los angeles water & power employee’s retirement plan · 5/10/2017 · agenda • hamilton...
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Los Angeles Water & Power Employee’s Retirement PlanMay 10th, 2017
Securities distributed in the United States by Hamilton Lane Securities LLC, member FINRA®, SIPC. Investment management services provided by Hamilton Lane Advisors L.L.C. Please refer to page 45 for contact information.
Agenda
• Hamilton Lane Overview Pg. 1
• Hamilton Lane Investment Process & Performance Pg. 7
• Leveraging the Hamilton Lane Platform Pg. 13
• Market Considerations and Strategy Overview Pg. 17
• LA Water & Power Portfolio Summary Pg. 23
• Pacing Analysis and Pipeline Pg. 33
• Appendix Pg. 39
Hamilton Lane Overview
Proprietary and ConfidentialPage 2
Private Markets Solutions
1 As of December 31, 2016.2 The 2016 capital allocated includes all primary commitments for which Hamilton Lane retains a level of discretion and all advisory client commitments for which Hamilton Lane performed due diligence
and made an investment recommendation. This amount excludes secondary and co-investment commitments.3 As of September 30, 2016. As shown in our discretionary track record in the Appendix.
Hamilton Lane works with sophisticated institutional investors to access the full spectrum of private markets
Firm Spotlight1
• 12 global offices
• 290 employees
• Significant employee ownership
• Nasdaq-Listed: HLNE
• $332B+ assets under management & supervision
• $24.7B in primary commitments in 20162
• $205.8M invested alongside our clients
What We Offer
Advised Solutions
Product Solutions
Technology Solutions
• Fund-of-Funds• Secondary Funds• Co-Investment Funds• Strategic Opportunities Funds
• iLEVEL Solutions• Cobalt
Managed Solutions
• 640+ bps realized outperformance vs MSCI World PME3 Distribution Management
Distressed Debt
Mez
zani
ne
Infrastructure
Secondary
Venture CapitalCo-Investment
Real EstateN
atural Resources
Buyout
PrivateMarkets
Proprietary and Confidential Page 3Page 3
Every Client & Investor is Unique
• Award-winning investment programs
• Many of our clients have been named among the best PE programs in the world
• Leaders in their industries
• Diversified by type, size and geography
• Approximately 60% U.S. clients, 40% non-U.S. clients
*Representative clients and investors were included based on account size, geographic location, and account type. The identification of these clients and investors does not serve as an endorsement of Hamilton Lane or the services provided.
Proprietary and ConfidentialPage 4
Global Presence
As of December 31, 2016
PhiladelphiaLondon
Tel Aviv TokyoSeoul
Hong Kong
New York
Ft. Lauderdale
Rio de Janeiro
San Francisco
San DiegoLas Vegas
Our Clients Our Investments
350Clients & Investors
Longest standing
client1991
Clients & Investors in
countries35
1,300+investment
opportunities in 2016
Capital deployed
across 87 countries
3,200+funds in
database
Our Firm
290Employees
12Offices
21Languages
spoken
2.6M+Miles traveled
in 2016
1,500+Client/GP
meetings in 2016
Proprietary and Confidential Page 5
Dedicated Global Investment Teams
Relationship Management
72
Business Development
19
Product Management
16
Finance17
IT13
Legal & Compliance
20
Human Resources
5
Private markets investing is all that we do
17Investment Committee members
19average years in the PE industry
12average years working together
As of December 31, 2016
Distressed Debt
Mez
zani
ne
Infrastructure
Secondary
Venture CapitalCo-Investment
Real EstateN
aturalR
esources
Buyout
Prim
aries Secondaries C
o-Investment
97Investment
ProfessionalsLegal Research
Hamilton Lane Investment Process & Performance
Proprietary and ConfidentialPage 8
AccessLeading
market position
Viewed as a strategic partner
Manager Selection
Top-tier fund managers
Comprehensive analysis
Market OverlayVintage year diversification
Industry-leading data and market research
Portfolio Construction
Prudent diversification
J-curve mitigation
Value over growth
Building Portfolios Designed to Outperform
Top-Down + Bottom-Up Approach = Outperformance
Proprietary and Confidential Page 9
Consistent, Collaborative Investment Process
*Represents deals reviewed by each investment team and discretionary investments diligenced and completed in 2016
Shared intel, data and resources across Hamilton Lane’s investment and research activities
• Preliminary review of opportunity for investment
Screening
• GP Meetings• Company meetings
• Peer/competitor analysis
Initial Due Diligence
• Site visits• References
• Detailed analytics• GP questionnaire
• Valuation• Pricing
Full Diligence
• In-house legal team seeks to negotiate the best deal for our investors• Significant cost savings to our investors
Legal/Negotiation
• Dedicated client service team provides superior service to investors throughout entire investment lifecycle
Monitoring
Post Diligence Tracking
Diligence
Pr
imary Secondary
Research Co-Investm
ent
Deal Flow*Primary Secondary Co-Invest
703 296 317
Due Diligence
95 87 132
Invested
58 19 5151• Advisory boards • Annual meetings • GP update meetings
Proprietary and ConfidentialPage 10
Hamilton Lane Real Estate AUM 1
Real Estate AUM and Performance
$2.1BDiscretionary Primary/
Secondary AUM
$32.1BAdvisory Primary/Secondary AUS
Size and Scale• Demonstrated track record of strong outperformance driven by an experienced team, implementing a proven
investment process by relying on shared intel and resources to build customized portfolios
Hamilton Lane Real Estate Performance 2as of September 30, 2016
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Hamilton Lane3
1-Year RE Return NCREIF-ODCE4
1-Year Return Hamilton Lane3
3-Year RE ReturnNCREIF-ODCE4
3-Year Return Hamilton Lane3
5-Year RE Return NCREIF-ODCE4
5-Year Return Hamilton Lane3
10-Year RE ReturnNCREIF-ODCE4
10-Year Return
10.2% 9.7%
13.3%
11.6%
13.8%
11.4% 10.6%
4.9%
1 As of December 31, 2016; this does not include one Monitoring & Reporting only client who is still in transition. Total Assets for this client (Market Value + Unfunded) = 55,202.2 million2 Please see endnote in appendix
Leveraging the Hamilton Lane Platform
Proprietary and ConfidentialPage 14
Industry-Leading Data & Market Insights
Dedicated research team leverages our proprietary database to provide clients unique intel and competitive advantages
Representative:
Hamilton Lane Database Data Analytics & Tools Investment Insights & Proprietary Research
01
23
4
5
Team
TrackRecord
RiskProfile
CompetitivePositioning
ValueCreation
General Partner Rating System
Horizon Model
(18)
(50) (65) (72) (76) (78) (79) (80) (80) (80)
(5) (6) (9) (5)
4 14
24 30 39 44
13
44 56
67 79
92 102 109
118 124
(100)
(50)
0
50
100
150
FY Dec-2010
FY Dec-2011
FY Dec-2012
FY Dec-2013
FY Dec-2014
FY Dec-2015
FY Dec-2016
FY Dec-2017
FY Dec-2018
FY Dec-2019
$ in
mill
ion
s
Contributions Net Cash Flow Distributions
60% 55%
76% 64%
22% 35%
12% 23%
18% 10% 12% 13%
-20%
0%
20%
40%
60%
80%
100%
Fund I Fund II Fund III Total
Value Creation
Debt Paydown Multiple Expansion EBITDA Growth
PVFC
PVFC
Where:CFt
= investment cash flow at time t
r = investor’s required rate of returnt = time in years from fund’s first capitalcall to the approriate cash flow dateNAV = investment’s remaining unrealizedvalue at most recent valuation date
=
=
NPV (cash flows)Fund Commitments
Fund Commitments
CFt NAV(1+r)t (1+r)t
HL Deal Manager
SMRRT
Retu
rn
Risk
Venture Capital
Large BuyoutEmerging Markets
SMID Buyout
Turnaround
0
500
1000
1500
2000
2500
3000
3500
In Market
AegonLaSalle
StandardHenderson
CB
Hines
Colyzeo
JER
Doughty
LaSalle UK
Forum
Patron
OrionAREA
Carlyle
Harbert
MGPARedwood
Aberdeen
Schroder
2010
Opportunistic Value Add
2011 2012
Fund
Siz
e ($
mm
)
Funds Coming to Market
01
23
4
5
Team
TrackRecord
RiskProfile
CompetitivePositioning
ValueCreation
General Partner Rating System
Horizon Model
(18)
(50) (65) (72) (76) (78) (79) (80) (80) (80)
(5) (6) (9) (5)
4 14
24 30 39 44
13
44 56
67 79
92 102 109
118 124
(100)
(50)
0
50
100
150
FY Dec-2010
FY Dec-2011
FY Dec-2012
FY Dec-2013
FY Dec-2014
FY Dec-2015
FY Dec-2016
FY Dec-2017
FY Dec-2018
FY Dec-2019
$ in
mill
ion
s
Contributions Net Cash Flow Distributions
60% 55%
76% 64%
22% 35%
12% 23%
18% 10% 12% 13%
-20%
0%
20%
40%
60%
80%
100%
Fund I Fund II Fund III Total
Value Creation
Debt Paydown Multiple Expansion EBITDA Growth
PVFC
PVFC
Where:CFt
= investment cash flow at time t
r = investor’s required rate of returnt = time in years from fund’s first capitalcall to the approriate cash flow dateNAV = investment’s remaining unrealizedvalue at most recent valuation date
=
=
NPV (cash flows)Fund Commitments
Fund Commitments
CFt NAV(1+r)t (1+r)t
HL Deal Manager
SMRRT
Retu
rn
Risk
Venture Capital
Large BuyoutEmerging Markets
SMID Buyout
Turnaround
0
500
1000
1500
2000
2500
3000
3500
In Market
AegonLaSalle
StandardHenderson
CB
Hines
Colyzeo
JER
Doughty
LaSalle UK
Forum
Patron
OrionAREA
Carlyle
Harbert
MGPARedwood
Aberdeen
Schroder
2010
Opportunistic Value Add
2011 2012
Fund
Siz
e ($
mm
)
Funds Coming to Market
$20
$200
$2,000
$20,000
1980 1984 1988 1992 1996 2000 2004 2008 2012
Fund
Siz
e ($
M)
First Fund Takedown Date
Hamilton Lane Fund Investment Database Sample
Source: Hamilton Lane Fund Investment Database. As of December 31, 2013 (May 2014)
Proprietary and Con� dential 1
“
Ri� swith Mario Giannini, CEO
Pet Shop Boys, “Opportunities”
Sell all private credit investments. Now!
