NEVADA SYSTEM OF HIGHER EDUCATION...NEVADA SYSTEM OF HIGHER EDUCATION DISCUSSION MATERIALS SEPTEMBER 27, 2019 Wendy Walker, CFA Ijeh Ogbechie Lindsay Van Voorhis, CFA David Breiner

NEVADA SYSTEM OF HIGHER EDUCATIONDISCUSSION MATERIALS

SEPTEMBER 27, 2019

(INVESTMENT COMMITTEE 09/27/19) Ref. INV-4, Page 1 of 67


SEPTEMBER 27, 2019



SEPTEMBER 27, 2019

Wendy Walker, CFAIjeh OgbechieLindsay Van Voorhis, CFADavid BreinerKris LaczkovicsAlex Arnst


Copyright © 2019 by Cambridge Associates LLC. All rights reserved.

The information and material published in this report is nontransferable. Therefore, recipients may not disclose any information or material derived from this report to third parties or use information or material from this report without prior written authorization unless such use is in accordance with an agreement with Cambridge Associates (“CA”). Nothing contained in this document should be construed as the provision of tax, accounting, or legal advice. Past performance is not indicative of future performance. Broad-based securities indexes are unmanaged and are not subject to fees and expenses typically associated with managed accounts or investment funds. Investments cannot be made directly in an index. Any information provided in this document is as of the date of the document, and CA is under no obligation to update the information or communicate that any updates have been made.

The information contained herein represents CA's estimates of investment performance, portfolio positioning and manager information including but not limited to fees, liquidity, attribution and strategy and are prepared using information available at the time of production. Though CA makes reasonable efforts to discover inaccuracies in the data used in this report, CA cannot guarantee the accuracy and is ultimately not liable for inaccurate information provided by external sources. CA is under no obligation to update the information or communicate that any updates have been made. Clients should compare the investment values with the statements sent directly from their custodians, administrators or investment managers, and similarly, are ultimately responsible for ensuring that manager information and details are correct. Historical results can and likely will adjust over time as updated information is received. Estimated, preliminary, and/or proxy information may be displayed and can change with finalized information over time, and CA disclaims any obligation to update a previously provided report when such changes occur. Some of the data contained herein or on which the research is based is current public information that CA considers reliable, but CA does not represent it as accurate or complete, and it should not be relied on as such. This report is not intended as a Book of Record nor is it intended for valuation, reconciliation, accounting, auditing, or staff compensation purposes, and CA assumes no responsibility if the report is used in any of these ways.

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Table of Contents

5

1. Endowment OCIO Update 1

A. Performance 5

B. Asset Allocation and Guideline Compliance 15

C. Risk/Return Characteristics – C|A Portfolio 20

D. C|A Diversifiers and Private Investments 25

E. Legacy Assets 29

2. Annual Spending Policy Review 38

3. ESG Pilot Projects 44

A. Appendix A: “Excerpts from “Higher Education Investing in Clean Energy” 51

from the Intentional Endowments Network

B. Appendix B: Cambridge Associates ESG & Responsible Investment Policy 54

4. Responses to IC Questions 57


1. ENDOWMENT OCIO UPDATE

| 1


A. Performance:

In the 2-year OCIO track record from April 1, 2017 (start of formal track record) through March 31, 2019(lagged to include most recent Private Investment results), the NSHE Endowment has returned 6.8%annualized, 20 basis points above the Policy Benchmark and 50 basis points above peers (top 33% of a peergroup of 120 endowments with $100-$300 million in assets). C|A Managed Assets returned 6.1% net of C|A fees over this 2-year track record, 0.5% behind the benchmark with

0.5% lower volatility, resulting roughly similar risk-adjusted returns. This ranks in the third quartile (53rdpercentile) of the peer group.

The Legacy Assets return of 14.6% has been highly beneficial to the Endowment on both an absolute and relativebasis (outperforming its benchmark by 870 basis points).

For the fiscal year ended June 30, 2019, the NSHE Endowment returned a preliminary 4.8%, outperformingthe Policy Benchmark by 20 bps. (Private Investments are as of 3/31/2019, due to the manager reporting lag.)The breakdown by sleeve is as follows: +5.0% - Cambridge Associates (outperforming benchmark by 10 bps) +3.1% - Russell Investments (lagging benchmark by 300 bps) +8.9% - Legacy Assets (outperforming benchmark by 1040 bps)

Per the Endowment’s Investment Policy Statement, it is important to monitor returns on an ongoing basis andevaluate portfolio returns and risk over time periods that are suitably long for the long-term investmentstrategy of this perpetual pool. Over the trailing 10 years, the NSHE Endowment has delivered risk-adjustedreturns ahead of the Policy Benchmark and similarly sized peers.

Endowment OCIO Update – Executive Summary

| 2


Endowment OCIO Update – Executive Summary (cont’d)

At the Committee’s request, an accounting of manager/OCIO fees paid in CY2018 from the Endowment is asfollows:

B. Asset Allocation and Guideline Compliance:

The Total Endowment (encompassing C|A, Russell and Legacy Assets) is in compliance with all investmentguidelines and restrictions.

Within the C|A Portfolio, we continue to rebalance to stay fairly close to long-term policy targets, withmodest tilts toward asset classes for which current valuations suggest more robust returns looking ahead(e.g., emerging markets and Real Assets, including MLPs). We also remain keenly focused on liquidity totake advantage of opportunities as market conditions unfold.

($ ,000) (%) ($ ,000) (%)C|A OCIO fee 346$ 0.30% --- ---Custody fees 18$ 0.015% 5$ 0.015%Investment manager fees:

Annual management fees 978$ 0.86% 372$ 1.24%Incentive fees 113$ 0.10% 117$ 0.39%

C|A Managed Assets Legacy Assets

| 3


Endowment OCIO Update – Executive Summary (cont’d)

C. Risk/Return Characteristics – C|A Portfolio:

While the C|A Policy Benchmark has a 5.9% expected real (inflation-adjusted) compound return over thelong term (i.e. 25+ years), there is a wide range of potential outcomes, particularly over shorter timeperiods. In particular, current valuations look likely to challenge intermediate-term returns.

Relative to a 70/30 Simple Index, the C|A Policy Targets approved by the Investment Committee inDecember 2016 are expected to show slightly lower volatility and sensitivity to equity beta. Although theC|A Policy Benchmark would be expected to experience meaningful short-term declines in stressenvironments, it is expected to materially reduce the long-term risk of failing to keep pace with theEndowment payout while maintaining purchasing power in inflation-adjusted terms.

D. C|A Diversifiers and Private Investments: The C|A hedge fund portfolio is well diversified across 12managers. We have also committed $24.9 million to 21 Private Investments funds as we build toward thelong-term policy targets approved by the Investment Committee in December 2016.

E. Legacy Assets: NSHE’s Legacy Private Investments program returned 16.5% over the trailing year through3/31/19 and has outperformed public markets by 590 bps since inception. The Legacy Private NaturalResources funds have been particularly strong, with a 25.3% return since inception (16.3% ahead of publicnatural resource equities and 11.6% ahead of the C|A Private Natural Resources benchmark).

| 4


1. ENDOWMENT OCIO UPDATEA. PERFORMANCE

| 5


0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2 4 6 8 10 12 14 16 18

Aver

age

Annu

al C

ompo

und

Retu

rn (%

)

Annualized Standard Deviation (%)

Total Endow mentPolicy Benchmark

C|A Managed Assets Net of Fees

C|A Normalized Benchmark

Russell ManagedAssets

Russell Normalized Benchmark

C|A Endow ments $100mm-$300mm

Legacy Assets

LegacyBenchmark

70% ACWI (Net)/30% BC Agg

Legacy Assets have been highly beneficial

Average Annual AnnualizedCompound Standard SharpeReturn (%) Deviation (%) Ratio¹

6.8 8.6 0.616.6 10.6 0.476.1 10.4 0.436.6 10.9 0.465.0 8.5 0.396.7 8.8 0.5814.6 3.5 3.765.9 15.6 0.276.3 9.4 0.507.0 10.4 0.52

Total EndowmentPolicy BenchmarkTotal C|A Managed Assets Net of FeesC|A Normalized BenchmarkRussell Managed AssetsRussell Normalized BenchmarkLegacy AssetsLegacy BenchmarkC|A Endowments $100mm-$300m2

70% MSCI ACWI (Net)/30% Barclays Agg

1. Sharpe Ratio: To Calculate this number, subtract the average T-Bill return (risk free rate) from the manager’s average return then divide by the manager’s standard deviation. The amount of return over the risk free rate that can be expected for each unit of risk accepted.2. From 4/1/2017 to 3/31/2019, C|A Endowments $100mm-$300mm includes 120 institutions over time. Data is as of 3/31/2019.Note: Based on quarterly data to incorporate peer data and Private Investments. With only 8 data points, standard deviation and Sharpe metrics have statistical limitations.

NSHE Endowment Has Outperformed Policy Benchmark and Peers Over OCIO Track Record

Trailing 2 Years • April 01, 2017 (start of formal track record) – March 31, 2019 (lagged to include most recent Private Investment results)

C|A Managed Assets have had slightly lower return *and* lower volatility than benchmark, resulting in roughly similar risk-adjusted returns

| 6


R eturns (%)IN C EP T ION

D A T E

M A R KET VA LUE A S OF

JUN 2019

C A LEN D A RYEA R

T O D A T EF ISC A L YEA R

T O D A T E

A N N UA LIZ EDSIN C E

M A R 2017

A N N UA LIZ EDT R A ILIN G10 YEA R S


IN C EP T ION

Tota l Endowment* 6/30/1984 $261,600,982 10.5 4.8 7.0 8.2 9.7

Pol icy Benchmark² 6/30/1984 12.0 4.6 6.9 8.5 9.6

Total C|A Managed Assets Net of Fees* 11/30/2016 $116,822,007 12.6 5.0 6.7 ‐‐‐ 8.5

C|A Normalized Benchmark² 11/30/2016 12.5 4.9 7.1 ‐‐‐ ‐‐‐

Value Add 0.1 0.1 ‐0.5 ‐‐‐ ‐‐‐

Total Russell Managed Assets 12/31/2016 $110,265,319 10.0 3.1 5.3 ‐‐‐ 6.5

Russel l Normal ized Benchmark² 12/31/2016 11.4 6.1 7.2 ‐‐‐ 8.1

Value Add ‐1.3 ‐3.0 ‐1.9 ‐‐‐ ‐1.6

Total Legacy Assets* 11/15/1998 $34,513,643 5.3 8.9 12.9 12.7 11.6

Legacy Benchmark² 11/30/1998 12.5 ‐1.5 5.2 ‐‐‐ ‐‐‐

Value Add ‐7.2 10.4 7.6 ‐‐‐ ‐‐‐

Other Legacy Assets* 11/30/2012 $1,552,204 0.0 ‐3.1 ‐0.5 ‐‐‐ 3.7

Legacy Private Growth*¹ 11/15/1998 $24,972,470 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐

Legacy Private Natural Resources*¹ 11/15/1998 $7,988,969 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐

6/30/2019 Performance Is Still Preliminary Due to Private Investments Reporting Lag

* Rows marked with “*” contain preliminary data.Note: Private Investments performance is as of 3/31/2019, updated with cashflows through 6/30/2019. | 7


Fiscal Year Ended 6/30/19: Which Assets Drove Performance? (Preliminary – Private Investments as of 3/31/19)

1 (Asset Class Return) x (Weight in Portfolio) = Weighted Contribution to Total Assets Performance. Totals may not sum due to rounding.2. Analysis of trailing 12 months as of 6/30/19. Private investments are reported on a quarter-lagged basis and have a 0% return subsequent to 3/31/19.

