3. Redington
13-15 Mallow Street
London EC1Y 8RD
T. 020 7250 3331
www.redington.co.uk
Robert Gardner, Co-CEO of Redington
Beyond Matching Assets – An Overview
14 October 2010
4. • Bob McKim
• Stanford University
• A Creativity
researcher in 60s
and 70s
• Ran Stanford Design
Programme
• One of his Creativity
Exercises
• Draw your neighbour
very quickly...
• 30 Seconds...
• ...Lets GO
Let’s start by getting creative
9. 9
Session Topic Speaker
2 Investment Performance and Economic Outlook for 2010/2011
Gavyn, the former Government Advisor and Chief International Economist
for Goldman Sachs, examines markets performance and shifts in pension
fund asset allocations
Fulcrum Asset Management
Gavyn Davies
3 Developed Market Equities
The validity of active developed equity management appears to be in
question following the travails of the last 3 years' market turbulence and
poor active returns. David debates whether a passive approach to equity
investment is the way forward, what is an appropriate benchmark, and
what is the future for active equity management?
Intech International David Schofield
Agenda
10. 10
Session Topic Speaker
4 Emerging Market Equities – Stepping out of the shadows
Over the past ten years, emerging markets delivered 10% returns versus
roughly zero for developed markets. Jeff explores this impressive
performance and give his views on the future of this asset class
F&C Investments
Jeff Chowdhry
5 Hedge Funds – Whipping up the perfect exposure
Ensuring that your hedge fund exposure complements rather than
duplicates your existing investment portfolio can be a tough assignment.
Join David to learn more
Redington
David Thompson
11. 11
Session Topic Speaker
6 Commodities – Accessing Growth through Commodities
Oli and Kristen will discuss the strategic case for inclusion of Commodities
in a pension portfolio, the current outlook for prices and certain
implementation considerations
Blackstone Alternative Asset Management
Olivier Meyohas & Kristen Eshak
7 Growth assets in practice – Panel Discussion Speakers & delegates
8 2011 - Themes to consider
Guest Speaker, Canonbury Group
Dr Pippa Malmgren
14. The Global Economy and Asset Markets
Gavyn Davies
Chairman, Fulcrum Asset Management
14th October 2010
Redington Education
15. Jan Feb Mar Apr May Jun Jul Aug Sep Oct
80
85
90
95
100
105
110
Major Asset Classes - Total Returns in 2010
Global Equities (local currencies) Global Bond Returns ($ hedged) GSCI Global Commodities Index HFRX Global Hedge Funds
1
17. '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
-10
0
10
20
30
Leading Economic Indicators for the Global Economy
(OECD series, 6 mth annualised % change)
Developed and Emerging Economies Developed Economies China
3
18. '06 '07 '08 '09 '10
-25
-20
-15
-10
-5
0
5
10
15
20
25
BRICs and G7 Industrial Production Growth (12 months %change)
BRIC Economies less G7 Economies BRIC Economies Major G7 Economies
4
19. '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
-20
-15
-10
-5
0
5
10
15
20
25
30
Leading Indicators for the BRIC and G7 Economies
(6 month annualised percent changes)
BRIC Economies less G7 Economies BRIC Economies G7 Economies
5
20. Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
0
5
10
15
20
25
30
China Returns to Strong Growth
Industrial Production (% 1 mth annualised) Retail Sales (% 3mths annualised)
6
21. Q4 Q1
2008
Q2 Q3 Q4 Q1
2009
Q2 Q3 Q4 Q1
2010
Q2 Q3 Q4
-8
-6
-4
-2
0
2
4
6
A US Cycle Largely Dominated by Inventory Swings
GDP Contn. from Inventories (pct) Real GDP Growth (saar)
7
22. Q4 Q1
2009
Q2 Q3 Q4 Q1
2010
Q2 Q3 Q4
-1,000
-800
-600
-400
-200
0
200
400
600
US Employment Figures : Monthly Changes (000)
Private Sector Jobs Total Non Farm Payroll Jobs
8
23. Q3 Q4 Q1
2009
Q2 Q3 Q4 Q1
2010
Q2 Q3 Q4 Q1
2011
Q2
98
100
102
104
106
108
110
US Private Sector Employment Compared to Previous Cycles
Latest Recovery Recovery After 2001 After 1991 After 1982 After 1975
9
24. '06 '07 '08 '09 '10
-10
-8
-6
-4
-2
0
2
4
6
8
US GDP -- Real Time Estimates
US GDP forecast growth rate - 13 weeks ahead Best estimate of current US GDP growth rate
10
29. Q4 Q1
2008
Q2 Q3 Q4 Q1
2009
Q2 Q3 Q4 Q1
2010
Q2 Q3 Q4
50
100
150
200
250
300
350
Liquidity Injections by the Major Central Banks
(Jan 2008=100)
Bank of England US Federal Reserve European Central Bank Bank of Japan
15
30. '06 '07 '08 '09 '10
0
20
40
60
80
100
120
No Pass-Through from Monetary Base to M2 in the US
(% change over 12 months)
Monetary base Money supply M2
16
31. Q1
2009
Q2 Q3 Q4 Q1
2010
Q2 Q3 Q4
-0.5
0
0.5
1
1.5
2
Amount of Monetary Tightening Expected in the US
Rate Changes Implied by the Fed Funds Futures Contracts
Next 18 months Next 12 months Next 6 months
17
32. '07 '08 '09 '10 '11 '12
-4
-3
-2
-1
0
1
2
3
Fiscal Policy Thrust (%of GDP)
(Negative numbers = larger deficits and greater fiscal stimulus)
US UK Eurozone
Japan OECD
18
33. '03 '04 '05 '06 '07 '08 '09 '10
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
5.5
US 10 Year Government Bond Yields
Nominal and Inflation Adjusted (TIPS)
Treasury Yield TIPs Real Yield Average Average
19
34. '61 '63 '65 '67 '69 '71 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09
-3
-2
-1
0
1
2
3
4
5
6
US Corporate Credit Valuation vs Government Bonds
(Downward movements = cheaper credit vs government bonds)
Credit/government bonds valuation Trendline: Linear
20
35. '81 '85 '89 '93 '97 '01 '05 '09 '13 '17 '21 '25 '29 '33 '37 '41 '45 '49 '53 '57 '61 '65 '69 '73 '77 '81 '85 '89 '93 '97 '01 '05 '09
0
5
10
15
20
25
30
35
40
45
50
US Equities - Very Long Term "Shiller" P/E Ratio
Long term P/E Ratio (Shiller) 20 Year Moving Average Long Term Average
21
37. '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
-10
-5
0
5
10
15
20
