MINUTES Meeting of the Investment Committee State Universities … · 2019-06-12 · MINUTES Meeting of the Investment Committee of the Board of Trustees of the State Universities

MINUTES

Meeting of the Investment Committee of the Board of Trustees of the

State Universities Retirement System Thursday, March 7, 2019, 9:00 a.m.

State Universities Retirement System Main Conference Room

1901 Fox Dr., Champaign, Illinois 61820 The following trustees were present: Mr. Tom Cross, Mr. Dennis Cullen (via conference call), Dr. John Engstrom, Dr. Fred Giertz, Mr. Craig McCrohon, Dr. Steven Rock, Mr. Collin Van Meter and Mr. Antonio Vasquez (via conference call). Others present: Mr. Martin Noven, Executive Director; Mr. Doug Wesley, Chief Investment Officer; Ms. Ellen Hung, Deputy CIO; Ms. Kimberly Pollitt, Mr. Joe Duncan and Mr. Shane Willoughby, Senior Investment Officers; Mr. Alex Ramos and Mr. Brian DeLoriea, Investment Officers; Ms. Kelly Valle and Mr. Akshay Patel, Investment Analysts; Ms. Bianca Green, General Counsel; Ms. Kelly Carson and Ms. Annette Ackerman, Executive Assistants; Ms. Mary Pat Burns of Burke, Burns & Pinelli; Mr. Neil Rue, Mr. David Sancewich, Mr. Collin Bebee, Ms. Judy Chambers, Mr. Tad Ferguson and Ms. Kristen Chase of PCA; Ms. Sally Haskins, Ms. Barbara Bernard and Ms. Jan Mende of Callan; Ms. Linda Brookhart of SUAA, Mr. Jason Parks of Loop Capital and Mr. Timothy Spila. Investment Committee roll call attendance was taken. Trustee Cross, present; Trustee Cullen, present (via conference call); Trustee Giertz, present; Trustee McCrohon, present and Trustee Rock, present. Trustee Steven Rock made the following motion:

• That the trustees be allowed to participate via conference call for all meetings on March 7, 2019, pursuant to Section 7(a) of the Open Meetings Act due to their unavailability because of personal illness, employment purposes or family or other emergencies.

Trustee Fred Giertz seconded and the motion carried with all trustees present voting in favor. Trustee Aaron Ammons physically joined the meeting at 10:15 a.m.

APPROVAL OF MINUTES

Trustee Tom Cross presented the minutes from the Investment Committee meeting of December 6, 2018. Trustee Rock made the following motion:

• That the minutes from the December 6, 2019 Investment Committee meeting be approved as presented.

Trustee Giertz seconded and the motion carried with all trustees present voting in favor. Trustee Rock made the following motion:

• That the closed session minutes from the December 7, 2018 Investment Committee meeting be approved as presented and remain closed.

Trustee Giertz seconded and the motion carried with all trustees present voting in favor.

CHAIRPERSON’S REPORT There was no chairperson’s report.

CHIEF INVESTMENT OFFICER REPORT Mr. Doug Wesley provided a summary of current items he and staff are working on, noting the December 2018 automatic rebalance completed by Parametric and the review process for investment consultants, which includes PCA, Callan and Cammak. Mr. Wesley stated that staff is currently in the process of preparing a survey and that he will continue to update the board as the process continues. Lastly, Mr. Wesley provided a brief update regarding market values through the last quarter and also indicated that the annually required disclosures for consultants are attached in the materials under informational items.

SPECIALTY CONSULTANT PROCUREMENT

Mr. Wesley presented the Investment Procurement Policy that includes specific procurement requirements for investments recommended by a specialty consultant. Mr. Wesley stated that staff, Callan and fiduciary counsel have worked to design a procurement process that complies with the state of Illinois’ statutory requirements. Ms. Sally Haskins, Ms. Barbara Bernard and Ms. Jan Mende of Callan provided their input regarding the SURS procurement policy and outlined Callan’s due diligence process and conformity to said policy. Trustee Rock made the following motion:

• That based on the recommendation of staff, the revised Investment Procurement Policy be

approved, as presented. Trustee Van Meter seconded the motion with all trustees present voting in favor. A copy of SURS memorandum titled “Review of Procurement Policy” and presentations titled “SURS Investment Procurement Policy – March 2019 Revision” and “SURS Real Assets Procurement” are incorporated as part of these minutes as Exhibit 1, Exhibit 2 and Exhibit 3.

NON-CORE REAL ESTATE MANAGER INTERVIEW

Mr. Shane Willoughby discussed staff and Callan’s recommendation for the non-core real estate fund commitment, stating that this engagement would put the portfolio at approximately one quarter of the 2019 pacing goal set forth in the Real Assets Strategic Plan. Mr. Willoughby continued by stating that this commitment would help achieve long-term targets and gain international exposure in the

non-core real asset class. Ms. Jan Mende of Callan provided a summary of Blackstone and identified a few of the key factors used to determine the recommendation of Blackstone Real Estate Partners (BREP) Europe Fund VI. At this time Mr. Anthony Myers and Mr. Andrew Fenet of Blackstone presented the board with a background of the firm and its investment strategies, including that of BREP Europe Fund VI that is being recommended for a commitment. After the Blackstone presentation, Trustee Cross asked for a consensus from the board regarding the process of interviewing managers. Mr. Martin Noven asked if the board would like staff and consultants to review managers or if the board would like managers to continue to present during board and/or committee meetings. After further discussion, it was determined that staff would come up with a proposal to present to the board at a future date. Trustee Rock made the following motion:

• That based on the recommendation of staff and SURS real assets consultant, that a commitment of €75 million to Blackstone Real Estate Partners Europe Fund VI be approved, contingent on successful contract negotiations.

Trustee Giertz seconded the motion with all trustees present voting in favor. A copy of the staff presentation titled “Non-Core Real Estate Recommendation” is incorporated at part of these minutes as Exhibit 4. A copy of Callan’s presentation titled “SURS BREP Europe VI” and Blackstone’s presentation titled “BREP Europe VI presentation” are incorporated as part of these minutes as Exhibit 5 and Exhibit 6. The diversity disclosures are also incorporated as part of these minutes as Exhibit 7 and Exhibit 8.

CRO CLASS STRUCTURE

Mr. Collin Bebee of PCA presented an overview of the Crisis Risk Offset (CRO) Class. As part of the presentation he explained the purpose and implementation of CRO, as well as structuring and expectations while the CRO class is being applied. Mr. Bebee also discussed allocation comparisons, funding ratio, volatility and concluded with a review of trend following. Discussion continued as trustees asked questions regarding the CRO class structure.

A copy of PCA’s presentation titled “CRO Structure Review” is incorporated as part of these minutes as Exhibit 9.

ALTERNATIVE RISK PREMIA EDUCATION SESSION

Mr. Bebee provided an educational analysis on the basic concepts of risk premium by providing examples and explaining how premiums are measured. In addition, Mr. Bebee also discussed the sustainability of risk premiums, performance and the strategies used. A copy of PCA’s presentation titled “Educational Overview of Alternative Risk Premia” is incorporated as part of these minutes as Exhibit 10. The education session lasted for 45 minutes; ending at 12:10 p.m.

APPROVAL TO CONDUCT CRO RELATED MANAGER SEARCHES

Ms. Ellen Hung provided background information regarding the asset allocation approved in September 2018 for the CRO class which will include long duration, trend-following and alternative risk premia strategies. Based on prior educational sessions regarding these strategies, Ms. Hung provided staff’s recommendation along with a proposed timeline and guidelines for the Quiet Period Policy. Trustee Rock made the following motion:

• That based on the recommendation of staff and PCA, a commitment of no more than 1.75 percent of SURS total portfolio (35 percent of the initial 5 percent target to CRO) to long duration strategy be authorized, contingent on successful bidding among the approved slate of passively managed liquid fixed income providers.

Trustee Giertz seconded the motion which led to a roll call vote.

Trustee Ammons - aye Trustee Cross - aye Trustee Cullen - absent Trustee Engstrom - aye Trustee Giertz - aye Trustee McCrohon - nay Trustee Rock - aye Trustee Van Meter - aye Trustee Vasquez - absent

Motion passed. Trustee Rock made the following motion:

• That based on the recommendation of staff and PCA, that a search be conducted to identify qualified firms to manage a trend-following strategy.

Trustee Giertz seconded the motion and led to a roll call vote.


Motion passed. Trustee Rock made the following motion:

• That based on the recommendation of staff and PCA, that a search be conducted to identify qualified firms to manage an alternative risk premia strategy.

Trustee Giertz seconded the motion and led to a roll call vote.


A copy of staff’s memorandum titled “CRO Search Memo” is incorporated as part of these minutes as Exhibit 11.

PRIVATE EQUITY CONSULTANT SEARCH UPDATE

Ms. Kim Pollitt and Mr. Tad Ferguson provided an update to the board regarding the private equity consultant search and indicated that SURS received responses from thirteen firms. The RFP provided that firms could apply as a discretionary consultant, a non-discretionary consultant or both. Staff and PCA are currently evaluating the responses and have semifinalist interviews scheduled for April 3-4 in Chicago. Ms. Pollitt and Mr. Ferguson explained that they tentatively plan to have the selected finalist firms present to the board during the June meeting. Other key factors such as fee proposals, implementation process, and the need for additional staff support were also discussed.

A copy of PCA’s presentation titled “Private Equity Consultant Search Update” is incorporated as part of these minutes as Exhibit 12.

UPDATED ASSET ALLOCATION TIMELINE

Due to the cancellation of the February meeting, Mr. Wesley provided an updated preliminary 2019 work plan. PCA and staff will be evaluating the structure of each strategic class and may recommend manager terminations, funding level changes, strategy or mandate changes. In addition, graduation of existing managers within the emerging manager program will be considered, consistent with the investment policy.

A copy of PCA’s memorandum titled “Update of 2019 Structuring Work Plan” is incorporated as part of these minutes as Exhibit 13. QUARTERLY PERFORMANCE REVIEW / MANAGER REASSESSMENT DISCUSSION

Mr. David Sancewich and Ms. Kristen Chase of PCA provided a brief overview of financial markets as of December 31, 2018, including total plan investment performance. Mr. Sancewich also discussed managers with performance issues, specifically when compared to the Russell 2000 benchmark. Mr. Brian DeLoriea also provided input regarding the performance of the Mesirow Small Cap U.S. Equity portfolio, stating this fund has lagged its benchmark and has fallen into reassessment status for the last three quarters as defined by the criteria outlined in the SURS investment policy. Mr. Sancewich

provided performance information and reminded the board that during the September 2018 meeting it was recommended that SURS maintain exposure to the Mesirow Small Cap strategy while staff and the consultant continued to monitor the portfolio closely. At this time representatives from Mesirow Financial were invited to join the group for further discussion. Mr. Richard Price, Ms. Kathryn Vorisek and Mr. Leo Harmon presented the board with the background of the firm and discussed their investment strategy and performance.

CLOSED SESSION

Trustee Van Meter moved that the Investment Committee go into closed session pursuant to §2(c)(7) of the Open Meetings Act to consider the sale or purchase of securities or investments or to consider an investment contract. Trustee Rock seconded and the motion carried in a roll call vote:

Trustee Cross - aye Trustee Cullen - absent Trustee Giertz - aye Trustee McCrohon - aye Trustee Rock - aye

RETURN TO OPEN SESSION

Upon a motion by Trustee Rock, seconded by Trustee McCrohon, the motion carried and the Investment Committee resumed its meeting in open session. Trustee Van Meter made the following motion:

• That based on the recommendation from SURS staff and PCA, SURS shall terminate the Mesirow Small Cap strategy and liquidate assets to transfer to the cash account for benefit payments.

Trustee Giertz seconded the motion which lead to a roll call vote.

Trustee Ammons - aye Trustee Cross - nay Trustee Cullen - absent Trustee Engstrom - aye Trustee Giertz - aye Trustee McCrohon - nay Trustee Rock - aye Trustee Van Meter - aye Trustee Vasquez - absent

Motion passed. A copy of PCA’s presentation titled “SURS Q4 2018 Quarterly Report” PCA’s document titled “Manager Status Summary” and Mesirow’s Presentation titled “Mesirow Financial Presentation” are incorporated as part of these minutes as Exhibit 14, Exhibit 15 and Exhibit 16.

CONSIDERATION OF CONSENT FOR PCA ORGANIZATIONAL CHANGE

CLOSED SESSION

Trustee Van Meter moved that the Investment Committee go into closed session pursuant to §2(c)(7) of the Open Meetings Act to consider the sale or purchase of securities or investments or to consider an investment contract. Trustee Rock seconded and the motion carried in a roll call vote:

Trustee Cross - aye Trustee Cullen - aye Trustee Giertz - aye Trustee McCrohon - aye Trustee Rock - aye

RETURN TO OPEN SESSION

Upon a motion by Trustee McCrohon, seconded by Trustee Giertz, the motion carried and the Investment Committee resumed its meeting in open session. Trustee Van Meter made the following motion:

• That based on the recommendation from SURS Staff; SURS consent to the assignment of the Investment Consulting Services Agreement dated March 1, 2019, between the State Universities Retirement System and Pension Consulting Alliance, LLC, as articulated by trustees, subject to satisfactory completion of legal review.

Trustee Rock seconded the motion which led to a roll call vote.

Trustee Ammons - aye Trustee Cross - aye Trustee Cullen - absent Trustee Engstrom - aye Trustee Giertz - aye Trustee McCrohon - aye Trustee Rock - aye Trustee Van Meter - aye Trustee Vasquez - aye

Motion passed.

INFORMATIONAL ITEMS NOT REQUIRING COMMITTEE ACTION The following items were provided for reference and are incorporated as a part of these minutes:

1. Exhibit 17 – SURS Projected Funding Status 2. Exhibit 18 – PCA Compensation and Economic Opportunity Disclosure 3. Exhibit 19 – Callan Compensation and Economic Opportunity Disclosure 4. Exhibit 20 – Callan Fee 5. Exhibit 21 – Cammack Compensation and Economic Opportunity Disclosure 6. Exhibit 22 – SURS Risk Memo 7. Exhibit 23 - SURS Risk Report

8. Exhibit 24 – SURS FY 2019-20 Summary Work Plan

PUBLIC COMMENT There were no public comments presented to the Investment Committee. There was no further business brought before the committee and Trustee Ammons moved that the meeting be adjourned. The motion was seconded by Trustee Cross and carried with all trustees present voting in favor.

Respectfully submitted,

Mr. Martin Noven

Secretary, Board of Trustees MMN/kc

To: Investment Committee From: Douglas C. Wesley, CFA Date: February 22, 2019 Subject: Review of Procurement Policy The Investment Procurement Policy (Policy) was initially approved in March 2018. The Policy includes specific procurement requirements for investments recommended by a specialty consultant. Callan was subsequently retained as a Real Assets consultant. Staff, Callan and Fiduciary Counsel have worked to design a procurement process that complies with the State of Illinois’ statutory requirements. While discussing Callan’s specific procurement process we noticed that some minor Policy clarifications would be appropriate. The changes to the Policy are relatively minor and are highlighted below:

1. Clarified that the Quiet Period applies to an RFP process, not the specialty consultant procurement process.

2. Moved existing language within the document to organize the specialty consultant language in one section.

3. While always expected, we clarified that a specialty consultant will be required to satisfy the procurement requirements regarding diverse managers and diversity disclosures.

A red-lined version of the current Policy follows this memo. Also following this memo is a presentation by Callan that outlines their procurement process. Finally, the supplemental materials for the March 2019 investment committee meeting include the documents that prospective managers can submit to be considered for a mandate. These documents are available on both SURS’ and Callan’s website. Conclusion and Recommendation Staff recommends that the revised Investment Procurement Policy be approved, as presented.

Exhibit 1

0

STATE UNIVERSITIES RETIREMENT SYSTEM OF ILLINOIS

INVESTMENT PROCUREMENT POLICY

Adopted by the Board of Trustees March 9, 2018March 8, 2019

Exhibit 2

1

1. Introduction This policy addresses the general procedures of the State Universities Retirement System (“SURS”) in soliciting bids and surveying the market for investment advisers, consultants and other investment services (the “Policy”). The selection and appointment of firms to provide advisory, consulting and other investment services by the Board shall be made and awarded in accordance with the Illinois Pension Code (the “Code”) and all other relevant authority under the Illinois Compiled Statutes. 2. Definitions “Board” means the Board of Trustees of SURS. “Consultant” means any person or entity retained or employed by the Board to make recommendations in developing an investment strategy, assist with finding appropriate investment advisers or monitor the Board’s investments. “Consultant” does not include non-investment related professionals or professionals offering services that are not directly related to the investment of assets, such as legal counsel, actuary, proxy-voting services, services used to track compliance with legal standards and investment in fund of funds where the Board has no direct contractual relationship with the investment advisers or partnerships. A Consultant must be registered as an investment adviser under the federal Investment Advisers Act of 1940 or as a bank, as defined in the federal Investment Advisers Act of 1940. Included in the definition of a Consultant is a “Specialty Consultant”. A “Specialty Consultant” means a Consultant selected by the Board pursuant to a RFP process that specializes in one or more investment areas of expertise. “Chief Procurement Officer” is an individual designated by SURS to oversee and monitor the procurement process consistent with the requirements of this Policy, the Code and all other relevant authority under the Illinois Compiled Statutes. “Expenditure” means any investment, expense, or cost relating to Investment Services. “Investment Adviser” is any person or firm who: (1) is a fiduciary appointed by the Board in accordance with Section 1-109.1 of the Code; (2) has the power to manage, acquire or dispose of any asset of SURS; (3) has acknowledged in writing that he or she is a fiduciary with respect to SURS; (4) is registered as an investment adviser under the federal Investment Advisers Act of 1940 or as a bank, as defined in the federal Investment Advisers Act of 1940. “Investment Committee” means a duly authorized committee of the Board formed to assist the Board in the development of investment strategies and the review of prospective investments with the goal of supporting the Board in the prudent investment of SURS’ assets. The “Investment Committee Chair” shall mean the Chairman of the Investment Committee duly appointed pursuant to the Board’s by-laws and Investment Committee Charter. “Investment Services” means services provided by an Investment Adviser or a Consultant pursuant to Section 1-113.14 of the Code.

Exhibit 2

2

“Quiet Period” means a period of time during which a search RFP for a potential Consultant, custodian, Investment Adviser or vendor is underway and during which a set of guidelines governs any communication by the Board, Consultant or Staff with such parties. “RFP” means a request for proposal. “SURS” has the meaning given in Section 1 (Introduction). “Staff” means the investment staff at SURS, including the designated Chief Investment Officer (the “CIO”). 3. Applicability of RFP Procedures a. General applicability. The RFP procedures in this Policy apply to all Expenditures, including but not limited to, hiring of Consultants, Investment Advisers, custodians, proxy voting service providers and defined contribution service providers other than (i) emergency procurements, and (ii) at the discretion of the Board, contracts that are nonrenewable and one year or less in duration, so long as the contract has a value of less than $20,000. All exceptions granted under this section must be published on the SURS web site, shall name the person authorizing the procurement, and shall include a brief explanation of the reason for the exception. b. Additional Expenditures Covered by this Policy Unless specifically waived by the Board, effective July 1, 2018, the following Expenditures shall be subject to this Policy as proscribed below:

i. fund-of-funds investments shall be subject to the procurement requirements of this Policy at least once every five years; and

ii. follow-on funds that are managed in distinct entities from prior investments shall be subject to the procurement requirements of this Policy. For the avoidance of doubt, any follow-on fund shall not be subject to the procurement requirements of this Policy if such follow-on fund is recommended by a Specialty Consultant consistent with Section 3(c) of this Policy.

c. Expenditures Exempt from the Procurement Procedures of this Policy Notwithstanding anything provided in this Section, the Board will not be required to fulfill the RFP procurement requirements of this Policy for a follow-on fund or any investment if the follow-on fund or investment is specifically recommended by a Specialty Consultant and if such Specialty Consultant has adhered to the procurement requirements specifically outlined in this Policy for a Specialty Consultant. 4. Procurement Procedures and Schedule

Exhibit 2

3

The following are the general procurement actions that shall be taken by SURS when considering Expenditures. SURS shall develop and use uniform documents for the solicitation, review and acceptances of all Investment Services. References to actions by the Staff in this Policy shall mean the Staff in consultation with any applicable Consultant retained by SURS.

Prior to the Issuance of a RFP

a. Prior to issuance of a RFP, Staff shall compile a list of potential respondents for such Expenditure. Staff is expected to consult with third parties and potential respondents prior to the proposed RFP as necessary to address any inquiries and encourage participation in the procurement process. Members of the Board may communicate with third parties and potential respondents consistent with applicable law.

b. Following initial due diligence by Staff and/or members of the Board, Staff shall prepare the RFP for the Expenditure. The RFP shall contain all information statutorily required, as well as such information as necessary for, or related to, any potential Expenditure. Staff shall provide a form of the RFP, specifically including a list of questions to be included in the RFP, to the Investment Committee or the Board, as may be applicable. The Investment Committee/Board shall recommend or approve the issuance of the RFP; provided, however, that the Investment Committee/Board may conclude that the issuance of the RFP is not in the best interest of SURS and may decline to approve its issuance. Staff shall also provide the Investment Committee with a tentative time-line for all actions relating to the RFP. Such time-line shall include, but not be limited to, the RFP issuance date, the date all responses are due and the date of the expected final decision. The Quiet Period is initiated with the approval to issue an RFP.

c. Staff, in consultation with the Board, shall establish a date on which a formal RFP shall be publicly announced following approval of the RFP by the Board. In general, such date shall be established not less than ten (10) days or more than thirty (30) days following the Board’s formal approval of the RFP. Following Approval of the RFP

d. At a minimum, Staff shall post the RFP on the SURS website, advertise the RFP in a nationally circulated investment publication and any other publication deemed appropriate by Staff or as required by law. Staff is expected to: (i) contact a reasonable number of potential respondents in order to notify them of the issuance of the RFP and (ii) disseminate such RFP to a reasonable number of potential respondents.

e. The RFP shall provide that questions regarding the solicitation shall be submitted in writing by respondents to the designated point of contact and by the date stated in the RFP. SURS shall post responses to all questions on its website.

Exhibit 2

4

f. The deadline for submission of proposals shall be not less than fourteen (14) days following the posting of the RFP. RFP responses received by the deadline stated in the RFP shall be recorded and receipted by Staff. Staff shall review and analyze the responses to the RFP as expeditiously as reasonably practical within the RFP specifications. Staff shall verify information submitted and resolve or confirm any discrepancies. Staff will eliminate any response that fails to conform to the minimum qualifications outlined in the RFP. Staff will periodically throughout the procurement process prepare an analysis outlining how all RFP responses conform to these categories and provide an update with respect to the RFP process and make such report available to Members of the Board for review

g. Staff and/or Consultants shall meet or conduct phone interviews with representatives of the respondents selected as semi-finalists by Staff and/or Consultants to obtain an independent assessment of the firm’s capabilities.

h. Following the interview process, Staff and/or Consultants shall identify one or more qualified firms and recommend to the Investment Committee one or more RFP respondents, with a goal of presenting no less than three qualified firms, for possible engagement by the Board.

i. Following Staff’s recommendation, the Investment Committee shall interview the respondents recommended by Staff or direct that additional respondents be invited for interview. The Investment Committee shall approve a recommendation to the Board for selection of a respondent for the Expenditure. The Investment Committee may, in good faith, decline to recommend any respondent following such interviews. The Investment Committee may recommend a recommencement of the RFP process for such potential Expenditure, or terminate the search entirely.

j. The Board may approve or disapprove the recommendation of the Investment Committee with respect to any proposed Expenditure. If practical, at the time of selection the Board shall identify a second-choice respondent in the event that the Staff cannot negotiate terms with the first-choice respondent that are, in the opinion of Staff and the Board, prudent and in the best interests of SURS and consistent with the requirements of the Code.

k. Staff and/or Consultants shall, in conjunction with its legal counsel, negotiate the contract with the first-choice respondent. If required by the Code, such contract must at a minimum contain the specific requirements found in Section 1-113.14 of the Code. Staff shall promptly provide a report to the Investment Committee in the event Staff is unable to negotiate contract terms with the first-choice respondent that meet the requirements of the Code before engaging in negotiations with the second-choice respondent. The Quiet Period concludes with the completion of successful contract negotiations.

l. SURS shall post the name(s) of the successful respondent(s) on SURS’ web site, along

with a disclosure including the total amount applicable to the contract, the total fees paid or to be paid, and a description of the factors that contributed to the selection of the respondent consistent with the requirements of the Code.

Exhibit 2

5

5. Procurement Requirements for a Specialty Consultant The following are the general procurement requirements for any investment recommended by a Specialty Consultant hired by the Board; provided, however that any procurement or due diligence requirement in the contract between such Specialty Consultant and the Board and any specific directive from the Board to such Specialty Consultant regarding a proposed investment takes precedence over the general requirements of this Section.

a. In recommending any investment to the Investment Committee/Board for consideration, the Specialty Consultant shall develop and utilize a consistent and uniform competitive process for analyzing and vetting potential investments that shall be substantially similar to the competitive process outlined in Article 35 of the Illinois Procurement Code, if required by the Code.

b.a. The Specialty Consultant shall ensure that any potential investment and its terms are in compliance with the Code and any applicable law, regulation or directive of the Board, including SURS’ Investment Policy and approved asset allocation.

c.a. The Specialty Consultant shall conduct such competitive process in a transparent and streamlined manner to ensure the Specialty Consultant is recommending potential investments to the Board in a timely manner.

d.a. In recommending any investment to the Investment Committee/Board, the Specialty Consultant shall prepare a detailed report for the Investment Committee/Board outlining the utilized competitive process and its due diligence of the potential investment.

e.a. The Specialty Consultant should endeavor to recommend one or more qualified firms to the Investment Committee/Board on a quarterly basis, if consistent with SURS’ Investment Policy, asset class pacing plan and approved asset allocation.

65. Other RFP Requirements

a. The RFP process shall comply with all relevant sections of State and Federal law, including the Code and applicable case law.

b. It shall be the goal for Staff to recommend at least three respondents to the Investment Committee/Board for interviews by the Investment Committee/Board. If in any case an “emerging investment manager” (as such term is defined in the Code) submits a RFP response that meets the requirements for a specific search then the “emerging investment manager” shall receive an invitation to present to the Investment Committee/Board. In the case where multiple “emerging investment managers” meet the criteria of the search, the most qualified firm or firms shall be selected to present to the Investment Committee/Board.

c. Fees are an important factor when evaluating procurement for Investment Services and will be given full consideration in the procurement process. If a recommended RFP

Exhibit 2

6

respondent’s fees are materially different from other respondents presenting to the Investment Committee, Staff will include the rationale for considering the higher cost option in supporting materials provided to the Investment Committee.

d. SURS shall not enter into a contract with a Consultant that exceeds five (5) years in duration, unless approved by the Board and consistent with the requirements of the Code. No contract to provide consulting services may be renewed or extended. At the end of the term of a contract, however, the Consultant is eligible to compete for a new contract as permitted in the Code.

e. Any report, documentation, or list compiled or received by Staff or a Consultant relating to a RFP or Expenditure shall be promptly made available to the Board, or an individual Board member, upon request.

f. Nothing in this Policy is meant to prohibit or discourage any Board Member from being involved in any part of the procurement process; provided that such Board Member provides prior notice of his/her intent to participate to Staff in order to ensure such participation is in compliance with applicable law. It is expected that staff and consultants shall each provide independent recommendations to the Board regarding all such procurements.

g. No Board member, SURS employee or SURS vendor shall knowingly cause or advise the Board to engage in an investment transaction with a vendor when the Board member, SURS employee, SURS consultant or any of their spouses (i) has any direct interest in the income, gains or profits of the investment vendor through which the investment transaction is made or (ii) has a relationship with that investment vendor that would result in a pecuniary benefit to the Board member, SURS employee or SURS vendor or any of their spouses as a result of the investment transaction. References to the “investment vendor” include an employee or agent of such firm who has greater than 7.5% ownership of the consulting firm.

h. Quiet Period Policy 1. A Quiet Period will commence upon Board authorization to issue an RFP and end

once a selection has been made by the Board and the completion of successful contract negotiations with a respondent;

2. Initiation, continuation and conclusion of the Quiet Period shall be publicly communicated to prevent inadvertent violations;

3. All Board members, and Staff other than the Chief Procurement Officer or their designee, shall refrain from communicating with respondents regarding any product or service related to the search in process. All Board members and Staff shall refrain from accepting meals, travel, hotel, or other value from such respondents;

4. Throughout the Quiet Period, if any Board member is contacted by a respondent, the Board member shall refer such party to the Chief Procurement Officer;

5. All authority related to the search process shall be exercised solely by the Investment Committee or Board as a whole, and not by individual Board members;

Exhibit 2

7

6. The Quiet Period does not prevent Board approved due diligence, client conference attendance or communications with an existing vendor; provided, however, that discussions related to the procurement and pending selection shall be avoided during those activities;

7. The provisions of this Policy shall apply throughout the Quiet Period and shall be communicated to respondents in conjunction with any search; and

8. A respondent may be disqualified from a search process for a violation of the Quiet Period or any portion of this Policy.

56. Procurement Requirements for Recommendations by a Specialty Consultant The Board will not be required to fulfill the RFP procurement requirements of this Policy for a follow-on fund or any investment if the follow-on fund or investment is specifically recommended by a Specialty Consultant and if such Specialty Consultant has adhered to the procurement requirements specifically outlined in this Policy for a Specialty Consultant in formulating the recommendation. The following are the general procurement requirements for any investment recommended by a Specialty Consultant hired by the Board; provided, however that any procurement or due diligence requirement in the contract between such Specialty Consultant and the Board and any specific directive from the Board to such Specialty Consultant regarding a proposed investment takes precedence over the general requirements of this Section.


b. The Specialty Consultant shall ensure that any potential investment and its terms are in compliance with the Code and any applicable law, regulation or directive of the Board, including SURS’ Investment Policy and approved asset allocation.

c. The Specialty Consultant shall conduct such competitive process in a transparent and streamlined manner to ensure the Specialty Consultant is recommending potential investments to the Board in a timely manner.

i. If in any case an “emerging investment manager” (as such term is defined in the Code) submits a response that meets the requirements for a specific search then the “emerging investment manager” shall receive an invitation to present to the Investment Committee/Board. In the case where multiple “emerging investment managers” meet the criteria of the search, the most qualified firm or firms shall be selected to present to the Investment Committee/Board.

Exhibit 2

8

d. In recommending any investment to the Investment Committee/Board, the Specialty Consultant shall prepare a detailed report for the Investment Committee/Board outlining the utilized competitive process and its due diligence of the potential investment. As part of the recommendation process the Specialty Consultant and staff will secure and review all statutorily required disclosures and provide those disclosures to the Investment Committee/Board for consideration prior to taking action on the recommendation.

e. The Specialty Consultant should endeavor to recommend one or more qualified firms to the Investment Committee/Board on a quarterly basis, if consistent with SURS’ Investment Policy, asset class pacing plan and approved asset allocation.

Initially adopted March 9, 2018, Revised March 7, 2019

Exhibit 2

Procurement Process

Specialty Consultants

March 2019

Barbara Bernard Senior Vice President

Sally Haskins Senior Vice President

Jan Mende Senior Vice President

Exhibit 3

1 Knowledge. Experience. Integrity. Real Assets Procurement Process

Real Estate Structure and Strategies

Procurement Process

Exhibit 3


Key Points

• Callan’s contract requires us to implement an investment review and recommendation process that meets SURS’ Procurement Policy, Section 5. Procurement Requirements for a Specialty Consultant

• Callan is a fiduciary under the contract

• A competitive process is fostered by • We have an “open door” policy for manager meetings

• There is no fee for any manager to enter information and be included in any Callan database

• We do not have a “buy” or “recommended” list for managers

• Procurement for real assets will be continual until investment priorities are accomplished and to allow for flexibility in sourcing managers as they come to market versus a moment in time process. This will allow for managers to be brought to SURS on a quarterly basis.

