How Alternatives Provide Long-Term Diversification

HOW ALTERNATIVES PROVIDE LONG‐TERM DIVERSIFICATION

MAINTM Webinar Series

September 20, 2016

Webinar Overview

Millennium Trust Company and iCapital are not affiliated.

Millennium Trust does not endorse any platform or investment, including platforms and investments accessible through MAIN. Millennium Trust performs the duties of a custodian and, as such, does not provide any investment, tax or legal advice, or perform any due diligence on behalf of account holders or any third party.

Moderator: Presenter:

Meg ZwickSVP, Director of Alternative

Custody Services

Dan CroninSVP, Distribution

FOR INVESTMENT PROFESSIONAL USE ONLY

CONFIDENTIAL

iCapital NetworkOverviewSeptember 2016

CONFIDENTIAL FOR INVESTMENT PROFESSIONAL USE ONLY

Growing HNW Interest in Alternatives

Source: Goldman Sachs Global Investment Research; Alts Shops Chase High-Net-Worth Market Growth, www.fundfire.com

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Allocations to Alts are expected to increase more than 300% over the next 5 years


Our Research with RIAs Supports this Expected Demand

Source: Registered Investment Advisors and Private Equity, 2016; N=443

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HNW Clients Interestedin Private Equity

Yes67.5 %

Offering PE Today

Yes19.4%


High Net Worth Individuals and Family Offices have Allocated to Alternative Investments

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HNW represents 11%-16% of investors in hedge funds and private equity and allocate ~20%-30% to both asset classes

31% 24% 24%

25%26% 20%

16%11%

12%

15%

9%8%

11%

18%17%

2%12% 19%

Hedge Funds Private Equity Venture Capital

Number of Investors by Asset Class1

Endowment & Foundation

Pension Funds

HNW Individuals2

Fund of Funds

Financial InstitutionsOther

28%

12%6% 3%

19% 18%

9%2%

Family Offices Endowments &Foundations

Pension Funds FinancialInstitutions

Average Allocation by Investor Type3

Source: World Economic Forum, Alternative Investments 2020, An Introduction to Alternative Investments1 Figure 23: Breakdown of investors in core alternative investment asset classes by number of investors. Percentage of the number of investors Includes institutional investors that have invested in hedge funds or that have a preference for or previously invested in private equity or venture capital funds 2 Includes high-net worth investors, wealth management and family offices3 Figure 25: Average allocation to private equity buyout and hedge funds by select investor types. Average allocation as a percentage of total portfolio allocation


1. Updated as of 7/31/16.2. Funds managed and/or administered as of 7/31/16 (does not include number of offshore funds).3. Updated as of 7/31/16

Company Introduction

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CONNECT HIGH NET WORTH INVESTORS TO LEADING ALTERNATIVE INVESTMENT MANAGERS

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~$2.1B

1,100+PROFESSIONALS NETWORK USERS1

IN 28 PRIVATE EQUITY& HEDGE FUNDS2

$1.6TIN TOTAL HNW

INVESTABLE ASSETS3

Mission

Employees Registered Network Users

Platform Assets Registered Network Capacity


Launch of iCapitalTechnology Platform

History of Innovative Solutions

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iCapital Founded

HedgeFocus Reaches $1 billion

HedgeFocus Reaches $2 billion

HedgeFocus and iCapital Combine,Creating World Class Platform Spanning

Private Equity and Hedge Funds

Credit Suisse Team Joins iCapital

Launch of First PrivateEquity Access FundFormation of

iCapital Consortium

Launch of FirstiCapital Vintage Fund

Launch of FirstThematic Private

Equity Fund

DIRECT EQUITY

QMS LIQUIDITY SYSTEM

HEDGE FUNDS

20122011 2013 2014 2015 2016

HedgeFocus Founded by Credit Suisse Team

2017+

PRIVATE EQUITY


ProductOfferings1

CustomSolutions

Access funds for private equity

Access funds for hedge funds

Multi-manager funds

iCapital Provides Alternative Products and Solutionsto HNW Investors

1. Single manager and multi-manager funds available to Qualified Purchasers for minimum commitments of $100,000.

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Custom funds

White Label Platform Solutions

iCapital Provides a Platform of Leading Alternative Investment Managers toHigh Net Worth Investors for Minimums of $100,000

iCapital Provides Custom Fund Solutions for Advisors and Fund Managers Leveraging Technology and Online Workflows


Strategic Distribution Platforms

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iCapital Has Been Chosen by Highly Selective, Risk Averse Wealth Managers and Custodians Focused on Long Term Partnerships


iCapital Access Fund Details – How it Works

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FundStructure

iCapital Access Funds are limited partnership structures, 3(c)(7) funds

Qualified Purchasers can invest for minimums of $100,000

InvestmentProcess

Subscription documents completed in streamlined, online process

For private equity funds, capital call notices via email and view reports online

Obtain position values via custodian statements

Integration

ReportingiCapital was accepted into DTCC-AIP in April 2015.Allows position information to be reported at any major custodian. Fidelity has partnered with iCapital as a preferred custodian.

