenure: 8 years Industry Experience: 16 years
10.154 5 Organizational Overview
10.155 The Townsend Group: Platform Overview
$133.9B OF AA & $18.1B OF AUM ACROSS 106 CLIENT MANDATES5 120 PROFESSIONALS ACROSS 6 OFFICES
INVESTMENT MANAGEMENT SOLUTIONS ADVISORY SOLUTIONS Separately Managed Accounts TREA Strategy Core-Plus Strategy (Global Diversified) (Global Non-Core) (U.S. Core)
Inception 1986 1996 2007 2010
Global U.S. Strategy Custom Custom Non-Core Core-Plus
AUM / AUA $133.9B $12.0B3 $4.4B2 $656.1 MM2
S.I. Net Return NA NA 11.5%1 11.8%4
# Mandates 46 42 11 1*
1Net IRR is the net return earned by an investor over a particular time frame, including the performance of both realized and unrealized investments, at fair value. 2Reflects committed capital as of 3Q20 in USD. 3Separate Account AUM shown is net asset value plus unfunded commitments TREA Strategy (Global Non-Core) returns, AUM are as of 3Q20; Core-Plus Strategy (U.S. Core) returns, AUM are as of 3Q20, Separate Account AUM is as of 1Q19. The value of unrealized investments is subject to change. 4Since Inception Net Time Weighted Return The number of unique clients would be less than the number of mandates as a single client could participate in multiple strategies. 5As of June 30, 2020, Townsend had assets under management of approximately $18.1 billion; and provided advisory services to clients who had real estate/real asset allocations exceeding $133.9 billion. Please refer to back pages for additional disclosures and definitions. Employee numbers as of 4Q20. 10.156 *A second strategy designed specifically for ERISA investors was launched on December 3, 2018, with total commitments of $217.0 million and a since inception net time weighted return of 30.6%. 7 Townsend’s views are as of this date of this publication and may be changed or modified at any time without further notice. Past performance is not indicative of future results. Specialized Industry Position
. Astute investor and advisor with 30+ years of relationship building Real Estate Specialist and Global . Specialized industry position at intersection of real estate investment universe Solution Provider . Global footprint with access to local market knowledge . Informed position within the investment management community
. Concrete customized global strategy development Demonstrated Execution as Advisor . Dedicated fund and investment acquisition/ diligence personnel and Investment Manager . Realized outperformance and capital appreciation
. Track record of executed deals with established managers Leading Sourcing – . Viewed as friendly, non-competitive capital partner Friendly Capital, Lacking Bias . Ability to access local, prime operating partners and managers . Flexibility to pivot globally to attractive opportunities without overhead risk
. 30+ years of quantitative and qualitative performance data Information Advantage . 3,400+ active client positions . Information, sourcing, and thought-leadership advantage
10.157 Note: Data regarding client positions and managers tracked as of September 2020. 8 Townsend’s views are as of this date of this publication and may be changed or modified at any time without further notice. Customized Investment Solutions
A CORE SET OF INVESTMENT SKILLS USED TO CREATE CUSTOM REAL ASSET SOLUTIONS
TOWNSEND CUSTOM SOLUTIONS
INDUSTRY ANALYSIS PORTFOLIO CONSTRUCTION AND MANAGEMENT SPECIAL PROJECTS STRATEGIC PLANNING COORDINATE LEGAL AND TAX REVIEW ACCESS TO OFFERING PIPELINE INVESTMENT OBJECTIVES AND POLICY PORTFOLIO MONITORING ACCESS TO UNDERWRITING INVESTMENT PACING MODEL RISK MANAGEMENT ACCESS TO SECTOR SPECIALISTS INVESTMENT RESEARCH PERFORMANCE MEASUREMENT AND REPORTING ACCESS TO REGION SPECIALISTS INVESTMENT DUE DILIGENCE CLIENT MEETINGS/PRESENTATIONS INVESTMENT SELECTION
ASSET CLASS INVESTMENT GLOBAL STRUCTURE STRATEGIES
REAL ESTATE PRIMARY FUNDS CORE INFRASTRUCTURE SPECIALIZED FUNDS NON-CORE TIMBER SECONDARY INTERESTS SPECIAL SITUATIONS AGRICULTURE CO-INVESTMENTS REGIONAL MANDATES JOINT VENTURES REAL ASSETS CLUBS RECAPITALIZATIONS DIRECT INVESTMENTS
