Fresno County Employees' Retirement Association (FCERA) - May 2021 - County of ...
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Fresno County Employees’ Retirement Association (FCERA)
May 2021
www.aksia.com
Aksia Presenting Team
Jim Vos
Partner, CEO
Patrick Adelsbach
Partner, Head of Credit Strategies
Tim Nest, CFA
Managing Director, Head of Private Credit Research
Lynn O’Connell, CAIA
Portfolio Advisor
2
Aksia – At A Glance
$240bn+ 316
of AUA1 Professionals2
Client Centric
Business
Model
90+ >3,000
Institutional Clients1 Integrated Due Diligence Reports3
Founded in
2006 Front-to-Back
Approach
$10bn+ 3.1
of AUM1 Staff to Client Ratio1
100% Employee 7 Offices
Owned Globally
All references to Aksia herein refer to Aksia LLC, together with its wholly owned subsidiaries (collectively, “Aksia”)
1As February 28, 2021. Total AUA (inclusive of AUM) is defined as NAV plus unfunded commitments. Represents investments currently tracked and
monitored by Aksia’s Client Operations team. AUM includes fully discretionary accounts or accounts where the client retains veto authority
2As of March 31, 2021
3As of December 31, 2020 3
Our Professionals
Team Size Aksia Professionals' Average Industry Experience (Years)
ODD & Risk
35
Investment
76
Research,
Investment Research1 Senior, 17.5 professionals
Total, 7.3
Operational Due
55 23
Advisory &
Operations
Diligence1
Portfolio
Senior, 20.2
Client
professionals
Total, 8.1
Risk Management 26
Legal, IT, &
Senior, 15.0 12
Admin
professionals
Total, 10.1
Portfolio Advisory 43
0.0 5.0 10.0 15.0 20.0
Client Operations 64
Headcount by Function Type
Legal & Compliance 10
Information Technology 19 34% 16% 50%
Administration 23 Legal, IT, Investment Research,
Portfolio Advisory
& Client Operations & Admin ODD & Risk
316
As of March 31, 2021
1Of the 76 Investment Research professionals, 23 spend some or all of their time covering Private Credit strategies as well as 3 members of the relevant
investment committee or the investment research team specialized in niche strategies that can be expressed through Private Credit vehicles.
Operational Due Diligence professionals are generalists and cover all asset classes
4
Private Credit Team Resources
26 Investment Research Professionals
Patrick Adelsbach, Partner Tim Nest, Managing Director
Head of Credit Strategies Head of Private Credit Research
23+ years of experience 21+ years of experience Supporting Resources
Mike Krems, Partner Simon Fludgate, Partner
Dan Krivinskas, Partner1
Head of Co-Investments Head of Operational Due Diligence
Head of Real Estate Research
18+ years of experience 18+ years of experience Kara King, Partner
Head of Client Operations & Risk Management
Joshua Hemley, Managing Director Maiko Nanao, Managing Director
Co-Investments Investment Research, Asia Steve Beckett
12+ years of experience 21+ years of experience Head of Private Markets Risk
+
Brian Goldberg, Managing Director1 Leo Fletcher-Smith, Senior Vice President
Event Driven & Multi-Strategy European Private Credit Strategy Head ▪ 54 Operational Due Diligence
14+ years of experience 14+ years of experience ▪ 14 Risk Management
▪ 57 Client Operations
Kevin Hitchen, Senior Vice President1 Antonis Antypas, Global Head of Analytics
Head of Large Cap Buyouts 12+ years of experience
12+ years of experience
Ping Xu, Head of Hong Kong Office Filip Malaric, Vice President
17+ years of experience 7+ years of experience
Ilya Riskin, Vice President
15+ years of experience
5 Senior Associates | 4 Associates | 4 Analysts
As of March 31, 2021. Includes Investment Research, Risk Management and Client Operations professionals that spend some or all of their time
covering Private Credit strategies as well as members of the relevant investment committee or the investment research team specialized in niche
strategies that can be expressed through Private Credit vehicles (noted with “1”). Operational Due Diligence professionals are generalists and cover all
5
asset classes.