Exhibit 3


SURS Procurement Policy


b. The Specialty Consultant shall ensure that any potential investment and its terms are in compliance with the Code and any applicable law, regulation or directive of the Board, including SURS’ Investment Policy and approved asset allocation.

c. The Specialty Consultant shall conduct such competitive process in a transparent and streamlined manner to ensure the Specialty Consultant is recommending potential investments to the Board in a timely manner.

d. In recommending any investment to the Investment Committee/Board, the Specialty Consultant shall prepare a detailed report for the Investment Committee/Board outlining the utilized competitive process and its due diligence of the potential investment.

e. The Specialty Consultant should endeavor to recommend one or more qualified firms to the Investment Committee/Board on a quarterly basis, if consistent with SURS’ Investment Policy, asset class pacing plan and approved asset allocation.

Specialty Consultants

Exhibit 3


Callan’s Due Diligence Process and Conformity to Procurement Policy

Procurement Requirements for Specialty Consultant Met by Callan Process

Callan Due Diligence Process

• Sec. 35-20. Uniformity in Procurement (c) (1-5) • Part A Process must be competitive • Part B – Investments consistent with code and

policy and asset allocation • Part C – Process must be transparent • Part E – Investments must be consistent with

strategy, pacing, and policy

Client Portfolio Driven

• Investment priorities established via strategy, pacing model and policies. • Develop Strategy and Client Profile specific to SURS and for each strategy sought that outlines:

• General information about SURS and the portfolio; • Purpose, goals and objectives of the allocation; • Contacts; • Submission of information and selection process; • Qualifications and information requested; • Illinois specific considerations; • Investment Policy considerations including emerging manager goals, objectives, and

requirements; • Diversity profile/requirements; • Contract negotiation and awarding; • Illinois Freedom of Information Act Disclosure; • Other Terms and Conditions; • Process for reviewing managers once an investment is made; and • Definitions

• Strategy and Client Profile will be posted on Callan and SURS’ website along with data collection documents for a minimum of 14 days; updated as necessary or removed as strategies are filled.

• Discussion with client as process progresses. • No buy list - investments are sourced for each client independent of other client recommendations which

assists in a competitive process.

• Part A – Process must be competitive • Sec: 35-15 - Market monitoring

Primary Sourcing Mechanisms

• Callan databases – Active Fund Database, Performance Database, Vintage Year Database, Peer Group Databases. Used to generate an initial list of managers and for outreach including MWDO firms.

• Approximately 500 products in the Active Fund Database open for investment; 700 products in the performance database.

• Manager meetings – 400+ per year. Typically involves a discussion on client investment priorities. • Client investment activities. • Posting on Callan website and social media, posting on client website. • Weekly discussion of client investment priorities at real assets team meeting.

Exhibit 3



Procurement Requirements for Specialty Consultant Met by Callan Process

Callan Due Diligence Process

• Sec. 35-20 Uniformity in Procurement (a) –(c) • Sec. 35-15 Pre qualification • Part A – Consistent and uniform competitive

process

Uniform Data Collection • Qualitative and quantitative information collected via meetings, calls, written requests, and postings on

Callan website and client website. • Database entries by managers. • Organization, fund, and track record data collection used for initial screening. • Identification of emerging managers early in the review process • SURS Specific information requirements and forms (e.g. Diversity Profile Statistics) • Callan Standard Fund Due Diligence Questionnaire for respondents that best meet initial screens.

Questionnaire covers: • Organization; • Firm Management and Personnel; • Regulatory; Legal, and Insurance; • Conflicts of Interest and Use of Affiliates; • ESG; • Proposed Vehicle; • Investment Process; • Reporting; • Terms and Fees; • Performance; • References; • Operations; and • Documents.

Exhibit 3



Procurement Requirements for

Specialty Consultant Met by Callan Process Callan Due Diligence Process

• Sec. 35-20 Uniformity in Procurement • Part A – Consistent and uniform competitive

process • Part C – Bring investments in transparent

process and make recommendations on a timely basis

• 40 ILCS 5/1-109.1 - in any case an emerging investment manager meets the criteria established by a board for a specific search and meets the criteria established by a consultant for that search, then that emerging investment manager shall receive an invitation by the board of trustees, or an investment committee of the board of trustees, to present his or her firm for final consideration of a contract. In the case where multiple emerging investment managers meet the criteria of this Section, the staff may choose the most qualified firm or firms to present to the board.

Disciplined and Consistent Process • Detailed review of all submitted documents • Background checks as needed; all new managers for SURS would have background checks • Reference checks • Multiple meetings including onsites; property visits as needed. • Term and fee negotiation to bring terms in line with market or better • Active involvement in process by SURS client team in consultation with SURS staff to ensure

procurement requirements are met • Weekly discussion by real assets team and client team of due diligence underway • Identification of emerging manager(s) that meet criteria for the allocation • Standard due diligence report (see below for content) prepared by primary researcher and reviewed by

SURS client team • Alternatives Investment Committee review of due diligence report

• Formal meeting; SURS staff may participate • Provides oversight of due diligence process • Peer review to ensure objectivity in assessing the firms considered and the recommendation • Standard Due Diligence Report submitted to the committee covering

• Due diligence process, • Investments considered and eliminated during the process. A side by side comparison

of alternatives considered. The reasons for the elimination will be delineated. • For the recommended investment -- strategy, organization, investment and portfolio

process, terms and structure, historical performance, and attribution peer group, fund status, fit with client objectives and policies, strengths and issues, and recommendation (Yes or No), fee comparison of considered managers, and disclosures.

• Full evaluation report distributed to SURS staff.

Exhibit 3



Procurement Requirements for Specialty Consultant Callan Due Diligence Process

• Part C – Bring investments in transparent

process and make recommendations on a timely basis

• Part D – Provide detailed report to the Board outlining the process and diligence

• Part E – Bring one or more qualified firms on a quarterly basis, if consistent with the pacing plan and approved asset allocation

• 40 ILCS 5/1-109.1 - in any case an emerging investment manager meets the criteria established by a board for a specific search and meets the criteria established by a consultant for that search, then that emerging investment manager shall receive an invitation by the board of trustees, or an investment committee of the board of trustees, to present his or her firm for final consideration of a contract. In the case where multiple emerging investment managers meet the criteria of this Section, the staff may choose the most qualified firm or firms to present to the board.

Recommendation to Client • Report to Investment Committee/Board including

• Portfolio fit with asset allocation and strategic plan • Evaluation process including side by side of alternatives considered and eliminated • Sponsor information • Fund strategy • Track record • Terms • Recommendation including strengths and issues • Callan disclosures • Callan manager fee disclosure provided by Callan compliance to SURS staff • SURS specific disclosures, including certification and disclosure letter and diversity disclosure

which have been reviewed and signed off by SURS staff. • Fee comparison

• Callan presentation to Investment Committee/Board • Manager presentation to Investment Committee/Board

• Recommended manager • Qualified emerging manager whether recommended or not by Callan

• Part B – Investment must be in compliance

with laws, policy, asset allocation, etc.

Contracting • Callan works with SURS staff to close the investment and finalize documentation, providing comments

on business terms. • Callan does not provide legal advice. SURS contractual requirements will be addressed by external

counsel hired by SURS.

Exhibit 3


Disclaimers

This report 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 report 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.

Past performance is no guarantee of future results.

The statements made herein may include forward-looking statements regarding future results. The forward-looking statements herein: (i) are best estimations consistent with the information available as of the date hereof and (ii) involve known and unknown risks and uncertainties such that actual results may differ materially from these statements. There is no obligation to update or alter any forward-looking statement, whether as a result of new information, future events or otherwise. Undue reliance should not be placed on forward-looking statements.

Exhibit 3

Non-Core Real Estate Recommendation

March 2019

Exhibit 4

SURS Investment Program

• Non-Traditional Growth strategies include private equity and non-core real assets• Non-core real assets include assets requiring improvements (value add); opportunistic, distressed, and

developmental real assets; certain debt strategies; and newly-evolving property/sector types, among others• Non-Traditional Growth real assets investments seek relatively high returns by taking numerous risks, including

illiquidity, leverage, operational, and development risk, for example

• Under new long-term policy, allocation to Non-Traditional Growth real assetsexpected to increase from current actual allocation of ~2.8% of total plan assets totarget of 3.75% approximately five years from now

• Given the illiquidity of these assets, it is critical that a phased, deliberate approach be taken to funding the class• Paced funding (vintage year diversification) is a key risk mitigation tool utilized with these types of investments

Non-core real assets fits within Non-Traditional Growth asset class 2

Asset Class Weight Non-Traditional Growth 15% Traditional Growth 25% Stabilized Growth 26%

Options Strategies 6% Credit Fixed Income 14% Real Assets 6%

Inflation Protection 6% TIPS 6%

Principal Protection 8% Crisis Risk Offset 20%

Long Duration 5% Trend Following 10% Alternative Risk Premia 5%

Non-Core real assets and private equity; seeking approval for a real assets commitment

Exhibit 4

• Pacing study recently completed by Callan forecasts capital needed annually to keepreal assets portfolio close to target

• Model adjusted annually to reflect changes in total plan and real assets portfolio

• Real Assets is included in Broad Growth strategic class of new asset allocation• Examples of real assets include real estate, infrastructure, farmland, and timber

• Phase in commitments over time for vintage year diversification• Stabilized Growth commitments of approximately $450 million over next three years• Non-Traditional Growth commitments of $250 million-$350 million per year over next five years• REITs to be liquidated with proceeds used to fund future real assets and CRO commitments

• Recommended commitment of €75 million (~$85 million) to a Non-Core real estatefund

• €75 million (~$85 million) to Blackstone Real Estate Partners Europe Fund VI

Asset Class Area Sub-Class Area Real Assets TargetStabilized Growth Core Real Assets 6%Non-Traditional Growth Non-Core Real Assets 3.75%Traditional Growth REITs 0%

Real Assets Pacing

Recommending a commitment to a Non-Core real estate fund 3

Recommended commitment

Exhibit 4

Real Assets Pacing, Cont.• Recommended commitment expected to enhance current portfolio

• Blackstone Real Estate Partners Europe Fund VI would provide needed global exposure• Blackstone has generated strong returns for BREP Europe investors, demonstrating an ability to source

unique opportunities, execute with speed, scale, and certainty, and drive value through active assetmanagement in any market environment

• Liquidating REIT portfolio currently provides majority of global real estate exposure

• Additional commitments anticipated to occur through remainder of year• Further Non-Traditional Growth (Non-Core), along with Stabilized Growth (Core)

Commitment would put the portfolio approximately one-quarter to 2019 pacing goal 4

Exhibit 4

Real Assets Portfolio Statistics

• Recommended commitments help achieve targeted portfolio composition

• Recommended commitment expected to increase European exposure but notmaterially impact property type exposure

• SURS targeting up to 25% of real assets portfolio in Non-U.S. markets

Recommended commitment to help achieve long-term targets 5

Exhibit 4

Non-Traditional Growth Recommendation• SURS staff and real assets consultant Callan recommend a commitment of €75 million

(~$85 million) to Blackstone Real Estate Partners Europe Fund VI contingent on successful contract negotiations

• Additional materials provided, including manager and fund information from Callan, along with presentation and diversity disclosure from the manager

Commitment to a Non-Traditional Growth manager being recommended 6

Exhibit 4

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. 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 may consist of statements of opinion, which are made as of the date they

are expressed and are not statements of fact. 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. Past performance is no guarantee of future results. For further

information, please see Appendix for Important Information and Disclosures.

February 26, 2019

State Universities Retirement System of Illinois

Blackstone Real Estate Partners Europe VI SCSp

Exhibit 5

Knowledge. Experience. Integrity. 2

Table of Contents

Evaluation Process 3

Executive Summary 4

Sponsorship 5

Track Record 9

Peer Group 11

Recommendation 12

Important Information and Disclosures 15

Exhibit 5


Evaluation Process This report provides a recommendation regarding a potential investment by SURS to Blackstone Real Estate Partners Europe VI SCSp (“BREP Europe VI”) sponsored by The Blackstone Group, an existing manager for SURS. SURS made a $200 million commitment to Blackstone Property Partners Core Plus U.S. real estate fund in 2018. Callan’s investment evaluation process included the following steps to comply with the procurement policy: – Posted strategy and client profile on Callan’s website for at least 14 days. Announced posting via social media. The posting was

also picked up by various industry media outlets. Notified the peer universe of the posting;

– Collected qualitative and quantitative information and SURS specific information from the peer universe;

– Discussed peer universe with SURS staff and recommendation to pursue BREP Europe VI;

– Reviewed firm ownership details for peer universe to identify any emerging managers that submitted materials for SURS process and meet criteria for the allocation. No such managers have submitted information for SURS;

– Collected and reviewed additional materials from Blackstone including the response to Callan’s due diligence questionnaire, Private Placement Memorandum (“PPM”), Limited Partnership Agreement (“LPA”), and other offering documents and data requests;

– Callan used its substantial experience, knowledge of, and interactions with Blackstone in forming its recommendation for SURS. Over the past year, Callan interacted with the Firm’s real estate professionals as part of its ongoing analysis of client investments and Callan completed diligence on BREP IX, the Firm’s global real estate offering in Fall 2018. Specific to this Europe offering, Callan met with members of the Blackstone Europe team on numerous occasions including: (i) an onsite meeting in May 2018 at their London office and subsequent property tours in Berlin; (ii) attendance at the Blackstone Real Estate Partners 2018 annual meeting; (iii) a meeting with Mr. James Seppala, Senior Managing Director, and Ms. Alexandra Hill, Senior Managing Director, in December 2018 to discuss the Fund; and (iii) participation at the Fund’s due diligence session in London in January 2019. The due diligence meeting focused on the Blackstone organization, investment strategy, investment process, recent transactions, pipeline, team and track record. The following Blackstone professionals participated in the January 2019 meeting:

Name Title Name Title

Mr. James Seppala Senior Managing Director Ms. Lama Kanazeh Managing Director

Mr. Samir Amichi Senior Managing Director Mr. Peter Krause Managing Director

Mr. Michael Vrana Managing Director Mr. Abishek Agarwal Senior Managing Director

Mr. Luigi Caruso Principal Mr. Farhad Karim Senior Managing Director

Mr. Andrew Lax Senior Managing Director Mr. Adam Shah Managing Director

Mr. Patrick Kassen Managing Director Mr. Paul Quinlan Managing Director, CFO

Mr. Shomit Day Senior Vice President

– Callan had on-going communication and interaction with Blackstone during the due diligence process, with Ms. Alexandra Hill serving as the primary point of contact;

– Callan’s Alternative Investment Review Committee reviewed the recommendation and report on February 25, 2019; and

– Callan provided SURS investment staff with the full due diligence report which is a product of the aforementioned process.

Exhibit 5


Executive Summary1 The Blackstone Group is sponsoring the sixth real estate private equity fund focused on opportunistic real estate and real estate related investments in Europe. The Fund is a continuation of the strategy of the prior real estate fund which was raised in 2016, with €7.8 billion of limited partner commitments. The Fund will target large, complicated situations where competition is limited and Blackstone’s ability to move quickly is a competitive advantage. The Fund will employ a demonstrated investment strategy with the same process and investment approach that has been used globally, but tailored to the specifics of each investment market. The Blackstone Real Estate team benefits from the perspectives of the broader platform, as well as the scale of the Blackstone Real Estate Partners opportunistic equity real estate investment team. The platform offers macroeconomic and real estate market insights, real estate operating insights and proprietary deal flow which leverages off of the Firm’s €66 billion of investments in Europe across logistics, residential, office, retail, and hospitality property types.

Fund Summary

General Partner The Blackstone Group, L.P. (“Blackstone”, “BREP”, the “Firm”, or the “Sponsor”)

Fund Name Blackstone Real Estate Partners Europe VI SCSp (“BREP Europe VI”, “Fund VI” or the “Fund”)

Target Size / Hard Cap €7.8 billion

Sponsor Commitment At least $130 million, plus up to an additional 10% in each Investment on a side-by-side basis (based on an annual election) One-third from Senior Managing Directors in Real Estate and Blackstone Professionals who receive carry; Two-thirds from The Blackstone Group balance sheet and other Blackstone professionals

Fundraise Timing First close targeted for March 29, 2019

Investment Period Five years

Management Fee 1.5% per annum on commitments during the investment period and on invested capital thereafter. For commitments of €280 million ($300 million for a Dollar Partner) and greater, the fee is 1.25%. First close investors do not pay fees for the initial four months.

Incentive Fee First, return of capital (on a deal-by-deal basis), then, 8% preferred return to the Limited Partner (“LP”), then, 20% to the LP and 80% to the General Partner (“GP”), until GP has received 20% of aggregate distributions. Thereafter, 80% to the LP and 20% to the GP

Fund Term Later of the tenth anniversary of the Effective Date (termination of Fund V investment period) and the sixth anniversary of the last day of the Investment Period Two one-year extensions, if the Advisory Committee does not object

Key Persons If a) Jonathan Gray ceases to devote the Required Involvement and b) there are not at least two of Kenneth Caplan, Kathleen McCarthy, James Seppala, and Samir Amichi and such other persons designated by the General Partner and approved by an L.P. Advisory Committee Consent not devoting the Required Involvement, a majority-in-interest of L.P.s may vote to terminate the investment period.

1 Includes quoted and paraphrased excerpts from representative materials provided to, and reviewed by, Callan.

Exhibit 5


Strategy Summary

Overall Strategy Opportunistic real estate and real estate related investments

Target IRR 20% gross IRR (15% net); 2.0x gross multiple on invested capital (1.7x net)

Investment Type(s) Focus on urban logistics, commercial and residential properties in innovation cities (e.g. London, Stockholm, Barcelona and Berlin) rental housing, travel and leisure properties, and take private transactions

Country/Region(s) Major markets in Europe - primarily Western Europe, Southern Europe, and the Nordics. Investments in the U.K. France, Germany and Spain are expected to comprise a substantial percentage of the Fund

# Investments/Size 50 - 100/€10 million - €1 billion of equity per investment, smaller deals possible as platform add-on activity

Investment Limits Not more than 20% of commitments in one asset, except up to 37.5% if the Sponsor intends to reduce it to 20% within 180 days from initial investment, or if the investment has assets in five or more different geographic sub-markets as long as individual assets do not exceed 10% of commitments. Investments will be made in Europe. Investments outside of Europe may be made only if the non-European component of an investment comprises a minority of the overall investments. Not more than 30% of aggregate Capital Commitments may be invested in (a) real estate and real estate related assets primarily located in any one country in Europe (excluding France, the United Kingdom, Spain, and Germany), or (b) real estate or real estate related companies that have a majority of their assets or derive a majority of their revenue from sources in any one country in Europe (excluding France, the United Kingdom, Spain, and Germany). Not more than 15% of commitments at any one time in Investments consisting primarily of non-income producing land, other than entitled land relating to development of single and/or multifamily homes. No more than 25% in publicly traded securities of real estate operating companies unless the Sponsor contemplates taking the company private within one year of purchase. No blind-pool fund or oil and gas investments

Leverage Limits 85% portfolio-level leverage limit. No asset specific limit. A subscription facility may be used, but not for more than 25% of Capital Commitments at any time.

Hold Period Five years or less; Average hold period for European investments to date has been four years

Exit Mechanisms Individual asset sales, portfolio sales, mergers and public offerings

Sponsorship2 Blackstone is a large, publicly traded investment firm (NYSE “BX”) founded in 1985 by Stephen A. Schwarzman, its Chairman and CEO, and Peter G. Peterson who retired from the firm in 2008. Jon Gray serves as Blackstone’s President and Chief Operating Officer and was formerly Blackstone’s Global Head of Real Estate from 2005 to 2018. Mr. Gray assumed his new responsibilities from Hamilton (“Tony”) James, who is Executive Vice Chairman. The Firm totals more than 2,500 professionals in 31 offices worldwide. Blackstone’s businesses include real estate funds, private equity funds, credit-oriented funds, hedge fund solutions, and closed-ended mutual funds. Blackstone had total assets under management of over $457 billion as of September 30, 2018; this was comprised of


Exhibit 5


$120 billion in real estate funds, $126 billion in private equity funds, $131 billion in credit businesses, and $80 billion in hedge fund solutions. The following table shows the growth of Blackstone assets under management since 2006. Blackstone Assets Under Management (in $ billions, as of September 30, 2018)3

Blackstone Real Estate

Blackstone’s Real Estate group was established in 1991. Early investment vehicles focused heavily on the United States; however, as funds grew in size, international investment was added. In 2001, Blackstone sponsored its first European real estate fund, which invested parallel to the flagship global real estate fund series. Blackstone opened its first dedicated Asia office in 2006 and made its first two investments in the region in 2008, as part of the BREP series, then launched the first dedicated Asia fund in 2013. In 2008, Blackstone launched its first Blackstone Real Estate Debt Strategy (“BREDS”) fund to pursue non-controlling, high yielding investments collateralized by real estate. The Real Estate group focuses on three distinct strategies; BREP (Opportunistic) which includes the global fund series, an Asia fund series, and a Europe fund series; BREDS (Debt); and BPP (Core+) which includes the U.S. fund in which SURS holds an investment, a Europe fund, and an Asia fund. Investor capital across the three strategies is $70 billion for BREP, $17 billion for BREDS and $33 billion for BPP. The Real Estate team is led by Ken Caplan and Kathleen McCarthy, who joined the Sponsor in 1997 and 2010, respectively, and 27 Partners who have an average of 12 years of experience at Blackstone. Blackstone has 500 real estate professionals across 12 offices with 311 professionals in the Americas, 103 professionals in Europe and 86 professionals in Asia. Senior Real Estate Team and Investment Committee

As noted previously, Ken Caplan and Kathleen McCarthy are Co-Heads of the global real estate team and have been in their roles since 2018 when Jon Gray became President and COO for entire organization. Mr. Caplan and Ms. McCarthy, were previously CIO and COO, respectively. The real estate executive committee comprises the global and regional heads of the real estate group and oversees Blackstone’s real estate operations globally.

3 Assets under management represents the unrealized value of investments plus dry powder, co-investments and Blackstone's GP and side-by-side commitments, as applicable. All figures as of year-end unless otherwise noted.

$0$50

$100$150$200$250$300$350$400$450$500

200620072008200920102011201220132014201520162017 Q32018

Blackstone Real Estate

Blackstone Firmwide

Exhibit 5


Real Estate Executive Committee

Professional Title/Role Location Years with Blackstone

Years in Industry

Ken Caplan Global Co-Head of Real Estate New York 21 23 Kathleen McCarthy Global Co-Head of Real Estate New York 8 18 Gio Cutaia Global Head of Real Estate Asset Management New York 4 22 Frank Cohen Global Head of Core+ New York 22 23

Jonathan Pollack Global Head of BREDS New York 3 20 Chris Heady Chairman of Asia Pacific & Head of Real Estate Asia Hong Kong 18 20 Nadeem Meghji Head of Real Estate Americas New York 10 13 James Seppala Head of Real Estate Europe London 7 17

Farhad Karim Global General Counsel of RE & COO of Europe RE London 7 21 James Seppala, Head of Europe and Samir Amichi, Head of Europe Acquisitions, oversee investment activity in Europe. The prior head of Europe, Anthony Myers, relocated back to New York City for family reasons, but is on the investment committee and weighs in with his expertise in Europe in his role as Chairman of Real Estate Europe. All professionals for the Europe team are located in London except for Diego San Jose, Managing Director, who is based in Madrid and focuses on acquisitions in Spain. While Blackstone maintains a philosophy of having a centralized investment team in a single office to promote collaboration and communication, the Firm recognizes that the business culture in Madrid requires a more personal experience where the immediate physical presence of a professional is important. The European team has more than doubled in size since 2012 when it had 50 professionals to 103 today. The growth has been primarily in asset management and portfolio management and operations to support the operations of the business. Blackstone employs a robust investment process from acquisition to sale. The Global Real Estate Investment Committee (“Committee”) is part of this process and affirmative investment committee decisions require unanimous consent of the Committee, per the BREP process since 1991. The Committee comprises Jon Gray, Stephen Schwarzman, Tony James, and 27 senior directors of the real estate group. Jon Gray is the Chairman and discussions are led by Mr. Gray, Mr. Kaplan, and Ms. McCarthy. On the operational side, Blackstone has developed best-in-class real estate service providers that are used to operate the properties. There are potential operational and performance advantages to utilization of these related entities including delivering a consistent level of construction finish and asset management systems, etc. across the large Blackstone portfolio which is part of building institutional-quality portfolios. In the event these companies are used by the Fund, the Sponsor discloses the fees to these companies in its quarterly investor letters and annually to the L.P. Advisory Committee. Blackstone represented it does not have any legal, financial or other “disciplinary” events to report with regard to its status as registered investment adviser.

Investment Strategy4 The Fund is targeting an amount in line with the €7,800 million of Limited Partner commitments raised for the prior fund and will focus on opportunistic real estate and real estate related investments primarily in Europe, with return targets of 20% gross IRR (15% net) and 2.0x gross multiple (1.7x net) on invested capital. The Fund will seek to acquire distressed, out of favor and/or undermanaged properties at attractive pricing. Blackstone’s investment strategy can be summarized as – “buy it, fix it, sell it” – to acquire high-quality, well located assets at discounts to estimated replacement cost, address any property or business issues through proactive asset


Exhibit 5


management, and sell the assets once the Fund’s objectives are achieved. Fund VI is a continuation of the Fund V strategy. The Fund V portfolio by total of realized/unrealized value, as of September 30, 2018, is shown below, and represents a diversified portfolio by property type and region.

At the broad macro level, Blackstone believes there are several factors supporting continued investment in opportunistic real estate including political uncertainty in a number of countries in Europe, equity market volatility, regulatory challenges, moderate GDP growth and a low interest rate environment. The Sponsor will focus on market dislocations and opportunistic acquisitions from non-strategic owners of real estate and has identified several key investment themes for the Fund, as detailed in the following table:

Theme Detail

Urban Logistics

E-commerce has grown at double digit rates since 2013 and demand for logistics space by tenants continues to similarly increase. Urban/infill logistics are of particular interest since land values in these locations are high which constrains new supply of logistics. Net new supply of infill logistics is low or even negative in certain areas.

Innovation Cities

Acceleration of the technology industry has driven young and educated professionals to cities (e.g. London, Stockholm, Barcelona and Berlin) seen as hubs for technological innovation and media content creation – spurring the need for high quality office and residential properties in these markets. These listed cities have received 60% of all European venture capital investment are benefitting from high growth rates.

Rental Housing

Strong urbanization trends coupled with limited new supply in high growth European cities (e.g. London, Stockholm, Barcelona and Berlin) have created a structural housing shortage.

Travel and Leisure

Global leisure tourism has grown as people increasingly seek out experiences rather than purchased goods. The Sponsor cites 8% growth in 2017 for the European tourist arrivals and 13% growth for Southern Europe as compared to 7% world growth. The Sponsor will focus on acquisition of coastal resorts in Spain, Portugal and Italy to capitalize on this demand.

Spanish Recovery

Spain is having a sustained recovery with GDP growth rates substantially above other large European economies. At the same time, Spain’s banking sector still has over €100 bn of NPLs to clear off its books.

Public to Privates

This is a large opportunity in Europe and a primary theme of this Fund. During 2017/2018, the Sponsor invested in 11 public to private transactions as rising interest rates put pressure on public REIT pricing and created an attractive acquisition price for large portfolios of high-quality assets. Listed companies often react negatively to equity market volatility, are large opportunities, and may be thinly traded creating acquisition targets for Blackstone.

50% 18%

15%

9% 7%

1%

Property Type

Mixed Use

Industrial

Office

Multi-Family

Hotels

Retail42%

16%

12%

9%

7%

7% 4% 3%

Sector Type

Spain

Finland

Europe

U.K.

Germany

Denmark

Italy

Netherlands

Exhibit 5


Blackstone will target investment opportunities throughout major markets in Europe - primarily Western Europe, Southern Europe, and the Nordics. The Firm is expected to anchor the portfolio with investments in the U.K., France, Germany, and Spain, which have historically been sizeable portions of previous BREP Europe funds. While Central and Eastern Europe have strong growth prospects, they also have less expensive land values and relatively low barriers to entry compared to the target markets. Blackstone believes there is higher liquidity for real estate investments in the major markets as well. The Fund use leverage and has a leverage cap of 85% at the portfolio level. This limit is the same for Fund VI as it is for Fund V. BREP funds have generally averaged leverage 10-20% lower than the leverage cap. All investments will be financed in local currency. Blackstone has €66 billion of investments in Europe across logistics, residential, office, retail, and hospitality. As a large owner and operator in the region, Blackstone has visibility on activity in many markets which is advantageous to evaluating new acquisitions, operating assets and making exit decisions. They are one of the largest borrowers from European financial institutions. The Sponsor cited that they can often assemble attractive financing for their investments due to their reach in the market. They are the largest client of the real estate brokerage community which means they get first call on opportunities before they reach the market.

Track Record Blackstone Real Estate Europe VI will be the fourth fund that is dedicated solely to Europe. The strategies for the first two funds in the series, BREP International I and BREP International II, targeted real estate assets internationally but invested primarily in Europe. BREP International I was exclusively invested in Europe whereas BREP International II had one investment in India (<1% of invested capital for International II) and an investment in the Hilton public to private transaction which was a global transaction with hotels around the world (19% of invested capital for International II). Within the two BREP International funds and the three BREP Europe funds, Blackstone has made 173 investments representing a total of €15.3 billion of invested capital. A total of 92 investments from the series have been fully realized, and combined with 27 partially realized investments, have yielded a total of €116.2 billion in realized proceeds at the investment level. The following table summarizes performance for the prior funds.5

5 Gross IRR and multiple based on cash flows and other proceeds and the Sponsor’s estimated valuations as of September 30, 2018 before

management fees, organizational expenses, and the General Partner's allocation of profit, but after all other expenses. Blackstone cited that because it

is a publicly-traded company, the Firm is limited in its ability to provide projections of investment and fund performance during the marketing of a new

investment vehicle. Accordingly, the Sponsor provided historical cash flows and investment net asset values as of September 30, 2018.

Exhibit 5


Blackstone Performance (as of September 30, 2018), € millions

BREP Int’l BREP Int’l II BREP EU III BREP EU IV BREP EU V

Year 2001 2005 2008 2013 2016 Target Return 20% gross

15% net 20% gross

15% net 20% gross

15% net 20% gross

15% net 20% gross

15% net Capital Committed €797 €1,565 €3,186 €6,633 €7,797 Invested Capital €658 €1,401 €2,938 €6,372 €3,929 Realized Proceeds €1,363 €2,334 €5,494 €6,957 €14 Unrealized Value €6 €105 €778 €4,477 €4,836 Total Realized/ Unrealized Value €1,369 €2,439 €6,272 €11,434 €4,850 # Deals 25 24 31 72 21 Fully Realized Deals 22 21 21 28 - Partially Realized Deals 3 3 4 17 - Since Inception IRR/Mult. (Gross) 33% / 2.1x 9% / 1.7x 24% / 2.1x 25% / 1.8x 31% / 1.2x Since Inception IRR/Mult. (Net) 23% / 1.8x 8% / 1.6x 15% / 1.8x 18% / 1.6x 18% / 1.1x

BREP International I is almost fully liquidated with performance substantially above the target return. BREP International II is also basically fully realized. The multiples are strong on an absolute and relative basis compared to other funds in the vintage. The IRRs are below target due to the longer holding periods associated with the investments, all but one of which were made in 2006-2008, before the Global Financial Crisis. Eleven investments representing 38% of capital lost money and collectively returned a 0.39x equity multiple. The results of this fund were buttressed by strong results from other investments resulting in the strong equity multiples, particularly for this vintage. BREP Europe III has a since inception IRR and equity multiple above the target. Fund IV raised more than twice the capital than Fund III making 72 investments compared to Fund III’s 24 investments. All capital has been returned by 28 fully realized investments and 17 partially realized investments in Fund IV. Fund V is 74% invested and committed. The results to date are not particularly meaningful other than to show that Blackstone has invested consistent with the stated strategy. In the series, there are 92 realized investments, which represent 36.7% of invested equity and have returned 2.1x capital at the investment level. The Sponsor has partially realized 27 investments which represent 18.6% of invested equity, with a multiple of 2.0x. Fifty four investments, 44.7% of invested equity, are unrealized including the 21 investments from Fund V. Attribution by Investment Status (as of September 30, 2018), € millions

Status # Invested Equity

Equity %

Unrealized

Value

Realized

Value

ITD IRR

ITD Multiple

Unrealized 54 € 6,876 44.7% € 8,776 € 233 13.8% 1.3x

Realized 92 € 5,649 36.7% - € 11,786 20.2% 2.1x

Partially Realized 27 € 2,869 18.6% € 1,544 € 4,239 24.4% 2.0x

The chart below highlights the leveraged return ranges for realized and unrealized investment performance, categorized by the number of investments (first chart) and invested equity (second chart). The pattern shown is a good one with positive skew. The majority of realized investments produced returns at, or above targeted Fund returns. Of the 92 realized investments, 15 investments representing €643 million/4.2% of invested capital produced realized losses with 11 of these from BREP International Fund II a 2005 vintage fund. Of the 81 unrealized/partially realized investments, three investments are showing a negative IRR and expected to return 77.8% of invested capital per current business plans. The amount of realized and unrealized losses is low. There is potential for the business

Exhibit 5


plans to improve if the Sponsor can create additional value. The Sponsor’s most recent funds have had significantly more investments in number compared to funds at the start of the BREP series and this table reflects that, with the amount of unrealized investments. Distribution of Investment Returns – BREP EU Funds (By # of Investments, Gross IRRS as of September 30, 2018) Distribution of Investment Returns – BREP EU Funds (By Invested Equity, € millions, Gross IRRS as of September 30, 2018)

The chart above highlights the leveraged return ranges for realized and unrealized investment performance and is categorized by the amount of equity invested in each deal.