That’s the kind of apocalyptic advice I’ve been getting lately from all sorts of investors. It’s the kind of advice being given in the wake of Donald Trump’s election as U.S. President (an event some view as apocalyptic in and of itself ) and the Republicans assuming control of both houses of the U.S. Congress.
This is advice that hinges around two key pieces of logic; one economic, the other political. The economic theory is that the U.S. will embark on a massive program of � scal stimulus involving government spending and tax cuts. This will lead to economic growth and a rise in U.S. interest rates, the latter of which, the view holds, is necessarily bad for credit investing because rising rates mean lower bond prices. The political theory posits that the private credit space has grown in large part because regulation has strangled banks’ lending ability. With the Republicans planning to repeal Dodd-Frank, banks will resurrect lending patterns from a decade ago, e� ectively eliminating private credit providers - like private equity � rms - from the lending landscape.
Continued on page 4
THE SET LISTUpcoming events featuring Hamilton Lane speakers
3
SCALES & MEASURESSnapshots from the Hamilton Lane Fund Investment Database
2
SOUNDING OFFSta� ng for Success: The HumanCapital Factor
7
INSIDE THIS ISSUE
25years in
business
12o� ces
worldwide
$40B+discretionary
AUM
$273B+ advisory
AUS
21languages spoken
285+employees
350+clients/investors
*As of 9/30/16
“
FIRM SPOTLIGHT
Oh, there’s a lot of opportunitiesIf you know when to take them, you know?
There’s a lot of opportunitiesIf there aren’t, you can make them
Make or break them
NOW PLAYINGHamilton Lane� rm news
3
One Presidential Blvd. | 4th Floor | Bala Cynwyd, PA 19004
Annual Market Overview
Industry Papers & Quarterly Newsletters
Hamilton Lane University
01
23
4
5
Team
TrackRecord
RiskProfile
CompetitivePositioning
ValueCreation
General Partner Rating System
Horizon Model
(18)
(50) (65) (72) (76) (78) (79) (80) (80) (80)
(5) (6) (9) (5)
4 14
24 30 39 44
13
44 56
67 79
92 102 109
118 124
(100)
(50)
0
50
100
150
FY Dec-2010
FY Dec-2011
FY Dec-2012
FY Dec-2013
FY Dec-2014
FY Dec-2015
FY Dec-2016
FY Dec-2017
FY Dec-2018
FY Dec-2019
$ in
mill
ion
s
Contributions Net Cash Flow Distributions
60% 55%
76% 64%
22% 35%
12% 23%
18% 10% 12% 13%
-20%
0%
20%
40%
60%
80%
100%
Fund I Fund II Fund III Total
Value Creation
Debt Paydown Multiple Expansion EBITDA Growth
PVFC
PVFC
Where:CFt
= investment cash flow at time t
r = investor’s required rate of returnt = time in years from fund’s first capitalcall to the approriate cash flow dateNAV = investment’s remaining unrealizedvalue at most recent valuation date
=
=
NPV (cash flows)Fund Commitments
Fund Commitments
CFt NAV(1+r)t (1+r)t
HL Deal Manager
SMRRT
Retu
rn
Risk
Venture Capital
Large BuyoutEmerging Markets
SMID Buyout
Turnaround
0
500
1000
1500
2000
2500
3000
3500
In Market
AegonLaSalle
StandardHenderson
CB
Hines
Colyzeo
JER
Doughty
LaSalle UK
Forum
Patron
OrionAREA
Carlyle
Harbert
MGPARedwood
Aberdeen
Schroder
2010
Opportunistic Value Add
2011 2012
Fund
Siz
e ($
mm
)
Funds Coming to Market
1,200GPs
3,200Unique partnerships
$3Tin commitments
40,000Portfolio companies
As of December 31, 2016
Proprietary and Confidential Page 15
Enhanced Transparency
Enhanced Technology
• Highly secure, web-based solution providing 24/7 access to client portfolios
• Unique system automating the collection, storage, analysis and reporting of data to LPs
• Unparalleled flexibility including future enhancements allowing for the exchange of data directly between GPs to LPs for dynamic, detailed information sharing
• Fully integrated with Excel for ease of use
Data Integrity and Controls
Head of Reporting & Analytics Solutions
Data Manager
Data Entry & Integrity
Professionals
Vice President Client Services
Portfolio Reporting
& Analytics Professionals
• Comprehensive controls at every level of portfolio monitoring
• Independent SOC-1 (SSAE16) audited control environment
• 50 experienced professionals with finance and/or accounting background
Customized Performance Reporting
• Customized quarterly reports provide important details on client’s portfolio
• Quantitative and qualitative performance
• Portfolio diversification
• Benchmarking
• Underlying holdings review
TitleSubhead
Client Portfolio Quarterly Report
Proprietary and ConfidentialPage 16
Hamilton Lane monitors over $3 trillion in private markets fund level commitments1
• End-to-end back office solution
• Provides client the ability to focus on investment activities
• Unique system automating the collection, storage, analysis and reporting of data to LP
1 As of December 31, 2016
Customized Performance Reporting
• Quantitative and qualitative performance analysis
• Portfolio diversification• Benchmarking
Cash Management• Transactional data and IRR
calculations• Cash flow review, distribution and
support
Data Collection• Workflow driven data collection for
fund performance and individual portfolio companies
• Seamless data transitions
Market Considerations and Strategy Overview
Proprietary and ConfidentialPage 18
The Real Estate Market Cycle• As market cycles evolve from recovery to growth, to maturity, shifts in strategies are appropriate for each market
phase
Market Considerations
Phase I - Recovery
Long-Term Occupancy Average
• Declining vacancy• New construction
• Increasing vacancy• New construction
• Declining vacancy• No new construction
• Increasing vacancy• More completions
Market Cycle Quadrants
Phase II - Expansion Phase III - Hypersupply
Phase IV - Recession
Source: Mueller, Real Estate Finance, 1995.