Absolute Performanceby Asset Class (%)

Weighted Contribution to Total Assets Performance (%) ¹

Performance Relativeto Benchmark (%)

4.8

8.9

3.1

5.0

5.5

2.4

4.5

5.3

0.0

4.7

11.6

Total Endowment

Legacy Assets

Total Russell Managed Assets

Total C|A Managed Assets Netof Fees

C|A Managed Fixed Income &Cash

C|A Managed Real Assets

C|A Managed Diversifiers

C|A Managed Emerging Markets

C|A Managed Int'l Developed

C|A Managed Global Equity

C|A Managed U.S. Equity

4.8

1.2

1.3

2.2

0.3

0.1

0.4

0.2

0.0

0.2

1.1

Total Endowment

Total Legacy Assets

Total Russell Managed Assets

Total C|A Managed Assets Netof Fees

C|A Managed Fixed Income &Cash



C|A Managed EmergingMarkets

C|A Managed Int'l Developed



0.2

10.4

-3.0

0.1

-2.3

4.5

1.1

4.1

-1.1

-1.1

2.5

Total Endowment

Legacy Assets

Total Russell ManagedAssets

Total C|A Managed AssetsNet of Fees

C|A Managed Fixed Income& Cash



C|A Managed EmergingMarkets

C|A Managed Int'lDeveloped



2

2 2 2

2 2

| 8


C|A Managed Assets – Returns by Asset Class As of June 30, 2019 (preliminary – Private Investments as of 3/31/19)

Rows market with “*” contain preliminary data.Note: Private Investments performance is as of 3/31/2019, updated with cashflows through 6/30/2019

R eturns (%)IN C EP T ION

D A T EM A R KET VA LUE A S OF

JUN 2019

C A LEN D A RYEA R

T O D A T EF ISC A L YEA R

T O D A T E


M A R 2017

A N N UA LIZ EDT R A ILIN G10 YEA R S


IN C EP T ION

Total Managed Assets Net of C|A Fees* 11/30/2016 $116,822,007 12.6 5.0 6.7 ‐‐‐ 8.5C|A Normalized Benchmark2 11/30/2016 12.5 4.9 7.1 ‐‐‐ ‐‐‐Value Add 0.1 0.1 ‐0.5 ‐‐‐ ‐‐‐Public & Private Growth* 6/30/1984 $70,910,312 16.1 5.9 9.2 10.8 10.2Public Growth 6/30/1984 $67,671,688 16.3 5.7 9.1 10.8 10.2MSCI ACWI Index (N)3 6/30/1984 16.2 5.7 9.3 10.1 9.6Va lue Add 0.1 ‐0.0 ‐0.2 0.6 0.6U.S. Equity 6/30/1984 $25,484,445 20.3 11.6 13.3 15.5 11.4Wilshire 5000 Tota l Market Index 6/30/1984 18.7 9.1 11.9 14.7 11.3Value Add 1.7 2.5 1.4 0.8 0.2Global Equity 1/03/2017 $11,270,603 14.6 4.7 7.9 ‐‐‐ 9.6MSCI ACWI Index (N) 1/03/2017 16.2 5.7 9.3 ‐‐‐ 11.1Value Add ‐1.6 ‐1.1 ‐1.4 ‐‐‐ ‐1.5International Developed 12/31/1985 $19,739,732 13.2 ‐0.0 5.8 6.5 7.8MSCI EAFE Index (N) 12/31/1985 14.0 1.1 6.2 6.9 7.3Va lue Add ‐0.8 ‐1.1 ‐0.5 ‐0.4 0.5Emerging Markets 1/31/1995 $11,176,908 15.2 5.3 7.4 4.0 5.4MSCI Emerging Markets Index (N)4 1/31/1995 10.6 1.2 7.0 5.8 6.1Va lue Add 4.6 4.1 0.4 ‐1.8 ‐0.7Private Growth*1 11/17/2017 $3,238,623 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Diversifiers* 11/30/1999 $23,708,855 8.0 4.5 5.0 6.3 7.5Divers i fiers Benchmark5 11/30/1999 5.5 3.4 4.0 3.4 3.8Va lue Add 2.5 1.1 1.0 2.9 3.8Marketable Alternatives 2/28/2017 $21,218,413 8.7 4.7 4.9 ‐‐‐ 4.60.3 beta ‐adjusted MSCI ACWI (N) 2/28/2017 5.7 3.6 4.1 ‐‐‐ 4.1Value Add 3.0 1.0 0.8 ‐‐‐ 0.5Private Diversifiers*1 5/15/2017 $2,490,443 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Real Assets* 10/01/1987 $9,588,355 13.2 2.4 2.4 2.3 3.4Real Assets Benchmark2 9/30/1987 13.3 ‐2.1 2.6 6.5 9.0Va lue Add ‐0.1 4.5 ‐0.2 ‐4.2 ‐5.5Private Real Assets*1 7/01/2000 $1,812,055 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Public Real Assets 10/01/1987 $7,776,300 15.2 2.2 2.1 2.2 4.1Publ i c Real Assets Benchmark2 9/30/1987 15.1 ‐0.2 2.8 1.8 5.5Va lue Add 0.1 2.4 ‐0.7 0.4 ‐1.4Fixed Income and Cash 6/30/1984 $12,614,485 3.6 5.5 2.4 4.0 7.3BBG Barc Aggregate Bond Index 6/30/1984 6.1 7.9 3.9 3.9 7.2Va lue Add ‐2.5 ‐2.3 ‐1.5 0.1 0.1Fixed Income 6/30/1984 $10,907,777 4.5 6.9 3.0 4.3 7.7Fixed Income Benchmark2 6/30/1984 6.1 7.9 3.9 3.9 7.2Va lue Add ‐1.6 ‐1.0 ‐0.9 0.4 0.5Cash and Equivalents 7/01/1987 $1,706,708 0.5 1.3 0.9 0.9 3.3Audit Holdbacks 3/31/2017 $28,578 ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐

| 9


Monitor Performance Regularly, while Evaluating over Relevant Time Periods

Per Investment Policy Statement, several benchmarks assess different measures of performance and risk over varying time periods relevant to the long-term investment strategy of this perpetual pool

Benchmark Description Question Answered ExpectationEvaluationPeriod

Policy Benchmark

Weighted blend of benchmarks for each role in portfolio category

Have manager selection and tactical asset allocation been additive relative to the strategic target policy?

Outperformwith comparable volatility

Rolling 3-year periods

Simple Risk-Equivalent Benchmark

70% MSCI ACWI Index (net) / 30% Bloomberg Barclays Aggregate

Weighted blend of global equities (MSCIAll Country World Index) and U.S. fixed income (Bloomberg Barclays Aggregate Bond Index)

Have asset allocation and implementation been additive relative to simple, passive alternatives; has risk profile been consistent with expectations?

Outperform with equal or less volatility

Rolling 5- to 10-year periods (full equity market cycle)

Long-Term Objective

All-in Distribution Policy (4.625%) + Inflation (CPI-U)

Static benchmark not directly related to market performance

Is the portfolio meeting NSHE’s financial objectives to support a 4.625% payout and maintain purchasing power?

OutperformRolling 10-year periods

11

22

33

| 10



Total Endowment 4.9 7.3 0.56 Policy Benchmark 5.2 7.9 0.56 C|A Endowments $100mm-$300m² 4.8 7.5 0.53

70% MSCI ACWI/30% BC Agg 5.7 7.8 0.64


Total Endowment 9.2 9.3 0.95 Policy Benchmark 9.7 10.0 0.92

C|A Endowments $100mm-$300m² 8.7 9.2 0.90

70% MSCI ACWI/30% BC Agg 9.8 10.7 0.87

Endowment Has Delivered Solid Risk-Adjusted Returns Over the Long Term

1. Sharpe Ratio: To Calculate this number, subtract the average T-Bill return (risk free rate) from the manager’s average return then divide by the manager’s standard deviation. The amount of return over the risk free rate that can be expected for each unit of risk accepted.2. From 4/1/2009 to 3/31/2019, C|A Endowments $100mm-$300mm include 113-119 institutions over time. Data is as of 3/31/2019.

Trailing 5 Years • April 01, 2014 – March 31, 2019 Trailing 10 Years • April 01, 2009 – March 31, 2019

As of March 31, 2019– lagged to include most recent Private Investments results

2.0

4.0

6.0

8.0

4.0 6.0 8.0 10.0

Aver

age

Annu

al C

ompo

und

Retu

rn (%

)


Total Endow ment

70% MSCI ACWI/30% BC Agg

Policy Benchmark


6.0

8.0

10.0

12.0

6.0 8.0 10.0 12.0

Aver

age

Annu

al C

ompo

und

Retu

rn (%

)


Total Endow ment

70% MSCI ACWI/30% BC Agg

Policy Benchmark


| 11


Policy Benchmark Analysis: Rolling 3-Year Average Annualized Compound Returns


Rolling 3 Years • April 1, 1995 – March 31, 2019

| 12


Simple Benchmark Analysis: Rolling 5-Year Average Annualized Compound Returns

As of March 31, 2019 – lagged to include most recent Private Investments results


| 13


Long-Term Financial Objective: Rolling 10-Year Average Annualized Compound Returns



| 14


1. ENDOWMENT OCIO UPDATEB. ASSET ALLOCATION AND GUIDELINE COMPLIANCE

| 15


Blended Total Endowment Policy Adopted in December 2016

* Liquidity Guidelines: No new Private Investment (PI) commitments while: (1) Total PI NAV > 1.3x respective Fund Manager's PI target(2) Total PI NAV + unfunded commitments > 1.8x respective Fund Manager's PI targetPer Section 5.4.d of NSHE IPS: For the purpose of gauging compliance with asset allocation policy ranges and liquidity guidelines, 50% of Legacy Assets shall be attributed to each Fund Manager's portfolio.Per Section 6.d of NSHE IPS: For purposes of assessing Fund Manager performance, the System agrees that the official Fund Manager track record will begin April 1, 2017, after which the Fund Manager will be responsible for the Fund’s performance relative to the previously stated return and risk objectives.