Equity Valuation - Developed vs Emerging Markets - 12 Month Forward P/E
(Factset Aggregates)
Developed (MSCI World) Emerging (MSCI EM) P/E Premium for Emerging Markets Trendline: Linear
Trendline: Linear with 1st standard deviation, trend based
23
38. '06 '07 '08 '09 '10
2
4
6
8
10
12
14
16
18
20
Equity Valuation - Emerging Regions - 12 Month Forward P/E
Factset Aggregates
Eastern Europe Asia x Japan Latin America Middle East & Africa
24
39. '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
-3
-2
-1
0
1
2
3
Real Effective Exchange Rates for the Major Economies (BIS Indices)
Deviations from Long Term Averages, Expressed in Standard Deviations
Euro US Dollar Sterling Japan
25
40. Jan Feb Mar Apr May Jun Jul Aug Sep
94
96
98
100
102
104
106
108
110
112
114
HFRX Global
Hedge Funds
Balanced
Portfolio (No
fees)
FAB Plus
performance
Fulcrum Alpha
Global Financial Assets : Total Returns (%)
(Theoretical portfolio: 50% eqs, 40% bonds, 10% comms)
26
41. '04 '05 '06 '07 '08 '09 '10
35
40
45
50
55
60
-12
-10
-8
-6
-4
-2
0
2
4
6
8
UK - GDP and Business Surveys
Real GDP Growth (% saar) (Right) Composite Whole Economy Business Survey
27
43. 29
7 Year Average Annual Nominal Expected Total Returns
Major Equities
5.6%
4.0%
6.6%
7.6%
2.2%
5.9%
7.7%
4.1%
2.8%
2.2%
6.2%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
NominalTotalReturn
Expected Asset Return Expected Alpha Annual Return Over Last 10 Years
Global US Europe
ex UK
United
Kingdom
Japan Asia ex
Japan
Emerging
Markets
US
Large
US
Small
US
Growth
US
Value
44. 30
7 Year Average Annual Nominal Expected Total Returns
Major Fixed Income
4.9%
4.0%
6.8%
3.7%
6.3%
0%
2%
4%
6%
8%
10%
12%
NominalTotalReturn
Expected Asset Return Expected Alpha Annual Return Over Last 10 Years
Investment
Grade Fixed
Income
US 10 Year
Treasuries
High Yield US 10 Year
Index Linked
Emerging Market
Debt
47. Active vs. Passive Investing
Is the Debate Finally Over?
David Schofield
President, International Division
INTECH
Introduced by Janus Capital International Ltd
48. The Move to Passive Gains Traction
Investors disappointed with the performance of some of their active managers in 2008 and
2009 appears to be driving the growth in passive management.
Source: eVestment Alliance
49. • Recent performance
• Cost
• Career risk
• Consistency
• Transparency
Results Presented are Gross of Fees 2008 2005-2009
5th Percentile -32.99% 8.44%
25th Percentile -39.16% 5.47%
Median -41.20% 3.84%
75th Percentile -43.41% 3.02%
95th Percentile -49.94% 0.95%
# of Members in Universe 70 60
MSCI World Index -40.33% 2.57%
(0=Highest,100=Lowest)
Sources: FactSet and eVestment Alliance
Periods greater than one year are annualized. Data presented reflects past performance,
which is no guarantee of future results.
40
82
0%
25%
50%
75%
100%
PercentileReturnsRanking
MSCI World Index
What is driving the move to passive?
50. And even good managers underperform
Q: How likely is it that your manager with an IR of
0.75 underperforms for 5 years in a 20 year
period?
A: 69%
Q: So why bother?
A: Because it is 99% likely is it that this same
manager outperforms the market over 20 years
51. Why Active?
Consistent alpha is valuable
The chart illustrates the growth of a hypothetical $100 million for 30 years at 8%, 9%, and 10%.
Rates of return are hypothetical and do not represent the returns of any particular investment.
$100,000,000
$700,000,000
$1,300,000,000
$1,900,000,000
0 5 10 15 20 25 30
Years
8.00% 9.00% 10.00%
$1.7 Billion
$1.3 Billion
$1.0 Billion
The 1% Difference
Compounding Could Make a Significant Difference Over the Long Term
52. The Great Debate: Passive vs. Active Management
Passive Active Passive Active
• Low cost
• Implementation Efficiency (low
turnover, trade costs, liquidity
• Transparency
• Consistency of returns (you get
the market)
• Difficult to beat net of fees (it is
the average)
• No tracking error
• Little career risk
• Potential for above-market returns
• Alpha
• Potentially more efficient portfolio
than passive
• Opportunity to avoid market fads,
whims, etc.
• Can be critical in low nominal
return environment
• Contribution to finding “intrinsic
value” in stocks
• Compounding positive relative
returns can be a powerful
advantage over the long term
• Cap-weighted benchmarks may be
inefficient
• Subject to market fads, whims, etc.
• Definition of passive may vary
among manager and plan sponsors
• Aggregate of the market
• No alpha
• Higher cost
• Difficulty in identifying managers
who can produce alpha
• Career risk
• Tracking error risk
• Potential for short-term periods of
underperformance even with a
‘good’ manager
• Additional due diligence to ensure
consistent application of
investment process over time
• Requires long-term perspective
even if the investment process
is working normally
Strengths Weaknesses
53. Is Alpha Available in Large-Cap Equities?
Active managers seek alpha using many different investment strategies.
Fundamental strategies that seek to identify mis-valued stocks or pricing
inefficiencies.
Quant strategies that seek to predict stock or factor returns.
Mathematical strategies that seek to exploit the inefficiency of passive
benchmarks.
Examples of simple investment strategies that beat cap-weighted
benchmarks over time.
Equal-weighted portfolios.
Diversity-weighted portfolios.
Fama & French Size Factor.
Fundamental indexes.
54. Capturing Alpha Relative to a Benchmark is Easy
Chart represents top 500 stocks in the Center for Research in Security Prices (CRSP) U.S. Stock Database based on weighted capitalization for the period July 1, 1962 to December 31, 2009.
Data reflects past performance, which is no guarantee of future results.
An equal-weight portfolio
captures alpha relative to a
capitalization-weighted
benchmark.