10.158 9 Townsend’s views are as of this date of this publication and may be changed or modified at any time without further notice. Townsend Global Investment Platform
COMPREHENSIVE GLOBAL REAL ASSET COVERAGE WITH DEEP REGIONAL AND SECTOR EXPERTISE
INVESTMENT & ADVISORY COMMITTEES Terry Ahern Jay Long (IC Chair) MANAGEMENT GLOBAL MACRO John Schaefer Anthony Frammartino COMMITTEE Martin Rosenberg Prashant Tewari STRATEGY COMMITTEE Terry Ahern Morgan Angus Jack Koch Terry Ahern Prashant Tewari Anthony Frammartino Min Lim Nick Duff Jay Long Asieh Mansour1 Tony Pietro Karen Rode John Schaefer Mike Golubic
ADVISORY SOLUTIONS INVESTMENT STRATEGY & UNDERWRITING PORTFOLIO MANAGEMENT Jack Koch Co-Invest/JVs, Funds/Clubs, Real Assets Anthony Frammartino +25 Professionals John Schaefer +20 Professionals +30 Professionals
MARKETING & BUSINESS BUSINESS OPERATIONS REPORTING & DEVELOPMENT Ron Weihrauch, Chief Operating Officer ADMINISTRATION 5 Professionals Bryan Ahern, Chief Information Officer Sarah Cachat Aimee May, Chief Compliance Officer +8 Professionals Brian White, Chief Financial Officer +24 Professionals
1 10.159 Senior Advisor to The Townsend Group 10 Updated January 2021 Townsend Advisory Services
DEDICATED CONSULTANT WITH $133.9 B IN ADVISED ASSETS
ADVISED ASSETS AS OF 2Q20 TOWNSEND REPRESENTATIVE CLIENTS $133.9 B Pensioenfonds UWV New York State Common Retirement Fund American Electric Power Large U.S. Corporate Plan* University of California University of Wisconsin Australian Superannuation Plan*
* Contract requires confidentiality
Public Pension 82%
Private Pension 6%
Sovereign Wealth Fund 8%
Superannuation Fund 4%
The clients included above were not selected based on performance-based criteria and were selected based on diversification of client types. It is not known whether the listed clients approve of Townsend 10.160 or the services provided. Townsend’s views are as of this date of this publication and may be changed or modified at any time without further notice. Past performance is not indicative of future results. 11 Actual results and developments may differ materially from those expressed or implied herein. Real Estate Team Overview
10.161 Consulting Client Team Structure
Client Consulting Team
Chae Hong Jack Dowd Richard Ferguson Kirloes Gerges Partner Associate Analyst Partner (Backup Consultant)
Investment Committee Advisory Committee Global Macro Strategy Committee
Jay Long Committee Chair 10 Investment Professionals 5 Investment Professionals 8 Investment Professionals Average Townsend/Aon Experience: 16 years Average Townsend/Aon Experience: 18 years Average Townsend/Aon Experience: 16 years Average Industry Experience: 24 years Average Industry Experience: 28 years Average Industry Experience: 23 years
Advisory Solutions Investment Strategy & Underwriting Reporting & Administration
Jack Koch John Schaefer Sarah Cachat Leader Leader Leader 25 Professionals 30 Professionals 8 Professionals
10.162 13 Updated January 2021 Townsend Regional and Sector Specialists
North America Europe Jay Long Scott Miller Morgan Angus Nick Duff John Schaefer Chris Cunningham Lilia Stoyanova David Dix Scott Booth Brian Woods Oliver Hamilton Saran Satefanen Tony Pietro Adam Orlansky Lawrence Thomas George Fenton Dan O’Connell Zane Hemming Myles Grover Joanne Bywater Kirloes Gerges Larry Collymore Vuong Ngo Jose Calderon Dan Ryder Khalil Clements Tyler Ingel
Asia Pacific Nick Wong Min Lim Latin America Joseph Tang Daniel Choi Gordon Yu Hyun Tae Yim Mike Golubic Henry Chia Ruowen Ji Chris Cunningham Tyler Ingel
Public Markets Prashant Tewari
Infrastructure Agriculture/Timber Mike Golubic Chris Cunningham Special Situations Investing Karen Rode Kevin Rivchun Lilia Stoyanova Prashant Tewari John Schaefer Scott Miller Iftikhar Ahmed Tyler Ingel Min Lim Laurie Woolmer Morgan Angus Jeff Barone Patrick Callam Nick Duff Gordon Yu Nicola King Olivia Kebble Adam Orlansky Jonathan Ballin Brian Booth James Kipling Tod Akovic Dilon Glasko 10.163 14 Updated January 2021 Understanding WPERP’s Real Estate Portfolio Needs
Water and Power Client A Client B Client C Employees’ Retirement Plan
Total Plan Assets: $18,010 $17,400 $17,288 $15,636 (MM USD)
Total Real Estate: $1,258 $2,125 $1,019 $1,146 (MM USD)
