state universities retirement system of illinois 9- 5b ilsurs mwd... · even the upper end of the...

Finalist CandidatesMWD Private Equity Manager-of Managers Search

Callan Associates Inc.120 North LaSalle Street, Suite 2400Chicago, IL 60602312-346-3536

Callan Associates Inc.101 California Street, Suite 3500San Francisco, CA 94111415-974-5060www.callan.com

June 13, 2013

State Universities Retirement System of Illinois

Exhibit 9

Table of Contents

Background – Search Process 1

Summary Description of Finalist Manager-of-Manager Organizations 2

Credit Suisse Customized Fund Investment Group* 3

Fairview Capital 5

J. P. Morgan Private Equity Group 7

Comparative Staffing Tables and Comments 9

Staffing Comparison 9

Client by Type, Number and Asset Values 10

Discretionary and Non-discretionary Asset Values 11

Private Equity “Model Portfolios” 12

Actual Partnership Investment History 13

Finalists Fee Quotes 14

Projected Fee Comparison 16

Performance History Introduction 18

Vintage Year Analysis 20

Performance Benchmarking 21

Appendix

Appendix A Private Equity Manager-of-Managers Evaluation Criteria

Appendix B Glossary of Private Equity Terms

Appendix C Disclosure Statement

* CFIG is a finalist candidate by the request of the client, SURS. CFIG is currently in the process of being sold by Credit Suisse. CFIG appears to be a qualified manager; however, Callan Associates cannot provide a recommendation of the candidate at this time because of the magnitude of the uncertainty surrounding the outcome of the transaction.

Exhibit 9

1 Knowledge. Experience. Integrity.

State Universities Retirement System of Illinois Minority, Women, and Disabled (MWD)

PRIVATE EQUITY MANAGER-OF-MANAGERS Finalist Candidates

Background – Search Process State Universities Retirement System of Illinois (“SURS”) retained Callan Associates, Inc. to assist in the evaluation and prospective selection of a discretionary private equity manager-of-managers to develop an expanded allocation to emerging manager (minority, women, and disabled, or “MWD”) private equity partnerships for the pension plan’s private equity portfolio. The mandate must comply with Illinois Legislature Statue 40 ILCS 5/1-109.1 (from Ch. 108 1 /2, par. 1-109.1). The Statue specifies that 51% MWD ownership, or more, in the business (i.e., the general partnership) is required for eligibility under the law. SURS Staff, with input from Callan, is proposing an initial commitment of $50 million, and potentially as much as $75 million, to the manager-of-managers to be invested over three to four vintage years. The expected structure for the account will be a fund-of-one vehicle, which is a limited partnership where SURS is the sole limited partner and the manager is the general partner of the limited partnership. Due to the size of the investment program, only one manager should be selected. Even the upper end of the commitment range will not support sufficient diversification for two accounts. Search Process SURS Staff and Callan developed Evaluation Criteria and RFP materials. The Evaluation Criteria appears in Appendix A. Staff posted the RFP to SURS website and advertised the mandate in two trade publications. The search was reported broadly by the investment industry press. Additionally, Callan contacted all the firms that it was aware of that had some history of managing MWD private equity mandates to notify them of the posting. Ten RFP responses were received by SURS Staff and Callan. Below is a list of the responding firms:

Aon-Hewitt Invesco Private Equity Bank of America Merrill Lynch J.P. Morgan Private Equity Group Credit Suisse CFIG Muller & Monroe Fairview Capital Neuberger Berman Northbound Gray & Company StepStone Group

All RFP responses were reviewed jointly by Callan’s Private Markets Group and SURS Staff. Callan conducted supplemental comparative analyses and reviewed them with SURS Staff. Based on a discussion between Callan’s Private Markets Group and SURS Investment Staff, six groups were selected as semi-finalist candidates for Staff Interviews, which were also attended by Callan. The six firms interviewed are considered institutional quality candidates with respect to tenure, track record, client base, and terms and conditions. Through the interview process, Staff selected three firms that it believed best met SURS Evaluation Criteria, as experienced, high-quality investment management service providers in the MWD area. Callan provided input on the available choices.

Exhibit 9


The finalist candidates are: • Credit Suisse Customized Fund Investment Group (CFIG)* • Fairview Capital • J.P. Morgan Private Equity Group

* CFIG is a finalist candidate by the request of the client, SURS. CFIG is currently in the process of being sold by Credit Suisse. CFIG appears to be a qualified manager; however, Callan Associates cannot provide a recommendation of the candidate at this time because of the magnitude of the uncertainty surrounding the outcome of the transaction. Summary Description of Finalist Manager-of-Managers Organizations On the following pages, Callan provides a brief write-up on the three finalist firms based on the managers’ RFP responses (data through June 30, 2012). The summaries focus on five important considerations: • The candidate’s approach to investing in private equity in the MWD niche, and building portfolios, based upon

information provided in the SURS search questionnaire. • The staffing resources of the firm, including number of persons and experience levels. • The firm’s assets under management and a brief profile of the candidate’s client base, including the firm’s

representation of their historical MWD-specific assets and those that qualify under Illinois Legislature Statue 40 ILCS 5/1-109.1.

• Assessment of the firm’s investment experience in private equity and MWD-partnership investing. • Highlights of key strengths and potential weaknesses regarding the firms or their investment practice. Historical performance and fee commentary is provided following the narrative manager profiles.

Exhibit 9


Credit Suite Customized Fund Investment Group* Approach: Credit Suisse Customized Fund Investment Group (CFIG) believes that its comprehensive and proactive deal sourcing process enables it to generate quality deal flow in all key areas of the private equity market, including emerging manager (EM). CFIG’s coverage of the private equity landscape includes both established and emerging managers, leading to meetings with approximately 250 funds per year. Having a large network and asset base helps CFIG to regularly identify and monitor a set of private equity funds that are “best in class” in their respective categories, including MWD. CFIG also has an “open door” policy to encourage emerging managers to meet with CFIG. Through their sourcing efforts, they produce a top-tier fund focus list, which helps CFIG to methodically target and monitor fund managers. CFIG maintains close relationships with these managers through proactive calling and regular participation in conferences and seminars. This proactive sourcing enables CFIG to get a “first look” at upcoming emerging manager (EM) funds and, in some instances, helps CFIG secure preferred terms as one of the earliest institutional investors in a EM fund. CFIG benchmarks EM managers against the broad private equity market place to identify a set of private equity funds that are “best in class.” As CFIG conducts its extensive diligence process, the team employs the same rigorous investment process across all private equity investments, requiring all managers (including EM) to meet the same investment criteria. The team also focuses on partnering with experienced investors who have attributable track records and a demonstrated ability to generate attractive returns as fiduciaries of third-party capital. CFIG estimates that an emerging manager portfolio that would comply with the Illinois Legislative Statue would have the following strategy diversification:

Venture Capital 12% CFIG also proposes doing a small amount in Mid/Small BO 67% direct co-investments, if allowed in the mandate Special Situations 16% Restructuring 5% Total 100%

Organization: CFIG is the private equity fund-of-funds subsidiary of Credit Suisse. The firm was founded in 1999 within DLJ, which was subsequently purchased by Credit Suisse. The firm is a registered investment advisor (RIA) and as of June 30, 2012, had 120 total employees, with 15 Senior Professionals and 35 Junior Professionals. The firm is headquartered in New York, with additional offices located in Austin, Columbus, Detroit, Indianapolis, Los Angeles, Portland, Raleigh, London, Hong Kong, and Singapore. CFIG is currently in the process of being sold by Credit Suisse to a new owner. Asset/Clients: As of June 30, 2012, CFIG’s total private equity assets under management (uncalled capital plus net asset value) amounted to $19.5 billion across 100 client accounts. CFIG’s clientele covers public and corporate pension funds, as well as endowments, foundations, and non-US clients. Representative clients include Michigan Retirement Systems, Virginia Retirement System, Teachers Retirement System of Texas, Mississippi Public Employees Retirement System, Siemens AG, Jewish Federation of Chicago, and Purdue University. Access to Recognized Emerging Manager Partnerships: CFIG is known in the industry for its “Small and Emerging” mandates, and has been tracking the MWD market place for some time. Since 2000, CFIG states that it has logged 307 MWD partnerships (broadly defined), started due diligence on 188 funds, and closed 46 MWD investments totaling $1.5

Exhibit 9


billion. Representative MWD firms are Pharos (late stage VC/Growth), ICV Partners (small buyouts), Clearlake Capital (distressed), Ironwood (mezzanine), and ACON (mid-buyouts). Investment Breadth and Experience: CFIG has been investing in private equity since 1999 (over 20 years) employs a broad-market approach, investing across all key private equity strategies. The firm also specializes in customized mandates including in-state programs, emerging manager programs, and programs targeting other niche strategies or market segments of the private equity market. Additionally, the firm has an international platform and manages broad-market global mandates. Key Positive Attributes: CFIG specializes in custom mandates and has a history of managing various types of small and emerging manager programs. They are familiar quite with the MWD market. The firm has shown positive performance for both its broad MWD composite, and its composite of managers that comply with the Illinois Statute. The firm has a large global practice, which strengthens its overall resources. CFIG’s fees are between the other two candidates. Key Issues: CFIG is in the process of being sold to a new owner by Credit Suisse. If CFIG is chosen, SURS may wish to wait before closing a contract with the manager, resulting in a delay in the start of MWD investment program. The reasons for the potential delay are that SURS may want to ensure that: 1) a sale is consummated to hopefully reduce future instability; 2) the financial structure of the new firm is sound; 3) appropriate economics for the CFIG team are in place to ensure stability of the senior professionals; and 4) that key contracts are in place covering areas such as employment contracts, equity ownership, compensation arrangements – including management fee and carried interest split. Generally, sound fiduciary practice would recommend that these items be satisfactorily in place before SURS completes a contract. Three senior investment professionals have departed the firm in the last three years, although we believe they have been appropriately replaced by new additions or promotions. * CFIG is a finalist candidate by the request of the client, SURS. CFIG is currently in the process of being sold by Credit Suisse. CFIG appears to be a qualified manager; however, Callan Associates cannot provide a recommendation of the candidate at this time because of the magnitude of the uncertainty surrounding the outcome of the transaction.