Aksia Private Credit
Key Aksia Private Credit Statistics
$59bn in Total AUA Due Diligence on >600 PC 26 Investment Research 85+ PC
$5bn AUM1 Opportunities2 Professionals Sub-strategies
Client Investments in >55% Fund Size 200 Unique GPs1 >50% Global or Outside US2 Professionals Sourced LTM3
▪ Active in the Private Credit asset class since 2010
Seasoned Credit Team ▪ Deep credit research coverage and local presence across the global markets
▪ Synergies across public and private markets activities
▪ Proactive opportunistic idea generation
Thematic Approach ▪ Market and deal insights enhanced through broader platform relationships
▪ Global network of LPs, GPs, intermediaries
Deep Sourcing Channels ▪ Activities in PE, RA, RE and HF further complement credit sourcing efforts and market insights
▪ Proprietary tech platform houses information on over 2,900 private credit opportunities
▪ Anchor/seed deals, primaries, SMAs, dislocation vehicles, co-investments and secondaries
Flexible Capital Base
▪ Increasingly active managing credit-focused customized separate account mandates
1As of February 28, 2021
2As of December 31, 2020
3As of March 31, 2021. Based on initial communications with Managers. Includes deal flow from Aksia LLC and Aksia TorreyCove Capital Partners prior to the combination of
the businesses on March 31, 2020. Approximately $58mm has been invested in the last twelve months preceding September 30, 2020 6
Private Credit Coverage
DISTRESSED
DIRECT LENDING SPECIALTY FINANCE STRUCTURED CREDIT REAL ESTATE CREDIT REAL ASSETS CREDIT
& SPECIAL SITUATIONS
U.S. Direct Lending Corporate Distressed Consumer & SME Lending CLO U.S. CRE Core Lending Infrastructure Lending
Senior Stress / Distressed Trading Marketplace Finance CLO Debt U.S. CRE Core Lending Senior Focus
Opportunistic Influence / Control Lender/Platform Finance CLO Multi Sub-IG Focus
LMM (sponsored) Diversified Distressed Captive CLO Equity U.S. CRE Transitional Mezz Focus
LMM (non-sponsored) Factoring & Receivables 3rd Party CLO Equity Lending
Private BDCs Real Estate Distressed Factoring & Receivables Large Loan Energy Credit
Industry Focused Real Estate Distressed CRE Middle Market Energy Lending
Regulatory Capital Relief Non-Agency CRE B-Piece Small Balance Energy Mezzanine Lending
Revolvers
NPLs Regulatory Capital Relief Agency CRE B-Piece Opportunistic Opportunistic
European Direct Lending NPLs CMBS/CRE
Healthcare Royalties U.S. CRE Bridge Lending Trade Finance
Senior
Opportunistic Capital Solutions Healthcare Royalties RMBS Large Loan Trade Finance
Capital Solutions RMBS Middle Market
Lower Middle Market Music/Film/Media
Country-Specific Funds Small Balance Metals & Mining Finance
PC Special Situations Royalties Consumer ABS Metals & Mining Finance
Emerging Markets Lending PC Special Situations Music/Film/Media Consumer ABS European CRE Lending
Royalties Bridge Agricultural Credit
Asian
PE Special Situations Esoteric ABS Transitional Agricultural Credit
African
PE Special Situations Oil & Gas Minerals Esoteric ABS Core
CEE/Middle East Transportation
Latin American Royalties
Distressed-for-Control Oil & Gas Minerals Europe Structured Credit EM CRE Lending Aviation Lending
Pan-EM European Structured Credit Maritime Lending
Distressed-for-Control Royalties EM CRE Lending
Road & Rail Lending
Global Direct Lending Structured Credit Multi-
Global Metals Royalties Residential Mortgages Transportation Lending
Metals Royalties Sector Residential NPLs (Multi)
Structured Credit Multi- Single Family Rental
Healthcare Lending Sector Mortgage Servicing Rights
MEZZANINE Healthcare Lending Residential Origination
Venture Lending
U.S. Mezzanine Venture Lending
Upper Middle Market
Middle Market Insurance Linked Credit
Lower Middle Market Diversified
Life Insurance
European Mezzanine Non-Life Insurance
European Mezzanine
Litigation Finance
Structured Equity Litigation Finance
Structured Equity
Merger Appraisal Rights
Merger Appraisal Rights
PE Portfolio Finance
PE Portfolio Finance 7
Private Credit Coverage – Three Main Areas
DISTRESSED
DIRECT LENDING SPECIALTY FINANCE STRUCTURED CREDIT REAL ESTATE CREDIT REAL ASSETS CREDIT
& SPECIAL SITUATIONS
U.S. Direct Lending Corporate Distressed Consumer & SME Lending CLO U.S. CRE Core Lending Infrastructure Lending
Senior Stress / Distressed Trading Marketplace Finance CLO Debt U.S. CRE Core Lending Senior Focus