Peer Group The European peer group is comprised of real estate investment management organizations offering commingled funds investing in non-core European real estate. Managers in the European fund universe vary in nature with regards to ownership structure, investment style and investment strategy, including differences in risk/return profile, geography and property type. The following list includes firms that are in the market raising capital for a fund as well as those who are not currently raising a fund. Firms that submitted their information to be considered for SURS are indicated in italics:

European Real Estate Managers

Aermont Capital (not in the market) The Carlyle Group Henderson Park Capital

AEW Capital Management Catalyst Capital H.I.G. Capital

Angelo Gordon & Company CBRE Global Investors J.P. Morgan Asset Management

Ares Management EQT Partners Orion Capital Managers (not in the market)

AXA Investment Managers Europa Capital Patron Capital

Benson Elliot Capital Management GreenOak Real Estate PGIM Real Estate

BlackRock Harbert Management Corporation Tristan Capital Partners (not in the market)

05

1015202530354045

-100%--90% -90%--80% -80%--70% -70%--60% -60%--50% -50%--40% -40%--30% -30%--20% -20%--10% -10%-0% 0%-10% 10%-20% 20%-30% 30%-40% 40%-50% 50%+

Unrealized Realized

$0$500

$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000

-100%--90% -90%--80% -80%--70% -70%--60% -60%--50% -50%--40% -40%--30% -30%--20% -20%--10% -10%-0% 0%-10% 10%-20% 20%-30% 30%-40% 40%-50% 50%+

Unrealized Realized

Exhibit 5


While the universe of European real estate managers has grown substantially, the peer group lacks an extensive list of managers offering opportunistic funds that are diversified across Europe and have the ability to make large scale, thematic platform investments, which is the focus of the Blackstone fund series. However, there are a select number of managers with opportunistic European real estate platforms that can be considered somewhat comparable alternatives to the BREP Europe VI offering. Aermont Capital, Ares Management, Henderson Park Capital, Orion Capital Managers, Patron Capital, and Tristan Capital Partners manage European opportunistic real estate fund series that are diversified across Europe; however, none of these managers have funds close in size to Blackstone’s funds. Other European real estate managers include AEW Capital Management, Angelo Gordon & Company, AXA Investment Managers, Benson Elliot, Carlyle, Catalyst, EQT Partners, Europa, Harbert, H.I.G., GreenOak, J.P. Morgan, and PGIM; however, these managers are not comparable to the BREP Europe VI offering due to target returns, target geographies and/or property types, investment size, operating approach and/or limited or inconsistent track record. The Appendix includes performance information for those organizations that supplied it to Callan. The following is a summary of the reasons managers that submitted information for SURS were eliminated from consideration at this time: Manager Reason Not Considered AEW Capital Management May consider at later date; monitor execution and fund raising

Angelo Gordon & Company Fund not open for subscription; lack of realizations

Ares Management Track record mixed

Benson Elliot Capital Management Track record mixed; Fees

BlackRock Track record mixed

EQT Partners Short track record

Europa Capital Strategy; Track record mixed

GreenOak Real Estate Organizational concerns; Short track record

Harbert Management Corporation Track record; Timing of close

Henderson Park Capital New firm, First time fund; Timing of close; Strategy

Patron Capital May consider at later date

PGIM Real Estate Strategy

Recommendation Callan recommends an investment of up to €75 million Blackstone Real Estate Partners Europe VI SCSp as an appropriate investment for State Universities Retirement System of Illinois non-traditional growth real assets portfolio. Within the context of institutional-quality non-core European real estate investment managers, Callan believes that Blackstone is a competitive and highly skilled investment management organization. It is Callan’s opinion that the size, scale, and track record of Blackstone and its real estate funds are significant differentiators relative to the broader opportunistic real estate manager universe which allow the team to successfully execute its thematic opportunistic investment strategy in European real estate. An investment in this fund would provide SURS with diversified investment in Europe with a top tier manager, and function as the foundation of its European investment portfolio. Additionally, Blackstone is an existing manager for SURS. Finally, by considering this investment now, SURS may be able to make the first close and benefit from the fee break. Our recommendation is based on the specific considerations summarized below:

Exhibit 5


Strengths Detail Blackstone sponsorship, experience with opportunistic strategy and G.P. commitment

The Sponsor is a premier global, opportunistic real estate investor and the Fund investments will be reviewed by the overall long-tenured senior Blackstone global team. The Sponsor’s globally-integrated team shares best practices and knowledge across its global portfolios which is an advantage to source, operate and exit deals, and a significant differentiator from other investment firms. Additionally, Blackstone employees will contribute significant personal capital to the Fund, which aligns incentives across the region and the globe for certain key professionals, regardless of an employee’s geographic location.

Consistency of strategy

The Fund will employ a demonstrated investment strategy that is consistent with its predecessor funds’ investments. The prior funds in this strategy have exhibited strong realized and unrealized performance to date.

Strategy is appropriate for current markets

The investment strategy is appropriate given the prevailing dynamics of the real estate investment markets.

Large global team and European team, with demonstrated ability to execute complex transactions

Blackstone has a large team focused on Europe and around the world which is additive to deal flow and investment perspectives. The Sponsor has sourced deals through its proprietary relationships and executed complex transactions; its exits have met or exceeded performance targets with very few realized or unrealized losses.

Strong Operational Capabilities Through Operating Platforms, Information, and Technology

Blackstone has developed best in class platforms that may be used to manage properties. The scale of the Blackstone organization allows it to take advantage of new technology to invest and manage the portfolio. For example: the asset management team is increasingly utilizing additional sources of data from new technologies (such as cellphone data tracking at retail properties) to provide additional insight into operations and how a property can be improved; the breadth of Blackstone’s portfolio and resources (e.g. data team) are differentiators compared to other real estate investment firms.

Large fund size The Fund size is appropriate considering the nature of the business and size of transactions. There are few competitors of this size. As a result, the Fund may be able to take advantage of truly differentiated deal flow and complete transactions at both the investment and divestment stage that would be out of the scope for other managers.

Multiple exit mechanisms

Blackstone retains the flexibility to liquidate assets through individual sales, portfolio sales, mergers and public offerings.

Strong track record Blackstone has a substantial track record spanning multiple market cycles. The Sponsor has a performance history that is backed by a substantial amount of realizations with a focus on capital preservation and has consistently outperformed its peers.

Risks Detail New Global Co-Head Structure; New Head of Europe

In 2018, Jon Gray became the President and Chief Operating Officer for the Blackstone Group and Ken Caplan and Kathleen McCarthy took on Mr. Gray’s responsibilities as Co-Heads of the Global Blackstone Real Estate platform. Both Mr. Caplan and Ms. McCarthy have held senior leadership roles in the organization; however this is a change to the management of the group and may require some time for these three professionals to adjust to their roles. In Europe, James Seppala has recently taken over for Anthony Meyers, as

Exhibit 5


head of Europe. Mr. Seppala is experienced in the region as well as with Blackstone having been at the Firm for seven years. Mr. Meyers remains at Blackstone as Chairman of Real Estate Europe to provide continuity and insights for the Europe team. To date, the team has been very stable and Blackstone has been able to add well-qualified professionals to the business in both front and back office roles. As the organization is well regarded in the industry and the market continues to grow, there is potential that key people leave. This is mitigated by requiring significant personal investment from key people and vesting schedules for profit sharing.

Strategy is opportunistic, with correspondingly high leverage

The strategy is opportunistic and Blackstone may acquire investments with complex capital structures, although the Sponsor states they do not target development assets, which reduces the risk across the portfolio. The 85% portfolio-level leverage limit is high and enables the Fund to use significant debt financing at acquisition. Blackstone reported that its funds typically have less leverage (average peak leverage of 60-70%).

High-profile sponsor with potentially conflicting interests

Blackstone is a large, high-profile organization with many different entities and operations and hence is under increased scrutiny from the public and potentially more subject to litigation than other firms. There is potential for conflicting interests of the Firm’s Limited Partners and the Firm’s shareholders. This is mitigated by Blackstone’s high focus on firm-wide compliance with developed policies and procedures to reduce risk and maintain its reputation as a fiduciary for investors.

Deal by deal incentive structure

The Fund has a deal by deal waterfall, rather than portfolio waterfall, which is less attractive. However, a claw back provision is incorporated at the end of the Fund term and is backed by personal guarantees of the recipients.

Unique, large investments may be less saleable, especially in the event of a market correction

Although Blackstone intends to assemble build and sell large portfolios, it focuses on acquiring good assets a low cost and would undertake smaller portfolio sales to increase the number of interested buyers if the investment market for large transactions is not robust.

Exhibit 5


Important Information and Disclosures This investment evaluation of the candidate sponsor and the candidate investment vehicle(s) was compiled by exclusively for use by State Universities Retirement System of Illinois. This investment evaluation and the information contained herein is confidential and proprietary information of Callan and should not be used other than by State Universities Retirement System of Illinois for its intended purpose or disseminated to any other person without Callan’s permission. This investment evaluation gives consideration to the investment requirements and guidelines provided to Callan by State Universities Retirement System of Illinois and should not be relied upon by any person other than State Universities Retirement System of Illinois or used in whole or in part for any purpose other than considering an investment in the candidate vehicle(s). Information contained herein has been compiled by Callan and is based on information provided by various sources believed to be reliable but which Callan has not necessarily verified the accuracy or completeness of or updated. Information considered by Callan, includes information provided by the investment sponsor and information that is publicly available, as well as information developed by Callan from other sources, which may not be current as of the date of this investment evaluation. Callan does not make any representation or warranty, express or implied as to the accuracy or completeness of the information contained in this investment evaluation. Callan undertakes no obligation to update this investment evaluation except as specifically requested by State Universities Retirement System of Illinois. This investment evaluation is for informational purposes only and should not be construed as legal or tax advice. State Universities Retirement System of Illinois is urged to consult with legal and tax advisers before investing in the candidate investment vehicle(s) or any other investment vehicle. A potential investor in the candidate investment vehicle(s) should undertake an independent review of the sponsor’s private placement memorandum, related offering documents and due diligence questionnaire, which describe, among other important information, the sponsor’s background, experience and track record, investment strategy, investment risk factors, compensation program, and investor rights and obligations. Callan makes no representation or warranty, express or implied, as to the accuracy or completeness of the sponsor’s offering materials. It is incumbent upon State Universities Retirement System of Illinois to make an independent determination of the suitability and consequences of an investment in the candidate investment vehicle(s). The appropriateness of the candidate investment vehicle(s) discussed in this investment evaluation is based on Callan’s understanding of State Universities Retirement System of Illinois’s portfolio as of February 25, 2019. Opinions expressed in the investment evaluation are based on Callan’s standard evaluation procedures which are designed to provide objective comments based upon information provided to Callan. Such opinions may be amended, supplemented or restated, based on changes in State Universities Retirement System of Illinois’s investment objectives or investment portfolio, the macroeconomic environment, legal/regulatory/political climate, the organization or team of the candidate general partner(s) or candidate investment vehicle(s) or other identified or unidentified factors. Callan undertakes no obligation to update any opinion expressed in this investment summary except as specifically requested by State Universities Retirement System of Illinois. Nothing contained in this investment evaluation should be relied upon as a promise or representation as to past or future performance of the candidate investment vehicle(s) or other entity. Past performance is no guarantee of future results. Certain operational topics may be addressed in this investment evaluation for informational purposes; however, Callan has not conducted due diligence of the operations of the candidate sponsor, or candidate investment vehicle(s), as may typically be performed in an operational due diligence evaluation assignment. The issues considered and risks highlighted in this investment evaluation may not be comprehensive and other undisclosed or heretofore unknown risks may exist that may be deemed material to State Universities Retirement System of Illinois regarding the candidate sponsor and candidate investment vehicle(s).

Exhibit 5


Disclosure As indicated below, one or more of the candidates listed in this report may, itself, be a client of Callan as of the date of the most recent quarter end. These clients pay Callan for educational, software, database and/or reporting products and services. Given the complex corporate and organizational ownership structures of investment management firms and/or trust/custody or securities lending firms, the parent and affiliate firm relationships are not listed here. The client list below may include names of parent companies who allow their affiliates to use some of the services included in their client contract (e.g., educational services including published research and attendance at conferences and workshops). Affiliates will not be listed if they don’t separately contract with Callan. Parent company ownership of the firms included in this report and any relationship with Callan can be provided at your request. Because Callan’s clients list of investment managers changes periodically, the above information may not reflect recent changes. Clients are welcome to request a complete list of Callan’s investment manager clients at any time. As a matter of policy, Callan follows strict procedures so that investment manager client relationships do not affect the outcome or process by which Callan’s searches or evaluations are conducted.

Firm Is an Investment Manager Client of Callan*

Is Not an Investment Manager Client of Callan*

The Blackstone Group L.P. X

*Based upon Callan manager clients as of the most recent quarter end.

Exhibit 5

Highly Confidential & Trade Secret

BREP Europe VI

March 2019

Prepared at the request of and for the exclusive use of State Universities Retirement System of Illinois

0

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


Fund Investment Period Invested Capital

12/31/2018

Net IRR

Pre-BREP ’91–93 $140,714 33%

BREP I ’94–96 467,168 40%

Co-Investment ’95–Present 6,852,165 15%

BREP II ’96–99 1,218,877 19%

BREP III ’99–03 1,415,422 21%

BREP Intl ’01–05 757,312 23%

BREP IV ’03–05 2,737,220 12%

BREP V ’05–07 5,770,619 11%

BREP Intl II(1) ’05–08 1,904,034 8%

BREP VI ’07–11 10,958,509 13%

BREP Europe III ’08–13 3,896,899 15%

BREP VII ’11–15 15,045,063 16%

BREP Asia I ’13–17 4,583,066 15%

BREP Europe IV ’13–16 7,675,258 17%

BREP VIII ’15–Present 13,056,563 16%

BREP Europe V ’16–Present 4,878,659 18%

BREP Asia II ’17 - Present 340,923 n/m(2)

Total $81,698,471 15%(3)

1

BREP Track Record

Strong performance across time and geographies

BREP Performance Summary

Note: All figures in this presentation are as of December 31, 2018, unless otherwise indicated. In US$ 000s. Past performance is not necessarily indicative of future results. There can be no assurance that any Blackstone fund or investment will achieve its objectives or avoid substantial losses. See “Important Disclosure Information”, including, “Aggregated Returns”, “Performance Calculation” and “BREP Historical Performance Endnotes” .

(1) The 8% Net IRR excludes investors that opted out of the Hilton investment opportunity. Overall BREP International II performance reflects a 6% Net IRR which is included in the aggregate 15% Net IRR. See “BREP International II” in “Important Disclosure Information”. (2) Due to the short duration and the limited amount of activity, the Net IRR is not yet meaningful. (3) The aggregated Net IRR as represented here is in USD.

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


BREP Europe Performance

Consistent strong performance in Europe for 22 years

BREP Europe Investment Performance(1)

2 Note: Past performance is not necessarily indicative of future results. There can be no assurance that any Blackstone fund or investment will achieve its objectives or avoid substantial losses. See “Important

Disclosure Information”, including “Aggregated Returns”, “Realized and Unrealized Returns”, “BREP Historical Performance Endnotes” and “Performance Calculation”. (1) Represents all European opportunistic investments, including co-investment, the applicable BREP Global fund share, Blackstone’s GP Commitment and side-by-side commitments, as applicable. (2) Represents all European opportunistic investments, including co-investment, the applicable BREP Global fund share, Blackstone’s GP Commitment and side-by-side commitments, as applicable. The

realized/unrealized Net MOIC is 1.5x for BREP Europe funds.

€21B

€35B

Invested Capital Realized/Unrealized Value

€22B Realized Proceeds

€13B Unrealized

Value

2.0x Realized

Gross MOIC(2)

1.7x Realized/Unrealized

Gross MOIC(2)

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


Blackstone Europe Advantage: Experience & Resources

Deep, multinational team integrated within Blackstone’s global real estate business

Note: As of January 1, 2019. (1) See “Global Investment Committee” in “Important Disclosure Information”. 3

103 Professionals

2,800+ Portfolio Company

Employees

1 Global Investment

Committee(1)

20+ Nationalities

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


Blackstone Europe Advantage: Information

Extensive European portfolio provides key proprietary insights

Current Holdings(1)

(1) As of September 30, 2018. In addition to wholly-owned assets, figures include leased assets, collateral, assets managed through stakes in publicly-traded companies and assets owned through joint-ventures (reflected at 100%), as applicable. See “Important Disclosure Information”. 4

Residential 135k Units

Hospitality 27k

Keys

Retail 23M Square Feet

Office 47M Square Feet

Logistics 260M Square Feet

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


Blackstone Europe Advantage: Execution

Scale and experience uniquely position us to execute large, complex transactions

Significant 2017/2018 Transactions

5 Note: The above investments are not representative of all investments of a given type or of investments generally. Past performance is not necessarily indicative of future results and it should not be

assumed that Blackstone will make comparable or equally successful investments in the future. See “Important Disclosure Information” including “Blackstone Proprietary Data”.

Exhibit 6

Investment Environment

6

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


European Investment Environment Overview

Supportive macro environment and real estate fundamentals remain solid

Macro Environment Real Estate Investment Environment

Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. See “Important Disclosure Information,” including “Trends”. 7

• Moderate growth

• Political uncertainty

• Low interest rates

Strengthening Tenant

Demand

Select Investment

“Bright Spots”

Limited New Supply

Wide Cap Rate Spreads

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


Macro Environment

Moderate growth with political uncertainty leading to continued volatility

2018F GDP Growth(1) Political Uncertainty

Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. See “Important Disclosure Information,” including “Trends”. (1) IMF World Economic Outlook, as of January 2019. Europe represents Euro Area. Continental Europe includes France, Germany and Spain. 8

U.K./Brexit

France

Italy

Regulatory Challenges

1.8%

1.4%

0.8%

Continental Europe U.K. Europe 10-YearAverage

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


Macro Environment

Divergence between sectors and geographies with areas of outperformance

Select European REITs(1) Investment “Bright Spots”(2)

9

Berlin

10x Office Take-Up vs.

New Supply Since 2015

Stockholm

+18% Population Growth

Since 2007

Amsterdam

+20% Office Rental

Growth Since 2015

Madrid

+13% Residential Rental Growth Since 2016

Residential

Logistics

Office

Retail

50

60

70

80

90

100

110

120

130

140

150

Jan'18 Mar'18 May'18 Jul'18 Sep'18 Nov'18 Jan'19

Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. See “Important Disclosure Information,” including “Trends”. (1) Bloomberg, as of January 11, 2019. Residential represents Hembla (formerly D. Carnegie and Co.) and Deutsche Wohnen; Logistics represents Segro; Office represents Gecina; Retail represents

Hammerson & Intu. Represents 7-week moving average. (2) Berlin: CBRE, as of December 31, 2018; Stockholm: Eurostat, as of September 2018. Represents 2007/2017 percent change; Amsterdam: CBRE, as of December 31, 2018; Madrid: Idealista, as of

December 31, 2018.

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


Interest Rate Environment

Continued low interest rates and wide cap rate spreads

10-Year Sovereign Debt Yields(1) Prime Office Spread(2)

Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. See “Important Disclosure Information,” including “Trends”. (1) Bloomberg, as of January 31, 2019. “Pre-Crisis Avg.” represents the average from 1997-2006. (2) German, French, and U.K. 10-year bond yields as of December 31, 2018, Bloomberg; Munich/Frankfurt/Berlin/London/Paris weighted average office cap rate as of December 31, 2018, CBRE. “10-Year

Pre-Crisis Avg.” represents 1997-2006.

10

2.3% Spread

10-Yr Pre-Crisis Average

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

'08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

5.1%

4.5% 4.5%

1.2%

0.2%

0.6%

U.K. Germany France

10-Yr Pre-Crisis Avg. Today

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


3.1%

4.7%

2009 2018

2.0%

1.4%

2009 2018

Real Estate Environment

Real estate fundamentals remain supportive

European Office Supply & Take Up(1) European Office Vacancy(1)

Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. See “Important Disclosure Information” including “Trends”. (1) CBRE, as of December 31, 2018. Office markets include Paris, Berlin, Hamburg, Munich, Dublin, Milan, Amsterdam, Barcelona, Madrid and London. Weighted by total stock. 11

Down 31%

Up 51%

Supply Take-Up

5.3%

4%

5%

6%

7%

8%

9%

10%

'09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


80

90

100

110

120

130

140

150

160

170

180

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Real Estate Environment

Economic recovery in Spain continues to offer compelling opportunities

Spanish Home Price Index(1)

Spanish Bank Non-Core Real Estate Exposure(2)

Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. See “Important Disclosure Information” including “Trends”. (1) Instituto Nacional de Estadistica (INE), as of September 30, 2018. (2) Citigroup, as of June 30, 2018.

12

Blackstone starts investing

€37B

€10B

€5B

€3B €3B €2B €2B

Sareb Santander Bankia Unicaja Liberbank Sabadell BBVA

€63B Total

Spain +7% YoY

Madrid +11% YoY

Catalonia +9% YoY

Q3'18

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


BREP Europe VI Investment Strategy & Themes

Stay true to our strategy and capitalize on high conviction investment themes

Note: There can be no assurance that any Blackstone fund or investment will be able to implement its investment strategy, achieve its objectives or avoid substantial losses. See “Important Disclosure Information”. 13

Current Investment Themes

Identify macro trends

Establish a differentiated view

Identify operating business / team

Execute in scale with speed & certainty

Add value post-acquisition

Identify optimal exit strategy

Blackstone Approach

Distress/Dislocation

Urban Logistics

Urbanization / Knowledge Centers

Resort Hotels

Rental Housing

Exhibit 6

Important Disclosure Information

14

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


Important Disclosure Information

15

This document is for informational purposes only and does not constitute an offer to sell, or a solicitation of an offer to buy, any security or instrument in or to participate in any trading strategy with any Blackstone fund or other investment vehicle (each a “Fund”). If such offer is made, it will only be made by means of an offering memorandum as it may be amended, supplemented or restated from time to time (the "Offering Memorandum"), which would contain material information (including certain risks of investing in such Fund) not contained in this document and which would supersede and qualify in its entirety the information set forth in this document. Any decision to invest in a Fund should be made after reviewing the Offering Memorandum of the Fund, conducting such investigations as the investor deems necessary and consulting the investor's own legal, accounting and tax advisers to make an independent determination of the suitability and consequences of an investment in the Fund. In the event that the descriptions or terms described herein are inconsistent with or contrary to the descriptions in or terms of the governing and subscription documents of a Fund, such documents shall control.

This document contains highly confidential information regarding Blackstone and a Fund’s investments, strategy and organization. Your acceptance of this document constitutes your agreement to (i) keep confidential all the information contained in this document, as well as any information derived by you from the information contained in this document (collectively, "Confidential Information") and not disclose any such Confidential Information to any other person, (ii) not use any of the Confidential Information for any purpose other than to evaluate or monitor investments in a Fund, (iii) not use the Confidential Information for purposes of trading securities, including, without limitation, securities of Blackstone or its portfolio companies, (iv) except to download this document from BXAccess, not copy this document without the prior consent of Blackstone, and (v) promptly return this document and copies hereof to Blackstone upon Blackstone's request, in each case subject to the confidentiality provisions more fully set forth in the Offering Memorandum and any other written agreement between the recipient and Blackstone.

No Fund nor its affiliates make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained herein and nothing contained herein should be relied upon as a promise or representation as to past or future performance of a Fund or any other entity. Any prior investment performance or other results of a Fund or any of its affiliates and any hypothetical information are presented in this document for illustrative purposes only and are not indicative of the future performance or other results of such Fund. The Fund does not qualify, and has not been authorized by the Luxembourg Commission de Surveillance du Secteur Financier, as (i) an undertaking for collective investment under the law of 17 December 2010 relating to undertakings for collective investment, as (ii) a specialized investment fund under the law of 12 February 2007 relating to specialized investment funds, or as (iii) an investment company in risk capital under the law of 15 June 2004 relating to the investment company in risk capital, Any representation to the contrary is unlawful.

This document is made available to EEA investors pursuant to the marketing passport of Blackstone Europe Fund Management S.à r.l. (the “AIFM”) and relates to an investment in a Fund managed by the AIFM only. This Important Disclosure Information contains a summary of only certain considerations and is qualified in its entirety by the more detailed information to be set forth in the “Risk Factors, Potential Conflicts of Interest and Other Considerations” section of the Offering Memorandum. You should read the Offering Memorandum carefully, including the risk factors, potential conflicts of interest and other considerations described therein, before investing in a Fund. No offer to purchase shares in a Fund will be accepted prior to the receipt by the offeree of all appropriate documentation.

Prospective investors should note that Blackstone Real Estate Partners Europe VI SCSp (together with its parallel vehicles, feeder and any holding vehicles, “BREP Europe VI” or the “Fund”) has not yet commenced operations and therefore has no operating history upon which prospective investors may evaluate its performance. Past activities of investment vehicles managed or sponsored by Blackstone provide no assurance of future success. Moreover, the prior investment results of the existing BREP Funds are provided for illustrative purposes only and not to imply that such results will be obtained in the future.

In considering investment performance information contained in this document, prospective investors should bear in mind that past or projected performance is not necessarily indicative of future results and there can be no assurance that BREP Europe VI will achieve comparable results, implement its investment strategy, achieve its objectives or avoid substantial losses or that any expected returns will be met.

All information is as of December 31, 2018 (the “Reporting Date”), unless otherwise indicated.

Aggregated Returns. The calculation of combined or composite net IRR/net returns takes the aggregate limited partner cash flows by actual date from inception of the strategy through the current quarter end and uses the terminal value (including unrealized investments) as of the current quarter end to comprise an overall return for the strategy. The actual realized returns on the unrealized investments used in this calculation may differ materially from the returns indicated herein. In addition, the actual returns of each Blackstone fund, account or investment vehicle included in such combined or composite returns may be higher or lower than the Aggregated Returns presented. Furthermore, no limited partner has necessarily achieved the combined or composite returns presented in such performance information, because a limited partner’s participation in the applicable funds, accounts and/or investment vehicles may have varied. See “Performance Calculation” below.

Blackstone Proprietary Data. Certain information and data provided herein is based on Blackstone proprietary knowledge and data. Blackstone is a global owner of many property types including office, industrial, multifamily, retail, single family, hospitality, senior housing, and student housing. This portfolio of real estate holdings and underlying portfolio companies provides proprietary market data to Blackstone, including about local market supply and demand conditions, current market rents and operating expenses, capital expenditures, and valuations for multiple property types. Such proprietary market data is used by Blackstone to evaluate market trends as well as to underwrite potential and existing investments. While Blackstone currently believes that such information is reliable for purposes used herein, it is subject to change, it reflects Blackstone’s opinion as to whether the amount, nature and quality of the data is sufficient for the applicable conclusion, and no representations are made as to the accuracy or completeness thereof.

BREP Fund Participation. A BREP global fund will generally participate in 20% of the amount of each investment pursued by a BREP Asia or Europe fund. Investors should note that the BREP global funds and the BREP Asia funds have different investment objectives than the BREP Europe funds and the returns and investment performance for any such funds shown in this presentation are not necessarily relevant to an investment decision for any BREP Europe fund.

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70


Important Disclosure Information (Continued)

16

BREP Historical Performance Endnotes:

“The BREP Performance Summary” provided herein is solely for background purposes and should not be considered an indication of future performance.

“Funds”: Pre-BREP through BREP Intl are substantially fully realized funds and BREP IV, BREP Intl II, BREP V, BREP VI, BREP Europe III, BREP VII, BREP VIII, BREP Asia I, BREP Europe IV and BREP Europe V represent realized and unrealized values as of the Reporting Date. BREP Intl, BREP Intl II, BREP Europe III, BREP Europe IV and BREP Europe V are Euro denominated funds and the Net IRRs for such funds represent the Euro denominated return. The calculation of the combined Net IRR takes the aggregate LP cash flows by actual date from inception of the strategy through the current quarter end and uses the terminal value (including unrealized investments) as of the current quarter end to comprise an overall return for the strategy. The actual realized returns on the unrealized investments used in this calculation may differ materially from the returns indicated herein.

“Invested Capital” includes amounts invested by the applicable BREP funds and Blackstone (including its side-by-side investments). The invested capital figures for BREP Intl I, BREP Intl II, BREP Europe III, BREP Europe IV and BREP Europe V have been converted using the foreign exchange rate at the time each individual, underlying investment was consummated, aggregated over the investing life of the respective fund.

“Co-Investment” refers to capital subscribed for by third parties alongside certain of the BREP funds, as the context requires. The performance information for co-investments contained herein is presented on an overall basis, representing the aggregate of discrete co-investment transactions alongside such BREP funds, and not with respect to a particular fund or managed investment portfolio. Such net returns were calculated in a manner consistent with the calculation of the net returns for the BREP funds and may not reflect the actual returns of investors in each such co-investment. Past performance of co-investments is not necessarily indicative of the results of any future co-investment opportunities that may be offered.

BREP International II. The 8% Net IRR represents the performance for BREP International II investors that elected to participate in the Hilton investment. The fund’s partnership agreement was amended to permit the investment and offer the election because a majority of Hilton’s revenues were derived from the United States. Including the performance of investors that did not elect to participate in Hilton, the Net IRR for BREP International II is 6%.

ERISA Fiduciary Disclosure. The foregoing information has not been provided in a fiduciary capacity under ERISA, and it is not intended to be, and should not be considered as, impartial investment advice.

Forward-Looking Statements. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “intend,” “continue” or “believe,” or the negatives thereof, other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of the Fund described herein may differ materially from the events, results or performance reflected or contemplated in such forward-looking statements.

Global Investment Committee. Blackstone has a centralized investment process. Generally, significant equity investments are evaluated by the Global Investment Committee and significant debt investments are evaluated by the BREDS Investment Committee. Smaller investments are evaluated by subsets of each committee, as applicable.

Highly Competitive Market for Investment Opportunities. The activity of identifying, completing and realizing attractive investments is highly competitive, and involves a high degree of uncertainty. There can be no assurance that the Fund will be able to locate, consummate and exit investments that satisfy its rate of return objectives or realize upon their values or that the Fund will be able to invest fully its committed capital. In addition, there is no guarantee that investment opportunities will be allocated to BREP Europe VI and/or that the activities of Blackstone’s other real estate funds (including other core+ real estate funds, real estate-related opportunistic funds and/or debt funds) will not adversely affect the interests of BREP Europe VI.

Images. This document contains select images of certain investments that are provided for illustrative purposes only and may not be representative of an entire asset or portfolio or of any Fund's entire portfolio. Such images may be digital renderings of investments rather than actual photos.

Leverage. The Fund will use leverage, which magnifies investment, market and certain other risks and may be significant. Additionally, the Fund’s underlying investments may be significantly leveraged. The leveraged capital structure of such assets will increase their exposure to certain factors such as rising interest rates, downturns in the economy, or deterioration in the financial condition of such assets or industry. In the event an investment cannot generate adequate cash flow to meet its debt service, the Fund may suffer a partial or total loss of capital invested in the investment, which may adversely affect the returns of the Fund. While leverage presents opportunities for increasing the absolute return on investments, it also has the effect of potentially increasing losses.