Exhibit 9


Fairview Capital Approach: Fairview Capital (FV) states that it was formed to counter the paucity of risk capital available to ethnic minority entrepreneurs and businesses, where investment opportunities were present – but largely untapped. It states that it was the first investment manager to provide institutional investors a mechanism to intermediate capital to ethnically diverse markets through fund-of-funds. In 1999, the firm diversified into developed manager asset management by offering top-tier venture capital to institutional investors, and has since added a broader-market approach by incorporating developed corporate finance strategies. FV takes a diversified approach to building portfolios, and includes strategies such as buyout, growth equity, venture capital, subordinated debt/mezzanine, and restructuring/distressed. FV believes that it is beneficial to construct diversified portfolios across multiple dimensions, including strategy and stage. FV believes that its pioneering efforts and long-standing involvement in the MWD sector provides it with strong “reactive” deal flow, while the firm also utilizes its existing network of relationships to ensure that it sees all institutional quality emerging manager opportunities in the market place. Given the relatively small (but growing) universe of emerging managers, FV has found proactive sourcing to be most productive. Sourcing occurs through contacts introduced by its existing stable of emerging managers; through discussions with industry veterans and other “friends of the firm”; and its long-standing involvement with trade and advocacy groups (e.g., NAIC) and emerging manager conferences. These same networks also support a robust and thorough due diligence process. FV estimate that an emerging manager portfolio that would comply with the Illinois Legislative Statue would have the following strategy diversification:

VC Multi-Stage 15% FV proposes a portfolio of primary partnerships VC Later-Stage/Growth 15% for the mandate (no co-investments or Mid/Small Buyouts 60% secondaries) Mezzanine Debt 10% Total 100%

Organization: FV was founded in 1994, and was collaborated and co-located with Bigler/Crossroads, one of the early venture capital fund-of-funds organizations. FV has a strong background in the emerging manager area, as one of the co-founders, JoAnn Price, was one of the early Presidents of the National Association of Investment Companies (NAIC). FV’s first three fund-of-funds were EM oriented. When Bigler/Crossroads was later sold, several Bigler professionals joined Fairview and assisted with the top tier venture capital practice, bolstering the firm’s product diversification and client base. Based on its equity ownership, FV qualifies as a minority-owned business. The firm is a registered investment advisor (RIA), and as of June 30, 2012, had 26 total employees including two senior advisors. Also as of June 30, 3012, the firm had seven Senior Professionals and four Junior Professionals. FV is headquartered in West Hartford, CT, with an additional office in Andover, MA. Asset/Clients: As of June 30, 2012, FV’s total private equity assets under management (uncalled capital plus net asset value) were $2.4 billion, across 29 clients and 19 investment vehicles. FV’s clientele covers public and corporate pension funds, as well as endowments, foundations, and financial institutions. Representative clients include Pennsylvania Employees Retirement Systems, New York State Common Retirement Fund, State of Connecticut, New Jersey Division

Exhibit 9


of Investment, S.C. Johnson & Sons Master Retirement Group Trust, Howard University, and Riverside Church in New York City. Access to Recognized Emerging Manager Partnerships: FV is well-known in the industry as a manager of EM mandates, and has been tracking the MWD market place for 20 years. Since 2000, FV has closed 83 MWD investments totaling $1.2 billion. Representative MWD firms are ACON-Bastion Partner (small buyouts), ICV Partners (small buyouts), SW Pelham (mezzanine), Artiman Ventures (venture capital), and Brightwood Capital (mezzanine). Investment Breadth and Experience: FV was one of the first fund-of-funds focused on the private equity diversity market place. They have raised and deployed 19 investment vehicles across both emerging and developed managers and have overseen the complete liquidation of 11 EM partnerships. Investments have covered the spectrum of buyouts, venture capital, growth equity, and subordinated debt. Fairview has also established a number of single-client customized fund-of-one vehicles, so it is familiar with servicing tailored mandates. Key Positive Attributes: FV is a boutique private equity practice with long-standing focus on MWD investing. The firm itself is a minority-owned enterprise. Fairview has set up several customized emerging manager focused investment programs for large public plan clients. Fairview’s fee proposal does not have a carried interest component, and is the lowest fee proposal of the three finalists. The firm’s senior professionals have been very stable. Key Issues: FV historical performance composite that complies with the Illinois Statute has the lowest return of the three candidates. The firm is a domestic boutique and has smaller staffing than the other two candidates that are large global platforms, but FV also has a smaller asset base and client roster to service.

Exhibit 9


J.P. Morgan Private Equity Group Approach: J.P. Morgan Private Equity Group (JPM) seeks to invest in emerging manager (EM) partnerships led by investment professionals with whom it has had long-standing business relationships, and to pursue the selective identification of new emerging private equity groups with unique skill sets or a differentiated strategy. JPM seeks to invest with partnership sponsors who it expects to develop (or have developed) strong franchises and quality deal flow, and produce (or who have produced) attractive net returns. JPM states that it has developed significant and long-standing relationships with partnership sponsors globally, and is proactive in the MWD market place. They also state that their direct co-investment experience supports an ability to advise partnership sponsors throughout the lifecycle of an emerging partnership’s investment activities, and provides maximum visibility of portfolio activity and performance for its clients. JPM has a strong due diligence process. They state that their due diligence process recognizes that each partnership sponsor is unique, and while the professionals may have similar investment philosophies and comparable business and academic credentials, that investment results by sponsors may vary significantly. Through its due diligence process, it seeks to understand the investment approach of each EM, the discipline with which the investment process is implemented, and the dynamics of the sponsor’s organization in order to evaluate the sponsor’s ability to generate sustainable deal flow and attractive risk adjusted returns. JPM creates portfolios that are diversified by strategy – including early stage, growth equity, buyout, and perhaps mezzanine or distressed debt investments. The firm estimates that an emerging manager portfolio, complying with the Illinois Legislative Statue, would have the following strategy diversification:

Venture Capital 27% JPM also proposes doing a small amount in Growth Equity 20% direct co-investments, if allowed in the mandate. Mid/Small Buyout 53% JPM also proposes doing a small amount in Total 100% secondary investments, if allowed in the mandate.

Organization: JPM’s Private Equity Group is the private equity fund-of-funds subsidiary of J.P. Morgan Asset Management. The team was founded in 1980 as AT&T’s private equity pension staff. In 1997, the team moved to J.P. Morgan Asset Management and began to manage third-party capital. JPM initiated it first emerging manager mandate in 2005. The firm is a registered investment advisor (RIA), and as of June 30, 2012, had 54 total employees, with 40 Senior Professionals and five Junior Professionals. The Private Equity Group is headquartered in New York, with additional offices located in London and Hong Kong. Asset/Clients: As of June 30, 2012, JPM’s total private equity assets under management (uncalled capital plus net asset value) amounted to $23.8 billion, across 130 clients. JPM’s clientele covers public and corporate pension funds, as well as endowments, foundations, and non-US clients. Representative clients include AT&T Corporation, State of Connecticut, Los Angeles County Employees Retirement Association, New York State Common Retirement Fund, and University of Florida. Access to Recognized Emerging Manager Partnerships: Having managed emerging manager programs for major public pension plans since 2005, JPM is well known in the MWD community. As a large global platform, the firm has deep industry contacts and an extensive network of private equity partnership sponsors maintained by the firm’s professionals.

Exhibit 9


The firm states that between January 2005 and September 2012, it received information on close to 1,200 potential EM investments. JPM also commits significant financial and human resources to maintaining direct access to, and support of, the diverse professional organizations through which MWD candidates may be identified. Since 2000, JPM states that it has closed 173 MWD investments, broadly defined, totaling $4.4 billion. Representative MWD firms are Alsop Louis Capital (venture capital), Syndicated Communications (venture capital), FCC Partners (corporate finance), and 21st Century Group (corporate finance). Investment Breadth and Experience: The JPM Private Equity Group is one of the longest standing private equity teams in business today. They take a broad strategy approach to building portfolios, and have been pursuing MWD-specific partnership investments on behalf of public fund clients since 2005. The firm has experience establishing and managing customized mandates in the emerging manager area for large public plan sponsors. The firm also has an international platform and manages broad market global mandates, which strengthens its overall resources. Key Positive Attributes: JPM is a large established platform that has experience in managing MWD-oriented portfolios for large plan sponsors. The firm is large and stable, and has been very focused on the MWD area, as seen by its recent affiliation with Loop Capital to seek to raise a commingled MWD fund. The offering has been subsequently withdrawn due to a lack of investor interest. The firm has shown positive performance for both its broad MWD composite and its composite that complies with the Illinois mandate. Key Issues: JPM’s provided two fee structure options and both are the highest of the three finalist managers.

