Hedge Fund Review’s special report gives particular emphasis on EXANTE’s potential to support the next generation of financial companies by connecting different types of clients such as asset managers and high-net-worth individuals with its unique integrated electronic trading and fund platform providing access to all markets, all instruments and a variety of exchanges, as well as direct market access and high-speed infrastructure.

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FUND PROFILES
5 MTG China Arbitrage Fund
Capturing the essence
of market growth
Liza Aizupiete reveals how the MTG China
fund is entirely unique despite its trading
system boasting an impressive heritage
6 FTM
Playing it safe
An innovative way to gain value from
discounted medical accounts receivables
is proving popular with investors
7 Chicago Capital
Management
Beautifully boring
Chicago Capital Management’s
strategy will not get any pulses
racing, but its returns will
8 Niagara Discovery Fund
A winning formula
David Rothberg sticks to what he
knows and hires managers he knows
for the Niagara Discovery Fund
9 The Jordan Company
Hedge fund manager makes
virtual track record a reality
A focus on small and mid-cap
companies in undervalued sectors
is proving a winning formula
for The Jordan Company
10 Apis Offshore Capital
A global approach
to opportunities
Extensive experience, coupled
with a flair for finding overlooked
investment stories, is a profitable
strategy for Apis Offshore Capital
11 Quantum Brains Capital
From algos, with love
Quantum Brains Capital has used
local expertise in mathematics
and information technology to
create what it believes is a unique
set of trading algorithms
OVERVIEW
3 EXANTE
Access all areas
EXANTE managing partner Alexey
Kirienko discusses how technology is
at the centre of creating systems and
product offerings that are attractive for
both asset managers and investors
EXANTE 2013exante.eu

3. OVERVIEW
Access all areas
3
EXANTE, a Malta-based brokerage company,
has harnessed cutting-edge technology to
develop an integrated trading and fund
platform to support the next generation of
financial companies, says managing partner
Alexey Kirienko.
The company was established in March
2011 to exploit a gap in the market for
an execution broker that could provide
an electronic platform with access to all
markets, all instruments and a variety of
exchanges, as well as direct market access
and high-speed infrastructure.
“All the managing partners of EXANTE
used to work with different brokers or
hedge funds around the globe,” explains
Kirienko, “so the niche was obvious to
us and we simply set up the platform
to address those needs.” Clients include
professional investors, brokerage firms,
hedge funds, financial institutions and asset
management companies.
EXANTE’s automated trading platform
(ATP) also offers access to EXANTE Hedge
Fund Marketplace, an online platform
that currently lists funds from more than
40 management companies. Professional
investors and financial institutions can
use the platform to view information on
a variety of products and then invest with
one click. Management companies that list
on the platform can gain exposure to users
such as high-net-worth investors, financial
institutions and funds of funds.
The idea for the listings tool came about
when brokers at the company found
themselves repeatedly connecting different
types of clients such as asset managers and
high-net-worth individuals.
“That wasn’t our core business, so
instead of introducing them via phone or
in person, we thought it would be much
more convenient to set up an online system
whereby our customers could click on a
particular hedge fund’s name, see details
of its performance and maybe read some
additional information before being able
to simply add it to their portfolio with one
click,” states Kirienko.
EXANTE’s infrastructure was designed to
aid accessibility and to promote transparency.
Kirienko argues that EXANTE’s hedge
fund marketplace can offer investors more
transparency and control than they would
normally be able to achieve when investing
money with a bank or in the stock market.
“An investor can use the platform to create
a portfolio of managers that specialise in
various fields and even flavour the portfolio
with bonds, stocks, and so on, receiving a fair
risk/reward,” explains Kirienko.
“But, even with a simple deposit in a bank,
you do not know what the risks are and
are simply paid an interest rate, which is
currently very low,” he says. “Stock markets
have proven themselves to be highly
correlated on a global scale and too reliant
on liquidity rather than the intrinsic value of
the business.”
Hedge funds, on the other hand, are “the
ultimate structure for the next generation of
finance”, says Kirienko. Investors can check
on performance because administrators
calculate net asset value (NAV) on a
monthly basis and auditors then check the
work of administrators. In addition, in the
event that an investor does lose faith in one
or more of the managers they have invested
with, they can simply drop the relevant
funds from their portfolio.
