Fire & Police Employees’ Retirement System of the City of ......Market Overview . Summit Strategies Group ... Greenspring Secondaries Fund III 2018 Venture Capital 16,000,000 2,240,000

Fire & Police Employees’ Retirement System of the City of Baltimore

Private Equity Portfolio Review and Recommendation

September 2018

Summit Strategies Group


1

Market Overview



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2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018

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Large Buyout Small Buyout R2000

Market Observations

As of 6/30/2018

$0

$200

$400

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$800

$1,000

$1,200

$1,400

$1,600

$1,800

2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018

$ B

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Private Markets Dry Powder

$2

03

$1

46

$1

97

$2

11

$3

10

$3

21

$3

02

$3

48

$3

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48

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16

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100

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$50

$100

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2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD2018

# o

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$ B

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Capital Raised ($B) # of Funds Closed

Global Dry Powder

Source: PitchBook

Global private equity fundraising in 2017 was near record highs.

This led to a further increase in dry powder, which remains at historical highs across all geographies.

Despite being lower than at year-end 2017, pricing and debt levels remain near historic highs for both large- and mid-market transactions.

Global Fundraising

Source: PitchBook

North American Purchase Price Multiples

Source: S&P Global Inc., Bloomberg



3

Market Observations (Cont’d)

It is estimated that there are approximately 200,000 mid-market private companies in the U.S., versus around only 1,500 publicly listed companies of similar size.

However, we estimate that private equity sponsors only own around 3% of these 200,000 mid-market private businesses.

So, while private equity has certainly scaled over time, we believe the opportunity set remains robust for groups focused on the mid-market.

Sources: PitchBook, Bloomberg, National Center for the Middle Market Note: Data is estimated and is for mid-market companies, as of 6/30/2017. Mid-market defined as companies with $10-$1,000 million of annual revenue,

except in the case of PE-backed companies, where mid-market is defined as buyout transactions between $25-$1,000 million.



4

Portfolio Review



5

Private Equity Dashboard

As of 6/30/2018



6

Private Equity Performance Overview

Note: Figures as of 6/30/2018 when available, otherwise based on 3/31/2018 rolled forward by Q2 2018 cash flows. PME calculated using the Russell 3000 Index. Direct Fund composite includes Greenspring secondary funds, which have a skew toward direct company interests.

Total portfolio has trailed the PME, driven by the Fund of Funds composite.

– The high degree of diversification associated with most of these funds, along with a prolonged bull market for public equity, have led to this result.

While still young, the Direct fund composite has generated strong outperformance versus the PME.

– While we would expect this return to come down slightly over time as these funds call additional capital, returns to date have still been driven by strong underlying value creation.

As underlying portfolio exposure continues to skew more toward the Direct fund composite, this should help narrow the negative return spread versus the PME.

Composite Net IRR PME

(Russell 3000)

Fund of Funds 9.5% 11.7%

Direct Funds 19.2% 11.1%

Total Portfolio 10.3% 11.6%



7

Private Equity Summary Private Equity Summary (one-quarter lag)June 30, 2018P artnerships Vintage Investment C apital D rawn D istributed M arket IR R P M E+ T VP I D P I Valuat io n R emaining

Year Strategy C o mmitment D o wn Value (%) R ussell 3000 M ult iple M ult iple D ate C o mmitment

($ ) ($ ) ($ ) ($ ) (1) (4) (1,2) (1) ($ ,3)

P rivate Equity

Pantheon USA VI 2004 Diversified (FOF) 35,000,000 33,075,000 42,630,000 9,335,635 7.28 7.68 1.57 1.29 03/31/2018 1,925,000

Capital Dynamics / HRJ Special Opps 2006 Distressed Debt (FOF) 20,000,000 17,866,165 15,302,828 5,203,386 1.92 9.14 1.15 0.86 03/31/2018 2,800,000

Aberdeen Asia Pacific 2006 Hybrid (FOF) 15,000,000 14,982,210 18,743,093 2,296,237 7.41 11.55 1.40 1.25 03/31/2018 481,676

Adams St. 2007 Direct 2007 Venture Capital (COI) 3,000,000 2,907,000 4,234,308 2,023,031 11.43 9.53 2.15 1.46 03/31/2018 93,000

Adams St. 2007 Non-U.S. 2007 Diversified (FOF) 10,500,000 9,980,250 9,146,453 5,847,861 7.75 11.66 1.50 0.92 03/31/2018 519,750

Adams St. 2007 U.S. 2007 Diversified (FOF) 16,500,000 15,732,750 18,515,547 9,090,529 11.63 11.53 1.76 1.18 03/31/2018 767,250

Blackrock Vesey St. IV 2007 Hybrid (FOF) 25,000,000 22,596,232 23,055,332 12,884,795 8.25 15.97 1.59 1.02 03/31/2018 2,624,994

Siguler Guff Distressed Opps III 2007 Distressed Debt (FOF) 15,000,000 14,665,690 20,495,355 2,759,595 10.69 16.65 1.59 1.40 03/31/2018 450,000

LGT Crown Europe M iddle M arket II* 2008 Buyout - M id (FOF) 20,000,000 13,496,085 13,104,668 6,098,987 9.74 14.50 1.42 0.97 06/30/2018 2,566,688

Drum Special Situations III 2010 Special Situations (FOF) 5,000,000 6,141,534 6,240,227 2,288,029 13.41 13.74 1.39 1.02 03/31/2018 2,584,419

