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Alternative Investments, including managed futures and hedge funds, involve substantial risk of loss and are not suitable for all investors. Past performance is not indicative of future results.

This material does not constitute an offer to sell or a solicitation of an offer to buy or sell, any commodities or securities and is intended for informational purposes only.

Governance – Liquidity & Transparency

Montreal PREMIA presentation by:Dr. Ranjan Bhaduri, CFA, CAIAChief Research Officer – Global Head of Research, AlphaMetrix Alternative Investment Advisors, LLC

Date: Wednesday, June 1st, 2011.

1

This presentation is solely for informational and discussion purposes only. These materials do not constitute an offer to sell or the solicitation of an offer to buy or sell interests in any financial instrument or any product. Any offer for any investment product will be made solely by a confidential offering memorandum. Information contained herein is confidential and may not be reproduced in any format.

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Agenda

• Governance• The Value of Liquidity• The Interplay between Liquidity, Transparency and Technology• The Role of Managed Accounts in an Institutional Portfolio – what one should

know• Transparency is the key … governance via the administrator

Appendix• Lintner Revisited – Managed Futures

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Governance

• 2009 Nobel Prize in Economics given to Elinor Ostrom (first woman to receive the Nobel Prize in Economics) and Oliver Williamson for their work in Governance

• Pedestrian approach to Governance– The organization of co-operation– Game theory– No conflicts of Interest– Independence– Well organized / processes / operational excellence

• Institutional Investors with fiduciary duty rightly demand proper governance before making an external investment, but this should not be construed as interfering with the trading. Good governance is in the best interest for all participants.

3



The Value of Liquidity: Balls in the Hat Game "Business is a game." IBM founder Thomas J. Watson

Consider the following game (Balls in the Hat Game)

– There’s a hat with 6 black balls and 4 white balls.

– At each turn you choose whether to draw out a single ball at random, without replacement.

– You gain $1 for each white ball drawn, and lose $1 for each black ball drawn.

– The game ends when you choose not to remove any further balls or when the hat is empty.

Would you want to play this game? Why?If someone were to play this game,

would you expect him/her to lose money?



The Value of Liquidity Joint work with Niall Whelan ( [email protected] )

Answer to the Balls in the Hat Game ….– Consider the hat of size six black balls and four white balls.

– Intuitively, one might think that it is not worth playing since there are more black balls than white balls.

– Surprisingly the expected value of this game is positive; equal to 1/15.

– Thus, it makes sense to play the game!

– WHY IS IT POSITIVE??

– The reason is that the ability of being able to stop at any time overcomes this imbalance of black balls to white. There is a value of the player's right to stop.

– Liquidity risk arises from not being able to pull one’s money out of an investment instantaneously at “fair” price

– Being able to stop playing the game at any time is analogous to liquidity



The Power of Liquidity

– Hat with six black balls and four white balls has a positive expected value of +1/15

– Power of liquidity (i.e. being able to stop playing any time) overcomes the negative imbalance of black balls to white balls

Whelan and Bhaduri (2008)



What is Liquidity Risk?

Liquidity Risk

Liquidity risk is the financial risk due to not being able to pull one’s money out of an investment instantaneously without market impact (i.e. not having perfect liquidity).



Other Risks: Hotel CaliforniaYou can check out anytime, but you can never leave…



Statistical Analysis of Investment Choices Liquidity – the Forgotten Dimension in statistical analysis?

Consider the following Scenario:

– Hedge Fund A has a 2-year Lock-up, annual redemptions, and trades in illiquid instruments (distressed debt, structured credit, OTC derivatives)

– Hedge Fund B has no Lock-up, monthly redemptions, and trades in illiquid instruments

– Hedge Fund C has no Lock-up, monthly redemptions, and trades in liquid instruments

– All three hedge funds have a 5-year track record.

– Is it fair just to compare the statistics (return, volatility, skew, kurtosis, omega, sharpe, etc.) and the risk factors of these three hedge funds?