Target Real Estate 10.5% 10.0% 7.5% 10.0%* Allocation:
Portfolio Composition Core: 57% Core: 50% - 70% Core: 50% - 80% Core: 50% - 100% Targets: Non-Core: 43% Non-Core: 30% - 50% Non-Core: 20% - 50% Non-Core: 0% - 60%
Client Tenure: 4 years 18 years 7 years N/A
10.164 Data for Client A, Client B, and Client C as of 3Q 2020; data for WPERP as of 2Q 2020. *Data as of December 9, 2020. 15 Townsend’s view regarding this example may be changed or modified at any time without further notice. The above example is for illustrative purposes only. Real Estate Philosophy & Working with Townsend
10.165 The Townsend Group’s Real Estate Philosophy and Approach
Philosophy Approach
. Develop highly customized investment solutions . Partner with clients. Operate as an extension of for each client depending on client’s needs and staff to understand evolving needs goals . Consultatively arrive at an appropriate long-term . Investment decisions are supported by sound strategy by understanding client’s asset class goals theory and empirical evidence and risk tolerances
. Investment policy and asset allocation are the . Construct a real estate portfolio using target primary determinants of long-term performance allocations that are aligned with the Townsend Group’s best ideas and our client’s policy . Risks within an investment program are well guidelines understood and measured . Provide ongoing education and policy review . We believe investors that maintain a long-term perspective have an advantage over others
10.166 17 Townsend’s view regarding this example may be changed or modified at any time without further notice. The Role of Real Estate in a Portfolio
Investment Objectives Access to Top Tier Investment Talent Program Benefits & Challenges
Real Estate can play a variety of Access to top tier managers based . Diversification benefits to roles within a multi-asset class on long term constructive total plan investment portfolio including: relationships and mutual transparency . Focus is often on the sector’s . Diversification beta with complements of . Firm and product research alpha . Yield focus: Business, Investment Staff, Investment Process, Risk . Characteristics include . Potential to Hedge Inflation Management and access to potential for: low volatility, strong cash flow, capital . Possible Enhanced Returns less liquid, more complex investment opportunities preservation and attractive risk-adjusted returns
. Challenges include limited liquidity, extended time to realization, control, and transparency
10.167 18 Townsend’s view regarding this example may be changed or modified at any time without further notice. Working with Townsend: Portfolio Construction Toolkit
. Real estate portfolio construction is critical for long term program success . Customizing the incorporation of these elements into a plan’s portfolio construction assists in creating a portfolio that best serves each plan’s unique objectives, risk tolerances and restrictions
Property Type Risk Spectrum Core (apt, office, Core industrial, retail) and Value Added Non- Core (hotel, self Opportunistic storage, land…) Public/Private
Economic Geography Industry exposure Distribute investments diversified through region across multiple regions Real Estate Portfolio and tenant exposure Construction
Terms/Structures Leverage Align investor & manager Judicious use allows for interests; Funds, Separate exploiting opportunities Accts, FoFs, etc. for enhanced returns
Complements Farmland, Timberland, Infrastructure, & other natural resources
10.168 19 Townsend’s view regarding this example may be changed or modified at any time without further notice. Working with Townsend: What to Expect
Portfolio Management Annual Program Review . Monitoring and Reporting . Review Portfolio Execution to-date . Back Office Operations . Address Structural and Tactical Goals . Issue Resolution . Set Annual Investment Plan and Pacing Collaborative & Iterative Process Customized to Client Preferences
Manager Selection . Execute Annual Investment Plan . On-going Sourcing; Due Diligence . Negotiate Partnership Closings
