FERI TRUST GMBH                  IN THE JUNGLE OF                    ALTERNATIVES                  SELECTION REQUIREMENTS ...
HEDGE FUNDS - A HIGHLY COMPLEX ASSET CLASS                                             Source: google pictures© FERI      ...
Hedge Funds         ....some simple facts© FERI              3
LET‘S LOOK AT SOME NUMBERS    Dow Jones Credit Suisse Multi-Strategy Hedge                                                ...
THE HEDGE FUND UNIVERSES (OFFSHORE & UCITS) STILL GROWS   Number of funds: UCITS HF         500         450         400   ...
HAVE HEDGE FUNDS LEARNED AFTER 2008?                   What did hedge fund manager change after the crisis                ...
Hedge Funds         ....a single and homogeneous asset class?                           ....NOT !                ....a div...
HEDGE FUND STRATEGY RETURNS ARE NOT CONSISTENT                                                                 1996       ...
OVERVIEW OF HEDGE FUND STRATEGIES                                  Global Macro               Tactical Trading   Managed F...
MANAGED FUTURES & GLOBAL MACRO: OVERVIEW Managed Futures -       Systematic Trading modells based on technical signals -  ...
MANAGED FUTURES & GLOBAL MACRO: CHARATERISTICSCharacteristics         Managed Futures   Global MacroLiquid                ...
MANAGED FUTURES & GLOBAL MACRO: OVERVIEW                  DJ CS Managed Futures Index   370                  DJ CS Global ...
MANAGED FUTURES & GLOBAL MACRO: CORRELATION    Managed Futures have a negative correlation especially in times of equity m...
MANAGED FUTURES & GLOBAL MACRO: RETURN IN TIMESOF CRISES                              Return in difficult equity markets (...
MANAGED FUTURES & GLOBAL MACRO: DIVERSIFICATION NEEDED                                                                    ...
OVERVIEW OF HEDGE FUND STRATEGIES                                  Global Macro               Tactical Trading   Managed F...
PERFORMANCEANALYSIS: EQUITY HEDGE VS. EQUITY LONGONLY                             Equity Hedge Index *                    ...
DRAWDOWNANALYSIS: EQUITY HEDGE VS. EQUITY LONGONLY                          Equity Hedge Index *                          ...
10% OF EQUITY HEDGE IN A TRADITIONAL PORTFOLIO                                                                            ...
Hedge Funds                    ....good or bad ?                   ... THE JUNGLE ?         ... And how can we shed light ...
CRITICAL ASPECTS OF HEDGE FUND SELECTION         1. Returns                  persistance, analysis...         2. Illquidit...
SPOT LIGHT INTO THE QUANT JUNGLE: FACTOR ANALYSISCurrent factors used (240): 35 Commodities factors 6 Credit factors 7 Cur...
HEDGE FUND MANAGERS: ....THEN A MIRACLE OCCURS                                           Source: google pictures© FERI    ...
HEDGE FUND RISK ANALYSIS – AN OVERVIEW                                        1. Administrative risks:   audit and control...
QUALITATIVE EVALTUATION CRITERIA                                                    Hedge Fund Evaluation System          ...
QUALITATIVE ANALYSIS:ASSESSMENT FRAMEWORK         Risk                                                           Strategy ...
QUALITATIVE ANALYSIS:ASSESSMENT FRAMEWORK  Inst. Aspects                               Management                         ...
QUALITATIVE ANALYSIS: DATABASE & CUSTOMIZED QUESTIONNAIRESAll information (up to400 data per fund) isentered into adatabas...
EXTENSIVE DOCUMENTATION OF EVERY PROCESS STEP         Contact Records            Meeting Notes            Investment Propo...
PORTFOLIO RISKS REPORTING FOR A MULTI STRATEGY HFPORTFOLIO Risk reports show parameters of                                ...
RÉSUMÉ: Hedge Funds.... ...is the name of a group of various strategies with vastly different characteristics ...all strat...
DISCLAIMER                         Any questions...?                         Thank you for your attention                 ...
Upcoming SlideShare
Loading in …5
×

In the Jungle of Alternatives - Presentation: Antje Biber Managing Partner, Feri Trust GmbH - Investments Summit

674 views

Published on

For more information contact: emailus@marcusevans.com

A presentation by Antje Biber, the Managing Partner at Feri Trust GmbH who presented on selection requirements for hedge funds at the Investment Consultant Summit, September 2012.