– But Hedge Fund C has the best liquidity and liquidity has a value! (Fund A has bad liquidity, Fund B has a liquidity mismatch which is a risk)

– Liquidity Risk is a composition of both how onerous the lock-up & redemption terms are as well the volume & complexity of the underlying instruments that it trades



Mistaking Liquidity for Alpha

Consider the Following:• Hedge Fund A has a two-year lock-up with annual redemption and trades illiquid

instruments• Hedge Fund B has no lock-up with monthly redemption and trades liquid instruments• Both hedge funds have a five-year track recordHow can the two investments be compared? (Answer: Liquidity Buckets)• Empirical Research conducted on the returns of 1,904 hedge funds over the three year

period from June 2004 – June 2007 neither supported nor refuted the existence of a liquidity premium in the returns of illiquid hedge funds.

– Bhaduri and Art, “Liquidity Buckets, Liquidity Indices, Liquidity Duration and their Applications to Hedge Funds,” Alternative Investment Quarterly, Second Quarter, 2008.

• Illiquid hedge funds with lock-ups have since underperformed liquid hedge funds in general – is there any reason to invest with illiquid managers?

• Lock-ups hold the investor prisoner!

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Private Equity – LONG Lock-ups! (i.e. long jail sentence)

• Does Private Equity Investments really compensate investors for the illiquidity?

In general, much more hidden risks in private equity than in Liquid Alpha programs.

• Private Equity – much like folks who go to a casino (only talk about winnings, not losses)

• Private Equity – no good data, valuations are often not accurate.

• Private Equity – investing in it means mathematically that one is comfortable with extreme volatility

• Private Equity – some investment boards may only approve because of the word “equity”

11



Liquidity Solutions

Liquidity and Portfolio Management

– Risk and Return are two sides of the same coin

– In portfolio construction, one MUST take liquidity of the underlying investments into consideration

– Liquidity buckets

– Liquid instruments tend to have less “hidden” risks

– Liquidity mismatches

– Liquidity vultures

– Liquidity derivatives?

“The market can stay irrational longer than you can stay solvent.” - John Maynard Keynes



Liquidity, Transparency and Technology

“Liquidity is the first line of Defense.”- Daniel MacDonald, CFA, Portfolio Manager, Alternative InvestmentsOntario Teachers Pension Plan

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• Liquidity, transparency and technology are interrelated• Investor may be invested in a fund vehicle that offers favorable liquidity terms,

but:– Lack of transparency leaves the investor vulnerable to

• Style drift• Concentration risk

• If a blowup were to happen for any of these reasons, the investor could still redeem afterward, but would have to do so after incurring a significant loss

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• Liquidity and model risk and entangled• No model is perfect• Financial modeling and measurement of risk complicated by valuation of illiquid

instruments– Infrequent pricing obscures relationship between price and the variables used in

the valuation model– Often results in hidden risks

• During a “fire sale” or crisis event, the seller may be forced to accept a deep discount in price to exit an illiquid position

– Model risk is significantly magnified as a result

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Know Model Risk

“Nothing at MIT had ever reminded me of my lab at home. I suddenly realized why Princeton was getting results. They were working with the instrument. They built the instrument; they knew where everything was, they knew how everything worked.”

- Late Nobel Laureate Richard Feynman on why Princeton’s cyclotron was getting better results than MIT’s.

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“Transparency is the best antiseptic.” Aleks Kins, President & CEO of AlphaMetrix

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Transparency, however, can be elusive…

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• Transparency via managed accounts comes in the form of large amounts of data

– Must be parsed– Must be cleaned and verified– Multiple sources and formats (i.e., different prime brokers/FCMs)– Trade information and market prices are constantly changing– Reconciliation with administrator and trading manager

• Technology allows investors to synthesize the information transparency provides so that they can unlock the value of liquidity

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Separately Managed Accounts - Overview

A separately managed account is an investment vehicle through which an investor opens an account at a prime broker or futures commission merchant in his or her name and provides a trading manager with limited power of attorney to trade the account on his or her behalf in exchange for a fee.

