Deutsche Bank Marketing material - For institutional investors only

Global Prime Finance 6 Time Voted No. 1 Prime Broker

Monthly Hedge Fund Trends

Global Custodian Prime Brokerage Survey
2013, 2012, 2011, 2010, 2009, 2008

September 2014
Executive summary* Global performance
Deutsche Bank Research Highlights: Focus Europe: One August 2014 Performance Dispersion
Trillion Euros? and Investor Positioning and Flows: Equity
5.0%
Positioning Close to Lows For The Year

CTA / Managed Futures

Emerging Markets Equity

In our first research piece, the team discusses the impact of the euro
exchange rate and the potential for inflation to reach the European
4.0%
Central Banks target level in 2017. Additionally, the euro area GDP

Equity L/S
details showed investment and inventories were to blame for the

Macro

All Funds

Multi-Strategy
stagnation in the second quarter of this year. In our second research 3.0%
piece, the team comments on the recent changes in equity positioning,

Market Neutral
Event Driven
finding that hedge funds have trimmed positioning closer to neutral.
An elevated macro fund beta has driven hedge funds to extreme short 2.0%

Fixed Income
CB & Vol Arb
positioning in the euro.

Distressed
Credit
Investor Sentiment 1.0%
In the US, the Capital Introductions team met with several Northeast
single and multi-family offices finding many family offices are
increasingly considering direct investments or co-investments as 0.0%
they look to further concentrate their portfolio, reduce fees, and/or
improve yields as a result of disappointing hedge fund performance.
-1.0% 75th Median Average 25th MSCI World
In the UK, family offices continue to seek managers who are able to
provide a proven source of uncorrelated returns and funds of funds
are also seeking niche strategies to invest on an opportunistic basis. Median
In Europe, interest in exposure to event driven managers from UK-based CTA / Managed Futures 2.35% Market Neutral 0.67%
allocators continues to remain the trend for investors given their current Emerging Markets Equity 1.40% Multi-Strategy 0.63%
opportunity set. In Asia, the team has noted an uptick in larger fund Macro 1.23% Credit 0.22%
launches with strategies ranging from Asian equity long/short to global Equity L/S 1.20% CB & Vol Arb 0.09%
macro. All Funds 0.96% Fixed Income 0.08%
Event Driven 0.81% Equity L/S -0.02%
Performance
The median fund gained 0.96% in August with almost all strategies Source: Hedge Fund Intelligence (HFI), September 2014
posting positive returns for the month. CTA/Managed Futures led
performance globally with the median fund gaining 2.35% in August.
Dispersion of returns was also highest among CTA/Managed Futures
strategies. Though the median distressed fund lost 0.02% last month, August 2014 Cumulative Median Performance by Strategy
the strategy continues to lead global performance, returning 6.40%
6.40% Distressed
YTD. Regionally, CTA/Managed Futures led in Europe and the US last
month, gaining 3.74% and 2.21% respectively. In Asia, China l/s gained 5.89% Credit
1.58% in August.
5.27% MSCI World

Leverage 5.24% Event Driven

The MSCI World 30-day volatility increased by 20.43% over the month, 4.05% All Funds
ending at 8.63 on 25 August 2014. Gross fundamental equity exposure Multi-Strategy
3.81%
increased by 1.2% (ending at 2.84), while net fundamental equity
exposure remained unchanged last month ending at 0.69 (0%). 3.80% Fixed Income
Emerging
3.64% Markets Equity
Securities Lending 3.49% Equity L/S
The securities lending team saw European first half earnings yield
more opportunities for fast money shorting on disappointing results. 2.86% CB & Vol Arb

In Japan, the central bank maintained its view the Japanese economy 2.52% Market Neutral
has continued to moderately recover this past month. The risk arbitrage CTA / Managed
2.30%
community showed steady interest in Burger Kings acquisition of Tim Futures
Hortons. 1.36% Macro

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00%

Regulatory
In the US, two Federal Reserve members gave speeches focused on
remaining regulatory reforms post-crisis in relation to non-banks and
to regulation of systemically important financial institutions. ESMA
published the official translations of the guidelines on reporting
obligations under Articles 3 and 24 of the Alternative Investment Fund
Managers Directive (AIFMD). Additionally, ESMA published a letter
from the European Commission stating that it will not be able to provide
clarity on the definition of a foreign exchange (FX) derivative under
MiFID1.
Source: Hedge Fund Intelligence (HFI), September 2014
* This document contains extracts and opinions from
various departments and business areas within
Deutsche Bank, including extracts from Research
Reports, as well as from external reports specifically
referenced herein. It is not, however, a research
piece and has been produced by a front office
function. Also, please refer to the body of the
document for a more detailed description of and
proper references to the topics covered in the
Executive Summary section.

