MEMORANDUM. Exhibit 6. State Universities Retirement System of Illinois. Russ Ivinjack Amy Paris. Date: December 1, 2009

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1 MEMORANDUM To: From: State Universities Retirement System of Illinois Russ Ivinjack Amy Paris Date: December 1, 2009 Re: Public-Private Investment Funds Summary The State Universities Retirement System ( SURS ) evaluated the merits of the United States Department of the Treasury s ( Treasury ) Public-Private Investment Program ( PPIP ) at the October 20, 2009 Board meeting and approved a $120 million initial allocation to the Opportunity Fund. Angelo Gordon / General Electric, RLJ Western and TCW were selected to receive mandates of $40 million each. The decision of whether to invest in Oaktree s PPIF 1 will be made after vetting the investment opportunity and interviewing Oaktree at the December 1, 2009 Board meeting. Below we outline the timeframe for PPIP and the process employed to identify finalists for the Board to interview. Treasury Announced PPIP March 23, 2009 Treasury Announced PPIFs July 9, 2009 EnnisKnupp meets with nine PPIFs July 2009 SURS Board Approves PPIF search September 10, 2009 Semi-Finalists Presentations October 1 & 2, 2009 Final Vote on Investment Mandate October 20, 2009 Finalist Presentations October 20, 2009 Finalist Presentation December 1, Public-Private Investment Fund.

2 Background Treasury selected nine eligible PPIFs from over 100 applicant firms. Selected firms were chosen based on their ability to meet Treasury s PPIF criteria, including a demonstrated capacity to raise at least $500 million of private capital, demonstrated experience investing in eligible assets 1, a minimum of $10 billion (market value) of eligible assets under management, and demonstrated operational capacity to manage the funds in a manner consistent with Treasury s stated investment objective 2 while also protecting taxpayers. The firms must also be headquartered in the United States. To ensure healthy and full participation by both large and small firms, these criteria were evaluated on a holistic basis and failure to meet any one criterion did not necessarily disqualify an application. Most criteria set forth by Treasury were met by the nine managers with the exception of $10 billion of eligible assets under management, which was met by less than half of the eligible managers. The firms selected by the Treasury include: 1. AllianceBernstein LP ( AllianceBernstein ) 2. Angelo Gordon/GE Capital Corporation ( Angelo Gordon ) 3. BlackRock Inc. ( BlackRock ) 4. Invesco Ltd. ( Invesco ) 5. Marathon Asset Management ( Marathon ) 6. Oaktree Capital Management ( Oaktree ) 7. RLJ Western Asset Management ( RLJ / Western ) 8. TCW Group Inc. ( TCW ) 9. Wellington Asset Management ( Wellington ) Search Process In evaluating the nine PPIFs selected by Treasury, EnnisKnupp judged such factors as the qualifications of the managers PPIF teams in managing structured asset pools, the portfolio construction process, the security selection process, the alignment of interests between the PPIF and the parent firm, the structure of firm ownership, the use of strategic and minority partners, and fees. To clarify its subjective judgments, EnnisKnupp scored each offering on 25 factors from 5 (best) to 1 (worst) in each of five broad categories: organization (30%), portfolio construction (30%), terms of the PPIP offering (25%), risk management (10%), and past performance (5%). 1 Eligible assets: commercial mortgage backed securities ( CMBS ) and residential mortgage backed securities ( RMBS ) issued prior to 2009 that were originally rated AAA or an equivalent rating by two or more nationally recognized statistical rating organizations without ratings enhancement and that are secured directly by the actual mortgage loans, leases or other assets and not other securities (other than certain swap positions, as determined by the Treasury). The Eligible Assets must be purchased solely from financial institutions from which the Secretary of the Treasury may purchase assets pursuant to Section 101(a)(1) of the Emergency Economic Stabilization Act of 2008 ( EESA ). 2 Investment Objective: To generate attractive returns for taxpayers and private investors through long-term opportunistic investments in accordance with the Investment Strategy. 2

3 EnnisKnupp identified six managers with particularly compelling investment platforms which we believe would be an appropriate fit within the SURS investment program. Semi-finalist interviews were conducted with these managers at SURS s offices. 1. AllianceBernstein 2. Angelo Gordon 3. Marathon 4. Oaktree 5. RLJ / Western 6. TCW After meeting the semi-finalists, SURS s Investment Staff and EnnisKnupp determined that the below listed four PPIFs presented the most attractive investment opportunities and decided to bring these firms forward for the Board s consideration. 1. Angelo Gordon 2. RLJ / Western 3. TCW 4. Oaktree Each finalist presents a differentiated offering. Angelo Gordon possesses strength in combined investment skill between the two PPIP asset classes, residential mortgage-backed securities ( RMBS ) and commercial mortgagebacked-securities ( CMBS ), and top level talent to navigate between the two markets. RLJ / Western is the only PPIF to be minority owned with 51% of the PPIF belonging to RLJ, the investment firm founded by Robert L. Johnson 1. Western s investment team, which will be running PPIF investment activities, has significant investment experience in non-agency RMBS and has approximately $20 billion currently invested in the asset class. With 65 investment personnel and two legacy non-agency RMBS funds, TCW has the deepest RMBS investment team and infrastructure. Due to Oaktree s CMBS focus, this PPIP offering will be presented at the December Board meeting when the focus will be on the real estate investment portfolio. Oaktree has spent the last two years building a proprietary model which evaluates each CMBS on a loan by loan basis. In other words, Oaktree re-underwrites each underlying commercial real estate loan which composes the securitized loan pool or CMBS. We expect this model to be a valuable tool in Oaktree s security selection process and portfolio construction. For full evaluation of Oaktree, please see the attached investment profile. 1 The RLJ Companies was founded by Robert L. Johnson, founder of Black Entertainment Television. RLJ manages $3 billion in real estate funds and $300 million in private equity funds. 3

