Comprehensive Annual Review Process

Transcription

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2 Agenda I. Private Equity Program: A Year in Review II. PE Performance, Portfolio, and Compliance III. Private Equity Market Review IV. Forward Looking Plans V. Conclusions 2

3 Section I 3

4 Comprehensive Annual Review Process Why do we conduct annual reviews? Per the TMRS IPS, comprehensive reviews are to be conducted and documented at least annually. The Review Process Includes: Annual due diligence questionnaire, ADV and compliance, as appropriate, are reviewed Includes firm changes, personnel, investment strategy, style, process, and philosophy Compliance, operations, risk management, and performance Both quantitative and qualitative factors The review includes an onsite due diligence visit to the Manager s office The Annual Review process holds TMRS Staff accountable for its portfolio management process in order to preempt manager specific, strategic, or other potential problems. 4

5 PE Program Review Accountability in Action What did we say we were going to do? Private Equity Initiatives Accomplished: Annual Review Develop a blueprint to implement a Private Equity Investment Program Managerial prioritization, Staff experience and consultant resources enabled TMRS to develop a path to ensure this outcome was accomplished Establish a due-diligence process to identify best in class manager opportunities Sourcing, investment and operational due diligence, and leveraging Staff and consultant relationships were key factors enabling the identification of opportunities Initiate & execute on manager selection, negotiation, and funding while maintaining consideration of portfolio construction and diversification looking forward 5 years Recommendations and approval of selected manager investments and funding are executed on a dynamic timeline taking into account anticipated portfolio diversification and market regimes Progress Private Equity Portfolio towards a target NAV while managing commitment levels, portfolio construction and access to best in class managers Commitment levels, portfolio construction, and access to best in class managers have been successful, but deployment somewhat outside of our control has been a bit slower than expected. Construct and maintain the PE portfolio to accomplish TMRS investment objectives of return driver $ 1.0 billion of private equity capital committed since Dec The risk/return profile of the invested portfolio achieves TMRS investment objectives relative to J-Curve considerations Monitor existing portfolio. Source, research, and pursue new strategies and coinvest opportunities Additional strategies, including international exposure, earlier stage venture and direct co-investments may be used to further optimize the portfolio as well as blend down fees with existing funds Status 5

6 PE Program Review Accountability in Action PE Commitment Timeline 1. Carlyle EMOF II (Special Sits) 2. TPG/TSSP III (Special Sits) 3. HIG Bayside IV (Special Sits) 4. Searchlight II (Buy-out) 5. Harvest VII (Buy-out) 6. Tritium I (Buy-out) 7. GSO COF III (Special Sits) 8. PSG III (Growth) 9. Updata V (Growth) 10. Mercato III (Growth) 11. Foundry Next (VC) 12. Kainos II (Buy-out) 13. FTV V (Growth) 14. GSO Co-Inv (Special Sits) 15. Incline IV (Buy-out) 19. Capital Partners III (Buy-out) 20. Altaris Health IV (Buy-out) 21. Altaris Constellation (Buy-out) 16. Marlin V (Buy-out) 17. Marlin Heritage II (Buyout) 18. One Rock II (Buy-out) 22. GTCR XII (Buy-out) 23. Dunes Point II (Buy-out) October February May September December January May Aug/Sept $350 million approved $317 million committed $ million approved $ million committed $372.5 million approved $ million committed $50 million in negotiations Strong planning, execution & portfolio management has put TMRS on the path to achieving strategic investment objectives. 6

7 PE Program Review Accountability in Action Additional Information Funds & Capital Approved & Closed: 2015 Funds Approved: Capital: $350 mm approved / $317 closed 2015 Average weeks to closing: 8.4 weeks 2016 Funds Approved: Capital: $ mm approved / $ closed 2016 Average weeks to closing: 5.3 weeks 2017 Funds Approved: Capital: $372.5 mm approved / $ closed ($50 million currently in negotiations) 2017 Average weeks to closing: 4.7 weeks Total Managers / Vehicles: 20 / 23 Total Direct Capital Committed: $998.5 mm ($1.05 bill) Strong execution & portfolio management has driven performance and put TMRS on the path to achieving strategic investment objectives. 7