Greenspring Global V-B 2011 Venture Capital (FOF) 25,000,000 22,001,686 20,025,000 26,431,576 21.20 13.12 2.11 0.91 03/31/2018 3,000,000

LGT Crown Asia-Pacific Private Equity II 2011 International Private Equity (FOF) 17,500,000 15,294,255 6,702,500 17,620,881 14.01 12.88 1.59 0.44 06/30/2018 2,432,500

Siguler Guff BRIC III 2011 Hybrid (FOF) 7,500,000 6,806,250 6,314,727 4,872,371 15.28 12.89 1.64 0.93 03/31/2018 693,750

LGT Crown Global Secondaries III 2012 Secondaries (FOF) 25,000,000 16,006,670 9,875,000 13,343,388 15.22 12.49 1.45 0.62 06/30/2018 9,000,000

Greenspring Secondaries Fund I 2014 Secondaries 7,500,000 7,197,289 1,984,991 9,259,011 18.88 12.16 1.56 0.28 03/31/2018 300,000

Greenspring Global Partners VI-B 2014 Venture Capital (FOF) 7,500,000 5,851,154 1,473,750 7,904,245 18.58 12.03 1.60 0.25 03/31/2018 1,650,000

Aberdeen(Flag) Private Equity VI 2014 Buyout - Small (FOF) 15,000,000 9,904,543 1,970,818 10,884,923 21.35 15.76 1.30 0.20 03/31/2018 5,100,000

Drum Special Situations IV 2015 Special Situations (FOF) 20,000,000 3,579,016 19,049 3,784,296 6.66 14.58 1.06 0.01 03/31/2018 16,500,000

Centana Growth Partners 2015 Growth Equity 7,000,000 2,803,942 40,040 6,477,056 98.57 14.41 2.32 0.01 06/30/2018 4,283,008

Greenspring Secondaries Fund II 2016 Venture Capital 20,000,000 17,800,000 3,295,000 19,365,792 31.80 15.10 1.27 0.19 03/31/2018 2,200,000

DC Capital Partners II 2016 Buyout - M id 7,000,000 2,046,892 7,147 2,281,656 12.89 13.61 1.12 0.00 06/30/2018 4,978,929

Castlelake Aviation III 2017 Special Situations 16,000,000 2,374,474 238,257 4,645,188 166.13 12.70 2.06 0.10 06/30/2018 13,625,526

BCP Fund II 2017 Buyout - Large 16,000,000 - - - - - - - 06/30/2018 16,000,000

Greenspring Secondaries Fund III 2018 Venture Capital 16,000,000 2,240,000 - 2,240,000 0.00 0.00 1.00 - 06/30/2018 13,760,000

Castlelake V 2017 Distressed Debt 16,000,000 2,614,380 - 2,678,130 4.15 4.15 1.02 - 06/30/2018 13,385,620

RLJ Equity Partners Fund II 2017 Buyout - M id 16,000,000 2,096,745 - 1,177,116 -43.86 -43.86 0.56 - 06/30/2018 13,995,200

AE Industrial Partners Fund II 2018 Buyout - M id 16,000,000 - - - - - - - 06/30/2018 16,000,000

Nexus Special Situations II 2018 Distressed Debt 16,000,000 - - - - - - - 06/30/2018 16,000,000

Columbia Capital Equity Partners VII 2018 Growth Equity 8,000,000 - - - - - - - 06/30/2018 8,000,000

Grain Communications Opportunity Fund II 2018 Growth Equity 8,000,000 - - - - - - - 06/30/2018 8,000,000

T o tal P rivate Equity C o mpo site 452,000,000 270,060,213 223,414,090 190,793,714 10.34 11.61 1.53 0.83 03/ 31/ 2018 183,717,310

1) Valuations are typically reported on one quarter lag. If the valuation date is earlier than the statement's date, the market value and performance are estimated by ro lling forward the latest reported balance to include relevant new cash flows.

2) Total Value to Paid In (TVPI) reflects to tal realized and unrealized performance. Distributed to Paid In (DPI) reflects realized performance only.

3) Remaining commitment includes recallable distributions which, if called, could cause drawn to exceed commitment.

4) The public market equivalent (PM E+) calculates benchmark performance by using the daily cash flows in a public index, and scaling the fund's distributions so the public market NAV remains positive.

The PM E will match the fund's IRR if no distribution/s had occurred during the life o f the fund.



8

Qualitative Fund Performance

Note: Rankings are based on 3/31/2018 metrics if 6/30/2018 reporting is not yet available.

Summit’s Qualitative Fund Performance rankings are intended to provide a holistic view of portfolio performance.

Rankings start with a performance comparison to peer funds in an appropriate vintage year.

Rankings are then adjusted to reflect Summit’s current knowledge of the firm, portfolio, and our own underwriting expectations for the fund.

Rankings are updated semi-annually, so these currently reflect the 6/30/2018 review.

Realized Performer On-Track Too Early Below Expectations Realized UnderperformerAberdeen Asia Pacific Aberdeen Private Equity VI AE Industrial II Pantheon USA VI

Adams St. 2007 U.S. Centana Growth Partners BCP Fund II Capital Dynamics / HRJ Special Opps

Adams St. 2007 Direct Greenspring Global V-B Castlelake Aviation III Adams St. 2007 Non-U.S.