Opportunistic Influence / Control Lender/Platform Finance CLO Multi Sub-IG Focus
LMM (sponsored) Diversified Distressed Captive CLO Equity U.S. CRE Transitional Mezz Focus
LMM (non-sponsored) Factoring & Receivables 3rd Party CLO Equity Lending
Private BDCs Real Estate Distressed Factoring & Receivables Large Loan Energy Credit
Industry Focused Real Estate Distressed
Regulatory Capital Relief
Cash Flow
CRE
Non-Agency CRE B-Piece
Middle Market
Small Balance
Energy Lending
Energy Mezzanine Lending
Revolvers
NPLs Regulatory Capital Relief Agency CRE B-Piece Opportunistic Opportunistic
European Direct Lending NPLs CMBS/CRE
Healthcare Royalties
Senior
Distressed Healthcare Royalties RMBS
U.S. CRE Bridge Lending Trade Finance
Cash Flow
Opportunistic
Lower Middle Market
Capital Solutions
Capital Solutions
Music/Film/Media
RMBS
Large Loan
Asset-
Middle Market
Trade Finance
Asset-Based
Country-Specific Funds Small Balance Metals & Mining Finance
PC Special Situations Royalties Consumer ABS
Based
Metals & Mining Finance
Emerging Markets Lending PC Special Situations Music/Film/Media Consumer ABS European CRE Lending
Royalties Bridge Agricultural Credit
Asian
PE Special Situations Esoteric ABS Transitional Agricultural Credit
African
PE Special Situations Oil & Gas Minerals Esoteric ABS Core
CEE/Middle East
Latin American
Distressed-for-Control
Royalties Asset-Based
Europe Structured Credit EM CRE Lending
Transportation
Aviation Lending
Pan-EM Oil & Gas Minerals
Distressed-for-Control Royalties European Structured Credit EM CRE Lending Maritime Lending
Global Direct Lending Cash Flow
Metals Royalties Structured Credit Multi- Residential Mortgages
Road & Rail Lending
Transportation Lending
Global
Metals Royalties Sector Residential NPLs (Multi)
Structured Credit Multi- Single Family Rental
Healthcare Lending Sector Mortgage Servicing Rights
MEZZANINE Healthcare Lending Residential Origination
Venture Lending
U.S. Mezzanine Venture Lending ▪ Cash Flow – lending strategies that primarily rely on cash generation from
Upper Middle Market
Middle Market Insurance Linked Credit ongoing company operations as collateral
Lower Middle Market Diversified
▪ Asset-Based – lending strategies that primarily target hard assets as collateral
Cash Flow
European Mezzanine
Life Insurance
Non-Life Insurance
▪ Distressed – strategies focused on buying in the secondary markets at a discount
European Mezzanine
Litigation Finance to intrinsic value (i.e., investor returns driven by capital gains rather than yield)
Structured Equity Litigation Finance
Structured Equity
Merger Appraisal Rights
Merger Appraisal Rights
PE Portfolio Finance
PE Portfolio Finance 8
FCERA Private Credit Exposure
DISTRESSED
DIRECT LENDING SPECIALTY FINANCE STRUCTURED CREDIT REAL ESTATE CREDIT REAL ASSETS CREDIT
& SPECIAL SITUATIONS
U.S. Direct Lending Corporate Distressed Consumer & SME Lending CLO U.S. CRE Core Lending Infrastructure Lending
Senior Stress / Distressed Trading Marketplace Finance CLO Debt U.S. CRE Core Lending Senior Focus
Opportunistic Influence / Control Lender/Platform Finance CLO Multi Sub-IG Focus
LMM (sponsored) Diversified Distressed Captive CLO Equity U.S. CRE Transitional Mezz Focus
LMM (non-sponsored) Factoring & Receivables 3rd Party CLO Equity Lending
Private BDCs Real Estate Distressed Factoring & Receivables Large Loan Energy Credit
Industry Focused Real Estate Distressed CRE Middle Market Energy Lending
Regulatory Capital Relief Non-Agency CRE B-Piece Small Balance Energy Mezzanine Lending
Revolvers
NPLs Regulatory Capital Relief Agency CRE B-Piece Opportunistic Opportunistic
European Direct Lending NPLs CMBS/CRE
Healthcare Royalties U.S. CRE Bridge Lending Trade Finance
Senior
Opportunistic Capital Solutions Healthcare Royalties RMBS Large Loan Trade Finance
Capital Solutions RMBS Middle Market
Lower Middle Market Music/Film/Media
Country-Specific Funds Small Balance Metals & Mining Finance
PC Special Situations Royalties Consumer ABS Metals & Mining Finance
Emerging Markets Lending PC Special Situations Music/Film/Media Consumer ABS European CRE Lending
Royalties Bridge Agricultural Credit
Asian
PE Special Situations Esoteric ABS Transitional Agricultural Credit
African
PE Special Situations Oil & Gas Minerals Esoteric ABS Core
CEE/Middle East Transportation
Latin American Royalties