Join the 2014 Investments Summit along with leading regional investors in an intimate environment for a highly focused discussion on the latest investment strategies in the market.

For more information contact: emailus@marcusevans.com




Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
674
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
11
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

In the Jungle of Alternatives - Presentation: Antje Biber Managing Partner, Feri Trust GmbH - Investments Summit

  1. 1. FERI TRUST GMBH IN THE JUNGLE OF ALTERNATIVES SELECTION REQUIREMENTS FOR HEDGE FUNDS Antje Biber Managing Partner, Feri Trust GmbH Investment Consultant Summit September 4th 2012
  2. 2. HEDGE FUNDS - A HIGHLY COMPLEX ASSET CLASS Source: google pictures© FERI 2
  3. 3. Hedge Funds ....some simple facts© FERI 3
  4. 4. LET‘S LOOK AT SOME NUMBERS Dow Jones Credit Suisse Multi-Strategy Hedge MSCI World Fund Index return Return p.a. Volatility p.a. return Return p.a. Volatility p.a.YTD 4.58% 9.36% 4.32% YTD 2012 6.29% 12.98% 16.35%2y 15.83% 7.62% 5.39% 2y 25.40% 11.98% 18.26%3y 29.17% 8.91% 4.65% 3y 38.91% 11.58% 17.58%5y 13.00% 2.40% 8.70% 5y -11.43% -2.40% 20.89%10 y 93.44% 6.82% 5.81% 10 y 74.69% 5.74% 17.20%Source: Credit Suisse und PerTrac, : 2002- June 2012© FERI 4
  5. 5. THE HEDGE FUND UNIVERSES (OFFSHORE & UCITS) STILL GROWS Number of funds: UCITS HF 500 450 400 350Anzahl 300 250 200 150 100 50 0 UCITS Long/Short Fonds Number of funds / Assets under management Offshore Hedge Funds© FERI 5 Source : Feri, Eurekahedge, BofAML
  6. 6. HAVE HEDGE FUNDS LEARNED AFTER 2008? What did hedge fund manager change after the crisis Einräumung häufigerer higher Liquidity Liquidationsmöglichkeiten 36% lower Management Fees Senkung der 31% Managementgebühren shorter Lock-up periods Fristen Senkung der Lock-Up 27% reduction of performance fee Reduzierung der Performance 16% Fee managed accounts Managed Angebot gesonderter 13% Accounts shorter Kürzung der Kündigungsfristen redemption period 9% changes of gating rulesder Veränderung Maximalkündigung (Gates) 7% lengthening of lock-upsLock-Up Verlängerung der 7% Fristen Source: Ernst&Young ‚Restoring the balance‘ 2010 global hedge fund survey.© FERI 6
  7. 7. Hedge Funds ....a single and homogeneous asset class? ....NOT ! ....a diversifing instrument ? ....absolutely !© FERI 7
  8. 8. HEDGE FUND STRATEGY RETURNS ARE NOT CONSISTENT 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 YTD Managed Equity Convertible Distressed Managed Distressed Distressed Equity Short Special Managed Convertible Special DistressedConvertible Global Macro Global Macro Global Macro Global Macro Futures Long/Short Arbitrage Securities Futures Securities Securities Bias Situations Futures Arbitrage Situations SecuritiesArb. 25.6% 37.1% 17.4% 5.98% 20.6% 47.2% 25.6% 20.0% 18.3% 25.1% 15.6% 17.0% 16.4% 18.3% 47.4% 14.4% 4.71% Relative Value Distressed Equity Equity Special Equity Short Equity Short Special Distressed Distressed Special Equity Short Fixed Income Equity Fixed IncomeFixed Income Global Macro Global Macro Global Macro Securities Long/Short Long/Short Situations Bias Bias Situations Securities Securities Situations Bias Arbitrage Arbitrage ArbitrageArb. 