Agenda Investment Advisory Council (IAC) · 6/18/2019 · IAC Meeting – Agenda. June 18, 2019 . Page 2 . 2:00 – 2:45 P.M. 4. Private Equity Asset Class Review . John Bradley,

Agenda

Investment Advisory Council (IAC)

Tuesday, June 18, 2019 1:00 P.M.*

Hermitage Centre Hermitage Conference Room, First Floor

1801 Hermitage Blvd., Tallahassee, FL 32308

1:00 – 1:05 P.M. 1. Welcome/Call to Order/Approval of Minutes

Bobby Jones, Chair

(Action Required)

1:05 – 1:15 P.M. 2. Opening Remarks/Reports Ash Williams, Executive Director & CIO

1:15 – 2:00 P.M. 3. Florida PRIME Review

A. Florida PRIME Legal Compliance Review – Chapter 218, Pt. IV, Florida Statutes

Glenn Thomas, Lewis, Longman and Walker, P.A.

B. Florida PRIME Best Practices Review Kristen Doyle, Aon Hewitt Katie Comstock, Aon Hewitt

C. Florida PRIME Portfolio Review Amy Michaliszyn, Federated Investors Paige Wilhelm, Federated Investors

D. Review of Florida PRIME Investment Policy Statement Ash Williams, Executive Director & CIO

(Action Required)

IAC Meeting – Agenda June 18, 2019 Page 2 2:00 – 2:45 P.M. 4. Private Equity Asset Class Review

John Bradley, SIO, Private Equity Wes Bradle, Senior Portfolio Manager Clark Griffith, Senior Portfolio Manager Liqian Ma, Cambridge Associates

2:45 – 3:30 P.M. 5. Defined Contribution Program Review Daniel Beard, Chief – Defined Contribution Programs Mini Watson, Director of Administration Walter Kelleher, Director of Educational Services Kristen Doyle, Aon Hewitt Katie Comstock, Aon Hewitt

3:30 – 4:20 P.M. 6. SIO Asset Class Updates

Alison Romano, SIO, Global Equity Tim Taylor, SIO, Global Equity Katy Wojciechowski, SIO, Fixed Income Steve Spook, SIO, Real Estate Trent Webster, SIO, Strategic Investments

4:20 – 4:30 P.M. 7. Major Mandate Review Kristen Doyle, Aon Hewitt Katie Comstock, Aon Hewitt

4:30 – 4:35 P.M. 8. IAC Compensation Subcommittee Bobby Jones, Chair (Action Required)

4:35 – 4:45 P.M. 9. Audience Comments/2019 Scheduled Meetings/

Closing Remarks/Adjourn Bobby Jones, Chair *All agenda item times are subject to change.

2

ACCURATE STENOTYPE REPORTERS, INC.

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INVESTMENT ADVISORY COUNCIL MEETING

MR. WILLIAMS: Mr. Chairman, do you want to

call the meeting to order? We have with us in the

room several IAC members, including newly appointed

member Tom Grady, Peter Jones, Peter Collins and

Vinny Olmstead and the Honorable Bobby Jones as

well.

MR. WENDT: Congratulations on being there,

gentlemen. The first order of business shall be to

elect a new chairman. And I delegate to Ash to make

the nominations for a new chairman.

MR. WILLIAMS: Well, thank you, Mr. Chairman.

Actually, I can't do that, but we'll probably have

some nominations from the group, and then after we

get that handled, we'll go back and approve minutes,

et cetera. But do we have motions?

And for background, for those of you in the

audience who may not know the process, the IAC has a

chair and a vice-chair elected by the membership,

and traditionally those are run largely along

seniority lines. And Mr. Wendt has served with

distinction in that role since March of last year,

and Mr. Jones has been vice-chair for a period of

time. So the normal succession is the vice-chair

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moves up and a new vice-chair is elected, and the

wheels of progress continue to turn. So with

that --

MR. COLLINS: I'd like to nominate Bobby Jones

as chair of the committee for the coming year.

MR. WENDT: Are there any other nominations?

The nominations will be closed. Call for a vote.

All in favor of Bobby Jones.

(Ayes)

MR. WILLIAMS: So a unanimous vote.

MR. WENDT: We have a unanimous vote for Bobby

Jones as chairman. Congratulations. Please take

the chair.

MR. BOBBY JONES: Thank you. Do we have any

nominations for vice-chair?

MR. PETER JONES: Yes. I'd like to nominate

Vinny Olmstead for vice-chair.

MR. BOBBY JONES: So Peter Jones has nominated

Vinny Olmstead. Are there any other nominations?

With that being said, nominations are closed. All

in favor of Vinny Olmstead as vice-chair, please say

aye.

(Ayes)

MR. BOBBY JONES: Vinny, congratulations, pal.

MR. OLMSTEAD: Thanks, sidekick.

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MR. BOBBY JONES: So with all that being done,

thank you, Gary. Thank you for your service, too.

It's been a real pleasure serving under you, and

thank you so much.

Now, if everybody has had a chance to look at

the December the 10th, 2018, board minutes, do we

have any corrections? And if not, I would like to

entertain a motion for approval of the

December 10th board minutes.

MR. COLLINS: So move.

MR. PETER JONES: Second.

MR. BOBBY JONES: Okay. All in favor say aye.

(Ayes)

MR. BOBBY JONES: All right. We are approved.

And now, with the board minutes approved, we'd like

to recognize our executive director and chief

investment officer, Ash Williams, for his comments

and outlook.

MR. WILLIAMS: Thank you, Mr. Chairman. A

couple of things. I've put a little handout at

everybody's place that has two sheets of paper in

it. And this is a little something John Benton

pulled together. We're at an interesting inflection

point in time in that we are just past the tenth

anniversary of the bottom of the great financial

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crisis, which occurred in March of 2009, just about

ten years ago.

So we took a look back as of the 9th of March

and said, well, okay, if we take the flows and look

at them on an actual intra-month basis, how have we

done since the bottom? And you'll see that the

market value on the day of the bottom of the U.S.

equity markets, 9 March 2009, was just south of

74 -- I'm sorry -- was just south of $84 billion,

83.706 and change. Total value as of the

corresponding early month period of March of '19,

157.652. So that's a delta in the market value of

just under $74 billion.

In addition to that, we've paid out just under

$60 billion in benefits. So we've had an aggregate

investment gain over the period since the bottom of

the financial crisis, bottom of the U.S. equity

market pricing, of $133,671,330,880. Not bad in and

of itself. And as Mr. Grady and I were discussing

over lunch last week, bull markets are wonderful

things and rising tides lift all boats.

So that raises the question, well, how did we

do relative to benchmark. Was that just a gift from

the broad markets, or was there some value add here?

And if you come down to the bottom bar of the page,

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you will see that the benchmark return over that

period annualized was 10.2 percent. We actually

delivered 11 percent. So there's significant

annualized value added. And if you look at the

cumulative value add over the period, it's fully

18 percent, which is $11.8 billion.

