THIRD QUARTER 2008

MORE HEADLINES

FAS 157 AND THE DENOMINATOR EFFECT
We touch on the impact of FAS 157 on reported financials and the decline in total portfolio assets.

Private Equity: Venture
The long-term nature of the venture capital investment strategy transcends multiple market cycles.

Private Equity: Buyout
Some private equity sponsors are well positioned to take advantage of market dislocations.

Private Equity: Special Sits
In this environment, risk taking of all kinds was punished.

Private Real Estate
Commercial real estate transactions slowed dramatically during the first three quarters of 2008.

Natural Resources: Timber
Instability in the housing market continued to negatively impact pricing among forest products.

Natural Resources: Energy
Crude oil prices fell during the third quarter and ended the quarter at $100/barrel.

PRIVATE CAPITAL OVERVIEW

The third quarter represented a sea change in the global capital markets, translating into a dramatic decline in activity in the private capital sectors. Lack of available financing was a material driver of the slowdown... While certainly all assets suffered, we note hedge fund returns are down roughly half that of the public markets... As such, we would argue that given the long view, carefully selected alternative investments (by strategy and by manager) should continue to provide strong portfolio benefits.

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