Fasanara Outlook Sept Investors Presentation 2013 | Artificial Markets are Structurally Fragile… Stay Hedged!
1. I N V E S T O R & M E D I A K I T
1 9 t h o f S e p t e m b e r 2 0 1 3 | F a s a n a r a C a p i t a l L t d . | 5 5 G r o s v e n o r S t r e e t - L O N D O N
I N V E S T M E N T
O U T L O O K
A r t i f i c i a l M a r k e t s a r e
S t r u c t u r a l l y F r a g i l e …
S t a y H e d g e d !Authorized and Regulated by the Financial
Conduct Authority
Presented by:
Francesco Filia | Chief Investment Officer
SEPTEMBER 2013
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6. TAKE-AWAY POINTS
We believe MARKETS remain structurally FRAGILE to VAR-shocks and any exogenous factor could take them down:
Among the driving forces: a) over-leverage in the system; b) low liquidity / low inventories; c) markets’ blind optimism
TAPERING: the only un-priced scenario was a postponement / lite-tapering, which will lead to a “SHORT-LIVED” RELIEF
RALLY… but Tapering will eventually HAVE TO HAPPEN
We see the possibility of a mild nominal rally in Q4 2013, but down the line the tapering’s side effects will materialize
RATES: in our opinion RATES remain the BIGGEST CATALYST to EQUITY UNDER-PERFORMANCE
A) tapering, while delayed, it will come no matter what; B) EMs might be forced to sell Treasuries to stem a currency crisis; C) rising
expectations on GDP could easily justify 4% on 10yrs Govies
CHINA: the key mounting issue for China is its Corporate Sector, whose leverage is 125%+ of GDP
Growth numbers below 7% have the potential to lit the fuse on corporate China excess credit
EUROPEAN ELECTIONS: beyond Germany, possible new elections in Italy represent a “FAT TAIL” event… not even such
“tail” event as its probability tops 40%
A) Italian bonds are well inside bubble territory; B) Italian equities are historically cheap… but not cheap enough to weather a tail event
The CIO’s CORNER:
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VALUE BOOK
FLAT
Remains light, as we see a risk of
10%+ correction over the medium
term
TACTICAL BOOK
EXPANDING
in absence of sustainable carry
generation in the Value Book
Tactical Long EuroStoxx – taper-
lite theme
Tactical Long single stocks linked
to EMs / Commodities - catch up
theme
L / S position in the Potash
market
HEDGING BOOK
ACTIVE
This is where we see MOST
OPPORTUNITIES
Short S&P / Long VIX
Long Credit Curve Flatteners
Short EUR
Long Inter-banking spreads
Long currency pegs
Short JGB rates / short JPY
Short AUD
7. PORTFOLIO POSITIONING
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H E D G I N G B O O KV A L U E B O O K
As the market misprices the potential for increased realized
volatility, we continue to identify ATTRACTIVE HEDGING
OPPORTUNITIES
To date we have EXPENSED 4% of the PORTFOLIO in
premiums to hedge against: a) DOWNSIDE RISK on the
S&P; b) further WEAKNESS in the EUROZONE, and against
a; c) CHINA HARD LANDING scenario
All current option structures have been engineered to
provide LONG DATED PROTECTION & HIGH
MULTIPLIERS
As we believe that MARKETS are TOPPY and at RISK of a
STEEP CORRECTION, we keep our VALUE BOOK
FLATTISH
Our current limited allocation to long positions targets
SPECIAL SITUATIONS offering ASYMMETRIC PROFILES
vs. RISKS
We will review our positioning in the Value Book when the
REAL WORLD and the FINANCIAL MARKETS tighten; or
when MARKETS MOVE SIDE-WAYS for a LONG ENOUGH
period of time
In fact, a century worth of data does NOT support being long
at current BUBBLE levels; neither in CREDIT nor in EQUITY
CREDIT is remindful of 2007, with the only exception that
the bubble is sustained by Central Banks this time around
(instead of Investment Banks)
EQUITY is remindful of conditions seen in 2007, but also in
2000, 1987, 1973, 1929… all of which were followed by
market crashes
We observe that over the last century there has NEVER been
such a HIGH level of RISK for such LOW RETURNS
T A C T I C A L B O O K
This book employs MOMENTUM DRIVEN STRATEGIES
As of the 31st of August the Tactical Book represents app.