For further information on any of the issues discussed in this newsletter, please contact the Global Prime Finance team: email: MPF.Trends@list.db.com
Monthly Hedge Fund Trends - Deutsche Bank Research Highlights 2

Marketing material - For institutional investors only

Deutsche Bank Research Focus Europe: Deutsche Bank Research Investor

One Trillion Euros? 1
As we expected, the ECB announced private QE during the first week of
September. The ECB plans to start purchasing ABS and covered bonds
from October. The objective is to expand the ECB balance sheet to early
2012 levels, implying a 1 trillion expansion. If achieved, the impact on
the euro exchange rate could be enough to push inflation to the ECB
target level in 2017, shortening the period of sub-target inflation. The
question is whether a 1 trillion net expansion of the ECB balance sheet
is credible. In our view, the ECB would have to be aggressive to go
significantly beyond half this number. ABS/CB purchases buys time, but
Draghi was careful to maintain insurance. Public QE was discussed this
month.
The final August PMIs saw a 1.2-point monthly decrease in the euro-area
composite index to 52.5, adding to the recent disappointing data trend.
The euro area GDP details showed investment and inventories were to
blame for the stagnation in Q2, supporting the geopolitics confidence
shock explanation. News of a ceasefire agreement in Eastern Ukraine is
a tentative positive.
We have scaled back our German GDP forecast for 2014 from 1.8% to
1.5%, as we now expect weaker growth in H2. This also reduces our
forecast for 2015 from 2.0% to 1.8%. The risks that this still constitutes
an overly optimistic forecast have increased significantly. The German
investment cycle will likely be more subdued than expected due to the
ongoing weakness of world trade and increasing geopolitical strains.
Even the hitherto still robust private consumption is emitting its first
warning signs.
Positioning and Flows: Equity Positioning
Close to Lows For The Year 2
Overall equity positioning close to lows for the year
Equity positioning turned further underweight ahead of major central
bank announcements and amidst continuing geopolitical risk. Mutual
funds moved further underweight; long/short equity hedge funds have
trimmed positioning closer to neutral; hybrid funds remain slightly
underweight; by contrast macro hedge fund beta is elevated.
Equity mutual fund underweight reflects persistent outflows
Equity mutual funds have experienced persistent outflows since April
and in response have been forced to build cash positions. Positioning
in cyclical sectors has fallen further to a 1.5 year low, reflecting an
underweight in all cyclical sectors with the exception of Tech; and an
overweight in defensive sectors with the exception of Utilities. This
week saw US funds receive their first inflow since April, notably into
growth and small cap funds which have suffered the bulk of outflows.
A resumption of inflows which tend to follow macro growth indicators
such as the ISMs would see MFs cover underweights.
European equity funds still underweight; Asian funds moved
overweight
European real money funds underperformed during the recent rally as
they remain underweight. As EM equities have rallied Asian funds have
moved from underweight to overweight but Latam and EMEA funds
continue to remain underweight and underperformed.

EU countries share of global FDI inflows has fallen from 50% in the early
2000s to less than 20%. FDI activity is very uneven across the euro area.
In 2013, the largest inflows were recorded for Spain and Ireland, offering
an important source of corporate funding when the flow of bank funding
is constrained. While Germany and Italy experienced an increase in FDI
inflows compared to 2012, they decreased strongly in France.
Hedge funds drive extreme short positioning in the Euro
Elevated macro fund beta reflects both an exposure to equities as well
as a large short position in the euro. The beta to short euro is 6 standard
deviations away from average. Leveraged fund short euro futures
positions on the CFTC are close to levels last seen in June 2012 during
the peak of the European financial crisis.

In our euro area inflation update we look at the positive effect that the Rates longs cut from post-taper extremes
weaker euro exchange rate to date ought to have on inflation in the Bond futures positions which had moved long across the curve with
period ahead. aggregate longs at May 2013 levels have been pared but remain
modestly long. Positions rotated away from longer duration contracts
Euro area breakeven inflation rates are correcting higher with 10 year contracts turning short and 15+ year longs cut while longs
were added to 2 year and 5 year contracts. Bond funds are neutral
2.3
duration and HY. They have outperformed through the recent rise in
2y1y
HICPxt swap rates yields on an overweight in MBS which has seen spreads compress.
2.1 1y1y
4y1y Inflows into longer duration bonds have entirely reversed the
1.9
taper outflow
1.7 From May to December 2013 post the taper communication bond funds
saw steady outflows of almost $40 billion a month. Beginning January
1.5 2014 as bonds rallied initially on covering of oversold positions and then
1.3
on Q1 data disappointments, inflows resumed, especially into longer
dated bonds. These inflows have now reversed the entire taper-driven
1.1 outflow. Meanwhile the strong trend of inflows into floating rate funds
has also reversed since March.
0.9

0.7 Dollar long positions at new highs on the back of shorts in

the Euro and Yen
0.5 Diverging data and central bank paths in the US versus Europe and Japan
Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14
have driven dollar longs to new highs and the dollar to 4-year highs. Oil
and gold long positions and prices in turn have continued to fall sharply.
Source: Deutsche Bank, Bloomberg Finance LP
Macro HFs beta to short Euro at extreme

Macro Hedge Funds: Multifactor beta

0.7 To EURUSD (rhs) To S&P 5000 (lhs)
0.6
0.5 0.4
0.2
0.3 0.0
0.1 -0.2
-0.4
-0.1 -0.6
-0.8
-0.3
-1.0
-0.5 -1.2
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14

1
http://pull.db-gmresearch.com/cgi-bin/pull/DocPull/3775-90E1/72905815/DB_FocusEurope_2014-09-
05_0900b8c088b3f3de.pdf
2
https://ger.gm.cib.intranet.db.com/ger/document/pdf/0900b8c088b46089.pdf

Source: HFR, Bloomberg Finance LP, Deutsche Bank

For further information on any of the issues discussed in this newsletter, please contact the Global Prime Finance team: email: MPF.Trends@list.db.com
Monthly Hedge Fund Trends - Investor Sentiment 3 3