Distressed-for-Control Oil & Gas Minerals Europe Structured Credit EM CRE Lending Aviation Lending
Pan-EM European Structured Credit Maritime Lending
Distressed-for-Control Royalties EM CRE Lending
Road & Rail Lending
Global Direct Lending Structured Credit Multi-
Global Metals Royalties Residential Mortgages Transportation Lending
Metals Royalties Sector Residential NPLs (Multi)
Structured Credit Multi- Single Family Rental
Healthcare Lending Sector Mortgage Servicing Rights
MEZZANINE Healthcare Lending Residential Origination
Venture Lending
U.S. Mezzanine Venture Lending
Upper Middle Market
Middle Market Insurance Linked Credit
Lower Middle Market Diversified
Life Insurance
European Mezzanine Non-Life Insurance
European Mezzanine
Litigation Finance [Black] Carlyle Accounts
Structured Equity Litigation Finance [Blue] Legacy Portfolio
Structured Equity
Merger Appraisal Rights
Merger Appraisal Rights
PE Portfolio Finance
PE Portfolio Finance 9
Target Returns Vary Considerably By Strategy
Sector Median Net Target Returns*
Low Medium High
Real Estate Direct Real Mezzanine Specialty Structured Distressed &
Credit Lending Assets Finance Credit Special Sits
Credit
Strategy Median Net Target Returns*
Median Target Net IRR
Metal & Mining Finance
Structured Credit Multi-Sector
Energy Credit CLO
European Mezzanine Factoring & Receivables Emerging Markets Lending
US CRE Transitional Lending Residential Mortgages Corporate Distressed
Infrastructure Lending US Mezzanine
Regulatory Capital Relief Royalties
US CRE Core Lending Venture Lending
CRE Structured Equity
European Direct Lending Special Situations
US CRE Bridge Lending RMBS
European CRE Lending Insurance Linked
US Direct Lending Litigation Finance
Global Direct Lending Real Estate Distressed
Consumer ABS PE Portfolio Finance
Transportation Healthcare Lending
Consumer & SME Lending
Low Medium High
*Data is sourced from Aksia’s internal database, as of December 31, 2020. Target Sector and Strategy returns are representative of information
provided by the managers of funds that are in Aksia’s database. Not all funds are included in the analysis due to insufficient amount of data. Target
returns are not indicative of future performance. 10Private Credit Manager Sourcing
Manager Selection Comprehensive Coverage
Real Estate Credit
11%
Real Assets Credit Direct Lending
28%
Preliminary Review 7%
By Sector
> 2,910 programs
Specialty Finance
12%
Mezzanine
2%
Further Review Structured Credit
8%
> 1,780 programs Distressed & Special Situations
32%
Due Diligence
> 640 programs
Americas
EMEA
By Geography
49%
17%
Asia Pacific
6%
8,000 60
7,000
50 Global
28%
6,000
40
5,000
$mm
Mega Micro
4,000 30 9% 6%
Small
By Fund Size
3,000 19% Micro: ≤ 200mm
20
Small: 200-500mm
2,000 Large Mid: 500mm-1bn
34%
10 Large: 1-3bn
1,000
Mega: > 3bn
0 0 Mid
2019 2020 32%
Client Commitments ($mm) Unique Programs
*Data is sourced from Aksia’s internal database, as of December 31, 2020, excluding legacy Aksia TorreyCove and Aksia Chicago’s private credit
coverage. Client commitments represent Aksia (Private Credit). Coverage by geography and fund size is representative of the universe of investment
programs (onshore & offshore count as one) on which Aksia has conducted due diligence (IDD, ODD, or Insights Report). 11Aksia Proposal
FCERA could consolidate the entire PC program, including legacy portfolio investments, within a Fund-of-One
FCERA Fund-of-One Proposal
(sole investor)
• Customized to FCERA’s objectives
• Access niche strategies & unique
“Yosemite” Aksia exposures more efficiently
Fund-of-One (appointed GP) • Full back-office operations & accounting
support on new & legacy investments
• Aksia leverages our scale when
negotiating fund terms on behalf of
Legacy Legacy New New New New
FCERA
Funds Funds Fund Fund Fund Fund
• Fee transparency: Aksia does not earn
any fees from the underlying funds & we
have no products to place clients in
Simplicity: Fund-of-One would be one line
item for performance & reporting purposes
12Benefits of Aksia Proposal
Aksia Investment Management Expertise
Actively manage $5bn in discretionary Private Credit portfolios
Flexible Direct Fund Simplify Operations Legal & Structuring
Governance Ownership & Reporting Support
Client chooses desired Fo1 owns underlying Consolidate legacy & Experienced legal team
level of involvement in positions and capacity future PC investments that negotiates on