18.4% 18.0% 13.5% 25.5% 21.5% 17.2% 23.0% 15.8% 18.1% 14.0% 11.7% 15.6% 16.8% 14.9% 27.4% 5.00% 3.90% Special Distressed Equity Distressed Equity Convertible Equity Equity Equity Equity Equity Merger Distressed Fixed Income Fixed Income Convertible Global MacroEquity Arb. Situations Securities Arbitrage Securities Arbitrage Arbitrage Long/Short Long/Short Long/Short Long/Short Long/Short Arbitrage Securities Arbitrage Arbitrage Arbitrage 14.7% 22.7% 20.7% 13.3% 22.2% 15.0% 14.6% 17.3% 11.6% 9.7% 14.4% 13.7% -3.3% 21.0% 12.5% 4.30% 3.74% Convertible Special Merger Convertible Merger Equity Equity Special Convertible Equity Special Managed Special Global Macro Global Macro Global Macro Equity ShortRisk Arb. Arbitrage Situations Arbitrage Arbitrage Arbitrage Arbitrage Arbitrage Situations Arbitrage Arbitrage Situations Futures Situations 8.5% 9.3% -4.6% Bias 2.17% 17.9% 20.5% 5.6% 16.0% 14.7% 9.3% 7.4% 17.2% 14.3% 9.3% 19.9% 12.2% 3.12% Event Driven Annual Return (% p.a.) Equity Equity Distressed Equity Special Fixed Income Fixed Income Managed Fixed Income Special Merger Special Equity Convertible MergerDistressed Global Macro Managed Long/Short Arbitrage Securities Arbitrage Situations Arbitrage Arbitrage Futures Arbitrage Situations Arbitrage Situations Long/Short Arbitrage ArbitrageSec. 13.5% Futures 2.15% 17.1% 14.8% -1.7% 15.3% 11.8% 8.0% 5.8% 14.1% 6.7% 7.2% 8.8% -16.3% 19.5% 11.0% 1.19% Equity Convertible Merger Special Convertible Convertible Equity Equity Equity Distressed Equity Merger Distressed Convertible EquitySpecial Global Macro Global Macro Arbitrage Arbitrage Arbitrage Situations Arbitrage Arbitrage Arbitrage Arbitrage Arbitrage Securities Long/Short Arbitrage Securities Arbitrage Long/ShortSituations -3.6% 11.7% 16.6% 14.5% 13.2% 6.8% 4.0% 12.9% 6.5% 6.1% 11.2% 8.4% -19.8% 12.0% 10.3% 0.49% 1.86% Fixed Income Merger Convertible Fixed Income Fixed Income Merger Special Merger Managed Merger Fixed Income Managed Distressed Equity DistressedEquity Global Macro Global Macro Equity Hedge Arbitrage Arbitrage Arbitrage Arbitrage Arbitrage Arbitrage Situations Arbitrage Futures Arbitrage Arbitrage Futures Securities Long/Short SecuritiesLong/Short 11.6% 1.52% 15.9% 9.8% -4.4% 12.1% 6.3% 5.7% 1.2% 9.0% 6.0% 3.1% 8.7% 6.0% -20.5% 9.28% -4.19% Merger Fixed Income Equity Short Managed Managed Distressed Fixed Income Merger Fixed Income Merger Equity Short Fixed Income Equity Merger Managed MergerEquity Short Global Macro Arbitrage Arbitrage Bias Futures Futures Securities Arbitrage Arbitrage Arbitrage Arbitrage Bias Arbitrage Arbitrage Arbitrage Futures ArbitrageBias 5.8% 13.8% 9.3% -6.0% 4.2% 1.9% -0.7% 8.0% 5.5% 0.6% 8.2% 6.0% -28.8% 4.1% 3.20% -4.94% 0.05% Managed Managed Fixed Income Managed Equity Equity Short Equity Equity Convertible Managed Managed Convertible Convertible Managed Equity Equity Equity Tactical TradingGlobal Macro Futures Futures Arbitrage Futures Long/Short Bias Long/Short Arbitrage Arbitrage Futures Futures Arbitrage Arbitrage Futures Arbitrage Long/Short Arbitrage 12.0% 3.1% -8.2% -4.7% 2.1% -3.6% -1.6% 7.1% 2.0% -0.1% 8.0% 5.2% -31.6% -6.6% -0.9% -6.48% -2.28% Equity Short Equity Short Special Equity Short Distressed Equity Merger Equity Short Equity Short Convertible Equity Short Fixed Income Equity Equity Short Equity Short Special Equity ShortManaged Bias Bias Situations Bias Securities Long/Short Arbitrage Bias Bias Arbitrage Bias Arbitrage Arbitrage Bias Bias Situations BiasFutures -5.5% 0.4% -9.0% -14.2% 1.9% -3.7% -3.5% -32.6% -7.7% -2.6% -6.6% 3.8% -40.3% -25.0% -22.5% -10.85% -7.62%Source: Credit Suisse; Data including May 2012 Source: Credit Suisse 2012© FERI 8