Marketing material - For institutional investors only

Northeast family offices look to co-investments in search
of yield
Our Hedge Fund Capital Group met with 16 single and multi family
offices in the Northeast during the month of August. Many family offices
are increasingly considering direct investments or co-investments as
they look to further concentrate their portfolio, reduce fees and/or
improve yields as a result of disappointing hedge fund performance.
The search for macro managers increased slightly as some of these
groups feel that there may be a market correction in the near term.
We also noticed a small uptick in demand for distressed as family
offices look more aggressively for alpha.
US endowments & foundations show interest in large
launches and international exposure
In our discussions with multiple endowments and foundations (E&Fs)
across the country we concluded that there have been a number of
allocations from the E&F community to large (>$300 million) start ups
and there continues to be more interest in this space. The strategy that
represents the largest proportion of these flows has been fundamental
equity but these investors are keen on fundamentally oriented,
concentrated funds across asset classes. Additionally many of these
groups are starting to look to increase their exposure to Asian equities as
well as global emerging markets.
UK-based family offices and funds of funds seek
opportunistic investments
UK-based family offices continue to seek managers who are able to
provide a proven source of uncorrelated returns. While they tend to be
largely opportunistic with their hedge fund allocations, this investor
group is able to move very quickly when necessary and can be a sticky
source of capital for hedge fund managers. UK funds of funds have also
expressed recent interest in niche strategies, into which they also plan to
invest on an opportunistic basis.
Asian hedge fund investors highly anticipating new Shanghai
Hong Kong Stock Connect
In conversations with over 20 investors in Hong Kong this month, the
Shanghai Hong Kong Stock Connect was the central topic of the
majority of these meetings. The new trading scheme will allow foreign
investors a unique opportunity to gain direct access to the China A
share market via stocks listed on the Shanghai Stock Exchange. It will
also allow Chinese high net worth investors the ability to access Hong
Kong-listed shares for the first time. On October 24th, the team will host
a Capital Introduction event focusing on Asia strategies in Hong Kong,
featuring 20 managers. Given the high level of interest, we also plan to
have a dedicated panel on the Shanghai-Hong Kong Stock Connect to
discuss its role in domestic markets as well as its broader implications.
Clear trends and themes emerge among Asian investors
Most of the investors the team met with in August showed interest in
single country funds, namely Greater China and Japan. On the back
of their strong performance since May, the interest into single country
funds seems to be back, but not without concern. The team did note
that investors were concerned with how these hedge funds would
manage volatility given past headwinds. While many of the investors
are looking for managers with AUM of $200 - $300 million and a stable
track record, there has been a renewed focus on new fund launches in
2014. The team has noted an uptick in larger fund launches as demand
grows and these strategies have ranged from Asian equity long/short to
global macro. Additionally, the team is seeing an increasing number of
managers investing globally from Asia and having success with building
track record and assets. As a result, the team is seeing other managers
follow suit and launch a global strategy out of Hong Kong or Singapore.

Event driven and European equity long/short remain in vogue

Interest in exposure to event driven managers from UK-based allocators
remains high. Many investors have remained focused on those
managers who offer European exposure, given the current opportunity
set. Anecdotally, we have found that many of these allocators have been
willing to meet with the handful of recent new launches in the strategy.
We have also seen notable demand for new ideas in the European equity
long/short space from both family offices and funds of funds.

Interest in fixed income and credit strategies from UK

investors remains stable
We continue to see a slow but steady move into fixed income
alternatives, and away from traditional bond portfolios, from UK
institutional allocators. We also note interest in the more non-
traditional ideas within both the public and private markets from funds
of funds and family offices. There has been particular interest in longer-
dated credit strategies from this group of investors, as well as direct
lending. We have also seen interest in short-biased credit strategies from
the UK wealth management community.

From Deutsche Bank Hedge Fund Capital Group

3

For further information on any of the issues discussed in this newsletter, please contact the Global Prime Finance team: email: MPF.Trends@list.db.com
Monthly Hedge Fund Trends - Performance 4

Marketing material - For institutional investors only

Americas Americas

2014 Year to date median performance August 2014 Performance dispersion of returns
5.0%

CTA / Managed Futures

8.39% S&P 500

Macro
US L/S
6.30% Event Driven

Global L/S
4.0%

All Funds

Multi-Strategy
6.27% Credit

6.25% Global L/S 3.0%

Event Driven
6.03% Distressed

Fixed Income
2.0%

Distressed
5.18% Fixed Income

Credit
4.98% All Funds
1.0%
4.49% US L/S

4.47% Multi-Strategy
0.0%

1.70% Macro
-1.0%
CTA / Managed
1.34%
Futures
75th Median Average 25th S&P 500
0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% -2.0%

Source: Hedge Fund Intelligence (HFI), September 2014 Source: Hedge Fund Intelligence (HFI), September 2014

Europe Europe

2014 Year to date median performance August 2014 Performance dispersion of returns
6.00%
CTA / Managed Futures

5.08% Credit

4.19% Stoxx 600 5.00%

Emerging Markets Equity

CTA / Managed
3.90%
Futures 4.00%
2.67% All Funds

Global L/S
All Funds
European L/S

Multi-Strategy
3.00%
Macro

Market Neutral

Event Driven
2.54% Multi-Strategy

2.00%

Fixed Income
2.17% Event Driven

Credit
1.89% Fixed Income 1.00%

1.64% Market Neutral

0.00%
1.54% European L/S
-1.00%
0.94% Macro

Emerging
-0.60% -2.00%
Markets Equity

-1.13% Global L/S

-3.00%
-2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 75th Median Average 25th Stoxx 600
-4.00%

