WE BELIEVE that our Eighth Core Portfolio investment strategy provides the answers to the previously mentioned issues and offers a truly balanced approach to investing. Equities, bonds, real estate and commodities are four asset classes that cover the core of any asset allocation process. The Eighth Core Portfolio is based on the idea that, during any given stage of a global investment cycle, money will flow across these assets, thereby affecting their performance. Rather than time the entry into the outperformer and the exit from the underperformer the Eighth Core Portfolio invests globally across all four in equal measure thereby ensuring that it participates in the best asset class in any environment. Over the investment period a constant exposure is maintained in order to avoid any outperforming asset class becoming a drag when the market turns. This balanced approach is designed to produce medium to long term returns which exceed those of nominal cash returns. Historical evidence shows that this strategy has had proven outperformance in various timeframes and in all environments (see Tables 1 to 3) More importantly it minimizes volatility by taking advantage of the low correlations between the individual asset classes (see Table 4).

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EIGHTH ASSET MANAGEMENT LTD.
PORTFOLIO
A SYSTEMATIC WAY OF MANAGING YOUR MONEY

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CONTENTS
Introduction 2
Investment Philosophy 3
Table Long Term Performance VS S&P 4
Table Medium Term Performance 5
Table Stress Test 6
Table Asset Correlations 7
Investment Strategy 8
Why Eighth Asset Management Ltd? 10
Hedging 11
Appendix 12
Risk Warning 20

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INTRODUCTION
THE Q U E S T FACINGevery investor in dealing with accumulated capital is to presser-
preserve and enhances wealth. In order to achieve these two objectives, investors aim for an ideal balance a
tailor-made structure that can produce consistent returns over the long run while minimizing volatility.
The process of defining an ideal investment strategy is influenced by the following additional requirements:
• To grow capital above prevailing inflation
• To invest in liquid assets that can provide for regular cash flows
• To build a transparent portfolio while avoiding mistakes that could cause major setbacks or permanent
portfolio impairment.
There is an obvious trade-off in achieving these objectives and requirements. Moreover, investor psychology
often adds an extra layer of uncertainty to the process of wealth management.

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INVESTMENT PHILOSOPHY
WE BELIEVE that our Eighth Core Portfolio investment strategy provides the answers to the previously
mentioned issues and offers a truly balanced approach to investing.
Equities, bonds, real estate and commodities are four asset classes that cover the core of any asset
allocation process. The Eighth Core Portfolio is based on the idea that, during any given stage of a global
investment cycle, money will flow across these assets, thereby affecting their performance. Rather than time
the entry into the outperformer and the exit from the underperformer the Eighth Core Portfolio invests
globally across all four in equal measure thereby ensuring that it participates in the best asset class in any
environment. Over the investment period a constant exposure is maintained in order to avoid any
outperforming asset class becoming a drag when the market turns.
This balanced approach is designed to produce medium to long term returns which exceed those of nominal
cash returns. Historical evidence shows that this strategy has had proven outperformance in various
timeframes and in all environments More importantly it minimizes volatility by taking advantage of the low
correlations between the individual asset classes.

