J.P. Morgan Prime Brokerage 2014 Investor Sentiments Report
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This material is provided by J.P. Morgan’s Prime Brokerage b...
2014 Investor Sentiments Report – J.P. Morgan Capital Introduction Group
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This material is provided by J.P. Morgan’s Prim...
2014 Investor Sentiments Report – J.P. Morgan Capital Introduction Group
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This material is provided by J.P. Morgan’s Prim...
2014 Investor Sentiments Report – J.P. Morgan Capital Introduction Group
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This material is provided by J.P. Morgan’s Prim...
2014 Investor Sentiments Report – J.P. Morgan Capital Introduction Group
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Important Information and Disclaimers
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This material is provided by J.P. Morgan’s Prime Brokerage business for informatio...
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JPM Prime Brokerage 2014 Institutional Investor Sentiments Report

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JPM Prime Brokerage 2014 Institutional Investor Sentiments Report

  1. 1. J.P. Morgan Prime Brokerage 2014 Investor Sentiments Report 1 This material is provided by J.P. Morgan’s Prime Brokerage business for informational purposes only. It is not a product of J.P. Morgan’s Research Departments. For Institutional Investors only. For the intended recipient only. The reference period for this publication is 2013 unless otherwise stated. March 28, 2014 Investor Sentiments Report While hedge funds performed better in 2013 than they did during the prior year, the industry found itself under some investor scrutiny as it still broadly underperformed the roaring developed equity markets. With the S&P 500 up 32.4% last year, hedge fund managers realized they were not only being compared to their peers but also to equity indices in general. As a result of positive economic data in the U.S. and Asia, improving economic sentiment globally, and continued bond buying by the Federal Reserve, developed market equities in the U.S., Europe and Japan were the best performing asset classes in 2013 (See Figure 1). Macro concerns including tensions in the Middle East centered on Egypt and Syria, heightened volatility in emerging markets, and China’s interbank market liquidity crunch, while notable, were not enough to halt the booming equity markets. To help gauge hedge fund industry trends and investment behavior, J.P. Morgan’s Capital Introduction Group completed its eleventh annual survey (“the Survey”) of nearly 300 of the world’s leading institutional investors. The Survey was based on hedge fund investment activity in 2013 and revealed a number of key findings: • We expect the hedge fund industry to continue to grow, as 97% of respondents plan to maintain or increase the number of their hedge fund investments in 2014. • Pensions appear to be the fastest growing investor segment as respondents increased their allocation to Hedge Funds; the most of any investor sector in 2013. • Event Driven was the preferred strategy of 2013, with 72% of respondents invested in the space as compared to 61% in 2012. • While respondents continue to focus on liquidity, an overwhelming majority are willing to accept a lock-up period of one year or more. Interest in hybrid/illiquid opportunities as well as hedge fund co-investment vehicles continues to grow. • Investors are more interested and willing to invest in new launches, with nearly 70% of respondents indicating they invested in a start-up manager in 2013 compared to 60% in 2012. • Despite an increase in customized product offerings and further evolution within the fund of funds industry, Survey respondents continued to decrease allocations to fund of funds for the fifth straight year. Most respondents indicated redemptions were due to performance or reallocating capital to direct hedge fund investments. The hedge fund industry continues to experience growth, ending the year with a record high of $2.63 trillion in total capital (See Figure 2). Much of that growth, however, was attributed to performance rather than net asset flows. The hedge fund industry saw $63.7 billion of net asset flows in 2013, nearly double the amount that entered the space in 20121 . Figure 1. 2013 Hedge fund performance versus developed market equity indices Source: HFR Year End 2013 Industry Report and Bloomberg Figure 2. Estimated growth of assets and net asset flows Assets in $Millions Source: HFR Year End 2013 Industry Report Even in the midst of a five year bull run in the U.S. equity market, institutional investors remain committed to the hedge fund industry. According to the Survey, 97% of respondents made new allocations to hedge funds in 2013 and expect to maintain or increase exposure in 2014. While the majority of new allocations were funded with capital returned from redemptions and lifted gates, investors more actively made 1 HFR Hedge Fund Research, HFR Global Hedge Fund Industry Report - Year End 2013, January 21, 2014 (“HFR Year End 2013 Industry Report”). 9% 32% 24% 59% 0% 10% 20% 30% 40% 50% 60% 70% HFRI Fund Weighted Composite S&P 500 MSCI Europe Nikkei ($500,000) ($250,000) $0 $250,000 $500,000 $750,000 $1,000,000 $1,250,000 $1,500,000 $1,750,000 $2,000,000 $2,250,000 $2,500,000 $2,750,000 $3,000,000 2007 2008 2009 2010 2011 2012 2013 Net Asset Flow Estimated Assets