30% of OVERALL PORTFOLIO
We however EXPECT TO INCREASE this TACTICAL
EXPOSURE in September / October, and will continue to do
so at least until a more sustainable carry generation can be
provided by the Value Book
8. FOCUS TRADES
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H E D G I N G B O O K : E U R O P E R I S KH E D G I N G B O O K : S & P P U T S
We maintain our BEARISH VIEW on EUROPE and the EUR…
although we recognize that such view make take time to
materialize
To express such view, without worrying about BURNING CASH
and having TIGHT TIME FRAMES, we have used the Itraxx
In fact, the Itraxx curve allows to structure a LONG-DATED
and INEXPENSIVE HEDGE against a number of bearish
European scenarios
We believe that MARKETS are sort of TOPPY, EXPENSIVE vis-
à-vis the fundamentals and potentially at RISK of a STEEP
CORRECTION .. particularly in the most expensive markets
To HEDGE the portfolio vs S&P DOWNSIDE RISK, while not
burning too much cash on expensive optionality, we have opted
for the following strategy:
BUY SPX put, strike 1650, expiry 21st September and 16th
of October, for 120% of the overall portfolio
SELL VIX put, strike 14%, expiry 21st September and 16th
of October, on 14% of the overall portfolio
T A C T I C A L B O O K : E U R O S T O X X L O N G
As written in our Sept. 3rd Outlook, in anticipation of a mild
Tapering, we believe in a SHORT-LIVED RALLY, across both,
equity and bond markets
Against this background, the European equity markets is one of
the cheapest to play a short-lived reflation story. Such rally
might also be supported by a breakout / acceleration of key
resistance levels
We have played this theme via tactical EUROSTOXX long
position. In fact, the European equity market is one of the
cheapest to play a short-lived REFLATIONARY story
In executing the trade above we have opted to use optionality,
on safe levels
T A C T I C A L B O O K : L / S P O T A S H P L A Y
On the 30th of July, OAO Uralkali, one of the largest potash
producers decided to BREAK AWAY from joint venture marketing
CARTEL Belarusian Potash Company (“BPC”)
Uralkali’s split from BPC is expected to DRIVE DOWN global
POTASH PRICES as the company shifts to a higher-volume
production model, with prices expected to settle at around
$350/tonne
While this decision might prove economically rational for Uralkali,
as its low-cost position means they can cut prices, maximise
production, and maintain gross profit, it is considered BAD NEWS
for higher-cost producers such as K+S
We initiated (then successfully closed) a L Uralkali / K+S position
10. OUR TAKES ON LAST NIGHT FED’S DECISION
PRE-FED ANNOUNCEMENT:
On June 28th we wrote: “If we are right about the LACK OF GROWTH being the elephant in the room, then
BERNANKE WILL BE NEXT CONFIRMING QE AND DELAYING TAPERING, with equity markets going up on
inflationary policies resuming in contrast to current expectations of tapering by Q3 and exiting by mid-2014… In
conclusion, we plan to remain flat to short the markets over the summertime, and potentially go long sometimes
after that“
On Sept. the 3rd we reiterated: “Tapering may get POSTPONED by a few months, leading to a SHORT-LIVED,
RELIEF RALLY.So much for the potential nominal rally we see possible in Q4”.
In anticipation of the FED announcement, we POSITIONEDTHE PORTFOLIO TACTICALLY LONG
FED ANNOUNCEMENT: *FED REFRAINS FROM QETAPER, KEEPS MONTHLY BUYING AT $85 BLN
*FED: RISE IN MORTGAGE RATES, FISCAL POLICY RESTRAIN GROWTH
*FED: `TIGHTENINGOF FINANCIAL CONDITIONS' COULD SLOW GROWTH
*MOST FED OFFICIALS SEE FIRST INTEREST-RATE RISE IN 2015
THE BOTTOM LINE:
The reason why we expected Bernanke to delay tapering or activate a “lite-taper”, had to do with our own
SKEPTICISM around the QUALITY of the GDP GROWTH and its sustainability
We view yesterday’s events as the confirmation of our assumptions on REAL ECONOMIC ACTIVITY, in contrast
to the broader market consensus. The FED seems to believe that extraordinary measures are still indeed needed.
