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Preqin Investor Outlook: Alternative Assets, H2 2015Views on the Alternative InvestmentFund Managers Directive (AIFMD)The Alternative Investment Fund Managers Directive (AIFMD), the European Union (EU) regulation introduced to harmonizeregulatory standards across all alternative investment managers across the economic region, has been the topic of much debatesince it was first approved in 2011.Investors are split over whether the directive is having a beneficial or negative impact. Some believe that it provides greatertransparency and more protection, while others believe that there is no need to protect sophisticated investors and that there willbe reduced choice as a result of some firms choosing not to register to market in the EU.Investor Views on the AIFMDGood for the AlternativeAssets IndustryBad for the AlternativeAssets IndustryUnsure?28%49%Reasons Investors See the AIFMD asPositiveProvides Greater Transparencyon the Fund6Reasons Investors See the AIFMD asNegative50%Regulations ProvideAdditional Levels of Protectionfor the Investor35%Will Lead to a Better Quality ofAlternatives Fund12%Will Lead to Greater Choice asan Investor23%Unnecessary Regulation toProtect Qualified Investors50%Will Lead to Reduced Choiceas an Investor35%Will Lead to Higher Fees12%4% 2015 Preqin Ltd. / www.preqin.com

1. Alternative AssetsFund Terms and Alignmentof InterestsInvestors largely feel that their interests are aligned with those of fund managers in most asset classes. The exception is hedgefunds however, with almost half stating that investor interests are not appropriately aligned with those of fund managers. Theredoes seem to be movement towards more investor-friendly terms by hedge fund managers in response to these concerns, with47% of respondents seeing fund terms becoming more investor friendly. It is clear that managers must ensure the fees theycharge are appropriate and aligned with the market, with more than 80% of investors rejecting funds across alternative assetclasses based on fund terms.Proportion of Investors that Feel Fund Manager and Investor Interests Are Properly AlignedPrivate EquityHedge FundsReal EstateInfrastructurePrivate Debt7051807783%%%%%Investor Views on Changes in Prevailing Fund Terms over the Last YearChange in Favour of Fund Manager19%Change in Favour of Investor44%47%Private Equity7%9%11%9%Hedge Funds35%27%37%Real EstateInfrastructurePrivate DebtFrequency with Which Investors Have Decided Not to Invest in a Fund Due to the Proposed Terms and ConditionsPrivate EquityHedge FundsReal EstateInfrastructurePrivate Debt0%10%20%30%Frequently 2015 Preqin Ltd. / ver7

Dynamic, up-to-dateand industry-leadingalternative assets data.For free. Conduct market researchand track industry trends Benchmark fundperformance Access slide decks fromPreqin presentations atconferencesGaining access to Preqin’s Research Center Premium is easy – to register for free,please visit:www.preqin.com/RCPalternative assets. intelligent data.

1. Alternative AssetsInvestor Activity onPreqin Investor NetworkPreqin Investor Network provides asset allocators with free access to key information on all2,200 private equity, private real estate and private infrastructure funds and 15,000 hedge fundscurrently open to investment. This section takes a look at the types of funds in market that investorshave paid particular attention to over the past year.88%97%94%95%88%77%71%100%Funds Screenedin Past Month64%57%55%31%Funds Screenedin Past ThreeMonthsFund of Funds& SecondariesGrowthFunds Screenedin Past YearDistressedPrivate EquityFig. 1.2: Proportion of Private Equity Funds Screenedby Investors on Preqin Investor Network by PrimaryGeographic Focus97%94%Funds Screenedin Past 0%NorthAmericaEuropeAsiaFig. 1.3: Proportion of Real Estate Funds Screened byInvestors on Preqin Investor Network by Primary FundStrategySource: Preqin Investor NetworkFig. 1.4: Proportion of Real Estate Funds Screenedby Investors on Preqin Investor Network by PrimaryGeographic Focus98%100%Funds Screenedin Past ThreeMonthsFunds Screenedin Past YearPrimary Fund Strategy90%Proportion of Funds ScreenedFunds Screenedin Past MonthFund of Funds& SecondariesValue 5%93%94% 94%90%83%82%81%76%80%72%69%70%64% 61% 61%56%60%52%50%40%40%30%30%20%10%0%Core-PlusRest ofWorldPrimary Geographic FocusSource: Preqin Investor NetworkCoreFunds Screenedin Past ThreeMonthsFunds Screenedin Past Year20%Fund TypeProportion of Funds Screened94%90%90%Proportion of Funds Screened100%100%97% BuyoutProportion of Funds ScreenedFig. 1.1: Proportion of Private Equity Funds Screened byInvestors on Preqin Investor Network by Fund Type80%97%93%92%85%80%Funds Screenedin Past Month70%60%57%58%56%Funds Screenedin Past ThreeMonths48%50%40%30%26%21%20%Funds Screenedin Past Year10%0%NorthAmericaEuropeAsiaRest ofWorldPrimary Geographic FocusSource: Preqin Investor NetworkSource: Preqin Investor NetworkPreqin Investor NetworkOver 7,100 investment professionals looking to make new commitments use Preqin Investor Network to access freedetailed information on alternative funds open for investment. Share data with Preqin to ensure these investors have the mostup-to-date information on your funds.For more information, or to update your firm and fund profiles, please visit: www.preqin.com/sharedata 2015 Preqin Ltd. / www.preqin.com9