-No forecasts are required.
Historically, equal-weight
portfolios have tended to
outperform their
capitalization-weighted
benchmarks over time.
Equal Weighted Relative Return
55. Many Simple Investment Strategies Beat
Capitalization-Weighted Benchmarks Over Time
No forecasts required.
No concern about inaccurate forecasts.
No need for sophisticated statistics.
No optimization required.
No need for sophisticated mathematics.
Theoretically plausible.
Consistent with Stochastic Portfolio Theory.
In reasonable markets:
Constant-weight portfolios beat capitalization -weighted portfolios over time.
Diversity-weighted portfolios beat capitalization-weighted portfolios over time.
Portfolios that smoothly go from underweighting a benchmark’s larger stocks to
overweighting a benchmark’s smaller stocks beat capitalization-weighted benchmarks
over time.
Small-stock portfolios beat large-stock portfolios over time.
Historically true.
56. Alpha Capture and Size Effect (Diversity)
Equal-Weighted Relative Return
Diversity is a measure of the concentration or dispersion of capital in a market.
Chart represents top 500 stocks in the Center for Research in Security Prices (CRSP) U.S. Stock Database based on weighted capitalization for the period July 1, 1962 to December 31, 2009.
Data reflects past performance, which is no guarantee of future results.
Alpha Capture Maximum Diversity is
equal weighted
Minimum Diversity is
100% of capital in a
single stock
Has been mean
reverting for 80+ years
57. Equal-Weighted Alpha Capture
and Rebalancing Frequency
Chart represents top 500 stocks in the Center for Research in Security Prices (CRSP) U.S. Stock Database based on weighted capitalization for the period
July 1, 1962 to December 31, 2009. Data reflects past performance, which is no guarantee of future results.
58. Changes in Market Diversity
*Broad Market Database includes stocks from the CRSP database prior to 2006 and from the Russell 3000 Index after 2006. The CRSP universe includes common stocks listed on the NYSE, AMEX and the NASDAQ
National Market excluding the following: preferred stocks, unit investment trusts, closed-end funds, real estate investment trusts, americus trusts, foreign stocks and American depository receipts.
Charts are cumulative through time period shown above.
Past performance does not guarantee future results.
-40
-20
0
20
40
1927 1936 1945 1954 1963 1972 1981 1990 1999 2008
As of June 30, 2010
Variation in Diversity - Broad Market Database*
ChangeinDiversity(%)
The Great Depression The “Nifty-Fifty” Era
The Tech Bubble
The Global Financial Crisis
The relationship between the market-cap size of stocks (small vs. large) affects the relative
performance of all managers. Low points in market-cap Diversity tend to coincide with market
crises.
Active Manager relative performance tends to do better when small-cap stocks are in favor and
tends to lag when large-cap stocks are in favor.
Trends in Diversity currently point to a future environment that is more likely to provide a
positive tailwind to active management.
59. 1E-09
1E-07
1E-05
1E-03
1E-01
1 10 100 1,000 10,000
1969
1979
1989
1999
2009
10 bps
0.1 bp
0.001 bp
0.0001 bp
Stability in a Changing World
Capital distribution is remarkably
stable, especially between the 10th
and 1,000th stock.
Trends that impact the
concentration of capital in the
short term average out over time
(e.g., size, economic turmoil,
systematic factors).
Capital Distribution of U.S. Stock Market*
Stocks Ranked by Capitalization
MarketWeight
1000 bps
*The curves were generated using the capitalization data from the daily stock database of the Center for Research in Securities Prices (CRSP) U.S. Stock Database. The market at each snapshot consists of the constituents of the
CRSP universe with available capitalization data on the last business day of the years shown. The market weight of a stock is defined to be the ratio of its market capitalization to the total market capitalization of all stocks in the
market. Stocks are ranked by capitalization from the largest stock (rank 1) to the smallest stock (rank <10,000).
0.00001 bp
60. An application of Stochastic Portfolio Theory
Fewer periods of negative relative returns.
Shorter periods of negative relative returns.
Less severe negative relative returns.
Lower tracking error.
A Higher Information Ratio.
Is it possible to generate alpha from Volatility
Capture, but with:
?
61. INTECH Simulated Alpha Capture Performance,
1968 – 2009
(Note: equal-weighted portfolios assume no trading costs; INTECH portfolios include trading costs)
Chart represents top 500 and 1000 stocks in the Center for Research in Security Prices (CRSP) U.S. Stock Database based on weighted capitalization for the period shown.
See Disclaimer for additional information regarding simulated performance. Data reflects past performance, which is no guarantee of future results.
Top 500 equal-weighted
Top 1000 equal-weighted
Volatility-Optimised Enhanced
Volatility-Optimised Moderate
Volatility-Optimised Aggressive
(Note: equal weighted portfolios assume no trading costs;
simulated optimised portfolios include trading costs)
62. Summary: Active vs. Passive
Active beats passive if there is an Alpha.
Does Alpha exist? Where can you find it?
Stochastic Portfolio Theory.
Alpha exists.
Alpha is easy to find.
Relative Volatility Capture provides an Alpha.
With market Diversity near historical lows and potentially poised
to trend upward, timing may favor active over passive.
Active beats passive over time.
63. Active vs. Passive Investing
Is the Debate Finally Over?
David Schofield
President, International Division
INTECH
64. Disclaimer
Issued by Janus Capital International Limited, authorised and regulated by the Financial Services Authority.
This document does not constitute investment advice or an offer to sell, buy or a recommendation for securities, other than pursuant to an agreement
in compliance with applicable laws, rules and regulations. Janus Capital Group and its subsidiaries are not responsible for any unlawful distribution of
this document to any third parties, in whole or in part, or for information reconstructed from this presentation and do not guarantee that the
information supplied is accurate, complete, or timely, or make any warranties with regards to the results obtained from its use. As with all investments,
there are inherent risks that each individual should address.
The distribution of this document or the information contained in it may be restricted by law and may not be used in any jurisdiction or any
circumstances in which its use would be unlawful. Should the intermediary wish to pass on this document or the information contained in it to any
third party, it is the responsibility of the intermediary to investigate the extent to which this is permissible under relevant law, and to comply with all
such law. Janus is not responsible for any unlawful distribution of this document to any third parties.
Past performance is not a guarantee of future results. There is no assurance that the investment process will consistently lead to successful investing.
