The New SEC & Asset Management PrioritiesVOLTAIRE ADVISORS 2ND ANNUAL WORKSHOP ON FUND VALUATION

NEW YORK, 25TH APRIL 2017

“”

2

God is not on the side of the big battalions, but on the side of the best shots.

Voltaire

3

Agenda

Welcome Ian Blance | Voltaire Advisors

0810 - 0850 Expert Discussion | Fixed Income Benchmarks & Indices

0850 - 0930 Panel Session | Valuation of Alternative Assets

0930 - 1000 Coffee

1000 - 1040 Panel Session | Fund Liquidity Risk Management

1040 - 1120 Panel Session | Evaluated Bond Pricing

1120 - 1200 Keynote | Norm Champ

1200 End of Briefing

4

Recent Valuation Topics

SEC ‘Sweep’ on Unicorn Pricing

Issues with private equity fund audit independence

Platinum Partners

SEC order against PIMCO re: odd-lot pricing

Saba Capital Management settlement

Visium Asset Management criminal charges

Premium Point difficulties?

Consolidation in municipal bond pricing & index vendor markets

Fund Liquidity Risk Management rules

Trading liquidity & transparency in fixed income

5

Expert Discussion

Recent Developments in Fixed Income Benchmarks & Indices

Mike Bruno, Head of Product Management, Rimes Technologies

JR Rieger, Global Head of Fixed Income, S&P Dow Jones Indices

6

Valuation of Alternative Assets

Moderator – Marine Cole, Editor, Private Equity International

Keith Smith, Managing Director, Empire Valuation Consultants

Mark McMahon, Managing Director, Alvarez & Marsal

Andrew Proctor, Director, Financial Services Advisory, HoulihanLokey

7

Discussion Topics

➢ What are you seeing amongst your fund clients in terms of regulatory challenges on valuation?

➢ What are the main regulatory concerns in this field?

➢ Regulation of asset management might be expected to ease in the Clayton SEC, but best practice marches on. What is going on with in this area in alternative asset valuation?

➢ Audience Q&A

The New SEC & Asset Management PrioritiesVOLTAIRE ADVISORS 2ND ANNUAL WORKSHOP ON FUND VALUATION

NEW YORK, 25TH APRIL 2017

9

Fund Liquidity Management

Moderator – Ian Blance, Managing Director, Voltaire Advisors

Jeanette Turner, Managing Director and General Counsel,Advise Technologies

Dan Huscher, Director - Global Fixed Income Pricing Product Development, IHS Markit

Karl Mackelburg, Head of Sovereign, Corporate Bond, and Money Market Evaluations, Thomson Reuters

10

Discussion Topics

➢ Context of the new regulation - what are the SEC concerns (Third Avenue, etc.)?

➢ What are the challenges of defining and classifying asset liquidity?

➢ How do funds currently deal with liquidity risk - what is already in place?

➢ What is the interaction between liquidity and valuation?

➢ What are the reporting challenges in the new rules?

➢ Audience Q&A.

11

Evaluated Bond Pricing

Moderator – Ian Blance, Managing Director, Voltaire Advisors

Mark O’Brien, Senior Vice President, Advantage Data

Frank Dos Santos, Head of North America Business Strategy, Fixed Income Pricing Services, IHS Markit

Tom Ryan, Head of Municipal Bond Evaluations, Thomson Reuters

12

Discussion Topics

➢ What are you seeing amongst your clients in terms of regulatory challenges on valuation?

➢ Odd-lot bond pricing.

➢ Syndicated and private loan pricing.

➢ High yield and distressed debt pricing.

➢ Audience Q&A.

© 2017 Kirkland & Ellis LLP. All rights reserved.

Voltaire Advisors

Valuation of Alternative Assets for Investment Funds Forum

April 25, 2017

14

Disclaimer: The views, opinions, statements, analysis and information contained in these materials are those of the individual presenters and do not necessarily reflect the views of Kirkland

& Ellis LLP, or any of its past, present and future clients. These materials (1) do not constitute legal advice; (2) do not form the basis for the creation of an attorney/client relationship; and (3)

should not be relied upon without seeking specific legal advice with respect to the particular facts and current state of the law applicable to any situation requiring legal advice. These

materials may only be reproduced with the prior written consent of Kirkland & Ellis LLP. These materials are provided with the understanding that the individual presenters and Kirkland &

Ellis LLP are not rendering legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly, such persons and entities assume no liability whatsoever in

connection with their use. Pursuant to applicable rules of professional conduct, this material may constitute Attorney Advertising. Prior results do not guarantee a similar outcome. The

following presentation is based on a limited set of publicly available materials and documentation which has not been verified or assessed by Kirkland & Ellis LLP and as a result this

presentation may not be wholly accurate or complete.