Exhibit 9


Comparative Tables and Comments It is important to note when reviewing the asset and returns tables in the following sections, that the managers were asked to provide historical MWD asset composites for holdings that would be compliant with the Illinois Statute. We also asked for a second composite of investments that have qualified as client MWD assets with less stringent MWD economic participation. Because the Illinois Statue is significantly more restrictive in its definition of emerging managers than all of the managers’ other MWD client mandates, the managers had not been tracking ownership information specifically at the 51% or more level. The “compliant” composites are conservative, such that unless a manager was certain of the 51%-plus ownership, partnerships were allocated to the non-compliant composite. Therefore, the managers’ historical compliant composites are likely underrepresented if compared with the managers’ actual compliant history. Staffing Comparison*

As of 06/30/2012

• All candidates are well staffed, with a number of key senior investment professionals, particularly in relation to assets managed and client rosters. The teams that will actively manage the MWD portfolios represent a subset of the larger investment teams.

• CFIG is led by five Managing Directors and three Partners. The large investment team, which is comprise of 49 individuals, is supported by 71 dedicated legal, business development and administrative professionals.

• FV’s investment team is comprised of eleven investment professionals. Of the firm’s 26 investment professional, 24

focus on private equity. Two professionals act as senior advisors to the firm.

• FV itself is classified as a minority and women-owned firm.

• JPM’s monitoring and support, marketing and client service professionals are leveraged across the broader firm (J.P. Morgan Asset Management), which help support all of JPM’s private equity product offerings and JPMAM’s other asset class offerings.

• JPM has a large investment team that is heavily weighted with senior professionals.

Position CFIG Fairview JP MorganSr. Professionals/Partners 14 7 40Jr. Professionals 35 4 5Monitoring & Support 36 9 0Marketing/Client Service 17 4 0Other 18 2 9Total 120 26 54

Exhibit 9


Client by Type, Number and Asset The top table below shows the Illinois Statue compliant MWD asset base for all three candidates. The middle table shows the MWD asset base that falls below the Illinois Statutes 51% MWD equity ownership requirement, but fit the definition of MWD under broader client definitions. The bottom table shows the firms developed manager (non-MWD) asset base. The sum of the three tables may not add to the Firm aggregate due to certain overlaps of clients and mandates in dividing the assets into the three composites. As of 06/30/2012 ($ millions)

• The client base and assets under management are substantial for all candidates and include significant exposure to

public pension plans. However, the table above illustrates the differences in assets and constituents among the individual firms.

• CFIG has the largest Illinois Statute compliant portfolio of the three candidates, both in terms of NAV and Uncalled Capital.

• FV has the largest amount of MDW assets relative to its overall asset base.

• JPM’s “non-compliant” MDW portfolio is larger than the other two candidates. It did not historically track 50%+ GP ownership closely for its mandates, so it is likely that some 51%+ compliant partnerships were defaulted into the non-compliant composite.

Client Type # Clients

Uncalled Commit

NAV Uncalled + NAV

# Clients

Uncalled Commit

NAV Uncalled + NAV

# Clients

Uncalled Commit

NAV Uncalled + NAV

Public Pension Plans 47 265 280 545 11 58 145 203 21 29 44 73Corporate Pension Plans 10 22 16 38 4 (0) 1 1 38 39 43 82Foundation/Endowment 2 3 1 4 3 0 3 3 10 0 1 2Financial Institutions 10 7 17 24 1 (0) 2 2 3 2 3 5Other (HNW) 7 7 36 42 2 0 0 0 14 7 11 19

Total 76 304 350 654 21 58 151 209 86 78 102 180


Uncalled Commit

NAV Uncalled + NAV

# Clients

Uncalled Commit

NAV Uncalled + NAV

# Clients

Uncalled Commit

NAV Uncalled + NAV

Public Pension Plans 51 145 377 522 11 364 701 1,064 22 228 692 921Corporate Pension Plans 12 36 61 97 4 8 26 34 49 379 1,611 1,990Foundation/Endowment 1 0 2 2 1 1 2 3 25 47 120 167Financial Institutions 10 12 22 34 0 0 0 0 4 37 115 152Other (HNW) 17 24 70 94 2 0 1 1 18 103 554 656

Total 91 217 531 748 18 373 729 1,102 118 794 3,092 3,886


Uncalled Commit

NAV Uncalled + NAV

# Clients

Uncalled Commit

NAV Uncalled + NAV

# Clients

Uncalled Commit

NAV Uncalled + NAV

Public Pension Plans 29 4,588 5,110 9,698 8 591 1,371 1,962 16 463 1,220 1,683Corporate Pension Plans 7 1,250 940 2,191 4 6 31 37 54 2,915 5,919 8,834Foundation/Endowment 7 126 160 285 1 1 2 3 25 255 360 615Financial Institutions 9 423 642 1,065 0 0 0 0 5 857 2,077 2,934Other (HNW) 39 1,623 1,624 3,247 2 0 1 1 25 3,869 4,885 8,754

Total 91 8,009 8,477 16,486 15 599 1,405 2,003 125 8,359 14,461 22,820

Firm Aggregate 100 $9,477 $10,067 $19,544 29 $749 $1,648 $2,397 130 $8,764 $15,078 $23,842

CFIG - > than 51%

CFIG - 50% or Less

Fairview - > than 51%

Fairview - 50% or less

JP Morgan - >51%

JP Morgan - 50% or less

CFIG - Developed Fairview - Developed JP Morgan - Developed

Exhibit 9


Discretionary and Non-Discretionary Asset Values The top table below shows the Illinois Statue compliant MWD asset base for all three candidates. The middle table shows the MWD asset base that falls below the Illinois Statutes 51% MWD equity ownership requirement, but fit the definition of MWD under broader client definitions. The bottom table shows the firms developed manager (non-MWD) asset base. The sum of the three tables may not add to the Firm aggregate due to certain overlaps of clients and mandates in dividing the assets into the three composites. As of 06/30/2012 ($ million)

• All candidates have meaningful experience, commitments and existing net asset value.

• All assets, and particularly MWD assets, are primarily discretionary for all managers.

• Fund-of-One vehicles are the predominant structures for the MWD mandates.

• As can be seen by the large number of accounts with MWD holdings, many of the MWD partnership investments

made by each firm (particularly CFIG and JPM) are dispersed throughout their portfolios with broader, non-MWD mandates.

Account Type # Accounts

Uncalled Commit

NAV Uncalled + NAV

# Accounts

Uncalled Commit

NAV Uncalled + NAV

# Accounts

Uncalled Commit

NAV Uncalled + NAV

Fund-of-funds 4 6 28 34 3 2 26 29 10 32 61 92Direct Investments 0 0 0 0 0 0 0 0 0 0 0 0Separate Accounts Discretionary 0 0 0 0 0 0 0 0 9 36 31 68 Non-Discretionary 0 0 0 0 0 0 0 0 1 (0) 2 1 Fund-of-Ones 72 298 320 618 9 56 124 180 1 11 9 19

Totals 76 304 348 652 12 58 151 209 21 78 102 180


Uncalled Commit

NAV Uncalled + NAV

# Accounts

Uncalled Commit

NAV Uncalled + NAV

# Accounts

Uncalled Commit

NAV Uncalled + NAV

Fund-of-funds 8 15 36 51 2 76 222 297 24 585 2,405 2,990Direct Investments 0 0 0 0 0 0 0 0 1 0 153 153Separate Accounts Discretionary 0 0 0 0 0 0 0 0 14 174 472 647 Non-Discretionary 0 0 0 0 0 0 0 0 5 5 26 31 Fund-of-Ones 83 201 495 696 11 297 508 805 3 30 36 66

Totals 91 217 531 748 13 373 729 1,102 47 794 3,092 3,886


Uncalled Commit

NAV Uncalled + NAV

# Accounts

Uncalled Commit

NAV Uncalled + NAV

# Accounts

Uncalled Commit

NAV Uncalled + NAV

Fund-of-funds 29 1,204 1,232 2,436 2 62 256 318 113 5,151 10,800 15,951Direct Investments 0 0 0 0 0 0 0 0 0 0 0 0Separate Accounts Discretionary 3 213 31 244 0 0 0 0 15 2,430 2,959 5,389 Non-Discretionary 0 0 0 0 0 0 0 0 6 778 702 1,480 Fund-of-Ones 59 6,592 7,214 13,806 8 537 1,148 1,685 0 0 0 0

Totals 91 8,009 8,477 16,486 10 599 1,405 2,003 134 8,359 14,461 22,820

Firm Aggregate 100 $9,477 $10,067 $19,544 19 $749 $1,648 $2,397 139 $8,764 $15,078 $23,842

CFIG - Greater than 51%

CFIG - Less than 51%

Fairview - Greater than 51% JP Morgan - Greater than 51%

CFIG - Developed

Fairview- Less than 51% JP Morgan- Less than 51%

Fairview - Developed JP Morgan - Developed

Exhibit 9


Private Equity “Model Portfolios” As of 06/30/2012 ($ million) The model portfolios represent the candidates’ suggestions of how they would hypothetically allocate the SURS MWD account. The model portfolios are solely partnerships that comply with the Illinois Statue of 51%+ MWD ownership of the GP. In the RFP, information for a five-year investment period and $60 million of commitments was requested.