Long-Term Targets

Normalized Benchmark

WeightsLong-Term

Targets

Normalized Benchmark

WeightsPolicy

TargetsNSHE Legacy Asset Values a/o 7/31/2019 (%) (%) (%) (%) (%)

Growth 62.0% 61.0% 61.5% 50% - 70%Public Growth 45.0% 51.0% 48.0%Private Growth* 17.0% 10.0% 13.5%

Less: Legacy Private Growth -10.6% -11.3%Total Managed Growth 51.4% 60.3% 49.7% 59.0%

Diversifiers 18.0% 12.0% 15.0% 5% - 25%Diversifiers with liquidity within 3 years 13.0% 12.0% 12.5%Private Diversifiers* 5.0% 0.0% 2.5%

Less: Legacy Liquidating Sidepockets -0.2% -0.3%Total Managed Diversifiers 17.8% 20.8% 11.7% 13.9%

Real Assets 10.0% 12.0% 11.0% 5% - 20%Public Real Assets 2.0% 7.0% 4.5%Private Real Assets* 8.0% 5.0% 6.5%

Less: Legacy Private Real Assets -3.4% -3.6%Total Managed Real Assets 6.6% 7.7% 8.4% 9.9%

Fixed Income & Cash 10.0% 15.0% 12.5% 5% - 25%Less: Cash reserved for Legacy Audit Holdbacks 0.0% 0.0%Less: Cash reserved for Legacy Assets -0.5% -0.5%

Total Managed Fixed Income 9.5% 11.2% 14.5% 17.2%

TOTAL ENDOWMENT 100.0% 100.0% 100.0%Managed OCIO Sleeves excl. Legacy Assets 85.3% 100.0% 84.3% 100.0%

(%)

Long-Term Targets for each Fund Manager Blended Total Assets PolicyCA Capital Russell Investments Blended Total Assets

Policy Ranges

| 16


Portfolio Role 7/31/2019Asset Allocation

Total Endowment Long-Term Policy

Targets

Total Endowment

Allowable Range

Growth 60.2% 61.5% 50% - 70%Public Growth 44.7% 48.0%Private Growth 15.6% 13.5%Diversifiers 14.2% 15.0% 5% - 25%Liquid Diversifiers(liquidity w/in 3 years) 13.0% 12.5%

Private Diversifiers 1.2% 2.5%Real Assets 11.8% 11.0% 5% - 20%Public Real Assets 5.9% 4.5%Private Real Assets 6.0% 6.5%Fixed Income & Cash 13.8% 12.5% 5% - 25%Fixed Income 12.4% 12.5%Cash 1.3% 0.0%

Total Endowment Asset Allocation Is Well Within Policy Ranges

Notes: Russell Multi-Asset Core Plus Fund (MAC+) look-through exposures estimated using 6/30/2019 MAC+ asset allocation provided by Russell Investments.Totals may not sum due to rounding. | 17


Market Value ($)As of

09/30/18 12/31/18 03/31/19 06/30/19 06/30/19

C|A Managed Growth 60.2% 59.4% 60.1% 60.7% $70,910,327C|A Managed U.S. Equity 21.6 20.6 21.0 21.8 25,484,445C|A Managed Global Equity 12.3 11.6 10.2 9.6 11,270,603C|A Managed Int'l Developed 17.9 17.3 17.1 16.9 19,739,732C|A Managed Emerging Markets 7.3 8.4 9.2 9.6 11,176,908C|A Managed Private Growth 1.1 1.5 2.6 2.8 3,238,638

C|A Managed Diversifiers 20.4 20.8 20.4 20.3 23,708,854C|A Managed Real Assets 7.9 7.9 7.7 8.2 9,588,355C|A Managed Fixed Income & Cash 11.6 11.9 11.8 10.8 12,614,485

Total C|A Managed Assets 100.0% 100.0% 100.0% 100.0% $116,822,020

% of Portfolio

Asset Allocation Over Time As of June 30, 2019

| 18


Endowment Liquidity Is Well Within Guidelines

* Italicized assets are excluded from C|A mandate.** Legacy assets are excluded from OCIO performance but are attributed 50/50 to each OCIO for purposes of asset allocation & guideline compliance.

Estimated Market Values as of 8/12/2019, pro forma for pending C|A transactions

Dollar Liquidity

ManagersPro Forma

($ mm) Exit Terms DailyWeekly/Monthly Quarterly

Semiannual/Annual Biennial Illiquid

U.S. Equity 24.3 8.3 3.9 12.1C|A U.S. Equity 24.3 Daily; monthly; quarterly 8.3 3.9 12.1Global Equity 58.4 52.5 5.9C|A Global Equity 10.9 Daily; monthly 5.0 5.9RIFL Multi-Asset Core+ Fund - Growth * 47.5 Daily 47.5International Developed Equity 18.8 1.3 17.6C|A International Developed Equity 18.8 Daily; monthly 1.3 17.6Emerging Markets Equity 10.4 0.9 7.2 2.3C|A Emerging Markets Equity 10.4 Daily; weekly; monthly; quarterly (2 year initial lock-up) 0.9 7.2 2.3Diversifiers 36.8 1.5 8.4 18.0 3.8 2.1 3.0C|A Marketable Alternatives 23.7 Monthly; quarterly; semi-annual; annual; biennial; illiquid 1.5 5.2 8.7 3.8 2.1 2.4Farallon Capital Illiquid Sidepocket** 0.5 Illiquid 0.5Och-Ziff Overseas Illiquid Sidepocket** 0.0 Illiquid 0.0Russell Hedge Funds* 12.4 25% monthly, with 30 days' notice; 37.5% quarterly, with 60 days' notice;

37.5% quarterly, with 90 days' notice

3.1 9.3

Private Growth 40.7 Illiquid 40.7Managed Venture/Growth Capital 3.5 Illiquid 3.5Legacy Private Equity** 10.7 Illiquid 10.7Legacy Venture Capital** 14.3 Illiquid 14.3Russell Private Growth* 12.2 Illiquid 12.2Real Assets 30.3 27.3 1.0 0.0 2.0C|A Real Assets 9.3 Daily; monthly; illiquid 6.3 1.0 2.0Legacy Private Natural Resources** 8.0 Daily 8.0RIFL Multi-Asset Core+ Fund - Real Assets* 7.4 Daily 7.4Russell Real Estate Equity Fund* 5.6 Daily 5.6Fixed Income 33.0 33.0C|A Fixed Income 11.0 Daily 11.0RIFL Multi-Asset Core+ Fund - Fixed Income* 5.4 Daily 5.4RIFL Core Bond Fund* 11.2 Daily 11.2RIFL Absolute Return Fixed Income Fund* 5.4 Daily, with 3 days' notice 5.4Cash and Cash Equivalents 4.2 Daily 4.2TOTAL ASSETS 256.9 128.9 44.0 30.1 6.1 2.1 45.6PERCENT OF TOTAL ASSETS 100% 50% 17% 12% 2% 1% 18%

Unfunded C|A PI Commitments as % of Total Assets 7%Total Illiquids + Unfunded C|A PI Commitments 25%

Liquidity Guidelines:No new commitments while:(1) Private Investment NAV > 1.3x respective Fund Manager's PI target(2)Private Investment NAV + Unfunded Commitments > 1.8x respective Fund Manager's PI target Yes

Endowment Portfolio Liquidity Summary

Guideline Compliance?

Yes

| 19


1. ENDOWMENT OCIO UPDATEC. RISK /RETURN CHARACTERISTICS – C|A PORTFOLIO

| 20


Policy (Alpha

Targets)

Policy (Passive)

70% / 30% Index

2%

3%

4%

5%

6%

7%

8%

10% 12% 14% 16%

Rea

l Com

poun

d R

etur

n

Standard Deviation

C|A Portfolio – Long-Term Risk/Return Expectations

* Assumes no positive or negative alpha from active management.Notes: “C|A Portfolio– Alpha Targets” portfolio assumes alpha for each portfolio role over its given benchmark of: 50-150 bps from public equity, 300-500 bps from private investments, and 250-350 bps from hedge funds. Alpha target is net of C|A fees. Decline statistics assume beginning market value of $100mm (C|A mandated portfolio) and use real cumulative asset class returns from November 1, 2007 to February 28, 2009.

Long-Term Real Risk/Return Projections Summary Statistics – Real Returns

4.625% real

Benefit of diversification & manager selection

Proposed C|A Portfolio -

Alpha Targets

Proposed C|A Portfolio

70% / 30% Index

Estimated Long-TermReal Compound Return 7.1% 5.9% 5.3%

Estimated Range of Returns (25th-75th %ile) 4.5 - 8.1% 3.7 - 7.1% 3.6 - 7.0%

Estimated Volatility(Standard Deviation) 12.6% 12.6% 12.7%

Estimated Betato Global Equity 0.68 0.68 0.70

Long-Term Risk: Estimated Probability of

Not Achieving 4.625% Real Compound Return

Over 25 Years

24% 34% 39%

-34%* -34% -37%-$34mm* -$34mm -$37mm

Short-Term Risk: Estimated Cumulative

Decline, 2008 Financial Crisis

| 21


5.9%5.3%

1.2%

0.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

C|A Long-TermTargets

70%/30% Index

Real

AAC

R (%

)

Long Term Real Return

8.0%

6.4 6.1 5.7 5.3 5.04.2

3.3 3.0 2.8 2.3

-4

-2

0

2

4

6

8

10

12

EM Equity Global Equity US Equity Non-U.S.Equity

NaturalResources

Equities

High YieldBonds

Commodities InvestmentGrade Credit

U.S.Treasuries

U.S. TIPS

Real

AAC

R (%

)

Long-Term (25-Plus Year) Steady State “Equilibrium” Assumptions:Real Returns (Adjusted for Inflation)

Valuations Will Likely Challenge Intermediate-Term Market Returns

As Private Investment allocations are ramping up toward long-term targets, results may fall short of long-term expectations

Key Assumptions: Inflation: 3%; Real EPS Growth: 2% for US and Dev ex US, 3% for EMs; Ending 10-Yr US Treasury Yield: 5.0%, Ending 10-Yr US TIPS yield: 2.0%

Sources: Barclays, Cambridge Associates LLC, Global Financial Data, Inc., MSCI Inc., and Thomson Reuters Datastream. MSCI data provided "as is" without any express or implied warranties.Notes: Policy allocations assume alpha for each portfolio role over its given benchmark of: 100 bps from public equity, 400 bps from private investments, and 300 bps from hedge funds. Alpha is net of C|A fees.