GDP growth is weak and shallow at best, far insufficient to fund the huge funding gap created by additional debt
inherited from QEs policies
We treat yesterday’s events as NEGATIVE for global markets in the medium term… in contrast to market
consensus, which led to a strong market’s rally. The market MAY and SHOULD realise that at some point down the
line. Such realisation should lead to the steep re-pricing that we expect (10-20% downside on S&P, possibly digitally).
We therefore plan to stay FULLY HEDGED!
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MOTIVES FOR BERNANKE’S ERRATIC PATH
What may have convinced Bernanke to announce tapering atJune FOMC meeting
What may have convinced Bernanke to back-pedaling on tapering after a few weeks
What may have convinced Bernanke to back-pedaling again on tapering at Sept FOMC meeting
Nikkei 20%
drop in May /
June
ImpliedVols on US
Rates doubled up
by end June and
again by early Sept
BERNANKE
12. TOPPY MARKETS ARE GAPPING MARKETS
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Liquidity-driven markets are VULNARABLE to
SUDDENT DIGITAL ADJUSTMENTS and EXTERNAL
SHOCKS. We then went further to define TOPPY
MARKETS AS GAPPING MARKETS
Over the last 4 months, we had extensive empirical
evidence:
1.) GOLD debacle in May
2.) JAPAN: the Nikkei lost 7.3% in one day in mid-May.
The largest drawdown since the 2011 Tsunami and 1998
Asian crisis
3.) INTEREST RATES DOUBLED IN JAPAN / SHOT UP IN
THE US: rates resurrected to 1% territory in Japan, while
rates volatility reached 2008 credit bubble’s levels. It is
remindful of the market in 2003 in Japan, where a volatility
induced sell-off drove rates from 0.5% to 1.6% between
June and September
4.) RATES IN THE US: in mid-June they skyrocketed,
while fixed income implied vols doubled up in few days
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RISK PARITY: ADDING VAR SHOCK ON RATES
Risk parity is an asset allocation framework that seeks to ALLOCATE SAME MARKET RISK TO EACH ASSET and then
LEVERSTHE PORTFOLIO in order to reach a target portfolio volatility
This means that in dollar terms, the portfolio is very OW low volatility assets, i.e. fixed income, and that those positions are
leveraged. The collapse in rate volatility relative to equity volatility since the start of QE means that the leverage in fixed
income positions has increased markedly over the past few years
As the MOVE Index now moves markedly HIGHER, we may see OVER-SHOOTING in market sell-off on rising rates.
Volatility-induced sell-offs.
14. MARKETS REMAIN STRUCTURALLY FRAGILE
We continue to believe that MARKETS ARE STRUCTURALLY FRAGILE to VAR-SHOCKS and to sudden, DIGITAL
ADJUSTMENTS
In our view, a number of EXOGENOUS FACTOR could force a DOWNSIDE CORRECTION on markets. Specifically:
I. OVER-LEVERAGE IN THE SYSTEM – NYSE outstanding margin debt at almost $400bn
II. LOW LIQUIDITY / LOW INVENTORIES – which have become a recurring element of current markets
III. MARKETS’ BLIND OPTIMISM – most investors have been bought into the Central Banks’ dogma, with substantial
part of the markets’ gains explained by P/E multiples rather than earnings expansion
The CAPITAL MISALLOCATION generated by QE-type polices, in order to alienate Tail Risks and kick start growth, is
BITING BACK at any given opportunity. Eg: Syria
We DO NOT BELIEVE that a 10% + CORRECTION from the current levels is totally UNJUSTIFIABLE!
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15. OVER-LEVERAGE IN THE SYSTEM
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H E D G I N G B O O K : B U B B L E M A R K E T i n E Q U I T I E S - S & P M O S T E X P E N S I V E !
MARKETS are sort of TOPPY, EXPENSIVE vis-à-vis the fundamentals and potentially at RISK of a STEEP CORRECTION.
This is particularly true when analysing the S&P
16. OVER-LEVERAGE IN THE SYSTEM
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H E D G I N G B O O K : B U B B L E M A R K E T i n E Q U I T I E S - S & P M O S T E X P O S E D
Source: Orcam
17. OVER-LEVERAGE IN THE SYSTEM
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H E D G I N G B O O K : B U B B L E M A R K E T i n E Q U I T I E S - S & P M O S T E X P E N S I V E !
