closed session minutes - surs.comsurs.com/sites/default/files/minutes/closed_inv_020217.pdf ·...

CLOSED SESSION MINUTES

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

State Universities Retirement System Thursday, February 2, 9:30 a.m.

Northern Trust – Global Conference Center 50 S. LaSalle St.

Global Conference Center Chicago, IL

Upon motion by Craig McCrohon and second by Trustee Dorinda Miller, the Investment Committee went into closed session pursuant to §2(c)(7) of the Open Meetings Act. The following trustees were present: Mr. Craig McCrohon, Chair; Mr. Aaron Ammons, Mr. Tom Cross, Mr. Dennis Cullen (via conference call), Dr. John Engstrom, Dr. Fred Giertz, Mr. Paul R. T. Johnson Jr., Ms. Dorinda Miller and Dr. Steven Rock. Others present: Mr. Martin Noven, Executive Director; Ms. Phyllis Walker, Chief Financial Officer; Ms. Bianca Green, General Counsel; Mr. Douglas Wesley, Interim Chief Investment Officer; Ms. Kimberly Pollitt, Mr. Shane Willoughby and Mr. Joe Duncan, Senior Investment Officers; Ms. Kelly Valle, Mr. Brian DeLoriea and Mr. Alex Ramos, Investment Officers; Ms. Kristen Houch, Legislative Liaison; Ms. Whitney Jones, Executive Assistant; Ms. Mary Pat Burns of Burke, Burns & Pinelli; Mr. Douglas Moseley and Mr. Phil Nelson of NEPC.

FIXED INCOME ASSET CLASS REVIEW At the conclusion of the Fixed Income Asset Class Review, Mr. Joseph Duncan presented a memo which recommended the termination of Chicago Equity Partners as a core plus fixed income manager.Reasons for the termination were provided along with a proposal for allocating the assets to existing fixed income managers. Various questions from the trustees were addressed. Discussion continued regarding the performance of other existing income managers and reallocating assets. A copy of the staff memorandum titled “Chicago Equity Partners Termination Memo” is incorporated as part of these minutes as Exhibit 1.

TIPS PORTFOLIO STRUCTURE Mr. Wesley reminded the trustees that the investment policy was revised in December 2016 and introduced the idea of determining which asset classes are to be active or passive. Mr. Wesley further noted that staff evaluated the TIPS manager universe to the new investment policy and considered several factors such as current manager performance, fees and minority exposure in order to make their recommendation on how the TIPS asset class should be managed. A copy of the staff memorandum titled “TIPS Structure Memo” and SURS presentation title “TIPS Active Scorecard” are incorporated as part of these minutes as Exhibit 2 and Exhibit 3.

COURTLAND PARTNERS UPDATE

Mr. Shane Willoughby provided an update on Courtland Partners new ownership structure. As part of the discussion, it was noted that SURS consent to a side letter provision naming successor representatives to the fund had been requested. Contractual options were discussed in lieu of executing the consent, but staff and SURS investment consultant recommended execution of the consent and maintaining the relationship as is, subject to continual monitoring of the firm going forward. A copy of the staff memorandum titled “Courtland Partners Update Memo” as Exhibit 4, the reports titled “Courtland Responsibilities for MFIRE Funds” as Exhibit 5, “Courtland-MFIRE Funds Team Organization Chart” as Exhibit 6, “Courtland Global Real Estate Partnership Fund II (MFIRE II) One Pager” as Exhibit 7, the presentation titled “IL SURS – Transition Update Presentation-01-23-16” as Exhibit 8 and a copy of the Courtland Partners’ memo titled “Courtland LP Notification – Change of Control” as Exhibit 9 are incorporated as part of these minutes.

Respectfully submitted,

Mr. Martin Noven

Secretary, Board of Trustees

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To: Investment Committee From: Investment Staff Date: January 19, 2017 Subject: Chicago Equity Partners Termination Memo Overview and Recommendation Performance of the Chicago Equity Partners (CEP) portfolio has been unsatisfactory over most time periods, failing to keep pace with the Barclays Capital Bond Index before factoring in any expected active management premium. Transferring the CEP allocation to three existing fixed income managers (Garcia Hamilton & Associates, Graham & Company, and State Street Global Advisors) would help decrease the number of managers in the portfolio, increase the assets managed by minority owned firms, and save SURS an estimated $358,500 a year in fees. Performance Information The following graph shows the excess return and risk-adjusted alpha of the portfolio net of fees over rolling 3-year periods since inception of SURS account. Additional performance information (net of fees) is provided at the end of the memo.

SURS History CEP became a core fixed income manager for SURS in September 2010 with an initial funding of $250 million. CEP received an additional $10 million as a part of the fixed income structure analysis in May 2013 and an additional $25 million due to rebalancing in February 2014. As of September 30, 2016, the portfolio was valued at approximately $340 million, which represents 10% of the SURS core fixed portfolio and 2% of the total SURS portfolio.

(1.5)

(1.0)

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0.5

1.0

Rolling 3-year Excess Return vs. Barclays Capital Aggregate Index

3 yr 3 year Alpha AMP

Exhibit 1

Organization CEP was established in 1986 as a division of Bank of America. In 2000, the five original partners of CEP bought the firm out of Bank of America to form CEP. Fixed income capabilities were added in 2000. In 2004, the firm acquired the legacy Chicago-based Loomis Sayles fixed income team. In 2006, CEP sold a majority stake of its business to Affiliated Managers Group (AMG). AMG owns 58.6% of the firm, while the remainder of the ownership interest in the firm is retained by the employees of CEP. Staff recently conducted on-site due diligence meetings with CEP at their office in Chicago in September 2016 and again in December 2016.

Recent Performance Commentary For the trailing twelve month period ending September 30, 2016, portfolio returns trailed the benchmark due to the overweight to U.S. Treasuries at a time when credit outperformed. Income was also a drag on relative performance because of their underweight to corporate securities and emphasis on higher quality issuers in the portfolio. Portfolio characteristics as of September 30, 2016:

Sector Weightings CEP Portfolio

Barclays Aggregate

Relative + / -

Treasuries 51.47% 36.37% + 15.10% Agencies 2.80% 2.39% + 0.41% Mortgages: Agency MBS 35.15% 27.73% + 7.42% CMBS - 1.57% - 1.57% Investment Grade Credit 10.07% 25.90% - 15.83% Municipal/Other - 6.04% - 6.04% Cash and Cash Equivalents 0.52% - + 0.52% Total 100% 100% -

Portfolio Characteristics SURS Portfolio

Barclays Aggregate

Effective Duration 5.65 5.60 Current Yield 2.49 2.85 Yield to Maturity 1.66 1.81 Average Coupon 2.67 3.10 Average Quality Aaa Aa2

Exhibit 1

Client Gains/Losses Over the last twelve months, CEP added two core fixed income accounts and lost four core fixed income accounts for a total net loss of $272 million. The core fixed income mandate has twenty-eight accounts with approximately $1.6 billion in AUM. Consultant Comments Chicago Equity Partners (“CEP”) had $9.4 billion in assets under management; $1.7 billion of those assets were invested in fixed income assets, as of September 2016. The firm continues to have a substantial employee ownership percentage (over 41%) with the majority owned by Affiliate Manager Group, a publicly-traded asset management firm. In 2015, the fixed income team had one employee leave the firm; Mr. Michael Millhouse who retired in March 2015 and was the Chief Investment Officer for the fixed income team. Following Mr. Milhouse’s retirement, Curt Mitchell was named CIO of the fixed income team. Mr. Mitchell currently leads a team of five fixed income investment professionals. CEP uses a quantitative process coupled with fundamental research. The engine of the firm’s process is a proprietary, multi-factor, quantitative model that helps identify sectors and securities that present attractive risk/return opportunities. The process is designed to generate excess returns from both sector positioning and security selection. CEP’s process typically lends to a more conservatively positioned portfolio during periods when the team develops a view the return vs. risk attributes of the non-government sectors are not attractive. The portfolio duration is managed within a tight range of +/- 10% to the index duration, but the sector positioning has been more heavily weighted to the U.S. Treasury sector since the end of 2010, which has generally resulted in the portfolio being positioned with a structural yield disadvantage to the BC Aggregate Index. This positioning was favorable in calendar-year 2015 when corporate spreads widened relative to U.S. Treasuries, but resulted in under-performance in 2016, as well as in 2012-2013. For the YTD period ending September 2016, the portfolio trailed the Barclay’s Aggregate Index by 92 basis points, with a return of 4.88% versus the index return of 5.80%. The product returns are also behind the index over the trailing 3- and 5-year annualized periods. The product has only delivered net of fee alpha in two of the last six calendar-year periods since the SURS account was established in November 2010. Looking at the longer-term product composite track record, the CEP Core Fixed Income product has really only added significant value during the 2008 financial crisis and in calendar-year 2011. NEPC believes that SURS can maintain exposure to the defensive positioning of the target index using the other Core Fixed strategies that are currently part of the SURS fixed income portfolio. Therefore, NEPC recommends that SURS close the CEP account and transition assets to Garcia Hamilton, Smith Graham & Company and the passive fixed income account managed by State Street Global Advisors.

