Macro Hedge Funds View on Emerging Markets Mr

Macro. Hedge Funds’ View on Emerging Markets Mr. Hans-Jorg Baumann, Partner and Chairman, Step. Stone Hedge Funds & Private Debt Contact Asia/Eurasia: Mr. Shin Kim, Partner September 2017 | Confidential BEIJING HONG KONG LA JOLLA LONDON NEW YORK PERTH SAN FRANCISCO SÃO PAULO SEOUL SYDNEY TOKYO

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Agenda I. Introduction to Step. Stone Group II. Global Macro III. • Strategic Dilemma and Investor Options • Characteristics of Global Macro Managers • Global Macro Themes • Emerging Markets Introduction to Step. Stone Hedge Funds • Features of Global Macros • Flexibility of Hedge Funds • Emerging Markets Hedge Funds • Historical Performance • Challenges when investing in Hedge Funds • Summary of our Services IV. Conclusion V. Appendix

I. Introduction to Step. Stone Group

Private Markets Capabilities • • Real Estate Step. Stone is a global private markets firm currently overseeing $120 billion of private capital allocations, including $31 billion of assets under management on behalf of the world’s most sophisticated investors This enhanced platform is expected to result in a comprehensive suite of private markets solutions, offering customized portfolios through a combination of separately managed accounts, advisory relationships and specialized commingled funds across primary, secondary and co-investment strategies Infrastructure & Real Assets Private Equity Private Markets Solutions Hedge Funds Private Debt Confidential Source: Step. Stone, as of August 2017 | 4

Step. Stone at a Glance Step. Stone’s global private markets platform, dedicated research teams, proprietary databases, and management experience provide a distinct advantage in the private markets sector Diversified Platform Global Team Research-Focused Active Investor 14 offices 2, 200+ manager US$120 bn 2 meetings 1 including 200+ Investment US$31+ bn Private Equity Private Debt Real Estate Infrastructure & Real Assets 10 countries Committee approvals 1 AUM Hedge Funds Primaries Secondaries Co-Investments Direct Investment & Asset Advisory Portfolio & Risk Management SPITM database 140+ investment professionals 300+ employees 33, 000+ companies 25, 000 funds US$19+ bn annual commitments 3 9, 500 GPs Monitoring & Reporting As of August 2017. All dollars are US$ 1. Last twelve months through August 2017. 2. US$120 billion indicates total private markets allocations and includes over US$31 billion in assets under management. 3. Step. Stone deployed over US$19 billion in 2016. Confidential | 5

II. Global Macro

Strategic Dilemma and Investor Options Long-Term Low Interest Rate Environment • (10 Y US Gov Yield, 1985 to date) Traditional asset classes (equities and fixed income) face major challenges: 10. 0% • Long-term decline in interest rates 7. 5% • Elevated equity valuations 5. 0% • 2. 5% 0. 0% 1985 Private Markets can offer long term and cyclical solutions: • 1990 1995 2000 2005 2010 2015 Long Term Options: 2020 • Replace traditional allocations with private markets/ alternative investments • Diversify returns by seeking uncorrelated asset classes Elevated Equity valuations (S&P 500 Index, 1985 to date) 2, 000 • Cyclical Options: 1, 500 • Enhance returns by identifying mispriced assets • Diversify returns by periodically allocating to lower-risk assets 1, 000 500 0 1985 1990 1995 2000 2005 2010 2015 2020 Private Markets can offer long term and cyclical solutions to traditional investment dilemmas – low interest rates, high valuations and volatility Sources: Bloomberg as of July 2017 This slide is for illustrative purposes only. Confidential | 8

Characteristics of Global Macro Managers • The global macro strategy invests globally in different asset classes, e. g. , equities, currencies, interest rate, commodities • Global macro managers have a top-down view and use macroeconomic models to identify shifts in global demand supply and forecast associated price dislocations • Global macro investing is typically not rule based, managers take their discretionary investment decisions predominantly opportunistic and rely on their personal experience and economic understanding • The global macro investment strategy produces uncorrelated and steady positive returns, particularly also during bear-markets Confidential | 8

