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July 2020HPS Mezzanine Partners 2019Presented toPennsylvania State Employees’ Retirement System1
DisclaimerFor institutional/wholesale/professionalclients and qualifiedinvestors only – not forretail use or distributionStrictly Private and Confidential. The information herein has been deliveredper Pennsylvania State Employees’ Retirement System’s specific request.The information presented is highly confidential.This presentation has been prepared for investors who qualify to invest inthe types of investments described in this presentation. In the US they wouldgenerally include investors who are “Accredited Investors” under theSecurities Act of 1933, Qualified Purchasers under the Investment CompanyAct of 1940, and “Qualified Eligible Persons” under Regulation 4.7 of theCommodity Exchange Act. These materials have been provided to you forinformation purposes only and may not be relied upon by you in evaluatingthe merits of investing in any securities referred to herein. The views andstrategies described may not be suitable for all investors. There is noassurance that any of the objectives will be achieved or that this investmentwill be successful. This material is not intended to provide, and should not berelied on for, accounting, legal or tax advice, or investmentrecommendations.2
Introduction to HPS3
HPS At A GlanceHPS Investment Partners,LLC (“HPS”) is a leadingglobal private investmentfirm with approximately 62 billion of capitalunder management.AUM COMPOSITION 42BNPrivate CreditFounded in 2007 andheadquartered in NewYork with 10 additionaloffices worldwide. 62bnTotal AUM 20BNPublic Credit 90%Institutional Investor Base370 Staff worldwide147Investment ProfessionalsworldwideSource: HPS. AUM as of June 1, 2020. Employees as of May 31, 2020. Totals may not tie due to rounding.4
HPS Investment ApproachDriven by an extensivenetwork of relationships,flexibility of capital andglobal ttom-up sector focusedresearch led by team withsubstantial experienceinvesting across the capitalstructure and credit cyclesDownside protectionthrough structuring andseniority in the capitalstructureSourcingPublic Credit 20bn1Private Credit 42bn1Direct Lending 22.4bnMezzanine 17.5bnPrivately negotiated secureddebt investments for middlemarket companiesPrivately negotiatedsubordinated debtsecurities for largecompaniesReal Estate 0.3bnPrivately negotiated juniordebt investments in realestate assets in transitionDistressed 0.2bnLoans & securitiestrading at discount topar to be restructuredand new capital toreorganized companiesCLOs 8.6bnManaged CLO Structuresthat invest in floating ratesecured corporate loansEuropean AssetValue 2.0bnMulti-Asset Credit 5.9bnPortfolios of performingfinancial assets (e.g.leases) and origination /servicing platformsLiquid corporate andsecuritized creditinvestmentsacross the capitalstructureLiquid Loans 3.8bnSyndicated securedcorporate loansAsia Credit 0.2bnAsian credit investmentsacross the capital structureStructured Credit 1.0bnSecuritized credit investmentsin CLOs, CMBS, ABS and othersub-sectors across thecapital structure1 Asof June 1, 2020. AUM of private credit funds, related managed accounts and certain other closed-ended public credit funds represent capital commitments during such funds’ investment periods and, post such funds’investment period, the cost of investment or NAV (including fund-level leverage but in all cases capped at capital commitments). AUM of public credit open-ended funds and related managed accounts other than CLOsrepresent the latest available net asset value. AUM of CLOs and warehouses represent the par value of collateral assets and cash in the portfolio.5
Mezzanine TeamOver 60 professionals supporting the Mezzanine strategy2Investment Committee¹Scott KapnickChief Executive OfficerScot FrenchManaging DirectorMezzanine TeamRegional CoverageUnited StatesUnited Kingdom²Energy & Power²Real Estate²Sponsor Coverage Team²Scot FrenchManaging DirectorShant BabikianManaging DirectorJake Blair³Managing DirectorOliver FeixManaging DirectorAurelio CusaroManaging DirectorChris StaintonManaging DirectorDavid StemplerDon DimitrievichManaging DirectorKim BourgeoisManaging DirectorMichael DorenfeldManaging DirectorJeffrey HostettlerPatrick CrosettoManaging DirectorTravis SkeltonManaging DirectorMark AlbertManaging DirectorMichael GirondoManaging DirectorRobert KostowManaging DirectorEd TamManaging DirectorManaging DirectorManaging DirectorRick MorrisManaging Director3Mathew CarvajalManaging DirectorGarrett CockrenManaging DirectorChris GuntherManaging DirectorTaylor KushnerManaging DirectorGrishma Parekh³Managing DirectorMichael PattersonManaging DirectorPurnima PuriManaging DirectorFaith RosenfeldChief Administrative OfficerAdditional CapabilitiesAustralia²Gary SteadManaging