Proprietary and Confidential Page 19
Strategy Overview
Core Core-plus Debt Value-add Opportunistic
Property Profiles
• Stabilized• Income producing• Primary markets
• Some leasing risk• Income producing• Some property
improvements
• Often more stabilized or occupied
• In need of renovation or repositioning
• Leasing risk
• Ground up development
• Major repositioning• Entity investment• Loan to own
Occupancy High High / Medium N/A Medium / Low Low / None
Leverage (LTV) <40% 40% to 55% First dollar <80% 55% to 65% 65% to 80%
Target Net Returns Mid to high single digits
High single digits Single digits to low teens
Low teens Mid to high teens
Return Type
• Mostly current income
• Modest appreciation
• Long hold
• Current income• Appreciation• Moderate hold
• Current income / YTM
• Discount to par
• Mainly appreciation• Some income• Short hold
• Property appreciation
• Short hold
Outlook
• Compressed entry yields with returns expected to moderate to historical norms
• Less risk with relative upside potential
• Attractive current cash payment and protected downside position
• Attractive strategy due to mature stage of the recovery; defensive alternative to opportunistic manager
• Higher risk due to position in market cycle and exposure to development with high leverage and vacancy
Sentiment
Proprietary and ConfidentialPage 20
Major economic and structural forces continue to shape the landscape for real estate investment
Strategic approach to late cycle investing appears most attractive
A continued focus on the U.S. and Western Europe; eyeing opportunities globally where sufficient risk premiums exist
• U.S. and Europe still offer a compelling combination of growth and distress
• Lack of necessary risk premium for investing in other global markets
• Demographics continue to play a major role• Technology is serving as a disruptor, creating some clear
winners and losers• Regulation has created both meaningful challenges and
new opportunities
• Moving closer to the middle of the risk spectrum• Taking risks in areas with structural tailwinds is an attractive
approach• Focusing on demographically, technologically, or regulatory driven
strategies should prove beneficial
Key Themes
Proprietary and Confidential Page 21
Move towards the middle of the risk continuum
• Core pricing has risen dramatically due to aggressive capital flows• Mature market stage requires cautionary approach towards highest
risk strategies
Debt as a complement to value add
• Debt strategies provide consistent current yields and downside protection. They serve as a beneficial way to maintain exposure in mature markets
Take risks in areas consistent with structural tailwinds
• Value-add and opportunistic strategies will typically take more risk with occupancy, leverage and development, among other factors.
• Focus on taking those risks in property types and geographies likely to exhibit greater demand drivers
Key Themes
LA Water & Power Portfolio Review
Proprietary and ConfidentialPage 24
Portfolio Summary
Portfolio Summary($ USD in Millions) 9/30/2016Total Partnerships 28Total GP Relationships 19Core Commitments $355.0Value-Add/Opportunistic Commitments $588.8Unfunded Commitments $357.8Net Asset Value $670.5Total Exposure $1,028.3
Historical Commitment Pacing - Excluding Core
$0
$50
$100
$150
$200
$250
2007 2008 2011 2012 2013 2014 2015 2016
Commitment Exposure Vintage Year
Com
mitm
ents
Hamilton Lane portfolio assumptions within this section based on infromation provied within 9/30/2016 from Courtland Partners, Ltd.LA water & Power Total Plan Value as of September 30, 2016
Proprietary and Confidential Page 25
Diversification Review
Portfolio Diversification - Including Core
Based on Remaining Net Asset Value Based on Total Exposure
Portfolio Diversification - Excluding Core
Based on Remaining Net Asset Value Based on Total Exposure
Core64%
Opportunistic15%
Value-Add21%
Core44%
Opportunistic25%
Value-Add31%
Opportunistic43%
Value-Add57%
Opportunistic45%Value-Add
55%
Proprietary and ConfidentialPage 26
Diversification Review (Continued)
Portfolio Diversification - Property Type Portfolio Diversification - Geography
Office35%
Residential23%
Retail17%
Industrial13%
Other9%
Hotel3%
East30%
West29%
South19%
Non-US11%
Midwest8%
US Not Allocated3%
Proprietary and Confidential Page 27
Largest Manager Exposures
Manager Exposures - Excluding Core
Manager % of Total Exposure
Number of Commitments
Strategic Exposure through Manager
Lone Star Funds 25.20% 4 Opportunistic
Mesa West Capital 14.80% 2 Value-Add
Westbrook Partners 10.40% 1 Value-Add
Blackstone 9.70% 2 Opportunistic
Torchlight Investors 9.70% 2 Opportunistic
Almanac 9.10% 2 Value-Add
DRA Advisors 7.50% 2 Value-Add
PGIM Real Estate 6.30% 1 Value-Add
Bristol 4.50% 1 Value-Add
Angelo Gordon 2.80% 1 Value-Add
CB Richard Ellis Strategic Investors 0.00% 1 Value-Add
Proprietary and ConfidentialPage 28
Core Benchmarking Performance
Partnership Inception Year
Remaining Market Value Fund IRR NFI-ODCE NFI-ODCE Spread NCREIF + 50 bps NCREIF + 50 bps
SpreadDimensional Global RE 2013 $30.0M 7.7%
QTD -0.1% 2.2% -2.3% 1.9% -2.0%One-Year 17.7% 10.6% 7.1% 9.7% 8.0%
Three-Year 11.2% 12.6% -1.4% 11.8% -0.6%Five-Year N/A 12.4% N/A 11.7% N/A
Partnership Inception Year
Remaining Market Value Fund IRR NFI-ODCE NFI-ODCE Spread NCREIF + 50 bps NCREIF + 50 bps
SpreadHarrison Street Core
Property 2016 $62.9M N/M
QTD 1.4% 2.2% -0.8% 1.9% -0.5%One-Year N/A 10.6% N/A 9.7% N/A
Three-Year N/A 12.6% N/A 11.8% N/AFive-Year N/A 12.4% N/A 11.7% N/A
Partnership Inception Year
Remaining Market Value Fund IRR NFI-ODCE NFI-ODCE Spread NCREIF + 50 bps NCREIF + 50 bps
SpreadHeitman RE Securities 2013 $28.4M 7.0%
QTD 1.0% 2.2% -1.2% 1.9% -0.9%One-Year 14.0% 10.6% 3.4% 9.7% 4.3%
Three-Year 7.0% 12.6% -5.6% 11.8% -4.8%Five-Year N/A 12.4% N/A 11.7% N/A
Partnership Inception Year
Remaining Market Value Fund IRR NFI-ODCE NFI-ODCE Spread NCREIF + 50 bps NCREIF + 50 bps
SpreadInvesco Core RE USA 2011 $59.0M 10.9%
QTD 1.5% 2.2% -0.7% 1.9% -0.4%One-Year 8.6% 10.6% -2.0% 9.7% -1.1%
Three-Year 11.5% 12.6% -1.1% 11.8% -0.3%Five-Year 11.0% 12.4% -1.4% 11.7% -0.7%
Partnership Inception Year
Remaining Market Value Fund IRR NFI-ODCE NFI-ODCE Spread NCREIF + 50 bps NCREIF + 50 bps
SpreadJamestown Premier
Property 2016 $58.6M N/M
QTD 2.8% 2.2% 0.6% 1.9% 0.9%One-Year N/A 10.6% N/A 9.7% N/A
Three-Year N/A 12.6% N/A 11.8% N/AFive-Year N/A 12.4% N/A 11.7% N/A
Proprietary and Confidential Page 29
Core Benchmarking Performance
Partnership Inception Year
Remaining Market Value Fund IRR NFI-ODCE NFI-ODCE Spread NCREIF + 50 bps NCREIF + 50 bps
SpreadJP Morgan SPF 2007 $74.5M 4.5%
QTD 1.8% 2.2% -0.4% 1.9% -0.1%One-Year 8.6% 10.6% -2.0% 9.7% -1.1%
Three-Year 11.0% 12.6% -1.6% 11.8% -0.8%Five-Year 11.6% 12.4% -0.8% 11.7% -0.1%
Partnership Inception Year
Remaining Market Value Fund IRR NFI-ODCE NFI-ODCE Spread NCREIF + 50 bps NCREIF + 50 bps
SpreadPCCP First Mortgage II 2012 $7.2M 6.0%
QTD 1.5% 2.2% -0.7% 1.9% -0.4%One-Year 6.2% 10.6% -4.4% 9.7% -3.5%
Three-Year 6.3% 12.6% -6.3% 11.8% -5.5%Five-Year N/A 12.4% N/A 11.7% N/A
Partnership Inception Year
Remaining Market Value Fund IRR NFI-ODCE NFI-ODCE Spread NCREIF + 50 bps NCREIF + 50 bps
SpreadPRISA 2006 $80.1M 4.2%
QTD 1.7% 2.2% -0.5% 1.9% -0.2%One-Year 8.7% 10.6% -1.9% 9.7% -1.0%