• CFIG has the preponderance of assets in the buyout strategy and the two venture capital strategies total to 11%.

• FV has venture capital of about 30%, buyouts account for 60%, and debt-related strategies represent approximately 10%.

• JPM has 27% in venture capital, 54% in buyouts and 20% in growth equity. The firm states in its RFP response that it may also invest in subordinated debt or restructuring strategies, but has not specified an allocation in their model portfolio.

CFIG: 2013-2017Strategy Type % to Strategy # of Invs $ to StrategyVC (Multi‑Stage) 3% 1 $2VC (Later‑Stage/Growth) 9% 3 $6Mid/Small Buyout 67% 11 $40Restructuring/Distressed Debt 4% 1 $2Special Sit./Subordinated Debt 16% 4 $10Total 100% 20 $60

Fairview: 2013-2016Strategy Type % to Strategy # of Invs $ to StrategyVC (Multi‑Stage) 15% 3 $9VC (Later‑Stage/Growth) 15% 3 $9Larger Buyout 10% 1 $6Mid/Small Buyout 50% 10 $30Subordinated Debt 10% 2 $6Total 100% 19 $60

JP Morgan: 2013-2016Strategy Type % to Strategy # of Invs $ to StrategyVC (Early) 20% 2 $12VC (Multi-stage) 7% 1 $4Growth Equity 20% 2 $12Buyout 53% 5 $32Total 100% 10 $60

Exhibit 9


Actual Partnership Investment History MWD Ownership 51%+ and <50% for Each Candidate As of 06/30/2012 The following tables outline diversification of partnership investments made by each candidate since 2003. The top table shows the Illinois Statue compliant MWD asset base for all three candidates. The bottom table shows the MWD asset base that falls below the Illinois Statutes 51% MWD equity ownership requirement, but fit the definition of MWD under broader client definitions.

• Both JPM and Fairview have the largest percentages of venture capital in their historical portfolios and CFIG has

predominantly buyouts.

• Generally, the Model Portfolio’s presented by the managers are congruent with the managers’ historical investment activities.

• JPM is the only firm that lists secondary investments in the MDW area.

MWD partnerships that comply with Illinois Statute = 51% or more MWD ownership of GP

Strategy # Closed $ Closed % # Closed $ Closed % # Closed $ Closed % VC Early‑Stage 1 $20,000,000 14 $107,000,000 1 $50,625,000 VC Multi‑Stage 5 121,472,008 2 44,800,000 3 100,000,001 VC Later‑Stage/Growth 1 23,000,000 3 53,000,000 1 15,150,000Total Venture Capital 7 164,472,008 26% 19 204,800,000 61% 5 165,775,001 85% Larger Buyouts 0 0 0 0 0 0 Mid/Small Buyouts 12 431,859,000 10 122,000,000 1 7,070,000 Industry-focused 0 0 0 0 0 0Total Buyouts 12 431,859,000 67% 10 122,000,000 36% 1 7,070,000 4% Restructuring/Distressed 1 25,000,000 0 0 0 0 Subordinated Debt 1 23,500,000 2 7,500,000 0 0Total Debt-Related 2 48,500,000 8% 2 7,500,000 2% 0 0 0%International 0 0 0 0 2 20,290,043 10%Secondary Purchases 0 0 0 0 1 1,167,921 1%Totals 21 $644,831,008 100% 31 $334,300,000 100% 9 $194,302,965 100%

MWD partnerships that do not comply with Illinois Statute = less than 51% MWD ownership of GP

Strategy # Closed $ Closed % # Closed $ Closed % # Closed $ Closed % VC Early‑Stage 9 $197,302,590 40 $501,603,000 43 $1,127,900,118 VC Multi‑Stage 2 25,000,000 17 305,000,000 20 661,828,826 VC Later‑Stage/Growth 1 7,500,000 4 42,000,000 12 209,358,099Total Venture Capital 12 229,802,590 28% 61 848,603,000 73% 75 1,999,087,043 47% Larger Buyouts 0 0 0 0 1 52,000,000 Mid/Small Buyouts 10 501,411,996 17 289,831,500 20 1,116,734,199 Industry-focused 0 0 0 0 3 140,410,051Total Buyouts 10 501,411,996 60% 17 289,831,500 25% 24 1,309,144,250 31% Restructuring/Distressed 1 69,000,000 0 0 2 76,000,000 Subordinated Debt 2 34,600,000 5 30,000,000 3 53,200,300Total Debt-Related 3 103,600,000 12% 5 30,000,000 3% 5 129,200,300 3%International 0 0 0 0 7 300,350,986 7%Secondary Purchases 0 0 0 0 50 356,636,411 8%Other (Various Strategies) 0 0 0 0 3 115,088,080 3%Totals 25 $834,814,586 100% 83 $1,168,434,500 100% 164 $4,209,507,070 100%

FairviewCFIG JP Morgan

CFIG Fairview JP Morgan

Exhibit 9


Finalist Fee Quotes

The fee proposals from each candidate are:

Credit Suisse Customized Fund Investment Group Management Fee: During the commitment period for the Program, 0.60% per annum of the portion of SURS’s Program commitment allocated to fund investments and 1.00% per annum of the portion of SURS’s Program commitment allocated to co-investments, payable quarterly. Thereafter, 0.60% per annum for fund investments and 1.00% per annum for co-investments of SURS’s pro rata share of the sum of (a) the aggregate capital contributions that have not been returned to SURS or written-off, (b) the aggregate unfunded capital commitments to underlying funds not yet drawn or released, and (c) the aggregate amount of SURS’s commitment reserved by the Program for purposes of making follow-on investments in co-investments, in each case calculated as of the last day of the immediately preceding quarter, payable quarterly. Carried Interest: CFIG would receive 5.0% of overall profits for fund investments after a return to SURS of its aggregated primary fund investment invested capital and management fees, and the payment of the Preferred Return with respect thereto. Additionally, CFIG would receive 10.0% of overall profits with respect to each co-investment after a return to SURS of invested capital and management fees with respect to such co-investment, and the payment of the Preferred Return with respect thereto. The Carried interest is subject to a preferred return to SURS of 8.0% per annum, compounded annually. Organizational and Other Expenses: SURS will bear the Program’s organizational expenses, including legal, registration, accounting, filing and other organizational expenses. The Program would also bear its operational costs, including the cost of identifying, making and monitoring investments and costs associated with reporting, taxes, if any, legal and accounting costs, and the costs of any audits. Fairview Capital The table belows shows the applicable annual rates over a 15-year vehicle life. The rates are applied to the commitment amount. However, during the commitment period, the fee is calculated only on the annual “tranche” committed to the vehicle for that year. For example, with a $50 million commitment and a four-year investment period, the 25 bp fee in year-one would be on $12.5 million; in year-two 25 bp would be applied to $25 million. In year-three, 35 bp would be applied to $35.7 million, and in year-four, 45 bp would be applied to the full $50 million. In the remaining years, the rate (which changes over time) applied would be on the $50 million vehicle commitment.

Fairview Rate Schedule: Year 1 thru 2 0.25% Year 3 0.35% Year 4 0.45% Years 5 thru 11 0.55% Year 12 0.45% Year 13 0.35% Years 14-15 0.25%

Organizational and Other Expenses: Other third-party fees and expenses that will be charged to the Fund include organizational costs (estimated at $80,000 initially, and an additional $15,000 per subsequent tranche); legal fees for partnership closings (estimated at $8,000 each); out of pocket travel expenses (not to exceed 0.05% of commitments annually); and audit and tax services (ranging from between $25,000 and $40,000 annually).

Exhibit 9


JP Morgan Private Equity Group Management Fee and Carried Interest: The fee options applicable to a discretionary separate account in which the Group would act as a fiduciary in making new investments on behalf of the account are as follows (note management fees are charged as commitments are made to investments):

Fee Component Option A Option B Management Fee 0.60% 0.35% Preferred Return/Hurdle 8.00% 8.00% Incentive Fee Partnerships 5.00% 10.00% Secondaries 10.00% 10.00% Directs 20.00% 20.00%

The annual management fee will be level until the fifth year. At that time, the management fee will be reduced each year by 5 percent of the management fee for the preceding year. As such, assuming equal commitments over a 4-year investment period and a total term of 15 years, the average annual management fee will be 0.43% or 0.25% for Option A or B, respectively, with carried interest being additional. Organizational and Other Expenses: In the case of both Option A and Option B, the management fee would be applied to commitment amounts as and when the commitments to investments are closed, not at the commencement of the commitment period. Thus, the dollar amount for fees paid adjusts in the event of increased or decreased commitment activity on an annual basis. There are no charges on drawdowns, and any fees earned by the Group for participation on boards or the like would be applied to lower the management fee paid by SURS. The annual management fee is paid quarterly in arrears. These fees are inclusive of all investment management and monitoring functions as well as reporting and performance measurement described herein. Legal costs relating to establishing the Fund of One Vehicle on behalf of SURS are not included; we estimate these one-time costs to be less than $50,000. Additional ongoing expenses including audit and custody are not included. Legal expenses relating to investments are split pro-rata among each vehicle participating in the deal.