DirectorRaymond LamManaging DirectorDistressed²Anders FisherManaging DirectorStrategic Financing²Portfolio Management/ Restructuring²Jeffrey FittsManaging DirectorDaniel WallittManaging DirectorDavid Pogoda3Managing DirectorMark RubensteinManaging DirectorValue Enhancement²John MaddenManaging DirectorBrett PertuzManaging DirectorAnil RanavatManaging DirectorAimee MeansManaging DirectorTransaction Management²Marcus ColwellManaging DirectorHyana KimManaging DirectorStrategy / Business DevelopmentCarla StoreyManaging DirectorDenotes Mezzanine Portfolio Manager 2 Executive Directors 1 Executive Director 1 Executive Director 3 Executive Directors 4 Vice Presidents 2 Vice Presidents 1 Vice President 1 Vice President 1 Vice President 2 Associates 7 Associates 3 Associates 1 Associate 1 Associate 2 Technical EngineersEmployees as of June 23, 2020. HPS Investment Committees, where applicable, are typically comprised of the founding partners and may contain other portfolio managers or senior professionals associated with a givenstrategy. 2 Includes/denotes shared resources across private credit. 3 Denotes shared investment professional across Mezzanine and Direct Lending. There can be no assurance that the professionals currently employed byHPS will continue to be employed by HPS or that the past performance or success of any such professional serves as an indicator of such professional’s future performance or success.16
Risk DisclosureThis material is for information purposes only, isconfidential and may not be reproduced ordistributed except as otherwise provided herein. Allinformation provided herein is as of the date set forthon the cover page (unless otherwise specified) and issubject to modification, change or supplement in thesole discretion of HPS Investment Partners, LLC(“HPS”) without notice to you. This information isneither complete nor exact and is provided solely asreference material with respect to the Fundreferenced herein. Defined terms are as set forthwithin.This material does not constitute an offering of anysecurity, product, service or fund, including the Fund,for which an offer can be made only by the Fund’sConfidential Offering Memorandum (the “ConfidentialMemorandum”). The terms and risk factors of theFund are set out in its Confidential Memorandumwhich is available to qualified prospective investorsupon request. The contents hereof are qualified intheir entirety by the Confidential Memorandum andsubscription agreements of the Fund.The purchase of interests in the Fund is suitable onlyfor sophisticated investors for which an investment inthe Fund does not constitute a complete investmentprogram and who fully understand and are willing toassume the risks involved in the Fund’s investmentprogram. Generally, the Fund would include investorswho are “Accredited Investors” under the SecuritiesAct of 1933, “Qualified Purchasers” under theInvestment Company Act of 1940, and “QualifiedEligible Persons” under Regulation 4.7 of theCommodity Exchange Act.The interests have not been and will not be registeredunder the Securities Act of 1933, as amended (the“Securities Act”), or any state securities laws or thelaws of any foreign jurisdiction. The interests will beoffered and sold under the exemption provided bySection 4(a)(2) of the Securities Act and Regulation Dpromulgated thereunder and other exemptions ofsimilar import in the laws of the states and otherjurisdictions where the offering will be made. TheFund will not be registered as an investment companyunder the Investment Company Act of 1940.Certain information contained in this materialconstitutes “forward-looking statements,” which canbe identified by the use of forward-lookingterminology such as “may,” “will,” “should,” “expect,”“anticipate,” “project,” “estimate,” “intend,” “continue”or “believe,” or the negatives thereof or othervariations thereon or comparable terminology. Due tovarious risks and uncertainties, actual events orresults or the actual performance of the Fund maydiffer materially from those reflected or contemplatedin such forward-looking statements.The interests are subject to restrictions ontransferability and resale and may not be transferredor resold except as permitted under applicablestatutes. In addition, such interests may not be sold,transferred, assigned or hypothecated, in whole or inpart, except as provided in the Fund’s organizationaldocuments. Accordingly, investors should be awarethat they will be required to bear the financial risks ofan investment in the interests for an indefinite periodof time. There is no secondary market for aninvestor’s interests in the Fund and none is expectedto develop. There is no obligation on the part of anyperson to register the interests under any statutes.In the U.K., this is an unregulated investment schemeand as such it