While the alternative investment market
is often perceived to be opaque, Kirienko
believes that proper due diligence by an
external party can boost investor confidence
in the sector. EXANTE itself implements
strict criteria for listing funds and has
developed an in-depth due-diligence
process that involves plenty of direct contact
with the fund managers before they are
accepted onto the marketplace.
“We conduct a lot of interviews and find
out where the fund is domiciled, ensure it
has appropriate accountants, administrators
and auditors,” Kirienko explains.
Past performance is also important.
For example, EXANTE looks at how long
the management company has been in
operation and how the fund fared during
difficult periods in the market such as the
2008 financial crisis.
“If the fund satisfies those parameters, we
go in depth with the manager about their
strategies. If we think the strategies make
sense and there is edge, then we are happy
to list the fund on the system.” Kirienko
adds that this is crucial to maintaining
EXANTE’s reputation as a company that
properly researches all of its listed funds.
“We look at it like we are going to invest in
them,” he says.
Technology is at the centre of creating systems and product offerings that are attractive
for both asset managers and investors
www.hedgefundsreview.com Hedge Funds Review Special report December 2012/January 2013
Alexey Kirienko

4. 4
OVERVIEW
Future growth
The next step for the platform in 2013 will
be to augment further its hedge fund listings
with the development of the EXANTE Hedge
Fund Index,which was launched in February
2012.This is an equally weighted portfolio
currently composed of the 22 best-performing
managers listed on EXANTE’s ATP.
EXANTE aims to increase this pool
over time to reach a minimum of 100
management companies. Kirienko believes
the index forms a strong basis for an
industry benchmark, as well as providing
ease of access for EXANTE’s users.
The user experience targets a gap
identified by EXANTE’s management
through its own experience of the market.
“We wanted to create a tradeable index that
can be accessed with one click,” he says.
“That’s very important because I haven’t seen
such a system elsewhere.” The key challenge
in 2013 for EXANTE will be expanding the
index by attracting liquidity and interest in
the secondary market, according to Kirienko.
As for the Hedge Fund Marketplace, the
aim is to increase that to include as many as
200 management companies. EXANTE also
plans to expand regionally, opening offices
in London and Zurich, as well as turning its
attention to emerging markets such as India,
South Africa and Brazil, among others.
“We have a presence, but we would like
to strengthen it,” Kirienko says, adding
that EXANTE has a lot to offer emerging
markets, particularly those that may not
be as technologically advanced as Europe
and the US.
As well as adding regional managers in
these areas, the company believes it can
grow by selling white-label versions of its
offering. “We think the white-label option is
going to be our key focus,” he says.”
EXANTE has not offered any white-label
packages to date but hopes to sell between
five and 10 in 2013, according to Kirienko.
“There is a lot of interest in this, especially
if the platform comes with all of the
instruments we have developed,” he adds.
Regulatory outlook
One potential break on expansion and
development could be the stricter regulations
on trading that have been developed in the
wake of the 2008 financial crisis. These will
affect the hedge fund structure that Kirienko
believes will be the definitive model for the
next generation of financial company.
He is confident about the suitability
of EXANTE’s business model to the new
regulatory regime.“We think we are operating
in the correct way and that the rest of the
market should operate like this,” he says.
“Managers with assets of $1 million or
$10 million should have systems such as
ours to showcase their talents. Technology
is key to everything.” Over the past
year EXANTE has already improved its
infrastructure by adding new server units
in New York, Chicago, London and Moscow,
among other cities with exchanges.
As for the regulations that are currently
taking shape, Kirienko worries they may
be too stringent. “At EXANTE we are all
liberals,” he says, arguing that the market
structure should be regulated, rather than
the market itself. “Any regulations should be
like a framework of honesty to allow liberal
markets to function. If you start regulating
exactly how markets should behave then
you will just create more road signs that
don’t solve any problems, they just cause
more traffic around the junctions.”
He argues that a good place for regulators
to focus is on service providers to the industry
such as administrators and accountants. For
example, by requiring that they be paid by
those who wish to view the resulting data
and reports rather than by the fund being
audited. “If the customer pays for an audit, he
receives an honest audit,” Kirienko reasons.