Exhibit 1

Conclusion and Recommendation Staff and NEPC jointly recommend that Chicago Equity Partners be terminated for the following:

Poor investment performance relative to the benchmark and peer group:

The relative performance of the CEP portfolio has been unsatisfactory. CEP significantly underperformed the Barclays Capital Index plus 0.40% threshold over the last year, and has underperformed over longer time periods, as well, trailing the three-, five-, and since inception periods.

Performance peer group rankings in the 90th, 85th, and 94th percentiles over the last one-, three-, five-year periods, respectively.

SURS staff and NEPC recommend:

That Chicago Equity Partners be terminated as a core fixed income manager. That the assets be reallocated to three existing fixed income managers (Garcia

Hamilton & Associates, Smith Graham & Company, and State Street Global Advisors) in the following amounts:

o Garcia Hamilton & Associates - $100 million. o Smith Graham & Company - $50 million. o State Street Global Advisors – Remainder of assets. As of September 30,

2016, the total amount to be reallocated is estimated to be approximately $340 million but may vary based on market fluctuations.

Exhibit 1

2010 (2 months)201120122013201420152016 (9 months)

Trailing 3-yearTrailing 5-yearSince Inception (11/2010)

-1.75

3.83

-0.030.81-2.00-1.36-0.60-0.24-1.32

-0.89-1.12-0.82

0.956.20

4.433.48

-1.728.244.62-1.626.37

4.88

3.542.363.01

HISTORICAL RETURNS

(BY YEAR)

Mgr Barclays Capital Aggregate + 0.40% Excess

ReturnReturn Return

9.052.62-2.985.770.71

Exhibit 1

CEP Data As of September 30, 2016

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Oct-15 Jan-16 Apr-16 Jul-16

Rolling 5-year Excess Return vs. Barclays Capital Aggregate Index

5 yr 5 year Alpha AMP

Efficiency Measures

Description 1 Yr 3 Yr 5 Yr 7 Yr SI

Sharpe Ratio 1.43 1.2 0.79 -- 0.96Treynor Ratio 3.6 3.24 2.17 -- 2.7Sortino Ratio 6.27 2.76 1.44 -- 1.87Tracking Error 1.04 0.73 0.76 -- 0.83Information Ratio -0.99 -0.66 -0.95 -- -0.5Upside Market Capture 86.26 96.12 91.5 -- 97.08Downside Market Capture 127.95 112.95 111.94 -- 111.1

Risk And Regression

Description 1 Yr 3 Yr 5 Yr 7 Yr SI

Standard Deviation 2.77 2.88 2.9 -- 3.06Standard Deviation - Benchmark 2.34 2.61 2.66 -- 2.72Annualized Alpha -1.48 -0.72 -0.85 -- -0.68Beta 1.1 1.07 1.05 -- 1.08

Exhibit 1

To: Investment Committee From: Investment Staff Date: January 19, 2017 Subject: TIPS Structure Memo Overview After evaluating the TIPS manager universe to the new Investment Policy and considering several other factors, Staff is recommending the TIPS asset class be passively managed. Investment Policy The table below summarizes the excess returns for the top quartile and median managers in the eVestment U.S. TIPS universe as of September 30, 2016:

Percentiles

Excess Returns 1 Year

Excess Returns 3 Years



25th Percentile 0.18% 0.14% 0.24% 0.20% Median -0.31% -0.19% 0.01% 0.07% AMP 0.30% 0.30% 0.30% 0.30%

The top quartile managers in the eVestment U.S. TIPS universe have outperformed by 0.18%, 0.14%, 0.24%, and 0.20% for the one-, three-, five-, and ten-year periods ending September 30, 2016 (gross of fees). The Active Management Premium (AMP) is not exceeded for any time period. The median managers in the eVestment U.S. TIPS universe have underperformed by -0.31% and -0.19% for the one-, and three-year periods and outperformed by 0.01% and 0.07% for the five-, and ten-year periods ending September 30, 2016 (gross of fees). The AMP is not exceeded for any time period. The AMP assigned to TIPS in the December 9, 2016 revision to the SURS Investment Policy Statement is + 0.30% over the benchmark return. Fixed income is the first asset class reviewed since the adoption of the new policy. Section VI of the SURS Investment Policy states: Active Management shall be considered for Asset Classes and styles of Marketable Securities (actively traded public Equity, public Fixed-income and Alternative markets), where empirical evidence shows that (i) a significant percentage (e.g. 25%) of Managers in such category (adjusted for survivorship) have consistently outperformed applicable Benchmarks for such category (net of fees) over a three (3), five (5) and ten (10) year period and (ii) that

Exhibit 2

outperformance has been significant (e.g. greater than 50 basis points). For categories not meeting this threshold, and subject to SURS’ MFDB Manager Utilization Goals and Manager Diversity Program, Passive Management will be followed. For all non-actively traded public Equity, public Fixed-income and Alternative markets, Active Management will be used. Performance and Other Information Staff considered several different items in order to make a recommendation, including: Current Manager Performance The following graph shows the rolling three-year excess returns for managers in the eVestment U.S. TIPS universe. There are thirty-four rolling three-year periods depicted on the chart. The lines indicate performance for the top quartile managers, median managers, performance (gross of fees) for PIMCO and NCA, as well as the assigned AMP for TIPS:

The top quartile managers in the eVestment U.S. TIPS Universe have outperformed the benchmark by an average of 0.43% over time, exceeding the AMP of 0.30%, in twenty-nine of thirty-four rolling periods. The median managers in the eVestment U.S. TIPS Universe have outperformed the benchmark by an average of 0.09% over time, trailing the AMP of 0.30%, in all but two of the thirty-four rolling periods. PIMCO has demonstrated the ability to outperform the index (and the AMP) over time. PIMCO has exceeded the benchmark plus the AMP in twenty-four of the thirty-four rolling periods, or approximately 71% of the time. PIMCO’s average excess performance over the thirty-four rolling periods was 0.62% (gross of fees), exceeding the AMP. NCA has a shorter track record, with only fourteen rolling three-year periods to analyze, but has outperformed the benchmark in thirteen of the fourteen rolling periods. The average outperformance over those periods was 0.25% (gross of fees), trailing the AMP by 0.05%. NCA has met or exceeded the AMP in five of the fourteen rolling three-year periods.

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Rolling 3-Year Excess Return

Top Quartile Median PIMCO New Century AMP (0.30)

Exhibit 2

The table below summarizes the relative universe rankings for SURS managers in the eVestment U.S. TIPS universe as of September 30, 2016:

Manager

YTD

1 Year

3 Years

5 Years

10 Years

Since Inception

NCA 38th 38th 10th 31st N/A 22nd

PIMCO 43rd 29th 54th 26th 23rd 49th

Both managers consistently rank in the top half of the universe over multiple time periods, the only exception being PIMCO ranking 54th over the three-year period. PIMCO ranks in the top quartile for the ten-years ending September 30, 2016 and New Century ranks in the top quartile since inception. Fees Fees versus excess performance were also examined. For the period from April, 2010 to September, 2016, the time since all three TIPS managers have been in place, the value added to the portfolio was approximately $270,000 net of fees. Performance over that same time period was +0.04%. SURS currently pays approximately 16 basis points for active management in the asset class. Estimated cost of passive management is 1 to 1.5 basis points annually, resulting in an estimated fee savings of approximately $1 million per year. Minority Exposure Finally, the overall impact of proposed changes on SURS assets managed by MFDB firms, on both a total assets under management basis as well as a % of active management basis, were evaluated. Should SURS choose to passively implement the TIPS allocation (as well as the proposed termination of Chicago Equity Partners and reallocation of their assets as outlined in a separate memo) the impact would be as follows:

Category Current Allocation Proposed Allocation $ Million % MFDB $ Million % MFDB SURS Total AUM $16,993 26.2% $16,993 25.1% SURS Total Active AUM $12,208 29.8% $11,357 30.4% SURS Total Passive AUM $4,785 28.2% $5,637 33.2% Total MFDB Firms $4,451 26.2% $4,264 25.1% Total 96-6 MFDB Firms $3,639 20.7% $3,452 19.6% Total 96-6 Active MFDB Firms $3,516 28.8% $3,329 29.3%