Material, Non-Public Information. By reason of their responsibilities in connection with other activities of Blackstone, certain Blackstone personnel may acquire confidential or material non-public information or be restricted from initiating transactions in certain securities. The Fund will not be free to act upon any such information. Due to these restrictions, the Fund may not be able to initiate a transaction that it otherwise might have initiated and may not be able to sell an investment that it otherwise might have sold. In addition, policies and procedures maintained by Blackstone to deter the inappropriate sharing of material non-public information may limit the ability of Blackstone Real Estate’s personnel to share information with personnel in Blackstone’s other business groups, which may ultimately reduce the positive synergies expected to be realized by the Fund as part of the broader Blackstone Real Estate investment platform.

No Assurance of Investment Return. Prospective investors should be aware that an investment in the Fund is speculative and involves a high degree of risk. There can be no assurance that the Fund’s objectives will be achieved or that an investor will receive any return on its investment in the Fund. The Fund may lack diversification, thereby increasing the risk of loss, and the Fund’s performance may be volatile. An investment should only be considered by sophisticated investors who can afford to lose all or a substantial amount of their entire investment. In addition, the Fund’s fees and expenses may offset or exceed its profits. Past activities of investment entities sponsored by Blackstone provide no assurance of future results.

No Market for Limited Partnership Interests and Restrictions on Transfer. Interests in the Fund have not been registered under the securities laws of any jurisdiction and, therefore, cannot be resold unless either (i) they are subsequently registered under applicable securities laws or (ii) an exemption from registration is available. Interests in the Fund are highly illiquid. There is no public market or organized secondary market for interests in the Fund and neither are expected to develop.

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70



17

Opinions. Opinions expressed reflect the current opinions of Blackstone as of the date appearing in this document only and are based on Blackstone’s opinions of the current market environment, which is subject to change. Certain information contained in the document discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.

Other Vehicles. Blackstone also manages other vehicles with a similar investment strategy as the funds shown herein. Track records for those funds, and other additional information is available upon request.

Performance Calculation. Unless otherwise stated, all Annual Rate of Return (“IRR”) and multiple on invested capital (“MOIC”) calculations, as applicable, include realized and unrealized values and are presented on a “gross” basis (i.e., before management fees, organizational expenses, partnership level expenses, the general partner’s allocation of profit, taxes and other expenses borne by investors in such fund, which in the aggregate are expected to be substantial). As used herein, Gross Annual Rate of Return (“Gross IRR”) is the annual implied discount rate that makes the net present value of all cash flows (the original investment, the interest, fees and expenses, the return of principal, or any other associated cash flows) from a particular investment equal to zero. The Gross IRR calculations for individual investments are annualized and made on the basis of the actual timing of investment inflows and outflows received or made by a Fund or investor, as applicable. A series of cash flows is created starting with the initial cash capital contribution for the investment from fund investors, followed by cash receipts representing current income, financing proceeds, and partial sale proceeds. The terminal cash flow represents either the actual proceeds from the realization of the investment or, if the investment is yet to be realized, a fair market value ascribed to it by Blackstone, which is meant to approximate the cash flow that would have been generated had the investment been realized as of the Reporting Date. The Gross IRR is based on a 365-day year and time-weights each cash flow based on the actual day invested or received by a Fund or investor, as applicable, and in the case of unrealized investments, as if the investment were realized on the Reporting Date. An IRR is a function of the length of time from the initial investment to ultimate realization or, in the case of an unrealized investment, a hypothetical realization. All else held equal, the IRR will decrease as the investment holding period increases. Net Annual Rate of Return (“Net IRR”) is calculated based on returns after management and servicing fees, as applicable, organizational expenses, partnership expenses, certain fund tax liabilities and the general partner’s allocation of profit (“carried interest”) (but before taxes or withholdings incurred by the limited partners directly or indirectly), and excludes certain non-fee and/or non-carry bearing parties (e.g., the General Partner commitment and Blackstone employee side-by-side investors, as applicable), and adds back the effect of any tax distributions paid for carried interest already reflected in the returns. Unless otherwise stated, all MOIC calculations include realized and unrealized values. Gross MOIC represents total realized and unrealized value divided by invested capital. Net MOIC represents total realized and unrealized value after management and servicing fees, as applicable, organizational expenses, partnership expenses, certain fund tax liabilities and the general partner’s allocation of profit (“carried interest” or “incentive fees”, as applicable) (but before taxes or withholdings incurred by the limited partners directly or indirectly) divided by invested capital, and excludes certain non-fee and/or non-carry bearing parties (e.g., the General Partner commitment and Blackstone employee side-by-side investors, as applicable), and adds back the effect of any tax distributions paid for carried interest already reflected in the returns. Calculations of net and gross IRRs and MOICs in respect of investment and performance data referred to herein are based on the payment date of capital contributions received from limited partners. As such, fund-level borrowings (made in lieu of or in advance of calling capital contributions) are not taken into account. Capital contributions called from limited partners and used to repay any such borrowings are treated as outflows as of the payment date of the investors' capital contributions, and these calculations therefore reflect the timing effect of utilizing fund-level borrowing in advance of receiving capital contributions. Fund performance shown reflects a Fund's return since inception and is based on the actual management fees and expenses paid by Fund investors as a whole. The management fees paid by certain investors during the performance period are materially different from those paid by other investors during the performance period due to, among other factors, fee holidays for limited partners subscribing to a first close or fee breaks for investors committing at or above a specified capital amount. In addition, certain investors may pay investor servicing fees to the manager during the performance period. Furthermore, Fund performance shown may not reflect returns experienced by any particular investor in a Fund since actual returns to investors depend on when each investor invested in such Fund, which may be at a point in time subsequent to the Fund's equalization period (if applicable). Accordingly, performance for individual investors may vary from the performance stated herein as a result of the management fees paid by certain investors; the investor servicing fees paid by certain investors, as applicable; the timing of their investment; and/or their individual participation in Fund investments.

Potential Conflicts of Interest. There may be occasions when the General Partner and/or the Investment Advisor, and their affiliates will encounter potential conflicts of interest in connection with BREP Europe VI’s activities including, without limitation, the allocation of investment opportunities, relationships with Blackstone’s investment banking and advisory clients, and the diverse interests of BREP Europe VI’s limited partner group.

Projections. Any projections, targets, forecasts and estimates are necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the projections, targets, forecasts and estimates contained herein will not materialize and/or that actual events and consequences thereof will vary significantly from the assumptions upon which such projections have been based. Any projections, targets, forecasts and estimates contained herein are based upon certain assumptions that Blackstone considers reasonable and prospective investors should pay close attention to such assumptions. The inclusion of projections, targets, forecasts and/or estimates herein should not be regarded as a representation or guarantee regarding the reliability, accuracy or completeness of such information, and the Fund is under no obligation to update or otherwise revise such returns to reflect circumstances existing after the date when made to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying such returns are later shown to be incorrect. Recipients of this document are encouraged to contact Fund representatives to discuss the procedures and methodologies used to make the projections, targets, forecasts and estimates and other information contained herein.

Real Estate Investments. The Fund’s investments consist primarily of real estate investments and real estate related investments. All real estate investments are subject to some degree of risk. For example, real estate investments are relatively illiquid and, therefore, will tend to limit Blackstone’s ability to vary the Fund’s portfolio promptly in response to changes in economic or other conditions. No assurances can be given that the fair market value of any real estate investments held by the Fund will not decrease in the future or that the Fund will recognize full value for any investment that the Fund is required to sell for liquidity reasons. Additionally, deterioration of real estate fundamentals generally may negatively impact the performance of the Fund. In addition, the ability of BREP Europe VI to realize anticipated rental and interest income on its equity and debt investments will depend, among other factors, on the financial reliability of its tenants and borrowers, the location and attractiveness of the properties in which it invests, the supply of comparable space in the areas in which its properties are located and general economic conditions.

Exhibit 6

Blackstone

0 152 195 0 103 120 99 206 202 201 221 3 184 0 92 102 0 70



18

Realized and Unrealized Returns. Realized or partially realized returns represent both (i) proceeds from investments that are realized and have been disposed of and (ii) realized proceeds from unrealized investments, such as current income, financing proceeds, or partial sale proceeds. The unrealized value is based on a fair market value ascribed by Blackstone, which is verified as being reasonable by a third-party to approximate the cash flow that would have been generated had the asset been disposed of as of the Reporting Date. The actual realized value of currently unrealized investments will depend on, among other factors, future operating results, the value of the investments and market conditions at the time of disposition, legal and contractual restrictions, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which the current unrealized values are based. Accordingly, the actual realized values of unrealized and partially realized investments may differ materially from the values presented herein. While we currently believe that the assumptions used to arrive at unrealized value are reasonable under the circumstances, there is no guarantee that the conditions on which such assumptions are based will materialize or otherwise be applicable to the investments. Please let us know if you would like to see returns based on assumptions other than those which we have used.

Reliance on Key Management Personnel. The success of the Fund will depend, in large part, upon the skill and expertise of certain Blackstone professionals. In the event of the death, disability or departure of any key Blackstone professionals, the business and the performance of the Fund may be adversely affected.

Service Providers. Blackstone may retain third parties for necessary services relating to its investments, including any management, construction, leasing, development, and other property management services, as well as services related to mortgage servicing, group purchasing, healthcare, consulting/brokerage, capital markets, credit origination, loan servicing, property, title and/or other types of insurance, management consulting and other similar operational matters (“Property Management Services”) and company advisory services. Such third parties may also include joint venture partners or their affiliates. Affiliates of Blackstone may also provide such Property Management Services, company advisory services or such other services, which will not cause a reduction in the management fee. For further details, please refer to the applicable Offering Memorandum.

Third Party Information. Certain information contained in this document has been obtained from sources outside Blackstone. While such information is believed to be reliable for purposes used herein, no representations are made as to the accuracy or completeness thereof and no Fund nor its affiliates take any responsibility for, and has not independently verified, any such information.

Trends. There can be no assurances that any of the trends described herein will continue or will not reverse. Past events and trends do not imply, predict or guarantee, and are not necessarily indicative of, future events or results.

Use of Subscription-Based Credit Facility. Calculations of returns to investors are based on the payment date of investors’ capital contributions. There are instances where the Fund will utilize borrowings under its subscription-based credit facility in advance of or in lieu of receiving investors’ capital contributions. The use of a subscription-based credit facility will result in higher or lower reported returns than if investors’ capital had been contributed at the inception of an investment. In addition, the Fund will pay all related expenses, including interest, on its subscription-based credit facility and investors will bear such costs.

Capitalized terms used herein but not otherwise defined have the meanings set forth in the Fund's Offering Memorandum, which must be read carefully prior to investing in the Fund.

Exhibit 6

Exhibit 7

Exhibit 7

Exhibit 7

Callan LLC

600 Montgomery Street Suite 800 San Francisco, CA 94111

Main 415.974.5060 Fax 415.291.4016

www.callan.com

February 25, 2019 Mr. Shane Willoughby State Universities Retirement System 1901 Fox Drive P.O. Box 2710 Champaign, IL 61825-2710 Delivery via email: [email protected] Dear Mr. Willoughby, Pursuant to 40 ILCS 5/1-113.23, Callan is providing the following disclosure regarding economic and compensation received. Callan recently completed an evaluation of Blackstone Real Estate Partners Europe VI SCSp (“the Fund), sponsored by The Blackstone Group, for your organization and is recommending investment in the Fund. This letter confirms that Callan has not received any economic consideration during the past 24 months from The Blackstone Group. Best Regards, Rosanna Sangalang Sr. Vice President, HR & Compliance

Exhibit 8

STRUCTURE REVIEW:Crisis Risk Offset Class

Illinois SURS

March 2019

Exhibit 9

Illinois State Universities Retirement Systems (SURS) • Crisis Risk Offset Structure Review 2

Section Tab

Asset-Liability Study Recap 1

Structuring a CRO Class 2

Recommendation & Next Steps 3

Appendix

Agenda

Exhibit 9


Asset-Liability Study Recap

Exhibit 9


Principal Protection8%Inflation Sensitive

6%

Broad Growth66%

Long Duration5%

Systematic Trend Following10%

Alternative Risk Premia5%

Crisis Risk Offset20%

• In September 2018, Board approved new long-term allocation policy

• In October 2018, the Board completed education on Trend Following

CRO Components*

New SURS Long-term Allocation Policy

A/L Study Recap

*Preliminary weightings, subject to change

Exhibit 9


A/L Study Recap: CRO Broad Review

• Crisis Risk Offset Class:

1. Purpose is to offset – i.e.

To diversify in a portfolio context Diversify from Growth Risk (most portfolios’ largest risk by far) Provide significant positive returns during a Growth Risk crisis To maintain a very low correlation to Growth Risk on average

2. Practical implementation Desire negative conditional correlation to equities

o Positive returns when equities decline substantially Positive expected standalone return to risk High volatility to provide meaningful diversification / impact Cost effective - less dependent upon manager skill, more dependent upon

market adjustment mechanisms Liquid and scalable at an institutional level

• CRO was introduced in the 2018 Asset-Liability Model and subsequentlyapproved by the Board for implementation

Exhibit 9


A/L Study Takeaways & Rationale

CRO is expected to have a material impact on SURS investment outcomes

New targets improve the probabilities of achieving the System’s objectives

Ass

et

On

ly

Sta

ts

Median Comp. Return 6.9% 7.0%

Average Standard Deviation 12.9% 8.8%

Best Calendar Year 27.0% 22.5%

Worst Calendar Year -32.8% -19.4%

A/L

Sta

ts

Average Worst 10% FR Year 5 27.5% 32.8%

Scenarios < Lower FT Year 5 28.3% 21.9%

Median FR Year 15 52.0% 51.6%

Avg. Prob. > Lower FT 2028-37 59.7% 65.5%

Current Policy

New LT Targets

Non-Traditional Growth 9.0 15.0

Traditional Growth 54.0 25.0

Stabilized Growth 23.5 26.0

Hedged Strategies 3.0 0.0

EMD 3.0 0.0

Options Strategies 2.0 6.0

Credit Fixed Income 11.5 14.0

Real Assets 4.0 6.0

Inflation Protection 6.0 6.0

TIPs 4.0 6.0

Commodities 2.0 0.0

Principal Protection 7.5 8.0

Crisis Risk Offset 0.0 20.0

Long Duration 0.0 5.0

Trend Following 0.0 10.0

Alternative Risk Premia 0.0 5.0

Current Policy

New LT Targets

Exhibit 9


$0.10

$1.00

$10.00

$100.00

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

$ Va

lue

-Log

Sca

le

Year

Current vs. New Allocation Comparisons: Asset Growth*

Median long-term compound return: 7.0%

*Based on PCA’s 2018 capital market assumptions

8.9%

5.0%

$0.10

$1.00

$10.00

$100.00

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

$ Va

lue

-Log

Sca

le

Year

Median long-term compound return: 6.9%

9.8%

4.0%

Current Policy

New Policy

• Improvement in long-term

expected return

• Much tighter range of return paths

Exhibit 9


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045

Stochastic Funding Ratio

Current vs. New Allocation Comparisons: Funding Ratio*

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045

Stochastic Funding Ratio

Current Policy

New Policy

• Funding ratio paths bunched

more toward planned path

• Trade-off: reduction of both

extreme high and low funding

paths

*Based on PCA’s 2018 capital market assumptionsSources: PCA, GRS

Exhibit 9


Primary CRO Risks

• It is a volatile class by design Aggregate class may be subject to material drawdowns (-10%+) Individual components may experience even worse isolated drawdowns (-20%+)

• A material allocation to CRO could result in lagging peers during bull markets This is a consequence of “smoothing” the total portfolio return path

• CRO behavior during shorter drawdowns is highly unpredictable Reasonably probable the class will produce negative returns during shorter equity drawdowns

• It is not infallible There is no guarantee it will offset material equity drawdowns Empirical and academic research, coupled with economic intuition, provide strong support

Exhibit 9


Initial Implementation Steps

• In September the Board accepted a phased-in approach to its new allocation

• Interim allocations influenced by market behavior/dynamics

• Preliminary CRO plan: late-2019 – 5% (~$890M initial funding)7/1/2020 – 10%7/1/2021 – 20%

Exhibit 9


Structuring a CRO Class

Exhibit 9


Structuring a CRO Class

• Output from the asset-liability model is focused on allocations to the majorrisk-based, functional classes

• Class compositions are considered preliminary – they represent general guidelinesthat can be refined over time as they are implemented

• This approach allows for more robust class construction and decreases the relianceon quantitative modeling (which is prone to estimation error)

• The following slides examine various CRO structures (i.e., component weights) forfurther consideration

Exhibit 9


CRO: Review of Component Roles

Long

Treasuries

Trend

Following

Alternative

Risk

Premia

Most Effective When… Least Effective When…

Sudden Drawdown

Flight to Quality

Trending Markets Sharp Market Reversals

Systematic Implementation

Uncorrelated Returns

Not Driven by Growth Risk

Rising Rates

Role: 1st Responder

Cost: Low, <5 bps

Reliability: High

Role: 2nd Responder

Cost: Low, 20-60 bps

Reliability: Medium

Role: Diversifier

Cost: Medium, 35-90 bps

Reliability: Uncertain

Attributes

Brief review on following page

Education provided in Oct. 2018 (brief review on subsequent pages)

Education will follow this presentation

Exhibit 9


• Investments in 20-30 year U.S. Treasury Bonds• Key risk is sensitivity to interest rate hike surprises (similar volatility level as equities)• Can be implemented via passive strategies

SURS has a stable of passive providers that can be surveyed

Period Event S&P 500

Total Return

Index (%)

Long U.S.

Government

Index (%)

Difference

Q4 2008 Bear Market in U.S. Equities led by Financials -21.9 17.9 39.8

Q3 2002 WorldCom Scandal -17.3 12.1 29.4

Q3 2001 Terrorist Attacks on World Trade Center and Pentagon -14.7 6.7 21.4

Q3 2011 European Sovereign Debt Crisis -13.9 23.9 37.8

Q4 2018 Global Growth Concerns -13.5 4.2 17.7

Q2 2002 Continuing Aftermath of Technology Bubble Bursting -13.4 6.1 19.5

Q1 2001 Bear Market in U.S. Equities led by Technology -11.9 1.4 13.3

Q2 2010 European Sovereign Debt Crisis, “Flash Crash” -11.4 11.8 23.2

Q1 2009 Credit Crisis Continues -11.0 -5.3 5.7

Q1 2008 Beginning of Bear Market in U.S. Equities -9.4 3.8 13.2

Long U.S. Treasury Performance During the 10 Worst Quarters of Equity Performance

January 2000 – December 2018

CRO: Review of Long U.S. Treasuries

Exhibit 9


• Momentum and Trend Following are somewhat interchangeable terms

• Buy what is going up; sell what is going down

• Long and short positions in futures and forwards

• Derivatives-based leverage utilized to set strategy volatilities

• Investable universe includes all liquid investments across the globe: Equities, Fixed Income, Currencies, Commodities

• Systematic = rules-based implementation

• Related terms = managed futures, CTAs (commodity trading advisors)

CRO: Review of Trend Following

Exhibit 9


• Moving average crossovers are an example of trend following

• Loses money when trends reverse and makes money as they continue


Exhibit 9


Behavioral Factors

• Under/Over Reaction to News

• Feedback Loops

• Herding

Economic Factors

• Companies hedging price risks

Sources: Brian Hurst et Al., “Demystifying Managed Futures” Journal of Investment Management, 3rd Quarter 2013Trend Following with Managed Futures, Alex Greyserman, PhD and Kathryn Kaminski, PhD


Why Does it Work?

Exhibit 9


Long Duration Trend Following ARP

Various CRO Portfolio Structuring Options

Component weightings within CRO do not materially shift expected outcomes

Forecast errors make distinguishing weighting schemes difficult Weighting scheme should, at a minimum, reflect role orientations PCA prefers weightings that are less reliant on any one component, similar to Equal Capital/Risk

25.0

50.0

25.0

AL Model

33.3

33.3

33.3

Equal Capital

28.525.5

46.0

Equal Risk

35.0

35.030.0

Alternate

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

Mar

-00

May

-00

Jul-0

0Se

p-00

Nov

-00

Jan-

01M

ar-0

1M

ay-0

1Ju

l-01

Sep-

01N

ov-0

1Ja

n-02

Mar

-02

May

-02

Jul-0

2Se

p-02

Nov

-02

Jan-

03M

ar-0

3

2000-2003 Timeframe

0.40

0.60

0.80

1.00

1.20

1.40O

ct-0

7N

ov-0

7D

ec-0

7Ja

n-08

Feb-

08M

ar-0

8A

pr-0

8M

ay-0

8Ju

n-08

Jul-0

8A

ug-0

8Se

p-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09Fe

b-09

2007-2009 Timeframe

AL Model

Equal Capital

Equal Risk

Alternate

Equity Drawdown

Exhibit 9


• Considerations when constructing a CRO class

1. Risk Exposures

• Do I have concentrated risk exposures?

2. Growth Crisis Attributes

• Do I expect material positive appreciation in negative equity events?

3. Costs & Strategy Track Record

• Is the construction efficient and cost effective? • Does the construction tilt towards strategies with long or short track records?

CRO Portfolio Structural Considerations

Exhibit 9


CRO Portfolio Structural Considerations: Risk Exposures

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec

-98

Sep-

99Ju

n-00

Mar

-01

Dec

-01

Sep-

02Ju

n-03

Mar

-04

Dec

-04

Sep-

05Ju

n-06

Mar

-07

Dec

-07

Sep-

08Ju

n-09

Mar

-10

Dec

-10

Sep-

11Ju

n-12

Mar

-13

Dec

-13

Sep-

14Ju

n-15

Mar

-16

Dec

-16

Sep-

17Ju

n-18

Rolling 12-month Risk Weightings

25

50

25

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Capital Weightings in AL Model

Long Duration Trend Following ARP

• AL model structure was heavily reliant on trend following• At times can represent >70% of the risk exposure of the CRO class

Exhibit 9


CRO Portfolio Structural Considerations: Risk Exposures

• Even equal capital allocation is still tilted towards Trend Following

• Alternate portfolio allocates approximately equal risk to Trend Following andLong Duration

26%36% 33%

41%

59% 42%33%

43%

15% 22%33%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

AL Model Equal Capital Equal Risk Alternate

Average Risk Weightings

ARPTrend FollowingLong Duration

Exhibit 9


-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

Rolling 12-month Returns in Excess of MSCI ACWI

-30%

-20%

-10%

0%

10%

20%

30%

40%

Rolling 12-month Returns in Excess of BB Agg

AL Model Equal Capital Equal Risk Alternate

CRO Portfolio Structural Considerations: Crisis Attributes

• All constructions are expected to be positive in poor equity environments

• All constructions trail equity during most periods (i.e., on average)

• All constructions outperformed core bonds

during worst equity environments

• All constructions outperformed core bonds on average

• AL Model construction benefits most from the strong modeling attributes of trend following

Exhibit 9


Sources: PCA, GRS

Ass

et

On

ly

Sta

ts

Median Comp. Return 7.0% 6.9% 6.9% 6.9% 6.9%

Average Standard Deviation 8.8% 8.8% 8.8% 8.8% 12.9%

Best Calendar Year 22.5% 22.3% 22.4% 22.2% 27.0%

Worst Calendar Year -19.4% -20.4% -21.3% -20.2% -32.8%

A/L

Sta

ts

Average Worst 10% FR Year 5 32.8% 32.5% 32.2% 32.6% 27.5%

Scenarios < Lower FT Year 5 21.9% 22.1% 22.3% 22.2% 28.3%

Median FR Year 15 51.6% 51.6% 51.7% 51.6% 52.0%

Avg. Prob. > Lower FT 2028-37 65.5% 64.6% 64.4% 64.6% 59.7%

AL Model with Optional

CRO Weighting Schemes

AL ModelEqual

CapitalEqual Risk Alternate

Current

SURS

Non-Traditional Growth 15.0 15.0 15.0 15.0 9.0

Traditional Growth 25.0 25.0 25.0 25.0 54.0

Stabilized Growth 26.0 26.0 26.0 26.0 23.5

Inflation Protection 6.0 6.0 6.0 6.0 6.0

Principal Protection 8.0 8.0 8.0 8.0 7.5

Crisis Risk Offset 20.0 20.0 20.0 20.0 0.0

Long Duration 5.0 6.7 5.7 7.0 0.0

Trend Following 10.0 6.7 5.1 7.0 0.0

Alternative Risk Premia 5.0 6.7 9.2 6.0 0.0

• Equivalent expected

returns and risk measures

• Similar AL-focused statistics as well

• Each structure represents an improvement from current policy

• Significant potential volatility and downside

risk improvement

• Reasonable increases in chances to match funding plan

CRO Portfolio Structural Considerations: AL Model

Exhibit 9


Recommendation & Next Steps

Exhibit 9


CRO Structural Recommendation

• PCA Recommends that SURS adopt the Alternate CRO construction 35% Long Treasuries | 35% Trend Following | 30% Alternative Risk Premia

• This construction is based upon a blend of four key considerations

1. Risk Exposures

• More balanced risk exposures but tilted towards the highest conviction components

2. Growth Crisis Attributes

• Balanced risks provide more consistent results across negative equity environments

3. AL Model Attributes

• Overall portfolio expectations are in-line with the AL model review

4. Costs & Strategy History

• Lowest cost structure of the four• Higher weightings to components with longest track records

Exhibit 9


Next Steps

• Staff and PCA will develop draft policies for the IPS

• Staff and PCA will begin the manager search process across mandates

• Searches expected to conclude during late-3Q and 4Q 2019

• CRO Class expected to reach full target allocation in 2021

Exhibit 9


Appendix

Exhibit 9


Appendix – CRO Systematic Trend Following: Recent History

Sources: Societe Generale, Bloomberg, AlphaSimplex

• SG Trend Index = Manager index/composite of 10 largest trend followers

• Equities and SG Trend Index provide portfolio diversification

Year SG Trend Index S&P 500

2000 11.7% -9.1%2001 -0.1% -11.9%2002 26.1% -22.1%2003 11.9% 28.7%2004 2.7% 10.9%2005 0.7% 4.9%2006 8.2% 15.8%2007 8.6% 5.5%2008 20.9% -37.0%2009 -4.8% 26.5%2010 13.1% 15.1%2011 -7.9% 2.1%2012 -3.5% 16.0%2013 2.7% 32.4%2014 19.7% 13.7%2015 0.0% 1.4%2016 -6.2% 12.0%2017 2.2% 21.8%2018 -8.1% -4.4%

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

Growth of $1 since 2000

S&P 500 SG Trend Index

Exhibit 9


Trend Following Performance During the 10 Worst Quarters of Equity Performance


• Even during quarterly drawdowns, Trend Following can potentially offset equity declines

Sources: Societe Generale, Bloomberg, AlphaSimplex, CME Group



Total Return

Index (%)

SG Trend

Index (%)

Difference

Q4 2008 Bear Market in U.S. Equities led by Financials -21.9 12.7 34.6

Q3 2002 WorldCom Scandal -17.3 18.0 35.3

Q3 2001 Terrorist Attacks on World Trade Center and Pentagon -14.7 3.9 18.6

Q3 2011 European Sovereign Debt Crisis -13.9 2.4 16.3

Q4 2018 Global Growth Concerns -13.5 -5.1 8.4

Q2 2002 Continuing Aftermath of Technology Bubble Bursting -13.4 15.8 29.2

Q1 2001 Bear Market in U.S. Equities led by Technology -11.9 10.6 22.5

Q2 2010 European Sovereign Debt Crisis, “Flash Crash” -11.4 -3.1 8.3

Q1 2009 Credit Crisis Continues -11.0 -2.8 8.2

Q1 2008 Beginning of Bear Market in U.S. Equities -9.4 8.5 17.9

Exhibit 9


• Trend Following tends to perform poorly in range bound markets (i.e., flat-to-marginal returns in major asset classes)

• Sharp drawdowns and/or reversals negatively impact Trend Following strategies

Equity Performance During the 10 Worst Quarters of Trend Following Performance


Sources: Societe Generale, Bloomberg, AlphaSimplex, CME Group



Total Return

Index (%)

SG Trend

Index (%)

Difference

Q2 2004 Broad Stock, Bond, and Commodity Reversal 1.7 -14.1 15.8

Q2 2001 Reversals During the Dot Com Crisis 5.9 -9.6 15.5

Q2 2015 Trend Reversals in Multiple Asset Classes 0.3 -9.4 9.7

Q2 2000 Reversals During the Dot Com Crisis -2.7 -7.4 4.7

Q3 2008 Reversals During Bear Market in U.S. Equities -8.4 -6.9 -1.5

Q3 2000 Reversals During the Dot Com Crisis -1.0 -6.1 5.1

Q3 2007 CTAs Caught Short on Bear Market Rally in U.S. Equity 2.0 -6.0 8.1

Q1 2014 Bond and Currencies Reversals 1.8 -5.9 7.7

Q4 2018 Global Growth Concerns -13.5 -5.1 -8.4

Q2 2009 Reversals in the Aftermath of the Credit Crisis 15.9 -5.0 21.0

Exhibit 9


Source: AQR

Hypothetical Performance During 10 Largest Market DrawdownsJanuary 1880 – June 2018

Trend Following often provides material offset when traditional portfolios decline

Appendix – CRO Systematic Trend Following: Long History

Exhibit 9


DISCLOSURES: This document is provided for informational purposes only. It does not constitute an offer of securities of any of the issuers that may be described herein. Information contained herein may havebeen provided by third parties, including investment firms providing information on returns and assets under management, and may not have been independently verified. The past performance informationcontained in this report is not necessarily indicative of future results and there is no assurance that the investment in question will achieve comparable results or that the Firm will be able to implement itsinvestment strategy or achieve its investment objectives. The actual realized value of currently unrealized investments (if any) will depend on a variety of factors, including future operating results, the value ofthe assets and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which anycurrent unrealized valuations are based.

Neither PCA nor PCA’s officers, employees or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the information contained in this document orany oral information provided in connection herewith, or any data subsequently generated herefrom, and accept no responsibility, obligation or liability (whether direct or indirect, in contract, tort orotherwise) in relation to any of such information. PCA and PCA’s officers, employees and agents expressly disclaim any and all liability that may be based on this document and any errors therein or omissionstherefrom. Neither PCA nor any of PCA’s officers, employees or agents, make any representation of warranty, express or implied, that any transaction has been or may be effected on the terms or in themanner stated in this document, or as to the achievement or reasonableness of future projections, management targets, estimates, prospects or returns, if any. Any views or terms contained herein arepreliminary only, and are based on financial, economic, market and other conditions prevailing as of the date of this document and are therefore subject to change.

The information contained in this report may include forward-looking statements. Forward-looking statements include a number of risks, uncertainties and other factors beyond the control of the Firm, whichmay result in material differences in actual results, performance or other expectations. The opinions, estimates and analyses reflect PCA’s current judgment, which may change in the future.

Any tables, graphs or charts relating to past performance included in this report are intended only to illustrate investment performance for the historical periods shown. Such tables, graphs and charts are notintended to predict future performance and should not be used as the basis for an investment decision.

All trademarks or product names mentioned herein are the property of their respective owners. Indices are unmanaged and one cannot invest directly in an index. The index data provided is on an “as is”basis. In no event shall the index providers or its affiliates have any liability of any kind in connection with the index data or the portfolio described herein. Copying or redistributing the index data is strictlyprohibited.

The Russell indices are either registered trademarks or trade names of Frank Russell Company in the U.S. and/or other countries.

The MSCI indices are trademarks and service marks of MSCI or its subsidiaries.

Standard and Poor’s (S&P) is a division of The McGraw-Hill Companies, Inc. S&P indices, including the S&P 500, are a registered trademark of The McGraw-Hill Companies, Inc.

CBOE, not S&P, calculates and disseminates the BXM Index. The CBOE has a business relationship with Standard & Poor's on the BXM. CBOE and Chicago Board Options Exchange are registered trademarks ofthe CBOE, and SPX, and CBOE S&P 500 BuyWrite Index BXM are servicemarks of the CBOE. The methodology of the CBOE S&P 500 BuyWrite Index is owned by CBOE and may be covered by one or morepatents or pending patent applications.

The Barclays Capital indices (formerly known as the Lehman indices) are trademarks of Barclays Capital, Inc.

