Cerulli interactive Report Dashboards. Strategies for Engaging Partners, Competitors, and Gatekeepers $19,000. Overview & Methodology.

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1 U.S. Investment Consultants 2017 Strategies for Engaging Partners, Competitors, and Gatekeepers Overview & Methodology This annual report, in its fifth iteration, provides an overview of the evolving institutional investment consulting industry and the trends reshaping it. It examines the changing needs of each institutional client segment (e.g., defined benefit, defined contribution, endowments and foundations, health and hospital organizations), and how asset managers can partner with these key gatekeepers to help institutions achieve their goals and win new business. The report also covers opportunities and challenges facing the traditional (i.e., advisory) consulting business model, providing valuable insights for asset managers, institutional investors, and consultants. Data in this report comes from proprietary and partnership surveys and interviews with more than 65 participants, including field consultants, manager research teams, and institutional sales and service professionals. Benefits: y Gain insight into which client segments managers are likely to be very dependent on consultants for sources of new business. y Analyze the evolving trends in the consulting business, including how fee pressure has led to mergers and acquisitions, and the growth of the outsourced chief investment officer (i.e., OCIO) service offering. y Understand how managers are structuring their consultant relations teams to best develop and maintain relationships with consultants. y Identify trends in manager research, including the top factors considered when adding a new manager to a recommended list. Questions Answered: y For what asset classes or strategies do consultants anticipate manager search activity across a variety of institutional segments? y How have consultant relations groups been successful in targeting and maintaining relationships with field consultants? y In addition to traditional advisory services provided by consulting firms, how else are consultants working with institutional investors to help them achieve their goals? y What are the differences between perspectives of asset owners and consultants in the request for proposal (RFP) process? Subscription details $19,000 Purchase Includes y Digital copy and hardcopy in color y Online access to 4 related reports y Unlimited online firm-wide access y Exhibits in Excel y Key findings y Analyst support y Interactive Report Dashboards NEW y Executive Summary Video NEW For more information, contact us: ``info@cerulli.com Annual 127 PAGES 89 EXHIBITS Research Included with Subscription y Three years of The Cerulli Report U.S. Investment Consultants y The Evolving Investment Consulting Industry and Business Model: Opportunities for Institutional Asset Managers Cerulli interactive Report Dashboards NEW Experience Cerulli s digital analytics platform and explore interactive data from this report The following interactive dashboards are included with your subscription: 1. Investment Consultants Industry Opportunity Research: Assess new business opportunities and manager searches by plan type and expected search activity. 2. Expected Allocation Shifts Over the Next 12 Months: Explore expected allocation shifts over the next 12 months by plan type. 3. RFPs and Consultant Databases: Analyze the RFP frequency and consultant databases of asset owners and consultants. Cerulli Associates info@cerulli.com

2 What are Interactive Report Dashboards? As part of your Cerulli report subscription, we are pleased to provide you with Interactive Report Dashboards that allow you to interact with report data in unique ways: ACCESS Access consolidated data from multiple report exhibits in a single comparative view. FILTER DATA Apply filters to Cerulli report analyses including assets under management, net new flows, product type, channel, year, marketplace, and currency. EXPORT Easily build and export custom charts. Export options include; Excel, PDF, or image file. My Account: Joe Q. Sample How to Access Interactive Report Dashboards This service is complimentary and is accessible through our website. Use your unqiue Cerulli website login credentials, and you will find a View Interactive Report Dashboards link to this platform under My Reports. Interact View Dashboard You can also jump to related Interactive Report Dashboards in the report PDF by clicking on the Interact button shown on the left for reference. USER LOGIN To obtain online access, please visit or contact our account management team at: ``info@cerulli.com ` ` CERULLI ASSOCIATES info@cerulli.com

3 Consultant Relations Chapter 6 Exhibit 6.05 Attributes That Asset Managers Believe Win New Business with Investment Consultants, 2017 Source: Cerulli Associates Analyst Note: No respondents selected Portfolio specialist attending consultant meetings or Ability to convey integration of ESG/SRI capabilities. Asset managers were asked to Please select the topthree attributes that you feel impact winning new business with investment consultants. 90% 80% 76% 70% 60% 50% 40% 30% 41% 35% 35% 35% 29% 20% 18% 18% 10% 6% 0% Clearly articulating the firm s investment philosophy and process Sustainable process to generate alpha Competitive fees Relationship management Portfolio attribution and ability to explain past performance Willingness to provide frequent access to portfolio managers Accurate and timely consultant database updates Accurate and timely response to RFPs Flexibility to create new/ specialized share classes for specific consultants Overwhelmingly, 76% of managers cite clearly articulating the firm s investment philosophy and process as an effective way to win new business through consultants. Key Implication: Firm attributes such as the ability to add alpha, competitive fee structures, and timely database updates are all important, but unless a consultant completely understands a given asset manager s investment philosophy and process, the firm will likely not be selected for use in client portfolios. Moreover, consultants must have a comprehensive knowledge of not only the firm s philosophy, but also the operational aspects covering functions such as trading and compliance. Interestingly, no surveyed managers feel that their ability to convey integration of ESG/SRI capabilities is a necessary attribute in winning new business. However, Cerulli notes that as ESG continues to gain importance among institutional investors, this attribute will gain importance for consultants evaluating investment managers. The Cerulli Report U.S. Investment Consultants