18. 18
Should the bull market reverse, fixed income
will be much less liquid than investors expect
LOW LIQUIDITY / LOW INVENTORIES
B O N D M A R K E T S D R I V E N B Y Q E O N LY
20. BINARY EVENTS & VOLATILITY AHEAD
As we remain focused on TAIL RISKS, against which we design the portfolio to be over-hedged, here we enumerate the
most obvious catalysts ahead of us, warranting the NEED FOR PROTECTION STRATEGIES:
I. TAPERING: the market will keep trying to come to grips with the reality that the Fed might sooner or later begin
tapering their bond purchase. While tapering has so far been postponed, igniting what we expect to be a short lived
nominal rally in Q4, it still will have to materialise at some point with undoubtedly important consequences in the
medium term for Interest Rates and Asset’s Pricing
II. FED CHAIRMANSHIP: Summers’ withdrawal from the Fed Chair’s race has removed a contentious event from the
calendar for Q4. IsYellen a done deal?
III. US FEDERAL DEBT CEILING: Come October, confrontations on the fiscal front may heat up again. While our base
case scenario contemplates an extension of the debt limits for another year, this also largely represents the consensus
view. Therefore we should expect volatility and headline risks should this base case scenario not materialize. As Syria
and Summers are now fading away from the media’s headlines, a showdown may now be more likely
IV. CHINA’s CREDIT CRUNCH: the key issue for China is the Corporate Sector, whose leverage is 125% of GDP. Growth
numbers below 7% might potentially lit the fuse ofCorporate China’s excessive credit
V. EUROPEAN ELECTIONS: markets seem to be in standby for September 22nd elections in Germany. While the
consensus is that post-elections, Germany will be more accommodative on policies in Southern Europe, we disagree
with that. In addition, the political landscape in Italy is crystal-fragile and the chances for new elections are substantial
VI. RISING INTEREST RATES: rates represent the biggest threat in the near term, as higher long-dated rates could be the
casualty of few concurring forces: a) tapering; b) wild sale of Treasuries from EMs; c) rising GDP expectations that could
justify a 4% on 10yrs Govies (our threshold for a disorderly adjustment to asset pricing)
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21. BINARY EVENTS & VOLATILITY AHEAD
Rising GDP expectations could justify a 4% on 10yrs Govies
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R I S I N G I N T E R E S T R A T E S
22. BINARY EVENTS & VOLATILITY AHEAD
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Source: Street Talk Live blog
R I S I N G I N T E R E S T R A T E S N O T U N P R E C E D E N T E D D U R I N G Q E P R O G R A M S
23. BINARY EVENTS & VOLATILITY AHEAD
It is not just in the U.S. that rates are increasing. European bond spreads are surging as well.
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Source: Street Talk Live blog
R I S I N G I N T E R E S T R A T E S N O T U N P R E C E D E N T E D D U R I N G Q E P R O G R A M S
24. CENTRAL BANKS’ EXPANSIONARY POLICIES: in several occasions in the past, the FED and other monetary authorities
have attempted to cure financial pandemics with heavily expansionary policies… trading an asset bubble for another.
Last, but not least, the bubble in EMs it has been the unintended result of CB’s activities, as EMs saw net inflows doubling
up to $8tr in the last 5yrs on ZIRP and QEs policies
PERCEPTION & CONFIDENCE: the effectiveness of quantitative policies has always been about perception and
confidence. Any real mechanical linkage to sustainable equity valuations and stronger real economy has YET TO BE
PROVEN. Perception and confidence can easily evaporate…
DEBT: one of the major causes to the current market fragility is the ACCUMULATION OF DEBT alongside with the
INABILITY to GENERATE the INCOME SOURCES needed to service such debt
On the basis of what is above, we RATHER BE SAFE THAN SORRY and HEDGE our portfolio against severe DOWNSIDE
RISKS which have historically followed similar market conditions
We however recognize that it is extremely challenging to call the day in which such correction may take place. POLICY
MAKERS CAN INDEED BUY MORE TIME. Therefore, we rely on a SUSTAINABLE, MULTI-DIMENSIONAL RISK
MANAGEMENT POLICY
The market remains STRUCTURALLY FRAGILE and can be taken down by any one exogenous or endogenous factor. The
most dangerous catalysts are the ones we cannot currently see. Last time around, it was losses of few hundred billions in US
Subprime mortgages to push bubble markets into a deep re-pricing of 5 trillions lost GDP and 30 trillions lost market
capitalisations globally
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THE STRUCTURAL CASE FOR STAYING BEARISH