Exhibit 2

Total AUM managed by MFDB firms decreases slightly from approximately $4.5 billion to $4.3 billion or from 26.2% to 25.1%. Due to the TIPS allocation becoming passive, the % of actively managed assets by MFDB firms increases from 28.8% to 29.3%. Options Considered Option One: Maintain active TIPS management As shown on the performance dashboards, over most rolling 3- and 5-year time periods, the TIPS allocation has added value relative to the Index. In addition, two of the active managers have historically demonstrated the ability to perform in the top quartile of the manager universe and the TIPS asset class provides an opportunity to invest with an MFDB manager. Terminate Longfellow and transfer the assets to New Century Advisors (NCA). NCA and Longfellow have both managed TIPS assets for SURS since April 2010 and both are minority-owned firms. As of September 30, 2016 NCA managed approximately $172 million, or approximately 25% of the SURS TIPS allocation and Longfellow managed approximately $173 million, or 25% of the SURS TIPS allocation. The remaining 50% of the SURS TIPS allocation is managed by PIMCO. NCA is located in Chevy Chase, Maryland and Longfellow is located in Boston, Massachusetts. Performance of the Longfellow Investment Management (Longfellow) portfolio has been unsatisfactory over most time periods, failing to keep pace with the Barclays Capital U.S. TIPS Index before factoring in any expected active management premium. The following graph shows the excess return and risk-adjusted alpha of the portfolio net of fees over rolling 3-year periods since inception of SURS account:

Exhibit 2

Longfellow has forty-two periods with rolling three-year data. Over those forty-two rolling three-year periods, Longfellow has only exceeded the benchmark thirteen times and none of those times exceeded the Active Manager Premium (AMP). After evaluating alternative options for the Longfellow assets, and considering both performance and MFDB utilization goals, SURS Staff believes that terminating Longfellow and transferring the assets to NCA is worth considering. Things to consider include:

Pros: Reduction in the number of managers in the SURS portfolio. Assets managed by minority-owned firms would remain consistent. Both

Longfellow and New Century are minority-owned firms. Easy to implement. No RFP required when transferring assets to an existing

manager.

Cons: Higher cost. The estimated increase in fees would be approximately $56,000 per

year.

Consultant Comments Longfellow is a boutique investment firm founded in 1986 that is solely focused on investment grade fixed income. As of September 30th, 2016 Longfellow manages $8.9 billion in total assets on behalf of approximately 125 clients. Of this total, $173 million is managed in the U.S. TIPS strategy. The firm remains 100% employee-owned and majority female-owned. Changes to the investment team over the last twelve months include the hiring of Jessie Harris as Director of Research & Strategy, and the departure in the first quarter of Matt Benfer, the Senior Analyst with primary responsibility for supporting the lead portfolio manager on the TIPS product.

Through September 2016, the SURS U.S. TIPS portfolio has under-performed the Barclays US TIPS Index year-to-date due mostly to yield curve positioning relative to the Index, particularly in the first quarter. Over the trailing 3-and 5-year, and since-inception (May 2010) annualized periods, the SURS account has trailed the benchmark by approximately 0.20 - 0.35% (20-35 bps) after fees. Examining the firm’s product composite results, their U.S. TIPS product has under-performed the target benchmark in six of the last eight complete calendar-year periods. Of additional concern is that the firm has not been able to attract assets to the U.S. TIPS product as SURS remains its only client with capital allocated to the strategy. Therefore, NEPC recommends that SURS close the Longfellow account and consider transitioning assets to a passive index product as soon as search can be completed.

Exhibit 2

Option Two: Passive implementation. SURS utilizes active management with three different managers for our TIPS allocation. There are currently no passive TIPS providers in the portfolio.

Things to consider include:

Pros: Reduction in the number of managers in the SURS portfolio. Only one manager

would be necessary for passive TIPS implementation. SURS currently has three active TIPS managers.

Lower cost. Passive management is significantly less expensive than active management. SURS currently pays approximately 16 basis points annually for active management in the asset class. Estimated cost of passive management is 1 to 1.5 basis points annually, resulting in estimated savings of approximately $1 million annually.

Efficiency. Passive manager oversight requires less time than active manager oversight.

Cons: RFP required. A search would need to be conducted to identify passive providers

since SURS does not currently have a passive TIPS provider. Possible reduction in assets managed by minority-owned firms depending on the

outcome of the search. By choosing passive implementation SURS is foregoing the opportunity to

outperform the index.

Should the Board choose this option, Staff would issue an RFP in the February 20, 2017 publication of Pensions & Investments, and as required, in the Official State Newspaper (Taylorville Breeze-Courier). Longfellow would not be terminated at this time since all three active managers would be terminated at the conclusion of the passive search.

Conclusion and Recommendation After considering the different factors above, Staff and NEPC jointly recommend that SURS utilize passive management within the TIPS allocation. SURS staff and NEPC recommend:

Option Two:

That SURS pursue passive implementation of the TIPS allocation. That Staff issue an RFP to search for a passive manager.

Exhibit 2

TIPS Active Scorecard

Exhibit 3

Active Scorecard TIPS Managers

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Rolling 3-year Excess Return (Gross of Fees) vs Barclays US TIPS

25th Percentile Median

Average Minimum Maximum

25th Percentile 0.43 0.14 0.69

Median 0.09 -0.23 0.42

• The charts display the rolling 3-year excess returns of the top quartile and median managers in the selected asset class • The benchmark represents the 0.00 line • The box displays the average, minimum, and maximum values for the top quartile and median managers.

Exhibit 3

To: Investment Committee From: Investment Staff Date: January 20, 2017 Subject: Courtland Partners Ownership Update

Summary On December 2, 2016, SURS was notified of the unexpected passing of Michael Humphrey. Mr. Humphrey was the founder and Managing Principal of Courtland Partners, where he controlled 90% of the voting rights of the firm. On January 13, 2017 staff was provided a letter informing limited partners of the Real Estate Global Partnership Fund II (formerly Mesirow MFIRE Fund II) of a material change of control or ownership of Courtland Partners. The letter was accompanied by Form ADV, Part 2A describing the new ownership structure of the firm. Background As a reminder, Courtland Partners assumed responsibility for the entire Mesirow real estate fund-of-funds business in July 2015, when Mesirow exited the multi-manager real estate business. SURS investment with Mesirow was known as MFIRE II. Upon the transition to Courtland, the fund is now known as Real Estate Global Partnership Fund II. At the time of the transfer from Mesirow to Courtland, the side letter was renegotiated to include additional protections for SURS. Additional language was introduced into the side letter with Courtland stating that in the event John (“Jay”) Morgan and/or Mr. Humphrey are unable or unwilling to provide services to or on behalf of the Partnership, Courtland would promptly appoint a successor representative to Mr. Morgan and/or Mr. Humphrey. Such appointment is subject to SURS consent as discussed further in this memo. It is important to distinguish this situation from a “key person” event. The investment period for the fund ended in 2015. As a result, no key person event has occurred. Staffing and New Ownership Structure Mr. Humphrey indirectly controlled 90% of the voting rights in Courtland, while Steven C. Novick retained a 10% voting interest. Following Mr. Humphrey’s passing, the day-to-day management of the business of Courtland has been delegated to Mr. Novick and a firm Management Committee. Mr. Humphrey’s wife, Joanne M. Humphrey, has retained the 90% indirect interest in Courtland. Mr. Novick, Cortland’s Chief Operating Officer, Mr. Humphrey’s partner and co-owner of Courtland, has been named Managing Principal and Chairman of Courtland’s Investment Committee. In addition, Courtland has established a firm Management Committee consisting of Mr. Novick, Andrew Mitro, Michael Murphy, and Gianluca Romano.