8 PE Program Review Accountability in Action PE Staff Resources Private Equity Chris Schelling TBD Admin. Support Cindy Morse Debbie Farahmandi Compliance Kurt Cressotti PE Team Experience Chris Schelling 17 years experience Asset Management, Broker/Dealer, Researcher, Consultant & Pension experience MBA, MSF Chartered Alternative Investment Analyst Risk Management Dimitry Shishkoff Melissa Jerkins Ryan Conner Absolute Return Mark Leavitt Kevin Notaro CIO TJ Carlson Public Equity Kristin Qualls Carol Leung Fixed Income Jason Weiner German Gaymer Analyst TBD 235 applicants 7 first round/ 2 second round Real Assets Tom Masthay Eddie Schultz Rachel Cleak Operations Sally Case Geldon Vlluha Susan Jaques 8

9 PE Program Review Accountability in Action Additional Information Buy-out Growth Special Sits Secondaries Other Total Meetings In Meetings In Meetings In TOTAL Total Managers Internal Data Base Over 1,375 man-hours in meetings. Buy-out 150 Venture/Growth 143 Special Sits 122 Secondaries 35 Other 72 Total 522 Other Data Rooms Researched 95 Formal Reference Calls 146 Background Checks 67 Personality Inventories 41 As of September 25,

10 PE Program Review Accountability in Action Annual Review Highlights Manager & Consultant Scorecard Summary: All 20 manager relationships and 1 consultant relationship assessed are in satisfactory standing. Contractual Compliance: All managers, as appropriate, have certified compliance with relationship governing documents, including: Valuation policies Regulatory actions Code of Ethics compliance LPA/side letter compliance Monitoring and Review Summary: Quarterly monitoring, annual reviews (including annual onsite, due-diligence), ad-hoc reviews, capital calls reviews, LPAC meetings Manager Reporting: DDQ, ADV, Annual Audited Financials, Quarterly Capital Account Statements, Investment Commentary, Investor Letters, ILPA Templates and fee disclosures StepStone Reports: Investment Due Diligence, Operational Due Diligence, Meeting Notes, Manager Summaries, Quarterly Portfolio Monitoring, Exposure Reporting and Market Reviews IPS Compliance and Monitoring at the Portfolio Level 10

11 PE Program Review Accountability in Action Manager Monitoring Summary Report Manager Fund Name(s) Sub-Asset Class Scorecard Altaris Altaris IV, Constellation IV Buy-out, Small Market Growth Excellent Capital Partners Capital Partners Fund III Buy-out, Small Market Value Excellent Carlyle Carlyle Energy Mezzanine Fund II Special Situations, Mezzanine In good standing Foundry Group Foundry Group Next Fund Venture Capital, Late Stage Excellent FTV FTV V Growth Equity, Middle Market Excellent GSO GSO COF III, COF III Co-Inv Fund Special Situations, Large Mezzanine Excellent GTCR GTCR XII Buy-out, Large Market Growth Excellent H.I.G. H.I.G. Bayside Fund IV Special Situations, Non-Control Distressed Excellent Harvest Harvest Partners VII Buy-out, Middle Market Growth Excellent Incline Incline Equity IV Buy-out, Small Market Value Excellent Kainos Kainos II Buy-out, Small Market Value Excellent Marlin Equity Marlin Equity V, Marlin Heritage II Buy-out, Middle Market Value & Small Market Value Excellent Mercato Mercato III Growth Equity, Small Market In good standing One Rock One Rock II Buy-out, Small Market Value Excellent Providence PSG II Growth Equity, Middle Market Excellent Searchlight Searchlight Capital II Buy-out, Middle Market Value Excellent TPG TSSP Adjacent Opportunities Special Situations, Diversified Excellent Tritium Tritium I Buy-out, Small Market Growth Excellent Updata Updata Partners V Growth Equity, Small Market In good standing 11

