Hedge Fund Industry Snapshot - Citibank · 2013-10-29 · Composite hedge fund performance,...

Hedge Fund Industry SnapshotData as of September 2013

AmericasNew York: +800 773-2889 San Francisco: +415 617-8554

Citi Prime Finance | Market Commentary

www.citigroupgcib.com | Report Date: October 2013

EMEAEMEA: +44 0 207-986-0822

Asia PacHong Kong: +852 2501-8356Tokyo: +813 6270-3165Singapore: +65 6432-1223Australia: +612 8225-6424

This report has been prepared by members of Citi Prime Finance and is not a research report. This report does not constitute advice on investments or a solicitation to buy or sell any financial instrument. Please see final pages for Market Commentary Disclosures.

Table of Contents

Monthly Highlights 1

Hedge Fund Industry Overview AUM, Performance Industry Flows

2

Hedge Fund Stats by Strategy 4

Performance at a Glance*NEW Hedge Fund Performance Red/Black Report Hedge Fund Performance *NEW performance dispersion by strategy Citi HARP vs. HFRI Fund of Fund Performance Securities Market Performance

5

Short Flows Data US Short Sales & Short Cover by Sector US Short Sales & Short Cover by Industry Group

8

Hedge Fund (Fund Level) Profiles Fund Structure Fund Analytics

11

Risk vs. Return Metrics 13

By Strategy Performance vs. Respective Benchmark(s) Leverage Profile Hedge Fund Performance by Size Hedge Fund Performance by Age

14

Firm Disclaimers and Market Commentary Disclosures 25

Contacts 26

HighlightsPerformance, AUM & Flows

According to eVestment, industry assets rose for September 2013 gaining +$49.6 billion. Asset growth was attributed mostly from performance gains of +$32.0 billion with net positive investor flows accounting for +$17.6 billion.

September 2013 marks the sixth month with positive performance gains this year and reverses course from August performance losses of -$14.8 billion. Mean monthly performance gains now stand at +$10.7 billion for 2013 compared to +$9.6 billion for 2012. September 2013 performance contrasts with September 2012 performance gains which stood at +$18.9 billion.

Net positive investor flows of +$17.6 billion for September 2013 marks the seventh period of net positive flows YTD. September 2013 flows are higher than the mean monthly flows for 2013 which now stand at +$5.3 billion. September 2012 net flows were +$18.7 billion over the same period.

Fund Profiles Across the subset of hedge funds reporting performance and AUM, the monthly median performance for large single funds (>$500 million) was

+1.0%, medium single funds ($100–$500 million) +1.4% and small single funds (<$100 million) +1.6%.

Liquidity terms remain fairly consistent from recent reporting periods. However, Sept-13 data revealed a slight uptick in funds requiring 30 days or less notice for redemptions : 66% vs. 64% in Aug-13. Across the entire subset of reporting funds, the majority (52%) required no lockup (43%) or less than 1 year lock up (9%).

Consistent throughout recent reporting periods, large funds ( >$500 million AUM) continue to hold a large portion of industry AUM (71%) compared to medium funds ($100–$500 million) at 18% and small funds (<$100 million) holding only 11%.

Leverage, Shorts and Futures Market Positioning

On a global basis, we calculate gross leverage (as measured on a mean basis) at 1.95x in September versus 1.96x in August and 2.0x in July

Looking across gross leverage, the following strategies showed the highest uses of leverage: Equity Market Neutral (6.06x), Global Macro (3.62x), Multi Strategy (3.56x) and Convertible Arbitrage (3.17x).

Citi US short flows data included in this month’s report show continued interest in the Consumer Discretionary and Energy sectors. These sectors accounted for 29.85% of short executions and 32.05% of short covers in September vs. 30.88% of short executions and 27.47% of short covers in June 2013.

September was a quiet month in terms of volume in US futures markets. In terms of net positioning in the large speculator accounts once again saw the biggest change in EuroFX with a continued build in a net long position, where as a percentage of total open interest it reached the largest net long position it has been since June 2011. Large specs cut their net long position in gold in the month, and added to a modestly net long position in the S&P contracts. For the third month in a row net positioning in the 10-year T-note futures remained little changed and modestly net short.

1

Composite hedge fund performance, equal-weighted across funds, was up for September 2013 with performance ranging from +0.96% to +1.53%. Across the major hedge fund indices, returns were higher than the previous month which experienced -0.86% to -0.49% over the same period.

