12TH ANNUAL INVESTMENT MANAGER WEBINAR - JUNE 14, 2022 Presented by NEPC's Research Team
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12TH ANNUAL
INVESTMENT MANAGER
WEBINAR
JUNE 14, 2022
Presented by NEPC’s Research Team
PROPRIETARY & CONFIDENTIAL
NEPC INVESTMENT MANAGER RESEARCH
Our Goal
To work constructively with the asset management
community to deliver innovative and high-quality investment
strategies that meet and exceed our clients' objectives
AGENDA
▪ NEPC Update & Allocator Outlook
▪ NEPC Research Coverage & Process
▪ Investment Manager Search Activity
▪ Key Initiatives
▪ OCIO Business Update
▪ NEPC’s Approach to Fee Negotiations
PROPRIETARY & CONFIDENTIAL
TODAY’S SPEAKERS Sarah Samuels, Neil Sheth Chris Klapinsky, Varun Raman CFA, CAIA CAIA Partner, Head of Partner, Head of Global Partner, Head of Portfolio Investment Director, Investment Manager Research Strategy Discretionary Team Research
NEPC UPDATE PROPRIETARY & CONFIDENTIAL
ABOUT NEPC
▪ Our success as a firm is fueled by our love for this business
▪ We remain independent to prioritize client interests
▪ We invest heavily in research and people
327 EMPLOYEES 399 CLIENTS
7 REGIONAL OFFICES 53 Corporate $1.5 TRILLION
Assets Under
113 Non-profit/Charitable Advisement
EMPLOYEE-OWNED
45 Partners
68 Healthcare Related
NEPC also has a
practice team dedicated
Private
100% OF REVENUE to supporting our
from advisory consulting and 42 clients’ defined
80 Public
discretionary investment services contribution plans
43 across all client types.
Taft-Hartley
7 PRACTICE TEAMS
deliver expertise by client type
As of 1/1/2022
FEEL SMALL
BUT BE BIG
Feel Small Be Big
▪ Be flexible and customized in our ▪ Have deep resources at your disposal
partnership with you
▪ Benefit you by using our size for
▪ Dedicated segment experts to manager fees and access
anticipate your needs
▪ Share learnings and insights from all
▪ Identify niche managers and client segments
investment ideasALLOCATOR
OUTLOOK
PROPRIETARY & CONFIDENTIALKEY CHALLENGES FOR INSTITUTIONAL INVESTORS
60%
55%
50%
Percent of U.S. Institutions
46%
45%
40%
42%
42%
42%
38%
38%
30% 36%
29%
26%
25%
20%
23%
22%
22%
21%
20%
20%
19%
19%
17%
17%
17%
15%
10%
13%
11%
4%
4%
9%
8%
7%
7%
7%
7%
6%
6%
5%
5%
0%
Asset Market Rate of Risk Liability Manager Funding Rate Internal Inflation Risk Liquidity Incorporation Diversity & Governance Government
Allocation Volatility Return & Management Management Selection Volatility Organization of ESG Inclusion Structure & Regulation
Funding Practices
Issues
2019 2020 2021
Source: Coalition Greenwich 2021 U.S. Institutional Investors Study.INSTITUTIONAL INVESTORS
EXPECTED ASSET ALLOCATION SHIFTS NEXT THREE YEARS
U.S. Equities - Active -14% 5%
U.S. Equities - Passive -9% 7%
International Equities - Active -7% 5%
International Equities - Passive -8% 3%
Global Equities - Active -5% 5%
Emerging Market Equities -6% 7%
U.S. Fixed Income - Active -10% 7%
U.S. Fixed Income - Passive -6% 4%
Significantly Increase
International Fixed Income - Active -5% 1%
Global Fixed Income - Active Significantly Decrease
-3% 0%
Emerging Market Debt -1% 3%
Multi-Asset -7% 3%
Real Estate - Direct -5% 22%
Hedge Fund - Direct -10% 4%
Private Equity - Direct -3% 31%
Commodities -6% 1%
Private Debt -4% 23%
-20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35%
Percent of U.S. Institutions
Source: Coalition Greenwich 2021 U.S. Institutional Investors StudyENVIRONMENTAL, SOCIAL & GOVERNANCE
