Approach to Alternative Investments. Matthew Goldblatt, Vice President J.P. Morgan Alternative Investment Services

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1 Approach to Alternative Investments Matthew Goldblatt, Vice President J.P. Morgan Alternative Investment Services

2 Alternative Investing Asset scope of today s Master Class Private Equity & Real Estate Hedge Funds Topics for today Market Trends Investment mechanics Types of structures for entry Investor Involvement & Due Diligence Trends in Australia Discussion

3 Market Trends Est. $2T USD in each hedge fund and private equity assets under management Asset class with global reach rebounding from the Global Finance Crisis Investors Established US investors Emerging Asian investors Fund Raising Private equity time from road-show to close Hedge funds compression with fewer but larger funds Sources: Hedge Fund Research, The City UK, Preqin

4 Market Trends Hedge Funds: Historic to Present 2,500,000 7,800 Asset Size ($mm) 2,000,000 1,500,000 1,000, , Q Estimated Assets Estimated # of Funds 7,600 7,400 7,200 7,000 6,800 6,600 6,400 # of Funds (ex.fohfs) Source: HFR

5 Market Trends Q112 Private Equity Fund Raising by Strategy No. Funds Raised Aggregate Commitments Source: Preqin

6 Market Trends Asset class with global reach rebounding from the Global Finance Crisis (cont) Investment Shift in fund focus from Americas /Europe to Asia Fund Launches Managers are more local - fund launches around the globe Supports proximity to assets & investors Some opportunities due to local regulation Regulation is impacting the needs of investors and requirements of funds Sources: Hedge Fund Research, The City UK, Preqin

7 Mechanics Private Equity & Real Estate Closed-ended, commitment-based investment Long-term investment (7-10 years +) Potentially limited liquidity Externally driven cashflow activity J-curve of return over time

8 Hedge Funds Mechanics Open-ended investment Range of investment horizons Potentially complex subscription process Liquidity driven by redemption protocols

9 Structures Direct /Co-Invest Fund Fund of Fund Management Types of Investing Internal investment & portfolio management In-house investment analysis External investment advisors External investment management

10 Investors: Involvement Private Equity 18% 8% 4% 4% 2% Asset Manager Bank Edowment Plan Foundation 7% 11% Other Gov Agency 37% 5% 1% 1% Insurance Company Investment Company PE FoF Manager Private Sector Pension Fund Public Sector Pension Fund Source: Preqin

11 Hedge Funds Investors: Involvement 7% 4% Fund of Fund 4% 7% 40% 6% 6% Family Ofice Endowment/Foundation Consultant Bank Reg Investment Advisor 26% Pension Insurance Company Source: JPM Cap Intro Survey

12 Investors: Due Diligence Increased focus on due diligence Potential regulation requirements Experiences in Global Financial Crisis of 2008 Impact of Bernie Madoff Key considerations Manager/sponsor pedigree and history Partner operational risk management utilisation of 3 rd party administrators Internal due diligence socialisation

13 Trends in Australia Current Australian investor allocation to alternative investments is lower than global trends Globally, pensions allocate 20% Australian superannuation funds allocate 12% Plans to increase such allocation Onshore funds market is limited Therefore many investors will look to offshore funds Global and local regulation will have an impact Source: Towers Watson

14 Discussion

15 The Presentation is based on certain assumptions and conditions as of the date of the Presentation, all of which are accordingly subject to change. Neither the Presenter nor JPMorgan makes any representation or warranty regarding the accuracy or completeness of the data and other information contained in the Presentation Materials, and accordingly, no reliance should be placed on the information contained therein. Nothing in the Presentation Materials should be construed as investment advice or other professional advice or as a recommendation to purchase any services or product or to enter into any transaction with JPMorgan.