Financial markets gained in September as the US Federal Reserve elected not to taper its bond purchases, while into month end, investors prepared for US government shutdown over the budget bill impasse. Global equity markets posted broad-based gains for September, recovering August losses despite declining into month end, with gains across US, European, Asian & Emerging Markets regions. Sector gains were led by Technology, Cyclicals, Energy & Financials, with leadership also from small cap & growth equities. German election results contributed favorably to investor risk tolerance, with European equities led by gains in Germany, Spain, France, Russia & Italy. Asian and Emerging Markets also gained for the month, with leadership from Japan, China, Brazil, Hong Kong, Korea & Thailand. US yields fell as the yield curve steepened on continuation of Fed bond purchases, yields also declined across France, Germany, Spain & the Netherlands. US corporate issuance reached record level in September, as issuers positioned for higher future borrowing costs.

Hedge fund strategy wise, top performing strategies in September 2013 include Emerging Markets at +2.71%, Equity Long/Short at +2.60%, Event Driven at +1.94%, and Convertible Arbitrage at +1.34%. The lowest performing strategies include CTA/Managed Futures -1.13%, Equity Market Neutral at +0.50%, and Fixed Income Arbitrage at +0.87%.

Hedge Fund Industry: AUM, Performance

Source: eVestment; Hedge Fund Research, Inc., © 2012.

Source: HFR, eVestment|HFN.

Industry Performance: Sept-13 / YTD

Monthly Industry AUM and Performance

Note Pad

MSCI World Index: -5.0%; +16.9% YTD

MSCI EM Index: +6.5%; -3.6% YTD

S&P 500: +3.1%; +18.5% YTD

Citi US BIG Index: +0.9%; -2.4% YTD

S&P GSCI: -3.4%; -0.3% YTD

US Dollar Index: -2.3%; +0.7% YTD

HFN Country Indices Sept-13/ YTD: – Brazil: +4.19% / -5.44%; Australia: -0.58% / +2.86%– China: +1.68%/+8.61%; Japan: +4.24%/+23.04%

2

-2%

-1%

0%

1%

2%

3%

2,450

2,500

2,550

2,600

2,650

2,700

2,750

2,800

Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13

Monthly P

erformance (%

)

Indu

stry

AU

M ($

bn)

AUM HFN EqWt HFR EqWt HFRX Wt

4.29%

5.50%

5.64%

0.96%

1.53%

1.32%

-0.5% 1.5% 3.5% 5.5%

HFRX Wt

HFR EqWt

HFN EqWt

Sept-13 2013

Hedge Fund Industry: Change in Industry Assets

Source: eVestment

Source: eVestment|HFN.

According to eVestment, industry assets rose for September 2013 gaining +$49.6 billion. Asset growth was attributed mostly from performance gains of +$32.0 billion with net positive investor flows accounting for +$17.6 billion.

September 2013 marks the sixth month with positive performance gains this year and reverses course from August performance losses of -$14.8 billion. Mean monthly performance gains now stand at +$10.7 billion for 2013 compared to +$9.6 billion for 2012. September 2013 performance contrasts with September 2012 performance gains which stood at +$18.9 billion.

Net positive investor flows of +$17.6 billion for September 2013 marks the seventh period of net positive flows YTD. September 2013 flows are higher than the mean monthly flows for 2013 which now stand at +$5.3 billion. September 2012 net flows were +$18.7 billion over the same period.

Total industry AUM now stands at $2.74 trillion for September 2013 an increase of +5.5% from December 2012 and an increase of +6.1% from July 2012.

Composition of Change in AssetsSept -13 Amounts in ($ Billion)

Monthly Change in Industry Assets and Composition Note Pad

The Citi Prime Finance calculation for gross leverage (as measured on a mean basis) 1.95x in September versus 1.96x in August and 2.0x in July.

Gross leverage (mean): defined as sum of (LMV + abs SMV)/Net Equity.