may only be promoted to limitedcategories of persons pursuant to the exemptioncontained in Section 238 of the Financial Services andMarkets Act 2000 (the “Act”). Information containedherein may only be promoted to persons that aresufficiently experienced and sophisticated tounderstand the risks involved and who satisfy certainother criteria, as specified by regulations made underthe Act and Financial Conduct Authority (“FCA”) rules.If you are in any doubt as to whether or not you fallwithin one of the categories of permitted persons, youshould not solely rely on any information herein andshould contact HPS.The performance results of certain economic indicesand certain information concerning economic trendscontained herein are based on or derived frominformation provided by independent third partysources. The Fund believes that such information isaccurate and that the sources from which it has beenobtained are reliable. The Fund cannot guarantee theaccuracy of such information, however, and has notindependently verified the assumptions on whichsuch information is based.7
Risk DisclosurePast performance is not necessarily indicative offuture results. Performance is estimated andunaudited. While this summary highlights importantdata, it does not purport to capture all dimensions ofrisk. The methodology used to aggregate and analyzedata may be adjusted periodically. The results ofprevious analyses may differ as a result of thoseadjustments. The Fund is an actively managedportfolio and regional, sector and strategy allocationsare subject to ongoing revision. HPS has madeassumptions that it deems reasonable and used thebest information available in producing calculationsabove.Please note the following Risks: Investors are stronglyurged to carefully review the sections in theConfidential Memorandum titled “Risk Factors” and“Conflicts of Interest.” Among the risks involved in aninvestment in the Fund are as follows:General/Loss of capital. An investment in the Fundinvolves a high degree of risk. There can be noassurance that the Fund’s return objectives will berealized and investors in the Fund could lose up to thefull amount of their invested capital. The Fund’s feesand expenses may offset the Fund’s trading profits.Limited liquidity. An investment in the Fundprovides limited liquidity since withdrawal rights arelimited and interests are not freely transferable orredeemable. There is no secondary market for theinterests in the Fund and none is expected to develop.Dependence on manager. The fund manager hastotal trading authority over the Fund. The use of asingle advisor could result in lack of diversificationand consequently, higher risk. Decisions made by thefund manager may cause the Fund to incur losses orto miss profit opportunities on which it wouldotherwise have capitalized. Volatility. Investmenttechniques used may include the use of leverage andderivative instruments such as futures, options andshort sales, which amplify the possibilities for bothprofits and losses and may add volatility to the Fund’sperformance. Potential conflicts of interest. Thepayment of a performance based fee to the fundmanager may create an incentive for the fundmanager to cause the Fund to make riskier or morespeculative investments than it would in the absenceof such incentive. Valuation. Because of overall sizeor concentration in particular markets of positionsheld by the Fund or other reasons, the value at whichits investments can be liquidated may differ,sometimes significantly, from the interim valuationsarrived at by the Fund. Non-U.S. securities. TheFund will invest in foreign securities, which mayinclude exposure to currency fluctuation, reducedaccess to reliable information, less stringentaccounting standards, illiquidity of securities andmarkets, higher commissions and fees and localeconomic or political instability. Absence ofregulatory oversight. The Fund will not register asan investment company under the U.S. InvestmentCompany Act of 1940 or similar laws or regulations.Accordingly, the provisions of such laws andregulations will not be applicable.NOT FOR RETAIL DISTRIBUTION: Thiscommunication has been prepared exclusively forinstitutional/wholesale/professional clients andqualified investors only as defined by local lawsand regulations.The foregoing risk factors do not purport to be acomplete explanation of the risks involved in aninvestment in the Fund. Investors should read theentire Confidential Memorandum before makinginvestment determinations with respect to the Fund.8
Mezzanine Team Over 60 professionals supporting the Mezzanine strategy2 Employees as of June 23, 2020. 1 HPS Investment Committees, where applicable, are typically comprised of the founding partners and may contain other portfolio managers or senior professionals associated with a given