12 PE Program Review Accountability in Action Manager Performance Monitoring Prior Fund Current Fund 100% 100% 80% 31.6% 26.3% 42.1% Top Quartile 80% 27.3% 23.1% 30.0% Top Quartile 60% 40% 20% 0% 31.6% 52.6% 36.8% 26.3% 10.5% 10.5% 10.5% 10.5% 10.5% Second Quartile Third Quartile Fourth Quartile 60% 40% 20% 0% 45.5% 27.3% 30.8% 30.0% 30.8% 20.0% 15.4% 20.0% Second Quartile Third Quartile Fourth Quartile DPI TVPI IRR DPI TVPI IRR DPI TVPI IRR DPI TVPI IRR Prior Fund Average Quartile Rank Current Fund Average Quartile Rank

13 Section II 13

14 Private Equity Asset Class Objectives IPS Stated Objective for the Private Equity Portfolio: The Private Equity asset class is intended to enhance the total fund performance through investment in non-publicly traded securities by generating a long-term rate of return that exceeds that of publicly-traded equities. A primary goal of the annual review presentation is to discuss the Private Equity portfolio and its construction relative to IPS stated performance goals & implementation objectives: Performance Goals: Long-term performance objective is a rate of return of Russell 3, % or greater, net of investment management fees, over period of five years. For periods less than 5 years, reported performance is less meaningful and significantly more difficult to benchmark. Measures of success in portfolio construction: identify best in class managers, balance concentration and diversification, ensure sufficient strategy diversification, etc. 14

15 Private Equity Asset Class Objectives Private Equity Benchmark and Performance Considerations Role of Benchmark Has PE done better than simple, liquid approach? Has PE staff performed acceptably? How has PE portfolio performed relative to similar peers? How does PE performance compare to risk taken? Has PE achieved long term assumptions? Benchmark Characteristics Investable Measurable/Transparent Comprehensive Representative/Appropriate Strategic 15

16 Private Equity Asset Class Objectives Private Equity Benchmark and Performance Considerations Public Equity Plus Premium Fund Index Benchmark Absolute return or peer comparison Pros: - Investable? - Measurable & transparent - Strategic - Simple! - Measurable - Comprehensive - Highly appropriate and representative - Possibly strategic - Possibly representative Cons: - Premium not investable! - Not comprehensive - Not representative of risk or timing - Not investable - Not highly transparent - Not strategic Not timely - Not investable Not comprehensive - Not necessarily appropriate Long term, opportunity cost Short term, opportunity set 16

17 Private Equity Asset Class Objectives Private Equity Benchmark and Performance Considerations Public Equity Plus Premium Majority of pensions (75%) use as predominant benchmark. Fund Index Benchmark 51% of endowments use as predominant benchmark. Majority of users have two benchmarks Other Absolute return target (10.5% assumption) RVK and StepStone Peer Clients 18% 20% Public Index 5% 37% 20% Russell 3,000 S&P 500 Other MSCI ACWI MSCI World 10% 10% 20% Fund Index 11% 49% Burgiss Cambridge Preqin State Street Other 3% Premium 10% 22% 10% 55% < 200 bps 200 to to to Source: 2017 ILPA Survey 17

18 Private Equity J-Curve $150 J-Curve Effect 50% $100 $50 Outlay Inflows IRRs 25% Cash Flows $0 ($50) ($100) 0% -25% IRRs ($150) Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10-50% Cash outflows, fees, expenses, and little appreciation recognized early results in negative early reported returns. Capital gains upon realizations later in the life of the fund turn the internal rate of return positive. 18

19 TMRS Realized J-Curve 40% J-Curve 30% 20% 10% 0% -10% -20% -30% -40% -50% 6.57% Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Average PE Fund Average PE Portfolio 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% TMRS 2.0% Realized 2.0% 2.0% 2.0% Source: State Street Investment Analytics 19

20 Performance MKT VAL (MM) % of plan 1 Month 3 Months YTD 1 Yr. ITD Incept Date TMRS TOTAL PRIVATE EQUITY $ RUSSELL % Excess BUY-OUT TOTAL $ RUSSELL % Excess VENTURE-GROWTH TOTAL $ RUSSELL % Excess SPECIAL SITUATIONS SUB TOTAL $ Source: State Street Investment Analytics 20