3

1.80

1.85

1.90

1.95

2.00

2.05


Gross Leverage

(75)

(50)

(25)

-

25

50

75

100

125


Chg

in In

dus

Asse

ts ($

bn)

Chg due to Performance Net Investor Flows Total Change in Indus Assets

$17.6

$32.0

(60) (40) (20) 0 20 40

Net Investor Flows

Chg due toPerformance

4.1%

10.1%

1.5%

5.0%

14.4%

6.5%

15.0%12.5%

4.6%3.2%

-16.4%

-3.1%

-15.1%

-0.4% -0.6%

-8.9%

-1.1%

-13.9%

-7.4%

-1.1%

-15.4%

12.0%

-20.00%

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

Hedge Fund Stats by Strategy

Note: Hedge fund data is self-reported; each calculation is based on the respective data from funds who have reported for the current period. Breakdown by assets and number of funds updated on a quarterly basisSource: Citi Prime Finance.

Source: Citi Prime Finance.Source: Citi Prime Finance.

Source: Citi Prime Finance.

Hedge Fund Strategy Breakdown by Assets Hedge Fund Strategy Breakdown by Number of Funds

Hedge Fund Performance by Strategy Hedge Fund Leverage Ratios by StrategyGross Leverage (Mean): Defined as the sum of (LMV + abs SMV)/Net Equity

4

1.3%

7.0%

0.1%

0.9%

8.5%

29.6%

1.6%

7.1%

10.0%

25.9%

7.9%

Convert Arb

CTA/Managed Futures

Dedicated Short Bias

Distressed

Emerging Markets

Equity Long/Short

Equity Market Neutral

Event Driven

FI Arbitrage

Global Macro

Multi-Strategy

1.7%

14.6%

0.2%

1.0%

7.4%

30.3%

5.6%

6.3%

9.4%

19.4%

4.0%

Convert Arb

CTA/Managed Futures


Distressed

Emerging Markets

Equity Long/Short


Event Driven

FI Arbitrage

Global Macro

Multi-Strategy

3.17

2.20

0.87

1.39

1.68

6.06

1.99

2.46

3.62

3.56

Convert Arb


Distressed

Emerging Markets

Equity Long/Short


Event Driven

FI Arbitrage

Global Macro

Multi-Strategy

-100% -50% 0% 50% 100% 150%

Multi-StrategyGlobal Macro

FI ArbitrageEvent Driven

Equity Market NeutralEquity Long/ShortEmerging Markets

DistressedDedicated Short Bias

CTA/Mgd FuturesConvert Arb

-100% -50% 0% 50% 100% 150%






Hedge Fund Performance: Red/Black Report

Source: Citi Prime Finance. Note: Hedge fund data is self-reported; each calculation is based on the respective data from funds who have reported for the current period.

Sept-13: Percentage of Reporting Funds

4

YTD Sept-13: Percentage of Reporting Funds

Sept-13: Percentage of Reporting Funds YTD Sept-13: Percentage of Reporting Funds

Negative ( ) / Positive ( ) Performance

-20%-27%

-18%-9%

-34%-14%

-21%

-19%0%

-64%-6%

80%73%

82%91%

66%86%

79%

81%100%

36%94%

-100% -50% 0% 50% 100% 150%






-16%

-26%-23%

-10%-21%

-15%

-36%0%0%

-67%-12%

84%74%

77%

90%79%85%

64%100%100%

33%

88%

-100% -50% 0% 50% 100% 150%






Negative ( ) / Positive ( ) Performance

Below -3% ( ) / between-3% / + 3% ( ) /Above +3% ( ) Below -3% ( ) / between-3% / + 3% ( ) /Above +3% ( )

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13

Citi HARP Index

HFRIFOF Index

Citi Liquid Hedge Fund Replicator (HARP)

Sep-13 Aug-13 Sep-12 YTD-13

Citi Harp 0.30% -1.90% 1.01% -1.75%

HFRIFOF 1.91% -0.76% 0.87% 5.56%

Citi HARP Index vs. Benchmark (monthly rolling)

Citi HARP is a liquid investable index, which aims at approximating the performance of the hedge fund sector

Source: Citi and Hedge Fund Research, Inc., © www.hedgefundresearch.comHFRIFOF Index is the HFRI Funds of Funds Composite Index

Annualized Performance:

Last 12-Month

Citi HARP Index

HFRIFOF

Annualised Return -2.27% 6.96%

Annualised Volatility3.20% 3.53%

Sharpe Ratio -0.81 1.88

Correlation 85% -

The purpose of the Index is to approximate in broad termsthe performance of the hedge fund sector by achieving asimilarity between the pattern of the returns of the Indexand the pattern of the returns of a Benchmark - the HFRIFund of Funds Composite Index.