4 Table of Contents Table of Contents: Expanded Key Questions Answered How do the perspectives on the RFP process differ between asset owners and consultants in regard to sourcing candidates? In which institutional client segments are managers most dependent on consultant relationships? How successful have managers been in building relationships with field consultants? What are the challenges in structuring compensation for consultant relations professionals? What are the biggest challenges facing the traditional advisory consulting model, and how are consultants addressing them? What are the major issues facing institutional investors and how are consultants working with clients to address them?...18 Chapter 1: The State of the Investment Consulting Industry...19 Changes and Challenges...20 Exhibit Top-10 Investment Consultants by U.S. Institutional AUA, 2Q Exhibit Consultants Typical Fee Structure for Advisory-Only Clients, Consultant Penetration Across Client Segments...24 Exhibit Corporate DB Plans Adding LDI/Derisking Glidepaths to Their IPS, Exhibit Consultant Penetration: Not-For-Profit/Governmental DC and Health Service Organizations, Fee Compression Exhibit Greatest Threats Presently Challenging Investment Consultants, Shifting Industry Dynamics: Consolidation and the Growth in OCIO...30 Exhibit Select M&A Activity in the Investment Consulting Industry, Q Exhibit Investment Consultants Anticipated Asset Breakout: Traditional Consulting vs. OCIO Over the Next Year and Three Years, The Future of Investment Consulting...31 Chapter 2: Industry Overview...32 Exhibit Top-25 Investment Consultants by U.S. Institutional AUA, 2Q Exhibit Consultant Use by Institutional Channel, Exhibit Consultant Penetration in State/Local Government DB, Exhibit Consultant Penetration in Corporate DB, Exhibit Consultant Penetration in Taft-Hartley DB, Exhibit Consultant Penetration in Not-For-Profit/Governmental and Corporate DC, Exhibit Consultant Penetration in Endowments and Foundations, The Cerulli Report U.S. Investment Consultants

5 Table of Contents Exhibit Consultant Penetration in Health Service Organizations, For-Profit vs. Nonprofit, Exhibit Consultant Firm Share of Mandates Placed Databank, 1Q 2015 through 1Q Exhibit Consultant Firm Share of Mandates Placed for DB Plans Databank, 1Q 2015 through 1Q Exhibit Consultant Firm Share of Mandates Placed for DC Plans Databank, 1Q 2015 through 1Q Exhibit Consultant Firm Share of Mandates Placed for Endowments/Foundations Databank, 1Q 2015 through 1Q Exhibit Investment Consultant Compensation by Job Type, Exhibit Change in Investment Consultant Compensation Over the Past Three Years, Exhibit Consultants Typical Fee Structure for Advisory-Only Clients, Chapter 3: New Business Opportunities...49 Exhibit Investment Consultants Traditional Consulting Business Segmentation by Institutional Channel, Exhibit Investment Consultants Anticipated Asset Breakout: Traditional Consulting vs. OCIO Over the Next Year and Three Years, Exhibit Investment Consultants Traditional Consulting Business by Client Size, Exhibit Investment Consultants Expected Growth of New Business by Client Segment Over the Next Three Years, Exhibit Consultants Expected Manager Search Activity for Corporate Defined Benefit Pension Plans, Exhibit Consultants Expected Manager Search Activity for State/Local Government Defined Benefit Pension Plans, Exhibit Consultants Expected Manager Search Activity for Taft-Hartley Defined Benefit Pension Plans, Exhibit Consultants Expected Manager Search Activity for Defined Contribution Plans, Exhibit Consultants Expected Manager Search Activity for Nonprofit Institutional Investors, Exhibit Consultants Expected Manager Search Activity for Health and Hospital Systems, Exhibit Services Requested: IPS Changes, Asset Allocation Studies, and Additional Consulting Arrangements, Exhibit Corporate DB Plans Adding LDI/Derisking Glidepaths to Their IPS or Considering a Pension Risk-Transfer Transaction, Exhibit Consultants That Have Been Hired to Evaluate ESG/SRI Capabilities, Chapter 4: Asset Allocation...64 Exhibit DB Plan Asset Allocation, 3Q 2015 vs. 3Q Exhibit Expected Allocation Shifts for Corporate DB Plans Over the Next 12 Months, Exhibit Expected Allocation Shifts for State/Local DB Plans Over the Next 12 Months, Exhibit Expected Allocation Shifts for Taft-Hartley DB Plans Over the Next 12 Months, Exhibit DC Plan Asset Allocation, 3Q 2015 vs. 3Q Exhibit Expected Allocation Shifts for DC Plans Over the Next 12 Months, Exhibit Endowment Asset Allocation, 2016 FYE Exhibit Private Foundation Asset Allocation, Exhibit Expected Asset Allocation Shifts for Nonprofit Institutional Investors, The Cerulli Report U.S. Investment Consultants 2017