Three-Year 12.0% 12.6% -0.6% 11.8% 0.2%Five-Year 11.6% 12.4% -0.8% 11.7% -0.1%
Partnership Inception Year
Remaining Market Value Fund IRR NFI-ODCE NFI-ODCE Spread NCREIF + 50 bps NCREIF + 50 bps
SpreadPrologis Targeted US
Logistics 2015 $30.1M 13.7%
QTD 2.9% 2.2% 0.7% 1.9% 1.0%One-Year 13.2% 10.6% 2.6% 9.7% 3.5%
Three-Year N/A 12.6% N/A 11.8% N/AFive-Year N/A 12.4% N/A 11.7% N/A
Proprietary and ConfidentialPage 30
Non-Core Benchmarking Performance
Partnership Vintage Year Commitment ($ in millions) Fund IRR1 NFI-ODCE
Net IRR2Spread vs. NFI ODCE
Value-Add Real EstateCBRE SP V 2007 $20.0 16.2% 4.6% 1,158 bpsPRISA II 2007 21.5 5.7% 4.6% 110 bpsAG CRFP III 2011 20.0 24.5% 12.0% 1,249 bpsBristol Value Fund II 2011 25.0 8.3% 12.0% (370 bps)DRA G&I VII 2011 16.1 18.2% 12.0% 620 bpsAlmanac VI 2012 20.0 17.6% 11.4% 620 bpsMesa West RE Income III 2012 25.0 9.0% 11.4% (240 bps)DRA G&I VIII 2014 25.0 12.7% 15.4% (270 bps)Almanac VII 2015 30.0 10.6% 11.7% (110 bps)Westbrook X 2015 60.0 n/a 11.7% n/aMesa West RE Income IV 2016 60.0 n/a n/a n/a
Opportunistic Real EstateLone Star VII 2010 $10.0 50.3% 12.5% 3,783 bpsLone Star REF II 2010 10.0 27.1% 12.5% 1,463 bpsBlackstone VII 2011 25.0 20.0% 12.0% 800 bpsTorchlight Debt Opportunity IV 2012 25.0 9.5% 11.4% (190 bps)Blackstone Europe IV 2013 25.0 7.3% 11.8% (450 bps)Lone Star REF IV 2015 48.5 11.5% 11.7% (20 bps)Torchlight Debt Opportunity V 2015 30.0 10.7% 11.7% (100 bps)Lone Star REF V 2016 92.7 n/a n/a n/a
1 Performance obtained through Courtland Partners, Ltd. Quarterly report as of 9/30/162 Represents NCREIF-ODCE equal weighted returns; IRRs are calculated on a vintage year basis based on the underlying fund vintage
Proprietary and Confidential Page 31
LA Water & Power Portfolio Considerations
Portfolio Observations and Considerations
• The portfolio is performing nicely, with a quality roster of partnerships
• Prudent use of leverage within the portfolio and across strategies
• Good vintage year diversification since the downturn
• Continue to maintain exposure to new vintages
• Non-Core portfolio is largely comprised of diversified allocator funds
• Consider adding investments with a targeted, property or sector specific approach to complement existing exposures
• Policy concerning portfolio construction of core-plus and public securities positions?
• Consider specific core-plus, public security, and/or debt buckets to facilitate effective risk/return comparisons
• Continue focus on U.S. and selectively adding European exposure
• Focus on increasing exposures to markets with positive net migration, solid job growth, and diversity of industry
• Consider pushing new commitment dollars toward the middle of the risk spectrum
• Focus on strategies with structural demand drivers
Pacing Analysis & Pipeline
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Commitment Pacing
Private Equity Horizon Model AssumptionsAs of September 30, 2016
Total Plan Size $12,191
Expected Plan Growth Rate 7.25%
Current Real Estate as % of Plan 5.5%
Target Allocation 8.0%
What is the Hamilton Lane Horizon Model?
• A proprietary tool that takes into account LA Water & Power’s current exposure to the asset class and determines the investmentpacing moving forward to reach a target exposure
• Forecasts the cash inflows, cash outflows and valuations of the portfolio as future commitments are made
Please see endnotes in Appendix
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Real Estate Commitments
Commitment Pacing - Real Estate
Please see endnotes in Appendix
2017-2021
8% Target AllocationAnnual Commitment Amount Comparison ($ in Million)
Scenario 1: 7.25% Growth Rate
Scenario 3: 7.25% Growth Rate (125% Commitment Pacing) Scenario 4: 5% Growth Rate Scenario 5: 6.25% Growth Rate
Scenario 2: 7.25% Growth Rate (75% Commitment Pacing)
$375
$280
$470
$300 $325
$0
$100
$200
$300
$400
$500
4% 5% 6% 7% 8% 9%
10%
2016 2017 2018 2019 2020 2021
8% Target AllocationPlan Growth Rate Comparison
Scenario 1: 7.25% Growth Rate ($375 million/year) Scenario 4: 5% Growth Rate ($300 million/year) Scenario 5: 6.25% Growth Rate ($325 million/year)
4% 5% 6% 7% 8% 9%
10%
2016 2017 2018 2019 2020 2021
8% Target Allocation7.25% Plan Growth Rate
Scenario 1: $375 million in annual commitments Scenario 2: $280 million (75% Commitment Pacing) Scenario 3: $470 million (125% Commitment Pacing)
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Real Estate Pacing Model Detail
Horizon Model Scenario 1: Runoff, 7.25% Plan Growth Rate
($ millions) 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21
Total Commitments $323 $0 $0 $0 $0 $0
Annual Contributions $114 $139 $79 $48 $20
Annual Distributions $176 $174 $176 $172 $166
Net Cash Flow $62 $35 $97 $124 $147
RE Market Value $652 $635 $649 $613 $552 $472
Overall Plan Value $12,466 $13,370 $14,339 $15,379 $16,494 $17,690
RE Exposure as % of Plan Value 5.2% 4.8% 4.5% 4.0% 3.3% 2.7%
Horizon Model Scenario 2: $370m annual commitments, 7.25% Plan Growth Rate
($ millions) 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21Total Commitments $323 $370 $370 $370 $370 $370
Annual Contributions $174 $335 $362 $389 $380
Annual Distributions $177 $189 $220 $264 $316
Net Cash Flow $4 ($146) ($143) ($124) ($65)
RE Market Value $652 $690 $870 $1,066 $1,258 $1,420
Overall Plan Value $12,466 $13,370 $14,339 $15,379 $16,494 $17,690
RE Exposure as % of Plan Value 5.2% 5.2% 6.1% 6.9% 7.6% 8.0%
Horizon Model Scenario 3: $380m annual commitments, 7.25% Plan Growth Rate
($ millions) 12/31/16 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21
Total Commitments $323 $380 $380 $380 $380 $380
Annual Contributions $175 $340 $370 $398 $390
Annual Distributions $177 $189 $221 $267 $320
Net Cash Flow $2 ($150) ($149) ($131) ($70)
RE Market Value $652 $692 $876 $1,078 $1,277 $1,445
Overall Plan Value $12,466 $13,370 $14,339 $15,379 $16,494 $17,690
RE Exposure as % of Plan Value 5.2% 5.2% 6.1% 7.0% 7.7% 8.2%
Please see endnotes in Appendix
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Potential Funds Coming to Market - Real Estate
Potential 3-Year Value-Add Pipeline2017 2018 2019
Ares European Real Estate Fund V Abacus Multifamily Partners IV Asana Partners Fund IIBKM Industrial Value Fund II AEW Senior Housing Investors IV Colony Distressed & Credit Fund V (Debt)Cabot Industrial Value Fund V AG Opportunistic Whole Loan Fund (Debt) DRA Growth and Income Fund XColony Realty Partners V Blackstone Real Estate Debt Strategies III (Debt) Exeter Industrial Value Fund VCornerstone Enhanced Mortgage Fund II (Debt) Campus-Clarion Student Housing Partners II FCP Realty Fund IIICrow Holdings Realty Partners VIII CenterSquare Value-Added Fund IV Rockwood Capital Real Estate Partners XIEuropean Property Investors Special Opps V Cornerstone Real Estate Fund XI Rubenstein Properties Fund IVHarbert European Real Estate Fund V Covenant Apartment Fund IXHarbert U.S. Real Estate Fund VI Crow Holdings Retail Fund IIIMadison International RE Liquidity Fund VII H/2 Special Opportunities IV (Debt)Prudential Senior Housing Partners VI Invesco Real Estate Fund VRockbridge Hospitality Fund VII PCCP Credit Fund VII (Debt)Walton Street Real Estate Debt Fund II (Debt) ROC Multifamily and Commercial Office Fund IV