Blue bars denote targeted value added from manager selection

3. 5%

7.1%

Intermediate-Term (10-Year) “Return to Normal” Scenario, Assuming that Valuations Normalize Over Next 10 Years (Based on Current Market Valuations as of July 31, 2019)

EquitiesReal AssetsFixed Income

6.1

1.9

-0.5

4.8

7.7

2.33.4

0.4

-1.1

0.4

-5

0

5

10

15

EM Equity Global Equity US Equity Non-U.S.Equity

NaturalResources

Equities

High YieldBonds

Commodities InvestmentGrade Credit

U.S.Treasuries

U.S. TIPS

Real

AAC

R (%

)

2.3%

1.3%

1.2%

0.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

C|A Long-TermTargets

70%/30% Index

Real

AAC

R (%

)

Intermediate-Term Real Return

| 22


Real Return Expectations

-10%

-5%

0%

5%

10%

15%

20%

3 Years 5 Years 10 Years 25 Years

Real Return Distribution (AACR)

3 Years 5 Years 10 Years 25 Years5th 18.5% 15.6% 12.7% 10.1%25th 10.9% 9.8% 8.6% 7.6%50th 5.9% 5.9% 5.9% 5.9%75th 1.2% 2.2% 3.3% 4.2%95th -5.3% -2.9% -0.4% 1.9%

While the C|A Policy Benchmark has a 5.9% expected real compound return over the long term (i.e.25+ years), there is a wide range of potential outcomes, particularly over shorter time periods.

Short-Term Expected Returns Have a Significantly Wider Range than Long-Term Expectations

Over any given 3-year period the C|A Policy Benchmark has a 50% likelihood of a return between 1.2% and 10.9%

Over any given 25-year period the C|A Policy Benchmark has a 50% likelihood of a return between 4.2% and 7.6%

| 23


Historical Stress Scenarios

Note: Returns deflated using the Consumer Price Index - All Urban Consumers ($)Current Allocation as of 6/30/2019.

Length of Period

(Months)

C|A Current Allocation

Long Term Endowment

Targets 70/30 PortfolioOil Shock January 1, 1973 - September 30, 1974 21 -41.5 -40.7 -40.2Energy Crisis/Stagflation September 1, 1979 - March 31, 1980 7 -8.6 -10.2 -13.6Energy Crisis/Stagflation March 1, 1980 - March 31, 1980 1 -9.1 -9.0 -8.7Interest Rate Hikes July 1, 1980 - September 30, 1981 15 -6.7 -7.7 -12.3Interest Rate Hikes August 1, 1981 - July 31, 1982 12 -14.0 -13.1 -10.6Stock Market Crash September 1, 1987 - November 30, 1987 3 -16.9 -14.3 -17.2Japan Market Collapse January 1, 1990 - September 30, 1990 9 -10.7 -8.5 -16.1Mexican Peso Crisis February 1, 1994 - January 31, 1995 12 -5.1 -3.0 -6.0Russian Debt Default August 1, 1998 - September 30, 1998 2 -10.0 -8.9 -7.6Tech Bubble Burst April 1, 2000 - September 30, 2002 30 -26.9 -24.8 -28.1Credit Crisis/Great Recession November 1, 2007 - February 28, 2009 16 -36.5 -34.1 -37.4

Cumulative Returns - RealStress Period Estimates

DatesStress Name

1

| 24


1. ENDOWMENT OCIO UPDATED. C|A DIVERSIFIERS AND PRIVATE INVESTMENTS

| 25


Event-Driven

Global Macro – Systematic Directional

C|A Diversifiers Program Snapshot

Credit / Distressed

Goal is to extract profits from market trendsInvests in diversified portfolio of liquid futures, forwards, and swaps

Goal is to profit from mispricings in the capital structures of companies subject to corporate events

Buying stock in acquisition targets, shorting acquirersOther events: spin-offs, divestitures, reorganization, and restructuring

Goal is to identify credit opportunities Invest long and short in bonds, loans, credit default swaps and other credit markets.Stressed and distressed debt, capital structure arbitrage, post-reorg equities.

Open Mandate

Flexible mandate that targets the most attractive return opportunistically across capital markets, geographies, and strategies

Market NeutralGoal is to generate meaningful alpha, while aiming to minimize beta

Matching long and short positions to minimize market risk

Note: Percentages may not add to 100% due to rounding

Long/Short Equity

Goal is to limit exposure to “beta” and add meaningful “alpha”Short positions to generate returns (alpha) and reduce market risk (beta)Fundamental analysis identifies attractive companies (alpha)

(3) Total Event Driven, 20.8%

(2) Total Credit/Distressed, 17.2%

(1) Total Global Macro-Systematic, 5.0%

(1) Total Market

Neutral, 7.6%

(4) Total Long/Short Equity, 38.9%

(1) Total Open Mandate, 10.5%

Manager Percentages of Total Hedge Funds as of June 30, 2019

| 26


CA Private Investments Snapshot

Asset Class 1999-2006 (Legacy) 2010-2014 (Legacy) 2015 (Legacy) 2017 (C|A Capital) 2018 (C|A Capital) 2019 (C|A Capital)

# of Funds Commit Amt. ($mm) # of Funds Commit Amt. ($mm) # of Funds Commit Amt. ($mm) # of Funds Commit Amt. ($mm) # of Funds Commit Amt. ($mm) # of Funds Commit Amt. ($mm)Venture / Growth CapitalSub-Total 2 $7.6 2 $10.0 2 $1.8 1 $1.0 1 $1.0Private Equity / DistressedSub-Total 5 $31.0 2 $10.0 1 $5.0 2 $3.0 3 $3.1Total VC & PE 7 $38.6 4 $20.0 1 $5.0 4 $4.8 1 $1.0 4 $4.1

Private DiversifiersTotal Private Diversifiers 3 $5.0 3 $3.0

Private Real Estate

Private RE Sub-Total 1 $1.0 1 $1.0Private Natural ResourcesPrivate NR Sub-Total 1 $4.0 1 $5.0 1 $5.0 2 $3.0 1 $1.0 1 $1.0

Total Private RE & NR 1 $4.0 1 $5.0 1 $5.0 3 $4.0 2 $2.0 1 $1.0

Total Privates 8 $42.6 5 $25.0 2 $10.0 10 $13.8 6 $6.0 5 $5.1

NAV Unfunded Total

Annual Targets

2019 Actual Commitments

Long-Term

Targets($) (%) ($) (%) ($) (%) ($) ($) ($) (%)

Venture / Growth Capital 7.9 5.9% 6.2 4.6% 14.0 10.5% 2.0 $0 - $4 2.0 7.0%Private Equity / Distressed 7.9 5.9% 10.2 7.6% 18.0 13.5% 2.5 $0 - $5 3.0 10.0%Total VC & PE $15.7 11.8% $16.3 12.3% $32.1 24.1% $4.5 $0 - $9 $5.0 17.0%

Total Private Diversifiers $2.5 1.9% $5.6 4.2% $8.1 6.1% $1.5 $0 - $3 --- 5.0%

Private Real Estate 1.0 0.8% 1.0 0.8% 2.0 1.5% 1.0 $0 - $3 --- 4.0%Private Natural Resources 4.8 3.6% 5.5 4.1% 10.3 7.7% 1.0 $0 - $3 1.0 4.0%Total Private RE & NR $5.8 4.4% $6.5 4.9% $12.3 9.2% $2.0 $0 - $6 $1.0 8.0%

Total $24.0 18.0% $28.4 21.3% $52.4 39.3% $8.0 $0 - $18 $6.0 30.0%¹ Current allocation based on net asset values (NAV) as of 3/31/19 and adjusted for capital calls and distributions through 6/30/19.

Current Allocation ($mm) as of June 30, 2019¹ Target Commitment by Strategy ($mm)

Annual Range

Asset allocation percentages incorporate C|A Managed Assets ($116.8 mm), plus 50% of Legacy Private Investments ($16.48 mm) as of 6/30/19.

NSHE Private Investments Snapshot

| 27


FUNDING STATUS & PERFORMANCE OVERVIEW

Reporting Currency: U.S. Dollars ($), in millions Current Total Value/ AssetPaid-In Unfunded Distributions Net Asset Paid In Class CA

Asset Classes Commitment(s) Capital Commitment(s) at Market Value (NAV) Multiple IRR Median mPME IRR

Legacy Private Equity 46.0 39.7 5.9 53.8 10.9 1.6 11.2% 14.0% 5.1%

Legacy Venture Capital 17.6 15.8 1.9 9.2 14.4 1.5 6.3% 6.9% 7.2%

Legacy Private Natural Resources 14.0 11.1 2.8 16.2 8.1 2.2 25.3% 13.7% 9.0%

TOTAL LEGACY 77.6 66.6 10.5 79.2 33.5 1.7 12.1% 12.3% 6.2%

Managed Private Equity/Distressed 6.1 2.2 4.1 0.1 2.3 1.1 22.5% 15.4% 7.8%

Managed Venture Capital 3.8 0.5 3.2 0.0 0.6 1.1 14.6% 1.1% 2.7%

Managed Private Diversifiers 8.0 4.4 5.0 1.5 3.1 1.1 7.3% 9.8% 2.6%

Managed Private Natural Resources 5.0 1.0 4.1 0.3 0.7 1.0 4.3% 9.8% -2.9%

Managed Real Estate 2.0 1.1 1.0 0.2 1.0 1.1 9.5% 10.4% 10.4%

TOTAL MANAGED 24.9 9.1 17.4 2.1 7.7 1.1 10.3% 10.6% 4.0%

TOTAL PORTFOLIO 102.5 75.7 27.9 81.3 41.1 1.6 12.1% 12.1% 6.1%

As of March 31, 2019, Nevada System of Higher Education had committed $102.5 million to 36 private investment partnerships, of which $75.7 million hadbeen drawn down. Distributions of $81.3 million at market value, or 107.4% of paid-in capital, had been received. The total program return of 12.1% is net offees, expenses, and carried interest associated with each partnership and is weighted according to the amount that has been drawn down from eachpartnership as of March 31, 2019.