The Index contains weighted components. Thecomponents are a money market component and variousindex components. Each index component represents aclass of asset in which the hedge fund sector is assumedto invest: bond, commodity, equity and foreign exchange.

The weighting within the Index of each component isdetermined monthly. Every month, a multiple linearregression algorithm is used to identify the appropriateweighting.

Source: Citi Prime Finance; FactSet; Citigroup Index LLC.

US Equities(Large Cap vs. Small Cap)

Global Equities Developed vs. Emerging)

Fixed Income(High-Grade vs. High-Yield)

Commodities(US$ Performance)

7

Market Performance

Sept-13 Aug 13 Sept-12 YTD-13S&P 500 3.1% -2.9% 2.6% 18.5%RUS 2000 6.4% -3.2% 3.3% 25.3%S&P Mid 5.2% -3.7% 1.9% 21.7%

Sept-13 Aug 13 Sept-12 YTD-13MSCI World 5.0% -2.1% 2.8% 16.9%MSCI EM 6.5% -1.7% 6.1% -3.6%

Sept-13 Aug 13 Sept-12 YTD-13Citi US BIG Index 0.9% -0.5% 0.1% -2.4%Citi HY Bond Index 0.0% -0.7% 1.3% 2.8%

Sept-13 Aug 13 Sept-12 YTD-13S&P GSCI -3.4% 3.4% -1.4% -0.3%US-$ Index -2.3% 0.8% -1.6% 0.7%US 2yr Note 0.3% 0.4% 0.2% 2.6%

-6%

-4%

-2%

0%

2%

4%

6%

8%

9/30/20137/31/201305/31/20133/29/20131/31/201311/30/20129/28/2012-15%

-10%

-5%

0%

5%

10%

15%

20%

9/30/20137/31/201305/31/20133/29/20131/31/201311/30/20129/28/2012

-3%-3%-2%-2%-1%-1%0%1%1%2%2%3%

9/30/20137/31/201305/31/20133/29/20131/31/201311/30/20129/28/2012-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

9/30/20137/31/201305/31/20133/29/20131/31/201311/30/20129/28/2012

US Securities Lending Sector Short Flows

Source: S&P (GICS); Citi US Securities Lending. Executions of shorts and short covers settled at Citi Prime Finance based on Market Value.

Short Sale Executions Short Cover Executions

Utilities3.66%

Telecom Services6.74%

Financials13.02%

ConsumerStaples6.74%

Energy13.32%

Consumer Discretionary

16.53%

InformationTechnology

13.56%

Health Care11.82%

Industrials11.9%

Information Technology

12.86%

Utilities2.94%

Telecom Services2.44%

Materials6.3%

Health Care11.9%

Financials13.02%

Energy 15.81%

8

Consumer Staples6.6%

Materials7.42%

Industrials10.27%

Consumer Discretionary

16.24%

% Previous Month % Change From Sector Short Flows % Short Execution Short Execution Previous MonthConsumer Discretionary 16.53 16.20 2.04Information Technology 13.56 17.18 -21.07Energy 13.32 14.68 -9.26Financials 13.02 12.86 1.24Health Care 11.82 12.07 -2.07Industrials 10.27 11.01 -6.72Materials 7.42 5.07 46.35Consumer Staples 6.74 5.07 46.35Telecom Services 6.74 5.93 13.66Utilities 3.66 4.11 -10.95

% Previous Month % Change From Sector Short Flows % Cover Execution Short Cover Previous MonthConsumer Discretionary 16.24 15.47 4.98Energy 15.81 12.00 31.75Financials 13.02 12.63 3.09Information Technology 12.86 17.77 -27.63Health Care 11.90 11.07 7.5Industrials 11.90 10.15 17.24Consumer Staples 6.60 7.77 -15.09Materials 6.30 5.53 13.92Utilities 2.94 5.54 -46.93Telecom Services 2.44 3.57 -31.65

US Securities Lending Industry Group Short Flows

Source: S&P (GICS); Citi US Securities Lending. Executions of shorts and short covers settled at Citi Prime Finance based on Market Value.