Exhibit 9


Projected Fee Comparison Fee Table 1: Portfolio Returns 1.5x Gross Invested Capital

Note: Callan has used a number of simplifying assumptions to create a cross-comparison of the fee levels proposed by each candidate. Both CFIG and JPM propose preferred returns of 8%. For simplicity of modeling purposes, Callan has modeled two scenarios with gross return multiples of 1.5x and 2.0x. The managers highlight that carried interest would generally not be available below a multiple estimated to be 1.56x, if an 8% hurdle rate was applied. For illustrative purposes, Callan has shown carried interest at both multiple levels, so that SURS can understand its influence regarding manager compensation. The effect of applying a hurdle rate would make the fees in Table 1 considerably lower and the differential between Table 1 and Table 2 much larger. The managers also highlight that co-investments do not carry an underlying fee and carried interest charged by the GP (as is the case with partnership investments), so that can be viewed as providing a savings (or potential return enhancement) by investors.

Commitment Amount: $50,000,000Carry Multiple: 1.50

Fairview CFIG CFIG CFIG JP Morgan JP Morgan JP Morgan JP Morgan JP Morgan JP MorganYear Total Mgmt Fee Carry Total Mgmt Fee B Carry B Option B Mgmt Fee A Carry A Option A

1 2014 31,250 80,000 0 80,000 43,750 0 43,750 75,000 0 75,0002 2015 62,500 160,000 0 160,000 87,500 0 87,500 150,000 0 150,0003 2016 131,250 240,000 0 240,000 131,250 0 131,250 225,000 0 225,0004 2017 225,000 320,000 0 320,000 175,000 0 175,000 300,000 0 300,0005 2018 275,000 272,000 0 272,000 175,000 0 175,000 300,000 0 300,0006 2019 275,000 252,800 0 252,800 172,813 0 172,813 296,250 0 296,2507 2020 275,000 206,400 311,042 517,442 168,547 606,952 775,499 288,938 326,708 615,6458 2021 275,000 188,800 311,042 499,842 162,307 606,952 769,259 278,241 326,708 604,9489 2022 275,000 160,000 311,042 471,042 154,192 606,952 761,143 264,329 326,708 591,03610 2023 275,000 128,000 311,042 439,042 146,482 606,952 753,434 251,112 326,708 577,82011 2024 275,000 96,000 0 96,000 139,158 0 139,158 238,557 0 238,55712 2025 225,000 64,000 0 64,000 132,200 0 132,200 226,629 0 226,62913 2026 175,000 48,000 0 48,000 96,565 0 96,565 165,541 0 165,54114 2027 125,000 32,000 0 32,000 62,713 0 62,713 107,507 0 107,50715 2028 125,000 15,040 0 15,040 30,552 0 30,552 52,375 0 52,375

Total 3,025,000 2,263,040 1,244,168 3,507,208 1,878,028 2,427,807 4,305,835 3,219,477 1,306,831 4,526,309

Yearly Avg. 201,667 150,869 82,945 233,814 125,202 161,854 287,056 214,632 87,122 301,754

Avg. Bps 0.40% 0.30% 0.17% 0.47% 0.25% 0.32% 0.57% 0.43% 0.17% 0.60%

NPV @ 8% 1,640,150 1,443,058 649,225 2,092,266 1,086,057 1,266,849 2,352,888 1,861,800 681,923 2,543,705

Does not include expenses charged to the FOO vehicle, which usually include: organizational expenses, investment due diligence charges, legal, accounting and auditfor both the original investment due diligence and the SURS FOO vehicle.

Exhibit 9


Fee Table 2 Portfolio Returns 1.5x Gross Invested Capital

The table directly above illustrates the potential dollar and percentage increases in carried interest and total fees as a result of a portfolio performance increase from 1.5x to 2.0x invested capital.

Commitment Amount: $50,000,000Carry Multiple: 2.00

Fairview CFIG CFIG CFIG JP Morgan JP Morgan JP Morgan JP Morgan JP Morgan JP MorganYear Mgmt Fee Carry Mgmt Fee A Carry A Option A Mgmt Fee B Carry B Option B

1 2014 31,250 80,000 0 80,000 75,000 0 75,000 43,750 0 43,7502 2015 62,500 160,000 0 160,000 150,000 0 150,000 87,500 0 87,5003 2016 131,250 240,000 0 240,000 225,000 0 225,000 131,250 0 131,2504 2017 225,000 320,000 0 320,000 300,000 0 300,000 175,000 0 175,0005 2018 275,000 272,000 0 272,000 300,000 0 300,000 175,000 0 175,0006 2019 275,000 252,800 0 252,800 296,250 0 296,250 172,813 0 172,8137 2020 275,000 206,400 654,792 861,192 288,938 701,708 990,645 168,547 1,263,202 1,431,7498 2021 275,000 188,800 654,792 843,592 278,241 701,708 979,948 162,307 1,263,202 1,425,5099 2022 275,000 160,000 654,792 814,792 264,329 701,708 966,036 154,192 1,263,202 1,417,39310 2023 275,000 128,000 654,792 782,792 251,112 701,708 952,820 146,482 1,263,202 1,409,68411 2024 275,000 96,000 0 96,000 238,557 0 238,557 139,158 0 139,15812 2025 225,000 64,000 0 64,000 226,629 0 226,629 132,200 0 132,20013 2026 175,000 48,000 0 48,000 165,541 0 165,541 96,565 0 96,56514 2027 125,000 32,000 0 32,000 107,507 0 107,507 62,713 0 62,71315 2028 125,000 15,040 0 15,040 52,375 0 52,375 30,552 0 30,552

Total 3,025,000 2,263,040 2,619,168 4,882,208 3,219,477 2,806,831 6,026,309 1,878,028 5,052,807 6,930,835

Yearly Avg. 201,667 150,869 174,611 325,481 214,632 187,122 401,754 125,202 336,854 462,056

Avg. Bps 0.40% 0.30% 0.35% 0.65% 0.43% 0.37% 0.80% 0.25% 0.67% 0.92%

NPV @ 8% 1,640,150 1,443,058 1,366,701 2,809,741 1,861,800 1,464,624 3,326,406 1,086,057 2,636,575 3,722,614

Does not include expenses charged to the FOO vehicle, which usually include: organizational expenses, investment due diligence charges, legal, accounting and auditfor both the original investment due diligence and the SURS FOO vehicle.

Increase From 1.5x to 2.5xChange Fairview CFIG JPM Option A JPM Option B $ Increase 0 0 1,375,000 1,375,000 0 1,500,000 1,500,000 0 2,625,000 2,625,000% Increase 0% 0% 111% 39% 0% 115% 33% 108% 61%

Exhibit 9


Performance History Introduction Due to the short history of the asset class and fragmented, boutique nature of the manager-of-managers firms, evaluation is largely based on qualitative rather than quantitative considerations. Performance, a primary screen in stock and bond manager searches, may not be particularly accurate or relevant due to the changing nature of the industry. Changes include evolution of investment types, strategies employed by oversight manager firms, the short tenure of many of the firms, and the long life of the partnerships selected. Rather than screening historical performance, the candidates’ investment process and the qualifications of the personnel should be the key evaluation factors. While investment history and performance to date can be examined, it should not carry the same weight as in public security manager searches. Page 21 contains investment history information provided by the finalist candidates. The earliest information begins in 2003, which represents an approximate 10-year history. The returns shown are net of all underlying partnership fees and expenses, but gross of the fund-of-funds managers’ fees and expenses. Clients’ returns were lower than those shown by the amount of the manager-of-managers charges. Comment on Performance Information The three firms have different tenures investing in private equity limited partnerships. Their investment mandates have also differed with respect to the nature of the emerging manager mandates and capital available to invest over time.