& HEDGING TAIL RISKS
25. WHY TO STAY BEARISH & HEDGE TAIL RISKS!
Over the past 5 years the US has generated $1 of GDP for every $18 of DEBT, leading to a G7 debt / GDP of a 440%, the
function of $140 trillion in consolidated "developed world" debt
G7 countries added $18tn of consolidated debt to a record $140 trillion, relative to only $1tn of nominal GDP activity and
nearly $5tn of G7 central bank balance sheet expansion (FED + BoJ + BoE + ECB)
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Source: Deutsche Bank, Haver, ZeroHedge
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M O N E T A R Y B A S E E X P A N S I O N V S . M O N E Y M U L T I P L I E R A N D V E L O C I T Y O F M O N E Y C O L L A P S E
INFLATION SUBDUED UNTIL IT IS NOT
BmV = PY, (where B = the monetary base, m = the money multiplier, V = velocity of money), PY is nominal GDP
The money multiplier is a measure of the maximum amount of commercial bank money (money in the economy) that can be created
by a given unit of central bank money, i.e., the total amount of loans that commercial banks extend/create
The velocity of money is a measurement of the amount of economic activity associated with a given money supply, i.e., total Gross
Domestic Product (GDP) divided by the Money Supply
This measurement also shows a marked slowdown in the amount of activity in the U.S. economy for the given amount of M2 money
supply, i.e., increasingly more money is chasing the same level of output
27. EMs / COMMODITIES VS. G4 COUNTRIES
As explained already when describing the relationship between the Bubble Chain and the Deleveraging Chain (see below), it
is NOT possible to believe that EMs / Commodities could continue to FREE FALL, while G4 countries keep RISING “ad
infinitum” on QE and cross border re-allocation of capital flows
Over the last month, the EMs and Commodities have been a drag on Global Markets. Those are early signs of
RECOUPLING between the two chains
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CATALYSTS
29. TRADES’ HIGHLIGHTS
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H E D G E V S S & P D O W N S I D E R I S K
As outlined in our recent Investment Outlooks, we believe that MARKETS are sort of TOPPY, EXPENSIVE vis-à-vis the
fundamentals and potentially at RISK of a STEEP CORRECTION.This is particularly true when analysing the S&P
To HEDGE the portfolio vs. DOWNSIDE RISK in the S&P, while ensuring not to burn excessive cash on expensive
optionality, we have executed the following strategy:
BUY SPX put, strike 1650, expiry 21st Sept and 16th of Oct, for 110% of the overall portfolio
SELLVIX put, strike 14%, expiry 21st Sept and 16th of Oct, on 14% of the overall portfolio
While an S&P’s correction might be postponed, we argue that SEVERAL RISK FACTORS might keep VOLATILITY
LEVELS ELEVATED… therefore helping us to EXPENSE our HEDGES CHEAPLY and potentially even at zero cost
30. TRADES’ HIGHLIGHTS
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H E D G I N G B O O K : B U B B L E M A R K E T i n E Q U I T I E S - S & P M O S T E X P E N S I V E
SPX
31. TRADES’ HIGHLIGHTS
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H E D G I N G B O O K : B U B B L E M A R K E T i n E Q U I T I E S - S & P M O S T E X P E N S I V E
VIX
32. TRADES’ HIGHLIGHTS
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H E D G I N G B O O K : E U R B R E A K - U P a n d R E N E W E D C R E D I T C R U N C H R I S K S
KeyTrade details: Itraxx curve flattener 3yr vs 5yr | Duration weighted (5yrs vs 3yrs maturities)
33. TRADES’ HIGHLIGHTS
33Strictly Confidential | Not for Distribution
T A C T I C A L B O O K : E U R O S T O X X L O N G
As written in our Sept. 3rd Outlook, in anticipation of a mild Tapering, we believe in a SHORT-LIVED RALLY, across both,
equity and bond markets
In our view, a short lived rally might also be supported by a breakout / acceleration of key resistance levels