  2. 2. 2014 Investor Sentiments Report – J.P. Morgan Capital Introduction Group 2 This material is provided by J.P. Morgan’s Prime Brokerage business for informational purposes only. It is not a product of J.P. Morgan’s Research Departments. For Institutional Investors only. For the intended recipient only. The reference period for this publication is 2013 unless otherwise stated. allocations from new capital sources rather than allocating away from other asset classes (See Figure 3). Figure 3. Sources of capital for new hedge fund allocations Source: J.P. Morgan Capital Introduction Group: Institutional Investor Survey, 2014 A large contributor to the growth of the hedge fund industry in 2013 was the pension segment (See Figure 4). Assets invested in hedge funds by defined benefit plans grew faster than any other large alternative investment asset class in the year ended September 30th, 2013. The combined $150 billion total of direct hedge fund and hedge funds-of-funds investments from the 200 largest U.S. retirement funds represents a 10.3% rise from the prior year2 . Not only is the number of pension plans (both public and private) investing in hedge funds growing, the investor segment also typically makes the largest allocations, on average, amongst Survey respondents. On average, 88% of Pensions allocate more than $25 million per hedge fund investment. A number of the largest institutional investors actively investing in hedge funds are public or corporate pension plans. Figure 4. Pensions AUM in hedge funds as a percentage of overall hedge fund industry assets (2011 -2013) Source: J.P. Morgan Capital Introduction Group: Institutional Investor Survey, 2012- 2014 In response to mediocre hedge fund returns in 2012, especially when compared to U.S. equity markets, institutional investors 2 Pension & Investments, Healthy growth of hedge fund assets continuing among DB plans, February 3, 2014, http://www.pionline.com/article/20140203/PRINT/302039997/healthy-growth-of-hedge- fund-assets-continuing-among-db-plans. entered 2013 in search of managers who had longer-biased strategies that could participate in risk assets’ ongoing rally. Investors also hoped they could find managers that could generate alpha, even in the midst of market uncertainty. As previously stated, institutional investors, in general, did not redeem capital from the hedge fund industry; however, they did reduce their exposure to underperforming managers and strategies. In the first half of 2013, a number of allocators rotated out of CTA/Managed Futures, Global Macro, Commodities and Credit strategies, reallocating capital to Fundamental Long Short Equity and Event Driven strategies. According to Hedge Fund Research (“HFR”), approximately $6.3 billion flowed out of macro strategies in 2013, over three quarters of the outflows from systematic strategies3 . Multiple years of poor performance and an inability to recover lost high water marks prompted further redemptions from CTA/Managed Futures (See Figure 5). Increased flows out of Emerging Markets, unruly weather and recent super-storms impacted pricing and volatility in the commodity space, a strategy that had another underperforming year in 2013. With the Federal Reserve continuing its bond buying program throughout the year and maintaining low interest rate forward guidance, the search for yield remained one of the overarching themes of 2013. A significant portion of Survey respondents reduced their exposure to credit-oriented strategies as spreads grew increasingly narrow. Long Short Equity and Event Driven strategies were the beneficiaries of those reallocated flows (See Figure 6). Figure 5. Strategies in which institutional investors reduced exposures in 2013 Source: J.P. Morgan Capital Introduction Group: Institutional Investor Survey, 2014 3 HFR Year End 2013 Industry Report. 73% 65% 49% 0% 10% 20% 30% 40% 50% 60% 70% 80% Redeployed Capital from Returned Redemptions and Lifted Gates New Capital Reallocated Capital from Other Asset Classes in Portfolio 6% 11% 16% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 2011 2012 2013 15% 9% 8% 8% 7% 6% 6% 5% 5% 4% 4% 4% 4% 3% 3% 2% 2% 1% 1% 1% 1% 1% 1% 0% 0% 0% 2% 4% 6% 8% 10% 12% 14% 16% CTAs/Managed Futures Global Macro Commodities Credit: Long Short Credit: Structured Credit: Distressed Credit: HighYield Emerging Markets Fixed Income Arbitrage Long Short Equity: Fundamental Credit: Multi-Strategy Long Short Equity: MarketNeutral Multi-Strategy ConvertibleArbitrage Volatility Arbitrage Fund ofFunds Event Driven Activism Hybrid/IlliquidOpportunities Long Short Equity: Sector Long Short Equity: Quantitative Long Short Equity: Short Biased Short Only: Equity Long Only: FixedIncome Long Only: Equity