Preqin Investor Outlook: Alternative Assets, H2 2015Fig. 1.5: Proportion of Infrastructure Funds Screened byInvestors on Preqin Investor Network by Target SizeProportion of Funds Screened80%94% 94%89%90%78%97% 100%100%90%90%Funds Screenedin Past Month76%70%61%60%Funds Screenedin Past ThreeMonths50%40%Funds Screenedin Past Year30%20%Proportion of Funds Screened100%Fig. 1.6: Proportion of Infrastructure Funds Screenedby Investors on Preqin Investor Network by PrimaryGeographic Focus97%89%89%83%94%88%92%81%80%79%72%70%Funds Screenedin Past Month63%60%50%50%Funds Screenedin Past ThreeMonths40%30%Funds Screenedin Past Year20%10%10%0%0%Less than 500mn 500-999mnNorthAmerica 1bn or MoreTarget SizeEuropeAsiaRest ofWorldPrimary Geographic FocusSource: Preqin Investor NetworkSource: Preqin Investor NetworkFig. 1.7: Proportion of Hedge Funds Screened by Investorson Preqin Investor Network by Fund SizeFig. 1.8: Proportion of Hedge Funds Screened by Investorson Preqin Investor Network by Core Strategy90%84%80%64%58%60%48%50%40%Funds Screenedin Past ThreeMonths34%30%21%20% 15%10%90%96%25%Funds Screenedin Past Year85%84%84%80%78%80%69%70%Funds Screenedin Past 26%18%Funds Screenedin Past ThreeMonthsFunds Screenedin Past Year10%OtherRelativeValueMultiStrategyMacro 10bnor More 5-9.9bn 1-4.9bn 500999mn 150499mnLess than 150mnFund SizeLong/Short0%0%EventDriven70%100%92% 94%88%Funds Screened76%in Past Month70% 72%63%92%Proportion of Funds ScreenedProportion of Funds Screened100%Core StrategySource: Preqin Investor NetworkSource: Preqin Investor NetworkIdentify and evaluate alternative investmentopportunities on Preqin Investor Network. View all alternative investment fundscurrently raising capital Track fund-level past performance formanagers with a fund in market Easily request marketing materials frommanagers Access valuable market analysis andbenchmarking toolsSigning up to Preqin Investor Network is easy – to register for free,please visit: www.preqin.com/pin