Source: Hedge Fund Intelligence (HFI), September 2014 Source: Hedge Fund Intelligence (HFI), September 2014

Asia Asia

2014 Year to date median performance August 2014 Performance dispersion of returns
5.00%
Asia ex-Japan L/S

MSCI AsiaPac
China L/S

4.64%
incl Japan

3.85% Asia ex-Japan L/S

4.00%
Multi-Strategy

Pan-Asia L/S

All Funds

2.39% All Funds 3.00%

2.23% Multi-Strategy
Japan L/S

2.00%
Macro

2.07% Macro
1.00%

2.02% China L/S

0.00%

1.53% Pan-Asia L/S

-1.00%
0.92% Japan L/S

-2.00%
0.00% 1.00% 2.00% 3.00% 4.00% 5.00%
75th Median Average 25th MSCI AsiaPac incl Japan

Source: Hedge Fund Intelligence (HFI), September 2014 Source: Hedge Fund Intelligence (HFI), September 2014

For further information on any of the issues discussed in this newsletter, please contact the Global Prime Finance team: email: MPF.Trends@list.db.com
 Monthly Hedge Fund Trends - Leverage 4 5

Marketing material - For institutional investors only

Global
The MSCI World 30-day volatility increased by 20.43% over the month, ending at 8.63 on 25 August 2014. Gross fundamental equity exposure
increased by 1.2% (ending at 2.84), while net fundamental equity exposure remained unchanged last month ending at 0.69 (0%).
The percentage of funds in lower leverage ranges (-1 0.5) last month remained mainly unchanged since June 2014, while higher leverage
ranges (0.5 - 1.0) increased over the same period; however, the percentage of funds in the highest leverage band (1.75 - 2) remained unchanged
over the same time period.

Global net & gross equity leverage vs. volatility

16 3.0

2.8
14 2.6

2.4
12
2.2
MCSI World 30 day Historical Vol

2.0
10
1.8

1.6

Leverage
8
1.4

1.2
6
1.0

4 0.8

0.6

2 0.4

0.2
0 0.0
3 13 3 3 3 14 14 4 4 4 4 4 14
g1 Sep
t1 v1 c1 Jan Feb
r1 ril 1 y1 e1 y1 g
Au 25
Oc No De Ma Ap Ma Jun Jul Au
25 25 25 25 25 25 25 25 25 25 25 25

MSCI World 30d Vol Gross Leverage Net Leverage

Source: Deutsche Bank Global Prime Finance Risk, September 2014

Global August 2014 Quarterly change in net equity leverage distribution across funds
18%

16%

14%
% of funds (Deutsche Bank)

12%

10%

8%

6%

4%

2%

0%
5 5 0 5 0.5 5 1 5 1.5 5 2
-0.7 -0.5 -0.2 5- 0.2 5- 0.7 5- 1.2 5- 1.7 5-
-1 - 5- - -0.2 0- 0.2 0.5
- 0.7 1- 1.2 1.5
- 1.7
-0.7 -0.5