Sares-Regis Multifamily Value-Add Fund IIITorchlight Debt Opportunity Fund VI (Debt)Westbrook Real Estate Fund XI
Potential 3-Year Opportunistic Pipeline2017 2018 2019
Brookfield Strategic Real Estate Partners II AG Asia Realty Fund IV Arden Real Estate Partners IIICarlyle Realty Partners VIII Blackstone Real Estate Partners IX Blackstone Real Estate Partners Europe VICIM Fund IX Brockton Capital Fund IV Carmel Partners Investment Fund VIIFortress Real Estate Opps Fund III Fortress Japan Opportunity Fund IV Cerberus Institutional Real Estate Partners IVHarrison Street Real Estate Partners VI JBC Opportunity Fund VI Lone Star X (Debt)Iron Point Real Estate Partners IV Rockpoint Real Estate Fund VI Oaktree Real Estate Opportunities Fund VIIIKayne Anderson Real Estate Partners V Orion European Real Estate Fund VIKKR Real Estate Partners Americas II Related Real Estate Recovery Fund IIIOaktree Real Estate Opportunities Fund VIIOch-Ziff Real Estate IVPatron Capital Partners VIPIMCO Bravo Fund IIIShorenstein Realty Investors XII Starwood Global Opportunity Fund XITPG Real Estate Fund IIITrue North Real Estate Fund IV Virtus Real Estate Capital Fund IIWalton Street Real Estate Fund VIIIWaterton Residential Property Ventures XIII
1 Source: Hamilton Lane fund data base as of December 31, 2016; For illustrative purposes only. investment opportunities are subject to due diligence and not guaranteed
Appendix
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Hamilton Lane Investment Committees
Hartley Rogers ׀ ChairmanPrior: CSFB Equity Partners; Morgan StanleyEducation: Harvard Business School, M.B.A.; Harvard College, A.B.
Mario Giannini ׀ Chief Executive OfficerPrior: Fidelity Bank; IVT GroupEducation: Boston College, J.D.; University of Virginia, Master of Laws; California State University, B.A.
Erik Hirsch ׀ Vice Chairman & Head of Strategic InitiativesPrior: Brown Brothers Harriman; PFMEducation: University of Virginia, B.A.
Kevin Lucey ׀ Chief Operating OfficerPrior: Delaware Investments; Putnam InvestmentsEducation: Merrimack College, B.A.
Juan Delgado-Moreira ׀ Managing Director Prior: Baring Private Equity Partners; SEPIEducation: Universidad Complutense de Madrid, Ph.D. & B.A.
Andrea Kramer ׀ Managing Director Prior: Exelon Capital Partners; Philadelphia Gas WorksEducation: Temple University, M.B.A.; Franklin and Marshall College, B.A.
Michael Kelly ׀ Managing DirectorPrior: Inter Mountain Canola Company; DNA Plant Tech.Education: The College of William and Mary, M.B.A.; Trenton State College, B.S.
Paul Yett ׀ Managing DirectorPrior: Stone Pine Asset Management, LLC; Bramalea U.S. PropertiesEducation: San Diego State University, B.S.
Tara Blackburn ׀ Managing Director Prior: Pacific Corporate Group; Paul Kagan AssociatesEducation: Colorado College, B.A.
Thomas Kerr ׀ Managing Director Prior: BISYS Plan ServicesEducation: Saint Joseph’s University, M.B.A.; Rider University, B.S.
David Helgerson ׀ Managing Director Prior: Morgan Stanley; Credit Suisse First BostonEducation: Duke University, M.B.A.; Swarthmore College, B.A.
Brian Gildea ׀ Managing Director Prior: Bear Stearns Merchant Banking; Freeman SpogliEducation: Georgetown University, B.S.
Jerome Gates ׀ Managing Director Prior: Morgan Stanley Smith Barney; CitigroupEducation: University of Michigan, M.B.A.; Baldwin Wallace College, B.S.; CFP
Steve Brennan ׀ Managing Director Prior: Goldman Sachs; Bank of New YorkEducation: Fordham University, M.B.A.; Loyola College, B.B.A.
Jim Strang ׀ Managing Director Prior: Dunedin LLP; Bain and Company; Gartmore Private EquityEducation: University of Cambridge, Masters; University of Edinburgh, Ph.D. & B.Com
Ricardo Fernandez Jr. ׀ Managing DirectorPrior: Capital Dynamics; Santander Private EquityEducation: Harvard Business School, Exec. Ed; IESE Business School, M.B.A.; IBMEC, B.B.A.
Philadelphia New York Hong Kong San Francisco San Diego London Rio de Janeiro
Jeff Meeker ׀ Managing DirectorPrior: Goldman Sachs; The Perrier Group of AmericaEducation: University of Chicago’s Graduate School of Business, M.B.A.; University of Delaware, B.A.
Andrew Schardt ׀ Managing DirectorPrior: TCG Advisors, Holberg, Inc., Banc of America SecuritiesEducation: Duke University’s Fuqua School of Business, M.B.A.; Cornell University, B.A.
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Real Assets Investment Committee
Biographies
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Biographies
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Biographies
Hartley RogersChairman
As Chairman, Hartley focuses on the firm’s investment activities, client relationships, and strategic initiatives. He is the Co-Head of Hamilton Lane’s co-investment businesses and participates on the firm’s Investment Committees. He joined Hamilton Lane in 2003 and was formerly a Managing Director in the Private Equity Division and Co-Head of the U.S. and Canadian Private Equity Department of Credit Suisse First Boston. He continues to serve as Co-Head of CSFB Equity Partners, a $2.74 billion private equity fund, which is nearing the end of its term, and served as a senior partner and Investment Committee member of DLJ Merchant Banking Partners Ill, a $5.3 billion private equity fund. Prior to joining CSFB in 1997, Hartley was a Managing Director of Morgan Stanley & Co. where he was president of the general partners of the Princes Gate Investors family of private equity funds.
Hartley received an M.B.A. from Harvard Business School, where he was designated a Baker Scholar, and an A.B. from Harvard College.
Mario GianniniCEO
Mario is the Chief Executive Officer of Hamilton Lane and sits on the firm’s Investment Committees. He is responsible for the firm’s strategic direction and oversees the development of the firm’s management structure and process. Mario also plays a significant role in providing client services to the firm’s numerous clients and in marketing the firm’s products and services. In addition, Mario serves on several advisory boards on behalf of Hamilton Lane and its clients, including Thomas H. Lee, TPG Partners and Providence Equity Partners.
Mario received a J.D. from Boston College, a Master of Laws degree from the University of Virginia, and a B.A. from California State University.
Erik HirschVice Chairman & Head of Strategic Initiatives
Erik is the Vice Chairman of Hamilton Lane. In this role, he leads all the firm’s strategic initiatives. Erik also serves on the firm’s Investment Committees, as well as the firm’s Board of Directors.
Erik is the chairman of the board of Bison. Bison is an important strategic technology partner for Hamilton Lane and the two firms together have designed and launched a private markets analytics solution, Cobalt.
Erik is a frequently quoted expert on the private equity industry, both in the print and broadcast media, and is a regular lecturer at the Wharton Business School (University of Pennsylvania).
Prior to joining Hamilton Lane in 1999, Erik was a corporate investment banker in the Mergers & Acquisitions department of Brown Brothers Harriman & Co. He began his career as a municipal financial consultant with Public Financial Management (PFM). At PFM, Erik specialized in asset securitization, sport stadium financings and strategic consulting.