So that, I think, tells you, given that you're

looking over a decade-long period and you've had net

annualized value added and significant cumulative

value added and, touch wood, we've not had any major

control issues or other significant problems during

that period, on a policy level and on an overall

execution level, which is appropriate to this body's

role, overseeing the propriety of policy and its

execution, I think this is a reasonably good

indicator that performance is okay and that the

policies that are driving that -- driving our

organization's accomplishment are well-founded.

If you then go to the second page, this is a

different period of time and it's a different

source. The page looks like this. And those on the

staff of the SBA will recognize this. This is an

excerpt from the annual Cost Effectiveness

Management report we get. CEM, as the firm is

known, is a Toronto-based organization whose

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business is comparing metrics across pension funds

in North America. And they look at largely cost

measures, so they give an all-in cost measure for

each fund. And they also look at performance, and

they look at your value added and your performance

relative to the risk you're taking for your fund and

then plot cost versus value added on the

traditional, you know, kind of four-point scale.

And where you want to end up with that exercise

is being in the northwest quarter, where you have

lower cost but higher value added for your product.

Tastes great, less filling, as we like to say.

And what you'll see on this graph is, looking

back over a five year period, how have we done on

value added relative to our own benchmarks and

relative to our peers. And, again, these are

completely different dates because the CEM data is

lagged by just about a year, because it's audited

data for all the funds, and the funds are on

different fiscal years and things of that nature.

So it doesn't lay up perfectly with any fund's own

fiscal year. But by using the lagged data, you can

normalize it and get it right.

And what you see on this graphic is, on a

trailing five year basis, the SBA's value added of

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1.0 percent over that period compares to a median of

0.1 percent for our public fund peers. And if you

look across the -- peers being large public funds.

And if you look across all U.S. public funds, it's

0.2 percent.

So if you look at that 1 percent value add

going back over a five year period, it translates

into $9.3 billion of value added over five years, or

$7.7 billion more than we had performed like our

public fund peers and had a value add of

0.2 percent.

So, again, you've got some very tangible third

party objective data that suggests the overall

policy foundation and execution framework of the

State Board is working.

So unless there are any questions on that, I'm

going to touch on a couple of other things quickly

and then get into our agenda because we do have a

pretty rich agenda for the day. May I, Mr.

Chairman?

MR. BOBBY JONES: Sounds great.

MR. WILLIAMS: All right. So the obvious

questions are, well, okay, so if we've had this

great success, why and what's the risk to sustaining

that success. And I would say that the themes are

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predominantly two. Number one, we've been very

thoughtful -- and the IAC and the IAC's comp

subcommittee has been a major ally on this. We've

been very thoughtful about our ability to recruit

and retain talent.

We've had -- we've accomplished, I think, a

pretty thorough upgrade of the investment team over

the past decade, and we have a stable, mature team

of professionals who are respected all over the

country in their various fields. And that's

reflected in the asset class performance, which in

turn rolls up to the total fund performance.

We've also got, in addition to the people, I

think we've put a lot of time and effort into

developing the control environment and the systems

to support more internal asset management, which in

turn feeds our advantage on cost relative to our

peers. And we are consistently among the very low

cost competitors in the North American pension

space, which, particularly in an environment of

ever-shrinking forward returns, if you can pick up

50 or 100 basis points of advantage through lower

costs in an environment where the 15 year forward

total fund projected return is 6.4 percent, one

percent as a portion of 6.4 is 15 percent-ish.

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That's a real number in terms of an advantage. So

those are two powerful things.

MR. COLLINS: Imagine if that was levered.

MR. WILLIAMS: Real estate is coming up. Stay

tuned. The leverage graphics are embedded, Mr.

Collins.

So that's important. And if you then think

about what we've done with the externally managed

components of our book, both in public markets and

in private markets, I think you will see -- and

those of you who have been on this group for a while

know from the asset class presentations, there's a

lot of thought put into how we allocate that risk

into active management and what that portfolio

construction looks like.

So I think there's been an effective job done

of evaluating where we are in terms of risks and

opportunities as market cycles evolve and change

over time, and we're always trying to position in a

way that we're properly positioned for what's ahead

and we're not ignoring what we're going through now

or what we've just been through. But things aren't

constant. We move them around. So I think the

policy framework or policy construction is very well

managed at the asset class level.

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And the final piece of that is the

implementation of that policy, which means selection

of the right managers, public and private, to get

you in the right places at the right times with the

right emphasis and at the right cost structure that

aligns incentives. And I think that would tend to

be very positive as well. And both of those are

reflected in those value added numbers that CEM

sees.

So all is good. And I think the role of the

IAC here in evaluating and affirming policy is

important. It's very useful to the trustees, and it

keeps everybody on their toes, including the SBA

staff.

The other thing I wanted to -- two other things

I wanted to touch on. We have Tom Grady as a new

member. Tom, you might want to take just a sec and

introduce yourself to the group.

MR. GRADY: I think I've said hello to

everybody already here this morning. I'm Tom Grady,

and I'm a private investor in Naples, Florida. I

like to invest in kids and in clients and in

companies. And I know a little about this

organization, having represented them some years in

the past, and appreciate the opportunity to be here.

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But after that report, Ash, I've got to wonder,

should we just go home?

MR. WILLIAMS: Well, I think I should.

MR. BOBBY JONES: Tom, I think the old

advertisements always said, past performance is no

guarantee of future performance, something like

that, Tom.

MR. GRADY: Fair enough.

MR. WILLIAMS: Right. In addition to a new IAC

member, we have a couple of new trustees in a new

governor and a new attorney general. Both of them

are off to a terrific start, great rapport with both

offices, super effective staff, good access to the

principals, and I think all is good there.

CFO Patronis ran for office after completing

the unfulfilled term of Jeff Atwater. You'll

remember Governor Scott appointed him to that role.

He won election and has been, again, a great ally,

and we're working closely with his office as well.

The last thing I was going to touch on is it is

legislative season, so it's a time for caution and

always look around and pay attention. I'm happy to

say, absent a little interest in the catastrophe

fund, we're not seeing anything really in the

legislative environment on the pension front.

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The governor did recommend full funding of the

pension plan in his budget, budget recommendations

to the legislature. And we have no reason to

believe there are any issues there, but we will of

course remain attentive to that issue and responsive

to anything that comes up. So that's my report,

Mr. Chair. Thank you.

MR. BOBBY JONES: Thank you, Ash. Any

questions of Ash?

MR. COBB: Mr. Chair?

MR. BOBBY JONES: Yes.

MR. COBB: Mr. Chair, this is Chuck Cobb. I

have a question on, quote, full funding. Does that

mean over time, or what does that mean, full

funding?

MR. WILLIAMS: Good question, Ambassador Cobb.