01 Sept14 01 June14

Source: Deutsche Bank Global Prime Finance Risk, September 2014

4
Deutsche Bank Global Prime Finance Risk, September 2014

For further information on any of the issues discussed in this newsletter, please contact the Global Prime Finance team: email: MPF.Trends@list.db.com
Monthly Hedge Fund Trends - Securities Lending
Marketing material - For institutional investors only
Global 5
US % short interest sector change - August 2014
Financials
Utilities
Healthcare
Info Tech
Telecom
Cons Discr
Industrials
Materials
Energy
Cons Staples
-5.0% 0.0% 5.0% 10.0% 15.0%
Source: Markit Group Limited & Deutsche Bank, September 2014
European first half earnings continue upswing
First half earnings season continued through August, bringing many
opportunities for fast money shorting on disappointing results. Arkema
flagged early in the month that second quarter results would not meet
expectations.6 Bilfinger announced yet another profit warning, costing
the CEO his job.7 Bureau Veritas and also Tesco flagged significant
expectations downgrades, while Frontline signalled a cash generation
shortfall.8,9,10
M&A activity not losing steam
Summer did not dampen M&A activity, which continued apace both
within Europe and cross-border. Iliads bid for T-Mobile US surprised the
market with its ambition, but fell on deaf ears.11 Telefonica and Telecom
Italia spent the month pursuing Vivendi, seeking to merger their Brazilian
telecom operations with Vivendis GVT unit.12 By the end of the month
Vivendi had agreed to exclusive negotiations with the Spanish company.
Fiats merger created significant turmoil in the securities lending market,
as clarity was desperately sought regarding any contingent liabilities
owed to lender arising from shareholders withdrawal rights.13 Balfour
Beatty ultimately rejected interest from Carillion, refusing to engage
at any price the bidder was prepared to offer.14 Similarly, UK-based
chipmaker CSR rejected an approach from Microchip.15
Bank of Cyprus and Conzzeta merger top capital raising
efforts for August
Bank of Cyprus let shareholders claw back up to 20% of its recent
placement.16 Conzzeta raised capital pursuant to its merger with
Tegula.17 Kungsleden announced a SEK 1.5 billion rights offer.18 London
Stock Exchange Group Plc is to raise just shy of 1 billion in order to
complete its purchase of Russell Indices.19
Moderate recovery in Japan
The central bank maintained its view that the Japanese economy has
continued to recover moderately. At the same time, there has been
an improvement in the declining demand following the sales-tax
increase. With the U.S. economy heading towards recovery, there is
an expectation of a rise in the Japanese corporate earnings backed by
increased export volumes and a weaker yen. As for the month ending
August, the weaker yen didnt translate into higher exports. During the
month, the yen fell to 104.49 per dollar. The positive news during the
month was Japans $1.3 trillion Government Pension Investment Funds
announcement to buy more domestic shares.
Sony short interest increases despite restructuring plans
Activity by short sellers in the stock has increased slightly to just above
5% of shares outstanding after hitting an annual low on 18 August
2014.20 Ownership of institutional funds who lend currently stands at
nearly 16% of shares outstanding. Short interest was up 28% over the
month of August with 3.2 million shares sold short. The share price
is up 6% since the start of August and up 30% from this years low in
February 2014.21
For further information on any of the issues discussed in this newsletter, please contact the Global Prime Finance team: email: MPF.Trends@list.db.com
6
Europe % short interest sector change - August 2014
Telecom
Industrials
Info Tech
Utilities
Financials
Cons Discr
Health Care
Cons Staples
Energy
Materials
-10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%
Source: Markit Group Limited & Deutsche Bank, September 2014
Concerns about Fast Retailings Uniqlo brand
Considering that 50% of its operating profit comes from Japan, concern
about Uniqlo is evident in the volatile share price of the company which
reached its low on 8 August 2014.22 The rising input costs are just
starting to hit Uniqlos domestic margins and with the brokers doubting
the success for Uniqlos efforts in raising product prices, the share price
of the company has seen a downward trend.23 Short interest fell 46%
during the first week of August to 0.17 million shares from the 0.32
million shares sold short in the start of the month. Over the month, short
interest declined over 40% with 0.18 million shares sold short.
Burger King and Tim Hortons deal sees risk arbitrage interest
It was officially announced in August that Miami-based Burger King
would acquire Canadian coffee shop Tim Hortons in a deal widely
regarded as a tax inversion deal. 24 After deal announcement, risk
arbitrage demand pushed Burger King Worldwide borrow from a general
collateral rate to 10%+ fee (as of this writing) as short interest more than
tripled. Remaining supply is illiquid and highly concentrated with one
specific lender. Even as levels continue to deteriorate, we continue to
see steady demand from the risk arbitrage community.
Kinder Morgan consolidation moves rates from general
collateral
As Kinder Morgan looks to consolidate its oil-and-gas empire, the
borrow dynamic causes some in the equity finance world to hearken
back to the Kinder Morgan/El Paso deal of 2012.25 Towards the end of
that deal, rates were north of 40% on average as demand significantly
outweighed supply and the borrow market froze. Thus far, this
Kinder Morgan deal has not been nearly as dramatic. Prior to deal
announcement in early August, Kinder Morgan stock had been general
collateral rate with approximately 150 million shares of liquidity. As
the news took effect, borrow traded off top levels, settling in at about
0.625% per annum. Plenty of liquidity remains for new shorts, and term
borrow has been in play.
5
This material has been produced by the Deutsche Bank Securities Lending Group and must not be
regarded as research or investment advice.
6
http://www.bloomberg.com/news/2014-08-01/arkema-defers-margin-goal-by-a-year-after-disappointing-
results.html
7
http://www.bloomberg.com/news/2014-08-04/bilfinger-replaces-ceo-koch-after-issuing-second-profit-
8
warning.html
http://www.moneynews.com/Markets/Europe-stocks-Ukraine-market/2014/08/28/id/591434/
9
http://www.reuters.com/article/2014/08/07/tesco-sp-idUSL6N0QD44V20140807
10
http://thenextweb.com/insider/2014/09/05/frontline-ventures-announces-e40m-fund-european-startups/
11
http://online.wsj.com/articles/iliad-to-forge-ahead-with-t-mobile-bid-1407329989
12
http://www.businessweek.com/news/2014-09-09/vivendi-said-to-consider-buying-stake-in-mediaset-s-
pay-tv-unit
13
http://www.nytimes.com/2014/09/05/business/fiat-moving-along-with-chrysler-merger.html
14
http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/11045007/Carillion-
abandons-Balfour-Beatty-merger.html
15
http://www.bloomberg.com/news/2014-08-28/csr-soars-most-in-two-years-on-report-chipmaker-
exploring-sale.html
16
http://www.reuters.com/article/2014/07/28/bankofcyprus-idUSL6N0Q352A20140728
17
http://www.bloomberg.com/article/2014-08-04/azELGartTI5k.html
18
http://www.reuters.com/article/2014/08/15/kungsleden-brief-idUSWEA00E1720140815
19