Exhibit 4

Portfolio monitoring of Real Estate Global Partnership Fund II will continue to be handled by Amy Stone, Courtland’s Fund of Funds Accountant. In addition, investor relations for the fund will be primarily supported by Marc Rivitz and Tony Fragapane as co-Portfolio Managers. Jay Morgan continues to serve Courtland as a Senior Advisor and will continue to support Courtland’s team dedicated to managing fund matters. With respect to ongoing monitoring of the underlying investments owned by the fund, Courtland will take a team approach. In addition to Marc Rivitz and Tony Fragapane, the fund monitoring team includes Luca Romano, Andrew Mitro, Thomas Hester, Michael R. Humphrey, and Amy Stone. The roles of each are part of this memo, under separate cover, along with a table showing Courtland’s responsibilities for the MFIRE funds, pre- and post-Mesirow sale transaction. SURS is a member of the fund’s Advisory Committee, along with the retirement system of a large U.S. city ($12 million commitment), and discretionary capital from a consultant representing the assets of a university in Pennsylvania ($5 million commitment). Therefore, the Advisory Committee represents approximately 85% of total fund commitments. Side Letter Consent As mentioned previously, at the time of transfer from Mesirow to Courtland, an additional side letter provision was included regarding Mr. Humphrey and Mr. Morgan’s duties over the life of the Partnership. Courtland has chosen Tony Fragapane and Marc Rivitz, who are the fund’s co-Portfolio Managers, as the successor representatives. A consent document has been sent to SURS to reflect the appointments and elicit SURS’ consent. Per the side letter with Courtland, such consent shall not be unreasonably withheld, conditioned, or delayed. A copy of the consent follows this memo. Options for Consideration Aside from the above consent, options are available should SURS wish to take further action as a result of the new ownership structure. Mayer Brown, external counsel who reviewed the legal documents pertaining to the Mesirow Fund of Funds sale to Courtland, has reviewed our legal options as they relate to our commitment to Real Estate Global Partnership Fund II. Those options include:

• Option 1: Execute consent and maintain the mandate as is o Preferred option o Least disruptive to objectives as the fund is past its commitment period and in the

pre-wind down phase of portfolio monitoring o Provides opportunity for continued monitoring of Courtland as a firm and its

ability to apply resources to the fund of funds business, allowing for change in GP should it be necessary in the future

• Option 2: Don’t execute consent and request to transfer its interests or withdrawal from

the Fund o Not a likely option o Given the illiquid nature of the fund, investors are not allowed to withdraw from

the fund without the GP’s consent, which may be withheld in its sole discretion

Exhibit 4

o SURS may not transfer all or any portion of its interest in the fund without the

GP’s consent, which may be withheld in the GP’s sole discretion (subject to certain exceptions not applicable here)

• Option 3: Don’t execute consent and remove general partner without cause o Too severe/costly of an outcome given the circumstances o The fund investors have the right to remove Courtland as the investment advisor

(without cause) upon both (i) a vote of 66 2/3 of the interests held by fund investors and (ii) unanimous vote of the investor advisory committee members

o Would cause the fund to enter into an advisory agreement with a replacement investment advisor

o Upon removal, Courtland would continue to be entitled to fees for a one-year transition period during which it is obligated to make its personnel reasonably available to the new investment advisor to assist with the transition

o Courtland would be owed approximately $289,000 in fees for the year, plus the fee that would have to be paid to the replacement GP, and any related legal fees.

Staff Comments SURS staff met with the fund’s co-Portfolio Managers on December 15, 2016, in the SURS Champaign offices. Staff is comfortable with Courtland continuing the duties of the fund. It is important to note that Courtland Partners has served as a subadvisor to the fund since its inception in 2012 and became closely involved with all aspects of the fund as a result. Courtland is responsible for manager monitoring, performance reporting, currency hedging, fund accounting, investor relations and all other aspects of managing the fund. The fund is currently in monitoring mode before it ultimately transitions to harvesting mode. Courtland Partners was founded in 1995 to serve as a fiduciary/advisor providing real estate consulting services with additional competencies in infrastructure, timber, agriculture, and energy investments. The Courtland team has over 30 employees with diverse backgrounds, including investment management, workout, valuation, property management, development, legal, accounting, research, and brokerage. The firm has $83 billion in assets under advisement. Courtland has 35 retainer client relationships and various other project-basis clients. Some of its public pension fund clients include the Washington State Investment Board, the State of Wisconsin Investment Board, CalPERS, CalSTRS, Illinois State Board of Investments, and the Illinois Teachers’ Retirement System, among many others. The total fund size of Real Estate Global Partnership Fund II is approximately $91.5 million. To date, the fund has called $39.3 million of the $60 million SURS commitment amount. No additional capital is expected to be called as cash flow from the existing investments is expected to cover any cash needs. Under the terms of the LPA, the fund will be terminated on April 5, 2022, except that the GP, in its sole discretion, may extend the term for three additional one-year periods. If it becomes necessary to extend beyond the three one-year extensions, as a result of negotiations during the transition from Mesirow to Courtland, no management fees are to be paid to Courtland beyond the final one-year extension.

Exhibit 4

Over fiscal year 2016, approximately $289,000 in management fees were paid to Courtland Partners. Since inception, approximately $496,000 in carried interest has accrued as a result of our investment in the fund. For further reference a one-page summary of the fund (as part of the December Real Estate Asset Class Review) is included under separate cover. Conclusion and Recommendation While Mr. Humphrey’s passing is an unfortunate event, staff and NEPC conclude that the most appropriate course of action is to execute the consent and maintain the Real Estate Global Partnership Fund II relationship as is. Staff is comfortable with the Courtland team in place and in the ability to monitor the fund’s investments and ultimately wind the fund down as contemplated in the LPA. That being said, it is important to vigilantly monitor the operations of Courtland as a firm. Should a sufficient enough number of clients, either consulting or discretionary capital, leave the firm to warrant concerns about its ongoing viability, then discussions with the other fund participants should be conducted. At that point the option of GP removal would be warranted. As a result, staff and NEPC recommend:

• That SURS execute the consent appointing Anthony Fragapane and Marc Rivitz as successor representatives to John Morgan and Michael Humphrey

Exhibit 4

Activity Pre – Transaction Responsibilities Post –Transaction Responsibilities

Strategic Direction Set strategy regarding regional, property type and structure exposures. Evaluate potential secondary purchases and/or dispositions.

Manager Sourcing & Diligence Identified managers, visited managers, toured properties, analyzed prior funds and wrote evaluation reports for all underlying funds. N/A. MFIRE funds are fully committed.

Manager MonitoringMet on regular basis with all underling fund managers in Courtland’s Cleveland, Los Angeles and London as well as in the managers’ offices or via conference call to review investments, valuations, exposures and disposition schedules.

Meet on regular basis with all underling fund managers in Courtland’s Cleveland, Los Angeles and London offices as well as in the managers’ offices or via conference call to review investments, valuations, exposures and disposition schedules.

Manager Annual Meetings Attend the annual limited partner meeting of the underlying funds on behalf of MFIRE and other clients.

Attend the annual limited partner meeting of the underlying funds on behalf of MFIRE and other clients.

Weekly Updates Met weekly to discuss updates regarding existing managers, market conditions and pipeline candidates.

Meet weekly to discuss updates regarding existing managers, market conditions, and secondary opportunities for purchases and/or dispositions.

Quarterly Strategy MeetingsMet in Cleveland and Chicago quarterly to discuss global economies, capital markets and real estate fundraising activity. Specific attention was paid to updating the team on every underlying fund.

Meet quarterly to discuss global economies, capital markets and real estate fundraising activity. Specific attention to be paid to updating the team on every underlying fund.

Investment Committee The Courtland investment committee met independently to approve every investment commitment made by the MFIRE funds.

The Investment Committee will approve every acquisition of additional interest, disposition of current interest, as well as requests for extension or restructuring of the underlying funds.

Cash Management N/A. Courtland was not responsible for cash management. Courtland is responsible for cash management and will secure the services of best-in-class providers.

Quarterly/Annual Reporting Collect information from underlying funds, calculate performance and report on exposures.

Collect information from underlying funds, calculate performance and report on exposures. Additionally, Courtland will manage the production of audited financial statements.

Investors Relations N/A. Courtland was not responsible for investor relations. Courtland will provide quarterly and ad hoc updates tolimited partners and their consultants.

Courtland Responsibilities for MFIRE Funds

Exhibit 5

Name /Title /

Office Location

Years of Experience /Years With Courtland /Years on MFIRE Team

Role on Courtland-MFIRE Team

Steven Novick COO & Managing Principal Philadelphia Anthony Fragapane Senior Vice PresidentCleveland Marc Rivitz Co-Portfolio Manager Senior Vice President Regional Specialist – Latin America Cleveland Amy Stone, CPA Fund of Funds AccountantCleveland Andrew Mitro Vice President Cleveland Jay Morgan Senior Advisor Cleveland Thomas Hester Senior Vice President Los Angeles Gianluca Romano Managing Director London Michael R. Humphrey Analyst & Compliance Associate Cleveland

Manager Due Diligence and Review

Organizational Chart: Courtland-MFIRE Funds Team

2/2/2002 Manager Due Diligence and Review

Co-Portfolio Manager 23 / 1 / 1

Strategy and Oversight 40 / 15 / 9

22 / 5 / 5 Advisor

31 / 1 / 1 Manager Due Diligence and Review

14 / 3 / 3 Regional Specialist – Europe

11/9/2009

17 / 2 / 2 Fund Administration

8/8/2007

Exhibit 6

The fund of funds product provides global, diversified exposureThe fund of funds product provides global, diversified exposure

Global Real Estate Partnership II (MFIRE II)

$0

$10

$20

$30

$40

$50

($10)($8)($6)($4)($2)$0$2$4$6

Jun‐12

Sep‐12

Dec‐1

2Ma

r‐13

Jun‐13

Sep‐13

Dec‐1

3Ma

r‐14

Jun‐14

Sep‐14

Dec‐1

4Ma

r‐15

Jun‐15

Sep‐15

Dec‐1

5Ma

r‐16

Jun‐16

Sep‐16

($ mi

llions)

($ mi

llions)

Global Real Estate Partnership II (f/k/a MFIRE II) Cash Flow Analysis

Contributions (Left) Distributions (Left) Market Value (Right)

53%

13% 16%9% 10%

32%39%

10%

20%

0%

10%

20%

30%

40%

50%

60%

East West Midwest South U.S.Various

Europe Asia SouthAmerica

NorthAmericaex U.S.