Current legislation is also too detailed,
he adds, pointing to the mosaic of rules
that have been in development in the
US since 2010 under the Dodd-Frank Act
with both the US Commodity Futures
Trading Commission and the Securities
and Exchange Commission as regulators.
“The US is already over-regulated,” he
declares, adding that “each line in the [new]
regulations creates 100 more interpretations”.
EXANTE’s state-of-the-art co-location
infrastructure and ATP have been designed
to attract investors of all shapes and speeds,
from conservative money managers to high-
frequency traders. Attempts to limit the
latter under the new regulations “will not
end well”, according to Kirienko.
He believes such initiatives tend to be
suggested by those who do not understand
and have no experience of the market.“High-
frequency traders – our customers – take
large orders [such as those placed by pension
funds] and take them apart,shifting them
to other markets like Asia or Europe and
London,and transforming them into different
shapes to trade in option markets,physical
spot markets,futures markets and so on.”
Kirienko calls these larger trades “unwise”
and argues that, if pension funds invested
more in technology, their systems would
recognise the best and most effective way of
executing these orders.
Overall,just as EXANTE was designed to
help players of all shapes and sizes access
a range of products and markets,Kirienko
believes equal access to markets should
be key to any attempt to regulate financial
markets.“There should be some light
regulation to ensure everyone has equal
access,” he says.“Each market member has to
have equal rights.”
EXANTE 2013exante.eu

5. 5
www.hedgefundsreview.com Hedge Funds Review Special report December 2012/January 2013
MTG CHINA ARBITRAGE FUND
Capturing the essence
of market growth
MTG CHINA ARBITRAGE FUND prides itself on
having entered a new and exciting market place.
It is the second hedge fund created under the MTG
Fund SPC umbrella. But what sets this fund apart is,
as its name suggests, mainland China. The Chinese
markets are notoriously difficult to access for any
foreign entity wishing to participate. But, as MTG’s
manager Liza Aizupiete explains, the fund has
successfully established its presence in China, with
staff working at its Shanghai office.
The MTG China fund was launched in May 2011. It has netted
investors a solid 16.87% (which translates into more than 11% per
annum) after tax and expenses since its inception. “Considering
various investment restrictions and the relatively small size of the
fund, it has done exceptionally well in building up the infrastructure
and setting up core operations, thus realising the investment
strategy,” says Aizupiete.
“The fund draws on extensive experience in arbitrage from
the MTG Multi-Arbitrage Fund’s success. We are continuing the
investment pattern originally developed by the MTG Multi-Arbitrage
team on a new platform that the Chinese markets offer. It is not,
however, a pure replica of the trading system, as the new China
environment noticeably differs from other developed markets.”
Technically, algorithmic trading is less developed in China.
Therefore, a completely new algo-trading approach had to be
developed to accommodate a number of restrictions and regulations
in trading via application programming interface systems.
Trading in China is a commonplace activity. The Chinese
authorities welcome more institutional participation, in part to
stabilise often volatile trading volume swings. The market remains
largely closed to outside investors, yet some progressive investment
programmes are being set up to gradually liberalise the second
largest market in the world. It is only a question of time and political
willpower to continue the market reform process, explains Aizupiete,
and the MTG China fund is part of this unique opportunity to grow
alongside the global China market developments.
“We view this as our core selling point: to be able to offer
individual and institutional investors participation in the Chinese
markets, investing in strategies with low or no correlation to the
overall equity or bond markets,” continues Aizupiete. “The fund
strives to achieve long-term capital appreciation using a proprietary
arbitrage trading system designed and tested to take advantage of
market inefficiencies.”
The fund’s investment scope includes financial instruments
and commodities traded on all major Chinese
exchanges. The nexus of its trading, however, is
the futures instruments listed on the three largest
regulated commodities exchanges in China and
the largest commodity exchanges in the UK and
the US. Besides this, the fund is also increasing its
trading activities in the physical and over-the-
counter markets.
“Effectively, arbitrage is made possible because
of the Chinese market offering – similar products
with other well-developed markets that may differ
in quality, location and other specifications,” says
Aizupiete. “Our fund strategy captures the price
discrepancies that occur due to different market
participants with diverse sets of needs for hedging
or speculating. Our research team is constantly
scouting for the best market opportunities, and
management enforces the most optimal funds allocation across the
trading strategies. The fund’s current broad asset allocation stands at
more than 80% in commodities (including physical material), less
than 10% in currencies, and the rest is kept in cash.”