Citi Industry Group Short Flows (% Short)

9

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Short Execution Short Cover

% Previous Month % Change From Industry % Short Execution Short Execution Previous MonthEnergy 13.32 14.68 -9.26Materials 7.42 5.07 46.35Pharmaceuticals, Biotechnology & Life 6.80 7.10 -4.23Software & Services 6.69 7.09 -5.64Capital Goods 6.60 7.29 -9.47Retailing 5.68 6.27 -9.41Diversified Financials 5.04 4.68 7.69Health Care Equioment & Services 5.03 5.24 -4.01Technology Hardware & Equipment 4.68 7.42 -36.93Real Estate 4.20 3.96 6.06Telecom Services 3.67 2.14 71.50Utilities 3.66 4.11 -10.95Food Beverage & Tobacco 3.32 3.36 -1.19Media 3.18 3.19 -0.31Transportation 3.00 2.56 17.19Automobiles & Components 2.64 2.17 21.66Consumer Durables & Apparel 2.52 3.07 -17.92Consumer Services 2.51 2.19 14.61Banks 2.30 2.22 3.60Semiconductors & Semiconductor 2.19 2.67 -17.98Food & Staples Retailing 2.17 1.13 92.04Insurance 1.47 2.00 -26.50Household & Personal Products 1.25 1.44 -13.19Commercial Services & Supplies 0.67 1.29 -48.06

% Previous Month % Change From Industry % Cover Execution Short Cover Previous MonthEnergy 15.81 12.00 31.75Capital Goods 7.46 6.68 11.68Software & Services 6.89 8.69 -20.71Pharmaceuticals, Biotechnology & Life 6.30 6.39 -1.41Materials 6.30 5.53 13.92Retailing 6.22 6.16 0.97Health Care Equioment & Services 5.60 4.92 13.82Diversified Financials 4.37 4.05 7.90Technology Hardware & Equipment 3.98 6.42 -38.01Real Estate 3.84 3.61 6.37Food Beverage & Tobacco 3.41 4.66 -26.82Transportation 3.21 2.18 47.25Utilities 2.94 5.54 -46.93Consumer Durables & Apparel 2.82 2.51 12.35Media 2.76 3.15 -12.38Banks 2.66 2.62 1.53Consumer Services 2.60 2.64 -1.52Telecom Services 2.44 3.57 -31.65Food & Staples Retailing 2.28 1.93 18.13Insurance 2.16 2.36 -8.47Semiconductors & Semiconductor 1.99 2.65 -24.91Automobiles & Components 1.84 1.70 8.24Commercial Services & Supplies 1.23 1.39 -11.51Household & Personal Products 0.90 1.17 -23.08

Hedge Fund (Fund Level) Profiles

Source: Citi Prime Finance.Note: Hedge fund data is self-reported; each calculation is based on the respective data from funds who have reported for the current period.

On-shore/Off-shore

By Fund Size—$ AUM Redemption Frequency

By Fund Age—No. of Funds Lock-Up Domicile (by $ AUM)

By Fund Age—$ AUM Minimum Investment

Legal Status

Redemption Notice PeriodBy Fund Size—No. of Funds

11

Small:71%

Medium:18%

Large:11%

Small:5%

Medium20%

Large:75%

<= 2 Yrs:16%

2-5 yrs:33%

5+ yrs:51%

<= 2 Yrs:4%

2-5 yrs:20%

> 5 yrs:76%

Under 7:17%

7-30 days:47%

30-60 days:20%

60+ days:14%

< 30 days:21%

Monthly:52%Qtrly:

23%

> Qtrly:4%

< 1 yr:9%

1 -2 yrs:45%

2+ yrs:3%

No L/U:43%

=<250 K46%

$250 K -$5 MM48%

$5+ MM6%

32%

68%

On-shore: Off-shore:

Open-End:92%

Closed-End:8%

Amer:65%

EMEA:30%

ASIA:5%

Hedge Fund (Fund Level) Profiles

Source: Citi Prime Finance.Note: Domiciles, lock-up and redemption metrics updated quarterly. Hedge fund data is self-reported; each calculation is based on the respective data from funds who have reported for the

current period. Median YTD performance is calculated from funds reporting for all underlying periods. “n/m” = Not Meaningful.

