NAVCAP™NAV Capital Partners, LLC

Intelligent Distribution™

NAVCAP™ Competitive Advantageo Outsourced Distribution

o Variable Cost vs. Fixed Costo Salaries, Expense Management, Supervision, Licensing and Compliance, and Performance Trackingo Talent Retention, Compensation, and T&E Management managed by NAVCAP

o Core Competencieso Asset Management vs. Third Party Distribution (sales, marketing, and distribution)o Focus on Core Strengths (asset mgmt) and Execute at the Margin vs. sales, marketing, and

distributiono Talent

o Captive Cost Model (fixed) vs. NAVCAP™ High Value Differentiator (variable)o Experience, Industry Knowledge, Platform and Product Knowledge by Firm; Consults, MLPA, PIA,

Pace, MFA, UMA, MAC, CG, etc. o Deep Relationships with Financial Advisors, Key Accounts, Home Office Personnel, and other

intermediarieso Domain expertise, history of performance, demonstrated track recordso Initially 10-12 Experienced Specialists focused on Wirehouses and Regional Broker Dealers

o Resultso NAVCAP® - NAV Capital Partners is only compensated for resultso Distribution cost is based on a percentage of advisory management fee (we get paid when and only

when we deliver assets)

Where’s the business?

NY 10.82%CT 2.40% 13.22%

TX 5.98%LA 1.08%AZ 1.57%CO 1.94% 10,57%

FL 6.56%GA 2.54%TN 1.30% 10.40%

OH 4.61%MI 3.56%MN 2.07%WI 1.70% 11.94%

NC 2.21%SC 1.08%VA 2.44%MD 2.13% 7.86%

CA 13.26%WA 1.34% 14.60%

NJ 4.85%PA 4.27% 9.12%

IL 4.69%MA 3.24%MO 1.54% 9.47%

Wealth Management Landscape Consolidation The brokerage/wealth management landscape is undergoing seismic change

Assets: $2trnFAs: 20,000+ =

Assets: $1.4trnFAs: 16,000+ =

Assets: $1.7trnFAs: 21,600+ =

Shifts in distribution

Number of Wirehouse Brokers & Financial Planners

0

20

40

60

80

100

120

140

Wirehouse Brokers* Financials Planners

2000 2007 2008E

Share of Mutual Fund Sales by Channel

HNW

Individuals

National

BDs

Banks &

Insurance

Agents

RIAs

Institutional

Sales

Regional/ Independent

BDs

Source: Strategic Insight Simfund, Empirical Research Partners*Wirehouse brokers include financial brokers at Merrill Lynch, Smith Barney, Wachovia, Morgan Stanley & UBS

The top five states hold 41.56% of total opportunity

Adding the next five captures 61.43%

The top half of states yields 88.47%

The other twenty six produce 11.53% of flows

Defining Priority Segments

Defining Priority Segments

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

CA NY FL TX NJ IL OH PA MI MA GA VA CT NC MD MN CO WA WI AZ MO TN IN SC LA KY OR AL DC KS IA OK NE AR NM HI UT ME NH MS NV DE RI VT MT SD ID WV AK ND WY

Institutional clients shifting gears

Winning Categories Losing Categories

LDI Single manager hedge funds

Global mandates 130/30

Absolute return Quantitative equities

TAA Hedge fund of funds

Managed futures Private equity

Source: Eager, Davis & Holmes Survey, Empirical Research Partners

Survey of Pension Consultants

Industry ChangesIndustry changes have permanently altered asset management distribution. The effects of the latest crisis will be structural. Four main drivers have created an inflection point:

1. Shift in economics away from the manufacturer 2. Less rich revenue mix3. Rapidly falling return on the cost of sales4. Resurgence of boutique money managers

The shift in economics away from the asset manager will dramatically change their view of fixed distribution costs.

The confluence of merging platforms (UMA), share class acceptance/conversion, and downward pressure on fees in general continue to negatively affect average fee rates and margins. Even if the S+P remained at record levels, the actual fee income would remain dramatically reduced.

Industry Changes

Dynamic landscape requires flexibility o Consolidation continues both product manufacturers and distributors o Variable cost model preferableo Distribution model should be extremely focused on opportunity not

geographyo Advancing technology creates opportunity for “Boutiques”o Major shift toward advisory platforms

o Unified Managed Accounts

Shift to low-cost beta continueso Demand for low volatility and absolute return products is increasingo Increasing appetite for outcome or solution driven product

developmento Significant opportunity for absolute return product in mutual fund

package

Industry ChangesThe shift in economics away from the asset manager will dramatically change their view of fixed

distribution costs. The confluence of merging platforms (UMA), share class acceptance/conversion, and downward pressure on fees in general continue to negatively affect average fee rates and margins. Even if the S+P remained at record levels, the actual fee income would remain dramatically reduced.

Less rich revenue streamPlatform consolidation continues to drive effective fee rates lower. Load waived A shares are being converted and replaced by lower fee institutional shares in the best case. SMA model delivery is in most cases now less than 40 basis points in a slightly worse scenario. Also, customers will no longer pay high fees for beta. The race to be the low cost provider of beta continues. Revenue sharing is increasingly asset-based, further contributing to declining margins.

Rapidly falling return on cost of salesThe cost of a dollar of revenue continues to grow (approximately 13%/year 2006-2009). Shrinking existing coverage models and wholesaler compensation is not keeping pace with declining revenue. The costs of both starting and shrinking a sales force are considerable. The cost of no sales with fixed distribution costs is unbearable.

NAVCAP™ = Intelligent Distribution™

NAVCAP Specialists(outsourced)

• Variable cost, aligned• Turn-key Solution• Strong pedigree• Demonstrated performance• Existing relationships• Highly skilled• Results driven• Easy to add/delete• Key accounts• NAVCAP is an owner operator

model geared for longevity

Captive Wholesalers (internal)

• Fixed cost, unaligned• T&E funding and

oversight/accounting• Travel and expense budgets are

not aligned with ownership• Benefits• Training, supervision, HR,

registration, licensing• Distraction from core competency• Difficult to build/delete• Costly turnover

NAVCAP™Ralph Allen ralph@navcap.net http://www.linkedin.com/in/navcap Managing Partner

Michael Balch balch@navcap.net http://www.linkedin.com/pub/michael-balch/15/370/b47 National Sales Manager

Brent Hamlet brent@navcap.net http://www.linkedin.com/pub/brenton-hamlet/14/a65/612  

Michael Herndon herndon@navcap.net http://www.linkedin.com/in/rutgersmichaelherndon  

Scott Stanley scott@navcap.net http://www.linkedin.com/pub/scott-a-stanley-cima/13/0/585 National Key Accounts