21 Performance Review Source: StepStone Monitoring Report, March 31,

22 Performance Comparisons 140% Cumulative Return Comparison 130% 120% 110% 100% 90% 80% Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 TMRS PE Russell % ILPA Cambridge Burgiss (15-17) TMRS PE Russell % ILPA Cambridge Burgiss (15-17) 3/31/ % 1.72% 0.31% -0.52% 6/30/ % 3.38% 2.42% 1.18% 9/30/ % 5.15% 3.68% 3.00% 12/31/ % 4.96% 2.79% 1.96% 3/31/ % 6.49% 3.69% 3.88% 6/30/ % 3.77% % 9/30/ % 5.32% - - Annualized 6.56% 17.64% 7.30% 6.87% Source: State Street Investment Analytics 22

23 Implementation Risk Ranges Implied by IPS Asset Class Guidelines March % 25.0% 20.0% Based on current (and approved but unfunded) strategy allocations and Investment Department long-term assumptions regarding each strategy = Realized risk Risk 15.0% 10.0% 5.0% Series1 Current TMRS Risk Estimate 12.5% RVK Long-Term Assumption Risk Series2 range implied by IPS Rebalancing Policy Maximum risk implied by IPS Minimum risk implied by IPS 0.0% Core Fixed Income Absolute Return Non-Core Fixed Income Real Return Real Estate Non-US Equity US Equity Private Equity Total Plan 23

24 Deployment Pace Source: StepStone Monitoring Report, March 31,

25 Net Asset Growth $250 Private Equity Net Asset Value 25% $200 20% PE Value ($ MM) $150 $100 $50 15% 10% 5% Percent of Commitments $0 0% 1-Dec-15 1-Jan-16 1-Feb-16 1-Mar-16 1-Apr-16 1-May-16 1-Jun-16 1-Jul-16 1-Aug-16 1-Sep-16 1-Oct-16 1-Nov-16 1-Dec-16 1-Jan-17 1-Feb-17 1-Mar-17 1-Apr-17 1-May-17 1-Jun-17 1-Jul-17 1-Aug-17 1-Sep-17 Buy-Out Special Situations Venture-Growth % Deployed Source: State Street Investment Analytics 25

26 Strategy Diversification Private Equity Strategy Diversification by Commitment Private Equity Target Diversification 27.4% 21.1% 51.6% Buy-out (40.0% to 75.0%) Growth (5.0% to 25.0%) Special Situations (10.0% to 35.0%) 21.1% 21.6% 16.6% 40.7% Buy-out (40.0% to 75.0%) Growth (5.0% to 25.0%) Special Situations (10.0% to 35.0%) Un-allocated Private Equity Diversification by NAV Private Equity Diversification by Market Adjusted Basis 35.2% 24.2% Buy-out (40.0% to 75.0%) Growth (5.0% to 25.0%) 25.5% 54.6% Buy-out (40.0% to 75.0%) Growth (5.0% to 25.0%) 40.6% Special Situations (10.0% to 35.0%) 19.9% Special Situations (10.0% to 35.0%) 26

27 Manager Diversification Private Equity Manager Diversification by Commitment BO 1 BO 2 BO 3 BO 4 BO 5 BO 6 BO 7 BO 8 BO 9 BO 10 BO 11 BO 12 BO 13 GE 1 GE 2 GE 3 GE 4 GE 5 SS 1 SS 2 SS 3 SS 4 SS 5 Private Equity Manager Diversification by Commitment BO 1 BO 2 BO 3 BO 4 BO 5 BO 6 BO 7 BO 8 BO 9 BO 10 BO 11 BO 12 BO 13 GE 1 GE 2 GE 3 GE 4 GE 5 SS 1 SS 2 SS 3 SS 4 SS 5 UA Private Equity Manager Diversification by NAV BO 1 BO 2 BO 3 BO 4 BO 5 BO 6 BO 7 BO 8 BO 9 BO 10 BO 11 BO 12 BO 13 GE 1 GE 2 GE 3 GE 4 GE 5 SS 1 SS 2 SS 3 SS 4 SS 5 27

28 Geographic Diversification Private Equity Geographic Diversification by Commitment Private Equity Target Geographic Diversification 18.2% U.S.A. International 21.1% 14.3% 64.5% U.S.A. International Un-Allocated 81.8% Private Equity Geographic Diversification by NAV 11.0% U.S.A. International 89.0% 28