  9. 9. OVERVIEW OF HEDGE FUND STRATEGIES Global Macro Tactical Trading Managed Futures Other Systematic Trading Convertible Bond Arbitrage Diversifying Strategies Fixed Income Arbitrage Relative Value Equity Arbitage Capital Structure Arbitrage Mixed Relative Value Merger Arbitrage Special Situations Event Driven Distressed Securities Mixed Event Driven Directional Strategies Equity Hedge Long Bias Equity Hedge No Bias Equity Hedge Equity Hedge Short Bias Mixed Equity Hedge© FERI 9
  10. 10. MANAGED FUTURES & GLOBAL MACRO: OVERVIEW Managed Futures - Systematic Trading modells based on technical signals - Diverse substrategies o Trendfollowing / Momentum o Countertrend / Mean-reverting o Systematic Macro - Mainly directional positions diversified over multiple markets ( also commodities) Global Macro − Discretionary trading decisions based on macro economic views − Identification of makroeconomic trends − Diversification of managers through investment focus − Global and regional specialists − „relative Value“ as well as directional positions© FERI 10
  11. 11. MANAGED FUTURES & GLOBAL MACRO: CHARATERISTICSCharacteristics Managed Futures Global MacroLiquid + +Longterm uncorrelated + +/-Low leverage + +Diversified + +/-Trading decisions systematic discretionaryBasis technical fundamental© FERI 11
  12. 12. MANAGED FUTURES & GLOBAL MACRO: OVERVIEW DJ CS Managed Futures Index 370 DJ CS Global Macro Index MSCI World 320 270 220 170 120 70 Dec 97 Dez 97 Dec 98 Dez 98 Dec 99 Dez 99 Dec 00 Dez 00 Dec 01 Dec 02 Dez 02 Dec 03 Dez 03 Dec 04 Dez 04 Dec 05 Dez 05 Dec 06 Dec 07 Dez 07 Dec 08 Dez 08 Dec 09 Dez 09 Dec 10 Dez10 Dec 11 Dez 11 Dez 01 Dez 06 Quelle: Feri© FERI 12
  13. 13. MANAGED FUTURES & GLOBAL MACRO: CORRELATION Managed Futures have a negative correlation especially in times of equity market crises! 1 170 12M Korrelation CS 12m correlation: 0.8 CS Managed Future Index Managed Futures Index (lhs) 150 0.6 Korrelation: Langfristiger Correlation: Durchschnitt (lhs) longterm average 0.4 130 0.2 0 110 -0.2 90 -0.4 -0.6 70 -0.8 -1 50 Dez 98 Dec 98 Jun 00 Jun 00 Dez 01 Dec 01 Jun 03 Jun 03 Dez 04 Dec 04 Jun 06 Jun 06 Dez 07 Dec 07 Jun 09 Jun 09 Dez 10 Dec 10 Quelle: Feri© FERI 13
  14. 14. MANAGED FUTURES & GLOBAL MACRO: RETURN IN TIMESOF CRISES Return in difficult equity markets (1994 - today) 20% 15% 10% 5% 0% -5% -10% -15% MSCI World -20% DJ CS Managed Futures Index DJ CS Global Macro Index -25% Q4 2008 Q3 2002 Q3 2011 Q3 2008 Q3 2001 Q2 2010 Q1 2001 Q1 2009 Q3 1998 Q2 2002 Q1 2008 Source: Feri© FERI 14
  15. 15. MANAGED FUTURES & GLOBAL MACRO: DIVERSIFICATION NEEDED Volatile strategies need diversification 3 month returns on the basis of 420 funds Results based on randomly generated Portfolios (320.000 Data) 1 fund 10 funds Statistical characteristica (Median):600 600 10 Funds 2 Funds 5 Funds 1 Fund500 500400 400300 300 Return p.a. 9,6% 10,3% 10,8% 10,9%200 200 Volatility 20,0% 16,3% 13,3% 12,0%100 100 0 0 Sharpe (2%) 0,38 0,51 0,66 0,74 Apr. 01 Apr. 03 Apr. 05 Apr. 07 Apr. 09 Apr. 01 Apr. 03 Apr. 05 Apr. 07 Apr. 09 Dez. 99 Dez. 01 Dez. 03 Dez. 05 Dez. 07 Dez. 09 Dez. 99 Dez. 01 Dez. 03 Dez. 05 Dez. 07 Dez. 09 Aug. 00 Aug. 02 Aug. 04 Aug. 06 Aug. 08 Aug. 10 Aug. 00 Aug. 02 Aug. 04 Aug. 06 Aug. 08 Aug. 10 1 fund 10 funds Probability of 3-month-drawdowns (DD):35,0% 35,0% 10 Fonds 1 Fonds 2 Fonds 5 Fonds30,0% 30,0%25,0% 25,0%20,0% 20,0%15,0% 15,0% DD >-5% 17,9% 14,2% 9,8% 7,6%10,0% 10,0%5,0% 5,0% DD >-10% 6,9% 3,8% 1,3% 0,6%0,0% 0,0% -30,0% -20,0% -10,0% 0,0% 10,0% 20,0% 30,0% -30,0% -20,0% -10,0% 0,0% 10,0% 20,0% 30,0% © FERI 15
