Confidential presentation materials. Not for unauthorized distribution. Reproduction without express written permission is strictly prohibited. January 2012 32
Advanced Portfolio Management LLC 1330 Avenue of the Americas, 36th Floor New York, New York 10019 +1 212 838 4700 1 info@apmcap.com www.apmcap.com
Past performance is not indicative of future results. Some of the performance data is unaudited and has been computed by APM based on unaudited figures. The data set forth in this presentation is based on information from sources believed to be reliable but has not been independently verified. Performance is shown net of all fees and expenses, including investment expenses, and professional fees. The index information is included merely to show the general trend in markets in the periods indicated and is not intended to imply that the portfolio was similar to the indices either in composition or element of risk. This document does not constitute an offer for sale of interests which may be made only by means of a private placement memorandum to investors satisfying the applicable investor eligibility criteria. This document contains confidential information which is not for unauthorized reproduction or distribution. Reproduction or distribution without express written permission is strictly prohibited. Copyright 2012 by Advanced Portfolio Management LLC. All rights reserved.
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Table of Contents
Manager analysis
Attributes Performance analysis Comparative example 1 Comparative example 2 Terms analysis 8 9 14 16 18
20
Financial crisis
Alternative investments 28
28
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R = Rf + ( Rm Rf )
Measure of systematic risk y Meant to capture stable, long-term relationships
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R = Rf + ( Rm Rf ) R Rf = ( Rm Rf )
R Rf = ( Rm Rf ) +
Terminology from regression analysis
= X +
Measure of idiosyncratic risk and return Ways to generate alpha - Market timing - Security selection
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Manager analysis g y
Attributes
Performance analysis Returns analysis Quality of returns analysis:
- Ri k dj t d returns Risk-adjusted t - Alpha content - Downside analysis
Terms analysis:
- Liquidity - Fees
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Manager analysis g y
L/S Equity
Manager/Benchmark Manager Altvest Long Short Equity Index HFR Equity Hedge Index Tremont Long Short Equity Index Average US 1M T-Bill ill Barclays Aggregate SSB Non-US WGBI Merrill High Yield Russell 1000 Value Russell 1000 Growth Russell 2000 MSCI World Ex-USA
1Y Return
5Y Return
Return
1.7% 7.1% 6.6 5.8 6.5 0.1% 7.9 4.9 17.3 10.2 13.8 15.6 6.0
8.3% 5.1% 4.1 6.0 5.1 2.3% 6.1 7.5 8.9 1.3 3.7 4.3 4.7
6.5% 8.1% 7.1 8.2 7.8 2.0% 5.3 8.2 11.2 8.1 7.7 11.3 11.7
8.7% 7.8% 8.7 7.8 8.1 0.5% 3.8 8.8 11.3 16.3 15.9 20.7 18.5
0.5 0.8 0.6 0.8 0.7 N/A / 0.9 0.7 0.8 0.4 0.4 0.4 0.5
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Manager analysis g y
Investment Class
0.29
Manager Alpha US 1M T Bill T-Bill Barclays Aggregate SSB Non-US WGBI Merrill High Yield Russell 1000 Value Russell 1000 Growth Russell 2000 MSCI World ExUSA
6.5% 4.8 2.0 20 -1.1 -0.7 -0.8 -3.7 -0.2 0.3 5.9
100.0% 70.3 -2.5 25 2.8 0.6 0.4 14.1 0.2 -0.5 14.6
Factor analysis is applied to isolate alpha and precisely attribute both risk and return
Manager analysis g y
5Year
47.8% -7.4% 7. % May-06 Dec-06 8 6 0.7% 3.0% 7.7% -5.9% 5 9% 0.13 -0.09 6.3%
1Year
1.4% -5.1% 5. % May-10 Sep-10 5 1 0.1% 2.3% 5.8% -3.2% 3 2% 1.24 -0.11 8.8%
Drawdown analysis and alpha trends are important dimensions of manager performance f
8.0% 6.0% 4.0% 2.0% 0.0% Apr-01 -2.0% -4.0% -6.0% Sep-02
Average g Alpha
Regression g Line
Jan-04
May-05
Oct-06
Feb-08
Jul-09
Nov-10
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Manager analysis g y
Correlation Beta
Period 0.00 P i d 0 00 5Year -0.02 1Year 0.22 Period -0.01 5Year -0.43 1Year 101.12
