Absolute Return Strategies Presentation

Cliffwater Private Assets Forward Calendars Private Asset Research Activity Report - Second Quarter 2017 This quarterly report provides a review of private equity, private debt, real asset and real estate funds, which are currently in active due diligence or expected to be reviewed in the coming months. Please contact your client service representative or Gabrielle Zadra [email protected]: (310-448-5018) with any questions. nds that Closed During the First Quarter U.S. Large Buyout Competitive and efficient market. Dependent on capital markets for exits. Underweight US Md/Small Buyout More fragmented acquisition market. Selling opportunites with financial and strategic buyers. Overweight Distressed Low detauts, rising Interest rates, and uncertain political climate. No clear opportunity. Underweight Private Debt Market uncertainty and rising interest rates make senior-focused strategies more attractive. Overweight Venture Exits and valuations are expected to improve in 2017. Europe Uncertainty persists, which should benefit opportunistic Investors. Neutral Neutral Lower long-term macroeconomic growth in China. Favor control deals higher-growth sectors. Underweight Latin America Attractive entry valuations as many traditional sources capital have left the market. Neutral Energy Pockets of opportunity exist but commodity price volatility may continue to disrupt upstream Investing. Neutral Infrastructure A buoyant fundraising market has created a more competitive market. Natural Resources Metal and mineral commodity prices remain subdued though a lack of investment in new production will result in increasing prices. Acquisition activity for row crop acreage should Increase. Neutral Real Estate- Equity Headwinds from rising cap rate risks are offset by the Increased scarcity of transaction debt. Underweight Real Estate- Dedi Rising Interest rates and declining debt proceeds enhance debt opportunities for lenders Overweight Large Buyout New York $12.5 billion onal North Amorica buyout transactions and may pursuo opportunistic invostmonts in roal ostato and KR Il target large companies with over $1 billion in total orto priso value. The fund will invost in at with equity investmonts ranging from $500 million to $1 billion. The Firm has realized 55 investments crating a gross roturn of 26% and 2.3 timos invested capital. Mid-Market Buyout San Francisco $3.0 bilion in middlo market hoalthcaro, softwaro, financial sorvicos, and industrial tochnology companios. Tho nich are headquartered in the United States or Canada and will make oquity investments ranging from 1 companies with antcrprise values between $50 million and $1 billion. Transactions will tako tho form apitalizations, growth oquity financings, and carvo-outs. The firm socks partner strong lize their experianco and resources to accolorato rovonus and camings growth. The firm's matural turns of equal or better than two times paid-in capital with the axcoption of the vintage 2004 fund Mid-Market Buyout $2.0 bilion Hermosa Beach routs through complox transactions, corporato carvo-outs, and distrossod investmonts. The firm will s capital intensivo industrios including softwaro, healthcare IT, business sorvicos, and consumer cally pursuo a buy-and-build strategy and uso oporating rosourcos to strongthon companics. The firm Govern who was proviously the head of M&A and an invostmont committoo mombor at The Goros 0, 2016, Marlin Equity Ill, a 2010 vintage, has generatod a not IRR of 15.7% and Marlin Equity IV has %. As of September 30, 2016, the firm has gonoratod a not IRR of 24.8% across all funds sinco Mid-Market Buyout Los Angeles $6.5 bilion dlo markot invostmonts in undorporforming, valuo-orientod, or operationally complox companios. Thot experiencing operational difficulty with an omphasis on industrial and manufacturing businesses. Tho norated a gross return of 2.3 times invested capital as of June 30, 2016. Fund IV started investing in Mid-Market Buyout New York $3.0 billion rage. Direct Lending London €800 million aan lower middle market comparios. The firm was founded in 2011 and currently has 14 professionals I seek to structure each loan with a contractual return of 1.5 to 2.0 times invested capital and a 14% to iral upside through warrants or other equity like features. Metric Capital Partners I, a 2014 vintage apital and performance has not yet been meaningful. Metric Capital Partners I a 2012 vintage fund. % as of September 30, 2016. Direct Lending Chicago $300 million sponsor backed middle market companies with EBITDA between $7 million and $35 million. The firm obert Radway and a team that worked together previously at Merrill Lynch Capital. NXT has 72 investment professionals, headquartered in Chicago with offices in New York and Atlanta. The firm is 10 million and, with leverage, a total capital raise of $1.0 billion to $1.2 billion. The firm's most recent , has generated a net levered IRR of 8.8% as of September 30, 2016. VIII Direct Lending Santa Monica $1.0 bilion middle market non-sponsor companies and less competitive sponsor-backed transactions. The Fund mpanies with $15 million to $75 million of EBITDA that are less competitive due to some complexity or firm has 34 investment professionals based in Santa Monica with additional offices in San Francisco 0, 2016, Tennenbaum's prior direct lending funds have generated a net IRR of 9.3% since 2012. $1.0 bilion Boston Mezzanine investments in profitable