The Citigroup indices are trademarks of Citicorp or its affiliates.

The Merrill Lynch indices are trademarks of Merrill Lynch & Co. or its affiliates.

Exhibit 9

EDUCATIONAL OVERVIEW:Alternative Risk Premia (ARP)

Illinois SURS

March 2019

Exhibit 10

Illinois State Universities Retirement Systems (SURS) • Alternative Risk Premia Education 1

Table of Contents

Section Tab

Economic Intuition & Basic Concepts 1

Evolution of Risk Premia 2

Appendix

Exhibit 10


Economic Intuition & Basic Concepts

Exhibit 10


Financial Theory - History

Institutional portfolio design has evolved over time but primarily relies on four long-standing concepts/theories:

o Modern Portfolio Theory (MPT) – Investors determine optimal portfolios by maximizing the return/risk tradeoff based on mean, standard deviation, and correlation estimates. (Markowitz, 1950s)

o Capital Asset Pricing Model (CAPM) – Since investors seek to maximize the return/risk tradeoff under a portfolio context, assets are not priced in isolation but rather are priced based on how they covary with the “market”. A single factor (i.e., market beta) is the only risk factor; all other risk factors can be diversified away. (Treynor, Sharpe, Lintner, Mossin, 1960s)

o Efficient Market Hypothesis (EMT) – All relevant information is immediately incorporated into asset prices. One cannot generate above-average returns without taking on above-average risk. “You cannot beat the market.” (Fama + several predecessors, 1960s)

o Arbitrage Pricing Theory (APT) – Similar to CAPM but asserts that there are multiple risk factors that are incorporated into asset prices (rather than just one).(Ross, 1970s)

Exhibit 10


What is a Risk Premium?

• Risk and return are inherently related

• Economic investments generate positive returns because of risk premiums

• Risk premium = a positive payment for being exposed to a risko Analogy => insurance

Monthly premiums in exchange for downside coverage Insurance company generates a profit/return because the premiums cover the

payouts (over-time / on average)

• APT / multifactor models best represent the capital market landscapeo Multiple risk premiums exist that can reward investors

Exhibit 10


Risk Premiums and “Bad Times”

• The two most important words in investing are “bad times” – Ang, 2014

• All risk premiums exist because of “bad times”o Equity Risk = positive returns, on average, to equity investors because they are

negatively impacted when companies suffer

o Interest Rate Risk = positive returns, on average, to bond investors because they are negatively impacted when interest rates rise

• The key to designing a strategic allocation is to obtain exposure to as many economic, unrelated risk premiums as possible

o i.e., diversify

Exhibit 10

6Illinois State Universities Retirement Systems (SURS) • Alternative Risk Premia Education

Risk Premium Investment Example

• To receive a positive return (i.e., a premium), one must bear risko Risk = potential for a “bad time”

$0

$50

$100

$150

$200

$250

$300

Risk Premium Example

Cash Return

Expected Risk Premium

Expected to be

compensated for the

risk of this outcome

Expected Avg. Outcome

Potential Positive

Outcomes

Investment

NowFuture

Exhibit 10


How Are Risk Premiums Measured?

• Risk premiums are measured by comparing one investment return versus another (foregone) investment return

o Foregoing one investment is mathematically identical to short selling i.e., opportunity cost

• For example, the Equity Risk Premium is the difference between the return that equities generate in comparison to the return that cash generates

o Ex. S&P 500 = 7% returnCash = 1% returnEquity Risk Premium = 6% return (7% - 1% = 6%)

• In the above example, 6% represents the return that the investor earned for bearing equity risk (as opposed to investing solely in cash)

o i.e., the “premium” relative to cash

Exhibit 10


Traditional Risk Premiums

• Four traditional risk premiums dominate most portfolios:1. Interest Rate Risk/Duration Risk Premium

• Example: 10-year government bond return – cash return = Duration RP• Primarily held in Crisis Risk Offset, Principal Protection, and Inflation Protection

2. Credit Risk Premium

• Example: Sears 10-year bond return – 10-year government bond return = Credit RP• Held in Broad Growth (Non-Traditional Growth and Stabilized Growth)

3. Equity Risk Premium

• Example: S&P 500 return – cash return = Equity RP• Held in Broad Growth (Non-Traditional Growth, Traditional Growth, and Stabilized Growth)

4. Illiquidity Risk Premium

• Example: Private Equity return – S&P 500 Return = Illiquidity RP• Held in Broad Growth (Non-Traditional Growth and Stabilized Growth)

• These are also called “traditional” because they are pervasive, utilized heavily, and generally obtained/measured via long-only investing

Exhibit 10


Mapping Traditional Risk Premiums

• Risk premia/premiums may also be referred to as “factors”

Cash Cash Cash Cash Cash

Duration RP Duration RP Duration RP Duration RP

Credit RP

Equity RP Equity RP

Illiquidity RP

Cash Govt. Bonds Corp. Bonds Public Equity (Stocks) Private Equity

Tota

l R

etu

rn

Risk

Mapping Traditional Risk Premiums1

1Adapted from Unigestion Research Paper: Alternative risk premia investing: from theory to practice, Exhibit 1https://www.unigestion.com/app//uploads/2017/02/VF-Alternative-risk-premia-investing-from-theory-to-practice.pdf

Assets:

Exhibit 10


What is an Alternative Risk Premium?

• Alternative Risk Premiums = not Traditional Risk Premiums!o Ex. Value Risk Premium = the risk premium that investors receive by buying value

stocks/assets instead of growth stocks/assets

• Most Alternative Risk Premiums are obtained via tilting a long-only portfolio or using long-short portfolio constructs

o Tilting example = in an equity portfolio, buying only value stockso Long-short example = buying value stocks and selling short growth stockso Recommendation: utilize long-short implementations

• Alternative Risk Premiums are commonly present across the four major asset classes (equities, bonds, currencies, and commodities)

Exhibit 10


Strategy: Core Market Index Value Investing (Tilting) Value Risk Premium

Implementation:

Index Example: MSCI ACWI MSCI ACWI Value N/A

Description:Buying the total global stock

market index (passive investing)

Buying only “cheap” (value) stocks OR buying more “cheap” stocks than “expensive” stocks

Buying “cheap” stocks and selling(shorting) “expensive stocks, in

equal amounts

Other Terms: Passive, market cap, core, etc. Value mandate, fundamental indexing, smart beta, etc.

Style premia, alternative risk premia, etc.

Return AttributionMostly driven by Equity Risk

Premium

Slight contribution from ValuePremium but still mostly driven by

the Equity Risk Premium

Mostly driven by Value Risk Premium

Traditional Alternative Risk Premia

Equity Risk Premium

Value Premium

Equity Risk Premium Value Premium

Cash

Re

turn

Att

rib

utio

n

Implementation Complexity

Duration RP

Long Value StocksLong Growth Stocks

Long Value StocksLong Value Stocks

Short Growth Stocks

CashDuration RP

Cash

Exhibit 10


Risk Premia Exposure: Tilting versus Long-Short

• Tilting a portfolio to a risk premium is effective but has its limitationso Pros

Marginally increases the expected return of the investment versus non-tilting

o Cons Maintains exposure to the Traditional Risk Premium Limits the impact of the Alternative Risk Premium due to long-only restraint

• Capturing Alternative Risk Premiums in a long-short construct is a more robust approach

o Example: $100 investment into a 2X levered long-short value equity portfolio Russell 1000 Value = 10% return

Russell 1000 Growth = 7% return

Cash = 2% return

Portfolio = ($100*Cash) + ($200*R1000 Value - $200*R1000 Growth)Portfolio = 2% + (2 * 10%) – (2 * 7%) = 2% + 20% - 14% = 8% returnPortfolio = $102 + $220 – $214 Portfolio = $108 (8% return)

Harvests the difference between value/growthUP

MARKET

Exhibit 10



o Example: $100 investment into a 2X levered long-short value equity portfolio Russell 1000 Value = -5% return

Russell 1000 Growth = -9% return

Cash = 2% return

Portfolio = ($100*Cash) + ($200*R1000 Value - $200*R1000 Growth)Portfolio = 2% + (2 * -5%) – (2 * -9%) = 2% - 10% + 18% = 10% returnPortfolio = $102 + $190 – $182Portfolio = $110 (10% return)

o Because of the offsetting (i.e., market-neutral) equity positions, there is no exposure to the drawdown in the broad equity markets

o The long-short (market-neutral) construct allows for an element of leverage to enhance the overall return of the strategy

Harvests the difference between value/growthDOWN MARKET

Exhibit 10



Additional Examples (negative strategy returns)

Russell 1000 Value = 10% return

Russell 1000 Growth = 13% return

Cash = 2% return

Portfolio = $96 (-4% return)

o Strategy can generate a negative return even when broad markets producea positive return over a given period

Harvests the difference between value/growth

Russell 1000 Value = -8% return

Russell 1000 Growth = -4% return

Cash = 2% return

Portfolio = $94 (-6% return)

o Strategy can generate a negative return at the same time as broad markets

Harvests the difference between value/growth

UP MARKET

DOWN MARKET

Exhibit 10


Sustainability of Risk Premiums

• Constant debate amongst academics/practitioners as to whether premiums are risk-based or behavioral-based

o i.e., does the market reward investors because the activity is risky or because the market makes a mistake?

• The more important idea is whether this will continueo Risk premiums are more likely to continue but certain behavioral biases may

also persist

• As such, the “bad times” may be when the risk is evident or when the behavioral issue is uncorrected

o Example: Value stocks Value = distress risk; value companies are inherently more risky

(risk-based) Value = investors overpay for growth, thus value stocks are undervalued

(behavioral-based)

Exhibit 10


What are Common Risk Premiums?

Traditional Risk Premiums Alternative Risk Premiums

Equityo Ownership in a company

Duration / Interest Rate Risko Exposure to interest rate

movements

Credit o Lending money with the

potential for default

Illiquidity o Giving up liquidity in an

investment

Valueo Long “cheap” assets and short

“expensive” assets

Momentumo Buying recent “winners” and

selling recent “losers”

Trendo Similar to momentum, but

“winning” and “losing” is relative to each asset’s own history

Carryo Long high-yielding assets and

short low-yielding assets

Defensiveo Long lower risk assets and short

higher risk assets

Volatilityo Selling volatility (i.e., losing

when volatility rises)o SURS already harvests

this ARP via Global Options mandates

Each of these premiums should be measured in a simplistic way

Exhibit 10


Performance of Common Risk Premiums

Source: PCA, Bloomberg, Barclays, S&P, AQR, Merrill Lynch, Credit Suisse, MPI Stylus* See Appendix for specific factor descriptions. Factor portfolios include cash returns.

Duration and Equity represent the actual histories of the BB Government and MSCI ACWI GD indices.The histories of the Alternative Risk Premiums have been altered to reflect more conservative returns. Additionally, their respective volatilities have been modified to roughly match Global Equity over this time period (≈15%).

0.5

1

2

4

8

16

Growth of $1 - Various Risk Premium Portfolios*

Duration Equity Credit Trend Value Momentum Defensive Volatility Cash

Exhibit 10


Correlations Amongst Common Risk Premiums

Green = correlations less than 0.1Yellow = correlations between 0.1 and 0.4Red = correlations above 0.4

Long-term Monthly Correlations

• The majority of the risk premiums are complementary to one another

• Equity, Credit, and Volatility move similarly with one another (as expected)

• Trend and Momentum move similarly with one another (as expected)

Duration Equity Credit Trend Value Momentum DefensiveEquity -0.09Credit -0.43 0.61Trend 0.30 -0.12 -0.27Value -0.11 0.02 0.13 -0.17Momentum 0.19 -0.22 -0.30 0.41 -0.68Defensive 0.14 -0.22 -0.09 0.17 0.06 0.26Volatility -0.14 0.56 0.56 -0.07 -0.05 -0.02 -0.08

Exhibit 10


Evolution of Risk Premia

Exhibit 10


• Overtime, “alpha” has continued to morph into “beta”o Alpha = risk-adjusted excess return

• This concept indicates that active manager “skill” may be merely due to exposure to other risk premiums

o e.g., much of Warren Buffett’s success is due to Value & Defensive risk premia

• 1st portfolio consideration = exposure to risk premiums2nd portfolio consideration = pursuit of alpha

• The key to designing a strategic allocation is to obtain exposure to as many economic, unrelated risk premiums as possible

o i.e., diversify

Evolution of Alpha into Beta (aka Risk Premia)

Exhibit 10


Evolution of Alpha into Beta (aka Risk Premia)

TIME

Prior to indices After introduction of CAPM Current multi-factor world

Alpha

Alpha

Traditional Beta

- Equity -

- Duration -

- Credit -

Alternative Beta

- Value -

- Carry -

- Defensive -

- Volatility -

- Momentum -

- Trend -

Traditional Beta

- Equity -

- Duration -

- Credit -

- Illiquidity -

Alpha

Exhibit 10


• Alternative Risk Premia strategies now exist as standalone productso First product entrants were in 2012/2013, with material growth in 2016-2018o Formerly, they were hidden in expensive hedge funds or masked as “alpha”

in traditional long-only strategies

• These strategies provide robust/pure exposures to risk premiums that many institutional investors do not currently have

• These strategies typically combine three to six alternative risk premia across a global universe of investors

o Ex. Harvest Value, Momentum, and Carry across global equity, global bonds, currencies, and commodities

• An aggregate fee near 60-90 basis points is standard (this has continually decreased over the last few years)

Alternative Risk Premia Strategies

Exhibit 10


Appendix

Exhibit 10


Having a zero correlation does not mean two assets are unrelated

Correlation: Linear Relationship

Exhibit 10


• Monthly correlation of Asset 1 and Asset 2? -0.05

• Assets with low-to-negative correlations over one period can, in fact, be related over different lengths of periods

$0.50

$1.00

$2.00

$4.00

Growth of $1

(Two Simulated Assets)

Asset 1 Asset 2

Asset 2’s return is merely Asset 1’s return lagged by one month

Log

Sc

ale

Correlation: Time Period Synchronization

Exhibit 10


$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

$0.80

$0.90

$1.00

Growth of $1

(Two Simulated Assets)

Asset 1

Asset 2

-6%

-5%

-4%

-3%

-2%

-1%

0%

Monthly Returns

Asset 1

Asset 2

Average return of both assets = -4%

Correlation of the two assets? -1.0

When one asset produces a returnhigher than the average, the otherproduces a return less than the average

Correlation: Dependence on Average Return

Exhibit 10


Additional Risk Premia Investment Examples

• All long-short risk premia investments have a similar constructo Receives the cash returno Additionally, harvests the difference in returns of the long-short portion

• “Defensive” risk premia example:o Hypothetical ex: $100 investment into a long-short defensive equity portfolio

Using some metric of “defensive” (e.g., trailing volatility, beta, debt level, etc.), an investor goes long the safe/defensive stock and short the risky/aggressive stock

In this example, Johnson & Johnson is viewed as more defensive than Gilead Johnson & Johnson = 10% return

Gilead Sciences (Biotech)= 7% return

Cash = 2% return

Portfolio = ($100*Cash) + ($200*Johnson & Johnson - $200*Gilead)Portfolio = 2% + (2 * 10%) – (2 * 7%) = 2% + 20% - 14% = 8% returnPortfolio = $102 + $220 – $214Portfolio = $108 (8% return)

Harvests the difference between defensive/risky

Exhibit 10


o Hypothetical ex: $100 investment into a long-short defensive equity portfolio Johnson & Johnson = -5% return

Gilead Sciences (Biotech) = -9% return

Cash = 2% return

Portfolio = ($100*Cash) + ($200*Johnson & Johnson - $200*Gilead)Portfolio = 2% + (2 * -5%) – (2 * -9%) = 2% - 10% + 18% = 10% returnPortfolio = $102 + $190 – $182Portfolio = $110 (10% return)


Harvests the difference between defensive/risky


Exhibit 10



• “Carry” risk premia example:o Hypothetical ex: $100 investment into a long-short carry currency portfolio

Carry ≈ yield of an investment Iceland Krona = 3% return (cash interest rate)

U.S. Dollar = 1% return (cash interest rate)

Cash = 1% return

Portfolio = ($100*Cash) + ($200*Iceland Krona - $200*USD)Portfolio = 1% + (2 * 3%) – (2 * 1%) = 1% + 6% - 2% = 5% returnPortfolio = $101 + $206 – $202Portfolio = $105 (5% return)

o For currencies, the notion of selling/shorting ≈ borrowing i.e., instead of owing the return, the borrower owes the interest rate

Harvests the difference in high vs. low interest rates*

* For purposes of this example, the exchange rate is assumed to stay constant.

Exhibit 10


o Hypothetical ex: $100 investment into a long-short carry currency portfolio Japanese Yen = -0.1% return (cash interest rate)

Swiss Franc = -0.75% return (cash interest rate)

Cash = 1% return

Portfolio = ($100*Cash) + ($200*Yen - $200*Franc)Portfolio = 1% + (2 * -0.1%) – (2 * -0.75%) = 1% - 0.2% + 1.5% = 2.3% returnPortfolio = $101 + $199.8 – $198.5Portfolio = $102.3 (2.3% return)

o For currencies, the notion of selling/shorting ≈ borrowing i.e., instead of owing the return, the borrower owes the interest rate

Harvests the difference in high vs. low interest rates*


* For purposes of this example, the exchange rate is assumed to stay constant.

Exhibit 10



• “Momentum” risk premia example:o Hypothetical ex: $100 investment into a long-short momentum equity portfolio

Using some metric of momentum (e.g., trailing 1-year return), an investor goes long the stock with the best momentum and short the stock with the worst momentum

In this example, Google is assumed to have a better trailing 1-year return than Equifax Google = 10% return

Equifax= 7% return

Cash = 2% return

Portfolio = ($100*Cash) + ($200*Google - $200*Equifax)Portfolio = 2% + (2 * 10%) – (2 * 7%) = 2% + 20% - 14% = 8% returnPortfolio = $102 + $220 – $214Portfolio = $108 (8% return)

Harvests the difference in best momentum/worst momentum stocks

Exhibit 10


o Hypothetical ex: $100 investment into a long-short momentum equity portfolio Google = -5% return

Equifax = -9% return

Cash = 2% return

Portfolio = ($100*Cash) + ($200*Google - $200*Equifax)Portfolio = 2% + (2 * -5%) – (2 * -9%) = 2% - 10% + 18% = 10% returnPortfolio = $102 + $190 – $182Portfolio = $110 (10% return)


Harvests the difference in best momentum/worst momentum stocks


Exhibit 10


• Factors/premia utilized on slides 16 & 17 were selected due to their available histories (back to 1990) and generally accepted persistence

• Date Source/Factor Construct (Portfolios):

o Duration = BB Government Index No adjustment to historical return and volatility

o Equity = MSCI ACWI GD Index No adjustment to historical return and volatility

o Credit = BB High Yield Index less BB Government Index Volatility was adjusted to ≈ 15% Cash return was added Factor portfolio return was adjusted to 7% (i.e., cash + 4%)

Risk Premia Data

Exhibit 10


o Trend = AQR Simple Trend Data (1990-1997) & Credit Suisse Managed Futures Index (1998/2017) Volatility was adjusted to ≈ 15% Factor portfolio return was adjusted to 7% (i.e., cash + 4%)

o Value = AQR Value Everywhere Data Volatility was adjusted to ≈ 15% Cash return was added Factor portfolio return was adjusted to 7% (i.e., cash + 4%)

o Momentum = AQR Momentum Everywhere Data Volatility was adjusted to ≈ 15% Cash return was added Factor portfolio return was adjusted to 7% (i.e., cash + 4%)

Risk Premia Data

Exhibit 10


o Defensive = AQR Betting Against Beta Global Equity Data Volatility was adjusted to ≈ 15% Cash return was added Factor portfolio return was adjusted to 7% (i.e., cash + 4%)

o Volatility = 1-month S&P 500 implied volatility less 1-month realized volatility Volatility was adjusted to ≈ 15% Cash return was added Factor portfolio return was adjusted to 7% (i.e., cash + 4%)

o Cash = Merrill Lynch 3-month Treasury Bills

• For the correlation analysis, the cash return was removed from each factor/premia portfolio

Risk Premia Data

Exhibit 10


DISCLOSURES: This document is provided for informational purposes only. It does not constitute an offer of securities of any of the issuers that may be described herein. Information

contained herein may have been provided by third parties, including investment firms providing information on returns and assets under management, and may not have been

independently verified. The past performance information contained in this report is not necessarily indicative of future results and there is no assurance that the investment in question will

achieve comparable results or that the Firm will be able to implement its investment strategy or achieve its investment objectives. The actual realized value of currently unrealized

investments (if any) will depend on a variety of factors, including future operating results, the value of the assets and market conditions at the time of disposition, any related transaction

costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which any current unrealized valuations are based.

Neither PCA nor PCA’s officers, employees or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the information contained in

this document or any oral information provided in connection herewith, or any data subsequently generated herefrom, and accept no responsibility, obligation or liability (whether direct or

indirect, in contract, tort or otherwise) in relation to any of such information. PCA and PCA’s officers, employees and agents expressly disclaim any and all liability that may be based on this

document and any errors therein or omissions therefrom. Neither PCA nor any of PCA’s officers, employees or agents, make any representation of warranty, express or implied, that any

transaction has been or may be effected on the terms or in the manner stated in this document, or as to the achievement or reasonableness of future projections, management targets,

estimates, prospects or returns, if any. Any views or terms contained herein are preliminary only, and are based on financial, economic, market and other conditions prevailing as of the

date of this document and are therefore subject to change.

The information contained in this report may include forward-looking statements. Forward-looking statements include a number of risks, uncertainties and other factors beyond the control of

the Firm, which may result in material differences in actual results, performance or other expectations. The opinions, estimates and analyses reflect PCA’s current judgment, which may

change in the future.

Any tables, graphs or charts relating to past performance included in this report are intended only to illustrate investment performance for the historical periods shown. Such tables, graphs

and charts are not intended to predict future performance and should not be used as the basis for an investment decision.

All trademarks or product names mentioned herein are the property of their respective owners. Indices are unmanaged and one cannot invest directly in an index. The index data

provided is on an “as is” basis. In no event shall the index providers or its affiliates have any liability of any kind in connection with the index data or the portfolio described herein. Copying

or redistributing the index data is strictly prohibited.




CBOE, not S&P, calculates and disseminates the BXM Index. The CBOE has a business relationship with Standard & Poor's on the BXM. CBOE and Chicago Board Options Exchange are

registered trademarks of the CBOE, and SPX, and CBOE S&P 500 BuyWrite Index BXM are servicemarks of the CBOE. The methodology of the CBOE S&P 500 BuyWrite Index is owned by CBOE

and may be covered by one or more patents or pending patent applications.




Exhibit 10

To: Investment Committee From: Investment Staff Date: February 22, 2019 Re: Crisis Risk Offset Investment Strategies Background At the September 2018 Investment Committee meeting the Board approved a new asset allocation that includes a 20% target to Crisis Risk Offset (CRO). The CRO class will include long duration, trend-following and alternative risk premia strategies.

At the October 2018 Investment Committee meeting Staff and PCA presented an implementation plan for the adopted 2018 strategic allocation targets. The following is the proposed phase-in schedule for the CRO functional class.

Current Late 2019 7/1/2020 7/1/2021

Long-Term Target

CRO 0% 5% 10% 20% 20% Initial Phase - 2019 As a passive fixed income strategy, the long duration mandate can be managed by one of the managers on SURS approved slate of passive managers. The slate was approved at the June 9, 2017 Board meeting by the following motion.

The Northern Trust Company, Rhumbline, State Street Bank and Trust Company, Blackstone and Piedmont Investment Advisers shall be approved as a provider of additional passively managed liquid equity and fixed income, in such sub-classes and amounts as may be approved by the board from time to time.

Staff and PCA recommends obtaining bids from the approved slate of managers with an initial allocation of no more than 1.75% of SURS total portfolio (35% of the initial 5% target to CRO), consistent with the CRO structure presented by PCA. This allocation can be increased as other functional class changes are implemented. At the October 2018 meeting, an education session on trend-following strategies was provided by PCA along with presentations from David Lerman from the CME Group and Josh Diedesch from CalSTRS. At the March 2019 meeting, PCA will provide further education on alternative risk premia strategies. Trend-following and alternative risk premia strategies are separate strategies and the implementation of these strategies require separate searches.

Exhibit 11

Proposed Timeline Staff proposes the following timeline for the two searches.

Schedule of Events Quiet Period Begins March 8, 2019 RFP Issued April 1, 2019 Deadline for Responder Questions April 16, 2019 Response to Questions April 23, 2019 RFP Responses due 4:30pm CT May 2, 2019 Evaluations May / June 2019 Candidate Interviews July / August / Sept 2019 Selection September 12 / October 17, 2019

Quiet Period Policy Guidelines The Quiet Period Policy is intended to establish guidelines by which Board Members and Staff will communicate with prospective service providers during the search process. The objectives of the policy are to ensure that prospective service providers competing to become employed by SURS have equal access to information regarding the search parameters; communications related to the selection are consistent and accurate; and the process of selecting service providers is efficient, diligent, and fair. The following guidelines will be instituted during a search process for a service provider:

1. A Quiet Period will commence upon Board authorization and end once a selection has been made by the Board and the completion of successful contract negotiations with a respondent;

2. Initiation, continuation and conclusion of the Quiet Period shall be publicly communicated to prevent inadvertent violations;

3. All Board members, and Staff other than the Chief Procurement Officer or their designee, shall refrain from communicating with respondents regarding any product or service related to the search in process. All Board members and Staff shall refrain from accepting meals, travel, hotel, or other value from such respondents;

4. Throughout the Quiet Period, if any Board member is contacted by a respondent, the Board member shall refer such party to the Chief Procurement Officer;

5. All authority related to the search process shall be exercised solely by the Investment Committee or Board as a whole, and not by individual Board members;

6. The Quiet Period does not prevent Board approved due diligence, client conference attendance or communications with an existing vendor; provided, however, that discussions related to the procurement and pending selection shall be avoided during those activities;

7. The provisions of this Policy shall apply throughout the Quiet Period and shall be communicated to respondents in conjunction with any search; and

8. A respondent may be disqualified from a search process for a violation of the Quiet Period or any portion of this Policy.

Exhibit 11

Recommendations SURS Staff and PCA recommend a commitment of no more than 1.75% of SURS total portfolio (35% of the initial 5% target to CRO) to long-duration strategy be authorized, contingent on successful bidding among the approved slate of passively managed liquid fixed income providers. SURS Staff and PCA recommend that a search be conducted to identify qualified firms to manage a trend following strategy. SURS Staff and PCA recommend that a search be conducted to identify qualified firms to manage an alternative risk premia strategy.

Exhibit 11

June 2016March 2019

PRIVATE EQUITY CONSULTANT SEARCH UPDATE

State Universities Retirement System

Exhibit 12

State Universities Retirement System • Private Equity Consultant Search Update 2

Review

• SURS’ private equity portfolio has been discussed over the past several meetings– Key discussion items regarding the current use of fund of funds included:

• Costly approach with an unnecessary layer of fees (~$9.9 million in 2017)• Highly diversified exposures making it difficult to outperform the market

• New long-term target allocation to Non-Traditional Growth set at 15%– Represents an increase in target allocation to private equity, from 6% to 11.25%

• Requiring a material increase in private equity commitments per year

• Appropriate time to consider other implementation options for private equity– Issued a Private Equity Consultant RFP in December to consider options

Exhibit 12


Program Implementation & Oversight Options

• Trade-offs across implementation options– Commonly varying in control, required resources, and cost

• Responses exhibiting a new dynamic on pricing– Discretionary services priced below non-discretionary for majority of dual proposals

• Most discretionary bids included legal work, further reducing required client resources

Fund of Funds

Separate Account /

Discretionary Manager

Non-Discretionary

Advisor

Control Over Investment

Strategy/ Partnership SelectionLowest Better Greatest

Client Resources Required Lowest Lower / Varies Varies / Greatest

Costs Highest* Higher Lowest

*SURS has negotiated lower fee structures with its fund of funds managers, which could be lower than a discretionary mandate.

Implementation Options

Exhibit 12


Service Options

• Spectrum of services available across implementation models

• Responses have generally exhibited an ability to provide customized services– Investment planning can address aggregate private equity exposure– Program level monitoring and reporting– Many Separate Account/Discretionary fee proposals expressed as fixed retainer– Willing to provide research and education

Fund of Funds

Separate Account /

Discretionary Manager

Non-Discretionary

Advisor

Investment Policy Development No Maybe Yes

Investment Planning Product specific Product specific Yes

Partnership Selection and Due

DiligenceYes Yes Yes

Program Monitoring/Performance

ReportingProduct specific Product specific Yes, Program level

Legal Review/Negotiation Yes Yes External legal review,will negotiate terms

Ongoing Research and Education Internal Possible Yes

Additional SURS Resources Back-office support Back-office support TBD*

Fee Structure

Asset based fee probably with incentive fees

Asset based feepossibly with incentive

fees

Annual fee for service arrangement

* Highly dependent upon approach to portfolio construction, but 1 to 4 FTE expected (including back-office support)

Exhibit 12


SURS’ Private Equity Resources

• SURS private equity staffing and resource requirements are limited– Current staffing includes one dedicated investment professional to private equity

• Due to a recent shifting of responsibilities, as there was no dedicated resources previously

– Less than one FTE back-office support assisting with cash flows– Fund of funds are currently approved by the Board

• Due diligence conducted by staff and consultant

• Independent of the approach, additional back-office support is desired– Increased focus on underlying fees/expenses requires additional monitoring and

accounting• At least one additional FTE, given the status quo or a discretionary approach

• Additional resources will be necessary with a non-discretionary approach– One to two additional investment personnel and two to four additional back-office

support personnel • Function of SURS’ approach to portfolio construction

– Additional Board time will be required given the current governance structure• Each partnership will require Board presentation time and approval

Exhibit 12


Search Update

• Search for private equity consulting services was approved at December 2018 Board meeting

– RFP was advertised on the website and December 24 print edition of Pensions & Investments, noticed as required in the State newspaper, and posted to the SURS website beginning December 19

– SURS received responses from 13 firms• Eight firms bid on both discretionary and non-discretionary• Four firms bid on discretionary only• One firm bid on non-discretionary only

– Staff and PCA are currently evaluating responses

Timeline

Quiet Period Begins December 7, 2018

RFP Issued December 24, 2018

Deadline for Responder Questions January 16, 2019

Response to Questions January 22, 2019

RFP Responses due 4:30 pm CT January 29, 2019

Exhibit 12


Respondents• Respondents could apply as a discretionary consultant, a non-discretionary

consultant, or bothFirm Name HQ / Service Team Location Discretionary / Non-Discretionary

1. Adams Street Partners Chicago, IL / Chicago, IL Both

2. Callan San Francisco, CA / San Francisco, CA & Summit, NJ Non-Discretionary

3. Consequent Capital Management* Atlanta, GA / Atlanta, GA Both

4. Hamilton Lane Advisors Bala Cynwyd, PA / Bala Cynwyd, PA Both

5. Kohlberg Kravis Roberts & Co. New York, NY / New York, NY Discretionary

6. Meketa Investment Group Boston, MA / Boston, MA & Chicago, IL Both

7. Mesirow Financial Private Equity Chicago, IL / Chicago, IL Discretionary

8. Pantheon Ventures London / San Francisco, CA Both

9. Pathway Capital Management Irvine, CA / Irvine, CA Discretionary

10. Portfolio Advisors Darien, CT / Darien, CT Both

11. StepStone Group New York, NY Discretionary

12. TorreyCove Capital Partners* San Diego, CA / San Diego, CA Both

13. Wilshire Associates Santa Monica, CA / Pittsburgh, PA Both

*Minority-owned firm

Exhibit 12


Respondent Firm Profile

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

AdamsStreet

Consequent HamiltonLane

KKR Meketa MesirowFinancialPrivateEquity

Pantheon Pathway PortfolioAdvisors

StepStone TorreyCove Wilshire

$Mill

ions

Discretionary Private Equity Assets

Discretionary

Exhibit 12



$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Adams Street Callan Consequent Hamilton Lane Meketa Pantheon PortfolioAdvisors

TorreyCove Wilshire

$Mill

ions

Non-Discretionary Private Equity Assets

Non Discretionary

Exhibit 12



78

62

79

192

22

9

64 62

80 81

2821

0

20

40

60

80

100

120

140

160

180

200

AdamsStreet

Callan Consequent HamiltonLane

KKR Meketa MesirowFinancialPrivateEquity

Pantheon Pathway PortfolioAdvisors

StepStone TorreyCove Wilshire

Total Private Equity Investment Professionals

Private Equity Professionals

Exhibit 12


Fee Proposals

• SURS requested five-year bids from responding firms

• Bids generally came in one of two forms:– Fee based on fixed dollar amount per year – Fee based on level of commitment, net asset value, etc., often continuing for 12-15 years

• Results in significantly higher fee projections than fixed dollar fees

• In process of clarifying bids with respondents

Preliminary Summary of Fee Proposals – All Respondents*

• Eight firms submitted bids for both discretionary and non-discretionary services– Seven of the eight firms submitted bids equal to or lower for discretionary services vs. non-

discretionary services (when adjusting for estimated legal costs)– Non-discretionary bids do not include SURS’ cost of adding investment and accounting

staff

• Economics seem to favor discretionary mandates

$2M - $4M $4M - $6M > $6M

Non-Discretionary 3 firms 5 firms 1 firm

Discretionary 3 firms 4 firms 5 firms

*Assumes five years of commitments

Exhibit 12


Next Steps

• Staff and PCA will continue evaluation process– Follow up as necessary with several firms

• Additional information needed on:– Fee proposals– Performance– Capacity – Global capabilities– Emerging manager capabilities

• Interviews will be conducted in Chicago with semi-finalist firms on April 3-4

• After further evaluation, finalists will be selected and on-site visits conducted

• Finalists presented for consideration at upcoming Board meeting

Exhibit 12


DISCLOSURES: This document is provided for informational purposes only. It does not constitute an offer of securities of any of the issuers that may be described herein. Informationcontained herein may have been provided by third parties, including investment firms providing information on returns and assets under management, and may not have beenindependently verified. The past performance information contained in this report is not necessarily indicative of future results and there is no assurance that the investment inquestion will achieve comparable results or that the Firm will be able to implement its investment strategy or achieve its investment objectives. The actual realized value of currentlyunrealized investments (if any) will depend on a variety of factors, including future operating results, the value of the assets and market conditions at the time of disposition, anyrelated transaction costs and the timing and manner of sale, all of which may differ from the assumptions and circumstances on which any current unrealized valuations are based.