the investment process into one portfolio and FCERA’s behalf
overall line item
Customization Transparency Fee Discounts High Conviction Co-investments
Managers
Sole investor in Fo1; Transparency into Leverage the size of Leverage Aksia’s Invest selectively in
portfolio tailored to underlying Aksia’s broader client extensive research no/low fee co-
specific objectives investments & base to negotiate and advisory investment
and constraints position-level lower fees resources opportunities
exposures*
*Subject to GP cooperation 13Aksia’s Private Credit Performance
As of September 30, 2020 (USD Billions)
Total Gains
Total Invested Total Distributions (realized and unrealized)
$15.6 billion $4.9 billion $2.1 billion
Initial Gross Net Gross Net
Asset Class Invested Distributed Unrealized Total Value
Investment TVPI TVPI IRR IRR
Private Credit Jun-10 $15.6 $4.9 $12.7 $17.7 1.13x 1.13x 8.9% 8.5%
Please refer to page 25 for a description of methodology and the end of these materials for important information. These pro-forma performance
returns are being presented to illustrate the performance as if all investments were in a single portfolio and are not necessarily indicative of future
results. Investors may lose all or part of their invested capital. 14Private Credit Fee Discounts
• Aksia has a structured program for actively negotiating fee discounts generally based on aggregating advisory clients’
investments
• All fee discounts flow 100% to clients
• Fee discounts are generally made available to eligible clients to view via Aksia’s investor portal
Currently negotiated deals by:
Sector AUM
Micro
Mega 2%
9%
16% Small
4%
11%
30%
11%
Mid
22%
9%
Large
49%
37%
Direct Lending & Mezzanine Distressed & Special Situations Micro: ≤ 200 million Small: 200-500 million
Mid: 500-1 billion Large: 1-3 billion
Real Estate Credit Specialty Finance
Mega: > 3 billion
Real Assets Credit Structured Credit
*Aksia’s active negotiated private credit fee deals as of December 31, 2020. Fee deals are only available to advisory clients who subscribe to our
client operations and accounting support services. Sector and AUM breakout is by program. “Program” = onshore and offshore count as one
program. 15Questions?
Thank you!
16Appendix
17Private Credit Co-Investment Sourcing
Last 12 months as of March 31, 2021
• Approximately $3.1 billion in total private credit co-investment deal flow shown to Aksia
• 101 unique private credit co-investments sourced over this same time period
• 71 distinct managers showed Aksia private credit co-investment opportunities
Private Credit Co-Investment Sourcing by Sector Co-Investment Sourcing by Geography
2% 1%
9%
13%
16%
6%
44%
20% 74%
12%
3%
North America Europe Global Not Defined
Credit - Corporate Credit - Real Assets
Credit - Real Estate Specialty Finance
Structured Credit Distressed & Special Situations
Not Defined
Based on initial communications with Managers. Includes deal flow from Aksia LLC and Aksia TorreyCove Capital Partners prior to the combination of
the businesses on March 31, 2020. There is no guarantee that an investor can participate in any identified co-investment. 18Private Markets Client Operations
The Client Operations Team serves as an extension of client’s staff allowing clients to focus on investments rather
than administrative functions
• Investment Activity
PORTFOLIO ACCOUNTING IN MAX
• Workflows
• Checks and Balances
• Analytics
• Attribution
• Sector/Structure
• Strategy
• Vintage Year
• Geography
• Cash Flows
• Valuation
• Performance
• Exposures
• Documents
• Benchmarks
PERFORMANCE REPORTING
• Onboarding1
TRANSACTIONS SUMMARY
*For Illustrative purposes only
1May be at an additional cost if clean data is unavailable and Aksia is required to reconstruct the portfolio’s history 19Risk Analytics
Private Market Alternatives
Risk
exposures in
Company- the context of Investment-
specific risk the portfolio specific risk
Risk Profile
Return Attribution, Outlier and Trend Analysis1
Contexts Financials
Vintage Industry Revenue Leverage
Holding Period Asset Class EBITDA Valuation Bridges
Geography Deal-type Capital Structure Covenants
Aggregated Portfolio Risk Reporting
▪ Position Level Exposures
▪ Asset Class / Region / Industry
▪ Net / Gross Exposure
Available to Advisory clients and subject to the GP’s cooperation and provision of such data to Aksia.