6 Exhibit Expected Asset Allocation Shifts for Health and Hospital Systems Over the Next 12 Months, Exhibit Consultants AUA Segmented by Active vs. Passive Strategies by Client Type, Exhibit Consultants Expected Change in Passive Strategies Across Client Types Over the Next 12 Months, Exhibit Consultants Likelihood of Using/Recommending a Smart Beta Strategy to Client Type Over the Next 12 Months, Chapter 5: Manager Research...79 Exhibit Factors Considered Important by Consultants When Adding a New Manager to the Recommended List, Exhibit Consultants Rating Processes: Systematically-Weighted vs. Dynamically-Weighted, Exhibit Most Important Factors Considered by Consultants When Placing a Manager on a Watch List, Exhibit Consultants View on Encouraging Asset Managers to Maintain Relationships with Field Consultants, Exhibit Investment Consultant Team Members Who Attend Meetings with Asset Managers, Exhibit Consultants: Ideal Frequency of Meetings with a Portfolio Manager for Firms on Their Recommended List, Exhibit Non-Portfolio-Manager Team Members with Whom Consultants Would Be Most Satisfied to Meet, Exhibit Consultants Anticipated Future Interest in ESG/SRI-Focused Strategies by Client Type Over the Next 12 Months, Chapter 6: Consultant Relations...89 Exhibit Asset Management Firms with Dedicated Consultant Relations Teams, Exhibit Asset Managers: Consultant-Intermediated Institutional Net Flows, 2016 vs. 2017E Exhibit Client Segments Where Consultant Relationships Are Most Important, Exhibit Asset Managers: Effectiveness of Strategies for Targeting Investment Consultants, Exhibit Attributes That Asset Managers Believe Win New Business with Investment Consultants, Exhibit Asset Managers: Top Attributes To Maintaining Existing Relationships with Investment Consultants, Exhibit Asset Managers Greatest Sources of Frustration with Consultant Community, Exhibit Typical Compensation Structure for Institutional Sales/Service Professionals, Exhibit Typical Factors Affecting Compensation for Consultant Relations Professionals, Exhibit Consultants: Preferred Method of Learning About New Products/Strategies from Managers, Exhibit Consultants: Most Important Qualities of a Successful Asset Management Consultant Relations Team, Table of Contents The Cerulli Report U.S. Investment Consultants

7 Table of Contents Chapter 7: RFPs and Consultant/Third-Party Databases Exhibit Consultants: Frequency of Database Updates Required for Asset Managers, Exhibit Asset Owners vs. Consultants: Sources of Candidate Firms for RFPs, Exhibit Asset Owners vs. Consultants: Difference Between Request for Information and Request for Proposal, Exhibit Asset Owners: Scoring Methods for Issued RFPs, Exhibit Asset Owners: Level of Involvement in RFP Process, Exhibit Asset Owners vs. Consultants: Investment Management Searches by Evaluation Processes, Exhibit Asset Owners vs. Consultants: How RFPs Are Administratively Issued and Collected, Appendix: Firm Profiles Appendix 1. Aon Hewitt Investment Consulting, Inc Appendix 2. Mercer Appendix 3. Callan Associates Inc Appendix 4. RVK Inc Appendix 5. Pension Consulting Alliance Inc Appendix 6. Wilshire Associates Inc Appendix 7. NEPC LLC Appendix 8. Meketa Investment Group Inc Appendix 9. Russell Investments Appendix 10. Cambridge Associates Appendix 11. Willis Towers Watson Investment Services Appendix 12. Rocaton Investment Advisors LLC Appendix 13. Verus Appendix 14. Pavilion Advisory Group Appendix 15. Segal Rogerscasey Index of Companies The Cerulli Report U.S. Investment Consultants 2017

8 Index of Companies Index of Companies AON Hewitt... 10, 21, 53 Callan Associates... 10, 21 Cambridge Associates... 10, 21 CAPTRUST...22 Ellwood Associates...30 Lockton Retirement Services...22 Marquette Associates... 21, 30 Meketa Investment Group...10 Mercer... 10, 21, 53 MSCI...74 NEPC... 10, 21 NFP Retirement...22 Pavilion Advisory Group... 10, 21 Peirce Park Group Pension Consulting Alliance... 10, 21 Rocaton...10 Russell...10 RVK Inc...21 SageView Advisory Group... 22, 39 Segal Marco Advisors... 10, 30, 34, 38 Summit Strategies Group...21 Watershed Investment Consultants...30 Willis Towers Watson... 10, 21, 30, 53 Wilshire Associates... 10, The Cerulli Report U.S. Investment Consultants 2017