Neither PCA nor PCA’s officers, employees or agents, make any representation or warranty, express or implied, in relation to the accuracy or completeness of the informationcontained in this document or any oral information provided in connection herewith, or any data subsequently generated herefrom, and accept no responsibility, obligation orliability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such information. PCA and PCA’s officers, employees and agents expressly disclaim any and allliability that may be based on this document and any errors therein or omissions therefrom. Neither PCA nor any of PCA’s officers, employees or agents, make any representation ofwarranty, express or implied, that any transaction has been or may be effected on the terms or in the manner stated in this document, or as to the achievement or reasonablenessof future projections, management targets, estimates, prospects or returns, if any. Any views or terms contained herein are preliminary only, and are based on financial, economic,market and other conditions prevailing as of the date of this document and are therefore subject to change.

The information contained in this report may include forward-looking statements. Forward-looking statements include a number of risks, uncertainties and other factors beyond thecontrol of the Firm, which may result in material differences in actual results, performance or other expectations. The opinions, estimates and analyses reflect PCA’s current judgment,which may change in the future.

Any tables, graphs or charts relating to past performance included in this report are intended only to illustrate investment performance for the historical periods shown. Such tables,graphs and charts are not intended to predict future performance and should not be used as the basis for an investment decision.

All trademarks or product names mentioned herein are the property of their respective owners. Indices are unmanaged and one cannot invest directly in an index. The index dataprovided is on an “as is” basis. In no event shall the index providers or its affiliates have any liability of any kind in connection with the index data or the portfolio described herein.Copying or redistributing the index data is strictly prohibited.




CBOE, not S&P, calculates and disseminates the BXM Index. The CBOE has a business relationship with Standard & Poor's on the BXM. CBOE and Chicago Board Options Exchangeare registered trademarks of the CBOE, and SPX, and CBOE S&P 500 BuyWrite Index BXM are servicemarks of the CBOE. The methodology of the CBOE S&P 500 BuyWrite Index isowned by CBOE and may be covered by one or more patents or pending patent applications.




FTSE is a trademark of the London Stock Exchange Group companies and is used by FTSE under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors.No further distribution of FTSE data is permitted with FTSE’s express written consent.

Exhibit 12

M E M O R A N D U M

Date: February 18, 2019 To: State Universities Retirement System (SURS) From: Pension Consulting Alliance, LLC (PCA) CC: Doug Wesley, CFA, CIO | Ellen Hung, CFA, Deputy CIO

David Sancewich – PCA| Colin Bebee, CFA – PCA | Neil Rue, CFA – PCA RE: Update of 2019 Structuring Work Plan

Given the need to postpone the January/February Investment Retreat earlier this year, this memo updates the 2018-2019 Structuring Work Plan presented at the December Investment Committee meeting (see next page). The paragraphs below recap the discussion on this matter at the December IC meeting. At its September 2018 meeting, the SURS Board approved a new long-term strategic allocation for the System’s assets. At the October 2018 meeting, PCA provided information on an implementation plan and timeline that Staff and PCA would seek to follow in order get the strategic allocation largely in place by approximately the beginning of fiscal year 2020 (i.e., 7/1/2019). To fully execute the implementation plan, a significant number of milestones must be achieved within a relatively short period of time (i.e., in approximately nine months’ time). While it is reasonable and acceptable to allow certain milestones to be delayed by a meeting or two, the objective is to move forward at a relatively steady pace to implement important changes to the SURS asset portfolio in a deliberate and thoughtful manner. The process for implementation is expected to follow three basic steps:

(i) Educate and recommend selected structural changes (usually one strategic class at a time);

(ii) Once structural recommendations are approved and/or modified, draft and approve policy/guideline language reflecting those recommendations; and

(iii) Following these needed policy adjustments, search for and retain the appropriate

advisors/managers to implement the new policy structure. This step requires several sub-steps, including issuing requests for proposals, conducting due diligence, and drafting/finalizing contracts. Given the timeline, PCA and/or Staff may begin step (iii) prior to (or in conjunction with) finalizing step (ii).

Staff and/or PCA are available to answer questions on the Preliminary Work Plan.

Exhibit 13

2

Updated Preliminary 2019 Structuring Work Plan, by Meeting Date

Timeline

Item Nbr. Item

March 6 2019 Meeting

22 CRO structure recommendations

April 18 2019 IC Meeting

23 Approve new CRO segment of investment policy language

13 Credit v1.0 structure recommendations

28 PP class structure recommendations

June 6 IC Meeting

6 Traditional Growth structure recommendations

9a Request Traditional Growth search(es) (if needed)

16 Complete Private Growth consultant/advisor search

September 12 IC Meeting

14 Approve new Credit segment investment policy language29 Approve new PP segment investment policy language

8 Approve new Traditional Growth segment investment policy language

17a Private Growth segment structure recommendations

32 IS class structure recommendations

October 17 IC Meeting

17b Approve new Private Growth segment policy language (if needed)

21 Approve Private Growth segment investment policy language

24 Complete necessary CRO manager searches

14b Approve Credit search(es) (if needed)

33 Approve new IS segment investment policy segment (must allow for privates)

December 10 IC Meeting

2 Receive newly-designed SURS performance reports to account for new structure

10 RA segment structure recommendations

9b Complete Tradtional Growth manager searches (if needed)

34 Complete necessary IS manager searches

Exhibit 13

DISCLOSURES: This document is provided for informational purposes only. It does not constitute an offer of securities of any of the issuers that

may be described herein. Information contained herein may have been provided by third parties, including investment firms providing

information on returns and assets under management, and may not have been independently verified. The past performance information

contained in this report is not necessarily indicative of future results and there is no assurance that the investment in question will achieve

comparable results or that the Firm will be able to implement its investment strategy or achieve its investment objectives. The actual realized

value of currently unrealized investments (if any) will depend on a variety of factors, including future operating results, the value of the assets

and market conditions at the time of disposition, any related transaction costs and the timing and manner of sale, all of whi ch may differ

from the assumptions and circumstances on which any current unrealized valuations are based.

Neither PCA nor PCA’s officers, employees or agents, make any representation or warranty, express or implied, in relation to the accuracy

or completeness of the information contained in this document or any oral information provided in connection herewith, or any data

subsequently generated herefrom, and accept no responsibility, obligation or liability (whether direct or indirect, in contract, tort or

otherwise) in relation to any of such information. PCA and PCA’s officers, employees and agents expressly disclaim any and all liability that

may be based on this document and any errors therein or omissions therefrom. Neither PCA nor any of PCA’s officers, employees or agents,

make any representation of warranty, express or implied, that any transaction has been or may be effected on the terms or in the manner

stated in this document, or as to the achievement or reasonableness of future projections, management targets, estimates, prospects or

returns, if any. Any views or terms contained herein are preliminary only, and are based on financial, economic, market and other conditions

prevailing as of the date of this document and are therefore subject to change.

The information contained in this report may include forward-looking statements. Forward-looking statements include a number of risks,

uncertainties and other factors beyond the control of the Firm, which may result in material differences in actual results, performance or

other expectations. The opinions, estimates and analyses reflect PCA’s current judgment, which may change in the future.

Any tables, graphs or charts relating to past performance included in this report are intended only to illustrate investment performance for

the historical periods shown. Such tables, graphs and charts are not intended to predict future performance and should not be used as the

basis for an investment decision.

All trademarks or product names mentioned herein are the property of their respective owners. Indices are unmanaged and one cannot

invest directly in an index. The index data provided is on an “as is” basis. In no event shall the index providers or its affiliates have any liability

of any kind in connection with the index data or the portfolio described herein. Copying or redistributing the index data is strictly prohibited.

The Russell indices are either registered trademarks or tradenames of Frank Russell Company in the U.S. and/or other countries.


Standard and Poor’s (S&P) is a division of The McGraw-Hill Companies, Inc. S&P indices, including the S&P 500, are a registered trademark

of The McGraw-Hill Companies, Inc.

CBOE, not S&P, calculates and disseminates the BXM Index. The CBOE has a business relationship with Standard & Poor's on the BXM. CBOE

and Chicago Board Options Exchange are registered trademarks of the CBOE, and SPX, and CBOE S&P 500 BuyWrite Index BXM are

servicemarks of the CBOE. The methodology of the CBOE S&P 500 BuyWrite Index is owned by CBOE and may be covered by one or more

patents or pending patent applications.




FTSE is a trademark of the London Stock Exchange Group companies and is used by FTSE under license. All rights in the FTSE indices and/or

FTSE ratings vest in FTSE and/or its licensors. No further distribution of FTSE data is permitted with FTSE’s express written consent.

Exhibit 13

State Universities Retirement System of

Illinois (SURS)

Quarterly Report

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval fromPension Consulting Alliance, LLC.

Nothing herein is intended to serve as investment advice, a recommendation of any particular investment or type of investment, a suggestion of purchasing or selling securities, or an invi-tation or inducement to engage in investment activity.

Q4 2018

Exhibit 14

TABLE OF CONTENTS

INTRODUCTION/PORTFOLIO REVIEW

ECONOMIC OVERVIEW

PORTFOLIO DETAILPerformance Results RiskAttributionPrivate Markets

INVESTMENT MARKET RISK METRICS

APPENDIX Legacy AccountsGlossary of Terms Risk Metrics Description

Exhibit 14

INTRODUCTION / PORTFOLIO REVIEW

Exhibit 14

3-YR Statistics (Rank)

5-YR Statistics (Rank)

· The SURS Total Portfolio underperformed the Policy Benchmark over all of the 6 measured periods, net of fees. The Total Portfoliooutperformed the Median Public Fund over 2 of the 6 measured time periods, net of fees.

(1) Investment Metrics (IM) Median [Gross of Fees] - Public Fund >$1 Bilion Universe includes BNY Mellon Total Public Fund Greater than $1Billion Universe and IM client data.(2) Parametric Overlay program Inception Date: September 2014

3 Mo (Rank) 1 YR (Rank) 3 YR (Rank) 5 YR (Rank) 7 YR (Rank) 10 YR (Rank)

Total Fund w/ Overlay -7.1 (56) -4.2 (71) 5.9 (79) 4.8 (65) 7.8 (45) 9.0 (36)

Policy Benchmark -6.2 (39) -3.4 (51) 6.4 (57) 5.1 (50) 8.0 (38) 9.1 (26)

Excess Return vs. Policy Index -0.9 -0.8 -0.5 -0.3 -0.2 -0.1 Public Fund Median (1) -6.7 -3.3 6.5 5.1 7.7 8.6

Total Fund ex Overlay -7.4 -4.4 5.6 4.8 7.7 8.9

ReturnStandardDeviation

SharpeRatio

InformationRatio

Total Fund w/ Overlay 5.9 (79) 6.3 (64) 0.8 (79) -0.6 (93)Policy Benchmark 6.4 (57) 6.1 (57) 0.9 (58) -

Public Fund Median (1) 6.5 5.9 0.9 0.1

Portfolio Valuation ($000's)

1Quarter

Total Fund w/ Overlay Beginning Market Value 19,504,282 Net Cash Flow Fees/Expenses Income

-366,190 9,681

81,077 Gain/Loss Ending Market Value

-1,442,129 17,803,896Return

StandardDeviation

SharpeRatio

InformationRatio

Total Fund w/ Overlay 4.8 (65) 6.6 (70) 0.7 (75) -0.3 (81)SURS Policy Benchmark 5.1 (50) 6.4 (64) 0.7 (64) -

Public Fund Median (1) 5.1 5.9 0.8 0.0

SURS Portfolio Review - Net-of-Fees

As of December 31, 2018

State Universities Retirement System of Illinois (SURS) 4

Exhibit 14

ECONOMIC OVERVIEW

Exhibit 14

ECONOMIC & MARKET OVERVIEW – 4Q 2018

Overview: Due to the most recent government shutdown, the official release of fourth quarter U.S. GDP estimates has been delayed until the end of February. Current forecasts for fourth quarter U.S. GDP currently range from 1.5% to 3.0%. At quarter-end, the unemployment rate increased to 3.9%. The seasonally adjusted Consumer Price Index for All Urban Consumers increased by 1.2% on an annualized basis during the quarter. Commodities fell during the fourth quarter, and the 1-year return for a basket of commodities was negative at -11.2%. Global equity returns were negative for the quarter at -12.7% (MSCI ACWI). The U.S. Dollar appreciated against the Euro and Pound by 1.2% and 2.1%, respectively. The Dollar depreciated against the Yen by 3.5%.

Economic Growth

Real GDP increased at an annualized rate of 3.4 percent in the third quarter of 2018.

Real GDP growth was driven by increases in personal consumption expenditures, private inventory investments, government spending, and nonresidential fixed investment.

GDP growth was partially offset during the quarter by a decrease in

exports and residential fixed investments.

Inflation

The Consumer Price Index for All Urban Consumers (CPI-U) increased

by 1.2 percent during the fourth quarter on an annualized basis after seasonal adjustment.

Quarterly percentage changes may be adjusted between data publications due to periodic updates in seasonal factors.

Core CPI-U increased by 2.5 percent for the quarter on an

annualized basis after seasonal adjustment.

Over the last 12 months, core CPI-U increased by 2.2 percent after seasonal adjustment.

Unemployment

The U.S. economy gained approximately 762,000 jobs in the fourth quarter of 2018.

The unemployment rate increased to 3.9% at quarter-end.

The majority of jobs gained occurred in education and health services, professional and business services, and leisure and hospitality. No sectors suffered from job loss, however, information and utilities had the lowest job growth over the quarter.

3.4%4.2%

2.2%2.9%3.2%3.1%

0.0%

2.0%

4.0%

6.0%

2018 Q32018 Q22018 Q12017 Q42017 Q32017 Q2

Annualized Quarterly GDP Growth

1.2%1.8%

2.3%2.5%2.5%

3.9%

0.0%1.0%2.0%3.0%4.0%5.0%

2018 Q42018 Q32018 Q22018 Q12017 Q42017 Q3

CPI-U After Seasonal Adjustment

3.9%3.7%4.0%4.1%4.1%4.1%

0.0%

2.0%

4.0%

6.0%

2018 Q42018 Q32018 Q22018 Q12017 Q42017 Q3

Unemployment Rate

6

Exhibit 14


Interest Rates & US Dollar

Treasury Yield Curve Changes

Certain parts of the yield curve slightly inverted over the quarter with shorter yields rising while intermediate and long-term yields decreased over the quarter.

On December 19th, the Federal Reserve raised the federal funds rate for the third time in 2018. The current target is between 2.25 and 2.50 percent.

The U.S. Dollar appreciated against the Euro and Pound by 1.2% and

2.1%, respectively, but depreciated against the Yen by 3.5%.

Source: US Treasury Department

Fixed Income

Investment Grade bonds performed well over the quarter. High Yield provided relatively weak performance as they were down -4.5% for the quarter while Government bonds provided the strongest returns during the period with a return of 2.5%.

Over the trailing 1-year period, High Yield and Credit lagged all other sectors with a -2.1% return. Conversely, Mortgages provided the strongest return over the 1-year period with 1.0%.

US Fixed Income Sector Performance

(BB Aggregate Index)

Sector Weight QTR 1 Year

Governments* 42.2% 2.4% 0.8%

Agencies 2.8% 1.2% 0.3%

Inv. Grade Credit 24.3% -0.2% -2.5%

MBS 28.2% 2.1% 1.0%

ABS 0.5% 1.2% 1.8%

CMBS 2.0% 1.7% 0.8%

1.0%

2.0%

3.0%

4.0%

3 mo

6 mo

1 yr

2 yr

3 yr

5 yr

7 yr

10 yr

20 yr

30 yr

9/28/2018 12/31/2018

1.6%

0.0%

2.5%

0.9%

0.0%

-2.1

%

2.1%

1.0%

-4.5

%

-2.1

%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

QTR 1-Year

Fixed Income Returns

BB Agg BB Govt* BB Credit BB Mortgage BB High Yield

*U.S. Treasuries and Government Related *U.S. Treasuries and Agencies

7

Exhibit 14


-11.

4%

-13.

8%

-12.

5%

-13.

4%

-12.

7%

-14.

3%

-12.

2%

-11.

8%

-7.4

%

-14.

2%

-20%

-15%

-10%

-5%

0%

QTR 1-Year

International Equity Returns (GD in USD)

MSCI ACWI Ex U.S. MSCI EAFE MSCI Europe MSCI Pacific MSCI EM

U.S. Equities U.S. equities performed poorly over the quarter as they provided double digit negative returns across market capitalization and style. Value

outperformed growth stocks across market capitalizations. In terms of market capitalization, large cap stocks provided the strongest returns across styles. Large cap value stocks returned this quarter’s strongest return at -11.7%, and small cap growth stocks provided the weakest result at -21.7%.

During the trailing 1-year period, U.S. equities produced negative returns. Large cap growth stocks were the top performer, returning -1.5%. Conversely, small cap value trailed all other market caps and styles with a return of -12.9%.

0.4%

U.S. Equity Sector Performance

(Russell 3000 Index)

Sector Weight QTR 1 Year

Information Tech. 19.8% -17.4% 3.2% Health Care 15.1% -10.9% -12.8% Financials 14.2% -13.5% 5.2% Consumer Disc. 10.2% -16.4% -14.2% Industrials 10.1% -18.1% -1.0% Comm. Services 8.9% -13.3% -6.2% Consumer Staples 6.6% -5.6% -8.3% Energy 5.2% -25.8% -19.7% Real Estate 3.8% -6.3% -4.5% Utilities 3.1% 0.8% -17.0% Materials 3.0% -14.9% 4.4%

International Equities

International Equity Region Performance (GD in USD)

(MSCI ACWI ex US) Sector Weight QTR 1 Year

Europe Ex. UK 30.7% -13.0% -14.4% Emerging Markets 26.0% -7.4% -14.2% Japan 16.6% -14.2% -12.6% United Kingdom 11.4% -11.8% -14.1% Pacific Ex. Japan 8.4% -7.9% -10.2% Canada 6.5% -15.1% -16.6%

International equities provided negative returns across the board in the fourth quarter. Europe modestly trailed all other regions with a return of -12.7%.

Over the trailing 1-year period, the Pacific led all other regions with a return of -11.8%, while Europe slightly trailed all other regions with a -14.3% return.

-14.

3%

-5.2

%

-16.

3%

-2.1

%

-12.

2% -8.6

%

-13.

8%

-4.8

%

-15.

9%

-1.5

%

-11.

7% -8.3

%

-20.

2%

-11.

0%

-21.

7%

-9.3

%

-18.

7% -12.

9%

-30%-25%-20%-15%-10%

-5%0%

QTR 1-Year

U.S. Equity Returns

R3000 (Broad Core) R3000G (Broad Gr) R3000V (Broad Val)R1000 (Lg Core) R1000G (Lg Gr) R1000V (Lg Val)R2000 (Sm Core) R2000G (Sm Gr) R2000V (Sm Val)

8

Exhibit 14


*Performance is annualized for periods greater than one year.

Market Summary – Multi-term Performance*

Indexes Month Quarter 1 Year 3 Years 5 Years 10 Years 20 Years

Global Equity MSCI AC World Index -7.0% -12.7% -8.9% 7.2% 4.8% 10.0% 5.0% Domestic Equity S&P 500 -9.0% -13.5% -4.4% 9.3% 8.5% 13.1% 5.6% Russell 3000 -9.3% -14.3% -5.2% 9.0% 7.9% 13.2% 6.0% Russell 3000 Growth -8.8% -16.3% -2.1% 10.9% 10.0% 15.2% 5.1% Russell 3000 Value -9.8% -12.2% -8.6% 7.0% 5.8% 11.1% 6.3% Russell 1000 -9.1% -13.8% -4.8% 9.1% 8.2% 13.3% 5.9% Russell 1000 Growth -8.6% -15.9% -1.5% 11.1% 10.4% 15.3% 5.1% Russell 1000 Value -9.6% -11.7% -8.3% 7.0% 5.9% 11.2% 6.2% Russell 2000 -11.9% -20.2% -11.0% 7.4% 4.4% 12.0% 7.4% Russell 2000 Growth -11.7% -21.7% -9.3% 7.2% 5.1% 13.5% 6.1% Russell 2000 Value -12.1% -18.7% -12.9% 7.4% 3.6% 10.4% 8.2% Russell Microcap -12.1% -22.1% -13.1% 5.8% 3.1% 11.7% --- Alerian MLP Index -9.4% -17.3% -12.4% -1.1% -7.3% 9.6% --- CBOE BXM Index -7.7% -10.8% -4.8% 4.8% 5.1% 8.0% 5.0% International Equity MSCI AC World Index ex USA -4.5% -11.4% -13.8% 5.0% 1.1% 7.1% 4.6% MSCI EAFE -4.8% -12.5% -13.4% 3.4% 1.0% 6.8% 4.0% MSCI Europe -4.6% -12.7% -14.3% 2.7% 0.0% 6.8% 3.7% MSCI Pacific -5.1% -12.2% -11.8% 4.8% 3.0% 7.0% 4.5% MSCI EM (Emerging Markets) -2.6% -7.4% -14.2% 9.7% 2.0% 8.4% 8.8% Fixed Income BB Universal 1.6% 1.2% -0.3% 2.6% 2.7% 4.1% 4.8% Global Agg. - Hedged 1.4% 1.7% 1.8% 2.9% 3.4% 3.8% 4.6% BB Aggregate Bond 1.8% 1.6% 0.0% 2.1% 2.5% 3.5% 4.5% BB Government 2.1% 2.5% 0.9% 1.4% 2.0% 2.1% 4.1% BB Credit Bond 1.5% 0.0% -2.1% 3.2% 3.2% 5.5% 5.2% BB Mortgage Backed Securities 1.8% 2.1% 1.0% 1.7% 2.5% 3.1% 4.6% BB High Yield -2.1% -4.5% -2.1% 7.2% 3.8% 11.1% 6.6% BCBWGIL All Maturities - Hedged 1.2% 0.5% 0.1% 4.5% 4.2% 4.6% --- Emerging Markets Debt 1.4% -0.2% -2.5% 5.1% 4.2% 8.5% 9.0% Real Estate NCREIF 0.6% 1.8% 8.4% 8.2% 10.4% 7.0% 8.6% FTSE NAREIT All Equity Index -7.7% -6.1% -4.1% 4.6% 8.3% 12.4% 9.6% Commodity Index Bloomberg Commodity Index -6.9% -9.4% -11.2% 0.3% -8.8% -3.8% 1.8%

9

Exhibit 14


Annual Asset Class Performance

10

Exhibit 14

PORTFOLIO DETAIL

Performance Results RiskAttributionPrivate Markets

Exhibit 14

PERFORMANCE RESULTS

Exhibit 14

Total Fund w/ Overlay Policy Benchmark Actuarial Rate

($5.0)

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

12/82 12/84 12/86 12/88 12/90 12/92 12/94 12/96 12/98 12/00 12/02 12/04 12/06 12/08 12/10 12/12 12/14 12/16 12/18

$15.5

$20.8

$22.1

Total Fund Growth of $1 Since Inception



Exhibit 14

Actual vs. Target Allocations

As of 12/31/2018

22.5%

18.8%

8.8%

18.3%

3.2%3.9%3.0%

5.6%

7.2%0.7%5.2%1.9% 0.9%

C U R R E N T A L L O C A T I O N

22.3%

19.1%

8.1%

19.5%

3.2%3.9%3.0%5.5%

7.2%0.7%5.1%2.0%

-0.3%A L L O C A T I O N R E F L E C T I N G

O V E R L A Y

Policy Current Overlay Current Value

Cash 0.0% 0.9% -0.3% $158,119,1350

Commodit ies 2.0% 1.9% 2.0% $340,871,8190

Hedge Funds 5.0% 5.2% 5.1% $916,230,5070

Opportunity Fund 1.0% 0.7% 0.7% $117,974,3320

Private Equity 6.0% 7.2% 7.2% $1,281,054,8960

Real Estate 6.0% 5.6% 5.5% $986,927,6710

REITs 4.0% 3.0% 3.0% $538,892,1150

TIPs 4.0% 3.9% 3.9% $685,754,0120

Emerging Market Debt 3.0% 3.2% 3.2% $566,640,2880

Fixed Income 19.0% 18.3% 19.5% $3,244,253,3950

Global Equity 8.0% 8.8% 8.1% $1,551,271,5490

Non US Equity 19.0% 18.8% 19.1% $3,326,372,9900

Domest ic Equity 23.0% 22.5% 22.3% $3,985,947,7100

Overlay 0.0% 0.4% 0.0% $103,585,8160

Total 100% 100% 100% $17,803,896,236

Asset Allocation vs. Target

14

Exhibit 14

MarketValue

($)

AssetAllocation

(%)

LowerRange

(%)

Target(%)

UpperRange

(%)Total Fund w/ Overlay 17,803,896 100.0 - 100.0 -Domestic Equity Composite w/ Overlay 3,985,948 22.4 20.0 23.0 26.0International Equity Composite w/ Overlay 3,326,373 18.7 16.0 19.0 22.0Global Equity Composite w/ Overlay 1,551,272 8.7 5.0 8.0 11.0Fixed Income Composite w/ Overlay 3,244,253 18.2 16.0 19.0 22.0Emerging Market Debt 566,640 3.2 0.0 3.0 6.0TIPS 685,754 3.9 1.0 4.0 7.0REITs 538,892 3.0 1.0 4.0 7.0Real Estate 986,928 5.5 3.0 6.0 9.0Private Equity 1,281,055 7.2 3.0 6.0 9.0Opportunity Fund 117,974 0.7 0.0 1.0 4.0Hedge Funds 916,231 5.1 2.0 5.0 8.0Commodities Composite w/ Overlay 340,872 1.9 0.0 2.0 5.0Cash 158,119 0.9 0.0 0.0 3.0Total Overlay 103,586 0.6 0.0 0.0 3.0

Target% Actual%

0.0% 10.0% 20.0% 28.0%

Asset Allocation vs. Target Allocation with OverlayAs of December 31, 2018


Exhibit 14

Cash Commodities Domestic Equity

Emerging Market Debt Fixed Income Global Equity

Hedge Funds International Equity Opportunistic

Overlay Private Equity Real Estate

REITs TIPS

0

15

30

45

60

75

90

Allo

ca

tio

n (%

)

Nov

2013Aug

2014

May

2015Feb

2016

Nov

2016Aug

2017

May

2018Dec

2018

Historical Asset Allocation

5 Years Ending December 31, 2018


Exhibit 14

Trailing Period Perfomance (annualized)

12-Month Period As of December 31, 2018

(1) Investment Metrics (IM) Median [Gross of Fees] - Public Fund Greater than $1 Billion Universe includes BNY Mellon Public Funds >$1 Billion Universe and IM client data.

Total Fund w/ Overlay - Gross Total Fund w/ Overlay - Net Policy Benchmark Public Fund Median (1)

0.0

6.0

12.0

-6.0

-12.0

Re

turn

1Quarter

FYTD 1Year

3Years

5Years

Since Inception

-6.7-4.3 -3.3

6.5 5.1

-6.2-3.8 -3.4

6.4 5.1

-7.1-4.8 -4.2

5.9 4.8

9.0

-7.0-4.7 -4.0

6.1 5.1

9.1

Total Fund w/ Overlay - Gross Total Fund w/ Overlay - Net Policy Benchmark Public Fund Median (1)

0.0

8.0

16.0

24.0

-8.0

Re

turn

2014 2015 2016 2017 2018

6.7

0.5

7.9

16.0

-3.3

7.2

-0.6

7.8

15.5

-3.4

6.5

0.2

6.6

16.2

-4.2

6.8

0.4

6.9

16.5

-4.0

SURS Portfolio Relative Performance Results



Exhibit 14

(1) The Fixed Income composite returns consist of returns provided by NEPC through September 2017 and are calculated by PCA beginning in October 2017.

MarketValue($000)

1Quarter

1Year

3Years

5Years

7Years

10Years

15Years

Total Fund w/ Overlay 17,803,896 -7.1 -4.2 5.9 4.8 7.8 9.0 6.6Policy Benchmark -6.2 -3.4 6.4 5.1 8.0 9.1 6.7

Domestic Equity 3,985,948 -15.1 -6.6 8.4 7.4 12.1 13.5 7.7Dow Jones U.S. Total Stock Market Index -14.4 -5.3 8.9 7.9 12.4 13.2 8.0

Total Non US Equity 3,326,373 -12.1 -14.8 3.9 1.0 5.6 6.6 5.2International Equity Custom Benchmark -11.5 -14.2 4.5 0.7 4.8 6.6 5.2

Global Equity 1,551,272 -12.9 -7.2 8.1 6.0 9.5 10.5 6.4Global Equity Benchmark -12.8 -9.4 6.6 4.3 8.4 9.5 6.1

Fixed Income(1) 3,244,253 1.1 0.3 2.5 2.6 2.6 4.6 4.5Fixed Income Custom Benchmark 1.6 0.0 2.1 2.5 2.1 3.5 3.9

Emerging Market Debt 566,640 0.7 -5.5 6.1 - - - -50% JPM GBI-EM GD / 25% JPM EMBI GD / 25% JPM Corp Broad 0.9 -4.4 5.8 - - - -

TIPS 685,754 -0.5 -1.3 2.2 1.6 1.0 4.0 4.1Bloomberg Barclays U.S. TIPS Index -0.4 -1.3 2.1 1.7 0.9 3.6 3.8

REITs 538,892 -5.5 -4.6 3.1 6.2 7.9 11.1 7.6Total REITs Custom Benchmark -5.7 -5.6 2.8 5.9 7.7 10.9 7.2

Real Estate 986,928 1.1 7.4 7.6 10.3 10.6 5.4 7.0SURS Real Estate Index 1.9 7.7 7.8 9.7 10.1 4.6 7.3

Private Equity 1,281,055 4.2 15.6 12.4 11.0 11.6 9.6 11.5Dow Jones US Total Stock Market +3% Lag 7.9 21.1 20.5 16.8 20.3 15.4 13.3

Opportunity Fund 117,974 0.3 2.9 3.6 5.0 9.5 7.7 9.0Opportunity Fund Custom Benchmark 1.4 7.4 7.2 6.7 6.7 - -

Hedge Funds 916,231 -6.1 -3.2 - - - - -Hedge Funds Custom Benchmark -2.3 3.6 - - - - -

Commodities 340,872 -5.9 -6.9 - - - - -Bloomberg Commodity Index Total Return -9.4 -11.2 - - - - -

Cash 157,970 1.0 4.0 1.9 1.2 0.9 0.7 1.7FTSE 3 Month T-Bill 0.6 1.9 1.0 0.6 0.5 0.3 1.3

Asset Class Performance (Net-of-Fees)


State Universities Retirement System of Illinois (SURS)18

Exhibit 14

Private Markets PerformanceA As of 12/31/2018B

A Real Estate information provided by Northern Trust. BData is lagged one quarter.