ESG IS INCREASINGLY IMPORTANT TO ALLOCATORS
Institutional Utilization of ESG Focus on ESG Components
% of Respondents % Rating Extremely Important or Important
North 50% 62%
North
America 27% 61%
America
49%
71% 70%
Asia Asia 58%
46%
74%
58%
87%
Europe Europe 41%
66%
60%
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80%
Percent of U.S. Institutions Percent of U.S. Institutions
2021 2019 Environmental Social Governance
Source: Coalition Greenwich 2021 U.S. Institutional Investors StudyNEPC COVERAGE
& RESEARCH
PROCESS
PROPRIETARY & CONFIDENTIALINVESTMENT RESEARCH TEAM OVERVIEW
Tim McCusker, FSA, CFA, CAIA, Partner*
Chief Investment Officer
ASSET ALLOCATION INVESTMENT MANAGER RESEARCH
Phillip Nelson, CFA, Partner* Sarah Samuels, CFA, CAIA, Partner*,
Head of Asset Allocation Head of Investment Manager Research
PORTFOLIO CONSTRUCTION
MARKETABLE SECURITIES RESEARCH
Timothy Bruce, Partner* PRIVATE MARKETS RESEARCH
(Long-Only & Hedge Funds)
Head of Portfolio Construction
GLOBAL RESEARCH
Neil Sheth, Partner* EQUITIES PRIVATE EQUITY
Head of Global Research Will Forde, CFA, CAIA Joshua Beers,
Head of Equity Investments, Partner* Head of Private Equity Investments+
RESEARCH OPERATIONS
Dawn Swift, PRIVATE DEBT
Head of Research Operations CREDIT & MULTI-ASSET
Oliver Fadly,
OPERATIONAL DUE DILIGENCE Dulari Pancholi, CFA, CAIA, Head of Head of Private Debt Investments+
Credit & Multi-Asset Investments+
William Bogle, Partner* REAL ASSETS
Chief Compliance Officer
Matt Ritter, CAIA,
PORTFOLIO STRATEGY Head of Real Assets Investments+
Scott Perry, CAIA, Partner*
Head of Portfolio Strategy*
As of 7/1/22
*Ownership interest in NEPC (Partner)
+Principal designation for leadership within the Firm.RESEARCH TEAM
Tim McCusker, FSA, CFA, CAIA,
Chief Investment Officer*
PORTFOLIO CONSTRUCTION ASSET ALLOCATION INVESTMENT MANAGER RESEARCH
Timothy Bruce, Head of Portfolio Phillip Nelson, CFA, Sarah Samuels,
Construction* Head of Asset Allocation* CFA, CAIA, Head of Investment Manager Research*
Chris Hill, CFA, CAIA, Christopher Levell, ASA, CFA, CAIA, MARKETABLE SECURITIES RESEARCH
PRIVATE MARKETS RESEARCH
Sr. Investment Director+ Partner* (Long-Only & Hedge Funds)
Brandon Jones, Jennifer Appel, CFA, Investment Equities Credit & Multi-Asset Private Equity/Debt Real Assets
Sr. Investment Director Director
Will Forde, CFA, CAIA Dulari Pancholi, CFA, CAIA, Joshua Beers, Head of Matthew Ritter, CAIA, Head
Elton Thomaj, CAIA, Robert Goldthorpe, ASA, Investment Head of Equity Head of Credit & Multi-Asset Private Equity Investments of Real Assets Investments+
Sr. Investment Director+ Director Investments+ Investments+ Oliver Fadly, Head of Private Larissa Davy, Investment
Ryan Pelletier, Investment Director Appy Bubna, Rosann Halleran, Sr. Alec Rapaport, Debt Investments Director
Managing Editor Investment Director Sr. Investment Director+ Eric Harnish, Sr. Investment
Nina Petkova, Sr. Director+ GLOBAL RESEARCH
Kadmiel Onodje, CAIA,
Investment Director Investment Director Neil Sheth,
OCIO PORTFOLIO STRATEGY Andrew Pettersen, CFA, Sr.
OPERATIONAL DUE DILIGENCE Head of Global Research*
Scott Perry, CAIA, Head of Portfolio Rob Britenbach, Larissa Davy, Investment Investment Director
Strategy* William Bogle, CCO* Investment Director Director Colton Lavin, Investment
Alex Rickels, Investment Phillip Falk, CFA, Investment Director
James Reichert, CFA, Sr. Director of Catherine Hull, Sr. Investment Director Director Nicholas Mann, Sr.