Changes to the portfolio included the initial drawdown for Clean Growth Fund V, LP; Industry Ventures Partnership Holdings V, L.P.; New Energy CapitalInfrastructure Credit Fund II, L.P.; and Vision Ridge Sustainable Asset Fund II, LP. In the period following March 31, 2019, Nevada System of HigherEducation made an additional commitment to EMR Capital Resources Fund III, LP ($1.0 mm).

Paid-In Capital: Capital paid in to the partnership, w hich includes fees and capital for investments.Distributions at Market: Capital distributed to an investor from the partnership.Current Net Asset Value (NAV): The residual value of an investor's interest, which is reported by the partnership in its f inancial statements.IRR: The investor's return on its investment in the partnership, net of fees, expenses, and carried interest received by the general partners.Total Value: Total value is calculated by adding the NAV and Distributions at Market.

Legacy PI have outperformed public markets by 590 bps

C|A Managed PI have outperformed public markets by 630 bps | 28


1. ENDOWMENT OCIO UPDATEE. LEGACY ASSETS

| 29


Benefits: As shown on the following pages, the Legacy Private Investments (PI) program has been highly beneficial to Endowment

performance, generating a 12.1% return since inception, outperforming public market equivalents by 590 basis points. Every dollarinvested in the Legacy PI program is now worth $1.69, well ahead of the $1.29 that would have been generated by public marketequivalents.

We believe that the superior historical and expected performance versus public markets comes from accessing differentiatedexposures outside of public markets, along with a broader “tool kit” for PI managers to add value.

Our performance analysis of nearly 400 endowment clients shows that institutions with a PI allocation of more than 15% haveenjoyed higher returns than those with low PI allocations over numerous rolling periods (most recently, 100bps higher for the 10-yearperiod ended 3/31/19). Legacy PI currently represents about 12% of the Total Endowment, and we view that exposure as highlyvaluable to maintain as we make new fund commitments to build out the PI program within C|A Managed Assets (currently justunder 3% of the Total Endowment).

NSHE pays no fee to C|A for our ongoing monitoring and administration of the Legacy PI program until the funds wind down andreturn all capital.

Risks - At the Committee’s request, we itemize several risks to maintaining Legacy Assets in the Endowment: Illiquidity – Investments in these multi-year funds are illiquid, often for more than a decade, with no readily available secondary

market. However, our experience shows that clients like NSHE, with annual endowment payouts under 5%, can tolerate illiquidity.(Many leading endowments have PI allocations in excess of 40%.) In our OCIO policy-setting discussion in late 2016, we used GlobalFinancial Crisis returns as a stress scenario to illustrate the NSHE portfolio’s tolerance for illiquidity.

High fees – Many PI partnerships charge significant management & performance incentive fees (e.g., 2% plus 20% of profits above apreferred return). That said, it is important to note that we always present performance net of all fees and expenses – meaning thatNSHE has received significant value-add in excess of the PI manager fees.

Valuation risk - Since the underlying assets in PI funds are not listed on public markets, fund valuations rely on judgments of fairvalue. To mitigate this risk, C|A’s operational due diligence on any PI fund involves extensive analysis of the manager’s valuation andaudit policies and practices.

Strategy-specific risks – C|A’s initial recommendation for each fund in the Legacy PI program* would have included an assessment ofkey investment risks. We have subsequently updated NSHE staff and the Committee with any concerning organizationaldevelopments for the Legacy PI managers, each time with our assessment of whether the change merited trying to exit the fund in asecondary market (none did, in our opinion).

Benefits & Risks of Maintaining Legacy Assets in the Endowment

*with the exception of Drum Capital, which is an investment that NSHE made without a recommendation from or diligence by C|A

Exiting these illiquid PI partnerships before the end of their fund lives would entail selling the fund interests on the secondary market (likely at a discount). Weighing the risks vs. the benefits, C|A recommends allowing these

partnerships to self-liquidate as they return capital to investors and wind down over the coming years. | 30


IRR (%)1

FundInception Current Inception

Private Investments Partnerships Date Quarter 1 Year 3 Years 5 Years 10 Years to Date

Legacy Private Equity

Endowment Private Equity Partners IV, L.P. 01/00 3.3 4.5 27.1 12.4 20.4 16.8Commonfund International Partners IV, L.P. 02/01 -0.6 -3.6 8.3 1.3 15.5 13.0Commonfund Private Equity Partners V, L.P. 01/02 -2.0 -18.4 4.7 12.6 14.9 11.0Drum Capital Management SS Partners II, L.P. 04/06 0.0 -4.9 3.7 3.8 14.8 7.3Dover Street VIII, L.P. 06/11 4.8 14.2 13.4 16.7 --- 20.7Blackstone Strategic Partners VI, L.P. 08/13 -5.7 -2.7 6.5 --- --- 16.3Dover Street IX, L.P. 09/15 4.2 23.4 --- --- --- 38.1

Total Legacy Private Equity 0.8 3.5 9.6 10.0 15.9 11.2mPME Benchmark: MSCI World Index (Net) 12.5 3.7 11.3 6.6 14.8 5.1

Legacy Venture Capital

Endowment Venture Partners IV, L.P. 09/98 10.8 25.5 14.4 5.9 10.8 1.7Endowment Venture Partners V, L.P. 01/00 4.1 0.4 -3.1 -5.6 2.1 -0.2Commonfund Capital Venture Partners X, L.P. 03/12 10.6 37.2 20.0 21.9 --- 22.0Commonfund Capital Venture Partners XI, L.P. 09/14 4.7 36.7 26.8 --- --- 25.5

Total Legacy Venture Capital 8.3 36.1 20.7 19.8 15.2 6.3mPME Benchmark: Russell 2000® Index 14.6 1.9 11.9 7.5 16.1 7.2

Legacy Private Natural Resources

Commonfund Capital Natural Resources IX, L.P. 12/11 8.0 4.9 14.4 8.6 --- 7.7Commonfund Capital Natural Resources X 12/14 8.1 14.9 32.1 --- --- 30.0

Total Legacy Private Natural Resources 8.0 8.4 17.7 9.3 10.7 25.3mPME Benchmark: S&P North American Natural Resources Sector Index 16.2 -2.8 1.6 -1.1 4.0 9.0

TOTAL LEGACY 5.6 16.5 14.8 12.6 15.0 12.1mPME Benchmark: Total Portfolio Blend 14.2 1.6 9.8 5.8 14.1 6.2

Legacy PI Program Returned 16.5% Over the Trailing Year (vs. 1.6% for public markets)

Note: Reporting is in U.S. Dollars ($).1 IRR calculations are based on a stream of quarterly cash flows; including NAV, paid-in capital, and distributions. The multi-year return calculation assumes the starting period NAV is the first contribution in the stream of cash flows used to calculate the IRR. Liquidated investments are only included in the total returns for each asset class and` the total portfolio.

Multi-year performance detail as of 3/31/19

2

| 31


Cash Flow & Valuation Multiples IRR

Fund Unfunded Current Total Distributed / Total Value / Fund FundInception Commit- Paid-In Commit- Distributions Net Asset Value Paid In2 Paid In2 Quartile Fund CA Quartile

Private Investments Partnerships Date ment Capital ment at Market Value (NAV) Creation11 Fund CA4 Fund CA4 Rank IRR3 Median 4 Rank


Dover Street IV, L.P. 03/99 8,000,000 7,560,000 0 10,532,539 0 2,972,539 1.39 1.64 1.39 1.64 3 8.6% 15.2% 4Endowment Private Equity Partners IV, L.P. 01/00 5,000,000 4,880,000 120,000 10,224,015 59,755 5,403,770 2.10 1.78 2.11 1.83 2 16.8% 14.0% 5,9 2Commonfund International Partners IV, L.P. 02/01 4,000,000 3,900,000 100,000 6,937,156 347,358 3,384,514 1.78 1.77 1.87 1.77 2 13.0% 15.0% 6,9 3Commonfund Private Equity Partners V, L.P. 01/02 4,000,000 3,860,000 140,000 6,718,994 326,471 3,185,465 1.74 1.61 1.83 1.71 2 11.0% 11.1% 5,9 3Drum Capital Management SS Partners II, L.P. 04/06 10,000,000 9,112,118 887,881 11,027,256 3,317,033 5,232,171 1.21 1.43 1.57 1.55 2 7.3% 10.5% 7,9 3Dover Street VIII, L.P. 06/11 5,000,000 4,500,000 500,000 4,961,825 2,080,251 2,542,076 1.10 0.96 1.56 1.47 1 20.7% 14.2% 1Blackstone Strategic Partners VI, L.P. 08/13 5,000,000 2,965,738 2,044,365 2,551,837 1,857,341 1,443,440 0.86 0.81 1.49 1.51 3 16.3% 15.8% 2Dover Street IX, L.P. 09/15 5,000,000 2,900,000 2,100,000 857,774 2,955,745 913,519 0.30 0.25 1.32 1.35 3 38.1% 22.4% 1

Total Legacy Private Equity 46,000,000 39,677,856 5,892,246 53,811,396 10,943,954 25,077,494 1.36 1.38 1.63 1.61 11.2% 14.0% 10

mPME Benchmark: MSCI World Index (Net) 1.02 1.25 5.1% 12


Endowment Venture Partners IV, L.P. 09/98 5,000,000 4,912,500 87,500 5,286,463 207,572 581,535 1.08 0.85 1.12 0.87 2 1.7% -1.6% 9 2Endowment Venture Partners V, L.P. 01/00 2,640,000 2,571,881 68,119 2,404,149 133,635 -34,097 0.93 0.89 0.99 0.97 2 -0.2% -0.4% 9 2Commonfund Capital Venture Partners X, L.P. 03/12 5,000,000 4,587,500 412,500 1,207,628 8,748,684 5,368,812 0.26 0.15 2.17 1.55 1 22.0% 14.0% 9 2Commonfund Capital Venture Partners XI, L.P. 09/14 5,000,000 3,687,500 1,312,500 270,525 5,327,226 1,910,251 0.07 0.00 1.52 1.31 2 25.5% 14.6% 8,9 1