Significance of Vintage Year Analysis For comparing the performance of a specific fund or private equity manager, relative to an alternative opportunity set, we find the vintage year analysis methodology to be the most helpful. This comparative technique was developed by Venture Economics, now referred to as “ThomsonONE” after being acquired by Thomson Reuters in 2009, and compares partnerships beginning in the same year against one another. This mitigates the J-curve and market timing effects to better reveal the performance contribution attributable to the investment manager. In Vintage Year Analysis, funds less than four years old are generally considered too immature for the values to be meaningful. This creates somewhat of a dilemma in comparing private equity managers quantitatively. The investment history information is provided as another relevant insight into the manager candidates, but it is suggested that qualitative considerations may be of greater importance than quantitative ones at this stage in the industry’s development. Reading Vintage Year Tables The rate of return calculation represents a dollar-weighted or internal rate of return (IRR). An IRR is a single compound rate of return for an investment starting at a specific time and ending at the current time. The calculation results in a single figure return number, which takes into account the investment’s cash flows and single terminal value. It differs from the publicly traded, time-weighted return calculations, in that the time-weighted returns represent a series of quarterly returns, which have been linked together. The IRR is a project return calculation, as opposed to a periodic return calculation. In reading the tables, one is looking back from the date June 30, 2012. For example, the five funds purchased by FV in 2009 have produced an internal rate of return of 21.6% as of June 30, 2012, viewed as single project over the four-year period. Because the investment is early in its life, it is likely that the IRR will change substantially. As another example, the one partnership purchased by JPM in 2003 has produced a return of 13.3%, viewed as a project over the 10-year period, as of June 30, 2012. Because the partnership has reached maturity (all capital has been drawn and realizations mostly completed) the ultimate return from that partnership will remain closer to the stated figure. Performance Ratios The following tables show three performance ratios defined as follows: DPI = Distribution as a ratio of (divided by) paid-in capital (0.60 means that 60 cents has been distributed back to investors for every dollar contributed).

Exhibit 9


RVPI = Residual Value (NAV) as a ratio of (divided by) paid-in capital (0.70 means that the investment(s) is currently valued at 70 cents for every dollar contributed. TVPI = Total Value (Distributions + Net Asset Value) as a ratio of (divided by) paid-in capital. 1.30 means that the investment has created a total gain of 30 cent for every dollar contributed, however total value is composed of both returned capital and residual value (e.g., DPI of 0.60 + RVPI of 0.70 = TVPI of 1.30). Note: The historical internal rate of return information was provided by the private equity managers and has not been verified by Callan Associates.

Exhibit 9


Vintage Year Analysis VY Firm Track Records Since 2003 51%+ MWD Ownership Compliant Investments As of June 30, 2012 Track records are since 2003, since that is the time when all candidates began to have consistent, meaningful investment programs in the MWD strategy where investments were compliant with the Illinois Statute.

Credit Suisse CFIGVY # Fds Committed Paid-In Distributed NAV DPI RVPI TVPI IRR IRR Qtl

2003 0 - - - - 0.00 0.00 0.00 n/a n/a2004 2 48,605,341 45,403,336 15,016,687 45,492,775 0.33 1.00 1.33 9.21% Second2005 0 - - - - 0.00 0.00 0.00 n/a n/a2006 3 97,000,000 82,406,002 10,034,285 71,354,425 0.12 0.87 0.99 -0.41% Third2007 3 72,500,000 60,208,273 12,792,413 73,098,392 0.21 1.21 1.43 14.85% First2008 1 33,000,000 16,045,548 706,348 6,140,683 0.04 0.38 0.43 -31.33% Fourth2009 5 118,866,667 75,858,662 9,142,169 89,264,488 0.12 1.18 1.30 20.04% First2010 2 51,000,000 16,046,707 101,163 15,888,953 0.01 0.99 1.00 -0.23% Third2011 2 157,167,000 38,016,819 153,649 35,684,336 0.00 0.94 0.94 -12.14% Third6/12 2 57,392,000 586,405 235 224,018 0.00 0.38 0.38 n/m n/m

20 635,531,008 334,571,752 47,946,949 337,148,070 0.14 1.01 1.15 7.38% Second

Fairview Capital VY # Fds Committed Paid-In Distributed NAV DPI RVPI TVPI IRR IRR Qtl

2003 2 10,000,000 9,894,530 7,174,081 171,971 0.73 0.02 0.74 -10.3% Fourth2004 2 20,000,000 19,178,458 1,805,454 7,154,020 0.09 0.37 0.47 -15.8% Fourth2005 1 5,000,000 5,000,000 666,981 4,251,500 0.13 0.85 0.98 -0.3% Third2006 4 50,000,000 43,372,943 8,267,827 33,391,606 0.19 0.77 0.96 -1.4% Third2007 3 37,500,000 35,073,393 5,755,798 33,950,761 0.16 0.97 1.13 5.0% Second2008 2 20,000,000 13,468,965 1,471,513 12,033,640 0.11 0.89 1.00 0.1% Third2009 5 56,000,000 33,609,316 2,075,697 46,247,067 0.06 1.38 1.44 21.6% First2010 2 13,000,000 4,137,400 - 4,029,889 NM NM NM -1.8% Third2011 1 2,500,000 1,200,000 - 1,227,821 NM NM NM 8.1% First6/12 1 2,000,000 200,000 - 191,431 NM NM NM n/m n/m

23 216,000,000 165,135,005 27,217,351 142,649,706 0.16 0.86 1.03 -5.1% Third

J.P. Morgan Private Equity GroupVY # Fds Committed Paid-In Distributed NAV DPI RVPI TVPI IRR IRR Qtl

2003 1 23,000,001 25,941,012 26,547,239 12,656,758 1.02 0.49 1.51 13.3% First2004 0 - - - - 0.00 0.00 0.00 n/m n/m2005 1 1,167,921 1,192,568 2,045,569 997 1.72 0.00 1.72 14.2% First2006 2 53,150,000 47,964,722 28,582,185 38,995,271 0.60 0.81 1.41 11.4% First2007 0 - - - - 0.00 0.00 0.00 n/m n/m2008 1 7,070,000 3,068,009 - 2,776,094 NM NM NM -5.8% Third2009 1 44,000,000 13,813,000 699,530 11,589,927 0.05 0.84 0.89 -10.3% Third2010 3 65,915,043 37,897,823 85,064 36,027,644 0.00 0.95 0.95 -4.5% Third2011 0 - - - - 0.00 0.00 0.00 n/m n/m6/12 0 - - - - 0.00 0.00 0.00 n/m n/m

9 194,302,965 129,877,134 57,959,587 102,046,691 0.45 0.79 1.23 10.1% Second

Exhibit 9


Performance Benchmarking Venture Economics, Inc. is an independent service bureau that collects cash flows and calculated returns (IRRs) from venture capital, buyouts and other private equity funds, that represent a significant portion of the historical institutional private equity market. Thomson Reuters acquired Venture Economics in 2009 and consequently, the performance metrics and database are now referred to as “ThomsonONE,” and the table below shows the return profiles of the ThomsonONE Private Equity Performance Database. The private equity industry standard for performance measurement for private equity managers and individual partnerships is to be compared to, or “benchmarked” against, this database Example: An illustration of a vintage year comparison is that CFIG’s three investments in 2007 have generated a composite IRR of 14.85% as of June 30, 2013. The Upper Quartile Return is 9.53% and the Median return is 1.30%, thereby giving CFIG’s 2007 Funds a first quartile ranking. As mentioned earlier, the returns on partnerships less than four years old are likely to change considerably over the next few years, whereas partnership returns that are approaching 10 years in age should not change materially.

All Private Equity Database Private Equity Performance Database

Vintage Year through June 30, 2012 Year Sample Size Upper Qtl Median Lower Qtl1990 68 17.89 8.06 0.111991 53 22.52 7.43 1.941992 63 25.03 15.75 7.971993 87 24.58 11.23 0.681994 96 28.16 11.31 1.891995 110 29.99 9.35 -0.041996 111 21.72 6.64 -0.291997 180 21.09 5.73 -0.491998 213 11.65 2.22 -2.911999 247 7.76 -0.30 -6.472000 325 7.94 0.15 -3.842001 182 15.69 2.52 -1.732002 116 16.44 1.63 -2.462003 117 11.68 1.94 -3.742004 131 10.68 3.66 -2.522005 155 8.72 3.89 -2.862006 185 8.04 2.42 -3.082007 171 9.53 1.30 -4.322008 168 10.81 1.20 -6.992009 109 7.67 -2.34 -8.282010 49 13.20 4.72 -11.132011 76 5.35 -12.60 -35.46