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10009

+1 (212) 446-4800

1. Introduction to Kirkland’s Core Regulatory Team

2. An SEC in Transition

3. Recent Developments - Legislation / Rulemaking

4. Examination Trends

5. Enforcement Themes

Overview

15

1. INTRODUCTION TO KIRKLAND’S CORE REGULATORY TEAM

16

Introduction

17

▪ Partner, Kirkland & Ellis, Investment Funds Group (Current)

▪ Teaching Investment Management Law at Harvard Law School

in Fall 2017 for seventh semester

▪ Director of SEC’s Division of Investment Management 2012-15

▪ Deputy Director, SEC’s National Exam Program 2010-12

▪ EVP and General Counsel, Chilton Investment Company 1999-

2009

▪ Private Practice, Davis Polk & Wardwell

▪ Clerked in Federal District Court - SDNY

Going Public:

My Adventures Inside the

SEC and How to Prevent

the Next Devastating

Crisis

Published by McGraw-Hill Education and is now

available in stores and online. For more

information, please visit

www.goingpublicthebook.com.

18

Kirkland’s Core Regulatory Team

Jamie Lynn WalterPartner, Washington, D.C.

Prior Experience

Former Senior Counsel, Private

Funds Branch, SEC Division of

Investment Management

Aaron SchlaphoffPartner, New York

Prior Experience

Former Attorney Fellow,

SEC Division of Investment

Management

Norm ChampPartner, New York

Prior Experience

Former Director, SEC

Division of Investment

Management

Scott MoehrkePartner, Chicago

Rob SuttonPartner, New York

Josh WesterholmPartner, Chicago

Rob KhuzamiPartner, Washington, D.C.

Prior Experience

Former SEC Director of

Enforcement

Ken LenchPartner, Washington, D.C.

Prior Experience

Former Chief of Structured

and New Products, SEC

Division of Enforcement

Bob PommerPartner, Washington, D.C.

Prior Experience

Assistant Chief Litigation

Counsel, SEC Division of

Enforcement

SEC Enforcement Practice

+6 Partners

+15 Associates

19

Erica Williams*Partner, Washington, D.C.

Prior Experience

Former SEC Deputy Chief of

Staff

Special Assistant to the

President and Associate White

House Counsel

*Joining May 30th, 2017

New York: 60

San Francisco: 23 Chicago: 49

London: 25

Hong Kong: 12

Large, Global, Multidisciplinary Investment Funds Team

Houston: 3

Washington, D.C.: 3

2. SEC IN TRANSITION

20

Jay Clayton — Nominee for SEC Chairman

▪ Mr. Clayton is an experienced corporate attorney who has worked on several high-

profile transactions, including Alibaba’s IPO in 2014, and has limited government

experience

▪ The Senate Banking Committee voted 15-8 to advance Mr. Clayton’s nomination to the

full Senate floor for a final vote on confirmation, and the Senate is back in session as

of yesterday, so a vote should take place soon

▪ Clayton has been critical of the Foreign Corrupt Practices Act (FCPA)

▪ Mr. Clayton has laid out a capital formation agenda, that includes:

– Easing rules relating to investor discussions prior to an IPO

– Easing burdens for mid-sized companies related to accounting and compliance

regulations

– Streamlining disclosure requirements

Jay Clayton was announced

as President Trump’s SEC

Chair nominee on January 4

21

Three SEC Commissioner Seats are Vacant

22

To ensure that the Commission remains nonpartisan,

no more than three Commissioners may belong to the same political party.

Current

Commissioners

Nominated

Chairman

Vacant

Commissioner Seats

Chair, Mary Jo White (right),

stepped down on

January 20, 2017

(I)

(I)

(D) (R)Term expires 2017 Term expires 2018

(R) (D)

Five SEC Division Directors Have Resigned Since Election

23

▪ Marc Wyatt was named

Director of the Office of

Compliance Inspections

and Examinations (OCE)

and leader of the

National Exam Program

in November 2015

▪ Wyatt announced his

resignation in January

2017, despite speculation

that he’d remain in his

seat after the

administration change

National Exam Program

Division of Corporate Finance

▪ On December 6, Keith F.