INTECH will act as sub-adviser to Janus Capital International Limited. This information does not constitute or form part of an offer to provide
discretionary or non-discretionary investment management of advisory services, other than pursuant to an agreement in compliance with applicable
laws, rules and regulations.
For Institutional use only
RC-1010(12)0111 Europe Inst
65. Session 4
Emerging Market Equities
Stepping out of the shadows
Jeff Chowdhry, Head of Emerging Markets Equities | F&C Investments
66. Emerging Market Equities – Stepping Out of the Shadows
14th October 2010
Jeff Chowdhry – Head of Emerging Market Equities
71. Expect excellenceExpect excellence 71
Working Age Population Continues to Grow
15 to 64 age group
0
500
1000
1500
2000
2500
3000
3500
4000
4500
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010e
2015e
2020e
2025e
2030e
2035e
2040e
2045e
2050e
Developed
Emerging
Source: F&C, Morgan Stanley
72. Expect excellenceExpect excellence 72
Source: Morgan Stanley
0
50
100
150
200
250
300
350
400
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009e
2010e
2011e
2012e
2013e
2014e
2015e
2016e
2017e
2018e
2019e
2020e
BRICs
US
Euro Area
No.ofHouseholdsinMillions
Household Disposable Income Over US$10,000
73. Expect excellenceExpect excellence 73
Source: Morgan Stanley
Euro Area
Germany
France
Italy
Spain
Greece
UK
Sweden
Poland
Hungary
Czech
Russia
Turkey
S. Africa
China
Taiwan
Korea
India
IndonesiaThailand
Malaysia
Chile
Brazil
Mexico
Australia
Japan
Hong Kong
US
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
-14% -12% -10% -8% -6% -4% -2% 0%
2009 Budget Deficit as % of GDP
2009GovtDebtas%ofGDP
Portugal
National Financial Strength/Weakness
78. Expect excellenceExpect excellence 78
A Growing Asset Class
Emerging markets as a % of MSCI All World Index
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2002
2003
2004
2005
2006
2007
2008
2009
2010
Emerging Markets can no longer be ignored
?
Average exposure for Pension Fund
investors in emerging market equity
is between 3% and 8%
Source: F&C, Datastream, Pensions and Investment Jan 2010
85. Expect excellenceExpect excellence 85
MSCI Emerging Markets Index – Price:Book Ratio
Source: Morgan Stanley
2.1x
1.7x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
4.0x
4.5x
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
MSCI EM MSCI World
Source: MS Asia/GEMs Equity Strategy
Sep-10
86. Expect excellenceExpect excellence 86
8.00
-2
0
2
4
6
8
10
12
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Major EM Equity Market
Peaks
Major EM Equity
Market Troughs
ERP,%
Emerging Markets – Equity Risk Premium
Source: Morgan Stanley
87. Expect excellenceExpect excellence 87
China: % Rural Households – Washing Machines
Source: Wall Street Journal; China National Statistic Bureau; as at March
2008
88. Expect excellenceExpect excellence 88
China: % Rural Households – Computers
Source: Wall Street Journal; China National Statistic Bureau; as at March
2008
89. Expect excellenceExpect excellence 89
China: % Rural Households – Bicycles
Source: Wall Street Journal; China National Statistic Bureau; as at March
2008
90. Expect excellenceExpect excellence 90
China vs US: Domestic Automobile Sales* (Monthly)
*smoothed by 6 months average
Source: China Association of Automobile Manufacturers, FactSet as at
30/07/10
91. Expect excellenceExpect excellence 91
GE – “This is the era of the developing world and
emerging markets”
Vodafone – “Emerging Markets still offer us vast potential”
Rio Tinto – “ongoing development in Emerging Markets
will drive metals demand”
Pernod Ricard – “Emerging markets represent 30% of the
Group’s business and generate two-thirds of its growth”
Procter & Gamble – “our centre of gravity will shift to the
developing markets”
Quotes from Global CEOs
94. Redington
13-15 Mallow Street
London EC1Y 8RD
T. 020 7250 3331
www.redington.co.uk
David Thompson, Head of Manager Research
Allocating to Hedge Funds
14 October 2010
95. Why Allocate to Hedge Funds? What are you looking for?
Allocating to Hedge Funds
Why allocate to Hedge Funds
• Absolute returns during all market conditions?
• Equity like returns but with bond like volatility?
• Accessing asset classes which are not currently in the scheme, for example commodities?
• Low Correlation to other asset classes?
• Accessing currently held asset classes but using a different style of investment?
96. Allocating for Smaller Schemes
Allocating to Hedge Funds
Allocating for Smaller Schemes
For smaller schemes, it may be impractical to invest in individual hedge funds:
• A lot of upfront governance and advice needed;
• Complexity;
• Small allocations might be impossible and little scope to reduce fees;
• Manager concentration; and
• Ongoing monitoring.
In this situation a Fund of Hedge Funds will probably be more suitable:
• Asset allocation – active asset allocation into different styles;
• Diversification – across both styles and managers;
• Stream of different returns with the manager operating as many levers as possible; and
• Enables a small scheme to get a different perspective on the investment world.
97. Allocating for Larger Schemes
Allocating to Hedge Funds
Allocating for Larger Schemes
Larger schemes have a lot more flexibility and resources when it comes to investing in hedge funds.
However, the largest schemes must be aware of how the hedge fund strategies will fit into their
existing portfolio:
• The scheme will probably have a significant allocation to equities and credit and will already benefit
from rising equities, tightening credit and lower interest rates.
• They can either try to access their current asset classes in a different way by using hedge funds, or
look for completely new return streams, for example commodities, FX, macro and convertible
arbitrage.
• Well selected managers and styles can be used to complement the existing strategy and add
diversification.
• Fund of Hedge Funds may be less appealing to larger schemes, because they lose an element of
control over the investment. There is a case for thematic Fund of Hedge Funds where the strategy is
pre-determined to be relevant to the client’s existing portfolio.
98. 10%
Correlation
90%
Correlation
Not Here
Not Here
Allocating to Hedge Funds
Where is the Diversification?
Roll Up!
Roll Up!
Find the ball and win diversification!
Try Your luck for only 2 and 20!
Not Here Either!!!
Where is the Diversification?
