Agenda Item: 1:05 PM Joint Meeting of the Retirement Boards Meeting Date: January 24, 2018 City of Fresno Retirement Systems Customized Separate Account January 2 4 , 2018 Presented by: Gary Fencik and Miguel Gonzalo, CFA
Confidentiality Statement and Other Important Considerations Adams Street Partners has provided this presentation (the “Presentation”) to the recipient on a confidential and limited basis. This Presentation is not an offer or sale of any security or investment product or investment advice. Offerings are made only pursuant to a private offering memorandum containing important information regarding risk factors, performance and other material aspects of the applicable investment; the information contained herein should not be used or relied upon in connection with the purchase or sale of any security. Statements in the Presentation are made as of the date of the Presentation unless stated otherwise, and there is no implication that the information contained herein is correct as of any time subsequent to such date. All information with respect to primary and secondary investments of Adams Street Partners funds (the “Funds”) or Adams Street Partners’ managed accounts (collectively, the “Investments”), the Investments’ underlying portfolio companies, Fund portfolio companies, and industry data has been obtained from sources believed to be reliable and current, but accuracy cannot be guaranteed. The Presentation contains highly confidential information. In accepting the Presentation, each recipient agrees that it will (i) not copy, reproduce or distribute the Presentation, in whole or in part, to any person or party (including any employee of the recipient other than an employee or other representative directly involved in evaluating the Funds) without the prior written consent of Adams Street Partners, (ii) keep permanently confidential all information not already public contained herein, and (iii) use the Presentation solely for the purpose set forth in the first paragraph. The Presentation is not intended to be relied upon as investment advice. The contents herein are not to be construed as legal, business or tax advice, and each investor should consult its own attorney, business advisor and tax advisor as to legal, business and tax advice. The internal rate of return (IRR) data and multiples provided in the Presentation are calculated as indicated in the applicable notes to the Presentation, which notes are an important component of the Presentation and the performance information contained herein. IRR performance data may include unrealized portfolio investments; there can be no assurance that such unrealized investments will ultimately achieve a liquidation event at the value assigned by Adams Street Partners or the General Partner of the relevant Investment, as applicable. References to the Investments and their underlying portfolio companies and to the Funds should not be considered a recommendation or solicitation for any such Investment, portfolio company, or Fund. Past performance is not a guarantee of future results. Projections or forward looking statements contained in the Presentation are only estimates of future results or events that are based upon assumptions made at the time such projections or statements were developed or made. There can be no assurance that the results set forth in the projections or the events predicted will be attained, and actual results may be significantly different from the projections. Also, general economic factors, which are not predictable, can have a material impact on the reliability of projections or forward looking statements. 2
Introduction Miguel Gonzalo, CFA Gary Fencik Partner & Head of Investment Strategy Partner & Head of Investor and Risk Management, Chicago Relations, Chicago Education: University of Notre Dame, BA Education: Yale University, BA Northwestern University Kellogg School Northwestern University Kellogg of Management, MBA School of Management, MBA Years of Investment/ Years of Investment/ Operational Experience: 23 Operational Experience : 30 3
What We Will Highlight Today ■ Who we are ■ Why portfolio construction matters ■ Selecting the best managers ■ Our investment strategy and outlook ■ Customized Client Case Study: U.S. Public Fund 4
Overview 5