Global Macro Themes - Stronger, more uniform global growth: - Global growth and prospects have improved - Less divergence in growth: for example in the EU, growth has spread more evenly across regions - Risky assets rotate more globally Economic Policy Uncertainty - Policy shifts: - Gradual decline of Central Bank support, gradual monetary tightening: - The Fed, PBo. C, Bo. C all started tightening monetary policies - The ECB is thinking about, and preparing the markets for a decrease in QE - The Fed is ready to start Normalizing the Balance Sheet - Pivot towards Fiscal policy Central Bank’s balance sheets as % of GDP - Reflation: - Higher rates are expected, driven by monetary tightening - Inflation is going through a soft patch, but inflationary potential, improving labor markets, and QE unwinding strongly shift the risks to the upside - Geo-political risks: - North Korea, Qatar crisis, terrorism, … - Globalization headwinds: Trump has US’s trading power as both a tool, and objective ; Brexit Source: Bloomberg, Step. Stone Aug 2017 Confidential | 9

Emerging Markets

Emerging Markets Macro Themes (“challenges”) - EM Growth: - Economic and structural reforms are taking place - Infrastructure investments are boosting economic activity and future growth prospects - Profiting from DM reflation; Risks from DM de-globalization - Markets are assuming increased economical independence from DM, but links are stronger then ever (e. g. USD debt) - China deleveraging: - Aims at reducing leverage across the economy, not just the financial system! - Risk: China > other EM > DM - Commodities: GDP Growth 15 10 5 0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 -5 Advanced Economies GDP Emerging & Developing Asia GDP Emerging & Developing Europe GDP All GDPs PPP based, Current Dollars Source: Bloomberg, IMF - With no major improvement in commodity prices in sight, non-commodity exporters are favored - Currency fluctuations (esp. USD appreciation) pose a major risk to commodity exporters EM non-financial debt EM investing requires a much more granular and selective approach than before EM investments need to be hedged against global macro themes Total USD EUR Source: BIS Confidential | 11

Global interest in Megatrend themes (“opportunities”) Successful 19 year track record Megatrend Themes “Investing in Growth and Productivity” Focus on: • Asia/ Emerging Markets • Technology, Healthcare/Biotech • Global Macro / Commodity Sectors Confidential | 12

III. Introduction to Step. Stone Hedge Funds

Features of Global Macros Equity market Phase Bull market Clear trend Side market No clear trend Bear market Clear trend ~ Performance development Performance assessment Hedge Funds Performance development Performance assessment Confidential For illustrative purposes only. There can be no assurance that the investment will achieve its objectives, strategies or avoid substantial losses | 14

Flexibility of Hedge Funds Negative (Short) Market Exposure Positive (Long) β +1 Money market Hedge Fund 5 -10% Volatility Low <5% β -1 Generally more agility across all financial markets Bonds Greater diversity in financial instruments High >10% Equity β -1 Hedge funds cover the whole spectrum of market exposure and volatility matrix β +1 Hedge funds are more reactive to price movements across financial markets worldwide, therefore often able to capitalize on opportunities efficiently as well as help preserve capital Traditional „Long only“ Universe β -1: short only β +1: long only For illustrative purposes only Confidential | 15

Different types of single Long/Short Equity Funds Short Bias Market Neutral Source: Bloomberg, Step. Stone 2006 For illustrative purposes only Long Bias Opportunistic Confidential | 16

Emerging Markets Hedge Fund Return Russia/CIS & CEE Latin America. Asia ex. Japan China Market Return HFRI Indices L/S Equity Cluster Macro Cluster Confidential Source: Bloomberg, Step. Stone July 2017 | 17

Emerging Markets Shine in 2017 YTD + 8% Confidential Source: Bloomberg, September 2017 | 18