Erik has a B.A. from the University of Virginia.
Jerome GatesManaging Director
Jerry is a Managing Director at Hamilton Lane, where he is responsible for leading the firm’s real assets product area.
Prior to joining Hamilton Lane in 2011, Jerry served as Managing Director and Head of Global Real Estate Investments in the Alternative Investments organization of Morgan Stanley Smith Barney and as the Managing Director and Head of Global Real Estate Investments for Citigroup in Global Wealth Management. Jerry began his career at Citicorp, where he held a variety of positions in investment banking, investment management and corporate finance. Jerry serves as a board member for a number of real estate companies and funds.
Jerry received an M.B.A. from the University of Michigan and a B.S. in Chemistry from Baldwin Wallace College. He is a Certified Financial Planner.
Real Assets Investment Committee
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Biographies
Real Assets Investment Committee
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Biographies
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Biographies
Real Assets Investment Committee (cont.)
Juan Delgado-MoreiraManaging Director
Juan is a Managing Director and Head of Asia at Hamilton Lane, based in the firm’s Hong Kong office, where he is an Investment Committee member and oversees the firm’s Asian investment activities and client relationships.
Prior to joining Hamilton Lane in 2005, Juan was an Investment Manager at Baring Private Equity Partners Ltd. in London, where he focused on mid-market private equity in Europe. Previously, Juan held senior research positions at UK institutions such as the University of Essex and was a lecturer and Fulbright Scholar at Stanford University. Juan began his career as an analyst in Madrid at the SEPI (formerly known as lnstituto Nacional de Industria).
Juan received a Ph.D. in Research Methods/statistics and a B.A. in Political Science and Sociology from the Universidad Complutense de Madrid, Spain. He is a Chartered Financial Analyst, a member of the CFA Institute and the Securities Institute
Andrea KramerManaging Director
Andrea is a Managing Director at Hamilton Lane, where she is responsible for the oversight and management of the firm’s global Fund Investment Team. Andrea is an Investment Committee member and also serves on a number of fund advisory boards.
Prior to joining Hamilton Lane in 2005, Andrea worked as a General Partner at Exelon Capital Partners where she managed investments in the energy technology and enterprise application areas; as a Senior Business Development Manager for Philadelphia Gas Works; and as a Fund Manager for Murex Corporation.
Andrea received an M.B.A. in Finance from Temple University and a B.A. in Economics from Franklin and Marshall College.
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Biographies
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Biographies
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Biographies
Real Asset Investment Team
Michael RyanManaging Director
Mike is a Managing Director at Hamilton Lane, where he is responsible for the firm’s Research Team. In addition, he is active in due diligence for primary fund investment opportunities.
Prior to joining Hamilton Lane in 2008, Mike was a Principal at Capital Z Investment Partners, where he was responsible for sourcing, evaluating and structuring Capital Z’s hedge fund and private equity fund investments. Previously, Mike worked in the Technology Investment Banking and Real Estate Investment Banking groups at Merrill Lynch.
Mike received a B.A. in Economics and Computer Science from Williams College. He also is a CFA charterholder.
Lars Pace Principal
Lars is a Principal on Hamilton Lane’s Real Asset Team, where he is responsible for due diligence of primary fund opportunities in infrastructure and real assets.
Prior to joining Hamilton Lane in 2010, Lars was a portfolio manager at American Beacon Advisors, Inc., where he oversaw a $1 billion portfolio of private equity investments. Previously, Lars was a Financial Analyst with American Airlines Inc. and Ford Motor Company.
Lars received an M.B.A. from the University of Wisconsin-Madison and a B.A. from Duke University.
Robert Flanigan Principal
Bob is a Principal on Hamilton Lane’s Real Estate Investment Team, where he is responsible for the sourcing, evaluation and due diligence of private real estate investment opportunities.
Prior to joining Hamilton Lane in 2015, Bob served as Vice President of Capital Markets at BGL Real Estate Advisors, where he oversaw acquisitions for a private partnership, as well as capital raises for multiple real estate investment banking mandates. Bob previously held positions with The Townsend Group where he managed over a billion dollars of private real estate investment opportunities for institutional client portfolios. Bob was also a member of AIG’s Global Investment Group - originating private real estate debt investments.
He is an active member of the Urban Land Institute and The International Council of Shopping Centers.
Bob received a B.S. in Finance & International Business from The Pennsylvania State University. He is a CFA Charter holder.
Radhika Cobb Vice President
Radhika is a Vice President at Hamilton Lane where she is a member of the firm’s Real Asset Investment team and focuses on due diligence of all real estate investment opportunities on a global basis. Previously, she was on the firm’s Fund Investment Team.
Prior to joining Hamilton Lane in 2010, Radhika worked at American Land Fund, an opportunistic real estate private equity fund where she was responsible for the diligence and pro forma modeling for prospective acquisitions.
Radhika is a member of the Urban Land Institute and serves on a product council.
Radhika received a B.A. from the University of Pennsylvania and has completed coursework at the NYU Schack Institute of Real Estate.
Real Assets Investment Team
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Biographies
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Biographies
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Biographies
Dan Mei LinAnalyst
Dan Mei is an Analyst on Hamilton Lane’s Fund Investment Team where she is responsible for performing due diligence and evaluating fund investment opportunities. In addition, she is active in the due diligence of private real estate investment opportunities.
Dan Mei received a B.A. in Economics from Cornell University.
Leah DowdAnalyst
Leah is an Analyst on Hamilton Lane’s Fund Investment Team where she is responsible for performing due diligence and evaluating fund investment opportunities. In addition, she is active in the due diligence of private real estate investment opportunities. Prior to joining Hamilton Lane in 2015, Leah interned on the Equity, Debt & Structured Finance team at Cushman & Wakefield.
Leah received a B.A. in Economics and Comparative Humanities from Bucknell University.
Real Assets Investment TeamReal Assets Investment Team
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Contact Information
Philadelphia One Presidential Blvd., 4th Floor Bala Cynwyd, PA 19004 USA +1 610 934 2222
Rio de Janeiro Av. Niemeyer 2, Sala 102 Leblon Rio de Janeiro Brasil 22450-220 +55 21 3520 8903
New York 610 Fifth Avenue, Suite 401 New York, NY 10020 USA +1 212 752 7667
Tokyo 17F, Imperial Hotel Tower 1-1-1, Uchisaiwai-cho, Chiyoda-ku Tokyo 100-0011 Japan +81 (0) 3 3580 4000
London 8-10 Great George Street London SW1P 3AE United Kingdom +44 (0) 207 340 0100
San Francisco 200 California Street, Suite 400 San Francisco, CA 94111 USA +1 415 365 1056
Fort Lauderdale 200 SW 1st Avenue, Suite 880 Ft. Lauderdale, FL 33301 USA +1 954 745 2780
Las Vegas 3753 Howard Hughes Parkway Suite 200 Las Vegas, NV 89169 USA +1 702 784 7690
Hong Kong Room 1001-3, 10th Floor St. George’s Building 2 Ice House Street Central Hong Kong, China +852 3987 7191
San Diego 7777 Fay Avenue, Suite 201 La Jolla, CA 92037 USA +1 858 410 9967
Tel Aviv 14 Shenkar Street Nolton House Herzliya Pituach, 46733 P.O. Box 12279 Israel +972 9 958 6670
Seoul 16/17 Fl., Posco P&S Tower Teheran-ro 134, Gangnam-Gu Seoul 135-923, Republic of Korea +82 2 2015 7679
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EndnotesEndnotes1 The Discretionary Track Record includes all commingled funds-of-funds and separate accounts managed by Hamilton Lane for which Hamilton Lane retains a level of discretion for the investment decisions, as of September 30, 2016. The results herein include all secondary fund investments (except as noted below), as well as primary fund investments where a commingled fund-of-funds or multiple accounts participated in an investment. This presentation does not include co-investments or investments made on behalf of two accounts which Hamilton Lane no longer manages. As of September 30, 2016 this presentation represents commitments of $37.2 billion; in total Hamilton Lane had $45.8 billion in commitments for all discretionary accounts, of which $4.3 billion represents co-investments.2 Hamilton Lane IRR represents the pooled IRR for all Discretionary Track Record investments within the relevant vintage year for the period from inception to September 30, 2016. The returns are net of management fees, carried interest and expenses charged by the underlying fund managers, but do not include Hamilton Lane management fees, carried interest or expenses since it is not possible to allocate such items accurately in a composite measured at different points in time. The Hamilton Lane IRR would decrease with the inclusion of these fees, carried interest and expenses. See the hypothetical example below. Hamilton Lane has calculated and presented these returns on a pooled basis using daily cash flows. Performance results for the most recent vintage years are considered less meaningful due to the short measurement period, the incurrence of fees and expenses and the absence of significant distributions.3 The Hamilton Lane Realized IRR represents the pooled IRR for those Discretionary Track Record investments that Hamilton Lane considers realized for The Hamilton Lane Realized IRR represents the pooled IRR for those Discretionary Track Record investments that Hamilton Lane considers realized for purposes of its Discretionary Track Record, which are investments where the underlying investment fund has been fully liquidated, has generated a DPI greater than or equal to 1.0 or has an RVPI less than or equal to 0.2 and is older than 6 years. DPI represents total distributions divided by total invested capital. RVPI represents the remaining market value divided by total invested capital. These realized investments represent $9.6 billion of the $37.2 billion
of total commitments included in the overall Discretionary Track Record. The Hamilton Lane Realized IRR is measured for the 5-, 7- and 10-year periods ending September 30, 2016. These horizon returns are calculated on a point-to-point basis over the specified time periods. The contributions, distributions and remaining asset values at the beginning and ending dates of the horizon periods are used in calculating these returns. The returns are net of management fees, carried interest and expenses charged by the underlying fund managers, but do not include Hamilton Lane management fees, carried interest or expenses since it is not possible to allocate such items accurately in a composite measured at different points in time. The Hamilton Lane Realized IRR would decrease with the inclusion of these fees, carried interest and expenses. See the hypothetical example below. Hamilton Lane has calculated and presented these returns on a pooled basis using daily cash flows, where vintage years with larger amounts committed to investment have a proportionately larger impact on returns.