Global Real Estate Partnership II (f/k/a MFIRE II)Geographic Diversification

Global Real Estate Partnership II NFI‐ODCE

8%3%

11%

21%

8%

33%

4% 3%9%

38%

14%

25%19%

1% 3%

0%

10%

20%

30%

40%

50%

Office Industrial Apartments Retail Hotel ForSale/RentResidentisl

SeniorHousing

Mixed‐Use Other

Global Real Estate Partnership II (f/k/a MFIRE II) Property Type Diversification

Global Real Estate Partnership II NFI‐ODCE

Fund Final Close Sep-13Fund Size $92 millionSURS Commitment Date Apr-12SURS Commitment Amount $60 millionCapital Called to Date $39 millionDistributions to Date* $7.5 millionInvestment Period Ended December 2015Fund Term Ends March 2022* Portions may be recallable by the fund

Fund Objective

Create a diversified, risk-controlled, value-added and opportunistic, multimanager investment portfolio invested on a global basis

Risk Profile Value-add/OpportunisticTarget Fund Return 13-15% netGeographic Focus GlobalProperty Type Focus Diversified

Leverage Level 39%Number of Investments 18Target Deal Size $5-$10 million

Management Fee 0.55% on committed/investedCarried Interest 10% of profitsPreferred Return 10%

Distribution Waterfall

1. 100% to LP until LP has received 10% IRR2. 50% LP/50% GP until GP receives 10% of profits3. 90% LP/10% GP thereafter

Fund OverviewFund Statistics

Fund Strategy

Fund Economics

2Q16 1-Yr 3-Yr 5-YrSince

Inception

Global RE II 2.73% 10.18% 10.75% N/A 10.30%ODCE + 1.5% 2.28% 12.31% 13.47% N/A 13.12%Excess 0.45% -2.13% -2.72% N/A -2.82%

Annualized Fund Returns

Exhibit 7

Courtland Partners, Ltd. | Institutional Real Asset Advisor

Los Angeles | Cleveland | London

State Universities Retirement System of Illinois Courtland Firm Update Real Estate Global Partnership Fund II, L.P. February 2, 2017

Exhibit 8

Courtland Partners, Ltd. | 1

Courtland Overview

Exhibit 8


Courtland Overview

36 RETAINER CLIENTS

$65B ASSETS UNDER ADVISEMENT*

20+ YEARS OF EXPERIENCE

30+ EMPLOYEES

Founded in 1995 to serve as a fiduciary/advisor providing real estate consulting services with additional competencies in infrastructure, timber, agriculture, and energy investments.

100% privately owned providing independent ownership.

Experienced leadership with diverse backgrounds (e.g., management, general consulting, research, legal, compliance, accounting and reporting, and workout and valuation services).

A fiduciary first, no competing business lines or conflicts of interest.

Over $92 billion of investment commitments recommended since 2000.

Fiduciary First | Significant Investment Track Record | Experienced Leadership

*Includes NAV + unfunded commitments for discretionary accounts as of June 30, 2016.

Exhibit 8


Professionals located across the U.S. and London

Los Angeles

Cleveland New York

Philadelphia

London United States

Europe

Courtland Office

Courtland Employee

San Francisco

Exhibit 8


Courtland Business Portfolio

Courtland Consulting Business: • Courtland provides both non-discretionary and discretionary consulting services to institutional clients and does

not offer any conflicting or competing lines of business. • Courtland’s discretionary consulting services mirror the consulting services provided to the firm’s non-

discretionary clients. Courtland’s discretionary clients include smaller private pension plans such as Taft-Hartley (Union) and other pension plans. These pension plans typically do not have internal investment staffs. Therefore, Courtland serves as an outsourced investment staff for their real estate portfolios.

• Courtland charges clients retainer fees and does not receive any type of incentive compensation. Courtland’s fee structure with clients allows Courtland to provide conflict-free investment advisory services.

• Courtland is focused exclusively on being a fiduciary and currently has no plans to offer any fund of funds or other products that would conflict with our consulting business.

Fund of Funds Background and Information:

• In 2006, Courtland was asked by a client to establish a fund of funds platform. Courtland declined the client’s request to become a fund manager, given the conflicts of interest with Courtland’s consulting business.

• Courtland assisted the client in identifying a fund manager to serve as an intermediary which would serve as the general partner to the fund of funds. Through the process of researching and identifying a fund manager, Courtland selected Mesirow Financial Investment Management (“MFIM”) to be the general partner and fund manager.

• Courtland was retained as a sub-advisor tasked with strategy development, manager sourcing, due diligence, performance measurement reporting, and monitoring.

• Over the past three years, MFIM made the decision to exit the fund of funds business. In part due to the investment of a long-term Courtland client, an affiliate of Courtland acquired the fund of funds in July 2015.

• The fund of funds is not accepting new investments and is fully committed. Courtland’s role is to wind-down the funds and provide administrative and monitoring services to the investors.

Exhibit 8


Courtland has 36 retainer client relationships, including both discretionary and non-discretionary relationships.

Over $65 billion of client capital under advisory as of June 30, 2016, $2 billion of which is discretionary.

Assets Under Advisement

Public Pension Plans • North Carolina Retirement Systems • Washington State Investment Board • State of Wisconsin Investment Board • Hawaii Employees’ Retirement System • CalPERS • CalSTRS • Los Angeles Department of Water and Power • Pennsylvania Public School Employees’ Ret. System • West Virginia Investment Management Board • Illinois State Board of Investments • Illinois State Teachers Retirement System • Texas Municipal Retirement System Corporate, Healthcare, Foundations, Endowments • Fortune 100 Fund (Texas) • Fortune 100 Fund (New Jersey) • Fortune 500 Fund (Virginia) Non-U.S. Clients • French Insurance Company • Asian Sovereign Fund • European Pension Fund • Australian Pension Fund • Japanese Bank

Representative Client List

44%

27%

29%

Public Pension Fund

Union Pension Fund

Corporate Pension Fund

Retainer Client Breakdown (number of clients)

Exhibit 8


Courtland Client Tenure

The following chart displays the time each Courtland retainer client has been with the firm.

Over 30% of the retainer clients have been with the firm for over ten years and approximately 70% have been with the firm over five years.

11

14

7

4

0

2

4

6

8

10

12

14

16

0-5 Years 5-10 Years 10-15 Years 15 Years+

Exhibit 8


Recommended Investment Profile (Investment Vehicle)

Investment Capital

Number of Investments

Closed-End Funds 48.3 Bil. 690

Operating Companies (REOC)

16.5 Bil. 42

Open-End Funds 11.8 Bil. 146

Separate Accounts 9.7 Bil. 43

Securities 2.9 Bil. 20

Joint Ventures 2.2 Bil. 20

Co-Investments 1.4 Bil. 23

Total $92.9 Bil. 984

Real estate equity and debt investment activity across a wide variety of

investment vehicles …

Investment Experience

Apartment

Office

Industrial

Retail

Medical Office

Self-Storage

Student/ Senior/ Single Family

Housing

Agriculture/ Timber

Infrastructure

Manufactured Housing

…in both traditional and non-traditional real estate sectors

Capital recommended as of December 31, 2016; Figures may not total due to rounding.

Exhibit 8


Recommended Investment Profile (Geography)

Allocation Percent

United States 51.3 Bil. 55.2%

Global & International 41.6 Bil. 44.8%

Total $92.9 Bil. 100.0%

$90 Billion of Investment Activity Since 2000

Recommended Investment Profile (Global & International)

Allocation Percent

Global 30.8 Bil. 74.0%

Africa 0.05 Bil. 0.1%

Asia 3.1 Bil. 7.3%

Europe 5.1 Bil. 12.3%

Central and Latin America 2.6 Bil. 6.3%

Total $41.6 Bil. 100.0%

Investment Experience

U.K. France

Germany Italy Spain

Czech Republic

Poland Russia

Hungary Romania Sweden Finland Norway China

Australia Singapore

Japan Bulgaria Turkey

South Korea Thailand

Hong Kong Vietnam

India Mexico Brazil

Colombia Peru

Panama Chile

Dominican Republic

South Africa

Over $40 Billion of Global & International Investment Experience

Capital recommended as of December 2016; Figures may not total due to rounding.