Worst and best monthly returns are examined to allow detailed investigation into outlying performance f
Jan-08 y May-06 Aug-07 Apr-03 Sep-09 Mar-06 Jun-08 May-09 Sep-10 S 10 Oct-08
-5.9% -5.4 -5.0 -3.5 -3.2 7.7% 6.8 6.6 5.8 58 5.3
0.2% 0.4 0.4 0.1 0.0 0.4% 0.2 0.0 0.0 00 0.0
1.7% -0.1 1.2 0.8 1.1 -1.0% -0.1 0.7 0.1 01 -2.4
4.0% 2.3 1.6 1.4 2.7 -1.2% 0.4 4.6 3.3 33 -2.5
-1.4% -0.1 1.1 5.8 6.0 0.6% -2.7 7.1 3.0 30 -16.3
-4.0% -2.5 1.1 8.8 3.9 1.4% -9.6 6.2 7.8 78 -17.3
-7.8% -3.4 1.6 7.4 4.3 1.5% -7.2 5.0 10.6 10 6 -17.6
-6.8% -5.6 2.3 9.5 5.8 4.8% -7.7 3.0 12.5 12 5 -20.8
-9.0% -3.8 -1.4 9.6 4.1 3.2% -7.8 12.6 9.6 96 -20.8
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Manager analysis g y
I
1.2% 2.7 -1.0 0.8 08 0.6% 2.3 -2.5 1.2 0.1% 3.0 -2.7 2.7 3.6 0.5% 3.1 -5.5 4.0 0.2% 3.1 -5.2 3.7 0.4% 3.0 -7.1 3.9 0.0% 2.9 -5.7 4.7
II
0.8% 2.7 0.2 0.2 02 1.0% 2.6 -0.2 0.5 0.8% 2.9 0.7 0.4 0.5% 2.7 0.1 1.0 0.8% 1.8 -0.3 0.9 0.7% 2.0 0.0 1.4 0.0% 2.2 -0.1 1.1
III
0.6% 2.4 0.8 0.2 02 0.2% 2.4 1.6 0.5 0.4% 1.3 1.5 0.2 0.4% 1.6 2.1 0.6 0.7% 2.6 2.2 0.8 0.4% 2.4 3.2 0.9 1.1% 2.4 2.9 0.7
IV
-0.4% 2.1 1.7 0.7 07 0.4% 2.9 3.9 1.4 0.9% 2.6 4.2 2.3 0.8% 2.6 5.9 2.0 0.4% 2.6 5.8 2.0 0.6% 2.7 7.7 2.6 1.1% 2.4 6.8 2.5
Worst-to-best quartile analysis of index returns versus the manager provide id additional intuition
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Manager analysis g y
L/S Equity
Manager/Benchmark Manager 1 Altvest Long Short q y Equity Index HFR Equity Hedge Index Tremont Long Short Equity Index Average US 1M T-Bill Barclays Aggregate SSB Non-US WGBI Merrill High Yield Russell 1000 Value Russell 1000 Growth Russell 2000 MSCI World Ex-USA
1Y Return
5Y Return
Return
4.2% 7.1% 11.6 5.8 8.2 0.1% 7.9 4.9 17.3 10.2 13.8 13 8 15.6 6.0
9.1% 5.1% 9.5 6.0 6.9 2.3% 6.1 7.5 8.9 1.3 3.7 37 4.3 4.7
9.0% 8.1% 14.7 8.2 10.3 2.0% 5.3 8.2 11.2 8.1 7.7 77 11.3 11.7
6.4% 7.8% 12.2 7.8 9.3 0.5% 3.8 8.8 11.3 16.3 15.9 15 9 20.7 18.5
1.1 0.8 1.0 0.8 0.9 N/A 0.9 0.7 0.8 0.4 0.4 04 0.4 0.5
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Manager analysis g y
Investment Class
0.24
Manager 1 Alpha US 1M T Bill T-Bill Barclays Aggregate SSB Non-US WGBI Merrill High Yield Russell 1000 Value Russell 1000 Growth Russell 2000 MSCI World ExUSA
9.0% 6.2 2.0 20 -0.1 0.8 -0.6 1.8 -1.6 -1.0 1.5
100.0% 75.0 0.5 05 -0.5 5.8 -0.4 13.2 -1.7 -1.1 9.1
* Normalized
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Manager analysis g y
L/S Equity
Manager/Benchmark Manager 2 Altvest Long Short q y Equity Index HFR Equity Hedge Index Tremont Long Short Equity Index Average US 1M T-Bill Barclays Aggregate SSB Non-US WGBI Merrill High Yield Russell 1000 Value Russell 1000 Growth Russell 2000 MSCI World Ex-USA
1Y Return
5Y Return
Return
9.9% 7.1% 11.6 5.8 8.2 0.1% 7.9 4.9 17.3 10.2 13.8 15.6 6.0
10.4% 5.1% 9.5 6.0 6.9 2.3% 6.1 7.5 8.9 1.3 3.7 4.3 4.7
13.1% 6.5% 11.5 7.0 8.3 2.2% 5.7 7.1 8.7 4.2 4.3 6.6 8.0
21.3% 8.4% 13.0 8.5 9.9 0.5% 3.5 8.6 12.1 16.9 16.4 21.4 19.5
0.5 0.5 0.7 0.6 0.6 N/A 1.0 0.6 0.5 0.1 0.1 0.2 0.3
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Manager analysis g y
Investment Class
0.75
Manager 2 Alpha US 1M T Bill T-Bill Barclays Aggregate SSB Non-US WGBI Merrill High Yield Russell 1000 Value Russell 1000 Growth Russell 2000 MSCI World ExUSA
13.1% 3.3 2.2 22 0.5 -0.7 1.0 -2.0 0.4 -0.5 8.8
100.0% 25.1 -2.3 23 0.3 -1.8 5.7 -43.0 9.3 -5.5 112.2
Manager analysis g y
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Manager analysis g y
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Classifications
Equity long-short Credit-linked Event-driven Fixed income arbitrage Volatility y Tactical Other
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Multi-sector or sector focused Market-neutral, sector neutral Quantitative market neutral Statistical arbitrage g
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Credit-linked Examples p
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Event-driven Examples p
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Volatility Examples y p