4 The Hamilton Lane Total IRR represents the pooled IRR for all Discretionary Track Record investments and is measured for the 5-, 7- and 10-year periods ending September 30, 2016. These horizon returns are calculated on a point-to-point basis over the specified time periods. The contributions, distributions and remaining asset values at the beginning and ending dates of the horizon periods are used in calculating these returns. These returns are net of management fees, carried interest and expenses charged by the underlying fund managers, but do not include Hamilton Lane management fees, carried interest or expenses since it is not possible to allocate such items accurately in a composite measured at different points in time. The Hamilton Lane Total IRR would decrease with the inclusion of these fees, carried interest and expenses. See the hypothetical example below. Hamilton Lane has calculated and presented these returns on a pooled basis using daily cash flows, where vintage years with larger amounts committed to investment have a proportionately larger impact on returns.
5 The indices presented for comparison are the S&P 500 and the MSCI World, calculated on a Public Market Equivalent (PME) basis. The PME calculation methodology assumes that capital is being invested in, or withdrawn from, the index on the days the capital was called and distributed from the underlying fund managers. Contributions were scaled by a factor such that the ending portfolio balance would be equal to the private equity net asset value. The scaling factor is found by taking the sum of all shares sold (SS), the sum of all shares purchased (SP) and calculating the number of shares the ending value is worth (SEV). Dividing SEV + SS by SP solves for the PME scaling factor. The scaling of contributions prevents shorting of the public market equivalent portfolio in order to match the performance of an outperforming private equity portfolio. Realized and unrealized amounts were not scaled by this factor. The S&P 500 Total Return Index is a capitalization weighted index that measures the performance of 500 U.S. large cap stocks. The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The indices are presented merely to show general trends in the markets for the relevant periods shown. The comparison between Hamilton Lane performance and the index is not intended to imply that a fund’s or separate account’s portfolio is benchmarked to the index either in composition or level of risk. The index is unmanaged, has no expenses and reflects the reinvestment of dividends and distributions. The spreads are provided for comparative purposes only. A variety of factors may cause an index to be an inaccurate benchmark for any particular fund or separate account and the indices do not necessarily reflect the actual investment strategy of a fund or separate account.
6 The Hamilton Lane IRR for the 2016 Vintage Year, calculated on a non-annualized basis in a manner consistent with the CFA Institute’s standards for private equity performance reporting, as well as on a pooled basis using daily cash flows, is 19.58%. Hamilton Lane does not consider this performance metric meaningful due to the very short measurement period.
7 At the time that this track record was generated, approximately 98% of September 30, 2016 fund reported market valuations have been received from General Partners. For all other Funds represented in this track record, Hamilton Lane uses the “Adjusted Market Value” methodology which reflects the most recent reported market value from the General Partner adjusted for interim net cash flows through September 30, 2016. This performance is subject to change as additional September 30, 2016 reported market values are received from the General Partners. A fund’s market value contains unrealized investments. Valuations of unrealized investments are based on valuations by the underlying managers. The actual realized returns on unrealized investments will depend on factors other than the original cost, such as 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 on which the valuations contained herein are based. Accordingly, the actual realized returns on these unrealized investments may differ materially from the assumed returns indicated herein.
The following hypothetical illustrates the effect of fees on earned returns for both separate accounts and fund-of-funds investment vehicles. The example is solely for illustration purposes and is not intended as a guarantee or prediction of actual returns that would be earned by similar investment vehicles having comparable features. The hypothetical assumes a separate account or fund-of-funds consisting of $100 million in commitments with a fee structure of 1.0% on committed capital during the first four years of the term of the investment and then declining by 10% per year thereafter for the 12-year life of the account or fund. The commitments were made during the first three years in relatively equal increments, and the assumption of returns was based on cash flow assumptions derived from a historical database of actual private equity cash flows. We modeled the impact of fees on four different return streams over a 12-year time period. Under these models, the effect of the fees reduced returns by approximately 2%. This does not include performance fees since the performance of the account or fund would determine the effect such fees would have on returns. Expenses also vary based on the particular investment vehicle and, therefore, were not included in this hypothetical. Both performance fees and expenses would further decrease the return. Past performance of the investments presented herein is not indicative of future results and should not be used as the basis for an investment decision. The information included has not been reviewed or audited by independent public accountants. Certain information included herein has been obtained from sources that Hamilton Lane believes to be reliable but the accuracy of such information cannot be guaranteed.
Page 2Hamilton Lane Discretionary Track Record1,7
As of September 30, 2016Composite Performance
5-Year 7-Year 10-Year
Hamilton Lane Realized IRR3 16.12% 16.65% 12.80%
Spread vs. S&P 500 PME (bps)5 (396) bps 236 bps 418 bps
Spread vs. MSCI World PME (bps)5 63 bps 652 bps 643 bps
Hamilton Lane Total IRR4 12.67% 13.22% 11.04%
Spread vs. S&P 500 PME (bps)5 (349) bps (10) bps 109 bps
Spread vs. MSCI World PME (bps)5 75 bps 396 bps 394 bps
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Endnotes
Page 102The Hamilton Lane Opportunistic and Value-Add Real Estate Track Record includes all Hamilton Lane real estate fund primary investments in accounts in which Hamilton Lane had full discretion that pursue an opportunistic or value-add strategy, including debt real estate funds. The returns exclude secondary investments, investments in Core real estate strategies (defined as: institutional quality, income-producing properties where the return is primarily generated from income rather than appreciation and no more than 40% leverage is used) and one discretionary account that Hamilton Lane did not have full discretion over. Vintage years not shown did not have any investments that met the opportunistic and value-add criteria. 3The Hamilton Lane Total IRR represents the pooled IRR for all Hamilton Lane Real Estate Track Record investments and is measured for 1, 3, 5, and 10 year period ending September 30, 2016. These horizon returns are calculated on a point-to-point basis over the specified time periods. The contributions, distributions and remaining asset values at the beginning and ending dates of the horizon periods are used in calculating these returns. These returns are net of management fees, carried interest and expenses charged by the underlying fund managers, but do not include Hamilton Lane managementfees, carried interest or expenses since it is not possible to allocate such items accurately in a composite measured at different points in time. The Hamilton Lane Total IRR would decrease with theinclusion of these fees, carried interest and expenses. See the hypothetical example below. Hamilton Lane has calculated and presented these returns on a pooled basis using daily cash flows, wherevintage years with larger amounts committed to investment have a proportionately larger impact on returns.4 The NCREIF Property Index is a measure of investment performance of a large pool of individual commerical real estate properties acquired in the private market for investment purposes only The index presented for comparison is the NCREIF Fund Index - Open End Diversified Core Equity (“NFI-ODCE”). The NFI-ODCE index is a quarterly time series composite measure of investmentperformance reporting on both a historical and current basis the results of 34 open-end commingled funds pursuing a core investment strategy. The NFI-ODCE Index is capitalization-weighted and isreported net of fees. Measurement is time-weighted. This time weighted return for the index is presented merely to show general trends in the markets for the relevant periods shown. The comparisonbetween Hamilton Lane performance and the index is not intended to imply that a fund’s or separate account’s portfolio is benchmarked to the index either in composition or level of risk. The spreads areprovided for comparative purposes only. A variety of factors may cause an index to be an inaccurate benchmark for any particular fund or separate account and the indices do not necessarily reflect theactual investment strategy of a fund or separate account. The investment volatility of the NFI-ODCE may differ from that of a fund or separate account. The NFI-ODCE index is being included to provideinvestors with a baseline from which to just the performance information provided herein. While the NFI-ODCE index is focused on Core investment strategies and the Hamilton Lane performanceresults specifically exclude Core investment strategies, we are showing this index as it is a common measure of real estate performance used by investors to gauge their returns. To our knowledge, atthis time there is no publicly available index that focuses specifically on Value Add or Opportunistic strategies. While the Hamilton Lane returns shown herein exclude Core investment strategies, someclients utilize the NFI-ODCE and then overlay a certain performance spread against which they gauge their non-Core real estate investment strategies.