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LONG TERM PERFORMANCE VS S&P
Metrics of long-term strategic health show the ability of an enterprise to sustain its current operating
activities and to identify and exploit new areas of growth. A company must periodically assess and measure
the threats—including new technologies, changes in public opinion and in the preferences of customers, and
new ways of serving them—that could make its current business less attractive. In assessing a company's
long-term strategic health, specific metrics are sometimes hard to identify, so more qualitative milestones,
such as progress in selecting partners for mergers or for entering a market, are needed.
While Home Depot's leading position in the home-improvement business appears to be solid in the medium
term, a longer-term threat comes from Wal-Mart, which sells many of the same fast-moving items, such as
light bulbs. The cost base of Wal-Mart is lower because it provides less in-store help than does Home Depot,
which must therefore ensure that store associates focus on higher-margin areas where support is critical
(such as plumbing) rather than on products whose price doesn't incorporate assistance to customers.
Short-term metrics explore the factors that underlie historical performance and help indicate whether
growth and ROIC can be sustained at a given level or will probably rise or fall. These metrics might include
costs per unit (for a manufacturing company) or same-store sales growth (for a retailer). They fall into three
categories:
 Sales productivity metrics explore the factors underlying recent sales growth. For retailers, these
metrics include market share, a retailer's ability to charge higher prices than its peers, the pace of
store openings, and same-store sales increases.
 Operating-cost productivity metrics explore the factors underlying unit costs, such as the cost of
building a car or delivering a package. UPS, for example, is well known for charting out the optimal
delivery paths of its drivers to enhance their productivity and for developing well-defined standards
on how to deliver packages.
 Capital productivity metrics show how well a company uses its working capital (inventories,
receivables, and payables) and its property, plant, and equipment. Dell revolutionized the personal-
computer business by building products to order and thus minimizing inventories. Because the
company keeps them so low and has few receivables to boot, it can operate with negative working
capital.

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MEDIUM TERM PERFORMANCE
Medium-term metrics go beyond short-term performance by looking forward
to indicate whether a company can maintain and improve its growth and
ROIC over the next one to five years (or longer for companies with extended
product cycles, as in pharmaceuticals). These metrics fall into three
categories:
 Commercial-health metrics, indicating whether a company can
sustain or improve its current revenue growth, include the metrics for
its product pipeline (the talent and technology to market new products
over the medium term), brand strength (investments in brand
building), regulatory risk, and customer satisfaction. Metrics for
medium-term commercial health vary widely by industry. For a
pharmaceutical company, the obvious priority is its product pipeline
and its relationship with governments—a major customer and
regulator. For an online retailer, customer satisfaction and brand
strength may be the most important considerations.
 Cost structure health metrics gauge a company's ability, as
compared with that of its competitors, to manage its costs over three to
five years. These metrics might include assessments of programs like Six Sigma, which companies
such as General Electric use to reduce their costs continually and to maintain a cost advantage
relative to their competitors across most of their businesses.
 Asset health metrics show how well a company maintains and develops its assets. For a hotel or
restaurant chain, to give one example, the average time between remodeling may be an important
driver of health.

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STRESS TEST
Capital Assessment Program, or SCAP, popularly known as the bank stress tests.
The stress tests were limited to banking organizations with assets in excess of $100 billion dollars; banks
that the Fed considered "too big to fail". The requirements of the stress tests measured each institution's Tier
1 common capital against a baseline scenario and a hypothetical scenario that was deemed more adverse.
The final results showed that 10 of the 19 banks were deemed to have inadequate capital. That being said,
every bank tested met the legally mandated capital requirements.
Every year since the financial crisis in the year 2007 the US Federal Reserve (Central Bank) has put the
nation’s banks through "stress tests" designed to assess their reaction to hypothetical scenarios such as the
financial crisis.
The 2013 Stress Test involved:
Unemployment at 12.1%
Fall in equity prices of more than 50%
Fall in housing prices of more than 20%
An interesting caveat of this is the political amusement it brings. We clearly are safe if all 18 (except one) of
the largest banks would have survived such a scenario. I do wonder why they didn't include a spike in bond
yields and a fall in their value - Banks are major holders of Government Debt after all...
Guess that would have ruined the illusion of safety?

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ASSET CORRELATIONS
The following table shows return correlations between various asset classes (as represented by exchange
traded funds) over the past three months.

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INVESTMENT STRATEGY
THE S T R A T E G Y i n v e s t s globally in four main asset classes Equities, Bonds, and Real
Estate & Commodities in equal proportion i.e. 25% in each asset class. The allocations to these asset classes are
monitored quarterly and systematically rebalanced to the original 25% allocation, regardless of performance
during the period.
By doing this we periodically realize the profit on the outperforming asset class so that we do not become
unduly overexposed to it, and allocate further funds to the underperforming asset class in order to maintain our
equal allocation. Our research indicates that a quarterly rebalancing time period provides the optimal trade-off
between the benefits and costs of rebalancing.