Historical Performance 10 y period (1) 180 160 +52% China 140 MSCI AC World Daily TR Net USD 120 HFRI Fund Weighted Composite Index HFRI Emerging Markets China Index HFRI Emerging Markets: Asia ex-Japan Index 100 HFRI Emerging Markets: Russia/Eastern Europe Index HFRI Emerging Markets: Latin America Index 80 - 35% Russia /Eastern EM 60 40 20 0 12/2007 12/2008 12/2009 Source: Bloomberg, Step. Stone April 2017 12/2010 12/2011 12/2012 12/2013 12/2014 12/2015 12/2016 Confidential | 19

Historical Performance 10 y period (2) 60 60 40 40 20 20 0 0 HFRI Emerging Markets: Russia/Eastern Europe Index MSCI Daily TR Gross Emerging Markets Russia local 9 00 00 /2 12 01 /2 01 12 /2 00 12 /2 12 01 /2 01 12 /2 9 01 12 /2 00 /2 12 01 /2 01 12 /2 00 12 /2 12 12 HFRI Emerging Markets: Asia ex-Japan Index 5 60 01 60 3 80 /2 80 01 80 12 80 1 100 /2 100 01 100 12 100 /2 120 7 120 5 120 3 120 1 140 9 140 7 140 5 140 3 160 1 160 7 160 5 160 3 180 1 180 9 180 7 180 HFRI Emerging Markets China Index Latin America 200 12 Russia/CIS 200 /2 Asia ex-Japan 200 12 China 200 HFRI Emerging Markets: Latin America Index MSCI Daily TR Gross Emerging Markets Latin America (Free) local HFRI China HFRI Asia ex-Japan HFRI Russia/CIS & CEE HFRI Latin America 10 y Return (p. a. ) 4. 0% 2. 8% -4. 5% 0. 1% 12 m Return 14. 2% 17. 4% 12. 5% 13. 6% 0. 6 0. 9 0. 6 2. 7% 1. 3% -5. 9% -1. 3% 0. 7 0. 9 0. 8 0. 7 Equity Beta to MSCI World Alpha over MSCI World Correlation to MSCI World Confidential Source: Bloomberg, Step. Stone Aug 2016 | 20

Challenges when investing in Hedge Funds 15% Large Strategy Dispersion Limited Return Persistence (5%) 2008 2009 2010 2011 2012 2013 2014 2015 2016 HFRI MRO Syst. 18. 06 HFRI RV 25. 75 HFRI ED 11. 82 HFRI RV 0. 09 HFRI RV 10. 61 HFRI EH 14. 3 HFRI MRO Syst. 10. 6 HFRI EMN 4. 23 HFRI ED 10. 87 HFRI EMN (5. 92) HFRI ED 24. 95 HFRI RV 11. 54 HFRI EMN (2. 08) HFRI ED 9. 03 HFRI ED 12. 54 HFRI RV 3. 96 HFRI MRO Disc. 0. 05 HFRI RV 7. 64 HFRI MRO Disc. (7. 34) HFRI EH 24. 58 HFRI EH 10. 48 HFRI ED (3. 33) HFRI EH 7. 42 HFRI RV 7. 07 HFRI EMN 3. 09 HFRI RV (0. 23) HFRI EH 5. 41 HFRI RV (18. 04) HFRI MRO Disc. 11. 76 HFRI MRO Syst. 9. 75 HFRI MRO Syst. (3. 49) HFRI MRO Disc. 3. 7 HFRI EMN 6. 47 HFRI EH 1. 84 HFRI EH (0. 99) HFRI MRO Disc. 2. 88 HFRI ED (21. 82) HFRI EMN 1. 39 HFRI MRO Disc. 6. 03 HFRI MRO Disc. (5. 98) HFRI EMN 2. 96 HFRI MRO Disc. 1. 84 HFRI ED 0. 98 HFRI MRO Syst. (2. 22) HFRI EMN 2. 23 HFRI EH (26. 65) HFRI MRO Syst. (1. 72) HFRI EMN 2. 85 HFRI EH (8. 42) HFRI MRO Syst. (2. 51) HFRI MRO Syst. (0. 88) HFRI MRO Disc. 0. 75 HFRI ED (3. 65) HFRI MRO Syst. (1. 43) 11 20 12 20 13 20 14 20 15 Large Turnover 20 20 10 (25%) 1, 400 1, 200 1, 000 Liquidity Restrictions Large Fund Dispersion 800 600 400 2008 2009 2010 2011 2012 Launches “Retail characteristics” Index Value 600 2014 2015 2016 “Institutional characteristics” Index Value 600 Investable Universe (“HFRX”) 2013 Closures Non-Investable Universe (“HFRI”) 500 Requires Permanent Re-Underwriting 400 300 200 100 0 0 Dec 94 Dec 96 Dec- Dec 98 00 MSCI World Dec 02 Dec- Dec 04 06 HFRX Global Dec 08 Dec- Dec 10 12 14 16 US Balanced (40/60) Dec 94 Dec 96 Dec 98 MSCI World Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 HFRI Fund Weighted Source: Step. Stone, Bloomberg as of December 2016 This slide is for illustrative purposes only. The referenced indices are shown for general market comparisons and are not meant to represent any particular investment. An investor cannot directly invest in an index. Moreover, indices do not reflect commissions or fees that may be charged to an investment product based on the index, which may materially affect the performance data presented. Dec 10 Dec 12 Dec 14 Dec 16 US Balanced (40/60) Confidential | 21