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• Primary strengths– Liquidity is controlled by the investor

• No lockups, gates, side-pockets, or suspension of NAV– Transparency of positions

• Facilitates ongoing monitoring and due diligence• Concentration risk, style drift

– Custody or control of assets• Cash is not wired to the trading manager but remains at prime broker or

FCM– Provides the investor with operational control and reduces the role of the

manager to trading– Allows for efficient funding of investments

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• Given these obvious strengths, why have separately managed accounts only become popular recently?

• Financial crisis of 2008 exposed:– Liquidity mismatches

• Gates, lockups, suspension of redemptions, side pockets– Fraud– Concentration/blowup risk– Style drift, strategy drift

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Challenges to investing via separately managed accounts:• Minimum investment is often quite high• Often difficult to negotiate; legal costs can be high (Trading Advisory

Agreement)• Potentially unlimited liability – margin calls• Technology necessary to harness data to make use of transparency• Operationally difficult to manage

– Investor must perform middle and back office functions• Trade reconciliation, often with multiple counterparties• Accruals of fees and expenses

– Negotiate brokerage commissions– Negotiate ISDAs for over-the-counter instruments

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Managed Account Platforms – A potential solution?

Managed account platforms offer investors a variety of structures and formats:• Pooled managed accounts

– Hybrid managed account/fund structure– May offer investors superior liquidity and transparency– Third-party custody and control– Turnkey access to trading managers

• Separate structures– Investor utilizes platform to consolidate operations– Data aggregation and risk monitoring

• Potential weaknesses– Selection of managers (biases and quality)– Extra fees– Tracking error (and some strategies do not lend itself well to managed

accounts)– Costly to set up

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Comparison of Managed Accounts, Funds and Managed Account Platforms: Institutional Investors’ Perspective

Fund Investment

Separately Managed Account

Managed Account Platform

Convenience Yes No Yes

Limited Liability Yes No Yes - If Pooled

Liquidity Varies Superior Varies

Ability to Liquidate Positions to Protect Investor No Yes Yes

Transparency Varies Full Varies

Custody/Control of Assets Manager Investor Third Party

Investment Minimum Low High Low

Operationally Complex No Yes No

Tracking Error None Yes Yes

Extra Fees (No) No Yes

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Perhaps a better solution is to invoke Governance & Transparency via Hedge Fund Administrator

One does not need a managed account in order to obtain transparency. Hedge Fund Administrators are getting transparency! Therefore, would be good if the administrators would provide more service (research & technology).

If the Hedge fund’s administrator provides the transparency by getting the data from the Prime Broker (or FCM), then

– Governance is being provided by an independent financial institution– Transparency is furnished– Independent risk monitoring– Most positive features from a MAP are retained, but without the weaknesses

• Costly to set up• Tracking error• Potential Manager/selection bias

– Potential Weakness is that the costs go up considerably by the hedge fund administrator, and this is borne ultimately by the investor

• Solution: Have a ceiling on fees (entirely possible if liquid strategy and good technology)

26



Conclusion

1. Liquidity, Transparency and Technology are all interrelated and reinforce one another

2. Managed account solutions may help institutional investors mitigate some of the risks associated with investing in hedge funds

3. Hedge Fund Administrators can furnish a solution by providing independent risk monitoring, transparency, research, technology, and reporting.

Appendix4. Managed futures is a diverse and rich space offering investors opportunities to

generate uncorrelated returns in liquid, transparent and exchange-traded markets 5. Why invest in illiquid strategies when it may be possible to generate similar returns

with liquid strategies?

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APPENDIX – Lintner Revisited … Managed Futures

28



Lintner Revisited

Dr. John Lintner Ph.D., Harvard University• One of the co-creators of the Capital Asset Pricing Model• Presented “The Potential Role of Managed Commodity-Financial Futures

Accounts (and/or Funds) in Portfolios of Stocks and Bonds” at the Annual Conference of the Financial Analysts Federation in Toronto in May 1983.