  16. 16. OVERVIEW OF HEDGE FUND STRATEGIES Global Macro Tactical Trading Managed Futures Other Systematic Trading Convertible Bond Arbitrage Diversifying Strategies Fixed Income Arbitrage Relative Value Equity Arbitage Capital Structure Arbitrage Mixed Relative Value Merger Arbitrage Special Situations Event Driven Distressed Securities Mixed Event Driven Directional Strategies Equity Hedge Long Bias Equity Hedge No Bias Equity Hedge Equity Hedge Short Bias Mixed Equity Hedge© FERI 16
  17. 17. PERFORMANCEANALYSIS: EQUITY HEDGE VS. EQUITY LONGONLY Equity Hedge Index * MSCI World Return Return p.a. Volatility p.a. Return Return p.a. Volatility p.a.1- y -4.49% -4.49% 7.47% 1- y -13.54% -13.54% 20.01%2- y 4.14% 2.05% 6.78% 2- y 8.47% 4.15% 18.57%3- y 9.91% 3.20% 6.33% 3- y 11.92% 3.83% 17.88%5- y 11.18% 2.14% 8.70% 5- y -33.02% -7.70% 20.90%10- y 86.99% 6.46% 7.27% 10- y 11.87% 1.13% 17.22%Source: * ARIX Equity Hedge Index, Feri und Hedgefund.net, 01. 2002- 05. 2012© FERI 17
  18. 18. DRAWDOWNANALYSIS: EQUITY HEDGE VS. EQUITY LONGONLY Equity Hedge Index * MSCI World Drawdown Duration Recovery Drawdown Duration Recovery DD 1 -20.05% 13 25 DD 1 -55.51% 16 n.a. DD 2 -8.07% 5 n.a DD 2 -26.47% 6 15 DD 3 -3.96% 1 3 DD 3 -4.51% 2 3 Source: Feri und Hedgefund.net, 01.2002- 05.2012 *: ARIX Equity Hedge Index© FERI 18
  19. 19. 10% OF EQUITY HEDGE IN A TRADITIONAL PORTFOLIO Volatilitätsvergleich Return comparison Renditenvergleich Volatility comparison10% 9%8% 8% 7%6% 6%4% 5%2% 4%0% 3%-2% 2%-4% 1% 0%-6%-8% Equity Hedge Index 80%Bonds, 10% Equities, 10% ARIX Equity Hedge 80%Bonds, 20% Equities Equity Hedge Index 80%Bonds, 10% Equities, 10% ARIX Equity Hedge 80%Bonds, 20% Equities 10 % of Equity Hedge allocation leads to higher returns and lower volatility ! Source: Feri und Hedgefund.net HF Index: ARIX Equity Hedge , „Bonds“ Barclays Aggregate Bond Index „Equities“ MSCI World © FERI 19
  20. 20. Hedge Funds ....good or bad ? ... THE JUNGLE ? ... And how can we shed light on them ?© FERI 20
  21. 21. CRITICAL ASPECTS OF HEDGE FUND SELECTION 1. Returns persistance, analysis... 2. Illquidity redemption restrictions... 3. Benchmarking survivorship bias... 4. Regulation operational risk... 5. Transparency managers...© FERI 21
  22. 22. SPOT LIGHT INTO THE QUANT JUNGLE: FACTOR ANALYSISCurrent factors used (240): 35 Commodities factors 6 Credit factors 7 Currency factors 31 Emerging Markets factors 56 Equity factors 32 Fixed Income factors 31 HF Indices 9 Mortgage factors 14 Non-linear payoffs 9 Real Estate factors 10 Volatility factorsAutocorrelation and non linear performancecomponents considered© FERI 22
  23. 23. HEDGE FUND MANAGERS: ....THEN A MIRACLE OCCURS Source: google pictures© FERI 23
  24. 24. HEDGE FUND RISK ANALYSIS – AN OVERVIEW 1. Administrative risks: audit and controlling requirements (registration, official audit, independent pricing etc.) Qualitative Evaluation 2. Personal risks: background checks for all fund managers (education, former employers, clients etc.) 3. Operational risks: financial control, back office, trade execution, liquidity terms and lock-up periods 4. Management risks: detailed and appropriate risk management systems (personally checked !) Analysis Quant. 5. Portfolio risks: liquidity, leverage, market risk exposures, etc.© FERI 24
  25. 25. QUALITATIVE EVALTUATION CRITERIA Hedge Fund Evaluation System Risk Strategy Inst. Aspects Management Economics • Risk Management • Concept • Organizational • Ability/Profile • Fund cash flows Approach structure • Consistency • Resources • Costs • Systems • Customer • Capacity • Motivation Relations • Independent Risk Manager • Operations • Market exposureThe analysis and the evaluation prosess must be consistent, transparent, independent from the analyst ! Content of RatingBase System: For each fund 50 basic information criteria and 400 valuation criteria 60 valuation criteria are rating criteria All of these rating criteria are grouped into 5 rating segments These rating segments are weighted as shown and finally consolidated into the fund rating© FERI 25
