Statistical Arbitrage How to diversify to generate Alpha

Table of Contents

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Page I. Executive summary 3 II. Investment Strategies 4 III. Advantages of our system 5 IV. Performance 2013 6 V. Performance since inception 7 VI. How our trading system works 8 VII. BNP: Beta Neutral Portfolio 10 VIII. GYC: Introducing Global Yield Curves 11 IX. GYC: Yield Curve Strategies 12 X. GYC: Pairs trading long term rates 13 XI. GYC: Risk Management 14 XII. GYC: Performance 15 XIII. Why diversification? 16 XIV. Alpha generator 17 XV. Portfolio Revisions 18 XVI. Questions and answers 19 XVII. Investor Contacts 20 XVIII.Disclaimer 21

Executive Summary

3

Investment Strategies

4

It has been proven that long only and static asset allocation methodologies are incapable of enduring the peak-to-through decline of the markets.

Advantages of our system

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Performance - 2013

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-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0% S & P 500 T otal R eturn Hang S eng T R Z J P M As ian B ond Index

Key statistics Return (Jan’ 13 – Apr’13) 18.28% Return (Annualised) 55.91% Std Dev (Annualised) 17.01% Sharpe Ratio 3.29 Sortino Ratio 8.39 Alpha (Annualised) 57.27% Beta (vs S&P500) -4.49% Max Drawdown -1.71% VaR (Montecarlo @ 99.9%) -5.50% Correlations TRZ vs S&P500 -10.60% TRZ vs Hang Seng 7.60% TRZ vs JPM Asian Bond Index -2.95%

Performance – Since inception

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-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0% S & P 500 T otal R eturn Hang S eng T R Z J P M As ian B ond Index

Key statistics Return (Inception – Apr’13) 35.13% Return (Annualised) 52.13% Std Dev (Annualised) 15.67% Sharpe Ratio 3.33 Sortino Ratio 4.52 Alpha (Annualised) 54.36% Beta (vs S&P500) -10.06% Max Drawdown -2.54% VaR (Montecarlo @ 99.9%) -6.40% Correlations TRZ vs S&P500 -19.76% TRZ vs Hang Seng -0.19% TRZ vs JPM Asian Bond Index -11.11%

How our trading system works

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How our trading system works

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BNP: Beta Neutral Portfolio

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The BNP strategy assumptions are fairly easy to assess. From a mathematical point of view we apply part of the propositions theorized by Frazzini and Pedersen in their last paper. The remaining part is a proprietary model.

GYC: Introducing Global Yield Curves

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Parallel shift

Source: Diarch Research

Flattening Convexity Increase

Source: Diarch Research Source: Diarch Research

0.0%

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GYC: Yield Curve strategies

GYC captures most yield curve movements Parallel shifts, steepening/flattening, butterfly trades Returns on same assets but low correlation Positive carry and duration neutrality Directional in the level, slope and convexity

13

GYC: Pairs Trading long term rates

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GYC: Risk Management

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Performance

Since we started diversifying among strategies our trading system has consistently produced average returns around with very low draw downs. To achieve these returns we use a leverage of around 5 times the AUM which guarantees a very good trade-off between risk and returns. If the investor can afford a higher risk appetite this can be increased.

Why diversification?

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Alpha Generator

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83% Positive Alpha 17% Negative Alpha

-0.600%

-0.400%

-0.200%

0.000%

0.200%

0.400%

0.600%

0.800%

1.000%

1.200%

0 50 100 150 200

Portfolio Revisions

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Questions & Answers

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Contacts

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Jos Van Trier Partner and founder +31 (0) 888 723 900 jos@trzfunds.com Giancarlo Cobino Fund Manager + 31 (0) 208 083 863 giancarlo@trzfunds.com gcobino3@bloomberg.net

www.trzfunds.com

Disclaimer

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