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Morgan Stanley | RESEARCH Exhibit 13: NORTH AMERICA INSIGHT ~~ Alts organic growth has outpaced traditionals by 7% over the past 4 years, and we expect average Alts growth over the next to years to be 10x that of Traditionals Organic Asset Growth: Traditionals vs. Alts mAvg. 2014 - 2017E Growth Rate 20% 15% 10% 79, 5% 5% i 3% 0 | oP 1% 598% oy 0% i_ t | =a -5% -10% -15% ~13% < N 2 a“ a i = => - = Ww Qa a ¢ ey = 7 gs > FEF Oo Source: Company Data, Morgan Stanley Research estimates Note: We look at fee paying AUM for the alts to calculate organic growth Despite the more favorable view on asset growth, the alterna- tive asset mangers continue to trade at a significant P/E discount to traditionals. The group currently trades at 10.8x MSe 2018 EPS, a 3.0x turn discount to traditionals peers. This however is on total earnings per share, and is inclusive of performance fees which inves- tors use a Lower multiple on given volatility. However, we believe a re-rating of the management fee portion of earnings ina SOTP valua- tion alone could help close the overall P/E gap vs. traditionals. Exhibit 14: Organic Growth for Traditional Asset Managers (2018e avg) vs. Current 2018e P/E Multiple 2018 P/E Ratio 25x ” 23x 4 21x 4 19x 17x 15x BEN @ 13x 11x 9x ; + 1 -15% -10% -5% 0% 5% 10% 2018 Organic Growth Rate (%) @ HLNE BLK @ * e@nz VRTS @ rs MAM WDR @ Source: Company Data, Morgan Stanley Research estimates = Avg. 2018 - 2019 Growth Rate 18% 11% soy 10% | -2% -2% op) < od) dD) fo 8 & § R 2 & xt x ag (e) < g Bg e < a Exhibit 15: Organic Growth for Traditional Asset Managers (9m17 Annualized) vs. Current 2018e P/E Multiple 2018 P/E Ratio 27x 5 25x 4 23x 4 21x 4 19x 4 17x BEN 1 15x ¢ + WDR i V4 . © AMG RT. Sen8 9x 5 OMAM | -15% -10% -5% 0% 5% 10% 15% 9m17 Organic Growth Rate (% annualized) ra HLNE BLK ¢ > = < Source: Company Data, Morgan Stanley Research estimates B) Longer-term capital that is committed for a defined period of time and pays fees with an average duration of 12 years in a typical drawdown fund. As you can see in the following exhibit based on full- year 2016 data, we see larger redemption rates from traditionalasset managers (those that disclose redemption rates) relative to alts. For traditionals we look at total redemption rates. For the alternatives we look at realizations/harvesting of investments along with redemptions of open ended products from fee paying AUM as it is more comparable to traditional asset managers. If we take 1 divided by the redemption rate, we can back into an average duration of assets under management. For traditionals below (both covered and non covered), this equates to 4.3 years duration and for the alterna- HOUSE_OVERSIGHT_025562