And what full funding means is fully funding the

normal cost of the pension fund as recommended by

the independent actuaries using the inputs to

actuarial calculation approved by the actuarial

estimating conference -- in this case, this would be

the conference that took place in October of 2018 --

and also making an appropriate contribution to the

unfunded liability, which you will know occurred in

the wake of the decrease in equity market values

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back in the financial crisis and has not been

resolved as yet. But the accounting treatment under

which that is treated that's consistent with

accounting standards is a 30 year amortization.

So the funding of the contribution to the

unfunded liability is calculated by the actuaries

each year, taking into account any changes in

liabilities, any changes in assets, and is done at a

number each year that if consistently funded each

year would amortize to zero the unfunded liability

over a period of 30 years. So that's what full

funding means.

MR. COBB: That's what I thought. Thank you.

MR. BOBBY JONES: So basically it's a mark to

market on liabilities.

MR. WILLIAMS: Correct.

MR. BOBBY JONES: And, again, we've been

extremely fortunate for the State of Florida to be

doing that consistently in the last, what, eight,

nine years now.

Next we're going to be talking about the

Florida Growth Fund, which tied into Ash's

discussion of the performance for the past decade.

The Florida Growth Fund was started in 2009 with our

friends from Hamilton Lane, who will now tell us a

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little bit about it.

MR. COLLINS: Mr. Chairman, before we do

that --

MR. BOBBY JONES: Yes, sir.

MR. COLLINS: -- it might be useful, Ash, to

give some of the new members a couple-minute primer

on how this got started and how you guys

responded --

MR. BOBBY JONES: Yes, please.

MR. COLLINS: -- to start it this way. I know

Hamilton Lane is going to talk about from inception

of them, but really it goes before that.

MR. WILLIAMS: So here's the background. In

2008 the legislature created an initiative known as

the Florida Growth Fund that was designed to foster

the development of a venture capital industry in

Florida and to stimulate businesses in Florida and

investment of capital in Florida. It would be

supportive of clean tech, green tech, med tech, any

other good thing you can think of in the way of high

tech, high paying, clean industry.

And the legislation that was passed during that

session -- I was still in New York then, I had

nothing to do with it -- on its cover said something

very important. Everything under this section shall

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be implemented consistent with investment fiduciary

responsibility, and the SBA will make that decision.

So I get back here. The law has been passed.

It has not been implemented. The governor's office

had some complaints from a member of the legislature

who was a key person on this who wanted to see it

move more rapidly. I talked to him and said, Look,

I just got here. We're going to try and implement

this in a way that's prudent and works properly and

avoids the sorts of problems that we've seen in so

many states, which in many cases have ended up with

a hundred percent loss of capital and in many cases

federal grand juries pursuing wrongdoing in the part

of how that capital got evaporated, and we're going

to figure it out. And he said, Thank you very much.

Stay in touch. That's fine.

We studied the states where these sorts of

programs had been successful, in contrast to the

vast majority where there had been dismal failures.

And what we found is a governance structure that was

standard was, it was not an internal, politically

driven allocation process of capital. A third party

professional firm was brought in and given

discretion, which provided a cutoff between any

political insertion into the investment allocation

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process and the execution of that responsibility.

So we liked that idea. The other thing that

was interesting to us is that all three of the

states who had done this successfully coincidentally

used the same firm, and it was Hamilton Lane. And

we were already using Hamilton Lane as a private

equity adviser here at the State Board at the time

and had a longstanding relationship with them.

We went into the market, did a -- I think the

correct term for the procurement process was a

request for information. We heard from a number of

different firms, and we made the decision that

Hamilton Lane was the right outfit to implement

this.

We launched the fund in June of 2009, I

believe, and originally -- oh, the law allowed that

we could put up to 1 percent of the entire pension

fund into venture capital, growth capital, early

stage investing, et cetera, et cetera, et cetera.

Terrific latitude. It wasn't an obligation. It was

permissive.

So our judgment was, given where markets were

at that point in time, the safest thing to do, the

most prudent thing to do would be for us to make a

series of growth capital equity investments in

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companies at valuations that didn't represent

anywhere near the true value of those franchises,

because equity markets everywhere were crushed. The

comps were crushed in all the public comparables to

these companies.

And so we had that conversation with Hamilton

Lane and concurred on a growth capital approach.

Idea being, if we can put some serious points on the

board in terms of returns for the first few years,

build up a war chest of capital we then recycle into

the Florida Growth Fund, we will gradually, as the

growth capital opportunities thin out as we recover

from the crisis, we can start moving into some of

the venture areas, et cetera, where we all know

there's a way more pronounced J curve and a very

high atrophy of assets in the early years of

investment before the J curve is overcome.

And our concern was, if we go heavily venture

now, which is what the vibe was in the legislature,

70 percent of this money within five years will be

gone, and that will be a normal course of experience

in venture capital investing. But nobody in the

legislature is going to get that, and the people who

were around when this was discussed will likely be

gone. And people will be asking, How did you lose

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all that money? Who are we going to haul in here

and investigate for fraud or whatever?

So our theory was, let's make a lot of money

first, be investing house capital when we get into

the much higher risk activity, and that will get us

through that potential problem. That's exactly what

we did. It worked perfectly. We allocated an

initial -- I guess it was, what, half a billion

dollars, and then did a subsequent --

MR. COLLINS: I think it was 250.

MR. WILLIAMS: Okay, 250, whatever. A billion

here, a billion there. And I'm rolling the clock

forward over a long period of time. We then added a

mezzanine debt element to the project and then

decided, you know what? We could expand the

bandwidth by adding another private sector or

private equity outfit with discretion. Enter J.P.

Morgan, here with us today.

So where we stand today is total commitment of

the growth fund. We'll go over all of this in a

little while. It's now a meaningful amount of

money. It has a long track record, an excellent

track record. It is subject to annual audit by

statute of the state legislative office of program

planning and accountability, OPPAGA. I'm not sure

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what the acronym is exactly.

But at any rate, we've had now the better part

of ten years of OPPAGA audits and reviews, every one

of which has said what a great job this thing is

doing and the net returns are terrific. Our

responsibility, of course, is to provide prudent

risk-adjusted returns and prudent investment

activity.

OPPAGA looks at this more broadly and says, to

what extent has the Florida Growth Fund benefited

the Florida economy, created jobs? What is the

compensation of those jobs? And the number of

jobs -- and we'll cover all this. I'm not going to

steal the thunder of the people doing the

presentation. But suffice it to say the number of

jobs created by the activity of the Florida Growth

Fund is well into the thousands, and the average

income is double what the normal state average

income is.

So this program has been, I think, a

magnificent success for the state, for the pension

fund, for all involved. And it's done an awful lot

of good things. And there are some household name

companies that have been involved at one time or

another, and it's just been great. So unless there

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are other questions, hopefully that's a good enough

background.

MR. BOBBY JONES: Okay. Hamilton Lane.

MR. PERRY: Thank you, Mr. Chairman. I feel

like we should go home, to that earlier comment.