Drum Special Situations III Greenspring Global Partners VI-B Castlelake V Blackrock Vesey St. IV

Siguler Guff Distressed Opps III Greenspring Secondaries Fund I Columbia Capital VII LGT Crown Europe Middle Market II

LGT Crown Asia-Pacific PE II DC Capital Partners Fund II

LGT Crown Global Secondaries III Drum Special Situations IV

Siguler Guff BRIC III Grain Opps. II

Greenspring Secondaries Fund II

Greenspring Secondaries Fund III

Nexus II

RLJ Equity Partners II

Seasoned Early Seasoned



9

Qualitative Fund Performance (Cont’d)

Note: Figures as of 6/30/2018 when available, otherwise based on 3/31/2018 rolled forward by Q2 2018 cash flows. Exposure is calculated as market value plus remaining commitment.

Covers all commitments, including both fund of funds and directs.

87% of exposure is to funds that have generated performance at or above expectations, or that are still too young to evaluate.

The remaining exposure is to funds that have underperformed expectations.

–These are all legacy fund of funds that were committed to prior to the 2008/2009 financial crisis.

–Only one true manager-specific issue (Capital Dynamics/HRJ)—others have primarily been byproducts of over-diversification.

Classification Median IRR Exposure Number of Funds

Realized Performer or On Track 15.2% $146 million (39%) 13

Too Early 6.7% $179 million (48%) 12

Below Expectations or Realized Underperformer

7.8% $50 million (13%) 5



10

Fund Recommendation



11

Executive Summary

Commitment Pacing

– Summit recommends a private equity commitment pacing plan of $80 million in 2018.

• Estimating 6 total commitments.

– Four commitments have been made thus far.

• $16 million commitment to AE Industrial Partners Fund II.

• $16 million commitment to Nexus Special Situations Fund II.

• $8 million commitment to Columbia Capital Equity Partners VII.

• $8 million commitment to Grain Communications Opportunity Fund II.

Current Recommendation

– Summit is recommending a $16 million commitment to Vista Equity Partners Fund VII.

– Following Vista, there would be one commitment remaining this year.



12

Commitment Model: Private Equity

The Commitment Model attempts to predict how much capital will actually be in private equity funds at a given point in time. The model:

– Estimates the commitments needed to reach and maintain the allocation target.

– Diversifies the portfolio by staggering commitments to reduce vintage year risk.

The Commitment Schedule is monitored and adjusted over time by Summit Strategies.

The Commitment Model for Fire & Police ERS of the City of Baltimore is based on the following assumptions:

– $2.8 billion of total assets as of December 31, 2017.

– Annual portfolio growth rate of 7.5%.

– 10.0% private equity allocation.

Based on the Commitment Model, an $80 million private equity commitment budget is recommended for 2018.

YearAnnual

Commitments

Cumulative

Commitments

Projected

Market Value

Private Equity Target

(10% of Total Assets)

2018 $80,000,000 $484,000,000 $201,056,000 $300,183,060

2019 $80,000,000 $564,000,000 $229,335,931 $322,696,790

2020 $80,000,000 $644,000,000 $273,726,686 $346,899,049

2021 $80,000,000 $724,000,000 $292,803,408 $372,916,478

2022 $80,000,000 $804,000,000 $375,310,531 $400,885,214

2023 $100,000,000 $904,000,000 $416,215,536 $430,951,605

2024 $100,000,000 $1,004,000,000 $456,281,380 $463,272,975

2025 $125,000,000 $1,129,000,000 $502,592,443 $498,018,448

2026 $125,000,000 $1,254,000,000 $539,908,003 $535,369,832

2027 $125,000,000 $1,379,000,000 $582,084,896 $575,522,569

Commitment Schedule



13

Vista Peer Comparison

Vista Thoma Bravo Silver Lake Providence

A B B B

Fund Strategy / Qualifications

Vista was founded in 2000 and has had consistent senior leadership since that time. The firm has always had a sole focus on software, and has built the team out with a deep pool of both investment and operational expertise. Across their prior six buyout funds, Vista has proven their ability to execute the strategy and deliver strong returns to investors.

Thoma Bravo has a sole focus on software buyouts, similar to Vista. Due to this sector specialization, they have a very hands-on approach and have used this to deliver a strong historical track record. In saying this, the firm has not scaled its team like Vista has, despite substantially growing assets over time. The firm also has fewer in-house operating professionals than Vista.

Silver Lake is a highly successful firm focused on the technology space. However, this focus as historically taken on a broader scope than Vista, including areas such as e-commerce and media. While they have generally been able to manage this larger scope, we prefer Vista’s dedicated focus on software.

Similar to Silver Lake, Providence has built a very successful organization but takes a broader approach to technology than Vista. While they generally have a strong track record, some of their troubled deals have come from more volatile consumer-driven business models.

A A B B

Opportunity The opportunity in software continues to grow, as companies rely more and more heavily on tech-enabled services to support their operations. Importantly, software companies today are often characterized by a high level of recurring revenue, offering relatively stable cash flows and a certain degree of risk mitigation.

Given their similar focus, Thoma Bravo should benefit from the same favorable market dynamic that Vista faces.

In some ways, Silver Lake should benefit from a similar market opportunity as Vista. However, Silver Lake is exposed to a broader set of end-market risks since they will invest in areas outside of software. This could be compounded by consumer-driven areas such as e-commerce; versus Vista who only focuses on more stable B2B software.