Summary of our Services Clients ask for a full suite of customizable hedge fund investment services specifically tailored to help address our clients’ specific investment goals. Solutions / Products • • Portfolio Construction & Management Outsourced CIO Management of Troubled Positions Implementation (Separate Accounts, Legal Support) Research & Advisory • • Strategic Advice Manager Due Diligence Industry & Strategy Research Brick & Click Portfolios Monitoring & Reporting • Investment Monitoring • Performance & Analytics • Fund Administration Access to Proprietary Research & Intelligence Tools & Analytics AIDATM Database AIDATM Workflow Market/Peer Maps Fingerprints Exposure Control Reports & Materials Fund Summary Source: Step. Stone This slide is for illustrative purposes only. Investment Memo Operational DD Portfolio Report Monitoring Reports Confidential | 22

IV. Conclusion

Conclusion Macro Investments √ Reflation √ Proper understanding of Investment Themes and Investment Rational √ Policy shift of major CB’s √ Rotation on Themes √ Rotation of global risky assets √ Quality Insurance by Selection of Asset managers √ Asset Class Dispersion to increase √ Best in class implementation and execution of strategies Contact details: Shin Kim skim@stepstoneglobal. com Hans-Jörg Baumann hjbaumann@stepstoneglobal. com Confidential | 24

V. Appendix

About us Step. Stone’s hedge fund program leverages Step. Stone’s global platform to help enhance the client’s overall asset allocation through liquid alternatives US$5. 4+ bn in assets across all Experienced Team Experienced team of 20 investment professionals with significant senior leadership and over 180 years of combined investment experience 20 total investment professionals 5 Partners liquid Hedge Fund strategies and Fixed Income/Credit Significant Expertise Multiple Tailored Mandates Offering across entire investment Value Source: Step. Stone as of May 2017. More than $5. 4 bn deployed over 70+ Managers, most of them in bespoke solutions and with significant fee discounts based on our volume (relative value) solutions Customized Offerings Flexible and adaptive solutions across all hedge fund strategies and vast experience in implementation Platform Size Chain 19 years of hedge fund experience US$15+ bn in total investments 600+ single investments Stable team with 18 years of experience investing in hedge funds, with proven ability to preserve capital through multiple economic cycles Confidential | 26