But let me just open by saying, good afternoon. My

name is Nayef Perry. I'm joined by my partner Katie

Moore. And I just want to say thank you to Florida

SBA and to the Investment Advisory Council for

having us here today to present.

As Ash mentioned, this is -- 2019 is an

important year for the program, and it's important

because it is the ten year anniversary of the

program. And so this has been, for us, an ongoing

privilege to manage Florida SBA's capital. And

while we get the pleasure of sharing some of the

results today, I think it goes without saying, but

this is really a shared success between us and

Florida SBA.

We work very collaboratively day to day, week

to week, month to month on this program together.

And so we are very appreciative of that

relationship. We spend a lot of time with John Mogg

and his team as well. So I just want to say a big

thank you and just acknowledge their efforts as

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well, as we go through the numbers.

In terms of where we're headed, we'll just give

you a quick overview and introduction of Hamilton

Lane. We'll talk a little bit about the Florida

Growth Fund, just overview some of the performance.

We'll talk about the deal flow, and then we'll end

on the Florida impact.

But just to start with Hamilton Lane, we are

one of the largest, if not the largest investor in

the private markets on a global level. We manage

somewhere in the neighborhood of about 470 billion

in AUM. We are a global organization, so about 350

employees spread across 16 offices around the world.

And alignment is really key to what we're doing.

And so we have about 300 million of our own personal

capital invested alongside of our clients, Florida

Growth Fund being a part of that.

In terms of what we do, it's very simple. We

are exclusively focused on the private markets, and

we're really organized along four investment

verticals. And so the first of those being primary

investments or LP commitments to other funds, the

second being secondaries, third being real assets,

and then the last piece is co-investments. So that

really breaks out between equity and credit. And as

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Katie will talk about, we've got dedicated teams to

each of those strategies and dedicated investment

committees along each of those strategies.

As you think about us, I'd say probably, in

terms of competitive advantage, for lack of a better

word, it really comes down to two things from my

point of view. I think scale is one. We allocate

more capital than just about anybody in the

industry. And so from our vantage point, I think

that gives us very unique access to funds, inasmuch

as it gives us unique access to co-investments.

And so just to give you perspective there, I

think over the last four years we have allocated

somewhere in the neighborhood of around $91 billion.

And as Katie will talk about in a minute, that is

really the engine that drives the opportunities that

come to Hamilton Lane and ultimately down to the

Florida Growth Fund.

The second piece is information advantage. And

so, you know, with all that activity, we've got

basically four decades of funds in our database, all

the underlying portfolio companies underpinning

those funds. And so as you think about that,

particularly from a co-investment standpoint, it

really gives us the ability to not only evaluate an

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opportunity and understand whether the manager is

appropriately matched to the asset, but it also

gives us the ability to go deeper on the asset in

terms of due diligence.

And so, if you think about that, the company

that we may be looking at, if it was previously

private equity owned, it's highly likely that we may

have that information about how that company, for

example, performed during the downturn.

And so as you think about what we're doing day

to day, these are the private markets, not the

public markets, so you don't just pull a 10-K off

the website to get that type of information. And so

for us, that is a very powerful underwriting

advantage.

MS. MOORE: Great. So Ash did a nice job of

giving the history of the Florida Growth Fund

program. I thought I'd go through some of the

numbers. I'm on page three. So if you look at the

bottom here, when the program was launched back ten

years ago, Fund I was a $250 million tranche.

The strategy there was to both invest in fund

managers with a Florida track record, as well as

equity co-investments across the state. Three years

later we had a second tranche that was added to the

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program. That's a $150 million tranche. It had a

very similar dual strategy. And that was followed

by a $100 million credit tranche to take advantage

of a diversified pool of credit co-investments.

That fund today, the credit sleeve, is actually

fully committed, but we do have some ability to

recycle capital, so still a little bit in active

mode.

Florida Growth Fund II was then launched in

2015. That was another $250 million tranche. This

is primarily where our team spends its time today.

We are just about fully committed on that fund and

look forward to hopefully working with you on a next

tranche, but this is primarily where we spend a lot

of our active investment time today.

Looking at page four, as a very important

client to Hamilton Lane, the Florida Growth Fund

program has a dedicated seven-person team. We're

smiling here in the middle. It's a team across

levels and skill sets. We're focused on

constructing, investing and managing the funds that

you've entrusted us with.

So Nayef oversees our Miami office. They have

a local team there. And then Dave Helgerson and I

manage the diligence and client resources back in

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our home office in Philadelphia. So our job is to

bring the full Hamilton Lane platform and resources

to bear for your program.

Another thing I'd highlight on this page is

just the investment committee here at the top. We

have dedicated investment committees by strategy.

Those committees have over 17 years of partnership

and decision-making experience together. And

there's a lot of cohesion in that group, actually.

Over the life of this Florida Growth Fund program,

we've only had one retirement.

Turning to page five, we'll go through some of

the program highlights and the numbers. But the key

here is that the program continues to be very strong

across tranches. So Florida Growth Fund I, which

had more of a venture growth tilt, has an average

age of commitments of about 5.7 years, and it's

generating a 12.1 percent net IRR today.

Florida Growth Fund II, which had a little bit

more of a buyout tilt -- and we'll talk through

that -- has an average age of 1.8 years. And that's

generating a 14.8 percent net IRR.

One other thing that I'll highlight here, and

Nayef will go into more detail later, but one of the

ancillary benefits is that the job creation in

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Florida continues to move up and to the right. So

17,000-plus jobs created. And that has both an --

been both an ancillary benefit and a lasting impact

on the state of Florida.

Turning to page six, if you look here, I

mentioned that Florida Growth Fund I has two equity

tranches. We've seen a nice uptick in performance

here relative to last year. But the portfolio

continues to season, as you'll see.

We had 45 positions across both tranches, so 20

fund investments and 25 equity co-investments. I'll

talk about liquidity in a second, but you can see

here, 13 realized co-investments, generating a 2.5x

multiple of invested capital. So continues to be

strong.

Down at the bottom, on the portfolio

diversification, we believe the program is very

well-diversified. The circles are by exposure,

meaning they truly exclude any capital that's been

realized to date. But you can see about 42 percent

of remaining market value is in early stage and

growth deals. So we expect that to continue to hold

some value, but we've seen some nice liquidity

there.

Also we've got some good diversification by

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industry as well. So overall, tracking very nicely,

very well-diversified by industry and here within

the Florida ecosystem.

MR. OLMSTEAD: Katie, can I ask a quick

question?

MS. MOORE: Sure.

MR. OLMSTEAD: So when you look at the bottom

here, diversification, it's interesting to see the

diversification. Do you have any comments on the --

what's performing below? So is VC versus early

stage -- you know, when you look at some of the

stuff, what's the better-performing buckets in

those -- or in the diversification buckets?

MR. PERRY: Just very simplistically, it's --

I'd break it up between funds and co-investments.