4 Exclusions Of Treasury s nine selected PPIFs, BlackRock, Invesco, and Wellington were excluded from semi-finalist interviews. After conducting semi-finalist interviews, AllianceBernstein and Marathon were excluded. Each excluded PPIF is listed below with an explanation of the reasoning leading to its exclusion. First Round Exclusions BlackRock: BlackRock was excluded from EnnisKnupp s top PPIF choices due to its high fees and lower institutional capacity. High Fees - BlackRock s management fee is charged on all capital invested under the PPIF mandate, including debt. Therefore investors will pay a management fee double the stated fee of 25 basis points. BlackRock s PPIF also includes an 80/20 catch-up clause, i.e., after the preferred return of 10% is achieved, BlackRock earns a disproportionately high percentage of the PPIF s profits until it has received distributions on all profits as if there were no preferred return. Capacity Constrained - BlackRock has limited institutional capacity for its PPIF product as $600 million of the firm s $1.1 billion PPIF capacity will be allocated to a retail fund. Invesco: Invesco was excluded from EnnisKnupp s top PPIF choices due to its bifurcated investment approach and limited organizational collaboration. Bifurcated Investment Approach - Invesco was not selected as a top PPIF due to its two-tiered investment plan of incorporating both the U.S. Treasury-backed securities program and the U.S. Government-backed loan program, of which the details have yet to be announced. While Invesco s private placement memorandum states that Invesco will take advantage of the loan program, the loan program may or may not be launched by Treasury. Also, due to the structure of the securities program where terms are known, we believe rebalancing across the two programs is not possible due to limitations on distributions out of the securities program, which leaves no advantage for a combined fund relative to two separate funds, should the loan program be launched in the future. Limited Organizational Collaboration - The team is split among three cities: Atlanta, GA; Louisville, KY; and Dallas, TX. Atlanta will be the base for all loan investing, the Louisville office houses the RMBS team, and the CMBS team is located in Dallas. Wellington: Wellington s PPIF offering was not chosen as a semi-finalist because the investment team did not demonstrate above-average security selection techniques. Average Security Selection Skills - EnnisKnupp did not find a unique strength within the PPIF team or investment strategy relative to the other managers. While Wellington s fees are low and EnnisKnupp would not discourage an investment in Wellington s PPIP product, EnnisKnupp also does not believe that Wellington s PPIF represents as compelling an opportunity as those recommended. 4

5 Second Round Exclusions AllianceBernstein: AllianceBernstein was included in semi-finalist interviews because the strategy possessed many attractive features. AllianceBernstein was the only PPIF, for example, to segregate its team from other trading operations, which ensures a non-dilutive allocation process. Additionally, AllianceBernstein s strategic partners provide an edge to security selection valuation inputs through the ownership of a residential loan servicer. AllianceBernstein was, however, subsequently excluded from the finalist interviews due to its lack of experience investing in PPIP eligible assets relative to the finalists. Marathon: Marathon s PPIF was selected as a semi-finalist for several reasons. Most notably, the firm has strong alignment of interests. Marathon s employees will personally commit most of the $20 million Treasury has mandated that PPIF managers contribute to their own funds. This is unusual among PPIP managers and ensures the seven Marathon partners are personally vested in the success of their firm s offering. Also, the firm possesses skill and a relatively narrow focus on managing distressed debt and mortgage securities, the focus of PPIP. Marathon was, however, excluded after the semi-finalist round of interviews due to other firms comparative strengths in investing in the CMBS market. 5

6 PPIF Comparison Matrix Firm Angelo Gordon / General Electric Manager s Targeted Levered Net IRR 1 (as of November 2009) RLJ Western Asset Management TCW Oaktree High teens High teens High teens 12 17% Targeted Yield in 6-8% 8% 8% 8% Investment Period 2 Anticipated Portfolio Composition Opportunistic RMBS and CMBS 90% RMBS / 10% CMBS RMBS focus CMBS Management Fee 1.00% 0.50% 1.00% 0.65% Incentive Fee (or 20% 15% 10% Gross IRR 4 carry) 3 Hurdle Rate (or preferred return) 5 8% 10% 3% 8% Catch-up to General No 85% / 15% 90% / 10% 100% / 0% Partner after Hurdle 6 1 IRR refers to the discount rate where investment s cash outflows equal the value of its inflows; IRR is used in calculating returns of private equity funds because the timing and amount of cash flows are determined by the manager as opposed to investors and the magnitude of the cash flow is significant. 2 Targeted Yield refers to the percentage of capital that each PPIF expects to pay out to investors annually in the three year investment period and is not necessarily reflective of IRR levels. 3 Incentive Fee or Carry refers to the percentage of profits that the PPIF manager retains as payment. 4 Oaktree s Incentive Fee will equal the Fund s gross IRR and have a floor of 8% and a ceiling of 25%. 5 Hurdle Rate or Preferred Return refers to the IRR level at which the PPIP manager begins to receive the Incentive Fee. For example, Angelo Gordon / General Electric will receive 20% of profits on returns above 8%. The first 8% will be paid to investors and; thereafter, investors will receive 80% of the profits in excess of 8%. 6 Catch-Up refers to the portion of profits paid to the PPIF manager rather than the investor until the manager has earned its Incentive Fee on returns below the hurdle rate as if the hurdle were not in place. For example, when TCW s returns exceed 3%, TCW will receive 90% of profits and the investors will receive 10% until TCW has recovered its full incentive fee, 10%, on all profits. 6