23 February 201123 February 2011

2

USA, 27%

Canada, 3%

Finland, 3%

Netherlands, 15%

Sweden, 12%

UK, 31%

Denmark, 9%

Source: IFI, 2011Source: IFI, 2011

• 33 investors interviewed across 33 investors interviewed across Europe and North AmericaEurope and North America

• 70% were from Europe; 30% from 70% were from Europe; 30% from North America North America 

• Total assets allocating to in Total assets allocating to in excess of £1.1 trillionexcess of £1.1 trillion

 

3

48%

22%30%

0%

25%

50%

75%

100%

Much more Slight more important No more important

Source: IFI, 2011

Transparency of the overall investment process is important to most investors – interviewees did not distinguish between operational and portfolio transparency.

4

“Transparency means knowing how people are incentivized and how people are regulated and remunerated, and where the checks and balances are.”  “Transparency is the key to it all; we need to make sure that we know absolutely everything about what is going on.” “Transparency means clear and meaningful disclosure.” “In my view operational risk is more important than investment risk so operational transparency is absolutely critical…we do not want any surprises”. “It is all about having the right systems in place to make sure that procedures agreed to at the outset are adhered to throughout.”  “We require full transparency before investing otherwise we will not proceed.”

5

• Transparency requirements don’t differ by investment type. Transparency of the overall investment process is often more important than that of the portfolio’s underlying current positions.

• However, various institutions do require full portfolio transparency; but will accept positions that aren’t current. They’re also happy to sign NDAs to obtain this. • As a result of events of the last few years, other investors now require a specific level of transparency as a matter of policy, otherwise they are not able to invest.

6

(Prior to crisis) “We would take as much transparency as we could get...what mattered was being with the right managers in terms of their performance. That has changed.”  “We pay more attention to risk management. I'm getting tougher on the managers that we invest with and want more disclosure. And we are getting tougher on the fee levels and performance. We've also improved our own reporting and our website.” “We invest via a fund of funds. We expect to see how our assets are allocated and that adequate due diligence is being done.”

7

• All European institutions interviewed, except one, (61 % of all respondents) are aware of alternative UCITS funds.

• 26% of the European sub-sample said that they’re interested in Newcits because of the transparency stipulations within these structures.

• However, these respondents said that the chief attraction of these structures is their liquidity and regulatory appeal.

8

Most respondents have said that their need for greater transparency has not changed the way that they work with either managers or service providers.

“Yes - with fund managers - we are really drilling down into who they are and what they do, from the initial hiring stage. We do not work directly with administrators and given the type of work we do, I don't think that this is applicable to us.” “We want to establish our own connections with service providers.” “We have no dealings at all with the service providers…I think transparency is more important now. We are now going to have to report deeper to our stakeholders” “Big changes. Yes, we've consolidated our fund of fund allocations…they now provide us with an advisory service on their analytical platform.” “We expect more information...We are using various proprietary products to invest in risk. We've taken on more people. We are putting in a lot of effort.”

9

73%

27%

0%

25%

50%

75%

100%

Yes NoSource: IFI, 2011

Respondents said that technology wasn’t being used as was well it should be. They said that administrators should be developing more specific systems to help investors.

10

“Technology is moving so quickly but administrators are not doing enough to develop systems for our needs.” “We get what we need, so we are happy.”  “Yes - there is still a lot of ignorance from custodians about products and you have to like it or lump it. You have to keep a beady eye out. Custodians haven't been all that good…Administrators are so important.” “Yes - the key thing I'd change is service providers' automation of information - we'd like more detailed reports.”

11

12% of investors wanted to work more directly with administrators. In particular, they felt that administrators should come into the process at an earlier stage, including in the discussions before allocations are made.

“I'd make them more willing to consider upgrades [to reporting] at the beginning to see what their clients really need.”  “Timely investment in systems is important as things can change in the blink of an eye.” “This should be a matter for the manager, not us.” “We are certainly not aware that there is a problem with how things are done now, so no.” “I think administrators are a vital player in the relationship and it's critical that they do their part well.”

12

“Administrators play an important role but they are only one piece of the jigsaw.” “It would help if there were more commonly accepted standards, although I believe a lot of progress has been made here by industry bodies.” “Obviously the answer to this question is with the manager.” “Things have moved on so much in the last couple of years that I don’t think this question is that relevant any more. We now get all the transparency that we need.” “Yes, administrators could play a larger role and I am certainly interested in knowing those who our managers are using.” “We like to see that there are well known, large, secure operations that are doing the administration of the funds we invest with.” “The fund manager is the obstacle to transparency, not the administrator!” “It's a process of evolution…alternatives have evolved very rapidly from family offices to meet the needs of institutional investors.”

13