1Analysis is tailored to the asset class. The metrics listed are a subset of the metrics we request, and they are relevant in a variety of the asset classes
covered under this process. 20“MAX” – Investor Portal
• View performance and various statistics at the aggregated portfolio level
Holdings Shadow Accounting • Dissect performance and exposure by sector/strategy sleeves or vintage
• Portfolio pacing by investment/harvest period
Aggregated Portfolio Analysis
Fund Profiles
Due Diligence
Risk Analysis Reports
Fund & Portfolio
Fund Screener
Customizable Reports
*Provided for illustration purposes only
21Short-Term Private Credit Capital Markets Assumptions
Expected
Sector N ormalized
N et R etu rn
Volatility
Direct Lending 8.9% 7.5%
Mezzanine 8.1% 12.3%
Distressed &
12.5% 15.1%
Private Credit
Special Sits
Specialty Finance 10.9% 13.1%
Structured Credit 8.8% 12.1%
Real Estate Credit 14.2% 13.8%
Real Assets Credit 8.6% 7.6%
Investment Grade 1.4% 5.3%
Public Credit
Hig h Yield 2.4% 11.6%
Syndicated Bank
2.6% 4.1%
Loans
Emerg ing Markets
4.6% 11.6%
Debt
Distressed & Event
3.6% 5.7%
Credit
Hedge
Driven
Fund
Long /Short Credit 5.6% 7.1%
Please see page 26 for a description of methodologies.
NO RELIANCE ON FORECASTS: Any projections, forecasts or market outlooks provided herein should not be relied upon as events which will occur and no assurances
can be given that a particular strategy will perform in a manner consistent with its historical characteristics, or that forecasts, expected volatility or market impact
projections will be accurate. Use of this reference material does not assure any level of performance or guarantee against loss of capital. Neither Aksia nor any of its
representatives make any representation or warranty, express or implied, as to the accuracy or completeness of the information provided herein. Neither Aksia nor any of
its representatives shall have any liability relating to or resulting from the use of this reference material or any errors therein. 22Aksia Presenting Team Biographies
Jim Vos is CEO of Aksia and has over 35 years of alternative investments, research and derivatives experience. He is responsible for the overall
management of Aksia as well as the design of the firm’s research and advisory processes.
Prior to joining Aksia, Jim was a Managing Director and headed Credit Suisse’s Hedge Fund Investment Group from its inception through
December 2005, which grew to over $8 billion AUM. His 20-year career at Credit Suisse also included working in the Portfolio Strategies
group, running a research desk in Tokyo, managing the firm’s FLP trading desk and working within the Credit Suisse Financial Products
derivatives trading boutique.
Jim graduated from the University of Pennsylvania with a BS in Economics. In 2009 and 2010, he was recognized as Hedge Fund Consultant of
the Year by Institutional Investor. In 2016, he was recognized as Consultant of The Year by Chief Investment Officer.
Patrick Adelsbach is Head of Credit Strategies and has over 23 years of financial markets experience including 20 years focused on research
and investment management. He oversees private and public credit strategies, and works with clients to integrate credit strategies within their
portfolios. Patrick led the creation of Aksia’s private credit business and has worked with the institutional investor community to help transition
private credit as an institutional asset class.
Prior to joining Aksia, he was a Director and Head of the Event Driven and Fixed Income Emerging Markets sector team at Credit Suisse and
began his career in 1997 at Capital One Financial Corporation.
Patrick graduated cum laude from the Jerome Fisher Program in Management and Technology at the University of Pennsylvania,
contemporaneously earning a BS in Economics from the Wharton School and a BAS in Systems Engineering from the School of Engineering and
Applied Science.
23Aksia Presenting Team Biographies
Tim Nest is a Managing Director on the Investment Research team and has over 21 years of experience in alternative investments with a
primary focus in private markets. He manages the global private credit investment research professionals responsible for sourcing, conducting
due diligence, evaluating and monitoring of these strategies.
Prior to joining Aksia in 2015, Tim spent several years as a Vice President at Frontier Capital Advisors, a secondary investment firm. Before that,
Tim worked for GSC Group, focusing on two credit-based funds including the firm's distressed corporate credit and structured credit strategies.