Providence’s market opportunity set should be similar to Silver Lake. They can capitalize on the opportunity in software, but will focus on other areas such as media and education. While this flexibility could be a positive, it can also bring volatility to the strategy and make it more difficult to succeed in each area of focus.

A A A B

Portfolio Fit Differentiated strategy from what is already in the System’s portfolio. In addition, the firm is African-American owned (Robert Smith holds all of the firm’s voting shares).

Thoma Bravo would offer a similarly good fit for Baltimore’s portfolio.

Silver Lake would bring good sector diversification to the System’s portfolio.

Providence would generally bring good sector diversification to the System’s portfolio; however, their communications exposure could potentially bring some overlap with Grain and Columbia.

A A- B+ B

Overall / Recommendation

Summit has already approved this fund at its internal Investment Committee, and views Vista has an attractive way to access a control strategy in the software space. Note: this is a new manager relationship for Summit.

Thoma Bravo is a successful firm that is a high quality option and is currently raising a similarly sized fund to Vista. However, we feel that Vista’s deeper pool of resources leaves them better positioned to maintain success at a larger fund size.

Summit chose to pass on this manager’s most recent fundraise.

Summit chose to pass on this manager’s most recent fundraise.



14

VEPF VII Vista Equity PartnersCONCLUSION Vista's software domain expertise and depth of in‐house resources is a true differentiator. Vista has a proven ability to leverage these resources in order to drive revenue growth, enhance EBITDA margins, and deliver strong returns to investors. The firm has experience investing across cycles, and over time has demonstrated how they can preserve investor capital

without sacrificing upside potential. However, Vista manages significantly more capital than most other software‐focused private equity firms, and does not yet have a robust track

record to suggest they can maintain strong returns at the kind of fund size being considered for Fund VII. Further, as they continue to raise additional product lines, it will likely become

more difficult for them to properly allocate shared resources across the firm. In saying this, Vista has experienced substantial changes over time and has properly managed this to date.

Given the firm's long term proven ability in the software space and existing competitive advantages, we still believe that the firm is well‐positioned to execute on their strategy.

CONSIDERATIONS Robert Smith owns all of the firm's voting rights, so in effect he has full economic control over decision making.

Robert and Brian collectively take around 50% of the firm's total carry.

The remainder is allocated to the senior members of the team (i.e.

VP+) and Dyal, which takes 11%.

Vista continues to scale assets at a rapid pace, creating concern

around future alignment and focus on any one particular product.

Vista is expected to cap Fund VII at around $15 billion, which is

certainly large in absolute terms but also a meaningful increase from

the $11 billion that was raised for Fund VI.

The fund will naturally target more mature and more efficient

businesses due to the fund size. While Vista has proven an ability to

improve operations and create real value at larger companies, its track

record of doing this with a fund sized similar to Fund VII is limited (Fund

VI is the best comp, and its performance is still too early to gauge).

Vista has historically used healthy amounts of leverage when

purchasing businesses (7.5x average across prior two funds for deals

with positive EBITDA at entry). These are typically high recurring

revenue businesses so the leverage can be supported, but it still

increases risk.

Vista is offering two management fee/carry options. The first is

structured as a 1% fee, with a 30% carry over a 10% preferred return.

The second is a 1.5% fee, with a standard 20% carry over an 8%

preferred return. GP commitment is 2%, which is in line with peers.

Vista's sole focus on software should offer them a competitive advantage relative to generalist private equity firms that only partially focus on the space.

The team's deep operational capabilities allow Vista to be a hands‐on partner with portfolio

companies. This is bolstered by their 100+ person internal consulting group, which can be deployed

into portfolio companies on an as‐needed basis.

If you aggregate portfolio company revenue across Vista's funds, Vista would be the 4th largest

enterprise software company in the world. This breadth gives them unique insight that they can

leverage across their portfolios.

Despite their size, they continue to use an outside administrator which is attractive. 6‐person dedicated compliance team in‐house. They also use an outside compliance consultant.

All other operations checks were in line with if not better than peers.

Excluding Fund VI, which is still early in its life, Vista's flagship equity funds have all outperformed the benchmark median on both an IRR and TVPI basis.

Excluding two non‐control venture capital deals that were completed in Fund II, Vista has not lost

money on a realized deal across its flagship funds. Further, only two unrealized control deals have

been marked down, with the worst impairment being 0.75x cost.

Dyal owns 28% of the firm's equity, which was purchased in two roughly equal tranches. Since Dyal's initial investment, Vista's AUM has grown significantly.

Vista manages multiple platforms, which could potentially compete for time and resources. However,

given the breadth of the team and specialization by product, this concern is somewhat mitigated.