Portfolio Strategy* Director
Client Strategy Research Investment Director
Chris Klapinsky, CFA, Sr. Director of Mason Williams, Investment
Portfolio Strategy* Steve Gargano,
Sr. Investment Director Director
Brian Donoghue, Sr. Director of John Shanklin, CFA, CAIA,
Portfolio Strategy* Investment Director
Sujatha Bhat, CFA, CAIA, Investment Istvan Meszaros,
Director RESEARCH OPERATIONS Investment Director 21
Dawn Swift, Head of Research Investment Analysts
Varun Raman, Investment Director Operations
As of 7/1/2022
*Ownership interest in NEPC (Partner)
+Principal designation for leadership within the Firm.INVESTMENT MANAGER RESEARCH TEAM
INVESTMENT MANAGER RESEARCH
Sarah Samuels, CFA, CAIA, Partner*
MARKETABLE SECURITIES (LONG-ONLY & HEDGE FUNDS) PRIVATE MARKETS
Equities Credit & Multi-Asset Private Equity Real Assets Private Debt
Will Forde, CFA, CAIA Dulari Pancholi, CFA, CAIA Joshua Beers Matt Ritter Oliver Fadly
Head of Equities* Head of Credit & Multi-Asset+ Head of Private Equity+ Head of Real Assets+ Head of Private Debt+
Rosann Halleran Alec Rapaport Eric Harnish Neil Sheth Colton Lavin, CFA
Senior Investment Director Senior Investment Director+ Senior Investment Partner* Investment Director
Nina Petkova Kadmiel Onodje, CAIA Investment Director+ Larissa Davy Brendan Heaney
Senior Investment Director Director Nick Mann Investment Director Investment Director
Alex Rickels Larissa Davy Senior Investment Eli Johnson Lindsey Powers
Investment Director Investment Director Director Senior Investment Investment Analyst
Robert Britenbach Phillip Falk, CFA Andrew Pettersen, CFA Analyst
Investment Director Jocelyn Rivera
Investment Director Senior Investment Matt Treveloni Investment Associate
Lily Fayerweather Conor Fitzell, CFA Director Investment Analyst
Senior Investment Analyst Senior Investment Analyst
Mason Williams Evan Canney
Raj Palekar Investment Director
Manager Search & Senior Investment Analyst Investment Analyst
Research Associates Brian Cronin
Client Strategy Research
Shauna Kennedy Senior Investment
Steve Gargano
Investment Associate Analyst
Senior Investment Director
Luke Turo John Shanklin, CFA, CAIA Samantha Jeannotte
Investment Associate Senior Investment Director Investment Analyst
Briana Vertucci Istvan Meszaros Reema Kaakarli
Investment Associate Investment Director Investment Associate
As of 7/1/2022
*Ownership interest in NEPC (Partner)
+Principal designation for leadership within the FirmMANAGER RESEARCH PROCESS
1 2 3 4 5
Robust Idea Quantitative Qualitative Due Approval
Monitoring
Sourcing Analysis Diligence Process
▪ Peculiarities of ▪ Quantitative ▪ The key is to ▪ Approval for the ▪ Ongoing monitoring
various asset procedures are determine if the Focus Placement is an important and
classes create important to all strategy can List (FPL) integral component
different sourcing asset classes, but sustain repeatable strategies by of the due diligence
opportunities vary based on results governance process
type of strategy committees
consisting of
senior consulting
and research
professionalsNEPC INVESTMENT PROCESS – DUE DILIGENCE
We believe a combination of quantitative analysis of a track record and qualitative analysis of incentive
alignment allows us to identify the top investment managers and deliver to clients sustainable alpha
Qualitative Analysis
Quantitative Analysis
Investment Process Alignment of Incentives
We use proprietary tools to facilitate We focus on identifying the investment We spend significant time understanding
second-level thinking, which helps us edge of a strategy and determining whether whether the client and the manager
identify true skill. it is sustainable and repeatable. are aligned.
We also evaluate whether the team is
resourced sufficiently to support the
investment process.