Total Legacy Venture Capital 17,640,000 15,759,381 1,880,619 9,168,765 14,417,117 7,826,501 0.58 0.45 1.50 1.19 6.3% 6.9% 10

mPME Benchmark: Russell 2000® Index 0.74 1.43 7.2% 12


Endowment Energy Partners IV, L.P. 09/98 4,000,000 3,910,228 0 14,825,504 0 10,915,276 3.79 2.89 3.79 2.89 2 25.7% 24.7% 9 2Commonfund Capital Natural Resources IX, L.P. 12/11 5,000,000 4,332,500 667,500 710,761 4,772,738 1,150,999 0.16 0.31 1.27 1.16 2 7.7% 4.8% 9 2Commonfund Capital Natural Resources X 12/14 5,000,000 2,900,000 2,100,000 656,751 3,325,349 1,082,100 0.23 0.13 1.37 1.19 1 30.0% 12.4% 9 1

Total Legacy Private Natural Resources 14,000,000 11,142,728 2,767,500 16,193,016 8,098,087 13,148,375 1.45 1.17 2.18 1.77 25.3% 13.7% 10

mPME Benchmark: S&P North American Natural Resources Sector Index 0.75 1.25 9.0% 12

TOTAL LEGACY 77,640,000 66,579,965 10,540,365 79,173,177 33,459,158 46,052,370 1.19 1.12 1.69 1.54 12.1% 12 12.3% 10

mPME Benchmark: Total Portfolio Blend 0.91 1.29 6.2%

Legacy PI Program Has Meaningfully Outperformed Public Markets

NSHE’s Legacy Private Equity has delivered 6.1% excess return over public equities

Notable contributors: Secondaries funds (Dover Street post-1999 & Strategic Partners) and Commonfund Natural Resources

Notable detractors: Venture Capital funds from vintage years 1998 & 2000

Funding status and performance summary: Inception through 3/31/19

NSHE’s Legacy Private Natural Resources have delivered 16.3% excess return over public natural resources equities.

| 32


Legacy Assets Summary As of July 31, 2019

Fund Vintage YearCurrent Net Aset

Value (NAV) ($mm)% of Total

EndowmentManager Strategy/Portfolio Description

Dover Street VIII 2011 2.0 0.8%

Dover Street IX 2015 3.1 1.2%

Commonfund International Partners IV 2001 0.3 0.1%

CF Private Equity Partners IV 2000 0.1 0.0%

Commonfund Private Equity Partners V 2002 0.3 0.1%

Drum Capital Management Special Situations Partners II 2006 3.2 1.2% Drum Capital Management LLC

Fund of Funds manager focused on distressed debt, turnarounds, and restructuring partnerships. As of 3/31/18, SSP was invested with about two-thirds of the portfolio in 11 partnerships across various US & European strategies (e.g., control, trading, turnarounds, arbitrage) and almost a third in three co-investments. In December 2018, the manager’s second 1-year extension of the Partnership is scheduled to end, and the fund will enter the orderly liquidation period pursuant to its Limited Partnership Agreement.

Strategic Partners VI 2013 1.7 0.6% The Blackstone Group Secondaries manager that purchases primarily North American/European leveraged buyout funds that are 75% to 85% funded at purchase. The manager will also purchase LP interests in mezzanine, venture capital, fund of funds, and real assets funds.

Endowment Vanture Partners IV 1998 0.2 0.1%

Endowment Vanture Partners V 2000 0.1 0.1%

Commonfund Capital Vanture Partners X 2012 8.3 3.2%

Commonfund Capital Vanture Partners XI 2014 5.5 2.1%

Endowment Energy Partners IV 1998 -- 0.0%

Commonfund Capital Natural Resources IX 2011 4.6 1.8%

Commonfund Capital Natural Resources X 2014 3.4 1.3%

Farallon Capital Sidepocket 2012 0.5 0.2% Farallon Capital Management Special Situations account established prior to 2010 holding liquidating assets in real estate (75%) and illiquid equity/debt (25%)

Och Ziff Sidepocket 2012 0.0 0.0% Och-Ziff Capital Management Group Special Situations account established in 2012 to hold liquidating assets in illiquid equity/debt.

Commonfund Capital Inc.Fund of Funds manager that makes investments in underlying private equity funds with diverse regional, country, industry and stage investment strategies. For the International fund, Commonfund has structured its investment philosophy around European middle market buyouts and growth equity funds, with commitments expected to range from $10m to $50m.

Global secondaries manager that will pursue three types of private equity/venture capital secondary transactions:- LP Interest: HarbourVest purchases one or more interests in existing private equity and venture capital funds from an institutional investor. - Synthetic: HarbourVest purchases a portfolio of direct company interests typically from a bank or large corporation. At purchase, the portfolio’s management team usually agrees to continue managing the portfolio independent from its former employer. - Structured: HarbourVest purchases a large LP interest portfolio and sets up a structure such as a joint venture to accommodate the seller’s liquidity needs.


HarbourVest Partners LLC


Commonfund Capital Inc. Venture Capital Fund of Funds manager that commits capital to a diverse set of venture capital and growth funds, mostly in China, Europe, Israel, and India. These investments range from early-stage funds to later-stage funds.


Commonfund Capital Inc.Natural Resources Fund of Funds manager that focuses on a diversified group of natural resources-focused private equity funds in North America. A portion of investments are held in the gas and oil sector while also including other sectors such as clean energy, agriculture, and timber. A majority of investments are seen in priamry commitments with secondary and direct coinvestments taking a smaller role.

Legacy Liquidating Positions

| 33(INVESTMENT COMMITTEE 09/27/19) Ref. INV-4, Page 38 of 67

PORTFOLIO PERFORMANCE NOTES

1 In the period following March 31, 2019, Nevada System of Higher Education made an additional commitment to EMR Capital Resources Fund III, LP ($1.0 mm).

2 The Distributed / Paid In Multiple is calculated by dividing the total distributions from the fund by the total paid into the fund. The Total Value / Paid In Multiple is calculated by dividing the sum of the remaining investment NAV and total distributions from the fund by the total paid into the fund.

3 Fund internal rate of return includes the cash-on-cash return net of fees, expenses, and carried interest, as well as the net asset value of Nevada System of Higher Education's interest in the partnership.

4 CA vintage year benchmarks are as of March 31, 2019. All benchmarks are in U.S. Dollars and are considered final unless otherwise noted. The Legacy Private Equity asset class utilizes the Secondary Funds benchmark. The Legacy Private Natural Resources asset class utilizes the Private Equity Energy and Upstream Energy and Royalties benchmark. The Legacy Venture Capital asset class utilizes the U.S. Venture Capital benchmark. The Managed Private Diversifiers asset class utilizes the Private Credit benchmark. The Managed Private Equity / Distressed asset class utilizes the Ex U.S. Buyout benchmark. The Managed Private Natural Resources asset class utilizes the Private Equity Energy and Upstream Energy and Royalties benchmark. The Managed Real Estate asset class utilizes the Real Estate benchmark. The Managed Venture Capital Asset Class utilizes the U.S. Venture Capital benchmark.

5 Funds utilize the U.S. Private Equity benchmark.

6 Fund utilizes the Ex U.S. Private Equity and Venture Capital benchmark.

7 Fund utilizes Distressed Securities benchmark.

8 Fund utilizes the Venture Capital benchmark.

9 CA Median comparisons reflect the median of the pooled benchmarks for the vintage year of the three respective fund and two subsequent vintage years, based on the assumption that a fund of funds would typically make commitments over three years.

10 Cambridge Associates' asset class and portfolio benchmark medians are calculated using the middle breakpoint fund in each asset class vintage year, and are weighted by member's paid-in capital to each asset class and vintage year.

11Total Value Creation is equal to: [(Distributions at Market) + (Current Net Asset Value) - (Paid-In Capital)].

12 The mPME IRR evaluates what Nevada System of Higher Education's return would have been if the dollars invested in private funds had been deployed in a public market index. The mPME calculation assumes that a public index's shares are purchased and sold according to the cash flow stream of the private portfolio, with distributions calculated in the same proportion as the private portfolio's. The mPME NAV (the value of the shares held by the public equivalent) is a function of mPME cash flows and public index returns. All mPME values are as of March 31, 2019, and are calculated using U.S. Dollars.

13 Fund utilizes Growth Equity benchmark.

14 Commitment is as of 2Q19.

15Fund utilizes Secondary Funds benchmark.

Funds with NA (not applicable) are too young to have produced meaningful returns or have not yet commenced operations. Benchmarks with NA (not applicable) have an insufficient number of funds in the vintage year sample to produce a meaningful return.

Italicized funds have an inception date that is fewer than 6 years from the report date. Analysis and comparison of these partnerships' returns to benchmark statistics may not be meaningful.

Fund vintage year is determined based on the legal inception date as noted in the partnership's closing documents and financial statements. The vintage year is not based on the first close or first draw-down.

| 34


Nevada System of Higher Education EndowmentCustom Benchmark Compositions

Policy Benchmark



Wilshire 5000 Total Market

Index MSCI EAFE

Index (N)

MSCI ACWI ex U.S. Index

(N)

MSCI Emerging Markets

Index (G) MSCI Emerging

Markets Index (N)Adjusted MSCI

ACWI (N)(2)

CA Global Private Equity & Venture

Capital Benchmark

HFRI FOF Diversified

Index

0.3 beta-adjusted MSCI

ACWI (N)Inception to 03/31/96: X X 60% 10% X X X X X X X04/01/96 to 09/30/99: X X 45% 15% X 5% X X X X X10/01/99 to 06/30/00: X X 42% 15% X 5% X X X 8% X07/01/00 to 03/31/06: X X 42% 10% X X 3% X X 12% X04/01/06 to 06/30/13: X X 38% X 17% X X X X 12% X07/01/13 to 11/30/16: X X 24% 16% X X 8% X 10% 14% X12/01/16 to Present: ACB(4) ACB(4) X X X X X ACB(4) X X ACB(4)

FTSE NAREIT All Equity REITs

Index

FTSE EPRA-NAREIT Global

RE Index(3)BBG Barc U.S.