http://www.bloomberg.com/news/2014-08-22/lse-to-raise-1-6-billion-in-rights-for-frank-russell.html
20
http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=6758:JP
21
http://online.wsj.com/news/articles/SB10001424127887324595904578120670362217736
22
http://www.fastretailing.com/eng/ir/library/pdf/ar2013_en.pdf
23
http://asia.nikkei.com/print/article/36036
24
http://uk.reuters.com/article/2014/09/11/us-burger-king-loan-idUKKBN0H62BH20140911
25
http://dealbook.nytimes.com/2011/10/16/kinder-morgan-to-buy-el-paso/?_php=true&_type=blogs&_r=0
Monthly Hedge Fund Trends - Regulatory 26
Marketing material - For institutional investors only
ESMA publishes official translations of the AIFMD
reporting Guidelines
On 8 August 2014, the European Securities and Markets Authority
(ESMA) published the official translations of the guidelines on reporting
obligations under Articles 3 and 24 of the Alternative Investment Fund
Managers Directive (AIFMD). These articles of the AIFMD require
reporting of the principal markets and instruments in which the AIFM
is trading. The Guidelines aim to ensure consistent application of the
reporting obligations stemming from these Articles. The publication of the
translations begins the two month period within which NCAs must state
to ESMA whether they intend to comply with the guidelines or otherwise
explain the reasons for non-compliance. The guidelines would apply from
the end of this two month period.
EU Commission on FX definition
On 1 August, the ESMA published a letter from the European Commission
stating that it will not be able to provide clarity on the definition of a
foreign exchange (FX) derivative under MiFID 1. As ESMA could issue
guidelines, the letter sets out suggested criteria that they could consider.
The lack of a clear definition of an FX derivative under MiFID 1
was highlighted by ESMA to the European Commission earlier this
year, because of the inconsistency it creates in implementing EMIR
requirements for reporting and clearing. The Commission has said
that ESMA can either issue guidelines on this now, or wait to adopt
implementing rules under MiFID 2. Given that guidelines are not legally
binding on national regulators, it remains to be seen whether this issue
can be fully resolved before the beginning of 2017, when MiFID 2
will apply. In its letter, the Commission suggests a definition of an FX
derivative based on four criteria, including using a T+2 settlement period
to define FX spot contracts for EU and other major currency pairs.
Separately, the Central Bank of Ireland published FAQs on a temporary
definition of a FX forward for EMIR reporting purposes. Generally, the
guidelines only require reporting of FX transactions with settlement
beyond seven days, unless the jurisdiction where a counterparty is based
requires reporting for transactions with settlement earlier than seven days
into the future.
Federal Reserve on shadow banking and repos
Two US Federal Reserve members gave speeches focused on remaining
regulatory reforms post-crisis, particularly in relation to non-banks and to
regulation of systemically important financial institutions. On 11 August,
Stanley Fischer, US Federal Reserve Vice Chairman, spoke about the need
to strengthen reforms in a manner that reduces the risk of unintended
consequences. While global policymakers have made substantial
progress in strengthening the financial system, Fischer warned that
tougher banking regulation could result in activity moving away from the
banking system into the shadow banking system. He said that finding
ways of handling the shadow banking system is one of the areas where
further progress is needed.
On 13 August, the President of the Boston Federal Reserve, Eric
Rosengren, gave a speech in which he called for a re-evaluation of the
regulation of non-deposit taking institutions with significant broker-
dealer operations. He expressed concerns with a lack of progress by
broker-dealers to reduce their reliance on repurchase agreements. He
called for broker-dealers to be required to hold significantly more capital
than they would if they used stable sources of funding and suggested an
increase in the capital required for any holding company with significant
broker-dealer operations. He also called for restrictions on the ability to
which short-term repurchase agreements held by regulated financial
intermediaries could be used to finance long-term assets or high-credit-
risk assets.
For further information on any of the issues discussed in this newsletter, please contact the Global Prime Finance team: email: MPF.Trends@list.db.com
7
Phase II of EMIR reporting begins
On 11 August, phase II of mandatory reporting of derivatives under
the European Markets Infrastructure Regulation (EMIR) commenced.
Under the rules, both counterparties must now report the valuation of all
transactions and the attached collateral to Trade Repositories registered
with ESMA. Valuations must be reported at the end of the day following
the execution of the contract. Collateral valuations must be reported
by the end of the day following the valuation date by the counterparty
posting collateral.
Separately, ESMA are currently consulting on the first round of mandatory
clearing of certain classes of interest rate and credit derivatives. The
rules are expected to be finalized by end 2014 with clearing expected to
commence on a phased basis sometime from mid-2015.
UCITS 5 enters into law
On 28 August, the update to the UCITS directive (UCITS 5) was
published in the Official Journal of the European Union, meaning that
implementation of the requirements will be required by March 2016, or
March 2018 for some of the depository obligations. UCITS 5 requires
management companies to apply remuneration rules on deferrals and
non cash elements which apply to banks under CRD III and to hedge
funds under the AIFMD. Depository requirements are introduced which
are similar but not identical to those under the AIFMD. A harmonized
sanctions regime is also introduced for breaches of the requirements of
the directive.
US rules on CRAs and ABS finalized
On 27 August, the SEC finalized new rules on Credit Rating Agencies
(CRAs) and Asset-backed securities (ABS). The CRA rules, which
implement requirements under the Dodd-Frank Act, require annual
certifications by CEOs that ratings are not influenced by other business
activities, and that internal controls are effective. On ABS, the SEC
unanimously approved rules on enhanced disclosure, to provide
investors with data and tools to independently evaluate investments.
New requirements for issuers of ABS include the provision of asset-
level information in a standardized data format; a three day preliminary
prospectus required before an ABS can be sold, and executive certification
requirements from the issuer.
This is a summary of some of the themes underlying recent regulatory developments affecting hedge
26
funds and their managers. It does not purport to be legal or regulatory advice and must not be relied
on for that purpose. Deutsche Bank is not acting and does not purport to act in any way as your
advisor. We therefore strongly suggest that you seek your own independent advice in relation to any
legal, tax, accounting and regulatory issues relating to the merits or otherwise of the products and
services discussed.
 Monthly Hedge Fund Trends - Deutsche Bank Research Highlights 8
Marketing material - For institutional investors only