Composite Level IRRs

1-Year 3-Year 5-Year 10-Year Since Inception

Real Estate 8.4% 8.3% 10.1% 6.7% 7.1% Infrastructure (PCA) -2.1% 3.3% 4.6% -- 6.0% Private Equity 14.9% 11.8% 10.7% 8.8% 18.1%

Composite Level (Since Inception)

Capital

Commitment ($) Draw Down ($)

Remaining

Commitment ($) Distributed ($) Market Value ($) TVPI Multiple

Real Estate 1,306,436,556 1,169,248,426 137,188,130 700,305,815 997,016,817 1.5 Infrastructure 180,000,000 137,582,614 42,417,386 76,051,671 96,735,863 1.3 Private Equity 3,542,758,071 2,808,723,405 764,758,407 3,457,916,398 1,135,911,537 1.6

19

Exhibit 14

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0Re

turn

3 Mo (Rank) 1 YR (Rank) 3 YR (Rank) 5 YR (Rank) 7 YR (Rank) 10 YR (Rank)Total Fund w/ Overlay -7.0 (55) -4.0 (65) 6.1 (66) 5.1 (50) 8.0 (36) 9.3 (22)¢

Policy Benchmark -6.2 (39) -3.4 (51) 6.4 (57) 5.1 (50) 8.0 (38) 9.1 (26)�

5th Percentile -2.3 0.7 7.8 6.4 9.1 10.01st Quartile -5.4 -1.6 7.0 5.7 8.3 9.1 Median -6.7 -3.3 6.5 5.1 7.7 8.6

3rd Quartile -8.0 -4.5 6.0 4.7 6.9 8.195th Percentile -9.6 -6.5 3.9 3.6 5.6 6.7

Population 144 143 141 137 133 126

Plan Sponsor Peer Group AnalysisTotal Fund w/ Overlay vs. Investment Metrics Public Plans > $1B Gross

Calculation based on monthly periodicity.Median is the Investment Metrics(IM) Gross of Fees Total Public Fund Greater than $1 Billion Universe which includes BNY Mellon Public Fund >$1Bil Universe and IMclient data. 20

Exhibit 14

-20.0

-12.0

-4.0

4.0

12.0

20.0

28.0

36.0

Retu

rn

2009(Rank) 2010 2011 2012 2013 2014 2015 2016 2017 2018Total Fund w/ Overlay 23.4 (10) 14.0 (38) 0.3 (75) 14.2 (30) 17.3 (32) 6.8 (46) 0.4 (52) 6.9 (79) 16.5 (35) -4.0 (65)¢

SURS Policy Benchmark 23.1 (15) 13.5 (48) 0.2 (78) 14.7 (9) 16.4 (43) 7.2 (31) -0.6 (77) 7.8 (55) 15.5 (57) -3.4 (51)�

5th Percentile 24.2 16.2 5.4 14.8 20.9 8.6 2.5 9.7 18.2 0.71st Quartile 21.7 14.3 2.0 14.2 17.7 7.6 1.2 8.5 16.7 -1.6 Median 19.2 13.3 1.1 13.3 15.9 6.7 0.5 7.9 16.0 -3.33rd Quartile 15.4 12.5 0.3 12.2 12.0 5.5 -0.4 7.1 14.5 -4.595th Percentile 7.6 8.6 -0.7 9.4 5.0 4.8 -1.8 2.3 9.9 -6.5

Population 52 55 56 62 74 80 96 119 114 143

Calendar Year Returns

Plan Sponsor Peer Group AnalysisTotal Fund w/ Overlay vs. Investment Metrics Public Plans > $1B Gross

Parenthesis contain percentile rankings.Calculation based on quarterly periodicity.Median is the Investment Metrics(IM) Gross of Fees Public Fund Greater than $1 Billion Universe which includes BNY Mellon Public Fund > $1Bil Universe and IM client data. 21

Exhibit 14

-25.0

-10.0

5.0

20.0

35.0

50.0

65.0

80.0

Allo

catio

n (%

)

US Equity Intl. Equity US FixedIncome

Intl. FixedIncome Alternative Inv. Real Estate Cash

Total Fund w/ Overlay 23.7 (55) 27.6 (11) 22.8 (44) 2.5 (65) 10.8 (79) 8.6 (40) 1.5 (58)¢

5th Percentile 48.8 31.1 52.6 12.3 38.8 14.9 7.51st Quartile 33.7 22.8 27.2 8.0 25.7 9.9 4.1Median 24.9 18.0 21.3 3.6 18.6 7.5 1.93rd Quartile 18.2 13.5 15.5 2.0 12.9 4.9 1.195th Percentile 7.8 6.9 8.6 0.1 3.2 1.2 0.2

Population 128 126 119 52 86 73 76

Total Plan Allocation vs. Investment Metrics Public Plans > $1 BillionAs of December 31, 2018

Parentheses contain percentile rankings.Calculation based on monthly periodicity.Median is the Investment Metrics(IM) Gross of Fees Total Public Greater than $1 Billion Fund Universe which includes BNY Mellon Public Fund >$1Bil Universe and IM client data.Alternative Inv. class includes all funds not allocated to the other listed classes.

22

Exhibit 14

RISK

Exhibit 14

0.0

3.0

6.0

9.0

12.0

15.0

Re

turn

(%)

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0Risk (Standard Deviation %)

Return(Rank)Standard

Deviation(Rank)Sharpe

Ratio(Rank)InformationRatio(Rank)

Total Fund w/ Overlay 9.0 (36) 9.0 (83) 1.0 (85) -0.2 (42) Public Fund Median (1) Median 8.6 8.0 1.0 -0.2Policy Benchmark 9.1 9.3 1.0 -

Total Fund Risk/Return - 10 YearsAs of December 31, 2018

State Universities Retirement System of Illinois (SURS)

(1) Investment Metrics (IM) Median [Gross of Fees] - Total Public Fund Greater than $1 Billion Universe includes BNY Mellon Total Public Fund >$1Bil Universe and IM client data.

24

Exhibit 14

0.0

3.0

6.0

9.0

12.0

15.0

Retu

rn (%

)

0.0 0.7 1.4 2.1 2.8 3.5 4.2 4.9 5.6 6.3 7.0 7.7 8.0Risk (Standard Deviation %)

Return (Rank) StandardDeviation (Rank)

SharpeRatio (Rank)

InformationRatio (Rank)

Total Fund w/ Overlay 4.8 (65) 6.6 (70) 0.7 (75) -0.3 (81) Policy Index 5.1 (50) 6.3 (63) 0.7 (63) - All Public Plans > $1B-Total Fund Median 5.1 5.9 0.8 0.0

Total Fund Risk/Return - 5 YearsAs of December 31, 2018

State Universities Retirement System of Illinois (SURS)

(1) Investment Metrics (IM) Median [Gross of Fees] - Total Public Fund Greater than $1 Billion Universe includes BNY Mellon Public Fund >$1Bil Universe and IM client data.

25

Exhibit 14

Return StandardDeviation

SharpeRatio

InformationRatio

SortinoRatio

TrackingError

Total Fund w/ Overlay 4.84 6.56 0.66 -0.33 1.00 0.71Policy Index 5.10 6.34 0.72 - 1.11 0.00Domestic Equity 7.42 11.34 0.64 -0.56 0.93 0.68Dow Jones U.S. Total Stock Market Index 7.86 11.09 0.68 - 1.01 0.00Total Non US Equity 1.04 11.61 0.10 0.32 0.13 1.05International Equity Custom Benchmark 0.68 11.82 0.06 - 0.09 0.00Global Equity 6.01 10.96 0.53 0.91 0.80 1.87Global Equity Benchmark 4.26 10.77 0.38 - 0.55 0.00Fixed Income 2.59 2.31 0.85 0.08 1.42 0.75Fixed Income Custom Benchmark 2.52 2.77 0.69 - 1.12 0.00TIPS 1.57 3.59 0.28 -0.30 0.44 0.39Bloomberg Barclays U.S. TIPS Index 1.69 3.54 0.32 - 0.50 0.00REITs 6.21 11.44 0.53 1.06 0.82 1.73FTSE EPRA/NAREIT Developed Index (Net) 4.34 10.95 0.39 - 0.58 0.00Real Estate 10.35 2.30 3.95 0.27 238.54 2.26SURS Real Estate Index 9.71 0.76 9.60 - - 0.00Private Equity 11.01 4.56 2.21 -0.50 13.78 10.99Dow Jones US Total Stock Market +3% Lag 16.79 9.58 1.62 - 3.16 0.00Opportunity Fund 5.01 5.11 0.86 0.69 1.98 5.12CPI - All Urban Consumers (Unadjusted) Lag 1.52 0.99 0.93 - 1.52 0.00Cash 1.18 0.47 1.93 1.93 6.37 0.30FTSE 3 Month T-Bill 0.60 0.21 -0.15 - -0.05 0.00

Total Fund Risk Statistics (Net-of-Fees)5 Years



Exhibit 14

Return StandardDeviation

SharpeRatio

InformationRatio

SortinoRatio

TrackingError

Total Fund w/ Overlay 5.87 6.32 0.78 -0.60 1.11 0.72Policy Index 6.34 6.05 0.88 - 1.31 0.00Domestic Equity 8.40 11.60 0.67 -0.57 0.91 0.76Dow Jones U.S. Total Stock Market Index 8.92 11.21 0.73 - 1.00 0.00Total Non US Equity 3.90 11.45 0.30 -0.53 0.43 1.04International Equity Custom Benchmark 4.48 11.38 0.35 - 0.51 0.00Global Equity 8.06 11.08 0.67 0.71 0.94 2.02Global Equity Benchmark 6.60 10.48 0.57 - 0.79 0.00Fixed Income 2.50 2.29 0.65 0.56 0.96 0.76Fixed Income Custom Benchmark 2.06 2.84 0.38 - 0.55 0.00Emerging Market Debt 6.07 8.62 0.61 0.26 0.91 1.4750% JPM GBI-EM GD / 25% JPM EMBI GD / 25% JPM Corp Broad 5.77 7.38 0.66 - 1.00 0.00TIPS 2.18 3.03 0.40 0.21 0.59 0.29Bloomberg Barclays U.S. TIPS Index 2.11 3.05 0.37 - 0.56 0.00REITs 3.11 10.86 0.25 0.74 0.36 0.51FTSE EPRA/NAREIT Developed Index (Net) 2.72 10.82 0.21 - 0.30 0.00Real Estate 7.61 1.49 4.24 -0.12 102.65 1.61SURS Real Estate Index 7.83 0.45 12.04 - - 0.00Private Equity 12.39 4.50 2.44 -0.66 16.16 11.17Dow Jones US Total Stock Market +3% Lag 20.51 9.17 1.99 - 4.30 0.00Opportunity Fund 3.61 4.41 0.60 0.38 1.17 4.41CPI - All Urban Consumers (Unadjusted) Lag 1.99 0.79 1.26 - 2.47 0.00Cash 1.90 0.51 2.54 2.51 12.04 0.36FTSE 3 Month T-Bill 0.99 0.20 -0.06 - -0.02 0.00

Total Fund Risk Statistics (Net-of-Fees)3 Years



Exhibit 14

ATTRIBUTION

Exhibit 14

Total Fund Performance

-9.0 % -6.0 % -3.0 % 0.0%

Total Fund

Total Fund Benchmark

Total Value Added

-7.1 %

-6.2 %

-0.9 %

Total Value Added:-0.9 %

0.0% 2.0%-2.0 %

Other

Manager Value Added

Asset Allocation

0.3%

-0.8 %

-0.4 %

Average Active Weight

0.0% 2.0%-2.0 %-4.0 %

Total OverlayCash & Transition

CommoditiesHedge Funds

Opportunity FundPrivate Equity

Real EstateREITsTIPS

Emerging Market DebtFixed IncomeGlobal Equity

Total Non US EquityDomestic Equity

0.4%1.1%

-0.1 %0.1%

-0.4 %0.3%

-0.7 %-0.1 %

-0.4 %0.0%

-1.8 %1.0%

-0.1 %0.7%

Total Asset Allocation:-0.4 %

0.0% 0.1%-0.1 %-0.2 %-0.3 %

0.0%0.0%0.0%0.0%

0.0%0.0%

-0.1 %0.0%

0.0%0.0%

-0.2 %-0.1 %

0.0%-0.1 %

Total Manager Value Added:-0.8 %

0.0% 0.2%-0.2 %-0.4 %

0.0%

0.0%

0.1%

-0.2 %

0.0%

-0.2 %

0.0%

0.0%

0.0%

0.0%

-0.1 %

0.0%

-0.1 %

-0.2 %

Total Fund Attribution1 Quarter Ending December 31, 2018


Exhibit 14

PortfolioWeight

PolicyWeight

ExcessWeight

PortfolioReturn

PolicyReturn Allocation Selection Interaction Total

Domestic Equity 23.7 23.0 0.7 -15.1 -14.4 -0.1 -0.2 0.0 -0.3Total Non US Equity 18.9 19.0 -0.1 -12.1 -11.5 0.0 -0.1 0.0 -0.1Global Equity 9.0 8.0 1.0 -12.9 -12.8 -0.1 0.0 0.0 -0.1Fixed Income 17.2 19.0 -1.8 1.1 1.6 -0.2 -0.1 0.0 -0.2Emerging Market Debt 3.0 3.0 0.0 0.7 0.9 0.0 0.0 0.0 0.0TIPS 3.6 4.0 -0.4 -0.5 -0.4 0.0 0.0 0.0 0.0REITs 3.9 4.0 -0.1 -5.5 -5.7 0.0 0.0 0.0 0.0Real Estate 5.3 6.0 -0.7 1.1 1.9 -0.1 0.0 0.0 -0.1Private Equity 6.3 6.0 0.3 4.2 7.9 0.0 -0.2 0.0 -0.2Opportunity Fund 0.6 1.0 -0.4 0.3 1.6 0.0 0.0 0.0 0.0Hedge Funds 5.1 5.0 0.1 -6.1 -2.3 0.0 -0.2 0.0 -0.2Commodities 1.9 2.0 -0.1 -5.9 -9.4 0.0 0.1 0.0 0.1Cash & Transition 1.1 0.0 1.1 0.0 0.6 0.0 0.0 0.0 0.0Total Overlay 0.4 0.0 0.4 0.0 0.6 0.0 0.0 0.0 0.0Total Fund w/ Overlay 100.0 100.0 0.0 -7.1 -6.2 -0.4 -0.8 0.0 -0.9

Total Fund Attribution1 Quarter Ending December 31, 2018


Exhibit 14

Total Fund Performance

-6.0 % -4.0 % -2.0 % 0.0%

Total Fund

Total Fund Benchmark

Total Value Added

-4.2 %

-3.4 %

-0.9 %

Total Value Added:-0.9 %

0.0% 2.0%-2.0 %

Other

Manager Value Added

Asset Allocation

0.2%

-0.7 %

-0.3 %

Average Active Weight

0.0% 2.0% 4.0%-2.0 %-4.0 %

Total OverlayCash & Transition

CommoditiesHedge Funds

Opportunity FundPrivate Equity

Real EstateREITsTIPS

Emerging Market DebtFixed IncomeGlobal Equity

Total Non US EquityDomestic Equity

0.4%1.0%

-0.1 %-0.2 %

-0.4 %-0.4 %

-0.6 %-0.2 %

-0.4 %0.0%

-2.0 %1.2%

0.1%1.4%

Total Asset Allocation:-0.3 %

0.0% 0.1%-0.1 %-0.2 %-0.3 %

0.0%0.0%

0.0%0.0%

0.0%0.0%

-0.1 %0.0%

0.0%0.0%

-0.1 %-0.1 %

0.0%0.0%

Total Manager Value Added:-0.7 %

0.0% 0.3% 0.6%-0.3 %-0.6 %

0.0%

0.0%

0.1%

-0.3 %

0.0%

-0.2 %

0.0%

0.0%

0.0%

0.0%

0.0%

0.2%

-0.1 %

-0.3 %

Total Fund Attribution1 Year Ending December 31, 2018


Exhibit 14

PortfolioWeight

PolicyWeight

ExcessWeight

PortfolioReturn

PolicyReturn Allocation Selection Interaction Total

Domestic Equity 24.4 23.0 1.4 -6.6 -5.3 0.0 -0.3 0.0 -0.3Total Non US Equity 19.1 19.0 0.1 -14.8 -14.2 0.0 -0.1 0.0 -0.1Global Equity 9.2 8.0 1.2 -7.2 -9.4 -0.1 0.2 0.0 0.1Fixed Income 17.0 19.0 -2.0 0.3 0.0 -0.1 0.0 0.0 -0.1Emerging Market Debt 3.0 3.0 0.0 -5.5 -4.4 0.0 0.0 0.0 0.0TIPS 3.6 4.0 -0.4 -1.3 -1.3 0.0 0.0 0.0 0.0REITs 3.8 4.0 -0.2 -4.6 -5.6 0.0 0.0 0.0 0.0Real Estate 5.4 6.0 -0.6 7.4 7.7 -0.1 0.0 0.0 -0.1Private Equity 5.6 6.0 -0.4 15.6 21.1 0.0 -0.2 0.0 -0.3Opportunity Fund 0.6 1.0 -0.4 2.9 7.4 0.0 0.0 0.0 -0.1Hedge Funds 4.8 5.0 -0.2 -3.2 3.6 0.0 -0.3 0.0 -0.3Commodities 1.9 2.0 -0.1 -6.9 -11.2 0.0 0.1 0.0 0.1Cash & Transition 1.0 0.0 1.0 1.6 1.9 0.0 0.0 0.0 0.0Total Overlay 0.4 0.0 0.4 -3.8 1.9 0.0 0.0 0.0 0.0Total Fund w/ Overlay 100.0 100.0 0.0 -4.2 -3.4 -0.3 -0.7 0.1 -0.9

Total Fund Attribution1 Year Ending December 31, 2018


Exhibit 14

Portfolio CharacteristicsPortfolio Benchmark

Wtd. Avg. Mkt. Cap ($M) 149,534 167,103Median Mkt. Cap ($M) 1,298 1,418Price/Earnings ratio 16.3 17.0Price/Book ratio 2.9 3.05 Yr. EPS Growth Rate (%) 16.1 15.9Current Yield (%) 2.1 2.1Beta (5 Years, Monthly) 1.0 1.0Number of Stocks 3,468 3,015Debt to Equity 0.7 0.5

Top Ten Equity HoldingsPortfolioWeight

(%)

BenchmarkWeight

(%)

ActiveWeight

(%)

QuarterlyReturn

(%)Microsoft Corp 3.0 3.1 -0.1 -10.8Apple Inc 2.4 3.0 -0.6 -29.9Amazon.com Inc 2.1 2.4 -0.3 -25.0Alphabet Inc 1.3 1.3 0.0 -13.2Johnson & Johnson 1.2 1.4 -0.2 -6.0Facebook Inc 1.2 1.2 0.0 -20.3Berkshire Hathaway Inc 1.1 1.6 -0.5 -4.6Pfizer Inc 1.1 1.0 0.1 -0.2Exxon Mobil Corp 1.1 1.1 0.0 -19.0JPMorgan Chase & Co 1.0 1.3 -0.3 -12.9

% of Portfolio 15.5 17.4 -1.9

Sector Weights (%)

Domestic Equity Russell 3000 Index

0.0 5.0 10.0 15.0 20.0 25.0

Utilities

Real Estate

Materials

Information Technology

Industrials

Health Care

Financials

Energy

Consumer Staples

Consumer Discretionary

Communication Services

3.4

4.2

3.3

19.4

10.9

14.9

14.1

4.9

6.3

10.1

8.5

3.3

3.9

3.0

19.9

9.9

15.1

13.9

5.0

6.7

10.3

9.1

Distribution of Market Capitalization (%)


0.0

15.0

30.0

45.0

60.0

>100 Bil 75 Bil - 100 Bil

25 Bil - 75 Bil

15 Bil - 25 Bil

2 Bil - 15 Bil

0 - 2 Bil

41.2

6.8

20.7

8.6

18.7

4.0

36.9

5.7

19.2

8.8

23.6

5.8

Domestic Equity Portfolio CharacteristicsAs of December 31, 2018


Exhibit 14

Region


0.0 25.0 50.0 75.0 100.0 125.0

Other

United Kingdom

Pacific ex Japan

North America

Middle East

Europe ex UK

EM Latin America

EM Asia

0.0

0.8

0.0

96.9

0.0

2.2

0.0

0.0

0.0

1.0

0.0

96.6

0.0

2.3

0.0

0.0

Top Ten ContributorsPortfolioWeight

(%)

BenchmarkWeight

(%)

ActiveWeight

(%)

QuarterlyReturn

(%)Procter & Gamble Co (The) 0.7 0.7 0.0 11.4Merck & Co Inc. 0.5 0.6 -0.1 8.5Eli Lilly and Co 0.5 0.3 0.2 8.4Verizon Communications Inc 0.6 0.7 -0.1 6.5Red Hat Inc 0.1 0.1 0.0 28.9Starbucks Corp 0.2 0.3 -0.1 13.9McDonald's Corp 0.3 0.4 -0.1 6.8American Tower Corp 0.2 0.2 0.0 9.5Tesla Inc 0.1 0.1 0.0 25.7NextEra Energy Inc 0.4 0.3 0.1 4.4

% of Portfolio 3.6 3.7 -0.1

Top Ten DetractorsPortfolioWeight

(%)

BenchmarkWeight

(%)

ActiveWeight

(%)

QuarterlyReturn

(%)Apple Inc 3.0 3.7 -0.7 -29.9Amazon.com Inc 2.5 2.7 -0.2 -25.0Microsoft Corp 2.9 2.9 0.0 -10.8Facebook Inc 1.2 1.3 -0.1 -20.3NVIDIA Corp 0.4 0.6 -0.2 -52.4Exxon Mobil Corp 1.1 1.2 -0.1 -19.0Alphabet Inc 1.3 1.2 0.1 -13.2Netflix Inc 0.5 0.5 0.0 -28.5Citigroup Inc 0.5 0.6 -0.1 -26.9Bank of America Corp 0.8 0.9 -0.1 -15.9

% of Portfolio 14.2 15.6 -1.4

Sector Allocation

Sector Number ofAssets

Market Value($000)

PortfolioWeight

(%)

BenchmarkWeight

(%)

ActiveWeight

(%)Communication Services 137 324,316 8.5 9.1 -0.7Consumer Discretionary 373 386,166 10.1 10.3 -0.2Consumer Staples 113 242,931 6.3 6.7 -0.3Energy 197 186,898 4.9 5.0 -0.1Financials 588 539,183 14.1 13.9 0.2Health Care 557 569,667 14.9 15.1 -0.2Industrials 422 416,144 10.9 9.9 0.9Information Technology 415 743,405 19.4 19.9 -0.5Materials 136 127,197 3.3 3.0 0.3Real Estate 200 161,942 4.2 3.9 0.3Utilities 78 131,891 3.4 3.3 0.1Total 3,216 3,829,740 100.0 100.0 0.0

Domestic Equity Portfolio CharacteristicsAs of December 31, 2018


Exhibit 14


Wtd. Avg. Mkt. Cap ($M) 51,885 58,116Median Mkt. Cap ($M) 6,408 7,298Price/Earnings ratio 11.2 12.0Price/Book ratio 2.1 2.15 Yr. EPS Growth Rate (%) 12.5 10.6Current Yield (%) 3.6 3.5Beta (5 Years, Monthly) 1.0 1.0Number of Stocks 2,390 2,136Debt to Equity 1.0 1.1


(%)

BenchmarkWeight

(%)

ActiveWeight

(%)

QuarterlyReturn

(%)Roche Holding AG 1.3 0.9 0.4 1.6Nestle SA 1.2 1.3 -0.1 -3.3Tencent Holdings LTD 1.0 1.2 -0.2 -2.9Samsung Electronics Co Ltd 1.0 0.9 0.1 -16.2Novartis AG 0.9 1.0 -0.1 -1.2Taiwan Semiconductor 0.8 1.0 -0.2 -14.4Alibaba Group Holding Ltd 0.8 1.0 -0.2 -16.8Allianz SE 0.7 0.5 0.2 -10.1Diageo PLC 0.7 0.5 0.2 0.4Total SA Oil & Gas 0.7 0.7 0.0 -17.4

% of Portfolio 9.1 9.0 0.1

Sector Weights (%)

Total Non US Equity

MSCI AC World ex USA

0.0 5.0 10.0 15.0 20.0 25.0 30.0

UtilitiesReal Estate

MaterialsInformation Technology

IndustrialsHealth Care

FinancialsEnergy

Consumer StaplesConsumer Discretionary

Communication Services

3.3

4.2

7.8

8.1

12.3

9.1

21.0

7.2

9.7

9.7

7.7

3.4

3.4

7.7

8.0

11.7

8.4

22.2

7.3

9.9

10.6

7.6


Total Non US Equity MSCI AC World ex USA

0.0

10.0

20.0

30.0

40.0

>100 Bil 75 Bil - 100 Bil

25 Bil - 75 Bil

15 Bil - 25 Bil

2 Bil - 15 Bil

0 - 2 Bil

16.1

6.2

33.5

13.5

30.0

0.6

14.2

5.9

29.8

15.2

32.3

2.7

Non-U.S. Equity Portfolio CharacteristicsAs of December 31, 2018


Exhibit 14

Region

Total Non US Equity

MSCI AC World ex USA

0.0 8.0 16.0 24.0 32.0 40.0 48.0

OtherUnited Kingdom

Pacific ex JapanNorth America

Middle EastJapan

Frontier MarketsEurope ex UK

EM Mid East+AfricaEM Latin America

EM EuropeEM Asia

0.3

10.8

12.4

4.8

0.8

17.1

0.0

33.6

1.7

2.9

1.4

14.2

0.4

9.5

12.6

6.5

0.4

16.6

0.0

32.5

2.1

3.1

1.6

14.7


(%)

BenchmarkWeight

(%)

ActiveWeight

(%)

QuarterlyReturn

(%)Koninklijke Ahold Delhaize NV 0.4 0.1 0.3 10.1Banco Bradesco Sa Brad 0.1 0.1 0.0 42.4Itau Unibanco Holding SA 0.1 0.2 -0.1 24.9Deutsche Telekom AG 0.5 0.3 0.2 5.2HDFC 0.1 0.2 -0.1 16.9Sumitomo Dainippon Pharma Co 0.0 0.0 0.0 38.6Roche Holding AG 1.2 0.8 0.4 1.6Koninklijke Kpn NV 0.2 0.0 0.2 11.0Enel Ente Nazionale Per L'Energia 0.1 0.2 -0.1 12.6IRB-Brasil Resseguros S.A 0.1 0.0 0.1 30.9



(%)

BenchmarkWeight

(%)

ActiveWeight

(%)

QuarterlyReturn

(%)Samsung Electronics Co Ltd 1.1 1.0 0.1 -16.2Covestro AG 0.4 0.1 0.3 -39.1SAP AG 0.8 0.6 0.2 -19.2Total SA Oil & Gas 0.8 0.7 0.1 -17.4Softbank Group Corp 0.4 0.4 0.0 -34.1Alibaba Group Holding Ltd 0.8 0.9 -0.1 -16.8Taiwan Semiconductor 0.9 1.0 -0.1 -14.4JXTG Holdings Inc 0.4 0.1 0.3 -30.5Upm-Kymmene Corp 0.3 0.1 0.2 -35.4Ashtead Group PLC 0.3 0.1 0.2 -34.4


Sector Allocation


Market Value($000)

PortfolioWeight

(%)

BenchmarkWeight

(%)

ActiveWeight

(%)Communication Services 144 240,960 7.7 7.6 0.0Consumer Discretionary 266 306,374 9.7 10.6 -0.8Consumer Staples 193 303,917 9.7 9.9 -0.2Energy 118 224,850 7.2 7.3 -0.2Financials 418 658,659 21.0 22.2 -1.2Health Care 150 287,085 9.1 8.4 0.8Industrials 381 387,500 12.3 11.7 0.6Information Technology 175 256,048 8.1 8.0 0.1Materials 238 244,113 7.8 7.7 0.1Real Estate 154 130,676 4.2 3.4 0.8Utilities 115 102,643 3.3 3.4 -0.1Total 2,352 3,142,827 100.0 100.0 0.0

Non-U.S. Equity Portfolio CharacteristicsAs of December 31, 2018


Exhibit 14


Wtd. Avg. Mkt. Cap ($M) 115,535 58,116Median Mkt. Cap ($M) 16,347 7,298Price/Earnings ratio 16.8 12.0Price/Book ratio 2.9 2.15 Yr. EPS Growth Rate (%) 15.0 10.6Current Yield (%) 2.3 3.5Beta (5 Years, Monthly) 0.9 1.0Number of Stocks 413 2,136Debt to Equity 0.8 1.1


(%)

BenchmarkWeight

(%)

ActiveWeight

(%)

QuarterlyReturn

(%)Alphabet Inc 2.0 0.0 2.0 -13.4Amazon.com Inc 1.8 0.0 1.8 -25.0Microsoft Corp 1.8 0.0 1.8 -10.8Visa Inc 1.6 0.0 1.6 -11.9Tencent Holdings LTD 1.4 1.2 0.2 -2.9Allergan PLC 1.3 0.0 1.3 -29.5Johnson & Johnson 1.3 0.0 1.3 -6.0Essity Aktiebolag 1.2 0.1 1.1 -2.6Alibaba Group Holding Ltd 1.1 1.0 0.1 -16.8Exxon Mobil Corp 1.1 0.0 1.1 -19.0

% of Portfolio 14.6 2.3 12.3

Sector Weights (%)

Global Equity

MSCI AC World ex USA (Net)

0.0 5.0 10.0 15.0 20.0 25.0 30.0

OtherUtilities

Real EstateMaterials

Information TechnologyIndustrials

Health CareFinancials

EnergyConsumer Staples

Consumer DiscretionaryCommunication Services

0.7

3.7

2.0

3.2

18.2

13.1

15.7

14.6

4.3

6.4

10.3

7.9

0.0

3.4

3.4

7.7

8.0

11.7

8.4

22.2

7.3

9.9

10.6

7.6


Global Equity


0.0

10.0

20.0

30.0

40.0

>100 Bil 75 Bil - 100 Bil

25 Bil - 75 Bil

15 Bil - 25 Bil

2 Bil - 15 Bil

0 - 2 Bil

16.1

6.2

33.5

13.5

30.0

0.6

26.5

8.6

24.7

13.7

24.8

1.6

Global Equity Portfolio CharacteristicsAs of December 31, 2018


Exhibit 14

Region

Global Equity


0.0 15.0 30.0 45.0 60.0 75.0

OtherUnited Kingdom

Pacific ex JapanNorth America

Middle EastJapan

Frontier MarketsEurope ex UK

EM Mid East+AfricaEM Latin America

EM EuropeEM Asia

0.3

7.7

6.3

52.4

0.9

9.0

0.0

16.8

0.4

1.0

0.1

5.1

0.4

9.5

12.6

6.5

0.4

16.6

0.0

32.5

2.1

3.1

1.6

14.7


(%)

BenchmarkWeight

(%)

ActiveWeight

(%)

QuarterlyReturn

(%)Tesla Inc 0.8 0.0 0.8 25.7CME Group Inc 0.7 0.0 0.7 12.0Procter & Gamble Co (The) 0.6 0.0 0.6 11.4H D F C Bank Ltd 0.7 0.0 0.7 10.1Enel Ente Nazionale Per L'Energia 0.5 0.2 0.3 12.6Omnicom Group Inc. 0.7 0.0 0.7 8.6WH Group Ltd 0.6 0.0 0.6 9.3PT Bank Central Asia TBK 0.4 0.1 0.3 11.7Kyushu Railway Co 0.5 0.0 0.5 11.1NextEra Energy Inc 1.0 0.0 1.0 4.4



(%)

BenchmarkWeight

(%)

ActiveWeight

(%)

QuarterlyReturn

(%)Amazon.com Inc 2.3 0.0 2.3 -25.0Allergan PLC 1.4 0.0 1.4 -29.5Stericycle Inc 0.6 0.0 0.6 -37.5NVIDIA Corp 0.5 0.0 0.5 -52.4Wood Group (John) PLC 0.7 0.0 0.7 -35.9Visa Inc 1.8 0.0 1.8 -11.9Exxon Mobil Corp 1.1 0.0 1.1 -19.0Alphabet Inc 1.6 0.0 1.6 -13.4AMS AG 0.3 0.0 0.3 -57.4Apple Inc 0.6 0.0 0.6 -29.9

% of Portfolio 10.9 0.0 10.9

Sector Allocation


Market Value($000)

PortfolioWeight

(%)

BenchmarkWeight

(%)

ActiveWeight

(%)Communication Services 23 116,291 7.9 7.6 0.3Consumer Discretionary 37 151,359 10.3 10.6 -0.3Consumer Staples 24 94,239 6.4 9.9 -3.4Energy 26 62,984 4.3 7.3 -3.0Financials 64 214,516 14.6 22.2 -7.6Health Care 61 231,546 15.7 8.4 7.4Industrials 60 192,286 13.1 11.7 1.4Information Technology 65 267,520 18.2 8.0 10.2Materials 31 46,931 3.2 7.7 -4.5Real Estate 10 28,685 2.0 3.4 -1.4Utilities 7 54,086 3.7 3.4 0.3Total 408 1,460,443 99.3 100.0 -0.7

Global Equity Portfolio CharacteristicsAs of December 31, 2018


Exhibit 14

Credit Quality Distribution (%)

Fixed Income

Blmbg. Barc. U.S. Aggregate Index

0.0

50.0

100.0

150.0

-50.0

AAA/Aaa

AA/Aa A

BBB/

BaaBB/

Ba

Not Ra

ted

Sector Distribution (%)

Fixed Income

Blmbg. Barc. U.S. Aggregate Index

0.0

20.0

40.0

60.0

-20.0

Treas

Gov Re

Agy MBS ABS

CMBSCorp

Non-$Other


Avg. Maturity 7.2 8.0Effective Duration 5.0 5.9Yield To Maturity (%) 3.8 N/A

Fixed Income Portfolio Characteristics



Exhibit 14

SURS Manager Status Review Summary

Status Manager(s) Strategy Comments

Reassessment Mesirow Small Cap Core Performance

# of Managers

Enhanced Review 17Good Standing 11

Good Standing: A Manager's three (3) year and five (5) year rolling Annualized Alpha (net of fees) each exceed their Active Manager Premiums (AMPs) for such periods. Managers with less than a five (5) year performance history will be consdier in Good Standing.