99. -
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Dec-92
Jul-93
Feb-94
Sep-94
Apr-95
Nov-95
Jun-96
Jan-97
Aug-97
Mar-98
Oct-98
May-99
Dec-99
Jul-00
Feb-01
Sep-01
Apr-02
Nov-02
Jun-03
Jan-04
Aug-04
Mar-05
Oct-05
May-06
Dec-06
Jul-07
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Correlation
3 Year RollingCorrelation
HFRI Equity Hedge v.s SP 500 TR
HFRI Equity Hedge v.s MSCI World TR(Gross)
What you actually
get is increased
correlation
What you actually see....
Allocating to Hedge Funds
Correlations between Equity Long Short Strategies and Equities
Correlations Between Equity Hedge Strategies and Equities
-
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Dec-92
Jul-93
Feb-94
Sep-94
Apr-95
Nov-95
Jun-96
Jan-97
Aug-97
Mar-98
Oct-98
May-99
Dec-99
Jul-00
Feb-01
Sep-01
Apr-02
Nov-02
Jun-03
Jan-04
Aug-04
Mar-05
Oct-05
May-06
Dec-06
Jul-07
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Correlation
3 Year RollingCorrelation
HFRI Equity Hedge v.s SP 500 TR
HFRI Equity Hedge v.s MSCI World TR(Gross)
Ideally, we want low
or falling correlations
during a crisis
Historically, the
strategy has high
correlations
What you want to see....
Since December 1992, the rolling correlation between equity long/short strategies and equity
markets has trended higher. Since 2000 the rolling correlations between the HFRI Equity Index
(HFRI EI) and the S&P 500 and MSCI World have both been above 0.6. Since May 06 the correlation
of the HFRI EI and S&P 500 has been over 0.9. Using a long/short equity manager might not add
the diversification that you are seeking.
Source: Redington, HFRI, Bloomberg
100. Allocating to Hedge Funds
Correlations between Relative Value Strategies and Equities
Correlations Between Relative Value Strategies and Equities
-0.2
-
0.2
0.4
0.6
0.8
1.0
Dec-92
Jul-93
Feb-94
Sep-94
Apr-95
Nov-95
Jun-96
Jan-97
Aug-97
Mar-98
Oct-98
May-99
Dec-99
Jul-00
Feb-01
Sep-01
Apr-02
Nov-02
Jun-03
Jan-04
Aug-04
Mar-05
Oct-05
May-06
Dec-06
Jul-07
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Correlation
3 Year RollingCorrelation
HFRI Relative Value v.s SP 500 TR
HFRI Relative Value v.s MSCI World TR(Gross)
What you actually
get is increased
correlation
What you actually see....What you want to see....
-0.2
-0.1
-
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Dec-92
Jul-93
Feb-94
Sep-94
Apr-95
Nov-95
Jun-96
Jan-97
Aug-97
Mar-98
Oct-98
May-99
Dec-99
Jul-00
Feb-01
Sep-01
Apr-02
Nov-02
Jun-03
Jan-04
Aug-04
Mar-05
Oct-05
May-06
Dec-06
Jul-07
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Correlation
3 Year RollingCorrelation
HFRI Relative Value v.s SP 500 TR
HFRI Relative Value v.s MSCI World TR(Gross)
Ideally, we want low
or falling correlations
during a crisis
In the past, the
strategy has had
high correlations
The strategy has
produced low and
negative correlations
Since December 1992, the rolling correlation between relative value strategies and equity markets
has trended higher. Previous to October 1998, the rolling correlations between the HFRI Relative
Value Index (HFRI RVI) and the S&P 500 and MSCI World showed some diversification benefit,
however, this diversification has been eroded in recent times. The correlations have risen to around
0.75. Using a relative value manager might not add the diversification that you are seeking.
Source: Redington, HFRI, Bloomberg
101. -0.1
-
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Dec-92
Jul-93
Feb-94
Sep-94
Apr-95
Nov-95
Jun-96
Jan-97
Aug-97
Mar-98
Oct-98
May-99
Dec-99
Jul-00
Feb-01
Sep-01
Apr-02
Nov-02
Jun-03
Jan-04
Aug-04
Mar-05
Oct-05
May-06
Dec-06
Jul-07
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Correlation
3 Year RollingCorrelation
HFRI Macro v.s SP 500 TR
HFRI Macro v.s MSCI World TR(Gross)
Allocating to Hedge Funds
Correlations between Macro Strategies and Equities
Correlations Between Macro Strategies and Equities
What you actually see....
Ideally, we want low
or falling correlations
during a crisis
In the past, the
strategy has had
very low and
negative
correlations
What you want to see....
The strategy has
produced low (ish)
correlations
-0.1
-
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
Dec-92
Jul-93
Feb-94
Sep-94
Apr-95
Nov-95
Jun-96
Jan-97
Aug-97
Mar-98
Oct-98
May-99
Dec-99
Jul-00
Feb-01
Sep-01
Apr-02
Nov-02
Jun-03
Jan-04
Aug-04
Mar-05
Oct-05
May-06
Dec-06
Jul-07
Feb-08
Sep-08
Apr-09
Nov-09
Jun-10
Correlation
3 Year RollingCorrelation
HFRI Macro v.s SP 500 TR
HFRI Macro v.s MSCI World TR(Gross)
You do seem to get
some diversification
during a crisis
The strategy can still
produce very high
correlations
Here we see that macro strategies might offer some diversification benefit during a crisis. The
rolling correlation between macro strategies and equity markets has been low with some peaks,
although never breaching 0.8. During the recent financial crisis, the rolling correlations between
the HFRI Macro Index (HFRI MI) and the S&P 500 and MSCI World dropped steadily and troughed
at zero in April 2009. Using a macro manager might give you the diversification that you are
seeking during a severe downturn.
Source: Redington, HFRI, Bloomberg
102. Allocating to Hedge Funds
Correlations between Different Strategies
Correlations between Different Strategies – Pre and Post Lehman Collapse
As shown on the previous slides,
correlations do change over time. We
can see that post Lehman, the Macro
strategy correlations to other strategies
(mostly) fell
Source: Redington, HFRI, Bloomberg
103. Accessing existing asset classes with a different style of investments
Active Equity or Passive and Hedge Fund
Comparing an Active Manager with a Combination of a
Passive Manager and a Hedge Fund.
• An active manager with FTSE 100 as his benchmark with
an outperformance target of 100bp may be expected to
take 200bp of tracking error volatility. This may mean
that he effectively has circa 80% of his portfolio that
replicates the index and 20% that is active. Alternatively,
you could have 80% of your portfolio invested passively
and 20% managed extremely actively (perhaps by a
hedge fund).
