C|A Manager Guide

An Introduction to Working with

Cambridge Associates

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At Cambridge Associates, we value the relationship we have with our investment managers and strive to make it easier for you to do business with us. Ultimately, the better our researchers and consultants understand your firm’s investment philosophy, process, and performance, the better we can help our clients successfully build and manage their portfolios.

The C|A Manager Guide is designed to provide you with insight about how Cambridge works and how best to work with us. It provides an explanation of our manager-screening process, tips for having a successful meeting, and data-reporting expectations.

We appreciate the opportunity to work with you and thank you for your dedication to helping our mutual clients achieve their investment goals. As we continue to work together, we welcome your feedback.

Sincerely,

David ShukisManaging Director of Investment Manager Research

Welcome

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Table of ContentsAbout Cambridge Associates page 4

• Who We Are• Spectrum of Services• Our Global Network• Our Asset Allocation Philosophy • How We Are Structured

Working Together page 10• Building Successful Relationships• What C/A Looks For in a Manager

Manager Screening Process page 13• Screening Process Overview• Submitting Your Data• Requesting a Meeting• The C/A Meeting Culture• Having a Successful Meeting• Evaluating Business Risk• Assessing the Opportunity• Summary of Manager Steps

Contact Directory page 23• Contacting C/A

About Cambridge Associates

“Our research team is organized around the role assets play in a portfolio, rather than

just asset types. We think this is a better way to ensure full coverage of all opportunities.”

- David ShukisManaging Director of Investment Manager Research

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Who We AreCambridge Associates is a privately held, independent investment consulting firm. We strive to help global institutional investors and private clients meet or exceed their investment objectives by providing proactive, unbiased advice grounded in intensive and independent research.

Client Snapshot (as of 12/31/11)

Number of Clients Total Assets* ($ Billions)

Endowed Institutions 663 652Colleges & Universities** 210 302Foundations 192 189Medical 55 59Other Nonprofits† 206 102

Non-Endowed Institutions 91 2,841Corporations 51 167Public & Government Agencies 29 2,663Settlement Trusts 11 11

Families & Individuals 185 89Total 939 3,582* This represents client assets, not C|A’s assets under management.** Includes affiliated foundations of colleges and universities.† Includes performing arts, professional, religious, research, and service organizations; independent schools; museums and libraries; U.K. charities; and nonprofit retirement plans.

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Spectrum of ServicesThe Investment Manager Research group provides support across all of the types of services C|A provides to clients.

ResearchServices

ConsultingServices

Advisory and Outsourcing

Services

• Includesresearchoncapitalmarketsandallmajorassetclassesglobally,andresearchonabroadrangeoftopicalinvestmentissues

• Accesstoourproprietarymanagerdatabasesandtools

• Adefinedsetofcustomizedservicesprovidingsupportoninvestmentpolicy,assetallocation,implementation,and/orongoingmonitoringandreporting

• Comprehensiveday-to-dayoversightofportfolioinclud-ingallaspectsofinvestmentplanning,assetallocation,implementation,reporting,andongoingmonitoring

• Abilitytostructureasan“outsourcedinvestmentoffice”• Offeredonadiscretionaryoranon-discretionarybasis• Totalportfoliooralternativeassetsonly

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Our Global NetworkFounded over 35 years ago, we serve an international clientele from offices around the globe.

Total Cambridge Associates’ Employees Worldwide: 1,111 (as of 12/31/11)

Menlo Park

Dallas

Arlington

London

Singapore

Sydney

Boston

= Cambridge Associates’ offices

Beijing

North America

Consulting Team: 294Manager Research: 92

Asia-Pacific

Consulting Team: 24Manager Research: 8

Europe

Consulting Team: 41Manager Research: 11

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Our Asset Allocation PhilosophyHigh Equity AllocationThe investment objectives of most of our clients dictate that the major-ity of assets be invested in equities, which are the growth engine of a portfolio.

Hedge Against Catastrophic Risk High-quality, intermediate- and long-term bonds mitigate the risk of economic contraction, and inflation risk is hedged with investments in real estate, commodities, and inflation-linked bonds.

Diversify to Reduce Risk Volatility and other risks can be reduced by allocating growth invest-ments among a wide range of public equity investments (both long-only and long/short), as well as private investments. Portfolios also include investments specifically targeted to reduce volatility, like low-beta hedge funds and credit investments.