media, communications, information services, and business services ypically structure investments as non-control, preferred equity with warrants, but may also invest in ble securities, or other structures that have meaningful common equity subordinated to the fund's atment professionals, including three dedicated to the senior equity strategy who are all based at the ABRY Senior Equity IV, a 2012 vintage fund, is fully caled and has gonerated a not IRR of 11.9% as Neutral iddlo-market companios that provido sorvicos to government-rolated customers, including those at tho s. The fund will targot a portfolio of sovon to ton companios with total ontorpriso valuos botwoon $100 oquity investments batwoan $50 million and $500 million. As of Septembar 30, 2016, the Firm has across all funds since inception. Mid-Market Buyout Boston $3.0 bilion plated invostmonts in comparios with a total orto priso valuo botwoon $250 million and $1.3 billion. no the first institutional invostor in privato, profitable growth companios. Targot invostmonts will bo uro, ranging from minority investments to establishing control of companies through recapitalizations fund will typically deploy an averago aquity investment of $60 million to $120 million por transaction. Small Buyout Hermosa Beach $500 million westments in complex situations where the business is undergoing operational, financial, or situational on smaler businesses in less capital intensive industries including software, healthcare IT, business ducts. The fund will typically omploy a buy-and-build strategy with smallor initial oquity invostmonts corativo acquisitions aro complotod. As of Soptombor 2016, Marlin Horitago 1, a 2014 vintago, has 3 timos invostod capital and a not IRR of 25.8%. The firm has gonoratod a not IRR of 24.8% across all European Buyout Paris €1.0 bilion in middlo market companios primarily located in Franco, Gormany and Italy. Choquors has a long- • goographic markot of Franco and has built a broador notwork of rolationships across Europo. Tho ct loading companios with ontorpriso valuos of €80 million to €350 million. Targot companios aro nagomont toams and stablo cash flows. Sinco 1003. Choquors has gonoratod a roturn of 3.0 timos nvestments Direct Lending Chicago $1.0 bilion middle market sponsor-backed companies with an average EBITDA of $10 million to $30 million. The Angelo Gordon in 2014 from Madison Capital and operates under the name Twin Brook with 21 sed in Chicago. The fund will offer both levered and unlevered vehicles with a total capital raise target ©2017 Cliffwater LLC. All rights reserved. Page 2 of 18 Energy New York $350 million oral or royalty intorosts specifically located in the Dolawaro Basin within Toxas. The firm has not usod minoral intorost fund but has successfully Icased and oporated Dolawaro Basin acroago. inoral intorosts in the Dolaware Basin with acroago that has not roachod a moaningful stage of 1 its prior experianco of operating oil and gas wolls in the same aroa to oneuro futuro production will 0, 2016, prior Kimmoridge funds woro gonorating a not IRR of 64% and a not roturn of 2.5 timos old a final close with $350 million of commitments on March 30, 2017. e Opportunistic Roal Estate Chicago $850 million ely in the education, healthcare and storage property sectors through both its opportunistic and core inception, the firm has invested $15 billion across strategies, a total of 647 assets. Fund VI wil seek senior housing, medical office and storage properties with a focus on cash yields and opportunistic tember 30, 2016, Fund II, a 2010-vintage fund, has generated a net IRR of 20.7% and a return of 1.7 ulatively, the irm's funds have generated a 24% gross IRR and a gross multiple of 1.8 times invested $782 million in commitments as of April 2017 and will hold a final close during the second quarter. Value Added Real Estate San Francisco $250 million ati-tenant, small bay, light industrial proporally. The vertically-integrated platform has 65 employees. in urban locations nationally. The firm was founded in 34.5 million square feet of property s in asset management, lease administration, legal, property management and investment functions. he firm has invested $163 million of equity in 63 transactions across its previous four funds within the intage partnership which represents 89% of capital invested to date, has generated a net IRR of 16% vested capital. Fund III's 12 realized investments have generated a gross IRR of 39% and a return of dato. Value-Added Real Estate Chicago $1.3 billion 2009 and invests exclusively in double and triple net lease commercial properties. The fund will target setment grade tenants with an average of 15 years of remaining lease term in recession-resistant es and consumer staples. Since the firm's establishment, the GP has distributed income at an monthly basis without interruption and will seek to continue high cash distributions in Fund IV. Oak Page 3 of 18 ©2017 Ciftwater LLC. All rights reserved. ©2017 Cliffwater LLC. All rights reserved. Page 1 of 18 The information on this page contains Cliffwater's current views, projections regarding future events, and forecasts regarding the strategies described herein. There is no assurance that such events or forecasts will be achieved, and may be significantly different from that shown here. Cliffwater produces quarterly private asset "pipeline" reports for clients... ...used as the basis for investment planning over the next several quarters CLIFFWATERLC | 21