  3. 3. 2014 Investor Sentiments Report – J.P. Morgan Capital Introduction Group 3 This material is provided by J.P. Morgan’s Prime Brokerage business for informational purposes only. It is not a product of J.P. Morgan’s Research Departments. For Institutional Investors only. For the intended recipient only. The reference period for this publication is 2013 unless otherwise stated. Figure 6. Strategies in which institutional investors increased exposures in 2013 Source: J.P. Morgan Capital Introduction Group: Institutional Investor Survey, 2014 To further enhance returns in their hedge fund portfolios, many institutional investors not only strategically changed strategy exposures in 2013, but also began to venture off the typical hedge fund path, directing their attention to longer lock-up/hybrid opportunities as well as co-investment vehicles. Hybrid funds, or longer-lock vehicles, began emerging as a trend among institutional investors in late 2012 and grew more prominent last year. Hybrid funds are designed to eliminate the asymmetry between structure and strategy by using longer, private equity-like lock-up periods while retaining other hedge fund characteristics4 . Although institutional investors remain focused on liquidity, several groups have considered the idea of investing in hybrid funds in order to potentially increase portfolio return potential. According to the Survey, over 50% of respondents invested in a hybrid fund in 2013. Pensions, consultants, and insurance companies represent the groups most willing to allocate to these vehicles (See Figure 7). Figure 7. Institutional investors that invest in hybrid funds Source: J.P. Capital Introduction Group: Institutional Investor Survey, 2014 4 J.P. Morgan Prime Brokerage Perspectives, The New Convergence: Hybrid Hedge Fund Structures and Longer-Biased Strategies, March 7, 2013. Many allocators have also realized that having access to a manager’s high-conviction ideas while paying lower fees could potentially lead to higher returns, hence the recent emergence of co-investment structures within the hedge fund industry. Although co-investments have long been a staple component of the private equity world, they have emerged in the hedge fund industry only more recently5 . 52% of Survey respondents indicated a willingness to partake in hedge fund co-investment opportunities in 2013, typically alongside managers of whose flagship funds they already invest in (See Figure 8). Access to unique opportunities, reduced fee structures, alignment of interests with the management team, and enhanced transparency are only some of the incentives currently grabbing the interest of prospective investors. Co- investment structures have emerged more frequently among equity managers with activist-oriented strategies as well as from credit-oriented managers that invest in less liquid, longer-duration assets, including various credits, special situations, reorganizations and capital structure arbitrage. Figure 8. Institutional investor interest in participating in a co- investment opportunity in 2013 Source: J.P. Capital Introduction Group: Institutional Investor Survey, 2014 New hedge fund launches continued to gain interest from investors in 2013, as allocators were hopeful these fund managers with unique strategy opportunities would be more eager and better positioned to outperform broader market indices. Although institutional investors continue to allocate capital to established managers with greater than $5 billion in AUM, interest has grown for emerging hedge funds with assets of less than $100 million (See Figure 9). 5 J.P. Morgan Prime Brokerage Perspectives, Aligning Interests: The Emergence of Hedge Fund Co-Investment Vehicles, First Quarter 2014. 60% 42% 27% 22% 19% 18% 18% 16% 16% 14% 13% 12% 11% 9% 8% 6% 5% 5% 4% 4% 3% 3% 3% 1% 0% 0% 10% 20% 30% 40% 50% 60% 70% Long Short Equity: Fundamental Event Driven Global Macro Long Short Equity: Sector Multi-Strategy Activism Credit: Structured Long Short Equity: MarketNeutral Credit: Distressed Credit: Long Short Long Only: Equity Credit: Multi-Strategy Long Short Equity: Quantitative Fixed Income Arbitrage Emerging Markets Hybrid/IlliquidOpportunities Credit: HighYield CTAs/Managed Futures Volatility Arbitrage ConvertibleArbitrage Commodities Long Short Equity: Short Biased Fund of Funds Long Only: FixedIncome Short Only: Equity 43% 29% 76% 39% 49% 29% 17% 33% 57% 71% 24% 61% 43% 71% 83% 67% 8% 0% 20% 40% 60% 80% 100% Bank Consultant Endowment & Foundation Family Office Fund of Funds Insurance Company Pension Registered Investment Advisor No Yes No, but plan to invest in this type of product in 2014 32% 42% 48% 0% 20% 40% 60% Yes, in new vehicles launched totake advantage ofspecific opportunities Yes, alongside hedgefunds currently invested with No Yes 52% No 48%