▪ Second-Level Thinking1 ▪ People & Resources ▪ Business strategy
‒ Portfolio Managers & Analysts
▪ Luck vs. skill ▪ Viability/profitability
‒ Additional Resources
▪ Likelihood of success ▪ Succession planning
▪ Investment Philosophy, Strategy &
▪ Alpha expectations Process
▪ Performance ‒ Investment edge/thesis
‒ Absolute ‒ Investment Philosophy
‒ Relative ‒ Research Process
‒ Peer Comparison ‒ Portfolio Construction
‒ Risk Management
1https://www.oaktreecapital.com/docs/default-source/memos/2015-09-09-its-not-easy.pdfNEPC DUE DILIGENCE PROCESS
Investment Due Diligence Team & Firm Due Diligence
▪ Marketing Pitchbook ▪ Reference Calls
▪ Historical Data ▪ Key Person Risk
‒ Returns ▪ Onsite Visit*
‒ Characteristics ‒ Meet with team together and individually, both senior and junior
‒ Holdings team members
‒ Attribution ‒ Systems demo
‒ Exposures ‒ Evaluate lifecycle of a trade
▪ Due Diligence Questionnaire ▪ Operational Review
▪ ESG Questionnaire ▪ Form ADV
▪ Portfolio Company/Holding Case Studies ▪ GIPS Compliance Status
▪ NEPC Investment Framework
‒ Ownership, culture, business strategy, viability
‒ Portfolio managers, analysts, additional resources COVID-Era Enhancements
‒ Investment philosophy and edge
‒ Research process ▪ Video Conference Calls
‒ Portfolio construction ‒ Senior and junior investment team members
‒ Risk management ‒ Business leaders (C-Suite)
‒ Quantitative analysis of track record and exposures: returns- and ‒ Back office team members
holdings-based ‒ Virtual office tour (with floorplan)
▪ Fee Negotiations ▪ Additional Reference Calls
▪ Formal Review and Approval by NEPC Due Diligence Committee or ▪ Individual and Firm Background Checks
Alternative Asset Committee ▪ Non-US Strategies: ODD may be Outsourced to Local Providers
Note: Not all due diligence steps apply to every investment strategy. *When travel is not restricted due to pandemicMANAGER RATING SCALE
Rating Description
Due Diligence Rating 2
NEPC Research views 1-rated strategies as best ideas. The strategy has a clearly
articulated investment thesis, and the manager is sufficiently resourced and
1 incentivized to execute on the thesis. NEPC Research has high conviction that 1-rated
Analyst Opinion Score 2 strategies are positioned to deliver on a stated investment thesis and target return
over a full investment cycle.
NEPC Research has a positive view of the strategy. The strategy has a clearly
Firm/Organization 2 2
articulated investment thesis, and the manager is sufficiently resourced and
incentivized to execute on the thesis. A single factor or mosaic of factors may lead
NEPC Research to a 2-rating rather than a 1-rating.
People & Resources 3 NEPC Research has a constructive view of the strategy and believes the strategy can
play an appropriate role in certain client portfolios. Through initial and/or ongoing
3 research of a strategy, NEPC has not identified unreasonable risks from an
organizational, process, operational or investment perspective.
Investment Philosophy,
3
Strategy & Process NEPC Research has conducted a reasonable level of due diligence and has an
4 unfavorable view of the strategy due to issues, weaknesses or risks that we believe
would challenge the manager's ability to execute on a stated investment thesis.
Performance 1
NEPC has conducted a reasonable level of due diligence on the strategy and has
significant concerns about the effectiveness or viability of the strategy. Through the
5 due diligence process, NEPC has uncovered serious issues, weaknesses or risks that
Due Diligence Status No Action we believe challenge the manager’s ability to execute on a stated investment thesis.
Source: NEPCINVESTMENT
MANAGER
SEARCHES AND
ACTIVITY
PROPRIETARY & CONFIDENTIALSEARCHES & REVIEWS CONDUCTED IN 2021
Searches & Reviews by Asset Class
Large Cap Equity 14
Small/Mid Cap & Mid Cap Equity 7
Small Cap Equity & Micro Cap Equity 32
All Cap Equity (includes MLPs) 3
Int’l Equity/Global Equity/Emerging Equity 96
Passive 7 Total Searches and Reviews:
Fixed Income 33 595
High Yield Bonds 3
Global Bonds/Emerging Market Debt 16 Total Search Assets:
GAA/TAA (includes Risk Parity & LifeCycle) 31 $26 Billion
Hedge Funds 144
Real Estate 82
Real Assets 53
Private Equity (includes Private Debt) 74
Liquid Alt Beta 0
As of 12/31/2021HISTORICAL SEARCH ACTIVITY
Total Number of Searches
1000
Total Alternatives
800
Total Balanced
600
Total Non US FI
400
Total US FI
200
Total Non US Equity
0
Total Domestic Equity
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
As of 12/31/2021KEY INITIATIVES PROPRIETARY & CONFIDENTIAL
KEY INITIATIVES ▪ Fee Negotiations ▪ Outsourced CIO ▪ Private Markets ▪ DEI & Explorer Ratings Platform ▪ ESG & Impact
OCIO BUSINESS
UPDATE
PROPRIETARY & CONFIDENTIALDISCRETIONARY SERVICE
201
investment programs1 DAILY MONITORING
of your portfolio
$66.8
billion in aggregate assets1 SIGNIFICANT EXPERIENCE
coordinating client implementations
and manager conversions
29
investment, portfolio strategy
