1. Strategies

2.  Theory ◦ Portfolio Management ◦ Risk Management  Market neutral ◦ Long short ◦ beta ◦ Alpha investors ◦ Smart beta  Different way to order your market, alternative weightings ◦ Arbitrage  Market making/liquidity provider  Models (oil vs oil)  M&A  Convertible bonds 2

3. 65% M. Eriksen, 35% B. Stinson SR = 0.42  Diversification increases the Sharpe Ratio (SR)  Improved SR  Improved M 2 ! 3 100% M. Eriksen SR = 0.3 with r f = 1%

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8.  https://www.portfoliovisualizer.com/asset- correlations 8

9. 9 Strategy (long-term asset allocation) Tactic (short-term asset allocation due to market timing) Stock Picking Contribution to Performance 70 – 90% 5 – 25% 1 - 5%

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11.  What is the influence of your positions on your portfolio  Correlation ◦ σ P 2 = w A 2 * σ A 2 + w B 2 * σ B 2 + 2 w A w B * σ AB ◦ ρ AB = σ AB / (σ A * σ B ) 11

12.  Hedge the risk you do not want ◦ Make the correlation go away 12

13.  Value investing: don’t pair them but look at company values (over/undervalued)  Paired trading: buying and selling two related stocks to limit market risk.  Goal: ◦ Long increase more during bull ◦ Short decrease more during bear ◦ Minimize market exposure 13

14.  Market neutral: 4,6%  Long/Short: 9,29% 14

15.  Benefit from price differences between related items  Risk Arbitrage ◦ looks a lot like normal investing ◦ M&A ◦ Liquidation ◦ Convertible bonds 15

16.  Mortgage: ◦ 5%-8,7%  Swap Spread: ◦ 3,7%-6.8%  Risk Arbitrage ◦ 4,03%  Convertible Arbitrage ◦ 6,68%  M&A arbitrage: ◦ 10,64% 16

17.  Highest average return of all hedge funds  10,42% 17

18.  Distrissed debt  Return:  9,44% 18

19.  "Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years." Warren Buffet  berkshire hathaway (buffet): 22% compound yearly in 40 years  S&P 500: 10% ( 1928-2014)  AEX: 7% last thirty years, 10.7% if reinvested 19

20.  Return  -5,18%  Risk of unlimited downside 20

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