With the long-awaited advent of new listed derivatives such as
options, interest rates and bond futures, the MTG China fund is set
to grow exponentially, capturing the very essence of the Chinese
market growth.
Liza Aizupiete
Liza Aizupiete reveals how the
MTG China fund is entirely
unique despite its trading system
boasting an impressive heritage
Photo:
Normunds
Braslins

6. 6
Playing it safe
FORGET THE MARKET (FTM) fund manager Endre
Dobozy believes he can offer investors a safe haven
by capitalising on the inefficiencies of the US health
insurance market.
Dobozy describes himself as “extremely risk
averse, the kind of guy that won’t even cross the
street unless there are traffic lights”. That attitude
inspired him to develop a strategy to generate
returns outside of the equity market with minimal
risk to investors.
The resulting fund, FTM, was launched by Dobozy in 2010 to feed
the post-financial crisis appetite for products with an emphasis on
capital preservation. He aims to generate returns commensurate
with market averages without the rollercoaster ride generally
associated with investing in recent years.
The main component of the fund is an investment in discounted
medical accounts receivables secured at an average rate of $3 for
every $1 invested. This investment is routed through a US-based
medical accounts receivables company, which covers the medical
expenses of insured accident victims involved in personal injury
cases. A lien taken against a portion of the payout from the insurance
policy is paid once a claim is settled, creating FTM’s returns.
“Because the US system is so inefficient, it can take two years or
more for insurance payments to come through. So we speed the
process up and generate a return that has no correlation to the
market,” Dobozy says.
In order to minimise risk, the receivables are spread across
a number of insurers with no more than 10% of the portfolio
attributed to any one company. To further minimise risk, the fund
does not blindly purchase a pool of receivables. Rather, each case is
carefully reviewed and chosen based on criteria such as who was at
fault and whether the injured party is insured.
Dobozy adds that FTM is also heavily involved in the research
and due diligence conducted by the accounts receivables company
when choosing its cases. “We assist with the research of the cases and
ensure the accounts receivables company is audited annually. We see
the hospitals being paid, the patients being helped and healed, and
the money coming back from insurance policies,” he says.
The “incredibly strict” criteria used to choose cases means that
typically only one out of every five cases reviewed is eventually
chosen for funding by the accounts receivables company.
Dobozy ensures diversification by keeping between 5% and 10%
of the fund in cash and investing the remaining assets – up to a
maximum of 5% – in the currency markets via a proprietary trading
Endre Dobozy
An innovative way to gain
value from discounted medical
accounts receivables is proving
popular with investors
system. This strategy typically consists of five
open trades in sterling and US dollars. As a result,
Dobozy says, the fund can generate returns that
are separate to the medical accounts receivables
strategy, while also providing liquidity, something
accounts receivables cannot deliver.
Overall, Dobozy argues that FTM offers investors
a safe bet with a 95% capital secured portfolio and
an annual return of 12%. “If the market falls 10%,
20% or even 30%, it doesn’t matter to us,” he says.
“Even with the foreign exchange component –
which is set at a 35% stop/loss – the worst that
could happen is a 1.75% loss to the overall portfolio
and we make sure that doesn’t happen.”
So far, Dobozy’s risk-averse bet has paid off. As
of December 1, 2012, the fund is now in its 33rd
positive month in a row, with no negative months.
With a major shake-up on the horizon for the US healthcare
system under the 2010 Patient Protection and Affordable Care Act
(also known as ‘Obamacare’), some may question whether returns
are sustainable. Until the legislation is fully rolled out, it remains to
be seen how it might affect FTM’s future, says Dobozy.
FTM
EXANTE 2013exante.eu

7. 7
www.hedgefundsreview.com Hedge Funds Review Special report December 2012/January 2013
CHICAGO CAPITAL MANAGEMENT
Beautifully boring
CHICAGO CAPITAL MANAGEMENT (CCM) offers a
refreshing antidote to the hallucinogenic complexity
of many modern hedge funds.
Founded in 1998 by Steven Gerbel, CCM employs
a ‘classic’ merger arbitrage strategy, concentrating
exclusively in publically announced mergers and
acquisitions (MA) in developed markets.