TIPS Index

Wellington DIH

Benchmark

S&P NA Natural

Resources Index(3)

S&P GSCI(3)

Alerian MLP Index(3)

CA Private Natural

Resources Benchmark

BBG Barc Government/Credit

Bond Index

BBG Barc Aggregate Bond

Index

JP Morgan Global

Government Bond Index

Citigroup 3 - Month T-Bill

IndexInception to 03/31/96: X X X X X X X X 30% X X X04/01/96 to 09/30/99: 5% X X X X X X X X 30% X X10/01/99 to 06/30/00: 5% X X X X X X X X 25% X X07/01/00 to 03/31/06: 5% X 5% X X X X X X 23% X X04/01/06 to 06/30/13: 3% X X 7% X X X X X 23% X X07/01/13 to 11/30/16: X 2% X X 5% X X 1% X 14% 2% 4%12/01/16 to Present: X X X X ACB(4) X X X X X X ACB(4)


Adjusted MSCI ACWI (N)(1)(2)


ACWI (N)(1)

S&P NA Natural

Resources Index(1)(3)

FTSE EPRA-NAREIT

Global RE Index(1)(3)

S&P GSCI(1)(3)

Alerian MLP

Index(1)(3)

BBG Barc Aggregate Bond

Index(1)

12/01/16 to Present: 62% 18% 2.5% 2.5% 2.5% 2.5% 10%


MAC+ Custom Benchmark(1)(5)

BBG Barc 3M USD LIBOR Cash Index(1)

Bloomberg Barclays US Aggregate

Bond Index(1)LIBOR +

4%(1)

Bloomberg Barclays US 1-3M T-Bill

Index(1)

01/05/17 to 01/31/17: 73% 5%10%X12%02/01/17 to 03/31/17 73% 5%10%12%X

(1) Adjusted by 50% of Legacy Assets per Section 5.4.d of NSHE IPS.(2) Beginning 12/01/16, benchmark consists of two parts: (1) the MSCI All Country World Index (N) weighted by the Public Growth's actual allocation and (2) the Private Growth's actual return weighted by the Private Growth's actual allocation. Private investments will be self-

self - benchmarked for the first 5 years of each fund's life. After the fifth year, private investments will be retroactively benchmarked to the MSCI All Country World Index (N) to reflect any value that has been added over this timeframe. (3) Beginning 12/01/16, benchmark consists of two parts: (1) the Real Assets Benchmark weighted by the Public Real Assets' actual allocation and (2) the Private Real Assets' actual return weighted by the Private Real Assets' actual allocation. Private investments will self-

ben benchmarked for the first five years of each fund's life. After the fifth year, private investments will be retroactively benchmarked to the Real Assets Benchmark to reflect any value that has been added over this timeframe.(4) Benchmark is dynamically adjusted on a monthly basis to reflect the Average Capital Base weightings of C|A Managed Assets, Russell Assets and Legacy Assets.(5) Benchmark consists of a custom blend of the Russell Global Index (N) 50% Hedged, Bloomberg Commodity Index, FTSE EPRA/NAREIT Developed RE Index (N), S&P Global Infrastructure Index (N), BofAML Developed HY Constrained Bond Index USD Hedged, JP

EMBIEMBI Diversified Index, and BBG Barc US 1-3 month Treasury Bill Index provided by Russell Investments. (6) NCREIF Fund Index Open-End Diversified Core Equity-Equal Weight-Endowment & Foundation Eligible (NFI-ODCE-EQ-E&F).

NCREIF(6)

XX

04/01/2017 to Present: 68% 10%12%X 5% 5%

| 35


Nevada System of Higher Education EndowmentCustom Benchmark Compositions

C|A Managed Diversifiers Benchmark(3)

HFRI FOF Diversified

Index


ACWI (N)Inception to 11/30/16: 100% X12/01/16 to Present: X 100%

C|A Managed Real Assets Benchmark(4)

FTSE NAREIT All Equity REITs

IndexWellington DIH

Benchmark

S&P NA Natural

Resources Index

FTSE EPRA-NAREIT

Global RE Index S&P GSCI

Alerian MLP Index

Inception to 11/30/04: 100% X X X X X12/01/04 to 03/31/06: 65% 35% X X X X04/01/06 to 06/30/13: 30% 70% X X X X07/01/13 to 11/30/16: X X 70% 30% X X12/01/2016 to Present X X 25% 25% 25% 25%

C|A Managed Fixed Income Benchmark

BBG Barc Aggregate Bond Index

JP Morgan Global

Government Bond Index

Citigroup 3 - Month T-Bill

IndexInception to 06/30/13: 100% X X07/01/13 to 11/30/16: 70% 10% 20%12/01/16 to Present: 100% X X

(3) From 12/01/16 to present the benchmark consists of the lagged 0.3 beta-adjusted MSCI ACWI (N) to account for Private Managed Diversifiers lagged performance. Prior to 12/01/16 benchmark consists of HFRI Fund of Funds Diversified Index.(4) Beginning 12/01/16, benchmark consists of two parts: (1) the Real Assets Benchmark weighted by the Public Real Assets' actual allocation and (2) the Private Real Assets' actual return weighted by the Private Real Assets' actual allocation. Private investments will be

self-benchmarked for the first 5 years of each fund's life. After the fifth year, private investments will be retroactively benchmarked to the Real Assets Benchmark to reflect any value that has been added over this timeframe.

Legacy Benchmark

MSCI ACWI (N)Inception to Present: ACB ACB ACB

S&P NA Natural

Resources Index


ACWI (N)

ACB

91-Day T-Bill Index

| 36


| 37


2. ANNUAL SPENDING REVIEW

| 38


Annual Spending Policy Review – Overview

At the heart of endowment investment planning is the attempt to mediate among thefollowing conflicting objectives:

Maximize long-term total return

Maximize annual spending from the fund

Preserve the real value (purchasing power) of the fund’s principal and of its spendingdistributions over the long term

Maximize the stability and predictability of spending distributions. In other words, minimizeyear-to-year volatility of the spending stream or spending shortfall risk.

This leads to the following quandaries:

The higher the spending rate, the lower the growth rate of the spending amount for any givenlevel of return

Investment returns are inherently volatile, while program expense growth is relativelystable.

This section presents comparative data on the spending rates of peer endowments. This ismeant to be informative, not prescriptive; we find that clients consider this a helpfulreference point, but we recognize that needs and resources differ among institutions. Endowment spending rates have fluctuated over time but have been relatively stable at around 5%

over the last ten years.

A fiscal year 2018 survey of colleges & universities reveals more decreases than increases in thetarget rate over the past few years. | 39


4.7%

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016

% o

f Spe

ndin

g

Year

For Perspective, What Do Peers Spend?

Historical Endowment Spending Rates1968–2018

Source: Cambridge Associates LLC, as of 6/30/2018.Note: Data represent the median spending rate of our total endowment universe.

4.8% Average over the past 10 years

| 40


4.00% or Less20%

4.01% – 4.99%31%

5.00%42%

5.01% – 5.99%6%

6.00% and Above1%

4.00% or Less 4.01% – 4.99% 5.00% 5.01% – 5.99%

6.00% and Above

Under $100M 21% 18% 50% 6% 6%n 7 6 17 2 2$100M – $200M 16% 32% 47% 5%n 6 12 18 2$200M – $500M 19% 37% 37% 7%n 8 16 16 3$500M – $1B 27% 27% 36% 9%n 9 9 12 3Over $1B 20% 37% 39% 5%n 8 15 16 2

4.00% or Less 4.01% – 4.99% 5.00% 5.01% – 5.99%

6.00% and Above

Colleges & Universities 22% 34% 35% 8% 1%n 24 38 39 9 1Independent Schools 28% 39% 33%n 5 7 6Cultural & Environmental 10% 21% 59% 7% 3%n 3 6 17 2 1Health Care 20% 30% 50%n 2 3 5Other Nonprofits 19% 19% 57% 5%n 4 4 12 1

By Asset Size

By Institution Type

—

—

—

—

—

— —

— —

Spending Rates – Peer Comparisons

Source: Spending policy data as reported to Cambridge Associates LLC., as of 6/30/2018.Notes: Market value–based spending policies base spending on a pre-specified percentage of a moving average of market values. Chart reflects data for the 189 institutions that provided detailed data on their target spending rate. If a range was provided, the target spending rate was calculated using the midpoint of the range.

The vast majority of institutions have a target spending rates of 4% to 5%; NSHE’s currentall-in distribution rate of 4.625% is in line with that of other similarly sized institutions aswell as other educational institutions.

Target Spending Rates Used in Spending Calculation: All Institutions

n = 189

| 41


Most Peers Have Maintained Same Spending Rate in Recent Years

Percentage of Institutions Making Changes to Target Spending Rates

Source: Spending policy data as reported to Cambridge Associates LLC., as of 6/30/2018.Notes: Market value–based spending policies base spending on a pre-specified percentage of a moving average of market values. Chart reflects data for the institutions using a market value–based spending policy that provided the target rate used in their spending calculation. If a range was provided, the target spending rate was calculated using the midpoint of the range.

86% 89% 90% 84% 87%

2%3% 4%

6% 2%

11% 8%6% 10% 11%

2013 to 2014(n = 124)

2014 to 2015(n = 181)

2015 to 2016(n = 179)

2016 to 2017(n = 154)

2017 to 2018(n = 164)

Same Rate Increased Rate Decreased Rate

| 42


Balancing Current / Future Spending: A Historical Perspective

Sources: BofA Merrill Lynch, Citigroup Global Markets, Federal Reserve, Global Financial Data, Inc., Standard and Poor's, and U.S. Department of Labor - Bureau of Labor Statistics. Notes: Prior to June 30, 1984 portfolio return assumes a 75% allocation to stocks and 25% allocation to bonds since 1930, rebalanced quarterly and spends a given percentage of the portfolio’s 3-year trailing average market value. U.S. common equity series consists of Standard & Poor’s 500 Index (1900 to date). The long-term bonds series is composed of Citigroup AAA/AA Corporate (High-Grade) Bond Index from 1930 to date. From June 30, 1984 to present, returns represent the Nevada System of Higher Education Endowment Fund’s real returns (adjusted using the CPI-U).

Spending rates have an impact on theability to maintain purchasing power.Historically, spending rates of 5% or belowhave maintained endowment corpii overthe long term (albeit with a fewchallenging shorter-term periods).

Over time, a lower spending rate results inmore dollars available to spend (in realterms). For example, if NSHE had startedwith a $262 million endowment in 1930(adjusted for inflation over the past 89years), a 4.625% spending rate would resultin an annual distribution amount of $120million in 2019 in today’s dollars – or $10million more than if a 4.75% spending ratehad been applied over that time period.