10.169 20 Townsend’s view regarding this example may be changed or modified at any time without further notice. Working with Townsend: Real Estate Portfolio Considerations
Core Non-Core Other Considerations Portfolio Considerations Portfolio Considerations
Optimization . Comprehensive asset and market . Strategic execution evident in . Utilize multi-year proprietary level data collected quarterly <5% recommendation rate of pacing models capitalize on from a universe of over 50 fund fund database periods of real estate market managers distress as well as optimize for the real estate market cycle . Over 5,700 properties tracked in property database on a quarterly basis Real Estate . Concentrate managers to . Reduce exposure to bottom . Consider an allocation to core real Considerations maximize management fee quartile managers estate debt to reduce portfolio discounts while optimizing volatility . Identify property specific fund properties and geographies strategies like multifamily and . Target an approach to capitalize . Identify property specific core industrial on properties supported by funds as well as introduce real secular tailwinds estate debt Other . Introduce niche strategy funds: . Introduce niche strategy funds: . Expand upon “Best Idea” Considerations student/senior housing, medical student/senior housing, medical investing with efficient targeting office, storage, and data centers office, storage, and data centers of active risk . Look to European specific funds . Target funds with an operator to capitalize on opportunities model presented during COVID-19 . Contemplate property type and geography specific fund strategies
10.170 21 Townsend’s view regarding this example may be changed or modified at any time without further notice. Real Estate Due Diligence Process
10.171 Informed Perspective
A GLOBAL INVESTMENT THESIS INFORMS RESEARCH, SELECTION AND PORTFOLIO CONSTRUCTION
Market Data Market Research Townsend Team
. IPD . Manager research . Fund due diligence . Bloomberg . Green Street Advisors . Special situations . Reuters . PREA . Consultants . Morningstar . LaSalle . Investment Committee . AEW . Sector specialists
Global Macro Strategy Committee
View of the World
10.172 23 Townsend’s views are as of this date of this publication and may be changed or modified at any time without further notice. Due Diligence and Underwriting
RIGOROUS, SYSTEMATIC ANALYSIS YIELDS BETTER CLIENT OUTCOMES
People & Alignment of Track Record Risk Controls Market Risk Platform Interests
• Asset-by-asset review • Depth, breadth, turnover • Compensation structure • Portfolio constraints • Macro/micro economics • Peer group and vintage • History, culture, • Material co-invest capital • Investment guidelines • Geographic focus year (realized vs. ownership • Pooled carried interest • Investment process • Demographics unrealized) • Experience in execution • Clawback provisions • Reporting and • Geopolitical issues • Study of mistakes • Sourcing • Moderate catch-up transparency • Foreign direct investment • Style drift • Asset management • Sufficient carry dispersion • Key person triggers • Currency • Growth in fund sizes • Reference checks • Vesting schedule • Auditors and accountants • Concentration • Capital pacing • Performance attribution • Exclusivity • Legal representation • Pre-specified investments • Focus on creating • Investment allocation • Insurance and liability • Pipeline franchise value • Regulatory compliance • Parents/affiliates • Prior litigation
10.173 24 Townsend’s views are as of the date of this publication and may be changed or modified at any time and without notice. Townsend Due Diligence & Underwriting Process
DISCIPLINED SELECTION DRIVES VALUE IN FUND AND DIRECT INVESTING Robust Pipeline | Specialized Deal Access And Sourcing
Primary Fund Opportunities
Origination Sourcing & Initial Meeting 5,546
Under Consideration 2,576 Investment Committee Review to Proceed
Detailed Due Diligence 906 Comprehensive Research & Consideration
Approved/Executed* 236 Investment Committee Approval <5% Investment Rate 827