CCM does not speculate on rumoured
transactions and steers clear of high-octane deals
where hostile bids and antitrust concerns may cause
spreads to widen.
Put another way, the fund is reassuringly boring. “Merger
arbitrage is not the most exciting strategy,” Gerbel concedes, “but it
does produce very consistent returns.”
Merger arbitrage spreads – the difference between the offer price
and the target company’s current trading price – have historically
tracked at around three times the risk-free rate. This means the
arbitrageurs can earn an attractive return by investing in relatively
safe deals with a modest amount of leverage.
“You need to have a very methodical, repeatable approach.
We do the same thing over and over again, making a small profit
every time. It adds up to a nice return at the end of the year and
compounds handsomely over time,” states Gerbel.
“What you shouldn’t do is chase deals with wide spreads, thinking
you’ll make money more quickly. That doesn’t work. When you’re
wrong on those deals, you lose a tremendous amount of money. The
rewards rarely justify the risks.”
CCM’s philosophy is to “hedge as much as possible”. Gerbel aims
to collect the spreads on offer with the least amount of risk and
volatility. The fund typically has exposure to around 35 deals. The
risk of individual positions is capped at 5% of the fund’s value.
The risk profile of transactions in the portfolio is estimated on a
daily basis and the fund’s position sizes, hedges and leverage are
adjusted accordingly.
Although Gerbel tends to favour “boring deals” with limited
downside risk, CCM’s returns are far from mundane. The fund has
delivered compound annual returns of 17.32% since its inception in
1998, with a standard deviation of 11.23%.
CCM’s returns have held up despite falling deal volume and
spread compression since late 2011. While many merger funds have
struggled in this environment, CCM returned 6.51% in 2011 and was
up 4.38% in 2012 through the end of October.
Gerbel ascribes the low deal volume in 2012 to heightened
political and economic uncertainties, which made chief executive
officers reluctant to take on the risk of an acquisition.
“Management teams were understandably cautious. They didn’t
Steven Gerbel
Chicago Capital Management’s
strategy will not get any pulses
racing, but its returns will
know what the tax rates would be or if they would
continue to receive government subsidies. It’s
impossible to make an intelligent decision about a
deal in that situation,” he says.
However, Gerbel is convinced deal activity will
pick up in 2013.
“The outlook is very good for MA,” he says.
“There is $2 trillion of cash on the balance sheets
of corporate America. Asset prices are at historical
lows. Companies can borrow at the lowest rates
in a generation. A lot of deals will be cut once the
fiscal cliff is behind us and the questions over tax
rates and government spending are resolved.”
Gerbel expects to see plenty of deals in the
financial, pharmaceutical and technology sectors.
He predicts a large number of smaller US
regional and community banks will be forced to merge in 2013 as a
result of Dodd-Frank and the Basel III capital rules, while pharma
and tech companies need to make acquisitions to fill product gaps
after cutting back on research and development in the recession.
While the MA market may heat up in 2013, Gerbel has no
intention of ramping up the fund’s risk taking. “We’re going to do
what we’ve always done,” he says, “which means doing the little
things right, staying disciplined and avoiding style drift. It’s classic,
boring, blocking and tackling, but it works.”

8. 8
NIAGARA DISCOVERY FUND
A winning formula
THE NIAGARA DISCOVERY FUND provides exposure
to five distinct macro-oriented investment styles in a
fund of managed accounts structure.
The fund is the brainchild of Albert Friedberg
and David Rothberg. Friedberg is the founder and
chief investment officer of Friedberg Mercantile
Group (FMG), one of Canada’s best-known futures
trading houses.
FMG manages close to $1 billion in the Friedberg
Global Macro Hedge Fund, which has achieved
compound annual returns of more than 17.5% since its inception in
December 2001.
Rothberg, the fund’s strategy adviser, has been affiliated with FMG
since 1976 and sits on the macro fund’s risk committee.
Friedberg’s investment approach, which he has employed
successfully for nearly four decades, is built around five main trading
concepts: momentum, sentiment, fundamental and technical
analysis of commodities, discretionary macro and value investing.
While Friedberg’s macro fund utilises these approaches in a single
portfolio, the Discovery Fund assigns each strategy to an external
manager. The fund managers were hand-picked by Friedberg and
Rothberg, and most of them have strong connections to FMG.