January 1, 1930 – March 31, 2019

$49 $46 $42

$0$10$20$30$40$50$60$70 Real Annual Spending

4.50%4.625% (Current)4.750%

$2,909 $2,821 $2,735

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

1/1/1930 1/1/1940 1/1/1950 1/1/1960 1/1/1970 1/1/1980 1/1/1990 1/1/2000 1/1/2010

Real Cumulative Spending

4.50%4.625% (Current)4.750%

$287 $258 $232

$0

$100

$200

$300

$400

$500 Real Ending Market Value4.50%4.625% (Current)4.750%

| 43


3. ESG PILOT PROJECTS

| 44


ESG Pilot Projects: Overview & Recommendations

At the Committee’s request, we present on the following pages several potential pilot projectsfor Environmental, Social and Governance (ESG) investing for the Committee to consider.Below is a summary of our recommendations:

6/30/19 AUM ($mm) Recommendations

Endowment:C|A Managed Assets

$116.6 Our investment approach for C|A Managed Assets within the Endowment is informed by our firm’s commitments as a signatory to the Principles for Responsible Investment (PRI) and our ESG and Responsible Investment Policy:• C|A integrates ESG into our assessments of all managers, and 43% of marketable managers within C|A Managed Assets have

an ESG or Responsible Investment policy. While we do not recommend adopting any particular ESG approach as a “litmus test” for inclusion in the NSHE Endowment, if NSHE wishes a greater percentage of its managers to adopt certain ESG approaches, C|A recommends an influence campaign whereby C|A relays NSHE’s ESG priorities to the managers.

• Over 10% of C|A Managed Assets are already invested in strategies that have ESG or sustainability as a primary driver of the investment thesis; we would consider these investments to be pilot projects already in place within the NSHE Endowment. We will continue to seek similar ESG/sustainability-driven strategies that are consistent with portfolio diversification and the risk/return guidelines in the current Investment Policy Statement. Should the Committee wish to mandate even higher allocations toward ESG/sustainability-driven strategies, we recommend carving out a dedicated sub-pool of assets (e.g., $10-$20 million) governed by policy language prioritizing NSHE’s sustainability objectives.

Endowment:Legacy Assets

$33.7 The Legacy Assets pool is comprised of illiquid private equity, venture capital and private natural resources partnerships towhich NSHE committed before the current OCIO structure was incepted in late 2016. Notably, NSHE’s Legacy Natural Resource partnerships have generating a 25.3% annualized return since inception in 1998, more than 2.5-times the 9.0% return for public natural resource equities. (See C|A OCIO update for performance details.) It is also worth noting that these Legacy Natural Resource partnerships are managed by Commonfund, which as a PRI signatory has committed to incorporate ESG issues into its investment process. Exiting these illiquid partnerships before the end of their fund lives would entail selling the fund interests on the secondary market (likely at a discount). C|A recommends allowing these partnerships to self-liquidate as they return capital to investors and wind down over the coming years.

Operating Fund $772.2 The Operating Fund is managed with an emphasis on high liquidity and low fees, with US & international equities implemented through Vanguard index funds. Assuming that NSHE wishes to maintain this passive management approach, the Committee could consider reallocating some portion of the Vanguard allocations to ESG-oriented indices, such as Vanguard’s new ESG ETFs. C|A recommends that the Committee consider several foundational questions before making any potential reallocations.

Operating/Capital Budgets

n/a In Appendix A we include excerpts from “Higher Education Investing in Clean Energy” from the Intentional Endowments Network, which includes many campus case studies

| 45


C|A Managed Assets – ESG Approach & Pilot Projects

NSHE has granted discretionary investment management authority to Cambridge Associates over C|A Managed Assets within the Endowment, subject to the guidelines set forth in the Statement of Investment Objectives and Policies for the Endowment Fund.

Our investment approach is also informed by C|A’s commitments as a signatory to the Principles for Responsible Investment (PRI) and our ESG and Responsible Investment Policy:

At Cambridge Associates, all client portfolios are constructed in a customized manner, reflecting each client’s specific objectives. Given our focus on helping our clients add long-term value to their portfolios, we recognize that material environmental, social and governance (ESG) factors can impact the performance of investments. We also recognize the importance of aligning investments with the specific values and mission goals of our clients. We therefore view environmental, social and governance (ESG) considerations as being integral to the future of investing, for risk management, long-term value creation and alignment with values. (C|A’s full ESG and Responsible Investment Policy attached as Appendix B.)

C|A integrates ESG into our assessments of all managers (whether or not they self-identify as having an ESG- or sustainability-driven strategy). While we do not recommend adopting any of the ESG approaches below as a “litmus test” for inclusion in the NSHE Endowment, if NSHE wishes a greater percentage of its managers to adopt certain ESG approaches, we recommend an influence campaign whereby C|A relays NSHE’s priorities to the managers:

% of Marketable Strategies(C|A Managed Assets)

Manager is a signatory to the Principles for Responsible Investment (PRI) 43%

Manager has an ESG/Responsible Investment (RI) policy 43%

ESG factors are integrated into the investment strategy and process for the strategy 43%

Strategy integrates climate-related risks and opportunities into the investment process 24%

Strategy has ESG restrictions/exclusions 16%

Manager engages with companies or other stakeholders on ESG issues for this strategy 35% | 46


C|A Managed Assets – ESG Approach & Pilot Projects (cont’d)

Of NSHE’s strategies with ESG factors integrated into their investment process, a smaller subset have ESG or sustainability as a primary driver of the investment thesis. We consider these investments to be pilot projects already in place within the NSHE Endowment:

We will continue to seek similar ESG/sustainability-driven strategies that are consistent with portfolio diversification and the risk/return guidelines in the current Investment Policy Statement. Should the Committee wish to mandate even higher allocations toward ESG/sustainability-driven strategies, we recommend carving out a dedicated sub-pool of assets (e.g., $10-$20 million) governed by policy language prioritizing NSHE’s sustainability objectives.

% of C|A Managed Assets a/o 6/30/19

Diversified international small cap equity manager that weaves ESG criteria into their fundamental stock research and to enhance their understanding of portfolio company risks and opportunities.

2.9%

Thematic water strategy that invests in public companies whose innovative technologies & products will help provide solutions to global water challenges.

1.4%

Fixed income strategy that incorporates ESG analysis into credit underwriting with the goal of enhancing risk assessment and directing capital toward credits with impact-oriented use of proceeds. The manager gives a sustainability rating to each credit in its database.

1.9%

Private credit funds focused on midsize renewable energy projects with limited access to other sources of financing, which accelerates the build-out of low-carbon and sustainable infrastructure across the US. The fund also invests in community solar and solar financing operations.

2.6%*

Private sustainable real assets fund investing in asset-based growth opportunities that increase the efficiency and sustainability of real assets across four sectors: energy, water & agriculture, transportation and land.

0.9%*

Clean tech focused venture capital and private equity strategy focused on secondary opportunities in alternative energy, water and wastewater, transportation, and energy storage.

0.9%*

TOTAL 10.6%

*After manager fully calls committed capital| 47


Operating Fund – ESG Pilot Project Options

The Operating Fund is managed with an emphasis on high liquidity and low fees, with US & international equities implemented through Vanguard index funds.

Assuming that NSHE wishes to maintain this passive management approach, the Committee could consider reallocating some portion of the US and/or international exposure to new Vanguard ETFs tracking the FTSE Global Choice Index Series, “which is designed to help investors align their values with their investment choices by selecting companies based on the impact of their products and conduct on society and the environment.”*

Specifically, these indices exclude “companies involved in Vice Products (Adult Entertainment, Alcohol, Gambling, Tobacco), Non-Renewable Energy (Nuclear Power, Fossil Fuels), and Weapons (Civilian Firearms, Controversial Military Weapons, Conventional Military Weapons). Companies are also excluded based on Controversial Conduct and Diversity practices.”*

Other notable differences relative to NSHE’s current funds are higher management fees and capitalization/country exposures that would be expected to result in higher volatility:

*FTSE Russell factsheet

US – Current$180.2mm a/o 6/30/19

US – ESG Option International – Current$116.7mm a/o 6/30/19

International – ESG Option

Fund Vanguard Institutional Index Fund

Vanguard ESG US Stock ETF Vanguard Developed Markets Index Fund

Vanguard ESG International Stock ETF

Ticker VIIIX ESGV VDIPX VSGX

Total Expense Ratio 0.02% 0.12% 0.05% 0.15%

Expected annual fee for current allocation

$36,000 $216,000($180,000 increase)

$58,000 $175,000($117,000 increase)

Index tracked S&P 500 FTSE US All Cap Choice Index

FTSE Developed All Cap ex US Index

FTSE Global ex US All Cap Choice Index

| 48


Operating Fund – Questions for Committee Feedback/Direction

1. Do the exclusionary screens of the Vanguard ESG ETFs (listed on the prior page) reflect the values of NSHE and its campuses?

We welcome direction if the Committee believes that a more narrow or broader set of exclusions are a better reflection of NSHE’s mission and values, so we can revert with potentially better-suited investment vehicles beyond Vanguard.

2. Do exclusionary screens within an index satisfy the Committee’s ESG/sustainability objectives (in contrast with the ESG/sustainability-driven strategies of active managers in C|A Managed Assets, as described on earlier slides)?

We welcome further clarity on the Committee’s priorities, including whether we should revisit the current low-fee passive approach for equities within the Operating Fund.

3. The Vanguard ESG ETFs have management fees that are 3- to 6-times higher than NSHE’s current Vanguard fees, which could result in almost $300,000 in incremental annual fees if 100% of the US and international equity investments were reallocated to the ESG ETFs. How much of an annual fee increase would the Committee be willing to incur for this potential ESG pilot project?

4. Any exclusionary screens will result in performance differences versus un-screened indices – e.g., if fossil fuel stocks outperform the broader market over a given period, the ESG ETFs would underperform NSHE’s current index funds, and vice-versa. Is the Committee comfortable with a range of potential outperformance or underperformanceresulting from these exclusionary screens? (see following slides)

| 49


Screened ESG indices will have meaningful performance variance from

Documents

NEVADA SYSTEM OF HIGHER EDUCATION...NEVADA SYSTEM OF HIGHER EDUCATION DISCUSSION MATERIALS SEPTEMBER 27, 2019 Wendy Walker, CFA Ijeh Ogbechie Lindsay Van Voorhis, CFA David Breiner