Our Coverage of the Hedge Fund Universe Space ~ 400 EM/Frontier Funds Universe ~ 50 EM/Frontier Funds ~ 5, 000 Funds ~ 1, 000 Funds Pipeline 12 – 15 Funds Investable 65 Funds Invested Indicative Strategy Breakdown: • 35% L/S Equity • 25% Event Driven • 20% Rel. Value • 10% Global Macro • 10% CTA 60 Funds Turnover per year Responsibility Meetings / Calls Source: Step. Stone as of December 2016 Note: This slide is for illustrative purposes only. Space Universe Pipeline Investable Invested In: ~ 500 Out: n/a In: ~ 250 Out: ~ 100 In: 12 - 15 In: ~ 10 Out: ~ 10 Hedge Fund Databases 2 Analysts 3 Senior Analysts Advisory Committee 1 Advisory Committee 2 Desk Research > 100 Calls: 100 - 200 Meetings: 50 – 100 Calls: 200 – 300 Visits: min. 1 per year Calls: weekly - Confidential | 27

Hedge Funds industry The industry has experienced large growth since 2000. This has led to a very big space with more than 10, 000 funds and a variety of strategies. Turnover (open/closures of Single Hedge Funds (SHFs)) is significant and requires continuous re-underwriting of an investment by the selector. Very large space with a lot of turnover: Strong industry growth over the last 15 years: • • SHF assets quintupled since 2000 Assets today stand at c. $2. 4 trn (doublecounting of Fo. HF assets and inclusion of ’ 40 Act funds leads to figures >$3. 0 trn) Steady inflows since Global Financial Crisis (GFC) into all strategies Significant outflows from Fo. HFs Assets under Management / Flows #Funds / Open and Closures • far more than 10, 000 active funds – this number also quintupled since 2000 • SHF launches average around 900 per year since the GFC while closures have been around 800 per year • Fo. HF launches decreased steadily since the GFC from c. 400 to nearly zero last year Hedge Funds US and L/S Equity are still the main focuses: • 2/3 of funds are US-centric • 35% of funds are labeled L/S Equity • Global Macro used to be the largest strategy in the 90’s (close to 40% of all funds) but now ranks only 3 rd with 20% behind L/S Equity and RV (30%). Source: Step. Stone, Bloomberg, Preqin as of April 2017 *Management fee/Performance fee Geographical, strategy, and size breakdown Fees (SHFs and Fo. HFs) Pressure on fee has led to more attractive pricing: • Average management fee of a SHF is today around 1. 5% p. a. • A 20% performance is generally still the norm but due to Alt. Beta products charging 0% that average will come in. • Fo. HF fees went from 1. 4/10 to 0. 8/4* Confidential | 28

What are Hedge Funds? Strategies that still require skills from Hedge Fund or other Active Managers and where we draw the line Alt. Betas Alpha Arbitrage opportunities Stock-picking Credit-picking Macro divergence Distressed investing Market-making Macro convergence Carry Value Momentum Source: Step. Stone This slide is for illustrative purposes only. 1 target can not be achieved consistently Equity ILS / Collateralized Re Specific Sectoral Risk EM & Frontier Equity Risk CDO ABL Syndicated Loans MBS Duration Risk (Term) Sov Bonds (Credit) Corp Bonds (Credit) Real Estate “Trading” strategies Disc. Market timing Other Traditional luck-only 1 Developed Equity Risk Commodities long-only Confidential | 29

Demystification of Alpha over time What once was all Alpha, has been demystified over time and will continue to be demystified. However, while the remaining Alpha has shrunk the total harvestable (accessible) return has relatively increased. Total $ Returns today not accessible Return Sources Alpha Equity Risk Premium ? Alt. Betas (market-neutral) Other Traditional Risk Premia Equity Risk Premium Alpha not accessible Return Sources Time Source: Step. Stone This slide is for illustrative purposes only. Confidential | 30

Sample of current EM/Frontier Exposures (1) • South America: − Brazil: Receiving interest rates, long corporate credit and Brazil CDS − Argentina: Long sovereigns and corporate bonds in USD and or long ARG Peso − Venezuela: Long sovereign bonds • Central America: − Mexico: Long sovereign bonds and tactical longs in Mexican Peso • Middle East and Africa: − Egypt: Long Egyptian pound and long USD / local Egyptian pound denominated bonds − Turkey: Tactical longs in FX and local rates − Short Equities in Qatar and Long Saudi Arabia Confidential | 31