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REBALANCING MECHANISM
The guiding principles are as follows:
 Rebalancing benefit is driven by low asset correlations
and high asset volatility. The more volatile the asset and
the lower the correlation with the rest of your portfolio,
the better.
 The more similar your asset returns, the better. If the
returns of one asset are regularly higher than another (as
has happened with US and Japanese equity over the past
10 years) then it is quite possible to lose money
rebalancing.
I thought that it might be instructive to compare rebalancing
strategies for national markets in 3 different categories: Europe,
the Far East, and emerging markets.
To invest in the DFA fund you will need to services of a financial
advisor. What other options are available? Closed-end funds can
be used, but most of these are actively managed, have high
expenses, and in many case high turnovers, with their attendant
trading costs. These beasts are also plagued with fluctuating
premiums/discounts from NAV, and as I’ve previously noted this
causes adverse portfolio behavior, since it increases correlation
with the US market. A better option might be the ADRs of emerging markets nations, but managing a
portfolio of a 20 to 50 of these would require considerable effort and attention, and would also probably run
a fair amount of terminal wealth dispersion risk. (I.e., the risk that you may miss out on the best performers
in each market, which is a real worry in a portfolio which only owns a few stocks from each country.)

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INVESTMENT STRATEGY
IN OUR EXPERIENCE, the most
efficient way to track an index performance is by
using Exchange-Traded Funds (ETF) or Exchange-
Traded Commodity (ETC).
These are open-ended index tracking funds that are
listed and traded on major stock exchanges.
ETF’s/ETC’s trade like equities but have the structure
of a Collective Investment Scheme. Their aim is to
replicate an underlying index. In particular, they aim
to match the return (before tracking costs) and
volatility of their respective index. ETF’s/ETC’s
minimizing the possibility of losses due to human judgment and, as we have seen in the recent past, these
losses can be costly.
ETF’s/ETC’s evaluated against various criteria:
• Tracking error: how well it mirrors the return and volatility of the index it follows, a minimal
tracking error shows a close match to the index.
• Data Transparency: how accurate and easily available the data of the underlying index and
• ETF’s/ETC’s are and whether this captures the required universe that the index is supposed to
Represent.
• Liquidity: the liquidity and spread on ETF’s/ETC’s are mainly dependent on the liquidity and
spreads of the index constituents. Good ETF’s/ETC’s have good liquidity on primary and secondary
markets and tight spreads.
• Cost: ability to keep the rebalancing costs and management fees to a minimum.
• Investor acceptance: the more widely used the ETF/ETC is the more likely it is to be
representative of the asset class it is tracking.
• Income distribution: if the underlying asset has regular cash distribution, a good ETF/ETC can
collect these cash flows and distribute this to the ETF/ETC holder on a regular basis, thereby allowing the
investor to realize income.
The ETF’s/ETC’s we have selected are a fair reflection of the underlying asset classes and have the above
characteristics so we are comfortable with their ability to replicate the performance of the indices they
have been designed to follow.
Please be aware that the issuer risk of the ETC’s (Exchange Traded Commodities) is a Bank (e.g. UBS
AG for the UBS Bloomberg CMCI Composite) and not a Fund where the underlying cash is invested into
government/sovereign bonds.

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WHY EIGHTH ASSET
MANAGEMENT LTD?
AS WEALTH MANAGERS we
have several years of experience in the area of fund
management which enables us to efficiently manage
this type of portfolio. We aim to add value through
Research:
Implementing rigorous ETF’s/ETC’s selection &
monitoring processes.
Meeting ETF/ETC managers regularly to ensure
transparency on the ETF/ETC and getting updates on
available products.
Minimizing the tax drag by investing in tax-efficient
ETF’s/ETC’s with a focus on cash dividends.
Effective dealing:
Trading in large volume so as to minimize the cost of dealing and rebalancing.
Maintaining contacts with the right brokers to ensure that we can deal in volume without affecting the
price.
Avoiding price slippage by applying effective limits on buying and selling. Effective rebalancing
Ensuring quarterly systematic monitoring on all portfolios.
Establishing and reviewing appropriate tolerance limits so that the benefit of a rebalanced portfolio is not
outweighed by the costs of rebalancing. Currency exposure management (see Table 6)
Maintaining a mechanical passive hedge of currency exposure to avoid undue translation risk on.
Annual review of hedging practice based on currency allocation of underlying ETF’s/ETC’s.