Pages 34-36This presentation has been prepared solely for informational purposes and contains confidential and proprietary information, the disclosure of which could be harmful to Hamilton Lane. Accordingly, the
recipients of this presentation are requested to maintain the confidentiality of the information contained herein. This presentation may not be copied or distributed, in whole or in part, without the prior written consent of Hamilton Lane.
The information contained herein and based upon Hamilton Lane’s proprietary Horizon Model (the “Model”) may include forward-looking statements regarding the Model itself, our opinions, performance, fees, carried interest, dividends, distributions, projected economic benefit or other events. Forward-looking statements include a number of risks, including but not limited to material changes in either the market or economic conditions, uncertainties and other factors beyond our control of the Model or the control of the Funds, the underlying funds or their portfolio companies, which may result in material differences in actual results, performance or other expectations. The Model has been prepared based upon historical private equity fund data and is not intended to indicate future performance of investments made with, or independently of, Hamilton Lane, which may affect any estimated economic benefit shown. Its assumptions are derived from historical private equity investments and are designed to demonstrate potential behaviors of private equity investments. The Model does not represent an actual portfolio managed by Hamilton Lane. Investment results may differ materially.
Fund of Funds is an investment vehicle that invests in other private equity limited partnerships. It can invest in a single strategy or across a variety of strategies. The Fund of Funds category is net of the Fund of Funds manager fees and net of the underlying general partner fees. The opinions, estimates and analyses reflect our current judgment, which may change in the future. Therefore, the Horizon Model is not intended to predict future performance or economic savings and should not be used as the basis for an investment decision.
All opinions, estimates and forecasts of future performance or other events contained herein are based on information available to Hamilton Lane as of the date of this presentation and are subject to change. Past performance of the investments described herein is not indicative of future results. In addition, nothing contained herein shall be deemed to be a prediction of future performance. The information included in this presentation has not been reviewed or audited by independent public accountants. Certain information included herein has been obtained from sources that Hamilton Lane believes to be reliable but the accuracy of such information cannot be guaranteed.
This presentation is not an offer to sell, or a solicitation of any offer to buy, any security or to enter into any agreement with Hamilton Lane or any of its affiliates. Any such offering will be made only at your request.
We do not intend that any public offering will be made by us at any time with respect to any potential transaction discussed in this presentation. Any offering or potential transaction will be made pursuant to separate documentation negotiated between us, which will supersede entirely the information contained herein.
Any tables, graphs or charts relating to past performance included in this presentation are intended only to illustrate the performance of the indices, composites, specific accounts or funds referred to 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.
The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice, or investment recommendations. You should consult your accounting, legal, tax or other advisors about the matters discussed herein.
Proprietary and ConfidentialPage 48
Disclosures
As of April 26, 2017
This presentation has been prepared solely for informational purposes and contains confidential and proprietary information, the disclosure of which could be harmful to Hamilton Lane. Accordingly, the recipients of this presentation are requested to maintain the confidentiality of the information contained herein. This presentation may not be copied or distributed, in whole or in part, without the prior written consent of Hamilton Lane.
The information contained in this presentation may include forward-looking statements regarding returns, performance, opinions, the fund presented or its portfolio companies, or other events contained herein. Forward-looking statements include a number of risks, uncertainties and other factors beyond our control, or the control of the fund or the portfolio companies, which may result in material differences in actual results, performance or other expectations. The opinions, estimates and analyses reflect our current judgment, which may change in the future.
All opinions, estimates and forecasts of future performance or other events contained herein are based on information available to Hamilton Lane as of the date of this presentation and are subject to change. Past performance of the investments described herein is not indicative of future results. In addition, nothing contained herein shall be deemed to be a prediction of future performance. The information included in this presentation has not been reviewed or audited by independent public accountants. Certain information included herein has been obtained from sources that Hamilton Lane believes to be reliable but the accuracy of such information cannot be guaranteed.
This presentation is not an offer to sell, or a solicitation of any offer to buy, any security or to enter into any agreement with Hamilton Lane or any of its affiliates. Any such offering will be made only at your request. We do not intend that any public offering will be made by us at any time with respect to any potential transaction discussed in this presentation. Any offering or potential transaction will be made pursuant to separate documentation negotiated between us, which will supersede entirely the information contained herein.
The S&P 500 Total Return Index is a capitalization-weighted index of 500 U.S. large cap stocks that assumes all dividends and distributions are reinvested.
The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity performance of developed markets.
Certain of the performance results included herein do not reflect the deduction of any applicable advisory or management fees, since it is not possible to allocate such fees accurately in a vintage year presentation or in a composite measured at different points in time. A client’s rate of return will be reduced by any applicable advisory or management fees, carried interest and any expenses incurred. Hamilton Lane’s fees are described in Part 2 of our Form ADV, a copy of which is available upon request.
The following hypothetical example illustrates the effect of fees on earned returns for both separate accounts and fund of funds investment vehicles. The example is solely for illustration purposes and is not intended as a guarantee or prediction of the actual returns that would be earned by similar investment vehicles having comparable features. The example is as follows: The hypothetical separate account or fund of funds consisted of $100 million in commitments with a fee structure of 1.0% on committed capital during the first four years of the term of the investment and then declining by 10% per year thereafter for the 12-year life of the account. The commitments were made during the first three years in relatively equal increments and the assumption of returns was based on cash flow assumptions derived from a historical database of actual private equity cash flows. Hamilton Lane modeled the impact of fees on four different return streams over a 12-year time period. In these examples, the effect of the fees reduced returns by approximately 2%. This does not include performance fees, since the performance of the account would determine the effect such fees would have on returns. Expenses also vary based on the particular investment vehicle and, therefore, were not included in this hypothetical example. Both performance fees and expenses would further decrease the return.
Hamilton Lane (UK) Limited is a wholly-owned subsidiary of Hamilton Lane Advisors, L.L.C. Hamilton Lane (UK) Limited is authorized and regulated by the Financial Conducts Authority. In the UK this communication is directed solely at persons who would be classified as a professional client or eligible counterparty under the FCA Handbook of Rules and Guidance. Its contents are not directed at, may not be suitable for and should not be relied upon by retail clients.
Any tables, graphs or charts relating to past performance included in this presentation are intended only to illustrate the performance of the indices, composites, specific accounts or funds referred to 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.
The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice, or investment recommendations. You should consult your accounting, legal, tax or other advisors about the matters discussed herein.
The calculations contained in this document are made by Hamilton Lane based on information provided by the general partner (e.g. cash flows and valuations), and have not been prepared, reviewed or approved by the general partners.