Tim began his career as an Analyst in PwC's Corporate Finance practice.
Tim graduated from Boston College with a BS in Finance and Information Systems (dual degree). He holds an MBA in Corporate Finance and
Law and Business from the Leonard N. Stern School of Business at New York University with specializations in Corporate Finance and Law and
Business. He is a CFA charterholder.
Lynn O’Connell is a Portfolio Advisor primarily responsible for supporting clients based in North America in the management of their
alternative investment programs. She also supports the Portfolio Advisory team in various client and business development projects.
Prior to her current role, Lynn was a Senior Analyst on the Operational Due Diligence team focusing on assessing the operational, business,
regulatory and fraud risks of alternative investment funds. While on the Operational Due Diligence team she worked with clients during the due
diligence process, educating and advising them on operational risk considerations.
Prior to joining Aksia in 2012, Lynn was as an Operations Associate at ICON Investments, an alternative investment manager, where she
supported the legal, accounting, technology and investment departments.
Lynn graduated from Binghamton University with a BS in Financial Economics. She has earned the CAIA designation.
She is a member of 100 Women in Finance and was recognized as a Rising Star of Hedge Funds by Institutional Investor Magazine in 2017.
24Aksia Private Credit Performance Methodology
METHODOLOGY: Includes the performance of Aksia LLC’s, together with its wholly owned subsidiaries’ (collectively, “Aksia”) recommended private
credit investments made by some discretionary and predominantly advisory clients as of September 30, 2020. Performance statistics are calculated
through pooled cash flows of qualifying client investments; foreign-denominated investments are converted to USD using a constant FX rate defined at the
commitment date of each individual investment. Cash flows and valuations for terminated relationships are included through the termination date and, if
available, thereafter for so long as cash flow and valuation data are received by Aksia. The track record includes 294 client investments, representing 219
unique programs (where onshore and offshore count as one). Of the 294 investments, Aksia does not have any cash flow information for 15 investments or
5% of commitments, which have not been included. Upon request, Aksia can provide, the performance results of Aksia’s complete track record covering
all alternative asset classes.
PERFORMANCE NOTES:
“Invested” includes the gross capital invested plus fees and expenses.
“Distributed” represents total cash proceeds received.
“Unrealized” equals the fair value of each respective Asset. There can be no assurance that the investments will be realized at these fair values and actual
results may differ significantly.
“Total Value” equals the sum of Distributed and Unrealized.
“TVPI” is the quotient of Total Value over Invested.
“Gross IRR” and “Gross TVPI” are presented net of expenses, management fees and carried interest charged by the underlying managers but does not
include Aksia’s fees or performance compensation.
“Net IRR” and “Net TVPI” are net of management fees, expenses and carried interest charged by the underlying managers, and net of an assumed Aksia
management fee of 40 bps.
PAST PERFORMANCE: Past performance is not indicative of future results and should not be taken as an indication or guarantee of any future
performance or prediction. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown herein,
which are being shown for illustrative purposes and have not been experienced by any specific individual client account. The performance of a specific
individual client account may vary substantially from the track record performance. In addition, certain assumptions have been made by Aksia in
presenting the performance results herein. Therefore, no prospective client should assume that future performance will be profitable or equal either to the
track record performance results.
25Short-term Private Credit Capital Markets Assumptions Methodologies
• The credit universe: We divide the credit universe into three groups (private, public and hedge fund credit). For the purposes of this analysis we concentrate on a
subset of strategies within each sector as a proxy for the broader sector.
• Net return calculation: There are five components that comprise the net return values for the private and public sectors, as detailed below. Although the
Distressed and Special Situations sector typically does not invest in performing loans, we still approximate its returns using the same methodology as other credit
strategies; we assume a riskier mix of component indices to reflect the sector’s risk relative to performing credit sectors. Returns for hedge fund credit sectors use
an alternative methodology based on a trailing 120-month average total return on a representative HFRI index.
• Risk free rate: Wherever floating rate instruments are most prevalent, a 5-year average of the forward 3-month LIBOR curve is used. For fixed rate
instruments, a 5-year treasury rate is used. Risk free rates are as of July 29th, 2020.
• Spread: For private credit sectors, we use a hierarchy of sources (Aksia’s proprietary databases, managers-reported returns and indices) to represent the
current market spread (where applicable, upfront fees and OID are amortized and included in the spread). We use a public market index or a custom
index based on credit rating, issuer size and geography in cases where they offer a better representation of the underlying asset class.
• Losses: Calculated as an expected default rate multiplied by 1 minus the recovery rate.