I'd say, if you look at the portfolio, where we've

had a little bit more, on the co-investment side, a

little bit more of a roller coaster of emotions,

let's say, it's probably on the direct

venture-oriented stuff. You really need to be

thinking about a portfolio of those investments from

a direct investment standpoint.

I'd say on the fund side, believe it or not,

I'd say we've got one SBIC manager that's got both a

debt and an equity tilt. They're also using some

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leverage. They're one of the leading performers in

that fund. And then outside that, I'd say buyout

has been probably the stronger performer in that

group.

MS. MOORE: And that's why we've sort of tilted

that way a little stronger in Fund II, which we'll

talk through.

MR. COLLINS: Could you guys -- Mr. Chairman?


MR. COLLINS: So could you guys break that out

for us, not now, but in the next couple of days,

both on the co-invest side and on the fund side, by

strategy, and give us those numbers?

MS. MOORE: Yes.

MR. COLLINS: Thanks.

MR. BOBBY JONES: One thing I noticed was in

the job numbers, that that data was pretty recent.

It was September of 2018, on the jobs and average

salary, so -- go ahead. I'm sorry, Katie.

MS. MOORE: No, no. That's fine. I will say

that within the geography, though, 100 percent of

our co-investments have been within the state of

Florida. The fund investment is -- you know, you're

talking fund managers that have different

percentages that they invest with the state. But

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we'll get you the actual commitment dollars across

the board.

MR. COLLINS: Yeah. I just want to see what

those commitments look like. And not necessarily

the commitments, I want to see what the strategy,

the same strategy looks like in a fund versus a

co-investment, see how those numbers are. Thanks.

MS. MOORE: So on page seven, I'll talk for a

second about liquidity. You can see here that our

distributed to paid-in is strong. We're actually

close to a 1x, which has been a nice uptick from

last year. Of the 383 million that we've paid in,

about 327 million has been realized.

But I would say that Florida Growth Fund I

really is a tale of two tranches. So the older

tranche has a DPI of 1.2x. It's doing very nicely.

The second piece of it has about a 0.5x. So we

continue to see good exit momentum, and we think

that will continue to be strong over the next year

and really push us up.

MR. PERRY: Just to dive into the credit

tranche, so this is a 2014 vintage, 100 million in

size. And the investment focus here is really on

performing lower and middle market credits. We

targeted largely sponsor-backed investments through

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this tranche.

If you look at the performance as of 9/30, so

this fund had made 12 investments, at a gross IRR of

13 percent and a net IRR of 7.5 percent. Our view

is, as this portfolio continues to season, we would

expect some lift in the net IRR number.

If you look at the liquidity and some of the

realized activity in the tranche, as of 9/30, about

85 percent of the tranche was committed. We at that

point had five full and partial realizations in the

fund, distributing just over 33 million back to

Florida SBA. Of the three full realizations that

we've had in the credit tranche at 9/30, those were

performing at a 1.3x and over a 23 percent IRR.

MR. COLLINS: Question, Mr. Chairman?


MR. COLLINS: So on your credit overview, your

realized multiple and your IRR in the box, is that

a -- somebody just put the wrong number in there for

the IRR, or that's the realized IRR and your IRR

over on the other side is a blended of realized and

unrealized?

MR. PERRY: That's correct.

MR. COLLINS: Okay. And so why the big gap in

gross and net?

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MR. PERRY: It's a couple of things. Good

question. If you backtrack when we started this

program, so in 2014, when the credit fund got

launched, we actually ended up turning the fee meter

on at 9/30 of 2013. We didn't make our first

investment for about nine months. And so we had a

tremendous --

MR. COLLINS: Had a big J curve.

MR. PERRY: We had a tremendous drag on the

performance as a result of just that gap. And one

of the things that we had to do as we got this

program up and running was really go out and market

the capability of the program, because credit wasn't

part of the original capability set of the first

couple of tranches. So that's probably the biggest

one.

I'd say that kind of to a lesser degree we've

also -- you know, as you deploy capital, you're not

going to see that IRR season for a little bit, and

so some of this is reflective of some newer

investments in the fund.

MR. COLLINS: Okay.

MR. OLMSTEAD: Mr. Chairman?

MR. BOBBY JONES: Yes.

MR. OLMSTEAD: When you look at your sponsors,

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is it -- just mechanically, are you working with

sponsors from the state of Florida or looking at

companies in the state of Florida, and then when you

look at sponsors that you're partnering with, is

there a concentration? You don't have to say who,

but is there a certain concentration of sponsors

that you're working with?

MR. PERRY: So in terms of the companies, 100

percent of the companies that we've invested in for

the credit tranche and for the program, for that

matter, have been Florida companies. In terms of

the sponsor profile, it's mixed. It doesn't have to

be a Florida sponsor, because ultimately the OPPAGA

report is going to be driven off the activity that

the underlying portfolio company is able to produce,

in terms of job numbers, in terms of average annual

salary, et cetera.

So we're a little more agnostic. I'd say where

we scrutinize a sponsor more is just in terms of

capability of the sponsor. So going back to my

intro on the Hamilton Lane platform, we use our

database to -- if we're making an investment in a

technology company, it's unlikely that we would make

that investment, or a loan into a portfolio company

of a general partner who doesn't have any experience

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in technology, or if they have experience in

technology as their website might say, that they've

been able to produce a track record and a

demonstrated ability in that space. So that's one

of the things that we look for, more than just where

the sponsor is based, because ultimately the company

is Florida centered.

MR. BOBBY JONES: And we probably need to move

on on the Hamilton Lane portion, because we've got

more to go through, but it sounds great.

MR. PERRY: We'll quickly get through this.

We're now fully committed on the credit fund. Just

moving to Fund II, so this is a 2015 vintage,

250 million in size, and our investment focus, very

consistent with Fund I, so focus on investing in

general partners that have a demonstrated ability to

invest in the state of Florida, as well as a good

track record, and then making co-investments into

Florida companies.

If you look at the performance of this fund, as

of 9/30, we had 22 investments in the fund, at a

gross IRR of nearly 19 percent and a net IRR of

almost 15 percent. I think it's worth noting that

for this fund in particular, we were J curve

positive within two quarters. And so we were able

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to leverage some of the lessons learned from our

Fund I and apply those to Fund II to really achieve

that outcome.

Taking a look at Fund II, exit activity and

liquidity, as of 9/30, the fund was almost

80 percent committed. If you fast-forward to today,

we're nearly fully committed, so we've got capacity

for one remaining co-investment in the vehicle, on a

pipeline of currently three opportunities.

Fund II also saw some early liquidity, so

almost 20 million to date going back to Florida SBA.

We do have one co-investment in the fund that is

currently undergoing a sale process. And so if that

is successful, our expectation is that liquidity

number would more than double by 9/30 of this year.