*Includes discretionary best ideas approvals. Non-discretionary client specific approvals are not included. Data from 2007-3Q 2020. Source: Townsend. 10.174 Townsend’s views are as of this date of this publication and may be changed or modified at any time without further notice. Actual results and developments may differ materially from those expressed or 25 implied herein. Past performance is not indicative of future results. Townsend Due Diligence & Underwriting Process
DISCIPLINED SELECTION DRIVES VALUE IN FUND AND DIRECT INVESTING
Origination Under Consideration
931 488
457 243
1370 3345 813 475
North America Europe Asia Global/Rest of the World North America Europe Asia Global/Rest of the World
Detailed Due Diligence Approved for Investment
151 38
93 31
119 528 134 48
North America Europe Asia Global/Rest of the World North America Europe Asia Global/Rest of the World
10.175 26 Data from 2007-3Q 2020. Source: Townsend. Actual results and developments may differ materially from those expressed or implied herein. Past performance is not indicative of future results. Townsend Global Capital Scale and Influence
MORE THAN $179.8 BILLION OF CAPITAL INVESTED OR COMMITTED SINCE 2004
NORTH AMERICA
$109.7 BILLION 789 FUNDS/INVESTMENTS
EUROPE
$17.7 BILLION 169 FUNDS/INVESTMENTS
ASIA
$11.1 BILLION 107 FUNDS/INVESTMENTS
REST OF THE WORLD & GLOBAL
$41.4 BILLION 206 FUNDS/INVESTMENTS
Data as of 3Q20. Source: Townsend. 10.176 Townsend’s views are as of this date of this publication and may be changed or modified at any time without further notice. Actual results and developments may differ materially from those expressed or 27 implied herein. Past performance is not indicative of future results. Summary
10.177 Why the Townsend Group?
Senior Level, Tenured Lead Team (2 Partners, 1 Associate, and 1 Analyst)
Deep Experience with Public Plans
Why The Depth and Breadth of Practitioner Real Estate Expertise Townsend Group? Customized Solutions; Holistic View Across the Portfolio
An Extension of your Staff
10.178 29 Townsend’s view regarding this example may be changed or modified at any time without further notice. Proposed Real Estate Consulting Fee Schedule
Period Amount ($)
Year 1 285,000
Year 2 285,000
Year 3 285,000
Year 4 285,000
Year 5 285,000
Total Fee 1,425,000
10.179 30 Townsend’s view regarding this example may be changed or modified at any time without further notice. Market Update
10.180 Economic Backdrop
Pre-COVID Post-COVID
Economic Uncertainty causing large divergence in Uncertainty at historic levels and divergence uncertainty economic forecasts magnified
Economic Economic outlook positive but slowdown Significant falls in GDP forecasted in 2020. Large growth forecasted numbers of job losses and likely contraction in consumption
Interest rates Interest rates declining globally Rapid intervention by central banks. Interest rates EVEN lower for EVEN longer
RE forecast Cap rates low but spreads still healthy. Public markets implying 10-30% valuation declines. Fundamentals good in most markets. Low growth Prolonged global recession may impact all assets but income stable
RE focus Themes backed by secular trends with lower Similar themes but tactically take advantage of correlation to economic cycle dislocation
10.181 Source: The Townsend Group, an Aon company 32 Townsend’s views are as of the date of this publication and may be changed or modified and any time and without notice. Real Estate Market Views
Pre-COVID Post-COVID
Industrial Increasing e-commerce sales globally E-commerce enabling consumption at a creating demand for infill logistics distance particularly
Retail Traditional retailers under a lot of pressure. Lower income, lower occupancy and falling rents Lower class malls of particular concern forecasted across the globe
Office Selectively interesting. Non-traditional markets Potential headwinds from unemployment and in the US. Positive demographics in Australia acceleration of homeworking trends
Residential More defensive in downturn. Lack of good Occupancy forecasted to be resilient modern accommodation in Europe. Focus on but rents lower S/SE US due to migratory trends
Other Demographics providing tailwinds for senior Focus on technology based real estate enabling the housing and medical office modern economy