Exhibit 8


Courtland Services Summary

Serving as an extension of staff

Developing long-term strategic plans and annual tactical plans

Constructing real estate and real asset portfolios

Developing and/or reviewing investment policy statements

Sourcing investment opportunities

Performing investment strategy and operational due diligence

Recommending investments

Monitoring and reporting on client investment performance

Conducting trustee and board education seminars

Completing special assignments

Extensive

Experience and Market Knowledge

Independent, Conflict-Free

Platform Trusted Advisor

Over $65 billion of assets under advisement

$92 billion of investment recommendations

30+ employees in New York, Cleveland, London, Los Angeles, Philadelphia, and San Francisco

Fiduciary first with no new products (e.g., fund of funds, co-investment funds)

20+ years of serving institutional clients as a trusted fiduciary

Exhibit 8


Courtland Competitive Advantages Fiduciary Focus. Courtland is focused on being a fiduciary first to clients. The firm does not offer any services or products outside

of real asset investment consulting. As a result, all firm revenues are provided by firm clients. The firm does not accept compensation from investment managers or other parties that may create potential client conflicts of interest.

Manager/Partner Sourcing. Courtland provides exposure to, and detailed evaluation of, a broad risk/return spectrum of real estate investment opportunities and managers. Courtland annually has over 500 manager meetings and calls to review new investment opportunities. Information provided through these meetings and other firm contacts is summarized in the Courtland Manager Database. In addition, Courtland’s manager exposure provides an additional source of market intelligence beyond the usual research services.

Experience With Large Institutional Investors. Courtland has provided consulting services to a number of large institutional

investors, including an Asian sovereign fund with over $300 billion of total assets, an Australian superannuation fund with over $70 billion of total assets, a U.S. pension fund with over $100 billion of total assets, and a European insurance company with over $450 billion of total assets. Courtland recently assisted a large public pension fund with the search and selection of an investment manager to invest a separate account targeting office investments in New York, Boston, and Washington, D.C. Lastly, Courtland is currently assisting a German pension fund with the selection of four separate account managers to invest in office/retail, multifamily, industrial, and niche property types in the United States, respectively. Note, Courtland has completed one investment level due diligence report regarding the evaluation of a joint venture investment in an office asset in Washington, D.C.

Significant Investment Experience. Since 2000 Courtland has advised on over $92 billion in real asset (primarily real estate)

investments, globally. Courtland has a reputation for working with clients with larger allocations, utilizing many types of investment vehicles (e.g., real estate operating company “REOCs”). As a result, Courtland has significant experience in assisting clients with a number of direct investment structures, including separate accounts, REOCs, programmatic joint ventures, and co-investments. Courtland also has significant experience regarding investment in public REIT securities, including preferred securities and REIT debt.

Real Estate Focus. Courtland began as a real estate advisory firm, which continues to be the firm’s primary focus. Additionally, the

firm has professionals with infrastructure, timber, and agriculture experience as well. The Courtland Team. Courtland has over 30 employees with diverse backgrounds, including investment management, workout,

valuation, property management, development, legal, accounting, research, and brokerage. Senior firm professionals average over 20 years of real estate (or other real asset) and consulting experience.

Exhibit 8


Courtland Competitive Advantages

Proprietary Tools. Courtland maintains the following three proprietary databases. • Courtland Partners Index (“CPI”) and Performance Measurement System. The CPI is a self-administered, proprietary database

of approximately $692 billion of real assets (mainly real estate) across 475 active investments, providing both time-weighted and dollar-weighted gross and net performance returns dating to 1971. The CPI is updated quarterly and its returns are broken out by risk/return profile (e.g., core, value, and opportunistic). Courtland utilizes this data to assess client portfolio investments by risk/return level. Furthermore, the CPI returns can be used to create customized benchmarks by manager, vintage year, geographic region, property type, and investment type.

• Courtland Manager/Product Database. Courtland’s Manager/Product Database has been developed and maintained by the firm since inception. The Courtland Manager/Product Database is comprised of information submitted to Courtland by managers, including RFP responses, due diligence questionnaires, return performance and other relevant market information, historical reports, marketing presentations, offering memorandums, subscription documents, and market data.

• Courtland Investment Offerings Database. Courtland also maintains an Investment Offerings Database online, which is linked to the Courtland website. This database includes over 650 summaries of current and historical potential client investments.

Asset-Level Focus and Multiple U.S. Locations. The Courtland team incorporates significant asset-level experience within the senior

team and underwrites investments down to the market and asset level. Courtland has senior team members located in major markets (e.g., New York, San Francisco, London, and Los Angeles) attracting institutional investment.

Manager Fee Analysis. Courtland personnel have extensive experience in the analysis of investment manager fees. Courtland has evaluated manager fee structures and negotiated manager fee agreements on behalf of clients in commingled funds, separate accounts, co-investments, and REOCs.

Customized Performance Measurement Reporting. Courtland’s performance measurement reporting system is an Oracle Essbase

Hyperion database with an interface with Microsoft Excel. This database allows for a high level of customization to meet client reporting needs.

Exhibit 8


Courtland Governance

Exhibit 8


Courtland Firm Management and Ownership

Courtland has effectively managed the unexpected death of Michael Humphrey. • Michael Humphrey passed away on November 29, 2016. • Senior Courtland personnel notified clients by phone on November 30th and December 1st. • Courtland released the information on Michael Humphrey’s passing to the press and other organizations on December 1st

and December 2nd. • Steven Novick was appointed the Managing Principal of Courtland and now has decision making authority for day-to-day

operations. • Steven Novick is supported by the Courtland Management Committee, which is comprised of Steven Novick, Michael

Murphy, Gianluca Romano, and Andrew Mitro. Courtland has not had any changes in personnel since Michael Humphrey’s death. Courtland has not lost any clients since Michael Humphrey’s death. Notably, Courtland has had its contract extended

with a number of clients since December 1, 2016.

Every client has been notified of their right to cancel their service agreements with Courtland and none have cancelled to date.

Courtland experienced no stoppage or delay in client service following the death of Michael Humphrey. Normal

operations of the firm continued throughout the process of appointing Steven Novick as Managing Principal.

The firm is stable, debt-free and continues to serve its client base. Courtland Firm Ownership:

• Michael Humphrey’s majority share is now held by his estate, which is being advised by legal counsel. • The Courtland firm ownership expansion plan was established in late 2016 prior to Michael Humphrey’s passing and is

still in development.

Exhibit 8


Courtland Firm Decision Making Process

Courtland Management Committee:

• Prior to his death, Michael Humphrey was in the process of establishing the Courtland Management Committee. • As displayed in the Courtland Organizational Charts provided on the following pages, the Courtland

Management Committee has been put in place, in line with Michael Humphrey’s expectations. • The Courtland Management Committee is comprised of Courtland’s most senior personnel, including Steven

Novick, Michael Murphy, Gianluca Romano, and Andrew Mitro. • All firm management, including human resources, corporate management, and other day-to-day management

needs are provided by the members of the Courtland Management Committee. • Within the Courtland Management Committee, Steven Novick is the Managing Principal of Courtland and has

the ultimate decision making authority for day-to-day operations. Courtland Investment Committee:

• The Courtland Investment Committee is in charge of approving all recommendations issued to clients. The Courtland Investment Committee ensures consistency and quality of the recommendations provided to clients.

• Prior to Michael Humphrey’s death, the Investment Committee was comprised of Michael Humphrey, Steven Novick, and Michael Murphy.

• The Courtland Investment Committee is now comprised of Steven Novick, Michael Murphy, Andrew Mitro, and Thomas Hester.

Exhibit 8


Courtland Organizational Chart – Consulting and PMR

Note: Number of years with Courtland provided after each name in parenthesis.

Exhibit 8


Courtland Organizational Chart – Administrative

Note: Number of years with Courtland provided after each name in parenthesis.

Exhibit 8


Courtland Personnel Turnover and Employee Compensation

Courtland Employee Compensation and Promotions: • Courtland employees are promoted based on merit, aptitude, experience, and demonstrated competence.

• Two members of Courtland’s Investment Committee and Management Committee originally joined the firm as analysts and have continued to advance their skills and abilities while at Courtland, leading to numerous promotions and compensation adjustments.

• Courtland offers a variety of compensation incentives to retain employees. These incentives include: • Competitive base salary • Annual or quarterly bonuses • 401(k) retirement plan matching and contributions from Courtland • Health and medical benefits, including health, vision, and dental

• Courtland also recently established an equity participation plan. This equity participation plan allows for Courtland to enable key senior employees to have equity profits interest in the firm and a continued interest in firm value appreciation.