No-action relief
expires for
oral recording
requirements EMIR: Margin
for CTAs rules for
(31/12/2014) non-cleared
derivatives
become
FATCA: effective if one
Sponsoring counterparty
entities must Basel III: LCR belongs to a
be registered introduced at 60% AIFMD: Marketing group whose
MiFID 2: ESMA to with the IRS to of liquidity needs passport for non- aggregate
deliver consultation obtain their GIIN (01/01/2015) EU Alternative month-end
on detailed rules (31/12/2014) Investment Funds average
to EU Commission (at earliest). notional
(Q3/2014) EMIR: T+2 (22/07/2015) EMIR: EU amount of
EMIR: Earliest settlement for margining non-centrally
decision on transactions requirements cleared FATCA
High frequency mandatory conducted on OCC: Deadline to for non-cleared derivatives withholding on
trading: SEC/CFTC clearing of trading venues and comply with swaps derivatives begin for Jun-Aug foreign passthru
to propose rules derivatives in cleared by CCPs push out rule to phase in 2015 is < 3 tn payments
(Q3/2014) Europe (12/2014) begins (01/01/2015) (07/2015) (01/12/2015) (30/11/2016) (01/01/2017)

2014 2015 2016 2017

EMIR: Non-EU Swiss CISO Updated Market MiFID 2:
counterparties Marketing Abuse Directive to Proposed date
rules apply and Manager be implemented that MiFID 2
for derivatives registration: (Q4 2015) will come into
(10/10/2014) Deadline to register force (2017)
with FINMA
(02/2015) UCITS V: Potential
Final CFTC implementation
package trade date (Q4 2015)
phasing deadline
for non MAT
instruments
(16/11/2014)

Abbreviations
AIF Alternative Investment Fund
AIFMD Alternative Investment Fund Managers Directive
CBRC China Banking Regulatory Commission
CCP - Central Clearing Counterparty
CDS Credit Default Swap
Source: D
 eutsche Bank Government & Regulatory CFTC Commodity Futures Trading Commission
Affairs and Hedge Fund Consulting CRA Credit Rating Agency
CRD Capital Requirements Directive
CSD Central Securities Depositories
This timeline is for informational purposes only. Please refer to EBA European Banking Authority
the disclaimer section of this document for further information.
EC European Commission
ECON Economic & Monetary Affairs Committee
EIOPA European Insurance and Occupational Pensions
Authority
EP European Parliament
EMIR European Market Infrastructure Regulation
ESMA European Securities Market Authority
EU European Union
FATCA Foreign Account Tax Compliance Act
FDIC Federal Deposit Insurance Corporation
FFIs Foreign Financial Institutions
FSB Financial Stability Board
FFI Foreign Financial Institution
FTT Financial Transaction Tax
HFT High frequency trading
IRS Interest Rate Swap
JFSA Japanese Financial Services Agency
MAR Market Abuse Regulation
MiFID Markets in Financial Instruments Directive
MSP Major Swap Participant
OCC Office of the Comptroller of the Currency
PRIPs Packaged Retail Investment Products
RRD EU Recovery and Resolution Directive
SFC Securities and Futures Commission
SEC Securities and Exchange Commission
SEF Swap execution facility
SEPA Single Euro Payments Area
SIFI Systematically Important Financial Institution
SSM Single Supervisory Mechanism
TD Transparency Directive
UCITS Undertakings for Collective Investment in
Transferable Securities

For further information on any of the issues discussed in this newsletter, please contact the Global Prime Finance team: email: MPF.Trends@list.db.com
Monthly Hedge Fund Trends 9

Marketing material - For institutional investors only

Disclaimer
This document is intended for discussion purposes only and does not create any legally binding obligations on the part of Deutsche
Bank AG and/or its affiliates (DB). Without limitation, this document does not constitute an offer, an invitation to offer or a
recommendation to enter into any transaction. When making an investment decision, you should rely solely on any specific final
documentation relating to a transaction and not the summary contained herein. DB is not acting as your legal, financial, tax or
accounting adviser or in any other fiduciary capacity with respect to any proposed transaction mentioned herein. This document does
not constitute the provision of investment advice and is not intended to do so, but is intended to be general information. Any product(s)
or proposed transaction(s) mentioned herein may not be appropriate for all investors and before entering into any transaction you should
take steps to ensure that you fully understand the transaction and have made an independent assessment of the appropriateness of
the transaction in the light of your own objectives, needs and circumstances, including the possible risks and benefits of entering into
such transaction. For general information regarding the nature and risks of the proposed transaction and types of financial instruments
please go to www.globalmarkets.db.com/riskdisclosures. You should also consider seeking advice from your own advisers in making
any assessment on the basis of this document. If you decide to enter into a transaction with DB, you do so in reliance on your own
judgment. The information contained in this document is based on material we believe to be reliable; however, we do not represent that
it is accurate, current, complete, or error free. Assumptions, estimates and opinions contained in this document constitute our judgment
as of the date of the document and are subject to change without notice. Any projections are based on a number of assumptions as to
market conditions and there can be no guarantee that any projected results will be achieved. Past performance does not guarantee or
predict future results. This material was prepared by a Sales or Trading function within DB, and was not produced, reviewed or edited
by the Research Department. Any opinions expressed herein may differ from the opinions expressed by other DB departments including
the Research Department. Sales and Trading functions are subject to additional potential conflicts of interest which the Research
Department does not face. DB may engage in transactions in a manner inconsistent with the views discussed herein. DB trades or may
trade as principal in the instruments (or related derivatives), and may have proprietary positions in the instruments (or related derivatives)
discussed herein. DB may make a market in the instruments (or related derivatives) discussed herein. Sales and Trading personnel are
compensated in part based on the volume of transactions effected by them. DB seeks to transact business on an arms length basis
with sophisticated investors capable of independently evaluating the merits and risks of each transaction, with investors who make their
own decision regarding those transactions.