We have played this theme via tactical EUROSTOXX long position. In fact, the European equity market is one of the cheapest
to play a short-lived REFLATIONARY story
In executing the
trade above we
have opted to use
optionality, on safe
levels. Downside
below 2500 by
October expiry
34. TRADES’ HIGHLIGHTS
34Strictly Confidential | Not for Distribution
T A C T I C A L B O O K : E U R O S T O X X L O N G
Upside gaps: 2942.43
Downside gaps: 2867.11 / 2798.31 / 2721.37 / 2596.01 / 2570.76 / 2511.83 / 2427.32 / 2127.95
Sep Fut;
R: 2867/2888/2902/2922/2943
S: 2867/2851/2825/2805/2787
35. TRADES’ HIGHLIGHTS
35Strictly Confidential | Not for Distribution
T A C T I C A L B O O K : L / S P O T A S H P L A Y
On the 30th of July, OAO Uralkali, one of the largest potash producers decided to BREAK AWAY from joint venture
marketing CARTEL Belarusian Potash Company (“BPC”)
Uralkali’s split from BPC is expected to DRIVE DOWN global POTASH PRICES as the company shifts to a higher-volume
production model, with prices expected to settle at around $350/tonne
While this decision
might prove
ECONOMICALLY
RATIONAL for
Uralkali, as its low-
cost position means
they can cut prices,
maximise production,
and maintain gross
profit, it is considered
BAD NEWS for
higher-cost producers
such as K+S
37. TRADES’ HIGHLIGHTS
37Strictly Confidential | Not for Distribution
T A C T I C A L B O O K : L O N G E M s / C o m m o d i t y d r i v e n s i n g l e s t o c k s
Momentum driven strategies
Source: JPMorgan
38. TRADES’ HIGHLIGHTS
38Strictly Confidential | Not for Distribution
I N T E R E S T R A T E S V S . E Q U I T Y
Positive Correlation, in spite of real causality
Option using 10cms Strike(s) Barrier Expiry Offer Vanilla Discount Correlation
Put spread contingent on rates up 95%/85% ps atmf+100 12M 0.38% 2.70% 86% 20%
Option using 10cms Strike(s) Barrier Expiry Offer Vanilla Discount Correlation
Put spread contingent on rates up 90%/80% ps atmf+100 12M 0.27% 1.95% 86% 20%
SPX ref: 1660
12m10y: 2.52%
1y10y ATMF payer contingent on SPX <=
95% at maturity
0.87% offer
3.22% vanilla
25% correlation
37% digital
1y5y ATMF payer contingent on SPX <= 95%
at maturity
0.51% offer
1.52% vanilla
10% correlation
37% digital
Refs
SPX 1648
1y10y 2.62%
1y5y 1.67%
39. 39
Strictly Confidential | Not for Distribution
TRADES’ HIGHLIGHTS
Option
using
10cms
Strike(s) Barrier Expiry Offer Vanilla Discount Correlation
S&P PUT
contingent
on Rates Up
95% Atmf+50 9M 0.88% 4.00% 78% 23%
PUT
contingent
on Rates Up
90% Atmf+50 9M 0.58% 2.70% 79% 23%
PUT
contingent
on Rates Up
95% Atmf+100 12M 0.55% 5.25% 90% 23%
PUT
contingent
on Rates Up
90% Atmf+100 12M 0.39% 3.70% 89% 23%
Spx: 1595
9m10y: 2.08%
12m10y: 2.16%
41. 41
Strictly Confidential | Not for Distribution
F A S A N A R A R E S E A R C H
Since September 2011, we have published Investment Outlooks and
portfolio’s updates. Please find below links to our Research:
September 3rd 2013: Investment Outlook
June 28th 2013: Investment Outlook
May 31st 2013: Investment Outlook
May 3rd 2013: Investment Outlook
April 5th 2013: Investment Outlook
Portfolio Buckets as of 1st March 2013: Value Book vs Hedging
Book
March 1st 2013: Investment Outlook
February 1st 2013: Investment Outlook
January 11th 2013: Investment Outlook
December 17th 2012: Investment Outlook
November 16th 2012: Investment Outlook
October 26th 2012: Investment Outlook
October 5th 2012: Investment Outlook
September 14th 2012: LINK Bi-Weekly Note
July 27th 2012: Bi-Weekly Note
July 13th 2012: Bi-Weekly Note
May 2012: Investment Outlook
April 13th 2012: Investment Outlook
March 2nd 2012: Weekly Note
February 17th 2012: Weekly Note
January 7th 2012: Weekly Note
More 2012 reports available upon request
F O L L O W F A S A N A R A O N T W I T T E R
Follow Francesco Filia, CIO @ Fasanara Capital on Twitter:
https://twitter.com/francescofilia
F O L L O W F A S A N A R A O N Y O U T U B E
Follow Fasanara Capital on YouTube:
https://www.youtube.com/user/FasanaraCapital
RESEARCH & MEDIA LIBRARY
42. 42
Strictly Confidential | Not for Distribution