Effective Alignment Weak Concern Neutral Favorable Strong

Return Profile Weak Concern Neutral Favorable Strong

Operations Weak Concern Neutral Favorable Strong

Competitive Advantage Weak Concern Neutral Favorable Strong

CORE OPINION Weak Concern Neutral Favorable Strong



15

VEPF VII Vista Equity PartnersOverview Firm

Founded 2000

Primary Office Austin, TX

Ownership 72% employees; 28% Dyal

Assets Managed $31 billion

Strategies Covered Buyout, Credit, Long/ Short Equity

Employees >300

Diversity Status African-American owned

Investment TeamStrategy Professionals >100; 25 dedicated to Flagship funds

Key Personnel Title Joined Firm

Robert Smith Co-Founder, CEO 2000

Brian Sheth Co-Founder, President 2000

David Breach COO, CLO 2015

Expected Portfolio Characteristics Fees & Key TermsAsset Class Private Equity Target Size Min $300 million Annual Mgmt Fee 1% for Class A; 1.5% for Class B

Primary Strategy Buyout Target Size Max $2,000 million Carried Interest 30% for Class A; 20% for Class B

Average Ownership ~75% Positions 10-14 Preferred Return 10% for Class A; 8% for Class B

Average Debt 7.5x Investment Period 5 years from final closing

GP Commitment At least 2% of total commitments

Investment InformationTarget Size $12 billion; cap est. ~$15 billion

Commitments Closed or circled ~$10 billion

Minimum $10 million, subject to GP discretion

Expected Close Date 1st in Aug.; Final early Q1 2019

10 years from final closing, w/ one 1-

year extension at GP discretionFund Term

Vista is a software-focused private equity manager that manages private equity, private credit and hedge fund platforms.

VEPF VII is the firm's next vehicle for its flagship large buyout strategy. The fund will target control buyouts of mature software companies. These companies can be public or private, and will generally have $500-$1,500 million of revenue at entry.

Vista will look to purchase companies with ~20% EBITDA margins, and use their operational expertise to drive margins closer to 40% prior to an exit. Vista will leverage the firm's in-house operating executives and consulting group, as well as external operating partners to help drive operational improvements. These improvements can be related to sales and marketing, new product extensions, add-on acquisitions, etc.

Vista's internal consulting group, Vista Consulting Group ("VCG"), is a 100+ person consulting team dedicated to Vista's portfolio companies. The team is run to be breakeven and is deployed on an as-needed project basis.

The investment team is primarily segmented by vehicle, with the flagship fund having its own dedicated group of investment professionals and operating principals.

They will almost always replace part of the incumbent managemnet team, and will leverage their 100+ person external executive network for talent. 50%+ of the time they will replace management with an executive that has previously worked with a Vista portfolio company.

Software,

100%

Industry Exposure

US, 90%

Int'l, 10%

Geographic Exposure



16

VEPF VII Vista Equity PartnersObservations Track Record ($ Millions)

Fund

Vintage

Year

Fund

Size

Invested

Capital

Realized

Value

Unrealized

Value

Net

IRR

Net

TVPI

Fund II 2000 1,000 839.8 2,715.2 0.0 29.2% 2.7x

Fund III 2007 1,300 1,236.2 3,617.7 432.7 27.9% 2.6x

Fund IV 2011 3,500 3,066.3 3,799.2 3,524.8 19.2% 1.9x

Fund V 2014 6,000 5,678.2 1,541.3 7,142.2 14.6% 1.3x

Fund VI 2016 11,100 7,747.0 0.0 8,283.9 5.1% 1.0x

IRR Vintage Analysis TVPI Vintage Analysis

Performance data as of 12/31/17. Vintage comparison uses most recently available Pitchbook Buyout data.

Vista's prior five funds, with the exception of Fund VI which is too early to evaluate, have all been top or second quartile on both and IRR and TVPI basis when compared to Pitchbook Buyout funds.

Funds II and III are essentially fully realized while Funds IV and V are currently in harvest mode. As of 12/31/17, Fund VI had invested 70% of capital commitments.

Although Funds II and III cannot be evaluated on a PME basis, Funds IV and V are outperforming by 640 bps and 220 bps, respectively.

Vista has never experienced a realized loss on a control transaction.

29.2% 27.9%

19.2%

14.6%

5.1%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Fund II(2000)

Fund III(2007)

Fund IV(2011)

Fund V(2014)

Fund VI(2016)

IRR

3rd Quartile 2nd Quartile Vista

2.7x2.6x

1.9x

1.3x

1.0x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

Fund II(2000)

Fund III(2007)

Fund IV(2011)

Fund V(2014)

Fund VI(2016)

TVP

I

3rd Quartile 2nd Quartile Vista



17

VEPF VII Vista Equity PartnersIRR & TVPI Cash Flow J-Curve

Loss Rates Public Market Equivalent

Scatterplot omits a 2.98x/6010% deal and 5.0x/1231% deal for formatting purposes .

Fund II and II I PMEs not meaningful due to the magnitude of fund outperformance.

Fund IV

Fund III

Fund VI

Fund II

Fund V

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

-110% -10% 90% 190%

TVP

I

IRRUnrealized Holdings (Gross) Realized Holdings (Gross)

Fund II

Fund III

Fund IV

Fund VFund VI

0%

10%

20%

30%

0% 10% 20% 30%

Cap

ital

We

igh

ted

Lo

ss R

ate

Equal Weighted Loss Rate

29.2%27.9%

19.2%

14.6%

5.1%

n/m n/m

12.8% 12.4%

21.2%

0%

5%

10%

15%

20%

25%

30%

35%

Fund II Fund III Fund IV Fund V Fund VI

Vista PME-R2000

0%

50%

100%

150%

200%

250%

300%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Pe

rce

nta

ge o

f Co

mm

itm

ents

Fund Year

Fund II Fund III Fund IV Fund V Fund VI



18

Appendix



19

Qualitative Fund Updates

Adams Street 2007 Program – The Adams Street 2007 investment is split between the US sleeve, the Non-US sleeve and the Direct investment sleeve. Through 3/31/18, the best performing sleeves have been the US fund and the Direct fund, which have produced a 12% and 11% net IRR, respectively, and are considered marginally above median compared to peers. The worst performing sleeve has been the Non-US fund, which has produced an 8% net IRR and ranks fourth quartile. Adams Street broadly diversifies its portfolios across 60+ managers, which translates into 1,000+ underlying companies per portfolio. While this level of diversification helps mitigate downside risk, it also creates an index effect and makes it difficult for best ideas to impact the portfolio. As such, Adams Street can be expected to generally track the overall performance of the private equity market.