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How We Are StructuredC|A has more than 100 professionals dedicated to manager research. They conduct 7,500+ manager meetings and publish 100+ proprietary research reports each year. The manager research team is divided into five areas of coverage that span the globe.

Equities;Higher-BetaHedgeFunds;Distressed;HedgeFundsofFunds

Investment-GradeFixedIncome;Inflation-LinkedBonds;UnconstrainedBonds;EmergingMarketsDebt;Cash

HardAssets;Commodities;PubliclyTradedRealEstateandEnergy

PrivateEquity;VentureCapital;Distressed;Non-MarketableFundsofFunds;Secondaries

High-YieldCredit;BankDebt;GlobalTacticalAssetAllocation;ActiveCurrency;Lower-BetaHedgeFunds;GlobalMacro;TailRiskManagers

PublicGrowth

PrivateGrowth

InflationSensitive

Diversifiers

Investment-GradeBonds

Our Business Risk Management team and the Manager Information Group provide support across all coverage areas.

Working Together

“Our goal is to know managers well, so we can represent you well, and get our clients to understand you better.”

- Ashby Hatch Director of Public Growth Manager Research

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Building Successful RelationshipsC|A has a proven approach to building successful manager relationships. We look for managers who are good business partners to help our mutual clients achieve their objectives.

In our most successful manager relationships:• there is open communication• we receive a steady flow of information• manager results are consistent with the expectations they have set

Our goal is to know managers well, so we can represent you well, so our clients can understand you better. We believe that good decisions about managers can be made when clients have the right tools and informa-tion. Our clients are often involved in the manager-evaluation process, so we ask managers, when appropriate, to meet with clients.

The result of our intensive manager-selection approach is that we tend to stick with managers for the long term through various investment cycles. It’s not about chasing performance.

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What C|A Looks For in a Manager

Strategy and Process• Clarity and viability of investment

principles and strategy• Consistency of the investment process• Transparency

Organization• Commitment to product• Thoughtful management of firm assets• Alignment of firm ownership, economics,

and succession plan with clients’ interests

Personnel• Individual skills and experience• Sufficient resources (i.e., human,

technological, and financial)• Experience, talent, chemistry, and

stability of the team

Performance• Performance relative to expectations• Consistency of performance relative

to expectations• Historical return relative to risks taken

Competitive Advantages• Differentiated interpretation of

information and data• Quality of investment models,

intellectual rigor, and creative thought• Disciplined execution of investment

strategy

Risk Controls• Degree to which risks are understood,

measured, and transparent• Risk oversight• Strength of compliance culture and

procedures• Quality of operations and controls

for the strategy

Terms and Fees• Fees competitive with peer group• Reasonable investment minimums and

liquidity provisions• Availability of commingled funds

We identify managers that can demonstrate strength, stability, and a competitive advantage. Here is what we look for in a manager/firm.

Manager ScreeningProcess

“We want all of our research and consulting teams to become familiar with the managers

we see throughout the year. That is why our manager meetings are open to anyone

at C|A who is interested in attending.”

- Jody Fink Co-Director of Consulting

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Screening Process OverviewData and Materials CollectionInformation on investment managers is gathered Manager MeetingsCambridge staff meets with managers to ask questions

Business Risk ReviewA thorough operational review is conducted

Data AnalysisCambridge staff reviews data and conducts analyses EvaluationAll available information and observations are used to assess the opportunity

Ongoing MeetingsCambridge staff continues dialogue with managers

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Submitting Your DataInformation on investment managers is gathered in the following ways.

• Hedge fund and long-only managers already partici-pating in C|A’s Investment Manager Database should submit their data in the database through our website, www.cambridgeassociates.com.

• New managers can request access to the database by visiting www.cambridgeassociates.com and clicking “manager” in the upper-left corner of the homepage, then following the instructions.

• Our Manager Information Group also reaches out to managers directly (see next page).

• Private investment managers are invited to participate in our private investment benchmarks. To join, email privateinvestments@cambridgeassociates.com. A C|A staff member will be in contact with you about collecting historical and ongoing financial statements.

For Hedge Fund and Long-Only Managers

For Private Investment Managers

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Submitting Your DataData requests-the type and frequency-vary depending on how much exposure our clients have to an individual manager.

To make it easier for you, we direct the majority of requests through our Manager Information Group and have established automated processes for requesting updated data.