Positive Outlook Despite Slowing InvestorActivityThe first half of 2015 has seen a furtherincrease in the levels of private equitydry powder available for fund managersto invest, with 965bn* in uncalled capitalat the start of July 2015. With such largelevels of unspent capital, fundraisingand investor activity seems to haveslowed slightly in H1 2015. LPs may beputting off investments while they wait forpreviously committed capital to be putto work. Despite this, attitudes towardsthe asset class remain positive, with thevast majority (87%) of investors reportingthat their private equity investments haveeither met or exceeded expectationsin the past year. In fact, only 11% ofinvestors surveyed indicated they arelooking to invest less capital in privateequity compared to 12 months before,the smallest proportion across all assetclasses (page 14).This shows that LPs are still willing tocommit significant amounts of capitalto fund managers and it is thereforeimperative fund managers know theattitudes of LPs in order to access thismoney. Preqin’s most recent surveyof over 100 institutional investors inprivate equity provides fund managersthat are looking to nurture new andexisting LP relationships with valuableinsight, capturing a wealth of informationon investor sentiment and investmentpreferences.as offering the best opportunities inprivate equity, with 50% of respondentslooking to invest in this fund type in 2015.Notably, 23% of private equity investorssee venture capital funds as presentingthe best opportunities, followed bydistressed private equity and mezzaninefunds, which were viewed as presentingthe best opportunities by 17% and 14%of private equity investors respectively.According to Preqin’s latest survey, just9% of private equity investors are lookingto reduce the number of GP relationshipsthey maintain in their portfolio over thenext two years, compared with 14%six months ago. This will be welcomenews to fund managers, as the statisticsuggests that the LP community at largeis not following the lead of CalPERS, theworld’s largest institutional investor thatwas widely reported to be actively lookingto cut its number of GP relationships.In terms of fund types, the majority ofLPs still see small to mid-market buyoutsFirst-time fund managers continue to beat a disadvantage when looking to securecapital, with 51% of LPs indicating thatthey would not commit to a debut fundmanaged by a new GP. Just under half(47%) of LPs deem the length of a GP’strack record as the most important factorto take into account when decidingwhether to commit to a fund, highlightingthat experience remains vital to a GP’sfundraising success.Key Facts52%42% 60%Proportion of investors that madea commitment to a private equityfund during the first half of 2015,compared to 62% in H1 2014.Proportion of investors that arelooking to increase their allocationto private equity over the next 12months, up from 29% in H1 2014.Proportion of investors that arelooking to make their next privateequity commitment either in H22015 or 2016. 2015 Preqin Ltd. / www.preqin.com65%22% 1.89tn*Excludes private real estate and infrastructure.Proportion of investors thatsee valuations as the biggestchallenge facing investors seekingto operate an effective privateequity program.Proportion of investors that areexpecting to increase their directinvestments through co-investingalongside fund managers in thenext 12 months.Estimated aggregate capital*invested in private equity as of 31December 2014.11Section Two: Private EquityPrivate Equity

Preqin Investor Outlook: Alternative Assets, H2 2015Satisfaction withReturnsFig. 2.1: Investors’ Returns Expectations for Their Private Equity Portfolios, June2013 - June 2015100%90%Proportion of RespondentsWhile the private equity asset classis renowned for its outperformanceover public markets over the longerterm, Preqin has aimed to gauge morespecifically what margin is expectedfrom investors, and how they feel theirprivate equity investments have fared inthe last year. Between 2013 and 2014, anotable period for bull market conditionswith significant stock market highs,there was a decrease in the proportionof investors that expected their privateequity portfolios to beat the public marketby more than 2%. In June 2015, despitepublic market indices nearing recordhighs, the largest proportion of investors(49%) have indicated they expect theirprivate equity investments to exceedpublic market returns by more than 4%.This would be driven by the apparentsuccess of respondents’ private equityinvestments in the last 12 months.35%80%49%Public Market 4.1% and over49%70%Public Market 2.1% to 4%60%50%41%Public Market 2%40%34%30%39%Same as 15Source: Preqin Investor Interviews, June 2013 - June 2015Fig. 2.2 shows that over a third (35%)of respondents stated that their privateequity fund investments had exceededtheir expectations in the last year, whichis a substantial increase on previousyears. In recent times, the proportionof investors that had their expectationssurpassed for their private equityportfolios has been declining, fallingfrom 18% in June 2013 to 12% in June2014. The proportion of LPs that felttheir investments in the asset class hadfallen short of expectations has remainedrelatively constant at 13%.However, there is some notable disparityin satisfaction with returns betweenregions. According to Preqin’s survey,half of investors based in Europe hadtheir expectations exceeded by theperformance of their private equityFig. 2.2: Proportion of Investors that Feel Their PrivateEquity Fund Investments Have Lived up to Expectations,June 2013 - June 2015Fig. 2.3: Proportion of Investors that Feel Their PrivateEquity Fund Investments Have Lived up to Expectationsby Investor s70%60%50%68%MetExpectations74%40%52%30%Fallen Short -150%Source: Preqin Investor Interviews, June 2013 - June s50%40%62%57%30%43%31%Fallen Short ofExpectations20%10%10%12Proportion of RespondentsProportion of Respondents90%fund investments over the past year,as shown in Fig. 2.3. But with 19% ofEurope-based investors reporting thattheir private equity portfolio had fallenshort of expectations, the region has thelargest proportion of dissatisfied LPs.0%19%8%NorthAmericaEurope14%13%AsiaRest ofWorldSource: Preqin Investor Interviews, June 2015 2015 Preqin Ltd. / www.preqin.com