Castlelake V – As of 6/30/18, the fund as called only 16% of LP commitments but 37% of the fund is either invested or under LOI. The fund has invested $838m of the $2,448m across 119 investments and has realized $86m to-date, with the majority of realizations coming from commercial & industrial NPLs.

Castlelake Aviation III – Through the first half of 2018, Castlelake Aviation III had called 15% of commitments and, although still early, is posting significant markups in the portfolio and generating a 2.1x on the called capital. The fund has also paid back 10% of the amount called.

Centana Growth – Through 6/30/18, the fund had called 40% of commitments and made seven investments. Performance has been strong, with the fund generating a 99% net IRR and 2.3x net TVPI. The primary driver of value has been Jumio, which the fund bought out of bankruptcy and is now valued at 16x cost. The fund has also marked up Vena Solutions to 2.4x cost and SheerID, an enterprise software business that was closed at the end of 2017, to 1.8x.

DC Capital Partners II – At the end of 2017, the partnership acquired Janus Holdings, an environmental services and risk management company located in Tennessee. The fund invested $76 million, representing the largest of the three investments to date and bringing the percentage of called capital to 29% through the first half of 2018. As of 6/30/18, the fund is generating a 13% net IRR and a 1.1x net TVPI, although it is still too early to meaningfully evaluate performance.

Drum Special Situation Partners III – The fund has been fully committed to ten funds and 10 direct investments. Of the fund commitments, all seem to be performing in line with expectations with only two commitments, Rutland Fund III and Perceva France Special Situations, marked marginally below cost as of 3/31/18. Monomoy Capital II is the strongest performer of the fund commitments at this point and is currently marked at a 4.4x gross MOIC. The direct investments account for approximately 20% of committed capital and have already returned 1.5x of the capital contributed to those investments.



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Drum Special Situation Partners IV – This fund is still early in its life but appears to be on-track. Through 3/31/2018, the fund has committed 72% of LP capital to a total of eight funds and seven co-investments. Most of the underlying managers are still in the J-curve but the co-investments are displaying positive early performance, specifically ABC Group, which was marked at 2.3x as of 3/31/18.

FLAG PE VI (Aberdeen) – The fund is still young but off to a solid start. As of 3/31/18, about 66% of the capital has been called and the fund has committed to fifteen funds and twelve co-investments. The partnership has also generated a 0.2x DPI, with over half these proceeds paid from Providence Strategic Growth. Providence is still the largest position, accounting for 12% of the market value with a 1.8x net TVPI and 13% net IRR.

Greenspring Global Partners V-B – The fund has produced strong performance thus far, generating a 21% net IRR and 2.1x net TVPI through 3/31/2018; this performance puts the fund in the first quartile for both metrics relative to a PitchBook benchmark of fund of funds for the same vintage and second quartile relative to a benchmark of direct venture. The fund has called nearly 88% of LP capital since inception and has returned $97 million or approximately 39% of paid-in capital. A key contributor to the strong performance has been the fund’s allocation to direct investments which represent approximately 34% of invested capital. 16 of the 19 direct investments are held at or above cost with the gross TVPI for the direct portfolio at 2.7x. The fund portfolio is also doing well, currently marked at a 1.8x gross TVPI.

Greenspring Global Partners VI-B – The 2014 vintage has continued to build on its strong start; the fund is currently marked at a 19% net IRR and 1.6x net TVPI as of 3/31/2018. Relative to a PitchBook benchmark of fund of funds for the same vintage, this is considered a first quartile fund. When compared against direct venture of the same vintage, this fund is top quartile from an IRR perspective and second quartile on a TVPI basis. The fund has called 78% of committed capital and distributed 25% of paid-in capital back to LPs. As in Global Partners V-B, this strong early performance has been driven heavily by the direct portfolio which is already marked at a 2.2x.

Greenspring Secondaries Fund I – This was Greenspring’s first dedicated secondary fund, and performance thus far has proven out the thesis behind the strategy. Through 3/31/2018, the fund is 96% called and is marked at a 19% net IRR and a 1.6x net TVPI which is considered top quartile relative to direct venture funds of the same vintage. Based on cost, the fund’s remaining portfolio investments have aggregate exposures of 71% to IT and communications companies and 13% to healthcare and life sciences companies.

Greenspring Secondaries Fund II – Although it is still early in the fund’s life, GSF II has already called 62% of commitments and is generating a 32% net IRR and a 1.3x net TVPI as of 3/31/18. The partnership is fairly concentrated with 59% of the unrealized value invested in nine direct investments with the remainder of the portfolio diversified across thirteen fund interests.



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Greenspring Secondaries Fund III – The fund is still early in its life, so performance is not yet meaningful. On the investment side, the fund has invested $68 million (21% of commitments) across four different companies. Based on the opportunity set facing the firm today, they expect to continue to skew toward direct company interests versus LP fund interests.