“The idea behind the fund was to do what we know with people
we know,” says Rothberg. “We hire managers we have known
for years to run strategies that, in aggregate, deliver uncorrelated
returns with no beta.”
The momentum strategy captures long-term price trends in
futures markets. The systematic programme relies on an algorithm
to identify trends that are likely to persist beyond rational levels.
Volatility filters are used to size positions and identify exit points.
The sentiment strategy serves as a counterpoint to momentum.
In this case, the manager – an FMG alum – focuses on scenarios
where consensus runs contrary to current price trends. Trading
opportunities are identified by analysing divergences and
convergences in the relationship between open interest and price.
Rothberg characterises the momentum and sentiment managers
as “professional games players” who, like all commodity trading
advisers (CTAs), compete with other speculators to profit from
inefficiencies in the futures markets.
In contrast, the Discovery Fund’s discretionary macro manager
uses futures to express a top-down view of global economic trends.
This manager’s trades are based on the interplay between price,
time lags, supply and demand fundamentals as well as economic
imbalances.
The commodity portfolio is managed by a team of four traders
David Rothberg
David Rothberg sticks to what he
knows and hires managers
he knows for the Niagara
Discovery Fund
within FMG. The group performs fundamental
analysis of supply and demand for commodities
and combines this with technical analysis to
confirm their views and establish entry points and
stops for trades.
The fifth and final leg of the fund is a value
equity strategy. This manager invests in US mid-cap
stocks that are priced at a discount to value and
have plenty of free cash flow. Rothberg hedges out
the beta of the long portfolio with futures contracts.
Rothberg assigns the risk budgets and
leverage limits for the five strategies. In making
allocations to the strategies, he considers their
relative volatilities, risk/reward profiles and
correlations. Asset allocation is dynamic, although
the weightings rarely shift dramatically as the
strategies tend to be uncorrelated in most market environments.
The trades of underlying managers are continuously monitored
and any excess aggregate risks are hedged out at the portfolio
level. Stress tests are also performed to ensure the fund’s losses are
contained in a market crisis.
The result is a portfolio that provides exposure to a diverse mix
of uncorrelated macro-investment strategies with none of the
additional costs of a traditional fund of hedge funds.
EXANTE 2013exante.eu

9. THE JORDAN COMPANY
9
Hedge fund manager makes
virtual track record a reality
A BACKGROUND in corporate mergers and
acquisitions (MA) has allowed Vad Yazvinski,
chief investment officer of The Jordan Company
and portfolio manager for Jordan Capital Asset
Management, to hone a strategy of targeting
undervalued small and mid-cap companies that are
ripe for acquisition.
Intent on learning the MA business after
graduating from Western Carolina University,
Yazvinski went to work for the corporate strategy
group of SP 500 company Total System Services.
“My long-term goal was always to start a fund. I wanted to learn
how the MA process works from the inside and then go out there
and put together an investment vehicle,” says Yazvinski. In June
2008 he did just that, launching Atlanta, Georgia-based Jordan
Capital Asset Management.
Yazvinski’s previous investment experience consisted of six
years spent developing a virtual track record, during which time he
entered and won portfolio simulation competitions such as MSN
Money’s 2006 Strategy Lab Open. When it came to setting up the
fund, The Jordan Company accepted this virtual track record as
proof of his ability and of the strength of his investment rationale.
“There are very few people that can successfully transfer an
investment strategy from the virtual to the real world due to the very
emotional aspect of playing with funny money versus real money,”
he says.
It is a long/short fund with below-average volatility invested in
publicly traded securities. The fund is typically 55% net long and
unleveraged. Yazvinski aims for a return that is slightly better than
the market with a third of the risk.
While the $2 million held at launch in 2008 has since grown to
$31 million, Yazvinski’s aim is to build a track record rather than
aggressively market the fund.
“For me investing is not just my work, it’s something I want to
do for the rest of my life. So I want to focus on slowly and steadily
executing the strategy I’ve developed over the last decade, I’m not
really worried about the pace of assets under management growth.”
His strategy involves identifying small and mid-cap companies
in undervalued sectors that are ripe for change in the next 18 to
24 months. “I fully subscribe to the Warren Buffet-style value
methodology of looking for businesses that are trading at a discount
to intrinsic value,” he says.