• Fees: How do the fee structures compare? The fees for
the traditional active manager may be 60bp. The fees
for the passive equities may be circa 10bp and the
hedge fund 1.5% and 10% outperformance. Assuming a
performance of 10% this equates to a total combined
fee of 58bp which is comparable to a traditional long
only equity manager.
• Style: Does this get the style diversification you are
looking for? Do you want the manager to be able to go
to a zero allocation in equities if he sees fit? Are you
happy for your manager to have no benchmark?
• Risk: Is this likely to give you an improved risk return
Active
Equity
Passive
Equity
Uber
Active
104. Allocating to Hedge Funds
Summary
Summary
• It will be more practical for
small schemes to access hedge
funds through fund of funds.
• Larger schemes with more
resources will be able to able to
invest in individual hedge funds,
however...
• They need to choose the
strategy wisely and think hard
what they need from their
allocation. This will help to
ensure that it is appropriate for
their existing strategy and
portfolio.
• As we have seen, hedge fund
strategies might not offer
attractive correlations and these
correlations are prone to
change depending on the
market environment.
Source: Redington, HFRI, Bloomberg
107. Session 6
Accessing Growth through
Commodities
Olivier Meyohas & Kristen Eshak
Blackstone Alternative Asset Management
108. Redington Conference
14 October,2010
Blackstone®
Alternative Asset Management L.P.
Confidential – Not for public disclosure: This information is presented at your request and is for your
exclusive use only. This information is confidential and may not be reproduced, distributed, copied
or used for any other purpose.
109. Blackstone®
Alternative Asset Management L.P.109
_________________________________
Note: Opinions expressed reflect the current opinions of BAAM as of the date appearing in this material only.
Strategic Motivations For Inclusion of Commodities in Pension Portfolios
Confidential – Not for public disclosure.
Commodities may exhibit inflation-hedging characteristics
Commodities have historically provided diversification from, and low correlation to, traditional
asset classes
Commodities have generally exhibited low correlation to each other, providing further
potential diversification benefits
Commodities generally exhibit positive skewness and may offer a hedge against event risk
Commodities can provide exposure to future economic growth
110. Blackstone®
Alternative Asset Management L.P.110
_________________________________
(1) Facts & Fantasies about Commodity Futures by Gary Gorton (The Wharton School & National Bureau of Economic Research) & K. Gert Rouwenhorst (School of Management, Yale University)
Confidential – Not for public disclosure.
Commodities Exhibit Inflation-Hedging Characteristics
Correlation of Assets with Inflation (July 1959 – December 2004)
Stocks and bonds are negatively correlated with inflation, while the correlation of commodity futures with inflation is
positive at all horizons, and statistically significant at the longer horizons(1)
Stocks Bonds Commodity Futures
Monthly -0.15 -0.12 0.01
Quarterly -0.19 -0.22 0.14
1 year -0.19 -0.32 0.29
5 year -0.25 -0.22 0.45
111. Blackstone®
Alternative Asset Management L.P.111
-0.9%
-3.4%
16.5%
-3.3%
15.1%
73.2%
86.4%
10.3%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Jan - Dec 1970 May 73 - Jul 76 Feb 77 - Aug 82 Aug 90 - Jan 91
S&P 500 S&P GSCI Total Return Index
Commodities Exhibit Inflation-Hedging Characteristics (Cont’d.)
_________________________________
Source: Bloomberg. Indices are as follows: S&P GSCI TR Index, S&P 500. CPI: Consumer Price Index USA (International Monetary Fund). There is no guarantee of trading performance and past
performance is no indication of current or future performance/results.
Commodities are real assets which generally tend to rise in price as inflation increases
Confidential – Not for public disclosure.
CPI
5.4%
8.0% 8.7%
5.5%
112. Blackstone®
Alternative Asset Management L.P.112
Sample correlations between physical commodities, as well as physical commodities to equities and bonds, validate the
diversification benefits of commodities in a portfolio, as well as the opportunity set within the space.
The average correlation between all commodities in the major indices is 0.25 over the past 5 years (7/1/05 – 6/30/10).
Over the same period the average correlation of these commodities to equities is 0.18 and -0.14 to bonds (US 10Y).
_________________________________
Source: Bloomberg as of 7/1/10.
Confidential – Not for public disclosure.
Commodities Exhibit Low Correlation To Other Asset Classes and One
Another
WTI NG
Heating
Oil
RBOB Gold Aluminum Copper Nickel Zinc Wheat Corn Soybeans Sugar Cotton
Live
Cattle
Lean
Hogs
S&P 500 US 10Y
WTI 1.0000
NG 0.2805 1.0000
Heating Oil 0.7934 0.3502 1.0000
RBOB 0.7191 0.2827 0.7950 1.0000
Gold 0.2113 0.0553 0.2011 0.1363 1.0000
Aluminum 0.3729 0.1529 0.3651 0.3125 0.2591 1.0000
Copper 0.4241 0.1369 0.3978 0.3695 0.2629 0.7133 1.0000
Nickel 0.3237 0.0856 0.2984 0.2990 0.1868 0.5344 0.6200 1.0000
Zinc 0.3272 0.0936 0.3312 0.2789 0.2653 0.6848 0.7547 0.5958 1.0000
Wheat 0.3065 0.0913 0.2785 0.2253 0.1556 0.1952 0.2545 0.1787 0.1940 1.0000
Corn 0.3389 0.1380 0.3086 0.2685 0.1593 0.2447 0.2735 0.1978 0.2147 0.6304 1.0000
Soybeans 0.3966 0.1724 0.3842 0.3459 0.1141 0.2809 0.3081 0.2564 0.2650 0.4137 0.5768 1.0000
Sugar 0.2704 0.1546 0.2531 0.2181 0.1020 0.2170 0.2610 0.1904 0.2085 0.2202 0.2465 0.2530 1.0000
Cotton 0.2835 0.1139 0.2758 0.2603 0.1203 0.2654 0.2853 0.2389 0.2468 0.3006 0.3159 0.3539 0.2517 1.0000
Live Cattle 0.1613 0.0208 0.1402 0.1318 0.0200 0.1379 0.1873 0.1356 0.1220 0.1122 0.1324 0.0998 0.0993 0.1222 1.0000
Lean Hogs 0.0600 0.0240 0.0459 0.0582 0.0363 0.0373 0.0388 0.0580 0.0541 0.1060 0.0763 0.0439 0.0112 0.0507 0.1816 1.0000
S&P 500 0.2867 0.0953 0.2771 0.2573 (0.0267) 0.2310 0.2812 0.2116 0.2032 0.1653 0.1601 0.1895 0.1258 0.2177 0.1675 0.0494 1.0000
US 10Y (0.2781) (0.0399) (0.1725) (0.1562) 0.0348 (0.1642) (0.1977) (0.1397) (0.1358) (0.1419) (0.1006) (0.1857) (0.0840) (0.1465) (0.0930) (0.0286) (0.3391) 1.0000
113. Blackstone®
Alternative Asset Management L.P.113
60%
80%
100%
120%
140%
160%
Jun-90 Aug-90 Oct-90 Dec-90 Feb-91
GSCI S&P 500
85%
90%
95%
100%
105%
110%
115%
120%
125%
Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03
GSCI S&P 500
Commodities May Offer A Hedge Against Event Risk
_________________________________
Source: Bloomberg. Indices shown are S&P GSCI TR Index and S&P 500 Index.