29 Sector Diversification Sector Diversification by Commitment Sector Diversification by NAV 16.1% 6.8% 5.9% 3.7% 8.7% 44.4% 14.4% Healthcare General Services IT Financials Energy Consumer Industrial 13.9% 12.4% 6.1% 12.7% 5.4% 48.1% 1.4% Healthcare General Services IT Financials Energy Consumer Industrial As of March 31, 2017, TMRS had exposure to 174 separate portfolio companies. Source: StepStone Monitoring Report, March 31,

30 Vintage Year Diversification $175.0 $212.0 $220.0 $202.3 $809.3 Source: StepStone Monitoring Report, March 31,

31 Additional IPS Compliance Items Vintage Year Concentration TMRS has not breached the 35% concentration limit in any calendar year. Manager Concentration TMRS is within the limits of 1) 35% of total assets of the PE portfolio invested with any one PE manager and 2) 25% of the total assets under management for any PE manager. Vehicle Concentration TMRS is in compliance with the 25% limit to any given investment vehicle. Co-Investment TMRS is within co-investment guidelines. TMRS has 2 coinvestment funds and no direct co-investments. Valuation Policy TMRS managers are in compliance with IPS valuation policy requirements. 31

32 Section III 32

33 Private Equity Fundraising Global Quarterly Private Equity Fundraising, Q Q $ $ $120 No. of Funds $100 $80 $60 Aggregate Capital ($bn) 100 $40 50 $20 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Date of Final Close $0 No. of Funds Closed Aggregate Capital Raised ($bn) Source: Preqin 33

34 Private Equity Fundraising 100% Proportion of Target Size Achieved by Private Equity Funds, YTD 90% 14% 20% 23% 19% 23% 80% Proportion of Funds 70% 60% 50% 40% 30% 20% 10% 0% 24% 24% 24% 29% 28% 23% 25% 26% 26% 29% 28% 23% 22% 20% 19% 11% 8% 6% 6% 2% Q1-Q Date of Final Close Less Than 50% 50-99% 100% % 125% or More Source: Preqin 34

35 Private Equity Deal Flow Global Quarterly Private Equity-Backed Buyout Deals, Q Q ,200 $160 1,000 $140 $120 No. of Deals $100 $80 $60 Aggregate Deal Value ($bn) $ $20 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q $0 No. of Deals Aggregate Deal Value ($bn) Source: Preqin 35

36 Private Equity Valuations 12x Private Equity Valuation Levels 10x 9.7x 9.1x 8.9x 9.6x 8.8x 10.3x 10.0x 10.3x 10.2x 10.5x Multiple of EBITDA 8x 6x 4x 3.2x 3.9x 7.7x 6.2x 3.9x 4.1x 3.7x 3.9x 4.3x 4.5x 4.6x 5.0x 2x 6.5x 5.2x 5.0x 5.5x 5.1x 6.3x 5.7x 5.8x 5.6x 5.5x 0x 1.5x Q Debt / EBITDA Equity / EBITDA Valuation / EBITDA Source: Preqin 36

37 Private Equity Exit Environment Global Quarterly Private Equity Buyout-Backed Exits, Q Q $180 $ $140 No. of Exits $120 $100 $80 $60 $40 $20 Aggregate Exit Value ($bn) 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Year $0 No. of Exits Aggregate Exit Value ($bn) Source: Preqin 37

38 Private Equity Exit Environment Private Equity Buyout-Backed Exits in Q by Type 100% 90% 1% 7% 6% 80% 70% 34% 26% Proportion of Total 60% 50% 40% 30% 59% 68% 20% 10% 0% No. of Exits Aggregate Exit Value Trade Sale Sale to GP IPO & Follow-On Restructuring Source: Preqin 38

39 Private Equity Performance 10% 8% 6% 4% 2% 0% -2% -4% 8.7% 6.6% 5.2% 4.7% 2.6% 0.2% Quarterly ILPA Pooled Index Returns 3.5% 5.7% -0.3% 3.3% 3.8% 3.1% 2.6% 5.3% 7.5% 3.2% 4.8% 0.1% 2.2% 1.6% 4.9% -1.5% 1.4% 0.3% 3.7% 3.7% 2.8% 3.0% 2.4% -6% -5.4% Source: ILPA 39