Exhibit 9


Appendix A

STATE UNIVERSITIES RETIREMENT SYSTEM OF ILLINOIS EVALUTION CRITERIA

PRIVATE EQUITY MANAGER-OF-MANAGERS: EMERGING MANAGER STRATEGY Investment Product Description: The State University Retirement System of Illinois (SURS) seeks a private equity manager-of-managers to develop an Emerging Manager portfolio. Emerging Manager is defined as being focused on Ethnic Minority, Women, and Disabled-own Business Enterprises (MWDBE), and initiatives that will assist SURS to comply with Illinois Pension Code 40 ILCS 5/1-109.1. See the Description of Mandate document for a fuller discussion and examples of suitable direct partnerships and strategies. SURS prefers to invest in a commingled fund-of-funds for diversification enhancement, but will also consider traditional separate account and fund-of-one proposals. Preferred candidates will generally have an established investment history of investing in Emerging Manager partnerships as a stand-alone product. SURS seeks a portfolio that is broadly diversified across key private equity strategies, including venture capital, buyouts, special situations, mezzanine debt and distressed/restructuring partnerships. SURS prefers a portfolio that is primarily (preferably solely) U.S. domestic in geographic orientation, but well-diversified across the various U.S. geographic regions. The key considerations driving the search and selection will be prior experience and success with the Emerging Manager strategy, and appropriate diversification of portfolios by time, industry, and U.S. geography. Evaluation Criteria: SURS will consider the following in making its decision: Organization: The candidate firms will be evaluated for organizational structure, personnel and staffing, systems and infrastructure resources, ownership and succession planning, and organizational stability. Experience: It is preferred that managers have meaningful experience making the specific types of investments intended for the emerging manager private equity program. Asset Base: The manager should have significant discretionary private equity assets under management, preferably with a meaningful asset base in the Emerging Manager strategy being proposed. The firm’s AUM, client base and historical fundraising success, should indicate that the manager and strategy will be viable and growing in the future. Client Base: The manager should have experience managing assets for institutional tax-exempt institutions, with preference given to managers that have public pension funds in their client base. Access to Recognized Top Tier Emerging Manager Partnerships: The manager should exhibit historical investor relationships with partnerships generally recognized as being among the best at employing an Emerging Manager strategy. Investment Breadth and Experience: Demonstrated experience addressing the broad spectrum of private equity strategies in the Emerging Manager universe. Candidates should demonstrate the capability to address strategy diversification across key strategy types such as venture capital, buyouts of various sizes, special situations, mezzanine debt and distressed/restructuring funds. Candidates should demonstrate the capability to address diversification by time (vintage year), industry sector, and U.S. geographic region. International diversification is not necessarily viewed as desirable. Investment Strategy: The investment strategy should be predominantly targeted to investments in primary partnership interests. Funds with modest allocations to other strategies (e.g., secondary purchases or direct co-investments) will also be considered, recognizing that primary partnerships are the key investments sought. Indications of Performance: Tenure in the business, and specifically with the Emerging Manager strategy, where historical performance is sufficient to demonstrate above median returns compared to the Thomson Reuters Private

Exhibit 9


Equity database. Performance will not be the primary decision point in the selection process, but is an important element of the review process. Unrelated Business Income Tax (UBIT): The ability to shield UBIT may be a consideration in the selection process, as well as the intention to avoid or incur UBIT. Allocation Policy: The manager’s investment allocation policy should not disadvantage new clients’ ability to access high quality partnerships with which the manager has a legacy relationship. Fees: Management fees, expenses and other economic considerations must be institutional in composition and amount. Generally, proposals without incentive compensation components are preferred to those with profit participation. Terms and Conditions: Proposals will be reviewed for investor rights and other governance provisions. Proposals with stronger investor governance provisions will be viewed more favorably.

Exhibit 9


Appendix B Terms Glossary Private Equity: Refers to companies that are not quoted on the stock exchange. Investments are typically illiquid in nature. Ownership consists a of limited partnership interest. Vintage Year: The year in which a private equity fund makes its first investment. Commitment: The amount of a limited partner’s obligation to a private equity fund. Capital Contribution: The amount of capital called or drawn down by the general partner for an investment and also fees and expenses. Capital contributed is also referred to as paid-in capital and represents the amount of capital paid-into underlying investments, or companies. Distribution: Are the returns of cash or securities that an investor in a private equity fund receives. Market Value: Represents the carrying value of the investments. Market value is commonly referred to as the NAV, or net asset value. Internal Rate of Return (IRR): Is the preferred return methodology to benchmark the performance of private equity investments. The IRR uses the sum of present value of cash drawdowns (money invested), the present value of distributions (money returned from investments) and the current value of unrealized investments and applies a discount. The IRR is a dollar weighted calculation and accounts for the timing and size of flows, while the TWR seeks to mitigate the timing effects of the associated flows. Pooled IRR: Is an IRR calculation that treats the ThomsonONE database as a single portfolio. The initial database flow represents the total market value of the ThomsonONE database (if any) and the database is then adjusted for periodic flows thereafter. J Curve Effect: Is a common phenomenon associated with a developing private equity program. The actual curve is realized by plotting the return generated by a private equity fund against time (from inception to termination). In the early years of a developing program the payment of management fees out of drawn down notices does not produce an equivalent book value. Consequently, a private equity fund will initially show a negative return. For more detailed information on the “J-Curve Effect” ask to see Callan’s Whitepaper on the topic. Major Private Equity Strategies Venture Capital Seed Capital – An initial state of a company’s growth characterized by a founding management team, business plan

development, prototype development, and beta testing. - Series A – first round of institutional investment capital - Series B – second round of institutional investment capital - Series C – third round of institutional investment capital (Source: VCExperts)

Early Stage – A state of a company that typically has completed its seed stage and has a founding or core senior management team, has proven its concept or completed its beta test, has minimal revenues, and no positive earnings or cash flows. (Source: VCExperts)

Later Stage – A fund investment strategy involving financing for the expansion of a company that is producing, shipping and increasing its sales volume. Later stage funds often provide the financing to help a company achieve critical mass in order to position its shareholders for an Exit Event, e.g., an IPO on strategic sale of the company. (Source: VCExperts)

Exhibit 9


Growth Equity: Growth equity (or growth capital) targets rapidly-growing companies that are considered too established or mature to be considered late-stage venture capital, and also involve little or no financial leverage, so they are not considered control buyouts. The equity investments can be either minority stakes or control positions. Growth equity investments target a broad spectrum industries, including both traditional and developing industry sectors. Buyouts / Corporate Finance Leveraged Buyout – A takeover of a company, using a combination of equity and borrowed funds. Generally, the

target company's assets act as the collateral for the loans taken out by the acquiring group. The acquiring group then repays the loan from the cash flow of the acquired company. For example, a group of investors may borrow funds, using the assets of the company as collateral, in order to take over a company. Or the management of the company may use this vehicle as a means to regain control of the company by converting a company from public to private. In most LBOs, public shareholders receive a premium to the market price of the shares. (Source: VCExperts)

Management Buyout – A private equity firm will often provide financing to enable current operating management to acquire or to buy at least 50 per cent of the business they manage. In return, the private equity firm usually receives a stake in the business. This is one of the least risky types of private equity investment because the company is already established and the managers running it know the business—and the market it operates in—extremely well. (Source: VCExperts)

Allocation by Fund Size:

Small Buyout ($0 to $1 billion) Medium Buyout ($1 billion to $3 billion) Large Buyout ($3 billion to $7 billion) Mega Buyout ($7 billion +)

Mezzanine (subordinated debt): Is an investment strategy that involves providing capital or financing that is below the senior debt and above the equity in terms of liquidation priority. Mezzanine is analogous to private high yield debt and typically includes preferred stock and warrants. The majority of return is provided through coupon payments and equity sweeteners typically help to increase the returns. Mezzanine debt is typically structured as part of an LBO transaction. Distressed Debt: Corporate bonds of companies that have either filed for bankruptcy or appear likely to do so in the near future. The strategy of distressed debt firms involves first becoming a major creditor of the target company by snapping up the company's bonds at pennies on the dollar. This gives them the leverage they need to call most of the shots during either the reorganization, or the liquidation, of the company. In the event of a liquidation, distressed debt firms, by standing ahead of the equity holders in the line to be repaid, often recover all of their money, if not a healthy return on their investment. Usually, however, the more desirable outcome is a reorganization, which allows the company to emerge from bankruptcy protection. As part of these reorganizations, distressed debt firms often forgive the debt obligations of the company, in return for enough equity in the company to compensate them. (This strategy explains why distressed debt firms are considered to be private equity firms.) (Source: VCExperts) Infrastructure: Is an investment strategy involving investment in the equity and debt securities in transportation, communication, sewage, water and electric systems. Managers look to purchase public works/goods and improve efficiency so as to generate returns. Fund-of-Funds: A fund set up to distribute investments among a selection of private equity fund managers, who in turn invest the capital directly. Fund of funds are specialist private equity investors and have existing relationships with firms. They may be able to provide investors with a route to investing in particular funds that would otherwise be closed to them. Investing in fund of funds can also help spread the risk of investing in private equity because they invest the capital in a variety of funds. (Source: VCExperts) Co-Investments/Directs: The syndication of a private equity financing round or an investment by an individual (usually general partners) alongside a private equity fund in a financing round. (Source: VCExperts)

Exhibit 9


Performance Ratios DPI = Distribution as a ratio of (divided by) paid-in capital (0.60 means that 60 cents has been distributed back to investors for every dollar contributed) RVPI = Residual Value (NAV) as a ratio of (divided by) paid-in capital (0.70 means that the investment(s) is currently valued at 70 cents for every dollar contributed. TVPI = Total Value (Distributions + Net Asset Value) as a ratio of (divided by) paid-in capital. 1.30 means that the investment has created a total gain of 30 cent for every dollar contributed, however total value is composed of both returned capital and residual value (e.g., DPI of 0.60 + RVPI of 0.70 = TVPI of 1.30).

Exhibit 9


Appendix C Disclosure Statement Of the investment manager candidates listed in this report, the firms below and/or their Parent / Affiliate companies are those who currently do business with Callan Associates Inc.* In no way do these affiliations affect the outcome or process by which Callan Associates’ investment manager searches are conducted.