Existing trends and themes largely enhanced/exacerbated by COVID-19
10.182 Source: The Townsend Group, an Aon company 33 Townsend’s views are as of the date of this publication and may be changed or modified and any time and without notice. Disclosures
This presentation (the “Presentation”) is being furnished on a confidential basis to a limited number of sophisticated individuals meeting the definition of a Qualified Purchaser under the Investment Advisors Act of 1940 for informational and discussion purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any security. This document has been prepared solely for informational purposes and is not to be construed as investment advice or an offer or solicitation for the purchase or sale of any financial instrument. While reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of preparation, The Townsend Group makes no representation that it is accurate or complete. Some information contained herein has been obtained from third-party sources that are believed to be reliable. The Townsend Group makes no representations as to the accuracy or the completeness of such information and has no obligation to revise or update any statement herein for any reason. Any opinions are subject to change without notice and may differ or be contrary to opinions expressed by other divisions of The Townsend Group as a result of using different assumptions and criteria. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Statements contained in this Presentation that are not historical facts and are based on current expectations, estimates, projections, opinions and beliefs of the general partner of the Fund and upon materials provided by underlying investment funds, which are not independently verified by the general partner. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Additionally, this Presentation contains “forward-looking statements.” Actual events or results or the actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements. Material market or economic conditions may have had an effect on the results portrayed. Neither Townsend nor any of its affiliates have made any representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of any of the information contained herein (including but not limited to information obtained from third parties unrelated to them), and they expressly disclaim any responsibility or liability therefore. Neither Townsend nor any of its affiliates have any responsibility to update any of the information provided in this summary document. The products mentioned in this document may not be eligible for sale in some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates, or other factors. Prospective investors in the Fund should inform themselves as to the legal requirements and tax consequences of an investment in the Fund within the countries of their citizenship, residence, domicile and place of business. There can be no assurance that any account will achieve results comparable to those presented. Past performance is not indicative of future results. Townsend is a wholly owned, indirect subsidiary of Aon plc.
10.183 34 Disclosures and Definitions
GENERAL DISCLOSURES There can be no assurance that any account will achieve results comparable to those presented. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal.
Returns reflect the equal-weighted returns calculated during the periods indicated. Note: If including Core, this is value-weighted. In addition, the valuations reflect various assumptions, including assumptions of actual unrealized value existing in such investments at the time of valuation. As a result of portfolio customization/blending and other factors, actual investments made for your account may differ substantially from the investments of portfolios comprising any indices or composites presented.
Due to the customized nature of Townsend’s client portfolios, the performance stated may be considered “hypothetical” as it does not reflect the experience of individual client portfolios, but rather aggregate client positions in the stated investment strategy.