Higgins announced his

plans to depart his role

as Director of the

Division of Corporate

Finance

▪ Higgins led the SEC’s

implementation of

significant rulemaking

under Dodd-Frank

Division of Enforcement

▪ After nearly four years as

SEC Director, Andrew

Ceresney departed his

post in December 2016

▪ While he was head of

Enforcement, the SEC

filed more than 2,850

enforcement actions and

obtained judgments and

orders totaling more than

$13.8 billion in monetary

sanctions

Division of Economic &

Risk Analysis

▪ Mark J. Flannery, former

Chief Economist and

Director of the Division of

Economic & Risk

Analysis, stepped away

from his role in

December 2016 to return

to academia

▪ He has also represented

the agency on the

Financial Stability

Board’s Standing

Committee on

Assessment of

Vulnerabilities (SCAV)

Division ofTrading & Markets

▪ Stephen Luperello

departed at the end of

2016

▪ Luparello was named

Director of the SEC’s

Division of Trading and

Markets in February 2014

Division of Investment

Management

▪ David Grim was

announced as Director of

the Division of

Investment Management

in May 2015, after

previously serving as the

Acting Director following

Norm Champ’s departure

▪ Grim is expected to

remain in his position in

the near term

Additionally, other key SEC roles, such as General Counsel, remain vacant

3. RECENT DEVELOPMENTS - LEGISLATION / RULEMAKING

24

▪ Financial CHOICE Act / CHOICE Act 2.0

▪ Calls for, among other things:

▪ Repeal of the Volcker Rule

▪ Broad changes to SEC authority and oversight

▪ Credit rating transparency

▪ Exemption of private equity advisers from Advisers Act reporting

▪ Refinements to the “accredited investor” definition

▪ Streamlining of Reg. D offering

▪ Streamlining of Investment Company Act exemptive applicationprocesses

▪ The House Financial Services Committee will hold a hearing to discuss theFinancial CHOICE Act 2.0 on April 26

▪ Financial CHOICE Act was introduced by Rep. Hensarling, Chairman,House Financial Services Committee, in 2016

▪ Department of Labor (DOL) Fiduciary Rule

▪ Would expand definition of “investment advice fiduciary” under theEmployee Retirement Income Security Act of 1974 (ERISA)

▪ Automatically elevates all financial professionals who work with retirementplans or provide retirement planning advice to the level of a fiduciary, thusimposing additional legal and ethical standards on such professionals

▪ Being reviewed, and delayed effective date

▪ Financial Stability Oversight Council (FSOC)

▪ New Secretary of the Treasury, Steve Mnuchin, chairs the FSOC

▪ The Financial CHOICE Act 2.0 would retroactively repeal the authority ofthe FSOC to designate firms as systemically important financial institutions(SIFI)

▪ On April 21, President Trump issued a memo to the Secretary of theTreasury calling for a thorough review of FSOC SIFI designation processwithin 180 days

Recent Developments - Legislation / Rulemaking

25

Recent Developments - Legislation / Rulemaking

▪ Form ADV Amendments

▪ New Schedule R for managers using “umbrella registration” for

relying advisers

▪ Other enhanced reporting requirements, including whether the

manager’s CCO is compensated or employed outside of the

manager

▪ Adopted August 2016; effective October 2017

▪ Enhanced Performance Recordkeeping Requirements

▪ Registered advisers will be required to maintain records

supporting performance information sent to any person (rather

than current “ten or more persons” threshold)

▪ Will also be required to maintain records of performance-related

communications sent and received (e.g., one-off diligence

requests, e-mails, etc.)

▪ Adopted August 2016; effective October 2017

▪ Liquidity Risk Management / Swing Pricing

▪ Requires mutual funds and other open-end management

investment companies, including ETFs, to establish liquidity risk

management programs; compliance dates of December 2018 for

fund complexes with $1B or more in AUM and June 2019 for

smaller fund complexes

▪ Permits open-end funds (except money market funds or ETFs) to

use swing pricing; effective date November 2018

▪ Investment Company Reporting Modernization Act

▪ Requires funds to report portfolio holdings, including information

about risk metrics and the use of derivatives, on a monthly basis

▪ Creates new reporting forms (compliance date as early as June

2018)

▪ Makes revisions to Regulation S-X (compliance date of August

2017)

▪ SEC Rules Pending Adoption

▪ Adviser Business Continuity and Transition Plans

▪ Registered Funds’ Use of Derivatives

▪ Incentive-Based Compensation Arrangements

Recent Developments - Legislation / Rulemaking

27

4. EXAMINATION TRENDS

28

General Examination Trends in 2017

Seeing some

second-time exams after

initial private fund presence

exams

The presence of the Asset

Management Unit in

enforcement, and exams

focusing on asset

management issues, have

intensified

Has led to the SEC referring

more asset manager cases

to enforcement and/or

requiring significant

remediation as part of

deficiency letter process

Late 2015,

2016 and 2017 seeing

pickup in routine exams

29

Exam Focus Areas: Fees and Expenses Disclosure and Allocation

Fund /

Client

Adviser

Other

Adviser

Vehicles

Fund /

Client

vs.