MS. MOORE: So tying this back to the Hamilton

Lane platform, the primary fund deal flow continues

to be the largest driver of new manager

relationships and investment opportunities. And we

see this thesis still holds true, as you can see

sort of the growth in the opportunity set. On the

primary side, we're now seeing more fund managers

than ever.

And that's translated nicely to the

Florida-based private equity firms. So the same

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holds true in this region. The number of managers

based in the state of Florida has doubled over the

last five years. That's very impressive. Related

to, you know, GPs spinning out, related to new

managers up and coming, related to existing

institutional firms wanting to be a part of the

state ecosystem --

MR. WILLIAMS: Maybe the income tax.

MS. MOORE: The income tax. But the key theme

is that the managers are here. They're spending

time and resources and capital in the state, which

has all been very positive for SBA.

On page 13, this drives a lot of the

co-investment deal flow. If you kind of look at the

top left to right, the primary capital of 28 billion

we put out in 2017 drove a lot of the equity

co-investment and credit co-investment deal flow

that we had that year, last year.

And this trickles down really nicely to the

Florida Growth Fund program. So we saw over 42

deals, 1.1 billion in equity co-investment last

year, 462 million in 23 credit co-investments. And

as you know, we only do a handful of deals per year.

So choice is ample, and we've seen a really nice

uptick.

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On page 14, sort of another look at the private

equity ecosystem in Florida. The number of

PE-backed companies over the last ten years has

grown at an impressive growth rate. It's almost

doubled in size. And this creates new opportunities

for private equity funds but also for managers on

the credit side as well, as many of those companies

now have debt that you can buy and sell.

So over time we expect these deals will also be

sold and create a secondary buying opportunity for

both new managers and for Florida SBA.

MR. PERRY: And just to end on the Florida

impact, I think as Ash introed, you know, OPPAGA is

a third-party group responsible for measuring the

performance and the impact the Florida Growth Fund

is having on an annual basis.

And the partnership with Florida SBA, pleased

to report these numbers here that are coming

straight out of the OPPAGA report, but again this

has been a shared effort between Florida SBA and us.

But if you look from left to right, the job

creation, net jobs created since inception of the

program has continued to be an impressive number,

over 17,000 jobs.

In the middle there, if you look at the average

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annual salary, so that continues to remain high. So

if you look at 2018, for example, that 72,000 number

is the average salary of the total jobs created in

2018 alone. And if you compare that to the state

mean of about 47.6 thousand, you know, these are

high quality jobs that are being created as a result

of Florida Growth Fund dollars being invested in the

state.

The last piece is just around the capex. And

if you look in the far right, Florida Growth Fund

investments have now spent over three-quarters of a

billion dollars in capex in the state. So that is

also an impressive number that I think gets

sometimes overshadowed by the jobs number.

So just with that, I think just to wrap up from

our perspective, just want to say thank you to

everybody, but our focus is going to be very

consistent with what we've shared with this group in

the past. I think first there's going to be a focus

on performance. We think that that's driven by

three core components, its strong partnership with

SBA, leveraging the Hamilton Lane platform and

having a dedicated team on the ground in Florida.

The second piece is liquidity. So almost

400 million now going back to Florida SBA since the

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inception of the program. That's going to be an

ongoing area of focus for us. And then the last

piece is just around the Florida impact. And so we

are laser-focused on generating returns, but I think

we're also mindful of the impact that the program is

having on the state, so we're keeping an eye on

that.

MR. BOBBY JONES: Well, Nayef and Katie, thank

you so much for -- that's a pretty good ten years

there from start to right now.

MR. COBB: Mr. Chairman, this is Chuck Cobb.

MR. BOBBY JONES: Yes, Chuck. Yes, sir.

MR. COBB: The Florida Council of 100 has

started a -- or has completed now a $2 million

research project by McKinsey & Company to discuss

how Florida can dramatically improve its economic

development and job creation. And as part of that,

I have introduced McKinsey to this page 16 summary.

And McKinsey thought they had discovered bread, I

mean, they had discovered something that was the

most outstanding thing.

And so as part of their report to the Florida

Legislature and the governor's office, they have

recommended that the Florida Growth Fund be

expanded. And the governor's tentative reaction, I

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understand, was positive of that.

Now, I told them that we as a board also felt

that this might grow faster but that Hamilton Lane

and our administration had felt we were going about

as fast as we could go and that an increase was not

maybe warranted.

At any rate, Ash, have you heard any feedback

from the governor's office or other cabinet or

trustee members?

MR. WILLIAMS: I have not. And I would say

that, as for the capacity of the growth fund, as the

thing has grown and matured, Hamilton Lane, as we've

just learned, did a terrific job in the first phase

of the thing. And it's big enough now, we thought

it was prudent to diversify the talent. We brought

in another longstanding, trusted partner of the SBA,

J.P. Morgan & Company.

And that gives us the bandwidth to grow the

fund prudently at whatever the maximum rate is the

investment merits suggest. And the way this has

always been done, if you think about it, the

original statute on this was permissive, up to

1 percent of the fund.

And if you think about this, when that

1 percent of the fund was put in, it was back when

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the fund was $84 billion. It's a lot bigger than

that now. So that ceiling has grown. And I think

we have the flexibility on our own authority to

scale this as we see fit.

And I think we are attentive to it. It has

been highly successful. We've continued to scale it

without any external prodding. That's been our

judgment, together with Hamilton Lane, and now J.P.

is part of that discussion as well. So I think we

will continue to prudently pursue these

opportunities as they -- as we perceive them to

exist.

MR. WEBSTER: And if I could just make one

comment. We're currently doing due diligence on the

next tranche for Hamilton Lane. And assuming that

that goes through, that will be $1 billion in

commitments to the Florida Growth Fund by the SBA

since inception.

MR. BOBBY JONES: Well, that's good to know,

Ambassador, and it's impressive, the performance.

And speaking about expansion, we've got here, on a

new expansion of the Florida Growth Fund, some new

partners that are going to be joining with Hamilton

Lane, Rob Cousin with J.P. Morgan, who has started

and heads up their private equity group, who is also

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a Florida native. Rob, tell us about it.

Oh, I'm sorry, Tom. Tom Grady has got a

question first. I'm sorry.

MR. GRADY: And this may be for Ash as opposed

to our advisers in the program. And I'll just get

these questions out. I'll learn to pace myself in

these meetings, and I know we can't bog down

entirely on one presentation.

But it sounds like from the presentation and

the materials, we do not source individual

investments with this fund. We either hire a fund

or invest in a fund or we co-invest with another

sponsor; is that right?

MR. WILLIAMS: That's right.

MR. GRADY: And that's why we end up with I'm

going to say only, which is not a bad thing, but

only 55 percent of the equity investments in Florida

as opposed to 100 percent in Florida, because we

invest in a fund and there is no such thing as a

fund limited to Florida-based investments?