The distribution of this document and availability of these products and services in certain jurisdictions may be restricted by law.
You may not distribute this document, in whole or in part, without our express written permission. DB SPECIFICALLY DISCLAIMS
ALL LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER LOSSES OR DAMAGES INCLUDING LOSS OF PROFITS
INCURRED BY YOU OR ANY THIRD PARTY THAT MAY ARISE FROM ANY RELIANCE ON THIS DOCUMENT OR FOR THE RELIABILITY,
ACCURACY, COMPLETENESS OR TIMELINESS THEREOF. DB is authorised under German Banking Law (competent authority: BaFin -
Federal Financial Supervising Authority) and regulated by the Financial Conduct Authority and the Prudential Regulation Authority for
the conduct of UK business. In the US this document is approved and or distributed by Deutsche Bank Securities Inc., a member of the
NYSE, FINRA, NFA and SIPC.

IN AUSTRALIA: Deutsche Bank holds an Australian financial services licence (AFSL 238153).

In SAUDI ARABIA: Deutsche Bank AG in the Kingdom of Saudi Arabia (registered no. 1010217560) is regulated by the Saudi Arabian
Monetary Agency. Deutsche Bank AG - Saudi Branch may only undertake the financial services activities that fall within the scope of its
existing SAMA license. Principal place of business in Saudi Arabia: King Fahad Road, Al Olaya District, P.O. Box 301809, Faisaliah Tower -
17th Floor, 11372 Riyadh, Saudi Arabia.

Deutsche Securities Saudi Arabia LLC Company, (registered no. 07073-37) is regulated by the Capital Market Authority. Deutsche Securities
Saudi Arabia may only undertake the financial services activities that fall within the scope of its existing CMA license. Principal place of
business in Saudi Arabia: King Fahad Road, Al Olaya District, P.O. Box 301809, Faisaliah Tower - 17th Floor, 11372 Riyadh, Saudi Arabia.

IN DUBAI: Deutsche Bank AG in the Dubai International Financial Centre (registered no. 00045) is regulated by the Dubai Financial Services
Authority. Deutsche Bank AG - DIFC Branch may only undertake the financial services activities that fall within the scope of its existing
DFSA license. Principal place of business in the DIFC: Dubai International Financial Centre, The Gate Village, Building 5, PO Box 504902,
Dubai, U.A.E. This information has been distributed by Deutsche Bank AG. Related financial products or services are only available to
Professional Clients, as defined by the Dubai Financial Services Authority.

IN MALAYSIA: This document is distributed in Malaysia by Deutsche Bank (Malaysia) Berhad.

IN JAPAN: This document is prepared by Deutsche Bank AG London Branch and is distributed in Japan by Deutsche Securities Inc. (DSI).
Please contact the responsible employee of DSI in case you have any question on this document.
DSI serves as contact for the product or service described in this document.

IN QATAR: This document has not been filed with, reviewed or approved by the Qatar Central Bank, the Qatar Financial Centre Regulatory
Authority or any other relevant Qatari governmental body or securities exchange. This document does not constitute a public offering and
is addressed only to the party to whom it has been delivered. All applications for investment should be received, and allotments made,
outside Qatar.

IN HONG KONG: This document is intended for Professional Investors within the meaning of the Securities and Futures Ordinance
(Cap. 571) and any rules made thereunder. In Hong Kong this document is distributed by Deutsche Securities Asia Limited (DSAL) and
Deutsche Bank AG (DBAG). DSAL is an exchange participant of The Stock Exchange of Hong Kong Limited and a licensed corporation
with the Securities and Futures Commission. Deutsche Bank AG is regulated by the Hong Kong Monetary Authority as a licensed bank.

This document contains information regarding recent legal and regulatory developments. Any legal or regulatory information contained
in this document is for information purposes only and does not purport to be legal or regulatory advice and should not be relied on for
that purpose. The subject matter of this communication is described in summary form only and may contain material omissions. For a
more detailed explanation of the legal or regulatory issues highlighted in this document you should contact your own legal or regulatory
advisors. DB is not acting and does not purport to act in anyway as your advisor in relation to any legal or regulatory matters. You should
consider seeking your own independent advice in relation to any legal or regulatory matters discussed herein and professional legal,
regulatory or other professional advice should be obtained before taking or refraining from taking any action as a result of the contents
of this communication.

For further information on any of the issues discussed in this newsletter, please contact the Global Prime Finance team: email: MPF.Trends@list.db.com