Portfolio ManagementiCapital continues to integrate with major Portfolio Management Systems.

iCapital Fees

Private Equity FundsSubscription Amount

AccessFee

<$1M 75 bps$1M+ or $5M per RIA

50 bps

Hedge Funds50 bps Minus Any Retrocession Fees (if paid by manager)*Underlying fund manager fees are in addition to access fund feeBrokerage share class includes additional 0.50%, payable to the LP’s broker

* Retrocessions vary and can be zero


Why Consider: Private Equity provides an opportunity to pursue higher returns and greater diversity than may be available through the public markets alone.

Why Include in a Portfolio: Three key reasons why private equity can makes sense as part of a thoughtful, long-term investment strategy

The Case for Private Equity

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Long‐Term Outperformance

Expanded Opportunity Set

Complement to Traditional Investments


Long-Term Net Outperformance

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Source: Cambridge Associates US Private Equity Index as of 12/31/15Past performance is not indicative of future results. This example is for illustrative purposes only.

13.0%

11.2% 10.9%

12.8%

9.2%

6.8% 7.3%8.0%

12.6%

7.3%

5.0%

8.2%

3.4%4.5% 5.0% 5.3%

0%

5%

10%

15%

20%

5 Year 10 Year 15 Year 20 Year

CA US Private Equity Russell 2000 S&P 500 Barclays Gov't/Credit Bond

Private Equity Returns vs. Public Markets

Private Equity Has Consistently Outperformed Public Market Indices Over Multiple Time Periods


Complement to Traditional Investments

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PUBLIC INVESTMENTS PRIVATE INVESTMENTS

FREQUENCY & VOLUME OF PORTFOLIO TRANSACTIONS High Low

ACCESS TO INFORMATION Public, widely available & easily shared Can be asymmetric

MANAGER’S CONTROL OF INVESTMENTS Passive Active

TIME HORIZON &TRADABILITY Shorter-term & liquid Longer-term & illiquid

Private Investments Have Distinct Characteristics That Can Complement A Portfolio Heavily Weighted Toward Public Equities and Fixed Income


Expanded Opportunity Set

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134,000 private companies

5,100 publicly listed companies

US Companies with Revenues Between $25M - $1B1

Vs.

Source: Hoovers, March 6, 2015 excludes Forestry; Mining; Depository Institutional Security and Commodity Brokers, Dealers, Exchanges, and Services; Holding and other Investment Offices, Museums, Art Galleries, and Botanical and Zoological Gardens, Private Households, Public Administration. There were 5,008 listed companies in the US at the end of 2013 according to the World Federation of ExchangesPast performance is not indicative of future results. This example is for illustrative purposes only.

While Traditional Managers are Limited to Investing in the Public Markets, Private Equity Managers Can Invest in a Much Broader Universe of Companies


What Do Hedge Funds Add?

• Able to express views that an asset may fall or rise in value

• Access to a broad set of instrument types (eg. structured credit) typically not accessible through or suitable for traditional long-only vehicles

• Low correlation to other asset classes

• Adds diversification to an existing portfolio

Flexibility

Diversification

Risk Reduction • Similar returns to the equity market with half of the volatility

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*Source: iCapital Network (Please refer to Slides 11 - 13)Past performance is not indicative of future results. Additional information is available upon request.


Hedge Funds Have Greater Flexibility

The above are general characteristics that may not apply to all funds.

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Hedge Funds Have the Potential to Generate Returns in Different Parts of the Economic Cycle

HEDGE FUNDS TRADITIONAL MANAGERS

STRATEGY Opportunistic Highly Restricted

ASSET CLASS Unconstrained Constrained

PERFORMANCE DRIVERS Manager Talent, Strategy Market Direction

HEDGING Yes No

RESPONSE TIME TO CHANGING MARKETS Fast Slow


Hedge Funds May Reduce Volatility

Source: CS Hedge Fund Index and S&P 500 Index as of 12/31/15Past performance is not indicative of future results. Additional information is available upon request. Based on monthly total gross returns in US dollars from January 1994 to December 2015.

8.1% 9.0%6.6%

Annualized Return

7.1%

14.9% 15.0%

Annualized Standard Deviation

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Hedge Funds Have Produced Equity-like Returns with Half of the Volatility


Different Market Environments

Hedge Funds Add Diversification

Source: iCapital NetworkPeriod: January 1994 to December 2015The following indices were used in this analysis: US Equities – S&P 500 Index, International Equities – MSCI World Index, US Investment Grade – Barclays US Aggregate Bond Index, US Municipal Bonds – Barclays Municipal Bond Index, US High Yield – Barclays US Corporate High Yield Bond Index and Hedge Funds – Credit Suisse Hedge Fund Index.