Hedge Funds: Large (>$500 Million)

Hedge Funds: Medium ($100–$500 Million)

Hedge Funds: Small (<$100 Million)

12

% of Total

MedianAUM

($MM)

Median Monthly Perform

Median YTD

Perform

Domicile:AmericasRegion

Off-Shore

Preferred Lock-Up /% of Total

PreferredRedemption

Notice/ % of Total

PreferredRedemptionFrequency/% of Total

Under 2 yrs 4% $1,109 1.1% 5.0% 72% 98% 1-2 yrs / 76% 7-30 days / 69% Monthly / 56%2-5 yrs 12% $1,509 1.2% 4.1% 70% 63% 1-2 yrs / 79% 60+ days / 31% Monthly / 40%Over 5 yrs 83% $2,989 1.0% 5.0% 66% 72% 1-2 yrs / 41% 7-30 days / 32% Monthly / 47% Total 100% $2,572 1.0% 4.9% 68% 69% 1-2 years / 51% 7-30 days / 34% Monthly / 48%

Hedge Fund Age % of Total

MedianAUM

($MM)


Median YTD

Perform


Off-Shore


PreferredRedemption

Notice/ % of Total


Under 2 yrs 5% $201 1.1% 4.3% 71% 84% 1-2 yrs / 75% 7-30 days / 52% Under 30 / 51%2-5 yrs 30% $231 1.2% 6.8% 70% 73% 1-2 yrs / 66% 7-30 days / 41% Monthly / 49%Over 5 yrs 65% $235 1.6% 7.4% 70% 65% No / 52% 7-30 days / 48% Under 30 / 57% Total 100% $231 1.4% 6.9% 71% 68% No / 44% 7-30 days / 46% Monthly / 52%

Hedge Fund Age % of Total

MedianAUM

($MM)


Median YTD

Perform


Off-Shore


PreferredRedemption

Notice/ % of Total


Under 2 yrs 24% $32 1.7% 6.8% 87% 79% 1-2 yrs / 71% 7-30 days / 32% Monthly / 44%2-5 yrs 27% $32 1.7% 4.3% 64% 78% 1-2 yrs / 63% 7-30 days / 43% Monthly / 52%Over 5 yrs 50% $35 1.4% 7.2% 68% 65% No / 42% 7-30 days / 55% Monthly / 54% Total 100% $34 1.6% 6.9% 67% 73% 1-2 yrs / 46% 7-30 days / 50% Monthly / 52%

Risk and Return Metrics

Source: Credit Suisse Dow Jones Index

Risk vs. Return (Sept-12 – Sept-13)

Sharpe Ratios (Oct-04 - Sept-13)

13


(0.50)

0.17 0.19

0.310.46

0.66 0.680.89

0.98 1.061.17

(0.6)(0.4)(0.2)0.00.20.40.60.81.01.21.4

Dedicated ShortBias

CTA/ManagedFutures

Equity MarketNeutral

EmergingMarkets

FI Arbitrage EquityLong/Short

Convert Arb Global Macro Multi-Strategy Event Driven Distressed

Convert Arb

CTA/Mgd Futures


DistressedEmerging Mkts

Equity L/S

Eq Mkt Neutral

Event Driven

FI Arbitrage Global Macro

Multi-Strat

-26%-24%-21%-19%-16%-14%-11%-9%-6%-4%-1%2%4%7%9%

12%14%17%19%

0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.25% 2.50% 2.75%

Ret

urn

Standard Deviation

Convertible Arbitrage


Source: Citi ICG Analytics; FactSet. Source: Citi Prime Finance.

Note: Hedge fund data is self-reported; each calculation is based on the respective data from funds who have reported for the current period.1. Universe and sample sizes may be small.

Hedge Fund Performance vs. Benchmark(Monthly, LTM)

Leverage Profile(Monthly, LTM)

Hedge Fund Performance by Age1 Hedge Fund Performance by Size1

14


1.3%

2.8%

0.9%

Under 2 Years

2 - 5 Years

Over 5 Years

0.9%

1.0%

1.6%

Large($500+ MM)

Medium($100 - $500 MM)

Small(Under $100 MM)

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTDCiti-derived Median 2.3% 0.3% 0.9% 1.1% 1.2% -0.7% 1.2% 0.1% 1.3% 7.7%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-131.0

1.5

2.0

2.5

3.0

3.5

4.0


September -13 August -13 September-12 YTD-13Convert Arb 1.3% 0.1% 0.8% 7.7%CWB ETF 2.8% -0.8% 2.7% 13.9%

CTA/Managed Futures


Source: Citi Prime Finance; FactSet.