  4. 4. 2014 Investor Sentiments Report – J.P. Morgan Capital Introduction Group 4 This material is provided by J.P. Morgan’s Prime Brokerage business for informational purposes only. It is not a product of J.P. Morgan’s Research Departments. For Institutional Investors only. For the intended recipient only. The reference period for this publication is 2013 unless otherwise stated. Figure 9. Distribution of net asset flows by firm AUM tier Net asset flows in $Millions Source: HFR Year End 2012 Industry Report6 and HFR Year End 2013 Industry Report 2014 may shape up to be one of the most active years for hedge fund launches since before the financial crisis. That is due to a combination of factors, including experienced hedge fund teams planning to start their own firms, ready seed money from larger alternative investment managers, more spinouts of bank hedge fund and proprietary trading units from Volcker rule requirements, and institutional investors' increasing readiness to invest with managers with smaller AUMs and shorter track records. Many of the largest hedge fund managers have closed their funds to new investors, thus pushing talented managers to start their own firms and encouraging investors to look for new hedge funds to invest in, either to meet asset allocation targets or upgrade within current strategies7 . Institutional investors, even those that have not considered new hedge fund launches in the past, are increasingly interested in learning about new entrants into the industry. According to the Survey, nearly 70% of respondents are willing to invest in a start-up manager. When considering such an investment, Survey respondents highlighted fee discounts and founder’s share class offerings as the most important concessions required for an initial capital allocation. Consultants (most likely driven by client-demand) and Family Offices have exhibited the most notable increases in new launch appetite year-over-year, with roughly 19% and 18% more respondents, respectively, willing to invest in start-up managers in 2013 than in 2012 (See Figure 10). Although consultants are willing to look at new launch, they must have conviction that the manager will grow to allow for larger allocations. 6 HFR Hedge Fund Research, HFR Global Hedge Fund Industry Report - Year End 2012, January 18, 2013 (“HFR Year End 2012 Industry Report”). 7 Pension & Investments, Great year anticipated for hedge fund startups, January 20, 2014, http://www.pionline.com/article/20140120/PRINT/301209982/great-year- anticipated-for-hedge-fund-startups. Figure 10. Investments in Start-up Manager by Investor Type (2012 – 2014 Expected) Source: J.P. Morgan Capital Introduction Group: Institutional Investor Survey, 2014 Consultants and family offices are by no means the only institutional investor groups targeting new launches. In 2013, a majority of fund of funds continued to focus on emerging manager vehicles, some of which provide seed capital, to capitalize on interest expressed by their underlying clients in start-ups. This is just one step, of many, that fund of funds have taken since the financial crisis to retain and grow business. Despite the evolution of the fund of funds industry with several groups adapting their business models in order to better serve their clients (customized products, advisory services predominantly for manager selection, investment due diligence, and research), the segment is continuing to consolidate. While fund of fund AUM has remained steady over the last few years at roughly $645 billion, the number of managers continues to decline as institutional investors gain a better understanding of the alternatives space and move towards more direct hedge fund investments (See Figure 11). Survey respondents continued to decrease allocations to fund of funds for the fifth straight year, indicating redemptions due to either performance or reallocating capital to go direct. Figure 11. Estimated number of fund of funds (2001-2013) Source: HFR Year End 2013 Industry Report $1,789 $504 ($68) ($4,451) ($19,030) $55,689 $4,873 $1,646 $1,130 ($442) $16,602 $39,939 ($20,000) ($10,000) $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 <$100 million $100 to $250 million $250 to $500 million $500 million to$1 billion $1 to 5 billion >$5 billion 2012 2013 59% 46% 39% 53% 74% 45% 45% 50% 64% 65% 53% 72% 79% 46% 32% 63% 68% 80% 58% 67% 79% 46% 42% 63% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Bank Consultant Endowment &Foundation FamilyOffice Fundof Funds Insurance Company Pension Registered Investment Advisor 2012 2013 2014 Expected 0 500 1,000 1,500 2,000 2,500 3,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  5. 5. 2014 Investor Sentiments Report – J.P. Morgan Capital Introduction Group 5 This material is provided by J.P. Morgan’s Prime Brokerage business for informational purposes only. It is not a product of J.P. Morgan’s Research Departments. For Institutional Investors only. For the intended recipient only. The reference period for this publication is 2013 unless otherwise stated. An increasing number of fund of fund groups are offering customized, tailored products to complement their clients’ existing portfolios. 