“Indeed, […] the return/risk trade-offs provided by augmented portfolios consisting partly of funds invested with appropriate groups of futures managers (or funds) combined with funds invested in portfolios of stocks alone (or in mixed portfolios of stocks and bonds), clearly dominate the trade-offs available from portfolios of stocks alone (or from portfolios of stocks and bonds). [Lintner, pages 105-106]

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This material does not constitute an offer to sell or a solicitation of an offer to buy or sell, any commodities or securities and is intended for informational purposes only. 30

Managed Futures Risk Management

3 -Year Rolling Returns: Various Traditional and Alternative Indices, January 1990 – March 2011

FUTURES TRADING IS SPECULATIVE, AND INVESTORS CAN LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT. MEASURES THAT PROFILE RISK AND REWARD SUCH AS STANDARD DEVIATION, MAX DRAW DOWN AND THE SHARPE RATIO MAY MATERIALLY UNDERSTATE TRUE RISK BECAUSE FUTURES TRADING IS SUBJECT TO A "RISK OF RUIN” WHICH IS NOT REFLECTED IN SUCH STATISTICS. COMPARISONS OF ACTIVELY MANAGED PRODUCTS TO PASSIVE FINANCIAL INDICES INVOLVE MATERIAL INHERENT LIMITATIONS.

Source: AlphaMetrix Alternative Investment Advisors, CME Group, BloombergPast results are not necessarily indicative of future results.

Jan-90

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

-60%-40%-20%

0%20%40%60%80%

100%120%140%

3 Year Rolling Window Returns: Barclay CTA Index vs. S&P 500

S&P 500 Barclay CTA Index

Barclay CTA Index

Maximum 79.43%Average 22.79%Minimum 1.50%Negative Returns 0




• 3 -Year Rolling Returns: Various Traditional and Alternative Indices, • January 1993 – March 2011


*Barclays Bond Composite Global Index did not report returns for Sep 2008 and Oct 2008Source: AlphaMetrix Alternative Investment Advisors, CME Group, Bloomberg

S&P 500 Index

Barclays Bond Composite

Global Index

S&P Goldman Sachs

Commodity Total Return

Index

HFR Equity Hedge Index

HFRI Fund Weighted

Index

Barclay CTA Index

Barclay BTOP50 Index

Number of 3 Year Rolling Negative Periods (out of n = 219)

65 0 75 22 5 0 0




•


• CTAs generally employ active risk management which typically includes disciplined adherence to well‐defined stop‐loss limits• Managed futures programs also have the ability to go long, short, or neutral which also may help CTAs to recover more quickly from drawdowns by generating returns in falling markets• Indices of managed products are not indicative of the performance of any individual account.

Past results are not necessarily indicative of future results.

Jan-90

Oct-90

Jul-91

Apr-92Jan

-93Oct-

93Jul-9

4

Apr-95Jan

-96Oct-

96Jul-9

7

Apr-98Jan

-99Oct-

99Jul-0

0

Apr-01Jan

-02Oct-

02Jul-0

3

Apr-04Jan

-05Oct-

05Jul-0

6

Apr-07Jan

-08Oct-

08Jul-0

9

Apr-10Jan

-11-60%

-50%

-40%

-30%

-20%

-10%

0%

Drawdowns of S&P 500 and Barclay CTA IndexJanuary 1990 - March 2011

S&P 500 Index Barclay CTA Index



The Case for Diversification: Omega Functions


0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 200

0.5

1

1.5

2

2.5

3

Omega Graph: BTOP50 Index and Traditional Portfolio of Equities and Fixed IncomeJanuary 1987 - March 2011


Traditional Portfolio (60% S&P 500 Index/40% Barclays Capital Bond Compos-ite Global Index)

50% BTOP 50 Index/50% Traditional Portfolio (60% S&P 500 Index/40% Barclays Capital Bond Composite Global Index)

Annualized Return Threshold (%)

Om

ega

Perf

orm

ance

Mea

sure

Source: AlphaMetrix, Bloomberg. The Barclays Capital Bond Composite Global Index did not report Sep 2008 and Oct 2008Past results are not necessarily indicative of future results



The Case for Diversification: Correlations

•Managed futures have potential to show low correlation to broader market indices •(Jan 1990 – Mar 2011)


*Barclays Bond Composite Global Index did not report returns for Sep 2008 and Oct 2008Source: AlphaMetrix Alternative Investment Advisors, Bloomberg. Indices of managed products are not indicative of the performance of any individual account. Past results are not necessarily indicative of future results.