“However, the big difference between myself and typical value
managers is that identifying a catalyst that will provide value
realisation is also an important part of my strategy. I look for
Vad Yazvinski
A focus on small and mid-cap
companies in undervalued
sectors is proving a winning
formula for The Jordan Company
indications that a company is likely to be looking
for strategic alternatives, such as a tender offer, a
restructuring or a dividend payment.”
For example, the fund is currently invested in
the US regional banking sector, where Yazvinski
believes the larger regionals – the US top 30
banks – currently have no avenue for growth
other than taking over smaller players. “They are
looking for names that either represent a new
geography or an attractive entry point from a
financial standpoint, which means names that
are selling for below tangible asset value in many
cases,” he explains.
“The fund has positions in some small regional
banks that we believe are great acquisition
targets.” Regional banks in states such as Texas and
Wisconsin are particularly attractive because many large banks have
a smaller footprint in these states, according to Yazvinski.
This sector also provides the fund with exposure to what he
believes is the most undervalued asset class in the world – US real
estate. “This is currently one of our largest areas of exposure, but
we invest mostly on the preferred side because the common equity
of US homebuilders and real estate is overpriced,” he says. “Also we
effectively have an indirect bet on this sector by way of regional
banks since the majority of their loans are related to real estate.”
www.hedgefundsreview.com Hedge Funds Review Special report December 2012/January 2013

10. 10
EXANTE 2013exante.eu
APIS OFFSHORE CAPITAL
A global approach to
opportunities
NEW YORK-BASED boutique hedge fund Apis
Offshore Capital aims to identify undervalued and
underreported investment stories as they play out
across the globe.
According to Apis Offshore Capital fund manager
Dan Barker, his team’s level of experience sets
the fund apart from its competitors. Along with
his current colleagues, Barker left investment
management company JW Seligman to launch
Apis Offshore Capital in 2004.
“As a team, we have worked together for 10 years and that’s what
gives me the most confidence about Apis and our performance
going forward. We have had that continuity. We’ve grown together,”
says Barker.
The fund is mainly focused on small to mid-cap companies,
although it does invest in larger companies under the right
circumstances. “It’s really about whether we can add value to the
research process,” Barker says. “Inefficiencies are often greater in
small to mid-cap securities, so we naturally gravitate there, but it
doesn’t mean we won’t look at a large-cap situation if we think we
can bring edge to that idea.”
Geographical concerns are viewed with a similarly open attitude.
Barker believes the fund’s borderless approach to investing
allows for maximum leverage of each idea. The team’s combined
experience in global equities gives the fund a head start on emerging
trends as they spread to new regions or sectors.
For example, Apis Offshore Capital recently added a long position
in Japan-focused alternative energy player West Holdings to its
portfolio. The company has access to the lucrative government
subsidies currently being offered in Japan to stimulate energy
production after its nuclear sector was shut down following the
devastating earthquake in March 2011.
“This is typical of what we can do at Apis in that we’ve watched
similar subsidy programmes roll out in Germany, Italy and Spain,”
Barker says. “It creates a bonanza of activity in the sector. But what
is interesting about Japan’s programme is that the subsidies [in the
region] are more than double the best offered in Europe. We think
we are early to this play in Japan because of the experience we have
in Europe.”
Apis also looks for ways to short the market via long-term cyclical
themes.Recently,the fund has been short the global tanker market via
stocks such as energy transportation company Overseas Shipholding
Group.The thinking behind this strategy,Barker explains,is a global
oversupply of very large crude carriers,long-haul tankers that can
transport two million barrels or more of crude oil.
Dan Barker
Extensive experience, coupled
with a flair for finding overlooked
investment stories, is a profitable
strategy for Apis Offshore Capital
“When these ships are ordered, delivery can be
made as much as three years later. At the moment,
a lot of new ships are about to hit the water and
it will take many years for them to be absorbed,”
Barker explains.
Demand for the ships has fallen as the US has
become less dependent on foreign oil, he adds, a
trend that has been driven by the weak economic
picture as well as increasing US domestic energy
production. While Barker predicts that tanker
demand will eventually recover, he says the
current state of affairs in the market is likely to last
for some time.