  26. 26. QUALITATIVE ANALYSIS:ASSESSMENT FRAMEWORK Risk Strategy Risk – Risk Management Approach Strategy – Concept - How does the manager try to avoid getting into difficult - Competitive advantage? situations? - Structured investment process? - Match of advantage / uniqueness with investment Risk – Risk Management Systems process? - Will adverse moves be picked up quickly enough? Strategy – Consistency Risk – Independent Risk Manager - Has the manager left the area of his “edge”? - Is there a RM who will be able to stop out (or contain in - To which extent was the strategy changed? any other way) the losing position? - Is the change likely to have a positive or negative - Uniqueness impact on the future performance of the fund? Risk – Market Exposure Strategy – Capacity - What is the maximum loss likely to be suffered in normal - Approximate true capacity of the fund/strategy? / extreme market based on market exposure / position - Is the manager’s capacity estimation realistic? concentration / leverage / illiquidity of the book? - Is the manager operating above his capacity? Strategy – Trading - Match of trade execution process with strategy?© FERI 26
  27. 27. QUALITATIVE ANALYSIS:ASSESSMENT FRAMEWORK Inst. Aspects Management Economics Inst. Aspects – Management – Ability / Profile Economics – Fund Cash Flow Organizational Structure - Stability of team - Are there any dangers of the fund - Quality and independence of the - Relevance of work experience/education being squeezed out by redemptions? business partners: administrator, - Length of experience in industry prime broker, and auditor of the fund Economics – Costs Management – Resources - Is the cost structure excessive with Inst. Aspects – Customer - How many investment professionals / other respect to management motivation Relations Management staff? and strategy? - Is the report sufficient to monitor the - Is the staff concentrated on the fund or also fund? doing other things? - Is the staffing sufficient to support the scope of the strategy? Inst. Aspects – Operations - Is a proper financial control guaranteed by the fund’s structure Management – Motivation and its back office operations? - Is the staff (incl. analysts) directly linked to the success of the fund? - Is the manager hurt if he makes a big loss? - How is the manager’s other wealth distributed / is he focused on the fund?© FERI 27
  28. 28. QUALITATIVE ANALYSIS: DATABASE & CUSTOMIZED QUESTIONNAIRESAll information (up to400 data per fund) isentered into adatabase in acomprehensivemanner60 valuation criteriaare rating criterialeads to a finalinternal rating© FERI 28
  29. 29. EXTENSIVE DOCUMENTATION OF EVERY PROCESS STEP Contact Records Meeting Notes Investment Proposals ⇒Transparency and objectivity of evaluation is needed For every fund & every fund manager© FERI 29