Co-

investors

Portfolio

Companies

Limited

Partners

30

Affiliated/

Unaffiliated

Service

Providers

✓ Allocation of investment / Co-investment opportunities

✓ Whistleblower rule compliance

✓ Political contributions / Pay-to-play

✓ Valuation methodologies and adherence thereto

✓ Cross-fund investing

✓ Marketing materials

✓ Custody rule issues (including auditor independence issues)

✓ Fee calculations

✓ Cybersecurity

Additional Exam Focus Areas

✓ Financial statement disclosures

✓ Code of Ethics / Personal securities trading

✓ Compliance policies and procedures

31

▪ SEC independence requirements can

disqualify auditors of funds

▪ Could prevent issuance of audited

financial statements to comply with the

Custody Rule

▪ SEC can give relief

▪ Possibility of future guidance

Auditor Independence Requirements

32

5. ENFORCEMENT THEMES

33

SEC Enforcement Trends

▪ A top priority of the incoming SEC chairman will be to

appoint a new Director of the Division of Enforcement

▪ Under Andrew Ceresney, Enforcement set another record

with number of cases in Fiscal Year 2016

▪ 868 total enforcement actions (807 in 2015), and the most ever –

160 – involving investment advisers or investment companies

▪ Over $4 billion in aggregate disgorgement and penalties (approx.

$4.2 billion in 2015)

▪ First-of-its-kind case against a private equity adviser for acting as an

unregistered broker (Blackstreet Capital Management, (June 2016))

▪ The SEC has brought 11 private equity-related actions over its last two

fiscal years (including 8 in 2016)

34

The Asset Management Unit within the Division ofInvestment Management is a specializedenforcement unit specifically focused on bringingcases against investment advisers, investmentcompanies, hedge funds and private equity funds

Enforcement Structure and Issues

Common enforcement matters involving fund

sponsors include:

✓ Conflicts of Interest

✓ Fiduciary Duty

✓ Disclosure

✓ Fees and Expenses

✓ Pay-to-Play

✓ Valuation

✓ Management Fee Waiver

35

Potential Areas for Future SEC Enforcement Actions

▪ Advertising / performance presentation /

marketing materials

▪ Equity and/or investment advisory

compensation paid in underneath-the-fund

structures

▪ Investment / co-investment allocations

▪ Operating partners

▪ Pay-to-play rule violations

▪ Stapled secondaries / fund restructurings

▪ Valuation of alternative investments

36

Going Public:

My Adventures Inside the

SEC and How to Prevent

the Next Devastating

Crisis

Published by McGraw-Hill Education and is now

available in stores and online. For more

information, please visit

www.goingpublicthebook.com.

37

Beijing

Kirkland & Ellis International LLP

29th Floor, China World Office 2

No. 1 Jian Guo Men Wai Avenue

Beijing 100004

P.R. China

+8610 5737 9300

+8610 5737 9301 fax

Chicago

Kirkland & Ellis LLP

300 North LaSalle

Chicago, IL 60654

+1 312 862 2000

+1 312 862 2200 fax

Hong Kong

Kirkland & Ellis

26th Floor, Gloucester Tower

The Landmark

15 Queen’s Road Central

Hong Kong

+852 3761 3300

+852 3761 3301 fax

Houston

Kirkland & Ellis LLP

600 Travis Street

Suite 3300

Houston, TX 77002

+1 713 835 3600

+1 713 835 3601 fax

London

Kirkland & Ellis International LLP

30 St Mary Axe

London EC3A 8AF

+44 20 7469 2000

+44 20 7469 2001 fax

Los Angeles

Kirkland & Ellis LLP

333 South Hope Street

Los Angeles, CA 90071

+1 213 680 8400

+1 213 680 8500 fax

Munich

Kirkland & Ellis International LLP

Maximilianstrasse 11

80539 Munich

+49 89 2030 6000

+49 89 2030 6100 fax

New York

Kirkland & Ellis LLP

601 Lexington Avenue

New York, NY 10022

+1 212 446 4800

+1 212 446 4900 fax

Palo Alto

Kirkland & Ellis LLP

3330 Hillview Avenue

Palo Alto, CA 94304

+1 650 859 7000

+1 650 859 7500 fax

San Francisco

Kirkland & Ellis LLP

555 California Street

San Francisco, CA 94104

+1 415 439 1400

+1 415 439 1500 fax

Shanghai

Kirkland & Ellis International LLP

11th Floor, HSBC Building

Shanghai IFC

8 Century Avenue

Pudong New District

Shanghai 200120

P.R. China

+8621 3857 6300

+8621 3857 6301 fax

Washington, D.C.

Kirkland & Ellis LLP

655 Fifteenth Street, N.W.

Washington, D.C. 20005

+1 202 879 5000

+1 202 879 5200 fax

Offices

38

39

Contact Us

Voltaire Advisors LLP

14 Wall Street No.1 PoultryNew York LondonNY 10002 EC2R 8JRUSA UK

+44 800 677 1694info@voltaireadvisors.comwww.voltaireadvisors.com