and operational professionals2
1As of 4/1/2022
2As of 3/1/2022NEPC’S OUTSOURCED CIO SERVICE:
THE BENEFITS
SCALE: potentially lower investment fees and better access
1
due to lower investment minimums
2
AGILITY: we can rapidly deploy assets to potentially
enhance returns
SIMPLIFICATION: potentially stronger governance and
3
lower costsNEPC ACCESS VEHICLES ▪ NEPC recently launched access vehicles in two asset classes ‒ Global Equity ‒ Emerging Equity ▪ Clients benefit from ‒ A diversified balance of complimentary managers ‒ Even lower fees and better access due to pooling of assets ‒ Simplified reporting ▪ We anticipate launching additional access vehicles in 2023
OCIO OPERATIONS
EXPERIENCE IMPLEMENTATION LEGAL OVERSIGHT
Dedicated service team Significant experience with Internal and/or external
supporting trading, conversions, recordkeeper document reviews
operations, legal and coordination, manager
Document execution
compliance transitions, and contractingNEPC’S
APPROACH TO FEE
NEGOTIATIONS
PROPRIETARY & CONFIDENTIALNEPC RESEARCH FOCUS ON INVESTMENT MANAGER FEE SAVINGS FOR CLIENTS ▪ NEPC Research Team has actively negotiated fee discounts for its clients for many years ▪ Proprietary data analysis tool mines our databases and calculates these savings for clients ▪ NEPC currently has investment manager fee savings with 460 investment Fund Vehicles representing: ‒ 195 comingled marketable securities funds ‒ 24 hedge funds ‒ 85 private markets funds ‒ 156 SMAs
NEPC RESEARCH
FOCUS ON INVESTMENT MANAGER FEE SAVINGS FOR CLIENTS
▪ Key NEPC principles regarding investment manager fee process:
‒ Fees should not represent more than 20-25% of Fund’s outperformance over a
passive benchmark over the medium-long term
‒ Search books list the performance and fees for all the managers being considered
along with the eVestment universe median fees. Negotiated fees are also shown
next to these “standard” fees where applicable.
‒ Proactively targeting high exposure Investment Managers/Funds where NEPC
clients do not have a discount to standard fees and/or performance does not justify
the fees chargedQUESTIONS PROPRIETARY & CONFIDENTIAL
APPENDIX PROPRIETARY & CONFIDENTIAL
MANAGER RESEARCH
GLOBAL COVERAGE
Dedicated research group supplemented by consulting teams
12,500+ 593
investment strategies rated
searches2 in 2020
across asset categories1
2,881 $29.0 billion
total search2 assets in 2020
manager meetings in 2021
1Includes all unique products and strategies tracked in NEPC’s database on which NEPC has developed an opinion and assigned a rating of 1-5. Does not include products that are
flagged as Not Rated. Private equity, real estate and real assets categories include all products/strategies tracked in NEPC’s internal database.
2Includes public market searches, hedge fund reviews and private markets commitments to strategies approved/underwritten by NEPC.NEPC DISCLOSURES
Past performance is no guarantee of future results.
The opinions presented herein represent the good faith views of NEPC as of the date of this report and are subject to change at any time.
Data used to prepare this report was obtained directly from various sources. While NEPC has exercised reasonable professional care in preparing this report, we
cannot guarantee the accuracy of all source information contained within.
NEPC may provide background information on fund structures or the impact of taxes but investors should contact their legal counsel or tax professional for
specific advice on such matters.
This report may contain confidential or proprietary information and is intended only for the designated recipient(s). If you are not a designated recipient, you may
not copy or distribute this document.
Alternative Investments
1. It is important that investors understand the following characteristics of non-traditional investment strategies including hedge funds and private equity:
2. Performance can be volatile and investors could lose all or a substantial portion of their investment
3. Leverage and other speculative practices may increase the risk of loss
4. Past performance may be revised due to the revaluation of investments
5. These investments can be illiquid, and investors may be subject to lock-ups or lengthy redemption terms
6. A secondary market may not be available for all funds, and any sales that occur may take place at a discount to value
7. These funds are not subject to the same regulatory requirements as registered investment vehicles
8. Managers may not be required to provide periodic pricing or valuation information to investors
9. These funds may have complex tax structures and delays in distributing important tax information
10. These funds often charge high fees
11. Investment agreements often give the manager authority to trade in securities, markets or currencies that are not within the manager’s realm of expertise or
contemplated investment strategyTHANK YOU PROPRIETARY & CONFIDENTIAL
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