2. Private EquityInvestor Activity inH1 2015Asia-based LPs were the most cautioustowards the asset class in the first half of2015, with only 35% making commitmentsto new private equity funds (Fig. 2.5), astark contrast to the 75% of investors inthe region committing to new funds in H12014. This is likely due to the high levelsof dry powder Asia-based fund managershave ready to put to work, with investorsreluctant to make new commitments untilunallocated capital has been invested.The majority of investors based in NorthAmerica, Europe and all other regionsoutside Asia, however, committed freshcapital to private equity funds in H12015, with 56%, 55% and 67% doing sorespectively, reflecting healthy privateequity investor activity and a positivestance towards the asset class amonginvestors in those regions.Fig. 2.4: Proportion of Investors that Made New Private Equity FundCommitments in H1, June 2012 - June 2015100%90%Proportion of RespondentsGlobalfundraisingwasrelativelysubdued during H1 2015, with a totalof 509 private equity funds raising anaggregate 253bn, notably lower thanthe 272bn collected by 656 vehicles inH1 2014. Preqin’s recent investor surveyhas revealed a slight decline in investoractivity too, with only 52% of respondentsmaking private equity fund commitmentsin the first half of 2015, a decrease fromthe 62% of investors interviewed in June2014. This is somewhat surprising giventhe significant levels of capital beingdistributed back to investors, but could bethe result of record levels of dry powderavailable within the asset class being aconcern to investors.80%47%52%57%70%62%Made NewCommitments in H160%50%40%Did Not Make NewCommitments in ource: Preqin Investor Interviews, June 2012 - June 2015Target AllocationsData Source:Fig. 2.6 indicates that 52% of investorsinterviewed are currently below theirtarget allocation to private equity and afurther 45% are at their target allocation.Encouragingly, despite a slight slowdownin activity in the first half of the year,this suggests that the vast majority ofinvestors interviewed are likely to makenew private equity fund commitmentsgoing forward in order to maintain orwork towards their target allocation.Fig. 2.5: Proportion of Investors that Made New PrivateEquity Fund Commitments in H1 2015 by InvestorLocationPreqin’s Private Equity Online isthe leading source of intelligenceon the industry and includesdetails for all aspects of the assetclass, including fund performance,fundraising, institutional investors,fund managers and more.www.preqin.com/privateequityFig. 2.6: Proportion of Investors At, Above or Below TheirTarget Allocations to Private Equity100%Proportion of Respondents90%70%3%35%80%56%55%67%60%Above TargetAllocationMade NewCommitments in H150%40%65%30%20%Did Not Make NewCommitments in H144%45%33%52%45%At TargetAllocationBelow TargetAllocation10%0%NorthAmericaEuropeAsiaRest ofWorldSource: Preqin Investor Interviews, June 2015 2015 Preqin Ltd. / www.preqin.comSource: Preqin Investor Interviews, June 201513

Preqin Investor Outlook: Alternative

H2 2015 Private Equity Hedge Funds Real Estate Infrastructure Private Debt. 1. Alternative Assets . It is clear that the institutional community remains confi dent in the ability of alternatives to help them meet their return objectives. The majority feel returns are meeting or exceeding expectations and, as a result, a much larger .