This document summarizes a statistical arbitrage managed account strategy. [1] It targets double digit annual returns with 7% volatility through a model-driven, market neutral strategy that scans hundreds of instruments for long and short opportunities. [2] The strategy has near zero correlation to equity indices, uses no leverage, and seeks a Sharpe ratio above 1. [3] Positions typically last 10 days, making it a high turnover strategy.

1. StatArb - Statistical Arbitrage Managed Account
Statistical Arbitrage is a market neutral strategy that targets double digit annual
returns and a 7% volatility. It's a model driven strategy that scans hundreds of equity
instruments among all sectors in search for long-short positioning opportunities. Market
neutrality should manifest through near zero beta and correlation coefficients against all
major equity indices. The strategy follows no benchmark, uses NO leverage, and seeks an
above 1 Sharpe ratio. Typically a position lives around 10 days in the portfolio, making StatArb
a high turnover strategy. Always keep in mind the significant benefits from diversification
that your overall portfolio will experience when incorporating an uncorrelated strategy.
All data and analysis corresponds to the 162 trading day period between 03-31-2011 and 11-21-2011
StatArb S&P 500
Return Daily performance Inception date=1
Since inception 03-31-2011 -3,39% -10,02%
Annualized since inception -5,27% -15,56% 1,05
Month to date -0,95% -4,81%
Week to date -0,16% -1,86%
Today 11-21-2011 -0,16% -1,86% 1,00
Best day 1,42% 4,74%
Worst day -1,83% -6,66%
Daily Alpha against S&P 500 -2 bp 0 bp
0,95
Annualized Alpha -4,46% 0,00%
Risk
Annualized volatility 8,70% 25,97%
0,90
Beta against S&P 500 0,04 1,00
9-Jul
19-Jul
29-Jul
31-Mar
10-Apr
20-Apr
30-Apr
10-May
20-May
30-May
16-Nov
26-Nov
9-Jun
19-Jun
29-Jun
8-Aug
18-Aug
28-Aug
7-Sep
17-Sep
27-Sep
7-Oct
17-Oct
27-Oct
6-Nov
Correlation against S&P 500 0,12 1,00
Maximum drawdown -9,39% -19,39%
Days to the minimum 34 108
Maximum Drawdown Recovery StatArb
Date of the minimum 10-03-11 10-03-11
Days to recovery n.d. n.d. Daily return distribution
Next drawdown -3,74% -2,32%
Days to the minimum 61 60
Date of the minimum 07-29-11 07-26-11
Days to recovery 11 3 Normal distribution Empirical distribution
Next drawdown -0,73% -0,39%
Days to the minimum 21 10
Date of the minimum 06-02-11 04-20-11
Days to recovery 1 1
Risk-adjusted return
Sharpe ratio1/ -0,64 -0,61
Treynor ratio1/ -1,43 -0,16
Jensen's Alpha1/ -4,93% 0,00%
Other descriptive statistics
Days up 50% 55%
Days down 50% 45% -2% -1% 0% 1% 2%
Days between +/-1% 93% 56%
Days exceeding +/-2% 0% 18%
StatArb portfolio information Sector Breakdown
Number of open positions 73 Long Short
Long 37 Health Care 17,4% 16,8%
Short 36 Industrials 13,9% 14,2%
Average holding period (trading days)2/ 8 Energy 13,0% 13,0%
Portfolio turnover 20,7 Consumer Discretionary 11,6% 11,5%
Top five positions Utilities 11,1% 11,5%
Long positions Short positions Financials 10,5% 11,9%
Bristol-Myers Squibb Co 4,1% Endo Pharmaceuticals holdin 4,9% Information Technology 7,2% 7,4%
Delta Air Lines Inc 3,4% Protective Life Corp 4,2% Consumer Staples 5,4% 4,7%
Illinois Tool Works Inc 3,2% AMERIGROUP Corp 3,6% Materials 5,2% 2,6%
Duke Energy Corp 3,2% CenturyLink Inc 3,4% Telecommunications 4,7% 6,2%
CIGNA Corp 3,2% Par Pharmaceutical Compani 3,3% ETF's & Others 0,0% 0,0%
Monthly Performance
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov* Dec YTD
2011 4,20% -0,85% 0,07% -2,86% 3,16% -6,75% 0,97% -0,95% -3,39%
* as of 11-21-2011
1/ Calculation based on annualized returns and a 0,27% risk free rate corresponding to a 1 year US Treasury Bond yield at inception date.
2/ Closed trades only.