EFTA01452620.pdf

S'aituttitm •till 3. Jr bate on seising the Aiii .•.morass With volatile and less predictable earnings, the market has been reluctant to assign a comparable traditional asset manger P E en the Alts' caned interest income strum. which amountal for over half of Aire pretax income over the past 2 years, Dimmer. sec see limitations in this legacy sum-of-pans v aluatim rammaa (valuing fee-earnings at much higher multiples than carried interest) primarily because of the longer-term reliability of canied interest converting into cash distributions for public unit holders. Thus, we prefer to value the All. m ksnger-term Alistlibutable earnings' (DE), %%hi& is a proxy for cash flow and the basis for cash distributions to unit holders. On this appro.+. we think these 5 Ali managers can trade at a median 12-13x PE on our 2015 DE forecasts. a year from now. which implies about 2 points of multiple expansion and over 15•. prim appresiation. and about 2204 total return inclusive of median 6.7"odistnbution yield* at ourrent price levels. lei the cummt ameromiceapital markets cyek. the Abs are likely to increasingly benefit from realizing the value of their long-term investments (from sales via LISA. IP(M. etc.) and distributing more cash to unit holden over 2014-15. Thus, we see a greater convergence of I)E. and the more volatile mark-t nnarket- driven economic act income (EMI). as the realization cyck gains ITIOlbaliUM in 2014. Asset organic growth rases should remain healthy as strong investment performance track records enable Mndmising to outpace outflows trim realized distribution toll's. Key secular trends favoring Ails are I) rising allocations globally to alternative assets by institutions. and increasingly. individuals. 2) a major aompetitive advantage in ability to generate patient capital and invest long-term and influence IIIVOUTICIki outcomes. 3) a greater role for Alts in financing. creating more capital deplomient opportunities globally. & 4) increasing concentration of asset flows to the largest Altx, which (aeon these 5 stocks. Tazia Smith Director I Key Client Partners - US Deutsche Bank Securities Inc Deutsche Asset & Wealth Management 345 Park Avenue, 26th Floor New York, NY 10154 PagSittl..qtrgeibyym, This communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0109767 CONFIDENTIAL SDNY_GM_00255951 EFTA01452620