40 Private Equity Performance Source: ILPA 40

41 Private Equity Performance 6000% Cumulative Returns Comparison 5000% 4000% 3000% 2000% 1000% 0% 3/1/1990 2/1/1991 1/1/ /1/ /1/ /1/1994 9/1/1995 8/1/1996 7/1/1997 6/1/1998 5/1/1999 4/1/2000 3/1/2001 2/1/2002 1/1/ /1/ /1/ /1/2005 9/1/2006 8/1/2007 7/1/2008 6/1/2009 5/1/2010 4/1/2011 3/1/2012 2/1/2013 1/1/ /1/ /1/ /1/2016 Buy-out Venture Mezzanine Distressed 1 Yr 5 Yr 10 Yr Buy-out 13.6% 12.0% 9.1% 13.2% Venture 6.7% 13.1% 9.7% 15.4% Mezzanine 8.0% 9.2% 7.2% 10.6% Distressed 9.7% 7.8% 7.2% 12.9% Source: Burgiss 41

42 Private Equity Performance Return 30% 25% 20% 15% 10% 5% Historical Risk/Return Small Buy-out Late Stage / Growth Distressed Mezzanine Early Stage Venture Large Buy-out Return 20% 15% 10% 5% Expected Risk/Return Early Stage Late Stage / Venture Growth Small Buy-out Distressed Large Buy-out Mezzanine 0% 0% 10% 20% 30% 40% Risk 0% 5% 10% 15% 20% 25% 30% Risk Source: Burgiss, TMRS Staff 42

43 Private Equity Performance ILPA 10 Year 20 Year 3/31/2017 All Funds 9.12% 13.66% Top Quartile 13.57% 16.96% S&P % 7.86% ThomsonReuters 20 Year 12/31/2016 PE Index 16.62% S&P % Cliffwater 20 Year 6/30/ State Pension Funds 5.70% Private Equity Allocation 9.90% Public Equity Allocation 7.20% Cambridge 10 Year 6/30/2015 Private Equity 12.60% Russell 3, % Sources: ILPA, ThomsonReuters, Cliffwater, Cambridge 43

44 Section IV 44

45 Private Equity Pacing $2, Staff Pacing Model $1,865 $1,926 $1,929 16% $1,800 $1,709 14% $1,600 $1,465 12% $1,400 Value in US$ (Millions) $1,200 $1,000 $800 $853 $1,198 10% 8% 6% % of Total Plan Value $600 $400 $511 4% $200 $235 2% $- $450 $500 $525 $550 $575 $600 $635 $660 $ E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 0% Actual PE NAV Annual Commitment PE % of Plan Original Model Target % of Plan 45

46 Private Equity Agenda Target annual commitment of $500 million for 2018 (plus potential $150 MM in opportunistic secondary exposure) Pursue modestly more international diversification 75% USA /25% international and potentially first dedicated European exposure 1 Yr 5 Yr 10 Yr Risk Buy-out 13.55% 11.99% 9.14% 15.85% Europe Buy-out 17.18% 11.08% 8.23% 14.93% Pair-wise correlation 0.53 Continue to seek policy and process improvements to allow TMRS to execute on co-investments Initiative core private equity Co-investments Top Quartile Benchmark StepStone TVPI 2.31x 1.79x Co-investments Fund Braun et al PME Preqin 5% outperformance vs fund Texas TRS 7% outperformance vs fund 46

47 Core Private Equity A New Approach Long term fund Lower fees, expenses and transaction costs Better alignment of interests LP oversight 47

48 Section V 48

49 Conclusions TMRS has made substantial progress towards its strategic private equity objectives. Deployment has been a bit slower than expected, and there is still more work to be done. Interim measures of performance are good, but it remains far too early to be truly meaningful. Private equity continues to become increasingly competitive and transactional in nature. An adaptive organization will be successful in the long run, but static policies and processes can be damaging. Governance and policies should evolve accordingly. On the back of such evolution, additional opportunities such as coinvestments, as well as innovative new structures and models, can allow TMRS to become a leader within the private equity marketplace. 49

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