Source: CFTC, Bloomberg, Citi Futures Perspective.Source: Citi Prime Finance.


Hedge Fund Performance vs. BenchmarkLarge Speculator Positions: CFTC Commitment Of Traders (Futures & Options) Report Net of Longs Less Shorts as Percent of Total Open Positions

Hedge Fund Performance by Age

Hedge Fund Performance by Size

Combined S&P/Weighted Mini S&P Contracts US 10-Year Treasury Futures

EuroFX Futures Gold Futures

Last Update: 9/27/13 +2.0% Last Update: 9/27/13 -1.2%

Last Update: 9/27/13 +10.2% Last Update: 9/27/13 +6.9%

15

Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTDCiti-derived Median 1.8% -0.1% 0.5% 1.3% -1.9% -1.8% -0.9% -0.9% -1.1% -3.1%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%


September -13 August -13 September-12 YTD-13CTA/Mgd Futures -1.1% -0.9% -1.0% -3.1%S&P GSCI Commodity (SPGSCI) -3.4% 3.4% -1.4% -0.3%DJ-UBS Commodity (DJAGK) -2.6% 1.4% 1.7% -10.6%

(30)

(25)

(20)

(15)

(10)

(5)

-

5

10

15

20

25

Jan-07 Jan-08 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

%

prior month-end

(8)

(6)

(4)

(2)

-

2

4

6

8

10


%

prior month end

(30)

(25)

(20)

(15)

(10)

(5)

-

5

10

15

20

25


%

prior month-end

-

5

10

15

20

25


%

prior month-end

-1.2%

-1.0%

-1.1%

Under 2 Years

2 - 5 Years

Over 5 Years

-0.9%

-0.6%

-1.3%

Large($500+ MM)

Medium($100 - $500 MM)



Source: Citi Prime Finance. Source: Citi Prime Finance.

Source: Citi Prime Finance; FactSet. Source: Citi Prime Finance.





16

Gross Leverage (Mean): Def ined as the sum of (LMV + abs SMV) / Net EquityLMV Leverage (Mean): Def ined as Long Market Value / Net Equity

n/m

n/m

1.10%

Under 2 Years

2 - 5 Years

Over 5 Years

n/m

n/m

1.10%

Large($500+ MM)

Medium($100 - $500

MM)


Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTDCiti-derived Median -5.0% 0.5% -3.2% -3.8% -3.3% 0.5% -3.4% 2.3% 1.1% -14.2%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%


September -13 August -13 September-12 YTD-13Ded Short Bias 1.1% 2.3% -5.6% -14.2%S&P Short ETF (SH) -3.2% 2.9% -2.8% -18.9%Rus 2000 Short ETF (RWM) -6.3% 2.8% -3.5% -26.6%

Distressed


Source: Citi Prime Finance; Citigroup Index LLC; Altman-NYU Salomon Center. Source: Citi Prime Finance.





17


0.00%

1.25%

1.20%

Under 2 Years

2 - 5 Years

Over 5 Years

2.4%

0.5%

1.3%

Large($500+ MM)

Medium($100 - $500 MM)


Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTDCiti-derived Median 2.5% 1.0% 1.6% 1.3% 2.2% -1.0% 1.8% 0.5% 1.2% 11.0%

0.0

0.5

1.0

1.5

2.0

2.5


-5.0%

0.0%

5.0%

10.0%

15.0%


September -13 August -13 September-12 YTD-13Distressed 1.2% 0.5% 1.2% 11.0%Citi HY Bond Index 0.0% -0.7% 1.3% 2.8%

Emerging Markets







18


2.9%

3.1%

2.5%

Under 2 Years

2 - 5 Years

Over 5 Years

3.0%

2.6%

2.8%

Large($500+ MM)

Medium($100 - $500 MM)


Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTDCiti-derived Median 3.4% 0.1% -0.5% 1.0% 0.5% -4.1% 0.5% -0.5% 2.7% 3.1%

0.0

0.5

1.0

1.5

2.0


-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13September -13 August -13 September-12 YTD-13