S&P 500 Index

Barclays Capital Bond Composite

Global Index

S&P Goldman Sachs Commodity Total Return Index


HFRI Fund Weighted

Index


Barclay CTA Index

S&P 500 Index 1.00

Barclays Capital Bond Composite

Global Index0.14 1.00

S&P Goldman Sachs Commodity Total Return Index

0.14 0.05 1.00

HFRI Fund Weighted Index

0.72 0.06 0.33 1.00


0.73 0.06 0.28 0.95 1.00


-0.11 0.26 0.14 -0.03 -0.02 1.00

Barclay CTA Index -0.11 0.20 0.19 0.01 0.00 0.92 1.00



Managed Futures – Performance During Equity Market Drawdowns

•


- Indices of managed products are not indicative of the performance of any individual account. Past results are not necessarily indicative of future results.

Period Event S&P 500 Index

Barclay BTOP 50

IndexDifference

Fourth Quarter 1987 Black Monday - Global Stock Markets Crash -23.23% 16.88% 40.11%Fourth Quarter 2008 Bear Market in U.S. Equities led by Financials -22.56% 8.73% 31.29%Third Quarter 2002 WorldCom Scandal -17.63% 9.41% 27.05%Third Quarter 2001 Terrorist Attacks on World Trade Center and Pentagon -14.99% 4.12% 19.10%Third Quarter 1990 Iraq Invades Kuwait -14.52% 11.22% 25.74%Second Quarter 2002 Continuing Aftermath of Technology Bubble Bursting -13.73% 8.52% 22.26%First Quarter 2001 Bear Market in U.S. Equities led by Technology -12.11% 5.97% 18.08%Second Quarter 2010 European Sovereign Debt Crisis, "Flash Crash" in U.S. Equities -11.86% -1.92% 9.94%Third Quarter 1998 Russia Defaults on Debt, LTCM Crisis -10.30% 10.54% 20.84%First Quarter 2008 Credit Crisis, Commodity Prices Rally -9.92% 5.91% 15.83%Third Quarter 2008 Credit Crisis, Government-Sponsored Bailout of Banks -8.88% -3.71% 5.17%Fourth Quarter 2000 DotCom Bubble Bursts -8.09% 19.78% 27.87%Third Quarter 1999 Anxiety during Run Up to Y2K -6.56% -0.67% 5.89%First Quarter 1994 Federal Reserve Begins Increasing Interest Rates -4.43% -2.10% 2.33%Fourth Quarter 2007 Credit Crisis, Subprime Mortgage Losses -3.82% 3.02% 6.84%Source: AlphaMetrix Alternative Investment Advisors, Bloomberg

Performance of the Barclay CTA Index during 15 Worst Quarters of S&P 500 Index Performance



Managed Futures – Performance During Equity Market Drawdowns


• While not a hedge, managed futures has historically tended to perform well during periods that have been difficult for equities and many other hedge fund strategies.• This effect may possibly enhance the benefits from diversification managed futures offer by potentially contributing to an investor’s portfolio during periods that may be difficult for other investments

8/00 - 2/03



Lintner Revisited

• Objectives of “Lintner Revisited: A Quantitative Analysis of Managed Futures in an Institutional Portfolio”

– Revisit Dr. Lintner’s analysis of the role of managed futures in institutional portfolios to see if his insights remain true 25 years later

• Apply techniques previously unavailable to Dr. Lintner, such as the analysis of Omega functions

– Re-introduce Managed Futures as a group of liquid transparent hedge fund sub-strategies which trade global exchange-traded futures and deep liquid FX forward markets and do not tend to exhibit correlation to traditional or alternative investments

– Dispel some commonly held misconceptions about managed futures– Provide an overview of some more common strategies employed by CTAs– Explore the tendency of managed futures investments to perform well during

market dislocations– Discuss some of the unique benefits managed futures offer institutional

investors

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Managed Futures - Overview

Hedge Fund – A managed portfolio that may trade long and short, employ leverage and is generally not subject to restrictions in terms of investment strategy or the types of instruments traded.