Firm

Currently Does

Business with

Callan

Currently Does Not Do

Business with Callan

Parent / Affiliate Does Business with

Callan

Credit Suisse Customized Fund Group (CFIG) X Fairview Partners X J.P. Morgan Private Equity Group X

*Because Callan’s client list of investment managers changes periodically, the above information may not reflect very recent changes that are not yet updated in our database. You are welcome to request a list of Callan’s investment manager clients at any time. Reasonable care has been taken to identify affiliated organizations in this disclosure. Affiliated organizations can include (but are not limited to); holding companies, subsidiaries, and wholly-owned distinct organizations that have financial relationships with Callan's investment manager clients. Organizational affiliations in the investment management industry are complex, fluid, and can involve multiple layers of corporate structure. In some cases Callan may be unaware of the financial relationship between two entities, and hence some affiliated organizations may be inadvertently omitted from this disclosure.

Exhibit 9

List of Managers That Do Business with Callan Associates Inc. Confidential – For Callan Client Use Only

Callan Associates takes its fiduciary and disclosure responsibilities to clients very seriously. The list below is compiled and updated quarterly because we believe our fund sponsor clients should have a clear understanding of the investment management organizations that do business with our firm. As of 03/31/13, Callan provided educational, consulting, software, database, or reporting services to this list of managers through one or more of the following business units: Institutional Consulting Group, Independent Adviser Group, Fund Sponsor Consulting, the Callan Investments Institute and the “Callan College.” Per strict policy these manager relationships do not affect the outcome or process by which any of Callan’s services are conducted.

Fund sponsor clients may request a copy of this list at any time. Fund sponsor clients may also request specific information regarding the fees paid to Callan by the managers employed by their fund. Per company policy, information requests regarding fees are handled exclusively by Callan’s Compliance Department.

Clients should also be aware that Callan maintains an asset management division, the Trust Advisory Group (TAG). TAG specializes in the design, implementation and on-going management of multi-manager portfolios for institutional investors. Currently TAG serves as the sponsor and advisor to a multi-manager small cap equity fund and as the non-discretionary adviser to a series of Target Maturity Funds known as the Callan GlidePath® Funds. We are happy to provide clients with more specific information regarding TAG, including detail on the portfolios that it oversees. Per company policy these requests are handled by TAG’s Chief Investment Officer.

1

Quarterly List as of March 31, 2013

Knowledge. Experience. Integrity.

Manager Name Educational Services Consulting Services 1607 Capital Partners, LLC Y Aberdeen Asset Management Y Acadian Asset Management, Inc. Y Advisory Research Y Affiliated Managers Group Y AllianceBernstein Y Allianz Global Investors U.S. LLC Y Allianz Life Insurance Company of North America Y American Century Investment Management Y Analytic Investors Y Apollo Global Management Y AQR Capital Management Y Ares Management Y Aronson + Johnson + Ortiz Y Artio Global Management (fka, Julius Baer) Y Atalanta Sosnoff Capital, LLC Y Atlanta Capital Management Co., L.L.C. Y Y Aviva Investors North America Y AXA Rosenberg Investment Management Y Babson Capital Management LLC Y Baillie Gifford International LLC Y Baird Advisors Y Y Bank of America Y Barclays Capital Inc. Y Baring Asset Management Y Barrow, Hanley, Mewhinney & Strauss, Inc. Y Batterymarch Financial Management, Inc. Y BlackRock Y BMO Asset Management Y BNY Mellon Asset Management Y Y Boston Company Asset Management, LLC (The) Y Y Brandes Investment Partners, L.P. Y Y Brandywine Global Investment Management, LLC Y Brown Brothers Harriman & Company Y Cadence Capital Management Y

Exhibit 9

List of Managers That Do Business with Callan Associates Inc. (continued)

Confidential – For Callan Client Use Only




2Knowledge. Experience. Integrity.

Capital Guardian Trust Company Y CastleArk Management, LLC Y Causeway Capital Management Y Central Plains Advisors, Inc. Y Chartwell Investment Partners Y Citigroup Asset Management Y ClearBridge Investments, LLC (fka ClearBridge Advisors) Y Columbia Management Investment Advisors, LLC Y Y Columbus Circle Investors Y Y Cooke & Bieler, L.P. Y Corbin Capital Y Cornerstone Capital Management Holdings (fka Madison Square) Y Cramer Rosenthal McGlynn, LLC Y Crawford Investment Council Y Y Credit Suisse Y Crestline Investors Y Cutwater Asset Management Y DB Advisors Y Y Delaware Investments Y Y DePrince, Race & Zollo, Inc. Y Y Diamond Hill Investments Y Dimensional Fund Advisors Inc. Y DSM Capital Partners Y Duff & Phelps Investment Mgmt. Y Eagle Asset Management, Inc. Y EARNEST Partners, LLC Y Eaton Vance Management Y Y Echo Point Investment Management Y Epoch Investment Partners Y Evanston Capital Management Y Fayez Sarofim & Company Y Y Federated Investors Y Fiduciary Asset Management Company Y Y First Eagle Investment Management Y Fisher Investments Y Flag Capital Management Y Franklin Templeton Y Y Fred Alger Management Co., Inc. Y GAM (USA) Inc. Y GE Asset Management Y Y Goldman Sachs Asset Management Y Y Grand-Jean Capital Management Y Y Grantham, Mayo, Van Otterloo & Co., LLC Y Great Lakes Advisors, Inc. Y Y Guggenheim Investments Asset Management (fka Security Global) Y Harbor Capital Y

Exhibit 9







Harris Investment Management, Inc. Y Hartford Investment Management Co. Y Y Henderson Global Investors Y Hermes Investment Management (North America) Ltd. Y Hotchkis & Wiley Y Income Research & Management Y ING Investment Management Y Y INTECH Investment Management Y Invesco Y Y Investec Y Institutional Capital LLC Y Janus Capital Group (fka Janus Capital Management, LLC) Y Y Jensen Investment Management Y J.P. Morgan Asset Management Y Y KeyCorp Y Knightsbridge Asset Management, LLC Y Lazard Asset Management Y Y Lee Munder Capital Group Y Lincoln National Corporation Y Logan Circle Partners, L.P. Y Longview Partners Y Loomis, Sayles & Company, L.P. Y Y Lord Abbett & Company Y Y Los Angeles Capital Management Y LSV Asset Management Y Lyrical Partners Y MacKay Shields LLC Y Y Man Investments Y Manulife Asset Management Y Marvin & Palmer Associates, Inc. Y Metropolitan Life Insurance Company Y Metropolitan West Capital Management, LLC Y MFS Investment Management Y Y Mondrian Investment Partners Limited Y Y Montag & Caldwell, Inc. Y Y Morgan Stanley Alternative Investment Partners Y Morgan Stanley Investment Management Y Y Mountain Lake Investment Management LLC Y Newton Capital Management Y Neuberger Berman, LLC (fka, Lehman Brothers) Y Y Northern Lights Capital Group Y Northern Trust Global Investment Services Y Y Northern Trust Value Investors Y Nuveen Investments Institutional Services Group LLC Y Y OFI Institutional Asset Management Y Old Mutual Asset Management Y

Exhibit 9







Old Mutual International Y OppenheimerFunds, Inc. Y Pacific Investment Management Company Y Palisade Capital Management LLC Y Partners Group Y Peregrine Capital Management, Inc. Y Perkins Investment Management Y Philadelphia International Advisors, LP Y PineBridge Investments (formerly AIG) Y Pioneer Investment Management, Inc. Y PNC Capital Advisors (fka Allegiant Asset Mgmt) Y Y

Principal Global Investors Y Y Private Advisors Y Prudential Fixed Income Y Prudential Investment Management, Inc. Y Y Putnam Investments, LLC Y Pyramis Global Advisors Y Rainier Investment Management Y RBC Global Asset Management (U.S.) Inc. Y Regions Financial Corporation Y Renaissance Technologies Corp. Y RCM Y Y Robeco Investment Management Y Y Rothschild Asset Management, Inc. Y Y Russell Investment Management Y Santander Global Facilities Y Sasco Capital, Inc. Y Schroder Investment Management North America Inc. Y Y Scottish Widows Investment Partnership Y Security Global Investors Y SEI Investments Y SEIX Investment Advisors, Inc. Y Smith Graham and Company Y Smith Group Asset Management Y Y Standard Life Investments Y Standish (fka, Standish Mellon Asset Management) Y State Street Global Advisors Y Stone Harbor Investment Partners, L.P. Y Stratton Management Y Systematic Financial Management Y T. Rowe Price Associates, Inc. Y Y Taplin, Canida & Habacht Y TIAA-CREF Y TCW Asset Management Company Y Thompson, Siegel & Walmsley LLC Y

Exhibit 9







Thrivent Asset Management Y Tradewinds Global Investors Y Turner Investment Partners Y UBP Asset Management LLC Y UBS Y Y Union Bank of California Y Valley Forge Asset Management Y Van Eck Y Victory Capital Management Inc. Y Virtus Investment Partners Y Vulcan Value Partners, LLC Y Waddell & Reed Asset Management Group Y WEDGE Capital Management Y Wellington Management Company, LLP Y Wells Capital Management Y West Gate Horizons Advisors, LLC Y Western Asset Management Company Y William Blair & Co., Inc. Y Y

Exhibit 9

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