Emerging Mkts 2.7% -0.5% 2.2% 3.1%MSCI EM 6.5% -1.7% 6.1% -3.6%JPM EMBIG Core ETF (EMB) 3.2% -2.4% 1.8% -8.4%DB EM Liquid ETF (PCY) 4.2% -3.4% 2.0% -10.0%

Equity Long/Short







19


0.60.91.11.41.61.92.12.42.62.9


September -13 August -13 September-12 YTD-13Eq Long/Short 2.6% -0.5% 2.2% 10.9%Eq Mkt Neutral 0.5% -0.7% 0.4% 4.6%S&P 500 3.1% -2.9% 2.6% 18.5%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%


Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTDCiti-derived Median 3.5% 0.7% 1.8% 0.5% 1.5% -1.6% 2.4% -0.5% 2.6% 10.9%

3.4%

3.1%

2.5%

Under 2 Years

2 - 5 Years

Over 5 Years

1.9%

3.0%

2.6%

Large($500+ MM)

Medium($100 - $500

MM)

Small(Under $100

MM)








20


0.4%

0.9%

0.4%

Under 2 Years

2 - 5 Years

Over 5 Years

-0.01%

0.73%

1.19%

Large($500+ MM)

Medium($100 - $500 MM)



0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0


-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%


Eq Mkt Neutral 0.5% -0.7% 0.4% 4.6%Eq Long/Short 1.8% -0.5% 2.2% 10.1%LIBOR + 300 bps 0.3% 0.3% 0.3% 2.4%US T-Bill + 300 bps 0.3% 0.3% 0.3% 2.0%

Event Driven







21


1.3%

1.0%

2.1%

Under 2 Years

2 - 5 Years

Over 5 Years

2.3%

2.1%

1.5%

Large($500+ MM)

Medium($100 - $500 MM)


Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTDCiti-derived Median 1.8% -0.2% 1.3% 0.8% 1.7% -1.2% 1.5% 0.2% 1.9% 7.8%

0.0

1.0

2.0

3.0

4.0

5.0

6.0


-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%


September -13 August -13 September-12 YTD-13Event Driven 1.9% 0.2% 1.4% 7.8%The Merger Fund (MERFX) 0.9% 0.1% -0.3% 2.2%AQR Div Arb Fund (ADANX) 0.0% 0.4% 0.5% 1.5%

FI Arbitrage


Source: Citi Prime Finance; Citigroup Index LLC. Source: Citi Prime Finance.





22


0.9%

1.1%

0.8%

Under 2 Years

2 - 5 Years

Over 5 Years

0.7%

0.6%

1.4%

Large($500+ MM)

Medium($100 - $500 MM)



0.0

1.0

2.0

3.0

4.0

5.0

6.0


-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%


September -13 August -13 September-12 YTD-13FI Arbitrage 0.9% -0.1% 1.1% 5.8%Citi US BIG Index 0.9% -0.5% 0.1% 12.3%Citi HY Bond Index 0.0% -0.7% 1.3% 2.8%

Global Macro

Source: Citi Prime Finance. Source: Citi Prime Finance; FactSet.

Source: Citi Prime Finance; FactSet. Source: Citi Prime Finance; FactSet.





23


0.8%

1.1%

1.0%

Large($500+ MM)

Medium($100 - $500 MM)


Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTDCiti-derived Median 2.2% -0.5% 1.0% 2.3% 0.2% -1.6% 0.8% -0.5% 1.0% 4.9%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0


-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%


Global Macro 1.0% -0.5% 0.1% 4.9%MSCI World 5.0% -2.1% 2.8% 16.9%US$-Index -2.3% 0.8% -1.6% 0.7%

1.2%

1.8%

0.6%

Under 2 Years

2 - 5 Years

Over 5 Years

Multi-Strategy







24


0.9%

1.3%

1.4%

Under 2 Years

2 - 5 Years

Over 5 Years


0.0

1.0

2.0

3.0

4.0

5.0

6.0


-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%


September -13 August -13 September-12 YTD-13Multi-Strategy 1.3% -0.5% 0.1% 6.6%

1.6%

1.2%

1.0%

Large($500+ MM)

Medium($100 - $500

MM)

Small(Under $100

MM)

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25

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For Further Information, Please Contact

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This report has been prepared by members of Citi Prime Finance and is not a research report. This report does not constitute advice on investments or a solicitation to buy or sell any financial instrument. Please see Market Commentary Disclosures.

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