Even so, managers should expect to occasionally hear from C|A consultants with specific questions.

(cont.)

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Requesting a MeetingManagers with institutional-quality funds can send their marketing materials to ManagerMeetingInquiries@cambridgeassociates.com. This is considered your meeting request.

We receive hundreds of requests from new managers each year. While many don’t result in a manager meeting right away, we do look at all the submitted materials.

There is no simple formula to determine whether a manager is invited for a meeting. It depends on the current needs of our clients and a judge-ment of whether your product would fill those needs.

The timing of our response does vary depending on the schedule and priorities of the Investment Manager Research group.

Rest assured, the inbox is checked daily and that Cambridge staff will be in touch with you if we would like additional information.

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The C|A Meeting CultureAt Cambridge, we want all of our research and consulting teams to become familiar with the managers we see throughout the year. That is why our manager meetings are open to anyone at C|A who is interested in attending.

At a meeting there could be two people or twenty. They may include members of our research teams, consultants, or interested support staff. Cambridge personnel from our multiple offices worldwide may also par-ticipate by conference call and some meetings are videotaped. Sending your presentation materials in advance by email and bringing ten hard copies is advised.

Meetings are typically one hour long. Please note that many staff can only attend part of a meeting due to scheduling conflicts, so it is common for people to come and go during the course of the discussion. Please don’t misinterpret this as lack of interest. Members of the appro-priate research team will be in attendance for the entire meeting.

Also, expect lots of questions. While you may have a planned presenta-tion, questions from our staff may change the course of the discussion.

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Having a Successful MeetingIf you want the meeting to be successful...

DO DON’T

Send no more than three investment decision makers with ten hard copies

of your materials (A soft copy should also be emailed prior to the meeting)

Send people who won’t contributeto the meeting

Focus on individual products even if you have multiple products

Base your case entirely on your track record

Talk openly about your business plan Be afraid to admit historical mistakesor problems

Be transparent about the portfolio and investment process Overstate expected returns

Explain performance attribution Pretend your strategy will outperform in every market environment

Articulate your competitive advantage Make assumptions about what our clients want or need

Be balanced in your presentation between big picture and details

Be concerned if we interrupt you with questions

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Evaluating Business RiskInvestment managers may be subject to our thorough and comprehen-sive operational due diligence before they are considered for recommen-dation to clients. Our Business Risk Management team conducts a five-phase operating risk assessment for all hedge funds and selectively for other managers.

Phase I: ResearchExamination of firm legal documents and thorough background checks

Phase 2: Risk Profile and PlanningDevelopment of business risk profile and customized risk review plan

Phase 3: On-site MeetingOn-site visit to interview key management staff

Phase 4: Follow UpFollow-up on requests as a result of findings in the on-site visit

Phase 5: Review and DocumentReview of findings, discussion of strengths and weaknesses, and summary of conclusions

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Assessing the OpportunityThrough multiple meetings, a review of manager data, and often a busi-ness risk review, C|A research consultants collect all available data and formulate, or reinforce, an opinion of the manager and product. The opinion is then shared with the consulting organization and our clients.  

Our due diligence never stops and our opinions evolve over time.

We believe that our thorough manager selection process enables Cambridge to select truly talented managers versus those who have merely experienced strong performance due to favorable market condi-tions. To ensure this, we conduct ongoing monitoring, which could include annual meetings with the manager, analysis of quarterly results, and possibly a quarterly call and evaluation of any changes. As with any successful partnership, we expect to be informed by manag-ers of any significant changes related to personnel, ownership, or the organizational structure.

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Summary of Manager StepsWhile our manager-screening process is lengthy, there are actually only two steps for managers.

1. Submit data • Hedge fund and long-only managers: Submit your data

through our Investment Manager Database on the C|A website.

• Private investment managers: Join our benchmarks by contacting the benchmarking team.

2. Submit marketing materials/meeting request

C|A will follow up for additional information if warranted.

ContactDirectory

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Contacting C|A

To become part of our database or to update your data:Visit www.cambridgeassociates.com and click “manager” in the upper-left corner of the homepage.

To join our benchmarks:Email us: privateinvestments@cambridgeassociates.com

To submit your materials and meeting request:Email us: ManagerMeetingInquiries@cambridgeassociates.com

For Hedge Fund and Long-Only Managers

For Private Investment Managers

For All Managers