NFI-ODCE Index Overview March 2017 Aon Hewitt Retirement and - PowerPoint PPT Presentation

NFI-ODCE Index Overview March 2017 Aon Hewitt Retirement and Investment Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company. Nothing in this document should be construed as legal or investment advice. Please consult with your independent professional for any such advice. To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of Aon Hewitt.

NFI-ODCE Index NCREIF’s Open -End Diversified Core Equity Index (NFI-ODCE)  – is a value weighted, time weighted return index – comprises 24 open-end real estate funds – reflects Fund level performance, reported both gross and net of fees  Index Statistics: NFI-ODCE Index (as of 12/31/16) # Funds 24 GAV ($Bil.) $217.8 NAV ($Bil.) $174.3 # Assets 2,510 Average Asset Size ($Mil.) $86.8 Average Occupancy % 92.7% Leverage % 21.7% Cash 3.6% Source: NCREIF, 12/31/2016 Aon Hewitt | Retirement and Investment Proprietary & Confidential 2 Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

NFI-ODCE Index: Inclusion Criteria  Key requirements for inclusion: – The fund must market itself as a diversified core investment strategy, primarily investing in private equity real estate, as follows: • Real Estate : 80% of net assets invested in real estate  Investments : 80% of real estate net assets must be in private equity real estate properties  Domain : 95% of real estate net assets must be located in the U.S.  Property Types : 80% of real estate net assets must be invested in office, industrial, apartment, or retail properties  Life Cycle: 80% of real estate net assets must be invested in operating properties  Leverage : No more than 40% leverage  Diversification : No more than 65% invested in one property type or region Source: NCREIF, 12/31/2016 Aon Hewitt | Retirement and Investment Proprietary & Confidential 3 Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

NFI-ODCE Index: Current Fund Contributors 100% JPM-SPF Prudential-PRISA UBS -TPF MS-PPF Growth of Funds in Index RREEF-America Fund II Invesco-CRE ING CP-LPF 25 24 Principal-USPA Heitman -HART 20 AEW-CPF Bentall Kennedy-MEPT # of Funds ASB-AREF 15 14 American-CRF AFL-CIO-BIT Cornerstone-PF 10 La Salle Blackrock-GF 5 MetLife-CF TIAA-CREF Stockbridge-SMF 0 CBRE 2000 2004 2008 2012 2016 NYL - Madison CPF Source: NCREIF, 12/31/2016 Guggenheim-USPF L&B-CIP 0% % of Index Source: AHIC, 9/30/2016 Aon Hewitt | Retirement and Investment Proprietary & Confidential 4 Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

NFI-ODCE Index: Property Type and Geographic Distributions Other 3.3% Hotel 0.7% Industrial 14.7% Office 36.9% Retail 20.2% Apartments 24.3% Midwest 9.7% South 19.0% East 30.7% West 40.6% Source: NCREIF, 12/31/2016 Aon Hewitt | Retirement and Investment Proprietary & Confidential 5 Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

NFI-ODCE Funds: Use of Leverage 40%  Use of leverage in the Index 33.5% 35% tends to fluctuate with the 30% real estate cycle 25% 21.7% 20% 15%  Leverage rose significantly 10% leading into and during the 6.7% 5% 3.6% global financial crisis (GFC) 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016  Use of leverage since the GFC has been more moderate on average Max - ODCE Avg Min  Variance between funds is significant Source: NCREIF, AHIC, 12/31/2016; box chart 9/30/2016 Aon Hewitt | Retirement and Investment Proprietary & Confidential 6 Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

NFI-ODCE: Long Term Performance  Annual income returns have been relatively stable throughout the history  Appreciation exhibits considerably greater variance, following the general trend of the real estate market cycle 30% 19.3% 20% 10% 7.79% 0% 1978 1983 1988 1993 1998 2003 2008 2013 -10% -20% Appreciation Income Total Return -30% -35.7% -40% Since Inception (annualized averages) : Total Return: 8.06% -50% Income Return: 6.3%; Appreciation Return: 1.7% Source: NCREIF, AHIC, 12/31/2016 Aon Hewitt | Retirement and Investment Proprietary & Confidential 7 Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

NFI-ODCE Funds: Return Quartiles  Long term, fund returns across the NFI-ODCE universe tend to converge  Leverage explains a large percentage of the performance variance Max - ODCE Min Source: NCREIF, AHIC, 9/30/2016 Aon Hewitt | Retirement and Investment Proprietary & Confidential 8 Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.

NFI-ODCE Funds: Income Return Quartiles Max - ODCE Min Source: NCREIF, AHIC, 9/30/2016 Aon Hewitt | Retirement and Investment Proprietary & Confidential 9 Investment advice and consulting services provided by Aon Hewitt Investment Consulting, Inc., an Aon Company.