70% of fund of fund Survey participants currently offer or expect to offer customized products in 2014. There are those, however, that have chosen to take a different route, keeping their businesses alive through consolidation or merger and acquisition opportunities. According to the Survey, fund of funds engaged in or looking for these types of opportunities are doing so primarily to achieve size and scale (See Figure 12). Figure 12. Reasons for fund of funds merger and acquisition activity Source: J.P. Morgan Capital Introduction Group: Institutional Investor Survey, 2014 Consultants, like fund of funds, are experiencing similar business pressures. As the hedge fund industry evolves and institutional investors become more sophisticated in their investment practices, consultants have had to expand their coverage universe. Of those respondents who reported working with a consultant in the Survey, 86% and 76% use them primarily for operational due diligence and hedge fund research, respectively (See Figure 13). The notable increase in the amount of pensions investing directly in hedge funds has also led to higher demand for these consultancy services. Over half of pensions and endowments & foundations used a consultant in 2013. Therefore, consultants have been forced to examine strategies or segments they have not previously looked at, including emerging managers. Figure 13. Consulting services used by institutional investors Source: J.P. Morgan Capital Introduction Group: Institutional Investor Survey, 2014 As previously stated, many institutional investors rotated in to long short equity and event driven during 2013. Looking ahead, this trend is expected to continue for 2014 as Survey respondents predict that fundamental long short equity will be the best performing strategy (See Figure 14). As the potential for fundamentals and volatility returning to the market grows, institutional investors are hopeful that long short equity managers can once again generate alpha on the short side of their portfolios in addition to the long side. Additionally, the pickup in merger and acquisition activity has led to a renewed interest in event driven and activist strategies of which Survey respondents also anticipate performing well in 2014. Figure 14. Anticipated best performing strategy in 2014 Source: J.P. Morgan Capital Introduction Group: Institutional Investor Survey, 2014 2014 may be a telling year for the hedge fund industry, as fund managers will face continued investor inquiry as to why they have been broadly underperforming developed equity markets. Managers will be forced to justify high fees and long lock-ups by generating superior risk-adjusted returns and sourcing alpha. For now, institutional investors remain committed to the industry, but patience is limited due to the increasing availability of less expensive, long only investment vehicles. 10% 23% 40% 48% 75% 0% 20% 40% 60% 80% GeographicalDiversification Product Diversification Client Diversification Distribution Size and Scale 86% 76% 60% 38% 29% 2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% OperationalDue Diligence Research Investment Due Diligence Portfolio Construction/ManagerSelection Risk Management CIOOutsourcing 1% 1% 1% 1% 2% 2% 2% 2% 2% 3% 3% 3% 3% 4% 4% 13% 21% 32% 0% 5% 10% 15% 20% 25% 30% 35% Credit: Long Short Long Short Equity: Short Biased Credit: Distressed Fixed Income Arbitrage Convertible Arbitrage Credit: Structured Long Short Equity: Quantitative CTAs/Managed Futures Multi-Strategy Long Short Equity: Sector Emerging Markets Hybrid/Illiquid Opportunities Long Short Equity: Market… Long Only: Equity Activism Global Macro Event Driven Long Short Equity: Fundamental
  6. 6. Important Information and Disclaimers 6 This material is provided by J.P. Morgan’s Prime Brokerage business for informational purposes only. It is not a product of J.P. Morgan’s Research Departments. For Institutional Investors only. For the intended recipient only. The reference period for this publication is 2013 unless otherwise stated. This material (“Material”) is provided by J.P. Morgan’s Prime Brokerage business for informational purposes only. It is not a product of J.P. Morgan’s Research Departments. This Material includes data and viewpoints from various departments and businesses within JPMorgan Chase & Co., as well as from third parties unaffiliated with JPMorgan Chase & Co. and its subsidiaries. The generalized hedge fund and institutional investor information presented in this Material, including trends referred to herein, are not intended to be representative of the hedge fund and institutional investor communities at large. This Material is provided directly to professional and institutional investors and is not intended for nor may it be provided to retail clients. This Material has not been verified for accuracy or completeness by JPMorgan Chase & Co. or by any of its subsidiaries, affiliates, successors, assigns, agents, or by any of their respective officers, directors, employees, agents or advisers (collectively, “JPMorgan”), and JPMorgan does not guarantee this Material in any respect, including but not limited to, its accuracy, completeness or timeliness. Information for this Material was collected and compiled during the stated timeframe, if applicable. Past performance is not necessarily indicative of future results and J.P. Morgan in no way guarantees the investment performance, earnings or return of capital invested in any of the products or securities detailed