MR. WILLIAMS: Well, I think, if you come back

to the point Nayef made, the underlying companies

are 100 percent in Florida. And to the extent a

plan sponsor -- what the concept of the Florida

Growth Fund is, is to have a Florida nexus. Now,

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the nexus could come because you have a private

equity firm or a venture capital firm in Florida

that might be allocating to companies elsewhere, or

it could be that you have a company in Florida

that's growing with the benefit of fund sponsorship

by a fund that's in Los Angeles, Chicago, New York,

Boston, et cetera.

In many cases there is discussion collateral to

our investment decisions with these funds about the

possibility of them increasing a footprint in

Florida or building a footprint for the first time

in Florida, et cetera. So we wanted to be careful

not to overly narrow what constitutes Florida.

And one of the things that came up when this

first became law was the way it was perceived by the

public, based on media reports, was this was a,

quote, set-aside and there would now be 1 percent of

the pension fund available for Florida ventures.

And everybody who, as a former IAC chair Rob

Gidel used to say, had invented a beanie with a

propeller on it and put it in a box called us and

said, Look, if you'll just give me $5 million, I'll

make you a fortune. And we were careful to pursue

this in a way that we went after real businesses

that did have Florida tangency.

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MR. GRADY: So I'm still not clear then on what

the 45 percent other means in geography. You said

it's 100 percent invested in Florida businesses. So

this is referring to the managers?

MR. WILLIAMS: Yes.

MS. MOORE: I would say that the 55 percent

encompasses both some of the fund and the

co-investment. So of the 25 co-investments that we

did, 100 percent of that remaining market value is

still within that 55 percent. However, the fund

investment, the other 45 percent, would be invested

in companies that are outside of the state of

Florida. So that's not based off commitment

dollars. It's exposed market value remaining.

And so I think back to Peter's point, you want

a more complete graph of the dollars committed to

both co-investments in the state, which we will get

you, and then fund managers by strategy and what

percentage of those fund managers then have dollars

within the state of Florida in their companies. So

we can break that out for you further.

MR. GRADY: And I assume somewhere that we have

the identity of those managers as well as the

sources of co-investment?

MS. MOORE: Yes.

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MR. GRADY: And I just haven't seen it. Okay.

And we have broken down into the funds fund

investment number and co-investment numbers. Can

you also provide the dollar percentages, the

relative dollars versus those -- you know, where you

compare the fund investments versus the

co-investments?

MS. MOORE: Yes.

MR. GRADY: As opposed to just the investments

themselves?

MR. PERRY: And just for the record, these are

I believe in the OPPAGA report on a no-names basis,

that are categorized by industry or strategy. There

is a breakout by dollar amount in terms of where

we've committed dollars.

MR. GRADY: And I assume the fund investments

are leveraged?

MR. PERRY: The majority are not.

MR. GRADY: At the fund level?

MR. PERRY: So we -- Florida Growth Fund does

not use any leverage at the fund level. We don't

even so much as use a capital call facility at the

fund level. For the underlying fund commitments,

the only commitments that the Florida Growth Fund

has where there is any underlying fund level

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leverage are a couple of credit investments where

it's very common for those vehicles to use leverage.

But one of those two commitments is pretty modest

leverage. I think around 35 to 40 percent of the

fund is levered, primarily senior-oriented strategy.

The other one has a little bit more leverage, which

is very characteristic for an SBIC type fund.

MR. GRADY: And if I may.

MR. BOBBY JONES: Sure.

MR. GRADY: When we calculate the multiples and

the internal rates of return, it looks like we are

using what I would call a fairly traditional private

equity return analysis, which says, we'll start

measuring rates of return when the dollars are

invested as opposed to when the dollars are

committed; is that right?

MS. MOORE: It depends. At the net level, it

would be when you start calling them for capital.

At the gross level, it would be --

MR. PERRY: Yeah. So if you make a commitment

to a fund, they're reporting on any dollars that

they've drawn.

MR. GRADY: Right.

MR. PERRY: They're reporting a return, which

is net to Florida Growth Fund. And then the numbers

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that you see here will take into account the net

performance of that fund and the gross performance

of the co-investments to aggregate to a gross and

net performance presented here.

MR. GRADY: I understand that. And, again, we

can do some of this offline. I don't want to bog

down on it. But I'd just like to compare returns

and expenses as well as I can, apples to apples.

And I know private equity calculations are

different.

If we gave Hamilton Lane or J.P. Morgan a

billion dollars and said, go manage this in an

equity product, we start from day one to calculate

what those returns are. And with a private equity

investment, that may not be true. We may commit on

day one, not invest until day 360, and those returns

can be calculated in a very different way, as I've

seen it.

MR. COLLINS: If I might, I think that what

you're concerned about is being captured. It's

gross versus net, right? So net would be net of

fees. So the question that I asked on why the big

disparity on the gross versus the net, well, they

were charging fees. It's not, you know, the net --

the net picks that up. So it looks a lot better

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after you don't look at that. But we are getting

it. It's just which one you're focused on.

MS. MOORE: We can get you a time-weighted

return. We can do public market equivalents of any

kind, many different kinds. So those are fully able

to be calculated.

MR. GRADY: That would be great.

MR. BOBBY JONES: And obviously the

distributions help us a lot understand the

cash-on-cash side of it in terms of what's invested

and what's come back to us.

MR. GRADY: And then just one other question

for anyone, and that is, within the funds or

co-investments, are there any investments in

financial companies that might be obligated under

the Community Reinvestment Act?

And the reason I ask is I'm actually an

investor in a similar fund out west, and there is a

focus on investing in financial-oriented companies

because it creates the opportunity to satisfy what

is sometimes a burdensome obligation with the

Community Reinvestment Act. And the vehicle creates

a wonderful opportunity for those financial

companies to sort of leverage the opportunity within

the fund. And I'm wondering if that's been anything

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that we've ever considered.

MR. PERRY: Offhand, I don't think we have any

investments into financial companies of that nature.

MR. GRADY: Okay. Thank you, Mr. Chairman.

MR. BOBBY JONES: Thank you, Tom. Okay. Rob

Cousin with J.P. Morgan.

MR. COUSIN: Thank you, Mr. Chairman. Great to

be here. As was mentioned, we're recent additions

to the Florida Growth Fund. I think we activated

the -- sorry. The light is on? There we go. Sure

thing.

I think we activated the account in December,

so we have a grand total of just over three months,

so we don't have a meaningful performance to share

with you, but we really appreciate this opportunity

to --

MR. WILLIAMS: It's been a spectacular quarter.

MR. COUSIN: We appreciate this opportunity to

introduce our platform, our capabilities, and we're

very excited to be part of this program and working

with the team here.

So just to intro a bit about our platform, we

oversee 28 billion in assets under management.

That's solely in private equity, and that's solely

on behalf of external clients. We do not manage any

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of the bank's capital. We're in the asset

management division of J.P. Morgan. Most of that

capital is from large pension funds, endowments,

foundations, all the way up to sovereign wealth

funds.