Capital Dynamics (HRJ) Special Opportunities I – The original thesis with this fund was that it presented a way to capitalize on distressed opportunities that were expected to arise as a result of an anticipated wave of defaults around the time of the financial crisis. However, the fund deployed most of its capital (60%) prior to the onset of the financial crisis in 2008, which reduced its ability to take advantage of cheap asset prices. The fund has also been forced to deal with certain legal issues relating to the broader HRJ organization, though the impact of this on fund performance has been small (~14 bps). Through 3/31/2018, the fund has produced a net IRR of 1.9% and a net TVPI of 1.2x, both of which fall in the bottom quartile for 2006 vintage fund of funds. The performance of most underlying funds in the portfolio continues to improve, but it is unlikely that the fund will ever achieve the 10% LP preferred return. The fund continues to monetize holdings and expressed a willingness to explore a secondary sale once NAV reached 20% of committed capital. As of 3/31/2018, NAV stood at 26% of committed capital.

LGT Crown Asia-Pacific II – Through 6/30/18, the fund has produced a 14% net IRR and 1.6x TVPI which are ranked above median for 2011 vintage fund of funds. A key driver of this early performance is LGT’s allocation to secondary transactions (approximately 20% of commitments) and co-investments (approximately 4% of commitments). As of 6/30/2018, the secondary investments are marked at a gross IRR of 16% and the co-investments are marked at a gross IRR of 28%. The portfolio is generally well-diversified on the basis of vintage, geography, and strategy although the fund has a heavier weighting towards China and India which together represent 68% of the fund’s commitments. The portfolio is also tilted heavily towards growth capital and small/mid market buyout strategies which collectively represent 77% of commitments.

LGT Crown Global Secondaries III – The fund got off to a slower than expected start in terms of called capital but the pace picked up and has made 14 distributions to investors representing a 0.62x DPI. The fund is 64% called as of 6/30/18 which is below the 79% of other secondary funds of the same vintage. However, including the amounts committed to transactions (including two expected to close shortly after quarter end), the fund is 100% committed. The portfolio is heavily tilted toward buyout transactions with 42% of the portfolio invested in small and mid-size buyout and 13% invested in large buyout. At the fund level, the net IRR and net TVPI are 15% and 1.5x respectively, both of which are considered below median relative to a PitchBook benchmark of secondaries for the same vintage.



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LGT Crown Europe Middle Market II – The fund is well into its harvest period and delivering a DPI of 1.06x in euros. Performance to date has outperformed the median fund of funds on a local currency basis but the fund drops to the 25th percentile when converted to USD as of 6/30/18. On a gross basis, the fund has produced a 16% IRR before taking into account the impact of currency.

Pantheon USA Fund VI – The fund is in full harvest mode, and no additional capital calls are expected to occur. Fund performance has trailed expectations on an absolute basis, producing a net IRR and net TVPI of 7.3% and 1.6x through 3/31/18. However, on a relative basis, this performance is in line with the median TVPI and IRR relative to a PitchBook benchmark of fund of funds for the same vintage. The fund was almost fully invested prior to the financial crisis and heavily concentrated in the 2006 vintage, which has resulted in extended holding periods for the underlying funds and delayed distributions for Pantheon. The fund was also very broadly diversified to over 60 partnerships, which can dilute returns. There is still some upside for the fund on a multiple basis, as over $560 million of NAV remains on the fund’s balance sheet, but the IRR is not expected to meaningfully change.

RLJ Equity Partners II – RLJ II is still in fundraising mode and has closed/hard circled $202 million of its $300 million target. In January 2017, the fund closed on its first and only investment to-date, Native Maine. RLJ invested $7.9 million of equity in the produce distributor to purchase a 66.2% stake in the company, which, as of 6/30/18, is still marked at cost.

Siguler Guff BRIC III – The fund’s performance thus far has been strong. Through 3/31/18, the fund has produced a net IRR of 15% and a net TVPI of 1.6x, and the fund is considered top quartile versus the PitchBook fund of funds benchmark on both metrics. The fund’s co-investment portfolio has driven the outperformance, led by a direct investment in Alibaba (the Chinese e-commerce giant), which was realized for a 5x multiple. The key performance driver for the fund portfolio has been the Shunwei Chinese Internet Fund, a fully realized fund that returned more than 5x cost. The fund continues to have upside through CMC Capital Partners, which invested in Kuaishou Technology and Bilibili, both growing tech companies in China.

Siguler Guff Distressed Opportunities III – The fund has performed well through 3/31/2018 with a net IRR and net TVPI of 10.7% and 1.6x respectively. The fund has also distributed close to 1.4x invested capital which puts it in the first quartile for DPI relative to a PitchBook benchmark of fund of funds for the same vintage. The fund is well above median on an IRR and TVPI basis. One of the primary drivers for this has been timing – the fund was raised in 2007 but committed almost no capital until mid-2008. This allowed it to navigate the impending distressed cycle that took hold in late 2008/early 2009. But in addition to smart timing, the fund also made good investments; none of the fund commitments are marked below cost and only three of the 28 direct deals have returned (or are currently marked) below cost.