Confidential – Not for public disclosure.
S&P 500 vs. GSCI after First Gulf War S&P 500 vs. GSCI after SARS Epidemic
WHO Global Outbreak & Alert
Response Network reports “flu
outbreak” in China
Iraq invades
Kuwait
114. Blackstone®
Alternative Asset Management L.P.114
The Recovery In Commodity Prices Has Been Modest Compared To
Previous Recessions
_________________________________
Source: Barclays Capital Research
Note: Legend dates represent dates of recession. As of August 31, 2010.
(1) Indexed to 100 at start of each recession.
Confidential – Not for public disclosure.
GSCITotalReturnIndex(1)
115. Blackstone®
Alternative Asset Management L.P.115
_________________________________
Source: JPM Commodity Research, September 2010
Note: Opinions expressed reflect the current opinions of BAAM as of the date appearing in this material only.
Commodities Returns in Rate and CPI Environments
Confidential – Not for public disclosure.
US Rate Environment: Annualized Total Returns US CPI Environment: Annualized Total Returns
116. Blackstone®
Alternative Asset Management L.P.116
_________________________________
Source: JPM Commodity Research, September 2010
Note: Opinions expressed reflect the current opinions of BAAM as of the date appearing in this material only.
Emerging Market Demand Remains Buoyant
Confidential – Not for public disclosure.
Non-OECD Demand for Crude Oil
117. Blackstone®
Alternative Asset Management L.P.117
_________________________________
Source: JPM Commodity Research, September 2010
Note: Opinions expressed reflect the current opinions of BAAM as of the date appearing in this material only.
Emerging Market Demand Remains Buoyant
Confidential – Not for public disclosure.
Chinese Net Imports of Crude
118. Blackstone®
Alternative Asset Management L.P.118
_________________________________
Source: JPM Commodity Research, September 2010, Eurostat, DOE
Note: Opinions expressed reflect the current opinions of BAAM as of the date appearing in this material only.
Emerging Market Demand Remains Buoyant
Confidential – Not for public disclosure.
Auto Sales are Relatively Low
119. Blackstone®
Alternative Asset Management L.P.119
_________________________________
Source: JPM Commodity Research, September 2010, Bloomberg, Metal Bulletin
Note: Opinions expressed reflect the current opinions of BAAM as of the date appearing in this material only.
Declines in Capex Will Result in Tight Balance Sheets
Confidential – Not for public disclosure.
Supply Cuts Have Supported Prices
120. Blackstone®
Alternative Asset Management L.P.120
_________________________________
Source: Barclays Capital Commodity Research, 29 September 2010; USDA
Note: Opinions expressed reflect the current opinions of BAAM as of the date appearing in this material only.
Global Grain Production Looks Tight
Confidential – Not for public disclosure.
Large Cuts Were Made to 2010-11 Global Grain Production Forecasts
121. Blackstone®
Alternative Asset Management L.P.121
2009 Excess 2009 Total
Spot Roll Yield Return Return
Energy 62.4% -51.3% 11.0% 7.3%
Agriculture 14.7% -11.1% 3.6% 3.6%
Livestock 2.8% -17.0% -14.2% -16.3%
Precious Metals 26.2% -1.3% 24.9% 25.5%
Base Metals 91.2% -9.1% 82.1% 73.8%
Aggregate 50.3% -37.0% 13.3% 13.5%
2008 Excess 2008 Total
Spot Roll Yield Return Return
Energy -49.5% -3.6% -53.1% -52.4%
Agriculture -19.7% -10.3% -29.9% -28.9%
Livestock -6.4% -22.1% -28.5% -27.4%
Precious Metals 2.0% -3.1% -1.0% -0.5%
Base Metals 48.5% -1.8% -49.8% -49.0%
Aggregate -42.8% -4.5% -47.3% -46.5%
2007 Excess 2007 Total
Spot Roll Yield Return Return
Energy 52.3% -16.7% 35.6% 41.9%
Agriculture 41.1% -18.5% 22.6% 28.3%
Livestock 1.5% -14.2% -12.7% -8.6%
Precious Metals 29.4% -7.1% 22.3% 27.9%
Base Metals -10.7% 0.9% -9.8% -5.6%
Aggregate 40.7% -13.9% 26.8% 32.7%
2006 Excess 2006 Total
Spot Roll Yield Return Return
Energy -8.7% -21.5% -30.2% -26.8%
Agriculture 29.6% -21.6% 8.0% 13.3%
Livestock -5.9% -5.2% -11.1% -6.7%
Precious Metals 25.4% -7.2% 18.3% 24.1%
Base Metals 51.5% 1.9% 53.4% 60.9%
Aggregate 0.4% -19.5% -19.1% -15.1%
2009 Excess Return Components
2008 Excess Return Components
2007 Excess Return Components
2006 Excess Return Components
Cost Of Negative Roll Yield
S&P GSCI Commodities Performance – 2006 to 2009
_________________________________
Note: Results for 2006, 2007, 2008 and 2009. Source: JPMorgan Global Currency & Commodity Research (Commodity Index Monitor, December 2009).
Confidential – Not for public disclosure.