• Defaults: We typically stress a historical default rate for each sector to reflect our subjective outlook on the credit market during the projected
period. For some sectors where default data is not readily available or we believe is not an accurate representation of default risk, we use
public market data and adjust based on our view of the relative risk profile of the underlying assets.
• Recovery: We typically stress a historical recovery rate to reflect our subjective outlook on the credit market during the projected period. For
some sectors where recovery data is not readily available or we believe is not an accurate representation of the recovery risk, we use public
market data and adjust based on our view of the relative risk profile of the underlying assets.
• Fees: Private credit fees are calculated using Aksia’s proprietary databases of representative funds’ fee structures from recent vintages and account for the
investment period management fee, hurdle and carry. Fees for managing public credit portfolios are estimated based on expected implementation costs.
• Leverage: Applied where we believe fund-level leverage is usually employed and at typical market rates.
• Normalized volatility calculation: Normalized to approximate the volatility of a liquid investment with similar credit risk and adjusted to account for Aksia’s
outlook for the credit markets during the projected period. There are three components that comprise normalized volatility, as detailed below.
• Proxy index: The historical annualized standard deviation over a lookback period of 9 to 12 years of a public market index that we believe most closely
approximates the risk of each relevant credit sector.
• Factor: A multiplier to adjust for our view of (1) the relative risk between the proxy index and the sector, (2) illiquidity, (3) lookback periods that do not
include a market cycle and (4) our outlook of how risk will differ between the lookback and projected period.
• Leverage: Wherever leverage is used the volatility is increased (i.e., 1:1 D/E doubles volatility).
26Disclaimers
THIS PRESENTATION IS PROVIDED PURSUANT TO FCERA’S REQUEST. CERTAIN INFORMATION IN THIS PRESENTATION REQUIRES
FURTHER EXPLANATION AND SHOULD BE DISCUSSED WITH AKSIA. ACCORDINGLY, SUCH INFORMATION SHOULD NOT BE RELIED ON ABSENT
SUCH DISCUSSIONS
NO OFFERING: These materials do not in any way constitute an offer or a solicitation of an offer to buy or sell funds, private investments or other securities
mentioned herein. These materials are provided only in contemplation of Aksia’s research and/or advisory services. These materials shall not constitute advice
or an obligation to provide such services.
RELIANCE ON TOOLS AND THIRD-PARTY DATA: Certain materials utilized within this presentation reflect and rely upon information provided by fund
managers and other third parties which Aksia reasonably believes to be accurate and reliable. Such information may be used by Aksia without independent
verification of accuracy or completeness, and Aksia makes no representations as to its accuracy and completeness. Any use of the tools included herein for
analyzing funds is at your sole risk. In addition, there is no assurance that any fund identified or analyzed using these tools will perform in a manner consistent
with its historical characteristics, or that forecasts, expected volatility or market impact projections will be accurate.
NOT TAX, LEGAL OR REGULATORY ADVICE: The Intended Recipient is responsible for performing his, her or its own reviews of any private investment fund
it may invest in including, but not limited to, a thorough review and understanding of each fund’s offering materials. The Intended Recipient is advised to
consult his, her or its tax, legal and compliance professionals to assist in such reviews. Aksia does not provide tax advice or advice concerning the tax
treatments of a private investment fund’s holdings of assets or an investor’s allocations to such private investment fund. Tax treatment depends on the individual
circumstances of each client and may be subject to change in the future.
PRIVATE INVESTMENT FUND DISCLOSURE: Investments in private investment funds involve a high degree of risk and investors could lose all or substantially
all of their investment. Any person or institution investing in private investment funds must fully understand and be willing to assume the risks involved. Some
private investment funds may not be suitable for all investors. Private investment funds may use leverage, hold illiquid positions, suspend redemptions
indefinitely, modify investment strategy and documentation without notice, short sell securities, incur high fees and contain conflicts of interests. Private
investment funds may also have limited operating history, lack transparency, manage concentrated portfolios, exhibit high volatility, depend on a concentrated
group or individual for investment management or portfolio management and lack any regulatory oversight. Past performance is not indicative of future results.
RECOMMENDATIONS: Any Aksia recommendation or opinion contained in these materials is a statement of opinion provided in good faith by Aksia and based
upon information which Aksia reasonably believes to be true. Recommendations or opinions expressed in these materials reflect Aksia’s judgment as of the
date shown and are subject to change without notice. Except as otherwise agreed between Aksia and the Intended Recipient, Aksia is under no future
obligation to review, revise or update its recommendations or opinions.
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