• In addition to compensation incentives offered to retain employees, Courtland offers employees tuition and other cost reimbursement to encourage employees to continue to obtain further education and certifications. Currently, Courtland is providing tuition reimbursement for a senior employee to earn a Master’s in Business Administration. Courtland also reimburses and encourages employees to obtain and maintain professional licenses, including CPA, CFA, CAIA, and continuing legal education (CLE).

Exhibit 8


Courtland Compliance

Compliance:

• Courtland does not accept compensation of any kind from investment managers or other third parties. All fees received by Courtland are for consulting services provided to the firm’s clients.

• Employee gift and other policies are outlined in the Courtland Compliance Manual. Compliance is enforced and overseen by Courtland’s General Counsel and Chief Compliance Officer, Charles Manak. The Courtland Compliance Manual also includes Courtland’s Code of Ethics.

• Courtland performance measurement reporting and return calculations are completed in accordance with AIMR and NCREIF standards, which are in line with GIPS standards and are accepted standards of compliance within the real estate industry.

• Courtland is audited by a third-party accounting firm, Cohen and Company, each year. This audit includes a review of all financial and contractual information and a review of our accounting practices and policies at Courtland. Courtland’s external audit is supported by Courtland’s Director of Finance, Daniel Wolnik, CPA. To date, Cohen and Company has not noted any material deficiencies.

Courtland Corporate Credit: • Courtland maintains a line of credit with a local bank. The line of credit has no outstanding borrowings or debt

at this time. • Courtland has no debt outstanding to third parties at this time. • An affiliate of the majority owner of Courtland, Pru Investments, has notes payable to MFIM regarding the

fund of funds acquisition in July 2015. These notes mature in June 2018. Pru Investments is a separate legal entity from Courtland Partners, Ltd., but is included within the consolidated financial statements of the majority owner of Courtland.

Exhibit 8


Real Estate Global Partnership Fund II, L.P. Performance Overview

Exhibit 8


Inception to Date 4/6/2012As of 6/30/2016

Capital Availability:Total Fund Commitments 91,538,462

% Capital Called as of 6/30/2016 65.50%

Capital Activity: QTD Total ITD TotalContibutions as of 6/30/2016 - 59,957,693 Distributions as of 6/30/2016 - (5,950,000) Realized Gain Loss on Investments 2,445,960 10,432,329 Unrealized Gain Loss on Investments (753,652) 12,063,885 Unrealized Gain Loss on FX Translation of Investments 1,186,889 (1,494,225) Unrealized Gain Loss on FX Forwards 305,841 70,451 Realized Gain Loss on FX Forwards (184,292) 1,942,061 Management Fees and Expenses Paid to Underlying Funds by GPF II (25,875) (877,928) GPF II Management Fees (135,734) (2,393,163) GPF II Professional Fees/Miscellaneous Income (55,940) (1,491,139) Partners Capital Balance as of 6/30/2016 72,259,963

Accrued Unpaid Carried Interest (ITD) 733,758 Uncalled Capital as of 6/30/2016 31,580,769

Fund Level Time Weighted Returns:QTD YTD 1-Year TVPI

GPF II Fund of Funds Gross 4.27% 5.37% 12.70% 1.37xGPF II Fund of Funds Net 3.82% 4.62% 11.24% 1.30x

Property Gross

Fund of Fund Gross

Fund of Fund Net

Fund of Fund Net Net

Fund IRR Inception to Date #DIV/0! 12.69% 10.67% 10.28%

2Q16 Performance Overview Exhibit 8


2Q16 Schedule of Investments Accumulated Accumulated Net

Unfunded Net Realized Unrealized Appreciation/ % of Investment Contributed Investment Gain (Loss) (Depreciation) Partners' Investment

Commitment (A) Capital Commitment (B) on Investments Distributions Cost of Investments Fair Value Equity Geography Strategy

Investments in private equity partnerships:

Sterling Value Add Partners, L.P. 5,600,000$ 3,725,773$ 2,221,572$ 685,836$ (1,697,499)$ 2,714,110$ 1,577,652$ 4,291,762$ 5.9% US RetailWoodbourne Canada Partners II, L.P. 4,937,625 4,937,625 - 224,207 (1,266,771) 3,895,061 286,905 4,181,966 5.8% Canada DiversifiedHemisferio Sul Investimentos Fund IV, LP 5,600,000 4,316,650 1,283,350 11,981 (11,981) 4,316,650 (1,806,708) 2,509,942 3.5% Brazil DiversifiedBayview Opportunity Domestic IIIb, L.P. 5,600,000 5,345,791 254,209 - (1,092,583) 4,253,208 1,409,198 5,662,406 7.8% US Distressed DebtSullivan Debt Fund LP 5,600,000 5,597,822 2,178 1,351,425 (1,351,425) 5,597,820 1,647,376 7,245,198 10.0% US Distressed DebtFortress Japan Opportunity Fund II (Yen B) L.P. 7,412,146 5,515,252 1,896,893 1,025,362 (3,793,863) 2,746,751 1,952,239 4,698,990 6.5% Japan Distressed DebtLubert-Adler Real Estate Fund V, L.P. 629,229 629,229 - 214,300 (310,000) 533,529 500,785 1,034,314 1.4% US DiversifiedLubert-Adler Real Estate Fund VI, L.P. 4,458,061 3,933,497 690,834 1,974,443 (4,454,676) 1,453,264 956,512 2,409,776 3.3% US DiversifiedLubert-Adler Real Estate Fund VI-A, L.P. 1,624,933 1,453,252 290,099 983,686 (1,951,138) 485,800 397,709 883,509 1.2% US DiversifiedTerranum Capital Latin America Real Estate Fund I, L.P. 5,600,000 5,294,319 305,681 21,347 (855,896) 4,459,770 21,488 4,481,258 6.2% Latin America ResidentialKitty Hawk Capital Partners II L.P. 5,793,507 5,159,121 634,386 1,414,864 (2,876,065) 3,697,920 (300,364) 3,397,556 4.7% United Kingom DiversifiedFPA Apartment Opportunity Fund IV-A, L.P. 5,600,000 5,364,705 235,295 2,067,959 (3,267,254) 4,165,410 995,081 5,160,491 7.1% US MultifamilyBlackstone Real Estate Partners Asia L.P. 6,900,000 3,518,165 3,647,319 170,277 (427,065) 3,261,377 1,198,267 4,459,644 6.2% Asia DiversifiedEuropean Property Investors Special Opportunities 3 LP 6,706,338 4,912,112 1,794,227 (58,206) (442,858) 4,411,048 746,647 5,157,695 7.1% Europe DiversifiedJEN IV Co-Invest 2 LP 6,900,000 5,520,000 1,380,000 - (3,218,456) 2,301,544 1,316,399 3,617,943 5.0% US ResidentialEurope Fund III 1,407,949 1,407,949 - 344,849 (1,617,770) 135,028 221,257 356,285 0.5% Europe DiversifiedChina Car Parks Investment Fund L.P. 6,500,000 3,794,739 2,705,261 - - 3,794,739 (230,119) 3,564,620 4.9% China ParkingAlsis Mexico Housing Opportunities Fund Offshore II 5,000,000 3,293,828 1,706,172 - - 3,293,828 (320,666) 2,973,162 4.1% Mexico Multifamily

91,869,788$ 73,719,829$ 19,047,476$ 10,432,330$ (28,635,300)$ 55,516,857$ 10,569,658$ 66,086,517$ 94.2%

(A) Real Estate Global Partnership Fund II, LP's commitments to non USD denominated funds are as follows: Woodbourne Canada Partners II, L.P.: 5.6 million CAD, Fortress Japan Opportunity Fund II (Yen B) L.P. 450,000,000 JPY, Kitty Hawk Capital Partners II L.P.: 3.65 million GBP and European Property Investors Special Opportunities 3 LP: 4.80 million EUR. For purposes of estimating the outstanding capital commitments as of the balance sheet date, the product of the remaining uncalled capital and the period end currency exchange rate is summed with the actual inception-to-date contributions funded in U.S. dollars.

(B) Includes $2,671,439 of recallable distributions.