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HEDGING
A risk management strategy used in
limiting or offsetting probability of
loss from fluctuations in the prices of
commodities, currencies, or
securities. In effect, hedging is a
transfer of risk without buying
insurance policies.
Hedging employs various techniques
but, basically, involves taking equal
and opposite positions in two
different markets (such as cash and
futures markets). Hedging is used also
in protecting one's capital against
effects of inflation through investing
in high-yield financial instruments
(bonds, notes, shares), real estate, or
precious metals.
Making an investment to reduce the risk of adverse price movements in an asset.
Normally, a hedge consists of taking an offsetting position in a related security, such as a
futures contract.
To reduce the risk of an investment by making an offsetting investment. There are a large
number of hedging strategies that one can use. To give an example, one may take a long
position on a security and then sell short the same or a similar security. This means that
one will profit (or at least avoid a loss) no matter which direction the security's price takes.
Hedging may reduce risk, but it is important to note that it also reduces profit potential.

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JOINT VENTURE INVESTMENT
An agreement between two or more companies to cooperate on a specific initiative. The
joint venture may involve marketing a product, offering a service, or expanding into a new
geographical territory. Often, companies undertake joint ventures with companies in other
countries as a way to expand into new markets. While the local company will have the
business relationships and current business operations, the foreign company may bring a
brand name and managerial skills.
Foreign Invested Enterprise - FIE
Setting up an FIE is a common method of creating an operation in Asian countries,
especially in China. In China, any one of a number of legal entities can be considered FIEs
including equity joint ventures (EJV), cooperative joint ventures (CJV), wholly-owned
foreign enterprises (WFOE) and foreign-invested companies limited by shares (FCLS).
Any one of a number of legal structures under which a company can participate in the
foreign economy. FIEs tend to have tight government regulation at nearly every important
business juncture, which limits the efficiency at which any foreign company can profit
from foreign ventures as well as the amount of control that a foreign parent has over the
FIE.

15. RISK WARNING
THE F OL L OW I N G I N F O R M A T I O N is very important and you should
read this information if you are unclear at any time as to the purposes of this document.
Although information in this document has been obtained from sources believed to be reliable, EIGHTH
ASSET MANAGEMENT Ltd does not represent or warrant its accuracy, and such information may be
incomplete or condensed. All estimates and opinions in this document constitute our judgment as of the
date of the document and may be subject to change without notice.
EIGHTH ASSET MANAGEMENT Ltd will not be responsible for the consequences of reliance upon
any opinion or statement contained herein or for any omission. This document is for the private use of
EIGHTH ASSET MANAGEMENT Ltd and may not be reproduced or disclosed (in whole or in part) to
any other person without our prior written permission.
The value of investments and the income derived from them can fall as well as rise, and past performance
does not guarantee or predict future performance. Investment products may be subject to investment risks,
involving but not limited to, currency exchange and market risks, fluctuations in value and, where
applicable, possible loss of principal invested.
The manner in which this document is distributed may be restricted by regulation or law in certain
countries and persons who come into possession of this document should inform themselves of and
Observe any restrictions. This document does not constitute an offer to sell, solicit or offer to buy any
investment product, and is not intended to be a final representation of the terms and conditions of any
product. The investments mentioned in this document may not be suitable for all recipients and you
should seek professional advice if you have any doubts. Clients should obtain legal/taxation advice
suitable to their particular circumstances.
Eighth ASSET MANAGEMENT Ltd
Head Office