Enhanced Review: A Manager's three (3) year or five (5) year rolling Annualized Alphas (net of fees) are above their respective Benchmarks but below their AMPs.

Reassessment: A Manager’s (i) three (3) year and five (5) year rolling Annualized Alphas (net of fees) are below their respective Benchmarks for the preceding two consecutive quarters, and (ii) three (3) year and five (5) year Information Ratios are negative for the preceding two consecutive quarters; or other performance metrics reflect a significant negative trend.

1

Exhibit 15

Performance Analysis (Net of Fees)

Description 1-Year 3-Year 5-Year 7-Year 10-Year Since Inc. Inception Date

Mesirow - Gross -14.96 4.05 3.77 9.03 --- 6.93 5/31/2011Mesirow - Net -15.43 3.49 3.19 8.40 --- 6.34

Annualized Fee 0.47 0.56 0.58 0.63 --- 0.59Russell 2000 -11.01 7.36 4.41 10.44 --- 7.79

Excess Return -4.42 -3.88 -1.22 -2.04 --- -1.45

Annualized Alpha -5.77 -3.28 -0.88 -0.87 --- -0.83Active Manager Premium 2.00 2.00 2.00 2.00 --- 2.00Excess Risk Adjusted Returns -7.77 -5.28 -2.88 -2.87 --- -2.83Risk and Regression

Description 1-Year 3-Year 5-Year 7-Year 10-Year Since Inc.

Standard Deviation 18.57 15.15 14.30 13.45 --- 15.28Standard Deviaiton - Benchmark 19.33 16.01 15.43 14.68 --- 16.17Beta 0.95 0.93 0.90 0.89 --- 0.92R-Squared 0.98 0.96 0.95 0.94 --- 0.95Efficiency Measures

Description 1-Year 3-Year 5-Year 7-Year 10-Year Since Inc.

Sharpe Ratio -0.93 0.16 0.18 0.59 --- 0.39Treynor Ratio -18.24 2.67 2.84 8.92 --- 6.42Sortino Ratio -0.99 0.33 0.35 0.95 --- 0.71Tracking Error 3.06 3.36 3.54 3.66 --- 3.72Information Ratio -1.44 -1.15 -0.35 -0.56 --- -0.39Upside Market Capture 74.64 77.22 81.44 80.80 --- 82.15Downside Market Capture 101.78 93.32 86.62 84.62 --- 84.74

Status Evaluation:

3yr Alpha 5yr Alpha AMP

3yr Alpha vs.

AMP

5yr Alpha vs.

AMP Status

Current Quarter -3.28 -0.88 2.00 -5.28 -2.88Prior Quarter -3.37 -0.51 2.00 -5.37 -2.51

Mesirow Financial / Small Cap U.S. Equity

December 31, 2018

Reassessment

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

Rolling 3-year Excess Return vs Benchmark

Mesirow - Excess Mesirow - Alpha 2.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

Apr

-16

Ma

y-16

Jun-

16

Jul-1

6

Aug

-16

Sep-

16

Oct

-16

Nov

-16

Dec

-16

Jan-

17

Feb-

17

Ma

r-17

Apr

-17

Ma

y-17

Jun-

17

Jul-1

7

Aug

-17

Sep-

17

Oct

-17

Nov

-17

Dec

-17

Jan-

18

Feb-

18

Ma

r-18

Apr

-18

Ma

y-18

Jun-

18

Jul-1

8

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Rolling 5-year Excess Return vs Benchmark

Mesirow - Excess Mesirow - Alpha 2.00%

2

Exhibit 15

SURS Manager Status Review

Manager Strategy Status

CastleArk U.S. Small Cap Growth Enhanced Review

Mesirow U.S. Small Cap Core Reassessment

T. Rowe Price Large Cap Structured Active U.S. Equity Enhanced Review

Matarin U.S. Small Cap Core Good Standing

Channing U.S. Small-Mid Cap Value Good Standing

Earnest U.S. Mid Cap Core Enhanced Review

Denali U.S. Large Cap Value Good Standing

Piedmont Large Cap Structured Active U.S. Equity Enhanced Review

Gladius U.S. Equity Good Standing


Ativo All Cap Non-U.S. Equity Enhanced Review

Strategic Global Advisors Large Cap Non-U.S. Developed Enhanced Review

BlackRock Structured Active Non-U.S. Equity Enhanced Review

Fidelity Structured Active Non-U.S. Equity Enhanced Review

GlobeFlex All Cap Non-U.S. Equity Enhanced Review

Progress Large Cap Non-U.S. Developed Good Standing

U.S. Equity Managers

Non-U.S. Equity Managers

3

Exhibit 15

SURS Manager Status Review


Mondrian Global Equity Enhanced Review

Wellington Global Equity Enhanced Review

T. Rowe Price Global Equity Good Standing


Pugh Core Fixed Income Enhanced Review

Smith Graham Core Fixed Income Enhanced Review

LM Core Plus Fixed Income Enhanced Review

PIMCO Total Return Core Plus Fixed Income Enhanced Review

TCW Core Plus Fixed Income Enhanced Review

Garcia Hamilton Core Fixed Income Good Standing

Progress Core Fixed Income Good Standing

Neuberger Berman Core Plus Fixed Income Enhanced Review


Colchester EM Debt Good Standing

Progress EM Debt Good Standing

Prudential EM Debt Good Standing

Global Equity Managers

Core Fixed Income Managers

Emerging Market Debt Managers

4

Exhibit 15

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

Exhibit 16

STATE UNIVERSITIES RETIREMENT SYSTEM

MarketValue

Estimated Unfunded FundingAssets Liabilities Liabilities Ratio Month FYTD

Jun-18 19.04$ 43.15$ 24.12$ 44.1%Jul-18 19.38 43.26 23.88 44.8% 1.55% 1.55%

Aug-18 19.23 43.37 24.14 44.3% 0.72% 2.28%Sep-18 19.38 43.48 24.10 44.6% 0.21% 2.50%Oct-18 18.42 43.59 25.17 42.3% -4.71% -2.33%Nov-18 18.40 43.69 25.29 42.1% 0.99% -1.36%Dec-18 17.68 43.80 26.13 40.4% -3.46% -4.78%Jan-19 18.75 43.91 25.16 42.7% 5.20% 0.17%

Note: Assets and liabilities are estimated and unaudited through January 31, 2019. The fund had an actuarial value funding ratio of 42.8% at the end of Fiscal Year 2018, utilizing a 6.75% assumed rate of return.

Rate of Return

0%

20%

40%

60%

80%

100%

$0$2$4$6$8

$10$12$14$16$18$20$22$24$26$28$30$32$34$36$38$40$42$44$46

Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19

Perc

ent F

unde

d

$Bill

ions

SURS Projected Funding Status2019 Fiscal Year-to-Date Results

January Preliminary

Assets Liability Funding Ratio

Exhibit 17

Page 1 of 2

Disclosures Pursuant to Illinois Pension Code Section 1-113.22 & 1-113.23 Beginning January 1, 2018, Sections 1-113.22 & 1-113.23 of the Illinois Pension Code requires the following disclosures from a consultant prior to the awarding of a contract:

Name of Firm:

____________________________Pension Consulting Alliance, LLC___________________

1. The total number of searches for investment services made by the consultant in the prior calendar year; (If none, state “none”)

Number of Searches 61

2. The total number of searches for investment services made by the consultant in the prior calendar year that included (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability; (If none, state “none”)

Classification Number of Searches * Minority 26 Female 22

Person with a Disability 22 *Some searches may be counted more than once in the table above.

3. The total number of searches for investment services made by the consultant in the prior calendar year in which the consultant recommended for selection (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability; (If none, state “none”)

Contract Recommended for Selection Minority 10 Female 1

Person with a Disability 4. The total number of searches for investment services made by the consultant in the prior calendar year

that resulted in the selection of (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability; (If none, state “none”)

Contract Selected Minority 8 Female 1

Person with a Disability

Exhibit 18

Page 2 of 2

5. The total dollar amount of investment made in the previous calendar year with (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability that was selected after a search for investment services performed by the consultant. (If none, state “none”)

Contract Total $ of Investment Made Minority $529 million Female $250 million


6. All compensation and economic opportunity received in the last 24 months from investment advisors retained by the board of a retirement system, board of a pension fund, or investment board. "Compensation" means any money, thing of value, or economic benefit conferred on, or received by, a consultant in return for services rendered, or to be rendered, by himself, herself, or another. “Economic opportunity" means any purchase, sale, lease, contract, option, or other transaction or arrangement involving property or services wherein a consultant may gain an economic benefit. (If none, state “none”)

Total Compensation & Economic Opportunity None

7. Any compensation or economic opportunity received in the last 24 months from an investment advisor

that is recommended for selection by the consultant. "Compensation" means any money, thing of value, or economic benefit conferred on, or received by, a consultant in return for services rendered, or to be rendered, by himself, herself, or another. “Economic opportunity" means any purchase, sale, lease, contract, option, or other transaction or arrangement involving property or services wherein a consultant may gain an economic benefit. (If none, state “none”)

Total Compensation & Economic Opportunity None

Supplemental Diversity Information (Optional): If desired, please include additional information on your firm’s efforts to supplement the information provided above. Please feel free to attach or include any policies or documentation to support these efforts.

INVESTMENT ADVISOR / CONSULTANT/ PRIVATE MARKET FUND:

Company Name: Pension Consulting Alliance, LLC

Signature:

Printed Name: Neil Rue

Title: Managing Director

Dated: 2/27/2019

Exhibit 18

Page 1 of 3

Disclosures Pursuant to Illinois Pension Code Section 1-113.22 & 1-113.23 Beginning January 1, 2018, Sections 1-113.22 & 1-113.23 of the Illinois Pension Code requires the following disclosures from a consultant prior to the awarding of a contract:

Name of Firm:

_Callan LLC____________________________________________________________

1. The total number of searches for investment services made by the consultant in the prior calendar year; (If none, state “none”)

Number of Searches 193

2. The total number of searches for investment services made by the consultant in the prior calendar

year that included (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability; (If none, state “none”)

Classification Number of Searches* Minority 23 Female 12

Person with a Disability 0 *Callan conducted 33 searches in 2018 that included a minority owned business, a female owned business or a business owned by a person with a disability. The breakdown above includes a few searches that are double counted as the candidates were both minority owned and female owned.

3. The total number of searches for investment services made by the consultant in the prior calendar year in which the consultant recommended for selection (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability; (If none, state “none”)

Contract Recommended for Selection Minority 9 Female 7

Person with a Disability 0 4. The total number of searches for investment services made by the consultant in the prior calendar

year that resulted in the selection of (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability; (If none, state “none”)

Contract Selected Minority 4 Female 0

Person with a Disability 0

Exhibit 19

Page 2 of 3

5. The total dollar amount of investment made in the previous calendar year with (i) a minority owned business, (ii) a female owned business, or (iii) a business owned by a person with a disability that was selected after a search for investment services performed by the consultant. (If none, state “none”)

Contract Total $ of Investment Made Minority $140.3 million * Female


*Reflects $120.3 million invested with DWDO transition managers and $20 million invested with a minority-owned investment manager.

6. All compensation and economic opportunity received in the last 24 months from investment advisors

retained by the board of a retirement system, board of a pension fund, or investment board. "Compensation" means any money, thing of value, or economic benefit conferred on, or received by, a consultant in return for services rendered, or to be rendered, by himself, herself, or another. “Economic opportunity" means any purchase, sale, lease, contract, option, or other transaction or arrangement involving property or services wherein a consultant may gain an economic benefit. (If none, state “none”)

Total Compensation & Economic Opportunity See attached

7. Any compensation or economic opportunity received in the last 24 months from an investment

advisor that is recommended for selection by the consultant. "Compensation" means any money, thing of value, or economic benefit conferred on, or received by, a consultant in return for services rendered, or to be rendered, by himself, herself, or another. “Economic opportunity" means any purchase, sale, lease, contract, option, or other transaction or arrangement involving property or services wherein a consultant may gain an economic benefit. (If none, state “none”)

Total Compensation & Economic Opportunity Not applicable

Supplemental Diversity Information (Optional): If desired, please include additional information on your firm’s efforts to supplement the information provided above. Please feel free to attach or include any policies or documentation to support these efforts.

INVESTMENT ADVISOR / CONSULTANT/ PRIVATE MARKET FUND:

Company Name: Callan LLC

Signature:

Printed Name Sally Haskins

Title: Sr. Vice President

Dated: 2/15/19

Exhibit 19

Page 3 of 3

Exhibit 19

Callan LLCThe information contained herein is designated as Confidential and should be viewed only by the recipient.

Illinios State Universities Retirement System Managers* No 2017 Services

Total Fees for 2017 Services

EducationalAnalytics/Consulting

Alinda XBasis Investment Group XBlackRock 59,000$ Blackstone Property Partners XBlue Vista Real Estate Partners XBrookfield Strategic Real Estate Partners XCarlyle Property Investors XCrow Holdings Realty Partners XDune Real Estate XFranklin Templeton X X $ 225,972.00 Heitman X X $ 60,000.00 J.P. Morgan X X $ 92,500.00 Macquarie X X $ 64,000.00 Oaktree Real Estate XStepstone XUBS X X $ 87,000.00

2017 Manager Client Services

* Given the complex corporate and organizational ownership structures of investment management firms, parent and affiliate firm relationships are not listed if they don’t separately contract with Callan. 2/15/2019

Exhibit 20

Callan LLCThe information contained herein is designated as Confidential and should be viewed only by the recipient.

Illinios State Universities Retirement System Managers* No 2018 Services

Total Fees for 2018 Services

EducationalAnalytics/Consulting

Alinda XBasis Investment Group XBlackRock X 60,000.00$ Blackstone Property Partners XBlue Vista Real Estate Partners XBrookfield Strategic Real Estate Partners XCarlyle Property Investors XCrow Holdings Realty Partners XDune Real Estate XFranklin Templeton X X $ 247,851.00 Heitman X $ 60,000.00 J.P. Morgan X X $ 106,375.00 Macquarie X $ 63,000.00 Oaktree Real Estate XStepstone XUBS X $ 60,000.00

2018 Manager Client Services

* Given the complex corporate and organizational ownership structures of investment management firms, parent and affiliate firm relationships are not listed if they don’t separately contract with Callan. 2/15/2019

Exhibit 20

Disclosures Pursuant to Illinois Pension Code Section l-113.22 & 1-113.23

Beginning January I , 2018, Sections 1-l 13 .22 & I -l 13 .23 of the Illinois Pension Code requires thefollowing disclosures from a consultant prior to the awarding of a contract:

Name of Firm: Cammack LaRhette Advisors, LLC

1. The total number of searches for investment services made by the consultant in the prior calendar yea\(If none, state "none")

Number of Searchesnone

2. The total number of searches for investment services made by the consultant in the prior calendar year

that included (i) a minority owned business, (ii) a female owned business, or (iii) a business owned bya person with a disability; (If none, state "none")

Classification Number of SearchesMinority noneFemale none

Person with a Disabilitv none

3. The total number of searches for investment services made by the consultant in the prior calendar yearin which the consultant recommended for selection (i) a minority owned business, (ii) a female ownedbusiness, or (iii) a business owned by a person with a disability; (If none, state "none")

Contract Recommended for SelectionMinority noneFemale none

Person with a Disabilitv none

4, The total number of searches for investment services made by the consultant in the prior calendar yearthat resulted in the selection of (i) a minority owned business, (ii) a female owned business, or (iii) abusiness owned by a person with a disability; (If none, state "none")

Contract SelectedMinoritv none

Female nonePerson with a Disabilitv none

Page I of2

Exhibit 21

5. The total dollar amount of investment made in the previous calendar year with (i) a minority ownedbusiness, (ii) a female owned business, or (iii) a business owned by a person with a disability that wasselected after a search for investment services performed by the consultant. (If none, state "none")

Contract Total $ of Investment MadeMinority none

Female nonePerson with a Disabilitv none

6. All compensation and economic opporlunity received in the last 24 months from investment advisorsretained by the board of a retirement system, board of a pension fund, or investment board."Compensation't means any money, thing of value, or economic beneJit conferued on, or receivedby, a consultant in retarn for services rendered, or to be rendered, by himselJi herself, or another."Economic opportunitytt means any purchase, sale, lease, contract, option, or other transaction orarrangement involving property or services wherein a consaltant may gain sn economic benetit. (Ifnone, state "none")

Total Compensation & Economic Onnortunitvnone

7. Any compensation or economic opportunity received in the last 24 months from an investment advisorthat is recommended for selection by the consultant. "Compensation" means any money, thing ofvalue, or economic benefit confemed on, or received by, a consultant in returnfor services rendered,or to be rendered, by himself, herself, or another. "Economic opportunity" meflns any purchase,sale, lease, contrilct, option, or otlter transaction or arrangement involving property or serviceswherein a consultant may gain un economic beneJtt. (If none, state "none")

Total Compensation & Economic Opportunitynone

Supplemental Diversity Information (Optional):

If desired, please include additional information on youl' firm's efforts to supplement the informationprovided above. Please feel free to attach or include any policies or documentation to support these efforts.

IIYVESTMENT ADVISOR / CONSULTANT/ PRIVATE MARKET FUND:

Company Name: Cammack LaRhette Advisors, LLC

Signature: e-z 4/ z-Printed Name Earle W. Allen

Title Vice President

Dated: 02lts/2019

Page2 of2

Exhibit 21

To: Investment Committee From: Investment Staff Date: February 11, 2019 Re: Summary Risk Report

Attached is the Summary Risk Report for the quarter ending December 31, 2018. Highlights for the quarter include:

• Liquidity – The portfolio remains highly liquid with 80.46% of assets estimated to have liquidity of less than two weeks under normal market conditions.

• Value at Risk (1 Year Forward) – Tail risk increased during the quarter from 11.22% to 13.28%. This parameter indicates that, at a confidence level of 95%, the maximum estimated asset loss over a one-year period would be of 13.28%.

• Standard Deviation (5 Year Historical) – Total portfolio volatility increased from the prior quarter

from 6.03% to 6.66%. Per Northern Trust, volatility across asset classes increased during the 4th quarter. The risk estimate for the total plan increased from 6.82 to 8.08, higher than the 7.11 estimate one year ago. Risk estimates increased for equity, hedge funds, and real estate, while estimates for fixed income, commodities, and the opportunity fund decreased.

• Tracking Error: The forecasted 5-year tracking error of 0.74 was lower than the actual 0.84 for

the total fund for the quarter. The portfolio’s tracking error has been decreasing at a steady pace since early 2014 but slightly spiked during the quarter. The lower active risk of the total portfolio during the last few years can be partially explained by the increase in fund allocations to passive strategies.

• The Global Financial Stress Index (GFSI) was 0.36, higher than last quarter’s 0.18, indicating that

the market is experiencing more stress than during 3Q 2018. The index remains well below the peak of 3.01 during the Global Financial Crisis.

• U.S. Treasury Yield Curve – The yield curve became slightly inverted during the quarter. The

yield on the 10-Year Treasury decreased from 3.05% to 2.69% during the quarter.

• Appropriation Summary –FY 2019 state appropriations received were approximately $642 million, or 77.6% of the anticipated $828 million due, as of December 31, 2018. The total FY 2019 appropriation is $1,655,154,000. The actuarial benefit payment projection for FY 2019 is $2,716.848 million.

• Cash Account Summary – Ending cash on hand was approximately $158 million as of December 31, 2018. Net private partnership cash flows during the quarter were negative and approximately $50 million.

Exhibit 22

Summary Risk Report

Quarter Ending December 31, 2018

Exhibit 23

Risk Dashboard

Liquidity VaR StandardDeviation

100%0%

70%

50%

80.46%

20%

50%0%

18%

13.28 %

12%

10%

0% 30%

6.66%

o Liquidity Green = > 70.00% Highly Liquid, Yellow = 69.90% - 50.00%, Red = < 50.00%.

Liquidity Estimates Under Normal Market Conditions. Stressed Market Conditions Will Impact Both Liquidity & Pricing.

o Value at Risk (VaR) Green = < 18.00%, Yellow = 18.01% to 20.00%, Red = > 20.00%.

1 Year Forward Looking Maximum Data Point = 21.50% (March 2013). 1 Year Forward Looking Minimum Data Point = 11.22% (September 2018).

o Standard Deviation Green = < 10.00%, Yellow = 10.01 – 11.80%, Red = > 6.39%.

5 Year Historical Rolling Maximum = 13.89% (June 2012). 5 Year Historical Rolling Minimum = 5.74% (December 1996).

Exhibit 23

Liquidity Profile

0%

10%

20%

30%

40%

50%

60%

Cash Passive < 2 Weeks 1 Month + Illiquid

Estimated Days to Liquidate80.46%

Liquidity risk is the risk that SURS would not be able to meet short term financial demands due to cash flow and/or the inability toconvert securities or other assets to cash without a loss of capital and/or income in the process. Currently, approximately 82.6% ofthe portfolio is highly liquid under normal market conditions.Data Source: SURS

Exhibit 23

Value at Risk (VaR)

VaR is the estimated maximum loss over a one year period given a certain level of confidence (95%).Data Source: Northern Trust

0 1 2 3-1-2-3

68%

95%

99.7%

Downside Risk (Left Tail)

13.28%

11.00%

13.00%

15.00%

17.00%

19.00%

21.00%

23.00%

Mar

-13

Jun-

13Se

p-13

Dec-

13M

ar-1

4Ju

n-14

Sep-

14De

c-14

Mar

-15

Jun-

15Se

p-15

Dec-

15M

ar-1

6Ju

n-16

Sep-

16De

c-16

Mar

-17

Jun-

17Se

p-17

Dec-

17M

ar-1

8Ju

n-18

Sep-

18De

c-18

Total Fund (1 Year Forward Looking)

VaR

21.50%

11.22%

Exhibit 23

Standard Deviation

Standard deviation measures the variability of investment returns. A low standard deviation indicates that the data points tend to be veryclose to the mean, while high standard deviation indicates that the data are spread out over a large range of values. The expected standarddeviation of the SURS portfolio based on the target asset allocation is 12.5%.Data Source: SURS

6.66%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

Mar

-13

Jun-

13Se

p-13

Dec-

13M

ar-1

4Ju

n-14

Sep-

14De

c-14

Mar

-15

Jun-

15Se

p-15

Dec-

15M

ar-1

6Ju

n-16

Sep-

16De

c-16

Mar

-17

Jun-

17Se

p-17

Dec-

17M

ar-1

8Ju

n-18

Sep-

18De

c-18

Total Fund (5 Years Ending)

Total Fund

• Total Fund Annualized Standard Deviation (5 Years Ending) is 6.66% as of September 30, 2018

• Total Fund (5 Year Rolling) Standard Deviation ranges from 5.74% (Dec. 1996) to 13.89% (June 2012)

• Based on the current asset allocation, portfolio volatility is lower than the expected 12.5%

Key Observations:13.89%

5.74%

Exhibit 23

Tracking Error

0.74

0.84

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80M

ar-1

3

May

-13

Jul-1

3

Sep-

13

Nov

-13

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov

-14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov

-15

Jan-

16

Mar

-16

May

-16

Jul-1

6

Sep-

16

Nov

-16

Jan-

17

Mar

-17

May

-17

Jul-1

7

Sep-

17

Nov

-17

Jan-

18

Mar

-18

May

-18

Jul-1

8

Sep-

18

Nov

-18

Trac

king

Err

or %

5 yr Ex-Post Total Fund Tracking Error 5 yr Ex-Ante Total Fund Tracking Error

Tracking error is the standard deviation od the difference between the returns of an investment and its benchmark. It is also refered to as active risk. The 5yr ex-ante tracking error, is typically used to describe the range of annualized returns a portfolio will have around the benchmark two thirds of the time. Sources: Investopedia and Northern Trust

Exhibit 23

Global Financial Stress Index

Global Financial Stress Index (GFSI) Chart – The GFSI composite index aggregates over twenty measures of stress across fiveasset classes and various geographies, measuring three separate kinds of financial market stress: risk, as indicated by cross-assetmeasures of volatility, solvency, and liquidity; hedging demand, from activity in equity and currency options; and investor appetitefor risk, as measured by trading volumes as well as flows in and out of equities, high-yield bonds, and money markets. GFSI > 0means more stress than normal. GFSI < 0 means less stress than normal.Data source: BofA Merrill Lynch and Bloomberg

3.01

0.50

-0.50

0.00

0.36

-0.66

Exhibit 23

Treasury Yield Curve

A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturitydates. The U.S. Treasury yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lendingrates. The curve is also used to predict changes in economic output and growth. A normal yield curve is one in which longermaturity bonds have a higher yield compared to shorter-term bonds due to the risks associated with time. An inverted yield curve isone in which the shorter-term yields are higher than the longer-term yields, which can be a sign of upcoming recession. A flat (orhumped) yield curve is one in which the shorter- and longer-term yields are very close to each other, which is also a predictor of aneconomic transition. The slope of the yield curve is also seen as important: the greater the slope, the greater the gap between short-and long-term rates.Data Source: U.S. Department of the Treasury and Investopedia

3.05%

2.69%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

1 Month 3 Month 6 Month 1 Year 2 Year 3 Year 5 Year 7 Year 10 Year 20 Year 30 Year

9/28/2018 12/31/2018

Exhibit 23

Appropriation Summary

SURS Fiscal Year 2019 Appropriation $1,655,154,000

Month Amount Due Amount Received (Under) / Over % ReceivedJuly $137,929,500 $758,000 ($137,171,500) 0.5%

August $137,929,500 $69,343,750 ($68,585,750) 50.3%

September $137,929,500 $137,971,500 $42,000 100%

October $137,929,500 $143,122,280 $5,192,780 103.8%

November $137,929,500 $172,868,610 $34,939,110 125.3%

December $137,929,500 $117,861,110 ($20,068,390) 85.5%

FYTD Total $827,577,000 $641,925,250 ($185,651,750) 77.6%

Monthly appropriation payments can be volatile, making cash management and liquidity an area of focus. Data Source: SURS

Actuarial benefit payments projection for FY 2019: $2,716,848,000

Exhibit 23

Cash Account SummarySURS Cash Account Summary

October 1, 2018 – December 31, 2018

Beginning Balance $241,964,484

Cash In:

Partnership Distributions 25,849,079

Benefit Payments andReallocation to Global Fund

70,000,000

Funds from Closed Accounts 65,384,943

Other Income 2,134,563

Total Cash In: $163,368,584

Cash Out:

Partnership Capital Calls (75,456,773)

Initial Funding (5,162,528)

Net Contributions (Contributions less Benefit Payments)

(167,039,599)

Total Cash Out: (247,658,900)

Ending Balance $157,674,169Cash flow detail is provided in the Quarterly Board Report Data Source: SURS

Key Observations:

• Net private partnership (Private Equity, Real Estate, Infrastructure and Hedge Funds) cash flows were negative and approximately $50 million for the quarter.

• Benefit payments were approximately $70 million for the quarter.

Exhibit 23

Fiscal Year 2019-20 Summary Work Plan

Investment Committee Schedule State Universities Retirement System

Denotes recurring items - Denotes non-recurring items

FISCAL YEAR 2019 March 7, 2019 Annual Fixed Income & Emerging Market Debt Asset Class Reviews Quarterly Performance Review / Manager Reassessment Discussion - Specialty Consultant Procurement - Non-Core Real Estate Manager Interview - Continued Discussion of Asset Allocation Implementation (CRO Class Structure) - Update on Status of Private Equity Consultant Search - PCA Organizational Update - Educational Topic – Alternative Risk Premia April 18, 2019 - Prospective Real Asset Manager Interviews - Update on Status of Private Equity Consultant Search - Principal Protection Structure Recommendations - Credit Structure Recommendations - Defined Contribution Provider Search Update - Educational Topic – Defined Contribution Income Solutions June 6, 2019 SURS FY ’20 Budget Quarterly Performance Review - Defined Contribution Provider Search Update - Traditional Growth Structure Recommendation - Consideration of Finalists in Private Equity Consultant Search - Educational Topic - Active/Passive Education

Exhibit 24

FISCAL YEAR 2020 September 12, 2019 Annual Review of SURS Portfolio Consideration of SURS Fiscal Year 2020 Investment Plan Annual Investment Review of Self-Managed Plan (SMP) Annual Investment Policies Review Quarterly Performance Review - Consideration of Finalists in SMP and Supplemental Plan Providers Search - Continued Discussion of Asset Allocation Implementation - Educational Topic (TBD) October 17, 2019 Annual Broker/Dealer Review - Continued Discussion of Asset Allocation Implementation - Prospective Real Asset Manager Interviews - Educational Topic (TBD)

December 10, 2019 Receipt of Annual Report to the Governor and General Assembly on Utilization of Emerging

Investment Managers Annual Review of Investment Policy and Minority Brokerage Goals Quarterly Performance Review - Continued Discussion of Asset Allocation Implementation - Complete Necessary Inflation Protection Manager Searches (Consultants & Staff) - Receive Newly Designed SURS Performance Reports to Account for New Structure (PCA) - Educational Topic (TBD) January 30, 2020 Annual Fixed Income & Emerging Market Debt Asset Class Reviews - Educational Topics – Trustee Educational Forum (TBD) March 5, 2020 Quarterly Performance Review - Educational Topic (TBD) April 16, 2020 Annual U.S. Equity Asset Class Review - Educational Topic (TBD) June 4, 2020 SURS FY ’21 Budget Annual Private Equity Asset Class Review Quarterly Performance Review - Educational Topic (TBD)

Exhibit 24