Measures how closely related two asset classes are:

1.00 = perfectly0.00 = not at all

Historical Correlations Among Asset Classes

Hedge Funds

US Equities

Int’l Equities

US InvGrade US Muni’s US High

Yield

Hedge Funds 1.00

US Equities 0.57 1.00

Int’l Equities 0.67 0.95 1.00

US Inv Grade 0.16 0.04 0.02 1.00

US Muni’s 0.20 0.07 0.06 0.72 1.00

US High Yield 0.52 0.62 0.66 0.22 0.30 1.00

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Diversification Can Provide Downside Protection When Certain Asset Classes Are Under-Performing

Correlation


iCapital Platform Offers Alternative Investments

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Browse A Curated Menu of Private Equity & Hedge Funds

Evaluate Investments Via Fund Profile Pages and Research Materials


Register for iCapital Network

21

Create a User Login Verify Your Email11 22

REGISTER AT: https://s.icapitalnetwork.com/register/

Information Required to Register as RIA:

Firm Name:CRD:Year Registered:

Complete Questionnaire33


Questions?

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Melissa [email protected]

646-214-7464

Please feel free to reach out with questions or to schedule a demo with our iCapital Network representatives:

Travis [email protected]

646-214-7281

212-994-7333 | www.icapitalnetwork.com | [email protected]

ABOUT MILLENNIUM TRUST COMPANY

• Privately-owned independent custodian located in Oak Brook, IL

• Over 458,000 client accounts

• $18.9 billion of assets under custody

• $2.5 million in expanded FDIC coverage provided by multiple banks in a Cash Sweep Program for idle cash in retirement accounts

• Regulated by the Illinois Department of Financial & Professional Regulation

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WHY CHOOSE MILLENNIUM TRUST

Client Focused

Expanded Custody Solutions

Technology Enabled

Streamlined Processes

Account Management

Tools

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Platformsand

Portals

Marketplace Lending

Crowdfunding

Hedge Funds

Private Equity

Precious Metals

Other

SOURCE: Millennium Trust Company, Schematic Illustration

Millennium Trust does not endorse any platform or investment, including platforms and investments accessible through MAIN. Millennium Trust performs the duties of a custodian and, as such, does not provide any investment, tax or legal advice, or perform any due diligence on behalf of account holders or any third party.

MILLENNIUM ALTERNATIVE INVESTMENT NETWORK TM (MAIN)

Question & Answer Session

Platformsand

Portals

Marketplace Lending

Hedge Funds

Private Equity

Precious Metals

Other

MAIN WEBINAR SERIES

Tuesday, October 183:00 p.m. CT

Presented by: Equity Zen

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Thank you for attending!

www.mtrustcompany.com866-388-9419

www.icapitalnetwork.com212-994-7333


Disclosures

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These materials are for informational purposes only and are not intended as, and may not be relied on in any manner as legal,tax or investment advice, a recommendation, or as an offer to sell, a solicitation of an offer to purchase or a recommendation of any interest in any fund or security described herein. Any such offer or solicitation shall be made only pursuant to the final confidential offering documents which will contain information about each fund’s investment objectives and terms and conditions of an investment and may also describe certain risks and tax information related to an investment therein.

Past performance is not indicative of future results. All of the products described, including any products made available toclients of iCapital, are private placements that are sold only to qualified clients of iCapital through transactions that are exempt from registration under the Securities Act of 1933 pursuant to Rule 506(b) of Regulation D promulgated thereunder (“Private Placements”). An investment in any product issued pursuant to a Private Placement, such as the funds described, entails a high degree of risk and no assurance can be given that any alternative investment fund’s investment objectives will be achieved orthat investors will receive a return of their capital. Further, such investments are not subject to the same levels of regulatory scrutiny as publicly listed investments, and as a result, investors may have access to significantly less information than they can access with respect to publicly listed investments. Prospective investors should also note that investments in the products described involve long lock‐ups and do not provide investors with liquidity.

The information contained herein is subject to change and is also incomplete. This industry information and its importance is anopinion only and should not be relied upon as the only important information available. Information contained herein has beenobtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, orreferred to in any other publication, without express written permission. This material is confidential, and may not be shared with any party other than the intended recipient. This material is intended for institutional investors only.

Securities offered through iCapital Securities, LLC, a registered broker dealer, member of FINRA and SIPC and subsidiary of Institutional Capital Network, Inc. These registrations and memberships in no way imply that the SEC, FINRA or SIPC have endorsed the entities, products or services discussed herein.

Additional information is available upon request.

How Alternatives Provide Long-Term Diversification

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Transcript of How Alternatives Provide Long-Term Diversification