Volatility arbitrage (skew and calendar) Long gamma Dispersion trades Convertible arbitrage g
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Tactical Examples p
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Other Examples p
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Financial crisis
Hedge funds:
Leverage: amount and terms Liquidity: - A t and fund level-liquidity Asset d f d l l li idit - Gates, suspensions and side-pockets - Secondary market liquidity avenues Fees: Mark to market - Mark-to-market issues - High watermark and modified high watermark - Claw-backs
Financial crisis
Corporate restructuring
Out of court restructuring g Bankruptcy and workouts Restructured debt into equity
Commercial mortgages
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Firm Profile
Firm Profile Advanced Portfolio Management (APM) is a specialty asset management company that constructs and manages customized portfolios of hedge funds and other financial instruments for endowments, foundations, pension funds, insurance companies, and other financial institutions in North America, Europe, and Asia. Each APM product is designed to complement, enhance, and complete an existing asset allocation and investment portfolio. All products are managed to realize the clients unique investment objectives and risk parameters. APM products are currently utilized as active management overlays, alpha transport programs, completion funds, and stand-alone multi-manager hedge fund investments. APM's investment process integrates experienced qualitative investment judgment with rigorous analytical s uc u e. e p o ess o s structure. The professionals at APM have ove 100 ye s o co b ed investment and c p ve over years of combined ves e d capital markets e pe e ce e s experience providing a comprehensive understanding of the potential profit opportunities and the accompanying risks of active investing. To complement this experience and judgment, APM has constructed a state-of-the-art analytical platform which comprises: (i) manager-level risk and return attribution analysis and risk budgeting, (ii) non-linear Monte Carlo simulation processes driven by forward-looking expectations of return and risk, and (iii) portfolio optimization and rebalancing in a shortfall risk framework. By integrating experienced qualitative insights with robust analytical methods, APM delivers superior riskadjusted returns with negligible correlation or beta to the major market factors or benchmarks. APM is a Registered Investment Advisor with the US Securities and Exchange Commission (SEC).
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Advanced Portfolio Management LLC 1330 Avenue of the Americas, 36th Floor New York, New York 10019 +1 212 838 4700 1 info@apmcap.com www.apmcap.com
Past performance is not indicative of future results. The performance data in this presentation is unaudited and has been computed by APM based on unaudited figures. The data set forth in this presentation is based on information from sources believed to be reliable but has not been independently verified. Performance is shown net of all fees and expenses, including investment expenses, and professional fees. The index information is included merely to show the general trend in markets in the periods indicated and is not intended to imply that the portfolio was similar to the indices either in composition or element of risk. This document does not constitute an offer for sale of interests which may be made only by means of a private placement memorandum to investors satisfying the applicable investor eligibility criteria. This document contains confidential information which is not for unauthorized reproduction or distribution. Reproduction or distribution without express written permission is strictly prohibited. Copyright 2012 by Advanced Portfolio Management LLC. All rights reserved.
January 2012
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