  30. 30. PORTFOLIO RISKS REPORTING FOR A MULTI STRATEGY HFPORTFOLIO Risk reports show parameters of Systematic risk (Beta, style and factor exposures) strategy specific risks in the portfolio are monitored for each portfolio on a monthly basis Factor exposure VaR VaR max VaR breakdown per strategy: Type A Model 1.86% 2.56% Portfolio VaR (95%): 4.16% MSCI World 0.258 Style Weight VaR VaR weight Lehman Aggregate Bond Index 0.167 Goldman Sachs Commodity US $ DRI Index 0.052 ED 14% 153459 0.60% VaR weight EH 51% 483388 1.89% Type B Model 1.85% 2.25% RV 18% 105628 0.41% CSFB/Tremont Convertible Arbitrage Index -0.229 ED TT 17% 322428 1.26% 14% CSFB/Tremont Distressed Index 0.129 TT CSFB/Tremont Equity Market Neutral Index 0.149 30% CSFB/Tremont Event Driven Index 0.302 Sum 100% 1064903 4.16% CSFB/Tremont Fixed Income Arbitrage Index -0.002 CSFB/Tremont Global Macro Index 0.044 CSFB/Tremont Long/Short Equity Index 0.091 CSFB/Tremont Managed Futures Index 0.027 Factor exposure RV CSFB/Tremont Risk Arbitrage Index 0.256 EH 10% 46% factor exposure MSCI World 0.26 Factor exposure VaR VaR max Lehman Aggregate Bond Index 0.17 Strategy weight Unrestricted Model 2.33% 3.61% Goldman Sachs Commodity US $ DRI Index 0.05 10 year Bund yield* -0.821 10 year Japan yield* 0.598 10 year Treasury yield* 0.179 Style exposure TT ED 10-Year Treasury Benchmark 0.098 14% 3 months T-Bill yield* -0.012 17% Amex Oil Index 0.034 HF Index exposure DAX 30 0.013 DJ Stoxx 600 0.010 CSFB/Tremont Convertible Arbitrage Index -0.23 eur_tr 0.005 RV CSFB/Tremont Distressed Index 0.13 Fama/French SMB 0.017 18% Federal Reserve Trade weighted value of US Dollar 0.075 CSFB/Tremont Equity Market Neutral Index 0.15 FTSE All Shares -0.012 CSFB/Tremont Event Driven Index 0.30 EH FTSE Small Caps 0.037 High Yield factor 0.023 CSFB/Tremont Fixed Income Arbitrage Index 0.00 51% Investment grade spread* 0.100 CSFB/Tremont Global Macro Index 0.04 Lehman High Yield Credit Bond Index 0.023 MSCI Europe Small Caps 0.012 CSFB/Tremont Long/Short Equity Index 0.09 MSCI World 0.020 CSFB/Tremont Managed Futures Index 0.03 MSCI World Metals & Mining USD 0.018 Realized S&P 500 volatility change -0.057 CSFB/Tremont Risk Arbitrage Index 0.26 S&P 500 0.074 S&P/TSX OIL & GAS INDEX 0.002© FERI 30
  31. 31. RÉSUMÉ: Hedge Funds.... ...is the name of a group of various strategies with vastly different characteristics ...all strategies should be analyzed and allocated individually ...quantitative and qualitative analysis of Hedge Funds require an adaption of • research processes • evaluation parameters • risk monitoring ...can deliver diversification and alpha for institutional portfolios ... But remember: “There is no such thing as a free lunch!”© FERI 31
  32. 32. DISCLAIMER Any questions...? Thank you for your attention Feri Trust GmbH Haus am Park Rathausplatz 8-10 61348 Bad HomburgThis presentation is for informational purposes only. An investor should consult and review the appropriate offering memorandum before making any investment decisions.This presentation does not constitute an offer to any person to whom it would be unlawful to make such an offer.Prospective investors should inform themselves and take appropriate advice as to any applicable legal requirements and any applicable taxation and exchange control regulations inthe countries of their citizenship, residence or domicile which might be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments.Past performance is not a guide to future performance and the value of investments and the income derived from them can go down as well as up. Future returns are not guaranteedand a loss of principal may occur.Opinions expressed are current opinions as of the date appearing in this material only. No part of this material may be 1.) Copied, photocopied or duplicated in any form, by any means;or 2.) redistributed without Feri Trusts‘ (FT) prior written consent.© FERI 32

×