Exhibit 8


SURS 2Q16 Capital Account Statement

State Universities Retirement System of Illinois Contributed capital Syndication cost Accumulated profit Distributed capital Total partner's equity

Partner's equity at January 1, 2016 39,300,000$ (371,890)$ 9,679,268$ (2,103,307)$ 46,504,071$

Increase in partner's equity from operations:Net investment loss before management fee - - (188,576) - (188,576) Management fee - - (144,375) - (144,375) Net realized gain on investments - - 2,120,865 - 2,120,865 Net change in unrealized appreciation on investments

- - 318,658 - 318,658

Total increase from operations - - 2,106,572 - 2,106,572

Increase in partner's equity from capital transactions:Contributed capital - - - - - Distributed Capital - - - (1,803,846) (1,803,846) Accrued Unpaid Carried Interest - - 221,558 - 221,558 Syndication cost - - - - -

Total increase in partner's equity from capital transactions

- - 221,558 (1,803,846) (1,582,288)

Partner's equity at June 30, 2016 39,300,000$ (371,890)$ 12,007,398$ (3,907,153)$ 47,028,354$

For the Six Months Ended June 30, 2016

Exhibit 8


Courtland Multi-Manager Team Biographies

Exhibit 8


Steven Novick, Principal and Chief Operating Officer, has 40 years of real estate experience in all aspects of investing from property acquisitions and dispositions to portfolio construction. Mr. Novick’s experience is both as a direct investor as well as in the capacity of an advisor and consultant. Mr. Novick is the Chairman of its Investment Committee. Mr. Novick began his real estate career with the United Housing Foundation where he was responsible for various properties located throughout New York City. He then became a Vice President/ Director of Operations at Integrated Resources, where he performed both acquisition and asset management services. At Integrated, Mr. Novick was responsible for overseeing their national portfolio of properties. His responsibilities included establishing operating policies and procedures, developing leasing strategies and implementing national management operations. Mr. Novick left Integrated to become an Executive Vice President/Partner/Director of Asset Management for Urdang and Associates Real Estate Advisors. During his 11 years with Urdang, he participated in growing firm assets from 7 to 120 with a total value of $1.5 billion. Mr. Novick received his B.S. from Long Island University and a C.P.M. from the Institute of Real Estate Management. Mr. Novick is the lead consultant on a number of Courtland clients. Anthony Fragapane, Senior Vice President, has over 22 years of investment and finance experience. Over his career, Mr. Fragapane has worked on 76 distinct investment or dispositions transactions totaling $7.25 billion with an average size over $95 million. These transactions involved a total of over 260 real estate assets and 150 non-real estate assets. Projects have taken the form of discretionary commingled fund raising assignments as well as asset, stock, LLC and partnership/joint venture purchases and sales. Mr. Fragapane acted as principal, issuer advisor, buy-side and sell-side advisor in transactions involving various types of real estate as well as equipment and project finance assets located in the US, UK, the Netherlands, Canada, Australia and Japan. He previously served as Vice President of Farragut Investments Inc., Managing Director of Farragut Capital LLC and Vice President of Dana Commercial Credit Corporation. Mr. Fragapane received his B.B.A. degree, magna cum laude, with a concentration in Finance from the University of Toledo and an M.B.A. from Bowling Green State University. He also served in the United States Marine Corps Reserve. Marc Rivitz, Senior Vice President, has over 15 years of real estate investment and development experience. Mr. Rivitz began his real estate career at Spaulding & Slye Colliers (now Jones Lang LaSalle), where he valued office buildings and development projects with respect to property sales. He also worked with Tishman Speyer Properties in São Paulo, Brazil, where he developed a business plan analyzing Tishman’s entry strategy into the Brazilian residential development market. Prior to joining Courtland, Mr. Rivitz worked with the Trammell Crow Company (acquired by CB Richard Ellis) in Washington, D.C. where he managed their investment sales group which provided valuations and offering memoranda in conjunction with asset dispositions totaling over $1.0 billion. Mr. Rivitz received his B.A. from Cornell University and an M.B.A. from the University of Chicago. Amy Stone, CPA, Fund of Funds Accountant, has over 16 years of experience in asset management and accounting. At Courtland, Mrs. Stone is responsible for the Fund of Funds reporting and operations. She has previous experience on the investment team at Parkwood Corporation and as the controller at FTN Equity Capital Markets. Mrs. Stone received a B.S. in from Michigan State University and completed her accounting coursework at Grand Valley State University in Michigan.

Courtland Biographies Exhibit 8


Andrew Mitro, Vice President, has over seven years of real estate investment experience, all with Courtland. Mr. Mitro is responsible for providing client services including, investment due diligence, financial modeling, portfolio oversight and planning, and general support for a number of Courtland clients. In addition to client responsibilities, Mr. Mitro is in charge of investment manager research at Courtland and is responsible for tracking new investment offerings and managing Courtland’s investment manager databases. Furthermore, Mr. Mitro is tasked with assisting in firm marketing, including overseeing the request for proposal (RFP) response team in the Cleveland office. Mr. Mitro received his B.A. from The Ohio State University and is currently pursuing his Masters of Business Administration degree from the Case Western Reserve University Weatherhead School of Management. Jay Morgan, Senior Advisor, has advised institutional investors for over 20 years. Mr. Morgan was previously Senior Consultant, Director of Research and Principal at Hartland & Co., a regional general consulting firm where he was responsible for servicing public and corporate pension plans, managing a team of manager research analysts, establishing firm-wide tactical and strategic asset allocation targets and ongoing market monitoring. He began his career as a Research Analyst at Leo J. Shapiro & Associates in Chicago where he provided analytical services to companies making real estate site selection decisions as well as venture capital and buyout firms making investment or acquisition decisions. Mr. Morgan holds a Masters of Business Administration degree from the Case Western Reserve University Weatherhead School of Management, with a concentration in Finance. Additionally, Mr. Morgan completed graduate level mathematics studies in Statistics and Quantitative Analytics at the University of Chicago Graduate School of Business. He completed his undergraduate education at Denison University where he earned a B.S. degree with a major in Economics. Mr. Morgan completed part of his undergrad studies at the Université de Syracuse in Strasbourg, France. Thomas Hester, Senior Vice President, joined Courtland Partners, Ltd. in January 2016. He is a senior executive in commercial real estate finance, accounting, compliance and fiduciary duties, with 30 years of institutional real estate and capital markets experience. Mr. Hester has served public and private investment vehicles and sponsors, defined benefit and public pension plans, REIT’s, real estate operating companies and developers, and financial institutions. Mr. Hester also has significant experience in finance and accounting, fiduciary services, strategic planning, capital structuring, regulatory compliance, and valuation and feasibility services. Mr. Hester holds a B.S. in Marketing from San Diego University, and attended University of California, Los Angeles, John E. Anderson Graduate School of Management.



Gianluca Romano, Managing Director -- Europe, Courtland Partners, Ltd. Mr. Romano leads Courtland’s efforts in Europe and is a director of the firms UK subsidiary, Courtland Partners Europe Ltd. In addition to overseeing operations of the London office, he is responsible for advising clients on their European investments and developing relationships with European institutional investors looking to diversify their investments globally. Mr. Romano has over 24 years of consulting and investment management experience. He served as a private equity real estate portfolio manager first with a European asset management company of the Morgan Stanley Real Estate Funds and then with ABN AMRO in its Structured Real Estate Capital group. In these roles, Mr. Romano managed distressed asset portfolios in Europe with approximately €5 billion in gross book value representing over €1 billion of invested equity capital. Other prior experience for Mr. Romano includes serving as the COO of Vision Consulting Ltd. in the UK where he led the firm’s internal restructuring and worked with UK and Irish clients providing services such as the valuation of a UK onshore wind farm and reviewing the regulatory capital requirements for a UK water company. As an advisor to Boston Venture Partners, LLC in the US, Mr. Romano developed a joint venture servicing relationship relating to the firm’s real estate opportunity fund and the financial model for the firm’s real estate debt fund. He was also a Senior Manager with KPMG in the firm’s Milan and New York offices, and held Research Associate positions with the National Economic Research Associates, Inc., and New Windsor Associates. Mr. Romano earned an A.B. in Mathematics and Economics from Duke University, holds a Masters in European Integration from the University of Amsterdam, and a Masters in Economics from Miami University where he was the Charles S. Davis award recipient. He also spent an additional year of graduate study at the London School of Economics concentrating on microeconomics and industrial organization. Mr. Romano is a native English speaker, fluent in Italian, a dual citizen of the US and Italy, and a London resident. Michael R. Humphrey, Analyst and Compliance Associate, joined Courtland Partners, Ltd. in 2015. At Courtland, Mr. Humphrey is responsible for providing client services including, investment due diligence and analysis. During law school, Mr. Humphrey worked as a law clerk with firms in Cleveland and North Carolina, where he was responsible for researching and drafting pleadings, motions, and memoranda regarding corporate law, immigration, real estate, insurance issues, and corporate mergers and acquisitions. Mr. Humphrey holds a J.D., cum laude, from the University of North Carolina School of Law at Chapel Hill and a B.A. from Washington and Lee University.


Exhibit 9

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