The only other capital that we invest besides

our client capital -- and my wife reminds me of this

all the time -- is our own capital. So we

personally, similar as Hamilton Lane described,

personally invest in everything we put our clients

into, including the Florida Growth Fund. It's by

far the biggest piece of the net worth of everyone

on our team, and we just think that's a good

alignment of interests between ourselves and our

investors.

We're 50 professionals. Look at that a little

bit different. That's 50 people that only work in

private equity. It doesn't include all the support

resources that we have at J.P. Morgan, so it doesn't

include things like legal and technology and human

resources. Our 50-person team only makes

investments or services our private equity clients.

And our main office is in New York. We have

people on the ground in London, Hong Kong, India.

And as was mentioned, I am actually based in South

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Florida, been based there since 2012. I grew up

down here and spent far too long up in the Northeast

and decided I wanted to relocate back down to

Florida.

But it's important for the story and why we're

here because what you'll hear about today is, even

before we had the Florida Growth Fund mandate, even

before I relocated to Florida, we were doing a fair

amount of investing in Florida. We do a lot of

emerging manager investing, a lot of small,

mid-market investing.

And that's a very rich opportunity set down

here, and it's only grown recently even more

significantly, call it because of tax law changes,

call it because of quality of life or whatever. But

I live in Palm Beach County, and it seems like every

week there's a new firm, a new professional

experience, retiring from their firm up north and

opening up a shop down in South Florida. It's a

rich fundless sponsor environment. It's a rich

family office environment that often syndicates

deals. It's just a very good environment.

And as we'll show a bit today, we had been

making investments in Florida, a very sizable

amount, long before we had the Florida Growth

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mandate, which is why, when we started talking to

the team here, we really thought there were a lot of

synergies and we thought we were very well-situated

to work with the team here.

I'll skip the sad class picture here that we

have. Our team has gotten so big, the only way we

can fit together is in a lineup like that. But much

more importantly is some of the stats about our

team. Obviously we're biased, but we would put the

experience and continuity of our team among anybody

in the industry and our reputation in the industry.

You can see from the time together, many of us

have worked together for a very long period of time.

I'm a case in point. I started as a college intern

in 1990 with the team and have never left.

A little bit of history about the group, eight

of us, myself included, founded the group at J.P.

Morgan in 1997, but our legacy and our relationships

and our experience goes back well before that.

Eight of us were previously at AT&T's pension fund.

AT&T at one time was one of the largest corporate

plan sponsor investors in private equity, everything

from venture capital to buyout globally. And when

AT&T and Lucent split up, we decided to move the

team, because it was working real well, and started

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the business at J.P. Morgan.

The other thing I'd point out is, while I'm

here today and I'm the day-to-day main contact for

the Florida Growth Fund, and Patrick and Tyler, who

you'll hear from in a moment, are here with us

today, everyone on this team is charged with

assisting the Florida Growth Fund.

And in fact, in just the first three months

we've been active, several people on this page have

sourced deals through their own network, outside of

my network, for deals in Florida. And that's kind

of how we work. We do not work in silos, either by

product or by client. We basically serve all our

clients together.

In terms of our client list, here's a sample of

our client list. We're very proud of the fact that

we have everything from smaller institutions that

look to us to be their sole entree into the private

markets, and then we have large, sophisticated

investors like the SBA who have their own teams but

feel like we can add value to what they can do on

their own. And we bolded here some of the local

Florida-based LPs. We have a fair amount of client

interaction with local institutions.

When we started talking to the team here, what

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we said was, because of our size and because of the

number of relationships we have and our reputation,

we're offered a lot to do custom-type products to

custom funds, and we often say no to that. And the

litmus test for what we will take on is can we

execute and is there a good opportunity set.

And as I already alluded to and we'll touch

more on this, clearly there's a huge opportunity set

in Florida, a rich opportunity set. And can we

execute? We already work with many accounts,

including similar large public institutions.

Here are some examples here. These are custom

accounts with public institutions, everything from a

small mid-market emerging manager mandate that does

fund and direct investing for a large California

public fund to an in-state mandate very similar to

the Florida Growth Fund for a northeastern state to

we run a venture program for a big public fund in

the Southwest.

These are great reference accounts for us

because not only have we delivered strong

performance to them -- they're all running north of

20 percent IRR -- but it's much more than that. We

feel we've serviced them well. We've been a

strategic partner to them such that, you can see on

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the slide here, in each case they've grown the

mandates over time, increased the mandates with us,

and that's something we're quite proud of, which is

a good segue into how we work with investors.

When we take a large account like this, you

know, with a large, very sophisticated investor, we

want to provide much more than just investments, in

this case investments for the Florida Growth Fund.

We want to be an extension of the team's resources.

We want to be strategic partners to the team.

And that includes everything from, you know, we

share our due diligence on things, even outside of

Florida. What I said to the team here is we at J.P.

Morgan and the SBA are two of the larger private

equity investors in the market. We're going to see

the same things. We're going to run into each

other. Why not compare notes? Why not collaborate

on things if it makes sense?

So we've shared our diligence. We were here

this morning actually just sharing some of the

market views that we're seeing and having a debate

about that with the team. And that's just kind of

how we work, and it's been a great experience for

us, and we look forward to many years going forward

of doing that.

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MR. JAYROE: I'm Tyler Jayroe, one of the

portfolio managers here at J.P. Morgan. I'm just

going to give you a quick snapshot here on slide

nine of the mandate. We're really excited to be

investing on behalf of the SBA. The objective is to

construct return-enhancing private equity portfolio

investments here in the state.

Our goal is to deploy this $125 million mandate

over approximately four years, a maximum of

50 percent of which could be invested in any

particular year. Our target would be to invest

roughly half of this capital into partnership

investments, alongside eight to ten private equity

firms, with the remainder invested into secondary

investments or direct investments.

We are very much bottom up in our investment

approach, and opportunistic. And so there could be

material shifts, especially in a given particular

year, in the mix of investments that we make. So

the pie charts here are generally representative of

the type of portfolio we'd expect to construct, but

it certainly could change.

Our emphasis across our platform really has

been on small and mid-market buyout investments. We

expect that to be a material component of the

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portfolio here. We'll continue to also look at

growth and venture capital investments and

opportunistically at larger deals or special

situations.

We also would highlight a couple of bullets

towards the bottom of the page. We target

investment opportunities where we can leverage our

existing relationships with fund sponsors across our

platform. So we're typically investing on behalf of

other funds and accounts alongside the Florida

Growth Fund, where we'll be material investors with

those groups, and have made two fund investments

like that to date.

And we're always looking for creative

opportunities to source deals, and that could come

from nontraditional investment sources, such as the

ones that Rob mentioned, such as family offices o

Agenda Investment Advisory Council (IAC) · 6/18/2019 · IAC Meeting – Agenda. June 18, 2019 . Page 2 . 2:00 – 2:45 P.M. 4. Private Equity Asset Class Review . John Bradley,

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