AT A GLANCE INDUSTRY INSIGHT FROM THE INVESTMENT PROGRAM ASSOCIATION

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Cornelia Collins
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NOVEMBER, 215 DIRECT INVESTMENTS AT A GLANCE INDUSTRY INSIGHT FROM THE INVESTMENT PROGRAM ASSOCIATION Welcome to Direct Investments At-A-Glance!

1 NOVEMBER, 215 DIRECT INVESTMENTS AT A GLANCE INDUSTRY INSIGHT FROM THE INVESTMENT PROGRAM ASSOCIATION Welcome to Direct Investments At-A-Glance! The IPA and DST Systems are teaming up to provide industry analytics on non-listed REITs and BDCs. We plan to issue regular updates and identify the latest trends on products, sponsors, broker-dealers, advisors, and shareholders related to direct investments. In our inaugural issue we look at the buyer profile for direct investment products, and shed new light on recent industry growth patterns. We hope you find the information useful and welcome any input on future issues! Send your ideas to mtramel@ipa.com. Copyright 215 by DST Systems, Inc. Reproduction and sharing of any part of this report is illegal under the Federal Copyright law (17 USC 1 et seq.) and is prohibited. Photocopying or transmission of the information in any electronic or mechanical fashion is strictly forbidden, unless the user has obtained written permission from kasina. Contact kasina to learn more about your redistribution/attribution options.

2 Non-Listed BDC Investments are Driving Category Growth Both BDCs and REITs have shown shareholder growth over previous years. However, BDCs are growing their shareholder base at a significantly faster rate (BDCs have 14% (43K) more shareholders in Q3 215 than same quarter previous year while REIT shareholders have only grown by 3% (51K)). Both REITs and BDCs have seen consistent growth in the Buyer category, suggesting investor satisfaction with fund performance. Number of by : BDC vs. REIT 32, BDC REIT 28, 26, 24, 22, 18, 16, 14, 12, 8, 6, 29% 66% 25% 72% 4% 8% 82% 1, 1, 1, 1,, 9, 8, 7, 6, 5, 4% 5% 35% 11% 54% 26% 14% 17% 67% 4, 2, Definitions Buyer a shareholder who holds, in the reported year, shares in their first and only alternative investment product Buyer a shareholder who has, in years prior to the reported year, held shares in only one (1)alternative investment product but currently holds no shares Buyer a shareholder who, as of the reported year, held shares in at least two (2) different alternative investment products NOTE: A single shareholder can be counted as a buyer in 212, a buyer in 213, and a buyer in 214 2

3 Alternative Direct Investments Seeing Slower Growth in Qualified Accounts Qualified accounts do not have the same increasing trend in shareholders that we see in the non-qualified account. In fact, Q3 215 is 2% down from same quarter last year and Q3 214 was 12% down from Q The primary driver of this decrease in shareholders with qualified accounts is a decrease in new investors (repeat purchasers is actually growing, albeit slowly). The number of first time or one time purchasers in Q3 215 is down 14% from same quarter last year and Q3 214 was down 44% from same quarter prior year. Could this be due to the pending DOL rule changes? Number of by : Qualified vs. Not Qualified Accounts (Non-Listed REITs and BDCs) Qualified Not Qualified 35, 35% 36% 26% 24% 1, 1, 1, 1,, 33% 24% 15% 18% 25, 15, 4% 7% 58% 72% 75% 9, 8, 7, 6, 5, 39% 11% 56% 15% 67% 51% 5,

4 Wider Adoption Among Financial Advisors Over the past 4 years, Non-Listed REITs have seen wider adoption among Financial Advisors in the Alternative Direct Investment product category, with more than a 2 to 1 sales ratio. Most recently, however, Non-Listed BDC adoption is growing at a faster pace with category sales experiencing a growth rate in the past year. Number of Advisors selling BDC and REIT products Year/Sector 5, 4, 42K 49K 52K 46K BDC REIT Advisors 3, 2, 2K 22K 1, 8K 15K

5 Distributions Cash is King, but Reinvestment Remains Popular Over the past four years, an average of 49% of all shareholders took their entire distribution for the year as cash, compared to an average of 34% who re-invested all distributions within a year. 17% of shareholders (average over four years) received multiple distributions in a year, taking some amount as cash and re-investing some portion. This could be multiple accounts or multiple distributions on a single account. Distribution Behavior by - Overall 1% 9% 41.13% 34.24% 28.26% 33.57% Reinvest Cash 8% Both 7% 5% 45.93% 45.61% 48.48% 54.73% 4% 3% 2% 2.15% 23.26% % 12.94% % 215 Direct Investments Appeal to Pre-Retirees (Shareholder Age) 58.8 Years (18.78%) 6.3 Years (16.15%) 6.6 Years (65.7%) 5

PROSPECTS FOR VARIABLE ANNUITIES IN THE RETIREMENT INCOME MARKET Product & Marketing Strategies to Best Position Annuities

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