Mutual Funds Private Equity

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Managed Futures - Overview

• What is Managed Futures?– A group of liquid transparent hedge fund sub-strategies employed by professional

money managers who trade a diversified mix of liquid global markets utilizing futures, forwards and options on the foregoing

– Instruments tend to be exchange-traded; no valuation or accounting issues

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What Managed Futures is Not – Common Misconceptions

• Commodity Trading Advisors (CTAs) trade only natural resources/commodities– Trade diversified liquid global markets including equity indices, fixed income and

currencies• Association of CTAs with passive long-only commodity indices such as the S&P

GSCI, DJ UBS Commodity Index and Rogers International Commodity Index– Misleading because these do not account for active management and only include

a small fraction of the investment universe of most CTAs– Also may lead to general misconceptions about riskiness

• All CTAs are trend followers– Managed futures is a tremendously diverse and rich space

40

FUTURES TRADING IS SPECULATIVE, AND INVESTORS CAN LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT. MEASURES THAT PROFILE RISK AND REWARD SUCH AS STANDARD DEVIATION, MAX DRAW DOWN AND THE SHARPE RATIO MAY MATERIALLY UNDERSTATE TRUE RISK BECAUSE FUTURES TRADING IS SUBJECT TO A "RISK OF RUIN" WHICH IS NOT REFLECTED IN SUCH STATISTICS. COMPARISONS OF ACTIVELY MANAGED PRODUCTS TO PASSIVE FINANCIAL INDICES INVOLVE MATERIAL INHERENT LIMITATIONS.

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Managed Futures Strategies and Styles

• Trend Following– Seeks to capture directional trends or momentum across diversified portfolios of

futures markets– Continuous innovation and evolution– Multi-strategy– Multiple portfolio managers or risk silos within the same trading program

• Global Macro– Discretionary or systematic global macro trading based on macroeconomic themes

over multiple time frames. A Macro CTA seeks to profit from analysis of global economic factors (for example, interest rates, economic policies and currency fluctuations).

• Statistical/Quantitative– Employs sophisticated statistical or quantitative techniques borrowed from or

applied in the sciences. Examples include signal processing, neural networks and genetic algorithms. Typically technical and systematic.

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• Short-term Trading– Holding periods of a few hours or days allow traders to exploit short-term trends or

countertrends that behavioral finance research suggests result from the emotional reactions of market participants. Can be systematic, discretionary, or opportunistic; typically based on technical analysis.

• Sector Specialists– Natural Resources (Energy, Agriculture, Metals)

• Seeks to capture trends and countertrends, as well as relative value/market structure opportunities in natural resources/commodities markets. Trading styles vary from diversified systematic managers searching for trends to fundamental niche sector specialists trading only the grains and meats, for example.

– Financials (Equity Indices, Fixed Income, FX)• Seeks to capture trends and countertrends, as well as fundamental mispricing through

discretionary or econometric analysis– Foreign Exchange (FX)

• Seeks to capture trends and countertrends, as well as international interest rate differences, in the foreign exchange markets. Most foreign exchange trading is done primarily in highly liquid G10 currencies* (a group of 10 large developed economies).

*Eurozone, United States, United Kingdom, Switzerland, Japan, Canada, Australia, New Zealand, Norway and Sweden

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• Managed futures is best described as a group of liquid transparent hedge fund sub-styles unified by the fact that they trade global futures and FX markets

– Discretionary or Systematic– Wide diversity of trading styles and holding periods may also yield returns that

exhibit low correlations to traditional assets – like different radio receivers that “tune in” to different market frequencies

– Broad range of markets and the ability to go long, short, or neutral, as well as take relative value or spread positions

– Taking both long and short positions may enable managers to produce returns that are uncorrelated with traditional assets

– Ability to actively manage risk and quickly shift positions to exploit opportunities

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Managed Futures: Potential Benefits