The weak economic outlook has also affected the
long side of the fund. “We remain cautious about
global growth and currently favour areas in which the economic
backdrop is not as important, although it tends to play some part in
every company’s equation,” Barker says.
“We are invested in areas with a growth dynamic that is insulated
from what we feel might be a disappointing economic environment
next year.”
At the beginning of December 2012, the fund was up 11% for the
year. “This is somewhat in line with the benchmark MSCI index but,
with about two-thirds of the market’s volatility,” Barker says. Since
inception, the fund has returned 118% versus 53% from the MSCI.

11. QUANTUM BRAINS CAPITAL
11
From algos,with love
BEING ABLE to tap the knowledge of professionals
in a range of fields including mathematics, quantum
physics and computer theory is handy when trying
to formulate an algorithm that can make money in today’s complex
markets.
That is what Russia-based Quantum Brains Capital (QBC)
believes sets it apart. With the combined brain power of teams
of mathematicians, physicists and IT specialists to hand, it has
spent eight years and more than $10 million developing trading
algorithms before putting them to work in the Bermuda-domiciled
Quantum Brains Capital Fund, launched in 2012.
The management company was co-founded by Arsen Yakovlev
and Gregory Fishman. Yakovlev has a background in developing
mathematical methods for trading and algorithmic models. He
started his investment career in 2004 as a portfolio manager of a
Russian private investment fund.
Fishman’s experience spans both IT and finance, having worked
in the financial technology and communications businesses. He is
founder and president of Automated Intelligence Systems, a Russian
scientific institute established in 2006 to carry out research and
development on artificial intelligence systems.
From its base in Russia, QBC has access to some of the top
mathematics and IT graduates in the world. The University of
St Petersburg is known for its IT training and Russia has long had
a focus on maths education. In addition, QBC sources science
expertise from the UK and Russia.
Quantum Brains Capital Fund combines several different trading
strategies: trend following, mean reversion, arbitrage, fixed income,
high-frequency trading and heuristics, which in its most basic form
means finding solutions through trial and error. Long-term arbitrage
trades provide a contrast to the high-frequency trading strategies.
The fund trades a range of instruments and markets with a focus
on Russian equities, which have maintained a positive performance
through 2012. Russia’s blue chip RTS Index was up 5.07% in 2012 to
mid-December.
Close attention is paid to the correlation between assets. QBC
believes that by maintaining a diverse portfolio, systematic risk
is reduced.
Arsen Yakovlev
Quantum Brains Capital has used
local expertise in mathematics
and information technology
to create what it believes is a
unique set of trading algorithms
Daily turnover for the fund is around $1 billion,
which is about 10% of the daily turnover of the
Russian market, according to QBC.
During the development of the fund, combinations of
algorithms were created and then tested using an approach based
on Monte Carlo methods. The best-performing trading programs
were selected for the fund, which creates an optimal portfolio
maximising risk/return ratios, according to QBC. The testing also
determined the weight of each strategy in the portfolio and how
the strategies interact with one another.
QBC continues to tweak its systems, to make them better and
more powerful, with the hope that they will become faster and
more effective.
Risk management is impossible if you cannot predict future
events, believes QBC. With that in mind it has built a model based
on hidden semi-Markov processes to predict changes in the market
environment. The process, named for the Russian mathematician
Andrey Markov, is a stochastic process satisfying a certain property,
called the Markov property.
As with many hedge fund strategies, market volatility is used
to generate returns. For this reason, intervention in markets by
governments and central bankers has impacted performance
in 2012. Announcements from the European Central Bank, for
example, tend to send markets into frenzy, pushing volatility
higher. During such months, the fund generated positive returns.
Overall, it has retained positive performance for the year,
according to QBC.
The fund is on the Emerging Manager Platform, a Bermuda-
based platform for start-up managers established by managing
directors of Apex Fund Services Peter Hughes and John
Bohan. Apex provides administration services for funds on the
platform. Legal and accounting support for new managers is
also given.
Currently only internal money and some private asset managers
are invested in the fund, but QBC intends to open the fund to
external investors. QBC has big ambitions for asset growth for the
fund as well as its performance in 2013, believing it can achieve
returns of at least 40%.
www.hedgefundsreview.com Hedge Funds Review Special report December 2012/January 2013