Investing with Adams Street Partners Global Private Markets Investment Manager ■ 100% Employee-owned ■ 45 years of experience ■ $32B AUM Robust Investment Process ■ Integrated and disciplined investment process ■ Top-down, bottom-up portfolio construction ■ Consistent outperformance through market cycles Exemplary Client Service ■ Deep understanding of institutional client needs ■ Commingled products and separately managed accounts ■ Industry-leading analytical tools and data We have never lost capital for any client in any investment program since our inception in 1972 6
Deep Expertise Around the World Jeff Diehl Bon French Managing Partner & Chairman Head of Investments Chicago Chicago FUND INVESTMENTS DIRECT INVESTMENTS Kelly Meldrum Jeff Akers Dave Brett Terry Gould Bill Sacher Head of Primary Head of Head of Head of Head of Investments Secondary Co-Investments Venture/Growth Private Credit Menlo Park Investments Chicago Investments New York Chicago Chicago CO-INVESTMENTS VENTURE/GROWTH PRIVATE CREDIT PRIMARY SECONDARY Matt Morgan Saguna Yar-Ping Sachin Troy Tom Shahab Autrey Holzaepfel Malhotra Soo Barnett Tulyani Bremner Rashid Chicago Boston Menlo Singapore Chicago London Chicago New York Park Jeff Brijesh Sunil Michael Joe Alex Jeff Fred Burgis Jeevarathnam Taylor Goldrick Kessel Diehl Chung Mishra Chicago Menlo Park Menlo Chicago Singapore Chicago Chicago New York Park Greg Adam Jim Ross Benjamin Robin Justin Ling Jen Holden Chenoweth Korczak Morrison Wallwork Murray Lawrence Wu Chicago Chicago London London London Menlo Park New York Singapore Arnaud Alex Pinal Craig Fred Thomas Sergey Andy de Lesch Nicum Waslin Wang Petty Sheshuryak Wang Cremiers Chicago London Chicago Menlo New York London Beijing London Park Kristof Mike Doris Emily (Yiyang) Van Zappert Shiau Overloop Menlo Park New York Guo London Beijing INVESTMENT STRATEGY AND RISK MANAGEMENT Miguel Gonzalo Alex Jana Toby Jian Head of Investment Strategy Storer Tortora True Zhang and Risk Management Chicago Chicago Chicago Chicago Chicago 7
We Have a Global Footprint LONDON 1997 BOSTON 2016 BEIJING MUNICH 2011 2017 NEW YORK CHICAGO 2016 MENLO PARK 1972 SEOUL TOKYO 2006 2017 2014 SINGAPORE 2006 10 30+ 170+ = 1400+ PEOPLE OFFICES NATIONS INVESTED QUALITY OPPORTUNITIES REVIEWED ANNUALLY 8
All Strategies 1 Exceed Public Market Equivalents by 400 bps* As of June 30, 2017 Public Market Equivalent 4 Outperformance 30% Since Inception Since Inception 26.1% 25% 21.2% 21.0% Since Inception 3 Net IRR 10.1%^ 19.4% 20% 8.0%^ 15.5% 9.8% 15% 13.2% 9.9%^ 7.1%^ 10% 6.8% 5% 0% Primary Only 4 Primary Venture Primary Buyout 5 Secondary Only 6 Direct Funds 7 Co-Investment Funds Primary Primary Venture Primary Secondary Venture/ Co-Investment Capital ⁴ 8 Only 5 Capital 5 Buyout 6 Only 2,7 Growth 8 Funds 9 9 The page entitled “Notes to Performance: All Strategies 1 Outperform Public Market Equivalents by 400 bps*,” included in this presentation, is an important component of this performance data.
Constructing a Private Equity Portfolio 10
11 Source: Cartoon Stock
What’s on Investors’ Minds How do I construct a portfolio that: Hits my return targets? Protects me from a market correction? Provides access to the best investments? Maximizes return per unit of risk? 12
Portfolio Construction and Risk Analysis Multi-faceted approach Interim Distribution Period Volatility of Final Outcomes Frequency (%) Quarterly IRR Portfolio TVPI (Net) Risk Analysis and Portfolio Construction Fundamental Liquidity and Investment Analysis Cash Flow Projections Quarterly Cash Flows Macroeconomic input Investment strategy Manager specific factors Capital Calls Distributions Ending NAV 13
Portfolio Construction Basics DEPENDS ON RISK CRITICAL IMPORTANT TOLERANCE Investment Strategy # of Investments Selection Time Subclass Sector Exposure Diversification Geography Company Size A well-constructed portfolio can lead to 50-500+ bps of annual outperformance! 14
Case Study: Constructing a Private Equity Portfolio Helping determine risk appetite for U.S. Public Fund Client Europe 20-30% ■ Assumed Size: $280 million ■ Investment Period: 4-5 Years Asia North 15-25% ■ Net Return Target: Public Markets + 3% America 55-65% Strategy Subclass Buyout Fund Size Venture 10-20% Secondaries Other 20% 10-25% Small 30-50% Co-Investments Large Primaries 10% 50-70% 70% Buyout 60-80% 15 Actual allocations will differ once the Program is fully invested.
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