NON REGULATORY ASSETS UNDER MANAGEMENT As of June 30, 2020, Townsend had assets under management of approximately $18.1 billion. When calculating assets under management, Townsend aggregates net asset values and unfunded commitments on a quarterly basis. Townsend relies on third parties to provide asset valuations, which typically takes in excess of 90 days after the quarter end. Therefore, assets under management have been calculated using June 30, 2020 figures where available but may also include March 31, 2020 figures. Assets under management are calculated quarterly and includes discretionary assets under management and non-discretionary client assets where the client’s contractual arrangement provides the client with the ability to opt out of or into particular transactions, or provides other ancillary control rights over investment decision-making (a/k/a “quasi-discretionary”). Regulatory AUM is calculated annually and can be made available upon request.
ADVISED ASSETS As of June 30, 2020, Townsend provided advisory services to clients who had real estate/real asset allocations exceeding $133.9 billion. Advised assets includes real estate and real asset allocation as reported by our clients for whom Townsend provides multiple advisory services—including strategic and underwriting advice for the entire portfolio. Advised assets are based on totals reported by each client to Townsend or derived from publicly available information. Advised assets are calculated quarterly. Select clients report less frequently than quarterly in which case we roll forward prior quarter totals
TREA STRATEGIES (NON-CORE) employ a global non-core multi strategy approach with 50% or more of the investments invested in non primary fund investments such as co- investments, joint ventures, secondaries and clubs. Strategies are diversified by geography, sector, property type, manager and vintage year.
CORE-PLUS STRATEGIES (CORE) employ a global core/core plus multi strategy approach investing in primary funds, joint ventures, co-investments, secondaries, direct investments, debt strategies and REITs. Strategies are diversified by geography, sector, property type, manager and vintage year.
SEPARATE ACCOUNTS includes all Townsend active discretionary accounts which invest in a variety of investment styles and structures.
10.184 35 Disclosures
TREA STRATEGIES Townsend’s TREA Strategies (Non-Core) employ a global non-core multi strategy approach with 50% or more of the investments invested in non primary fund investments such as co-investments, joint ventures, secondaries and clubs. Strategies are diversified by geography, sector, property type, manager and vintage year. Global Opportunistic Strategy: Townsend’s 2007 vintage TREA Program was comprised of one closed end single limited partner vehicle (Cayuga Lake Fund, L.P.). Global Value-Add Strategy: Townsend’s 2007 vintage TREA Program was comprised of one closed end single limited partner vehicle (Seneca Lake Fund L.P.). Townsend’s 2008-10-11 vintage TREA Program was comprised of one closed end single limited partner vehicle (Lake Tahoe, L.P.) and two commingled funds (Penn Square Global Real Estate Fund II, L.P. and Townsend Select Opportunities Fund, L.P.). Townsend’s 2012 vintage TREA Program was comprised of one closed end single limited partner vehicle (Lake Tahoe, II, L.P.) and one commingled fund (Townsend Real Estate Alpha Fund, L.P.). Townsend’s 2015 vintage TREA Program was comprised of one closed end single limited partner vehicle (Lake Tahoe, III, L.P.) and one commingled fund (Townsend Real Estate Alpha Fund II, L.P.). Townsend’s 2018 vintage TREA Program was comprised of one closed end single limited partner vehicle (Lake Tahoe, IV, L.P.) and one commingled fund (Townsend Real Estate Alpha Fund III, L.P.).
Note: Investment level net IRR’s and equity multiples are reported. Net IRR is the net return earned by an investor over a particular time frame, including the performance of both realized and unrealized investments, at fair value. The Net IRR is based upon daily investor level cash flows, current quarter net asset value as hypothetical liquidation mark, and is after the deduction of fees. Investment performance data is reported to Townsend on a quarterly basis by the underlying investment manager. The value of unrealized investments is subject to change. Net Investment Multiple: Based upon daily investor level cash flows. Calculated as ([Since Inception Distributions + Since Inception Withdrawals + Net Asset Value])/Paid in Capital). The Townsend Group’s Investment Committee (IC) collaboratively makes all strategic investment decisions affecting Townsend’s client portfolios.
10.185 36