Sample of current EM/Frontier Exposures (2) • Eastern Europe and Russia: − Greece: Move from long government bonds into long equities, in particular financials and real estate − Russia: Long sovereign and corporate credit exposure in USD − Czech Republic: Short Interest rates and long Czech Krona − Long Russian Banks • Asia: − Long Chinese Renmimbi vs. USD − Closing the short HKD vs. USD position (is now close to the upper band of 7. 85), move was mostly due to interest rate differentials − Many managers have taken profits on long India positions − Interest rate receiving positions in countries like Korea and Thailand − Short bias in Asian currencies like Taiwan and Korea − Long Chinese Tech names such as Alibaba, Tencent, Mo. − Long Chinese Financials as NPLs in China are declining. − Long Equities in Vietnam (TMT), India (Financials) and Pakistan (Consumer). Short Singapore. Confidential | 32

Financial System as part of the Economic System Financial system (institutions and markets related to the circulation of money and credit): 1) Central bank; 2) Monetary financial institutions (normal banks); 3) Non monetary financial intermediaries (investment and pension funds, insurance companies, rating agencies, investment banks…) 4) Money markets (Short-term financial assets) 5) Financial markets (bonds, shares, derivatives, forex, commodities) Source: Step. Stone Confidential | 33

Risks and Other Considerations Risks Associated with Investments. Identifying attractive investment opportunities and the right underlying fund managers is difficult and involves a high degree of uncertainty. There is no assurance that the investments will be profitable and there is a substantial risk that losses and expenses will exceed income and gains. Restrictions on Transfer and Withdrawal; Illiquidity of Interests; Interests Not Registered. The investment is highly illiquid and subject to transfer restrictions and should only be acquired by an investor able to commit its funds for a significant period of time and to bear the risk inherent in such investment, with no certainty of return. Interests in the investment have not been and will not be registered under the laws of any jurisdiction. Investment has not been recommended by any securities commission or regulatory authority. Furthermore, the aforementioned authorities have not confirmed the accuracy or determined the adequacy of this document. Limited Diversification of Investments. The investment opportunity does not have fixed guidelines for diversification and may make a limited number of investments. Reliance on Third Parties. Step. Stone will require, and rely upon, the services of a variety of third parties, including but not limited to attorneys, accountants, brokers, custodians, consultants and other agents and failure by any of these third parties to perform their duties could have a material adverse effect on the investment. Reliance on Managers. The investment will be highly dependent on the capabilities of the managers. Risk Associated with Portfolio Companies. The environment in which the investors directly or indirectly invest will sometimes involve a high degree of business and financial risk. Step. Stone generally will not seek control over the management of the portfolio companies in which investments are made, and the success of each investment generally will depend on the ability and success of the management of the portfolio company. Taxation. An investment involves numerous tax risks. Please consult with your independent tax advisor. Conflicts of Interest. Conflicts of interest may arise between Step. Stone and investors. Certain potential conflicts of interest are described below; however, they are by no means exhaustive. There can be no assurance that any particular conflict of interest will be resolved in favor of an investor. Allocation of Investment Opportunities. Step. Stone currently makes investments, and in the future will make investments, for separate accounts having overlapping investment objectives. In making investments for separate accounts, these accounts may be in competition for investment opportunities. Existing Relationships. Step. Stone and its principals have long-term relationships with many private equity managers. Step. Stone clients may seek to invest in the pooled investment vehicles and/or the portfolio companies managed by those managers. Carried Interest. The entitlement of Step. Stone and the underlying portfolio fund managers to carried interest over and above their basic management fees could create an incentive for Step. Stone and the portfolio fund managers to make investments that are riskier or more speculative than would otherwise be the case. Other Activities. Employees of Step. Stone are not required to devote all of their time to the investment and may spend a substantial portion of their time on matters other than the investment. Material, Non-Public Information. From time to time, Step. Stone may come into possession of material, non-public information that would limit their ability to buy and sell investments. Confidential | 34