A total return index has three components:
spot return, roll return, and return on
collateral
Both traditional commodity indices and
ETFs are structurally flawed
To avoid physical delivery, each
month they buy the second forward
month, selling the current month to
avoid physical delivery
The monthly roll is very transparent in
the market
Negative roll yield has been a significant
drag on returns
Sell low and buy high in a contango
environment
The front month will often disconnect with
the rest of the forward curve
Does not reflect hedging activity
One dollar invested in the S&P Natural
Gas sub-index in January 2002 would be
worth 6.9 cents at the end of June 2010
122. Blackstone®
Alternative Asset Management L.P.122
Significant Drawdown Risk
A passive investment into the S&P GSCI TR index
beginning on January 1, 1990 would have generated a
cumulative return of +126.05%, equivalent to +4.25% on an
annualized basis.
Cost of Drawdowns(1)
0.00
100.00
200.00
300.00
400.00
500.00
600.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Indexvalue(Jan1,1990=100)
-48.26%
-35.42%
-26.41%
-67.65%
0.00
100.00
200.00
300.00
400.00
500.00
600.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Indexvalue(Jan1,1990=100)
-48.26%
-35.42%
-26.41%
-67.65%
Performance of the S&P GSCI TR Index
0.00
100.00
200.00
300.00
400.00
500.00
600.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Indexvalue(Jan1,1990=100)
-48.26%
-35.42%
-26.41%
-67.65%
0.00
100.00
200.00
300.00
400.00
500.00
600.00
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Indexvalue(Jan1,1990=100)
-48.26%
-35.42%
-26.41%
-67.65%
Performance of the S&P GSCI TR Index
Performance of the S&P GSCI TR Index
_________________________________
(1) Please note that the 50% and 75% drawdown scenarios are based on a hypothetical track record that is equal to the actual monthly returns for all periods outside of the drawdowns and a 50% or 75% reduction in exposure to
the monthly returns during the drawdown periods ( GSCI: Dec 1997 – Feb 1999, Dec 2000 – January 2002, October 2005 – January 2007 and July 2008 – February 2009 and the S&P 500 Jul 1998 – Aug 1998, Sep 2000 – Sep
2002 and Nov 2007 – Feb 2009. ). The 100% scenario represents the actual track record of the index. This analysis is for informational purposes only and is meant to broadly illustrate the benefits of active management. Please
note that active management would also likely limit the upside return participation.
Note: Opinions expressed reflect the current opinions of BAAM as of the date appearing in this material only.
Source: Bloomberg
Exposure to GSCI
Drawdowns
Cumulative Return Annualized Return
50.00% 739.58% 11.48%
75.00% 341.17% 7.87%
100.00% 126.05% 4.25%
Drawdowns in Commodities are
more severe than in Equities
Exposure to S&P 500
Drawdowns
Cumulative Return Annualized Return
50.00% 517.21% 9.74%
75.00% 317.95% 7.58%
100.00% 179.42% 5.39%
Confidential – Not for public disclosure.
123. Blackstone®
Alternative Asset Management L.P.123
Disclaimer
Important Disclosure Information:
The materials contained herein are for informational purposes only and do not constitute an offer to sell or a solicitation of an offer to purchase any interest in any investment vehicles (the “BAAM Funds”) managed by Blackstone
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relevant BAAM Fund (collectively, the “Agreements”). The PPM and Agreements relating to a BAAM Fund should be reviewed carefully prior to an investment in that Fund. The BAAM Funds are speculative and involve a high degree of
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In connection with your consideration of an investment in any BAAM Funds, you should be aware of the following risks:
The BAAM Funds may be leveraged and their portfolios may lack diversification, thereby increasing the risk of loss. The BAAM Funds may invest in instruments that are highly illiquid and extremely difficult to value, which may limit
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Investment in any of the BAAM Funds is only suitable for sophisticated investors for which such an investment does not constitute a complete investment program and which fully understand and are willing to assume the risks involved in
such Funds. We strongly encourage Investors to obtain independent advice from their own tax, accounting and legal advisers regarding any investment in any BAAM Fund. Investors are also urged to take appropriate advice regarding
any applicable legal requirements and any applicable taxation and exchange control regulations in the country of their citizenship, residence or domicile which may be relevant to the subscription, purchase, holding, exchange, redemption
or disposal of any BAAM Funds.
This communication is exempt from the restriction on the promotion of unregulated schemes (in section 238 of the Financial Services and Markets Act 2000 and the FSA's Conduct of Business Sourcebook 4.12) on the grounds that the
communication is only made to or directed at either (1) persons having professional experience of participating in unregulated schemes and the units to which the communication relates are available only to such persons; persons who
do not have professional experience in participating in unregulated schemes should not rely on it, or (2) eligible counterparties and/or professional clients as those terms are defined in the rules of the FSA. The units to which the
communication relates are available only to such persons. Any person who is not an investment professional, an eligible counterparty or a professional client must not act or rely upon the contents of this communication. BAAM is
registered as an investment adviser with the SEC. This material has been approved for distribution by The Blackstone Group International Partners LLP which is authorised and regulated by the UK Financial Services Authority ("FSA").
The Blackstone Group International Partners LLP performs marketing and investor services activities outside the United States for BAAM, which is located in the United States.
This document contains highly confidential information regarding BAAM's investments, strategy and organization. Your acceptance of this document from BAAM constitutes your agreement to (i) keep confidential all the information
contained in this document, as well as any information derived by you from the information contained in this document (collectively, "Confidential Information") and not disclose any such Confidential Information to any other person, (ii)
not use any of the Confidential Information for any purpose other than to consider investing in, or monitor investments in, BAAM Funds, (iii) not use the Confidential Information for purposes of trading any security, including, without
limitation, securities of Blackstone or its portfolio companies, (iv) not copy this document without the prior consent of BAAM, and (v) promptly return this document and any copies hereof to BAAM upon BAAM's request. The use of the
Confidential Information also is subject to the confidentiality provisions set forth in the Agreements and in any other written agreement between the recipient and BAAM/Blackstone.
125. Session 8
2011 – Themes to consider
Guest Speaker, Dr Pippa Malmgren | Canonbury Group
126. Upcoming Redington
“Teach in”
Topic: Alternatives to Cash Funding
When: 08.30 – 10.00 Thursday 25th November 2010
Where: RSA House, John Adam Street, London WC2N 6EZ
Sign up via the evaluation sheet or by emailing:
Education@redington.co.uk
And finally...................
127. SEEKING OUT THE
RETURN
GROWTH ASSETS
IN FOCUS…
Date: Thursday 14th October 2010
Time: 09.00 – 13.00
Place: Royal Society, London