• Transparency, liquidity and custody– Managed futures strategies typically offer high levels of transparency into their portfolios,

facilitating risk oversight and monitoring– Trade deep, liquid global markets; allows managers to more easily manage risk and offer

superior liquidity to underlying investors– Third party custody of assets helps to mitigate the risk of fraud, blow-ups

• Potential low correlation to traditional equity and fixed income markets, as well as other alternative investments

– Managed futures may reduce risk in some market environments and enhance returns in others

– Managed futures have, from time to time, historically performed well during equity market drawdowns

• CTAs often capture trends that result as investors flee equities for the safety of bonds or hard assets like commodities

– Often uncorrelated even to one another• Global market exposure through a variety of assets

– Trade international financial and commodity markets; diverse opportunity set – Trade long, short, or neutral futures, forwards and futures options

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References

• Abrams, Ryan and Ranjan Bhaduri and Elizabeth Flores. “Lintner Revisited: The Benefits of Managed Futures 25 Years Later,” CME Group, 2009.

• Bhaduri, Ranjan and Christopher Art. “Liquidity Buckets, Liquidity Indices, Liquidity Duration and their Applications to Hedge Funds,” Alternative Investment Quarterly, Second Quarter 2008.

• Bhaduri, Ranjan and Niall Whelan. “The Value of Liquidity,” Wilmott Magazine, January 2008.

• CME Group. “Managed Futures: Portfolio Diversification Opportunities,” CME Group, 2008.

• http://nobelprize.org/nobel_prizes/economics/laureates/2009/ecoadv09.pdf

• http://nobelprize.org/nobel_prizes/economics/laureates/2009/info.pdf

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http://nobelprize.org/nobel_prizes/economics/laureates/2009/ecoadv09.pdf

http://nobelprize.org/nobel_prizes/economics/laureates/2009/ecoadv09.pdf

http://nobelprize.org/nobel_prizes/economics/laureates/2009/info.pdf

http://nobelprize.org/nobel_prizes/economics/laureates/2009/info.pdf



Acknowledgements

• Montreal PRMIA Chapter



Important DisclaimersThese materials are solely informational and for discussion purposes only. In preparing these materials, we have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public and internal sources. AlphaMetrix does not undertake to advise you of changes in the information or materials contained herein, and we shall not in any way be liable for claims relating to them, and make no express or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in, or omissions from, them. The investment strategies discussed herein may not be suitable for all investors. The statistics contained in this report may contain model error which may be non-trivial. It should be understood that pro-forma statistics may have very serious limitations and shortcomings. Investors must make their own investment decisions based on their own investment objectives and financial position. An investor must be prepared to lose all or substantially all of any investment. These materials do not constitute an offer to sell or the solicitation of an offer to buy interests in any financial instrument or participate in any trading strategy. Any offering of interests in any investment vehicle will be made solely pursuant to the offering memorandum relating to such investment vehicle. No investment should be made without a detailed review of an offering memorandum, including, without limitation, risk factors. There may be many risks, some unarticulated and potentially very large, with any investment vehicle. Any investment returns, past, pro forma, or otherwise, are not a guarantee of future performance. Returns reflect past performance, and past performance is not indicative of future returns. Hedge Funds, Commodity Trading Advisors, and other alternative investments often engage in leveraging and other speculative investment practices that may increase the risk of loss, 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, and often charge high fees. The information in this document is directed only to qualified persons with whom AlphaMetrix and its principals have a pre-existing relationship, and therefore is meant for the review of the named recipient only. Please do not forward, copy or otherwise circulate this letter or any other information in this letter to any persons not affiliated with the recipient. This document does not constitute an offer to sell, or a solicitation of an offer to buy or sell any products named herein, any commodities interests, futures contracts, or securities, and is intended for informational purposes only. Any offer for any investment product will be made solely by a confidential private placement memorandum. Alternative investment products, including hedge funds and managed futures, involve a high degree of risk. Alternative investment performance can be volatile. An investor could lose all or a substantial amount of his or her investment. Alternative investment products often execute a substantial portion of their trades on non-U.S. exchanges. Investing in non-U.S. markets may entail risks that differ from those associated with investments in U.S. markets.

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