New Products

Adam Smith
July 17, 2012

How New Products Fit Into Our Business

New products provide an alternative means of packaging and delivering our
investment capabilities to investors in exchange for their capital and economics
Investment Expertise

Reasons for a New Product

New content, strategy or asset class

Raw Opportunities
Investment Returns

Capital
&
Fees

Traditional
Funds

Broader or different investor suitability

Special tax or structural considerations
Different liquidity needs

Syndications

New
Products

Regulatory drivers

Examples of New Products

Regulatory wrappers

Packaged Product

Joint venture or co-sponsored products

Retail or listed vehicles

Investor Universe

Structured products
Customized accounts
First time funds

The Opportunity is Large But Challenging

Where New Products Can Make A Difference

Current Alternative Penetration 6% of Global AUM

2010
AUM

% of
total

Hedge Funds
$1,581
Buyout
912
Real Estate
274
Higher
Venture
214
Fees
Distressed PE
146
Mezzanine
68
Other
316
Total Alternative AUM
$3,511
Traditional AUM
52,896
Total Global AUM
$56,407

2.8%
1.6%
0.5%
0.4%
0.3%
0.1%
0.6%
6.2%
93.8%
100.0%

Opportunity
Increase share in
existing strategies
Expand strategies

Mutual Funds, Long-Only

Equities & Credit

Lower
Fees

Source: Boston Consulting Group, Report: Global Asset Management 2011, Building on Success

94% = $53 Tn

Opportunity
Distribute
higher fee
alternatives
in broader
channel

Key Ingredients for a Successful Product Launch

Natural extension of our core investment capabilities and strengths that is mapped to meet
the particular investment needs of investors

Offers a differentiated investment opportunity or other features that are valued in the current
environment

Upfront collaboration across key functions to leverage internal expertise and unique
perspectives to execute on a product opportunity

Avoids cannibalization of higher value products and opportunities

Objective evaluation of marketability, scalability, profitability and key risks for the firm

Careful considerations of key marketing considerations throughout the development process

Clearly defined ownership of key work streams and organized plan for execution and product
launch

Not All New Products Are Created Equal

WOULD YOU RATHER WANT TO INVENT THESE

MULLET CAP

CANDWICH

WHITE CASTLE
CANDLE

BACON FLOSS

TOILET
MUG

FORKCHOPS

OR THIS?

Collaboration Is Core to the New Products Process

New Products Team

R&D
Connect the Dots
Terms and Structure from Product Perspective
Prioritize Initiatives/Drive Execution
Centralize Oversight of Terms and Negotiations

Sales and Distribution

Investment Teams

Identify Investment Opportunities and Themes

Integration of Product w/ Other Related
Product Offerings
Terms and Structure from Investment
Perspective
Marketing Support

Identify Investor Demand for New Products

Integration of Product w/ Firm-Wide Product
Offerings and Calendar
Terms and Structure from Investor Perspective
Develop Distribution and Roll-Out Strategy
Lead Marketing Process and Investor Relations

Support/Operations

Legal, Tax and Compliance Advice

Assist with Terms, Structure and Documentation

Integration with Infrastructure and Systems

Some Guidelines to Keep In Mind

Scott Nuttall, Suzanne Donohoe and Adam Smith to jointly review new initiatives
Things You Should Do:
Identify unique market and investment opportunities where we can benefit from new products
Involve sales/distribution force and new products teams early in the product development phase
Communicate early and often regarding your initiatives
Focus on products that have the potential for scale/profitability and capitalize on our strengths
Things You Should Avoid:
Going at it alone
Negotiate specific terms, structures, key features or pricing before vetting

Applies to investors, distributors and joint venture/operating partners

Current Key Areas of Focus

R&D

Adjacent or New Strategies

Focus on Accessing Retail Channel

Varying Levels of Involvement

Partner with U.S. Mutual Fund Complex

Energy Income Product

UCITS Compliant Vehicle for European

Retail Distribution

Real Estate Product

Liquid Co-Invest Syndication Vehicles

Repackaged Content

Indian Credit Products

Some JV Opportunities
Pricing, Terms and Integration

Highly Structured SMAs

Improved process for new products

Strategic Partnerships

Optimize value for the firm

Multi-Strategy Products

Protect pricing and terms

Assist in Developing Terms/Structure for

First Time Funds

Mitigate risk and help drive execution