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● Squadron (Aberdeen) Asia-Pacific Fund – The fund has produced a 7.4% net IRR and 1.4x net TVPI through 3/31/2018, both of which are considered third quartile relative to peers – of note is that if the System’s secondary transaction in Squadron is included, the performance is first quartile. The fund is now in harvest mode and has a DPI of 1.25x as of 3/31/2018. The fund continues to be buoyed by one very strong investment, Hony III, which is currently marked at 4.0x cost. Without this investment, the fund would have had a very different net return profile given mistakes the manager made in market selection and co-investments. On market selection, the fund has been adversely affected by its fund investments in India, both of which are currently marked below cost. The two fund investments in India represent nearly 18% of the remaining portfolio. In addition, co-investments represented approximately 9% of the committed capital and have a net TVPI of 0.1x.

● Vesey Street Fund IV (Blackrock) – Through 3/31/2018, the fund has produced an 8.3% net IRR, which is third quartile for 2007 vintage fund of funds. On a TVPI basis the fund has provided above median performance at 1.6x. The fund is in harvest mode and is posting a 1.0x DPI to date. While the financial crisis resulted in delayed distributions across the private equity industry, the fund was overly exposed to this dynamic due to its large allocation to large and mega buyout funds – based on committed capital, 41% of the portfolio is invested in these types of funds. These funds raised significant amounts of capital prior to the financial crisis, and they were too dependent on leverage when making investments. For Vesey Street IV, these deals have not necessarily resulted in capital losses, but they have weighed on the fund’s overall distribution pacing.



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2017 Fee Information

Partnership

2017 Fees/Carry Paid to

Underlying Managers

Gross IRR

(12/31/2017)

2017 Fees/Carry Paid

to Partnership

Net IRR

(12/31/2017)

ASP 2007 Direct1 n/a 16% 234,173 11%

ASP Non US 2007 535,009 10% 73,456 8%

ASP US 2007 970,205 14% 159,964 12%

Castlelake Aviation III1,2 n/a n/m 275,193 85%

Capital Dynamics (HRJ) n/m n/m 49,594 2%

Centana Growth Partners1 n/a 115% 466,631 109%

DC Capital Partners II1 n/a 32% 209,530 28%

Drum Special Sits. III n/m 20% 30,963 14%

Drum Special Situations IV n/m 38% 200,930 33%

Aberdeen (Flag) Asia Pacific 73,695 9% 49,881 7%

Aberdeen (Flag) PE VI 193,460 29% 216,400 26%

Greenspring Global Partners V-B 1,912,709 27% 839,020 22%

Greenspring Global Partners VI-B 347,921 25% 291,813 20%

Greenspring Secondaries I 73,460 25% 190,550 21%

Greenspring Secondaries II 30,912 49% 418,578 39%

LGT Crown Asia-Pacific II 913,604 16% 273,150 14%

LGT Crown Europe Middle Mkt II 388,116 13% 108,587 11%

LGT Crown Global Secondaries III 793,204 20% 493,886 16%

Pantheon USA Fund VI 288,632 9% 165,847 7%

Siguler Guff BRIC n/m 23% 144,955 16%

Siguler Guff Distressed Ops. III n/m 14% 95,805 11%

Vesey Street Fund IV (Blackrock) n/m 11% 248,765 8%

Note: All data was provided by the managers; Fees/Carry paid represent manager estimates. Carry reported is for paid and accrued during

period. Not all managers had information for the underlying fees/carry paid or gross IRR, in which case the amount was marked as "n/m".1Fund invests directly into companies rather than into funds, so no underlying fees or carry were paid.2Manager did not provide IRR; returns were calculated using client's cash flows and statements.



©2018 Summit Strategies Group. All rights reserved.

Disclosures

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Summit has prepared this presentation for the exclusive use of its intended audience. Any information contained in this report is for information purposes only and should not be construed to be an offer to buy or sell any securities, investment consulting, or investment management. The information herein was obtained from various sources, which Summit believes to be reliable. Summit cannot assure the accuracy of any third-party-generated numbers. Past performance does not guarantee and is not a reliable indicator of future results. No graph, chart or formula can, in and of itself, be used to determine which managers or investments to buy or sell. Any forward-looking projection contained herein is based on assumptions that Summit believes may be reasonable, but are subject to a wide range of risks, uncertainties and the possibility of loss. Accordingly, there is no assurance that any estimated performance figures will occur in the amounts and during the periods indicated, or at all. Actual results and performance will differ from those expressed or implied by such forward-looking projections.

This report may contain opinions developed by Summit. Summit does not guarantee the accuracy or completeness of the information contained in this report. The opinions, market commentary, portfolio holdings, and characteristics are as of the date(s) shown and subject to change.

Greenwich Quality Leader—The surveys were conducted by Greenwich Associates, a third-party research firm that is independent of Summit Strategies Group. Greenwich surveyed plan sponsors with assets in excess of $150 million to document their opinions of their investment consulting relationships. Consultants like Summit receive the survey results in exchange for providing Greenwich with evaluations of investment managers. Summit did not pay Greenwich any compensation for inclusion in this study. The 2016 survey is based on 1,216 interviews, 19 of whom retain Summit as their consultant. The 2015 survey is based on 1,341 interviews, 28 of whom retain Summit as their consultant. For more information regarding the methodology for the 2016 survey, please click the following hyperlink: https://www.greenwich.com/asset-management/institutions-seek-consultants-new-approaches-and-ideas. The Greenwich Quality Index is based on collective client ratings over a number of qualitative categories, such as investment counseling, manager selection, and client servicing. More information regarding these categories is available upon request. The awards presented are not necessarily representative of any single client’s experience, but rather represent the collective views of Summit’s sampled clients. Rankings do not represent an endorsement of Summit. Past performance is no guarantee of future results.

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