P R E S S
Fasanara Opportunities Fund Profiled:
Article
The Big Picture: Francesco Filia: Japan is a
catalyst for other economies: Article on
'Opalesque'
Rates, risks and the regulators - bad week for
everyone except Norway? Article on 'the
Bench'
V I D E O S
5th Sept. 2013: Expecting a Market
Correction Video
12th April 2013: Is a Euro Zone Break-Up on
the Way Video . Keep Gold Long Term,
hedge for monetary madness Video
18th February 2013: Go Long Nikkei and
Short Yen. Nikkei to 20,000 Video
28th November 2012: European Equities Will
Jump Video
28th November 2012: Real Estate Outlook
CNBC Interview 2
31st August 2012: How to hedge fatal
scenarios Video
CNBC CLASS ITALIA Video | Video
RESEARCH & MEDIA LIBRARY
44. Fasanara Capital Ltd.: Fasanara is an employee owned alternative asset management company headquartered in London
and authorized and regulated by the Financial Conduct Authority (“FCA”). Fasanara is also authorised by the Central Bank
of Ireland (“CBI”) to act as Investment Manager to Irish authorised collective investment schemes
Strategy: Fasanara pursues an event-driven, multi-strategy portfolio approach investing across the capital structure with
core strengths on credit, equity, liquid special situation securities and portfolio FatTail Risk Hedging strategies
Objective: Fasanara seeks to achieve superior, risk-adjusted returns significantly in excess of the debt and equity market
indices with modest volatility
Accomplished Investment Team: the team are the core members from the Merrill Lynch Principal Investors group in
EMEA, formerly ran by Francesco Filia (MD & EMEA Head), and have spent a combined 24 years in the industry
Competitive Advantage: dynamic and significantly profitable team of managers bound by a set of investment disciplines
built over the years
Commingled Vehicle - Summary of Terms & Structure:
Date of Launch | 1st ofJuly 2013
Portfolio Manager | Francesco Filia
Target size | $ 650MM in equity
Target return | MidTeens
Fund Structure | Cayman Incorporated Fund
Early Investors’ Fee Structure | Base Management Fee 1.25% (inclusive of Platform Fees) + Incentive Fee 20%
44
Strictly Confidential | Not for Distribution
FASANARA CAPITAL
45. 45
Fasanara targets mid-teens annual returns by investing in alpha generating ideas that are uncorrelated to investment
cycles
We are event-driven investors with a highly strategic focus on Fat Tail Risk Hedging strategies. We invest
opportunistically across a number of asset classes including debt, loans, high yield, distressed securities, securitized assets,
public equity and other special situation securities. While fundamental bottom-up analysis represents a key component of
our strategy, top-down macro views greatly influence the implementation of our bottom-up investment ideas and
strategic FatTail Risk Hedging strategies
We deploy capital opportunistically in response to pre-identified investment themes. This may result in dramatic shifts in
our portfolio allocations due to changes in the investment landscape
Our focus on event-driven scenarios and Fat Tail Hedging is expected to allow us to participate at the appropriate time,
and in the appropriate security type, for each individual investment by maximizing potential returns while minimizing
principal risk and protecting the portfolio against systemic events
Superior Risk Management: the team has developed a tailored-made risk management framework adapted to the event-
driven investment strategy. We have implemented strict rule-based limits that cover gross leverage, position liquidity,
country, sector, single name ownership, currency, short and maximum ownership exposures
Strictly Confidential | Not for Distribution
INVESTMENT PHILOSOPHY
46. 46
CONTACT INFORMATION
For further information please contact:
INVESTOR RELATIONS
Investor.relations@fasanara.com
Tel: +44 203 430 2480
FASANARA CAPITAL Ltd.
55 Grosvenor Street, 2nd Floor
London W1K 3HY
United Kingdom
Strictly Confidential | Not for Distribution