in the Information. JPMorgan has no obligation to update any portion of this Material. This Material may not be relied upon as definitive, and shall not form the basis of any decisions. It is the user’s responsibility to independently confirm the information presented in this Material, and to obtain any other information deemed relevant to any decision made in connection with the subject matter contained in this Material. Users of this Material are encouraged to seek their own professional experts as they deem appropriate including, but not limited to, tax, financial, legal, investment or equivalent advisers, in relation to the subject matter covered by this Material. JPMorgan makes no representations (and to the extent permitted by law, all implied warranties and representations are hereby excluded), and JPMorgan takes no responsibility for the information presented in this Material. This Material is provided for informational purposes only and for the intended users’ use only, and no portion of this Material may be reproduced or distributed for any purpose without the express written permission of JPMorgan. The provision of this Material does not constitute, and shall not be construed as constituting or be deemed to constitute, a solicitation of, or offer or inducement to provide or carry on, any type of investment service or activity by JPMorgan. Under all applicable laws, including, but not limited to, the US Employee Retirement Income Security Act of 1974, as amended, or the US Internal Revenue Code of 1986 or the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, as amended, no portion of this Material shall constitute, or be construed as constituting or be deemed to constitute “investment advice” for any purpose, and JPMorgan shall not be considered as a fiduciary of any person or institution for any purpose in relation to Material. This Material shall not be construed as constituting or be deemed to constitute an invitation to treat in respect of, an offer or a solicitation of an offer to buy or sell any securities or constitute advice to buy or sell any security. This Material is not intended as tax, legal, financial or equivalent advice and should not be regarded or used as such. The Material should not be relied upon for compliance. An investment in a hedge fund is speculative and involves a high degree of risk, which each investor must carefully consider. Returns generated from an investment in a hedge fund may not adequately compensate investors for the business and financial risks assumed. An investor in hedge funds could lose all or a substantial amount of its investment. While hedge funds are subject to market risks common to other types of investments, including market volatility, hedge funds employ certain trading techniques, such as the use of leveraging and other speculative investment practices that may increase the risk of investment loss. Other risks associated with hedge fund investments include, but are not limited to, the fact that hedge funds: can be highly illiquid; are not required to provide periodic pricing or valuation information to investors; may involve complex tax structures and delays in distributing important tax information; are not subject to the same regulatory requirements as mutual funds; often charge higher fees and the high fees may offset the fund’s trading profits; may have a limited operating history; can have performance that is volatile; may have a fund manager who has total trading authority over the fund and the use of a single adviser applying generally similar trading programs could mean a lack of diversification, and consequentially, higher risk; may not have a secondary market for an investor’s interest in the fund and none may be expected to develop; may have restrictions on transferring interests in the fund; and may affect a substantial portion of its trades on foreign exchanges. JPMorgan may (as agent or principal) have positions (long or short), effect transactions or make markets in securities or financial instruments mentioned herein (or derivatives with respect thereto), or provide advice or loans to, or participate in the underwriting or restructuring of the obligations of, issuers mentioned herein. JPMorgan may engage in transactions in a manner inconsistent with the views discussed herein. IRS Circular 230 Disclosure: JPMorgan Chase & Co. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters included herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone not affiliated with JPMorgan Chase & Co. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. © 2014 JPMorgan Chase & Co. All rights reserved. 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Morgan in other jurisdictions worldwide are registered with local authorities as appropriate. Please consult http://www.jpmorgan.com/pages/jpmorgan/investbk/global for more information. Contact Us: Alessandra Tocco Alessandra.Tocco@jpmorgan.com 212-272-9132 Kenny King, CFA Kenny.King@jpmorgan.com 212-622-5043 Christopher M. Evans c.m.evans@jpmorgan.com 212-622-5693 Tara Colli Tara.J.Colli@jpmorgan.com 212-622-1107

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