1. Hedge Funds Class 2005 (Not for External Distribution)
Yale SOM Fund of Funds
Hedge Funds Class 2005
(Not for External Distribution)

2. Summary Analysis
Performance as a Group
Distribution
Compensation

3. Performance as a Group Start with $1,000,000
Transactions costs imputed.
Feb 9, 2005 to April 22, 2005
Class Average: 958,578.55
Class Median: 976,054.37
Interest Only: 1,007,176.02
S&P 500: 987,612.69

4. Average Positions 729,408.86 [Cash at End] 523,283.79 [Long at End]
294, [Short at the End]
“Beta” at the end: 0.148
Trades: 1,276.00
Commissions: $32,274 at $25/trade
525 different securities
Equities, options, futures

6. Distribution Features
Skewness =
Why?
Is 1,351, unusual?
std, leverage, etc.
Is 457, unusual?

7. Time Series of Activity

8. Distribution of Trades

9. Compensation: 1% & 20% Fixed fees paid: $250,000
Incentive fees paid: $186,787.86
Total fees: $436,787.86
Suppose you only paid incentive fees if the client made money?
Fixed fees $250,000, Incentive = 0%
Who “eats” the sub-advisor fee?
How much would you charge to eat this fee?

10. Summary Class 1: History and theory of hedge funds
Hedge Funds and Financial Frontiers
Class 2: Andrew Redleaf, Whitebox Partners
The End of Arbitrage 1
Capital Structure Arbitrage
Questions about value

11. Wrap-up
Class 3: Theory of Hedge Funds II: Applications of linear models in performance evaluation
“Hedge Funds, Theory and Performance”
Where do Alphas come from?
Class 4: Carl Schecter, Nomura Securities, Event Driven,  M&A Arb.
Hedge funds as insurers
Role in M&A

12. Wrap-up Class 5: Alpha Investing
Quantitative applications for evaluation.
Pairs Trading: Characteristics of convergence strategies.
Class 6: Fixed Income and MBS: Ming Fang.
Financial engineering
Arbing the yield curve

13. Wrap-up Class 7: Bob Jaeger, Evaluation Associates
Counter-cultural view of the industry
Risk is different -- Net benefit?
Fees on Fees in Funds of Funds, Style Analysis
Class 8: Multi Funds
Building a fund of funds.
High Water Mark contracts: motivations and incentives.

14. Wrap-up Class 9: Fred Busk Class 10: Richard Deitz VR Capital
Service part of the fund industry
Turn-key hedge funds?
Volatility and Operational Risk: horror stories to remember.
Class 10: Richard Deitz VR Capital
How its done: Itl. opportunities
Hedge funds and Asian Crisis

15. Wrap-Up Class 11: Foote School Case
Hedge funds in the portfolio
Mean-variance model and alternative investments.
Class 12: Regulation and Industry Evolution
Regulation is a two-edged sword.

16. Rankings as of 04/29/05
For school-professor . . YAL-GOE
Rank Account Name(s) Cash MV Long MV Short Equity Trades
1 A Scott Wallsmith Joe Leiwant ,727, , ,069, ,351,
2 A Olukayode Aje ,993, , ,019, ,244,
3 A David Lieberman Sean Myers ,150, , ,234,
4 A Manuel Lecour Gerardo Garcia ,110, , , ,094,
5 A Arunava Biswas William Haluska , ,138, , ,033,
6 A Qinhai Xia , , , ,013,
7 A Vaidas Navickas ,011, ,011,
8 A PROF ACCT ,007, ,007,
9 A YALE UNIV INTEREST ONLY ,007, ,007,
10 A Ming Fang ,005, , ,007,
11 A Michael Blue Peter Ammon , , , ,005,
12 A Brian Watson , , ,001,
13 A Suhail Chandy , , , ,000,
14 A Michael Benson , , ,
15 A Ted Urban , ,341, , ,
16 A Kate Marshall John Brydels , , , ,
17 A Nick Halliwell ,110, , , ,
18 A Sharad Satia Gautam Nangia , , ,
19 A Len Rittberg , , , ,
20 A Jeff Kaczynski Sean Olesen , , , ,
21 A M Baig , , , ,
22 A Ryder Campbell Stephen Shea , , , ,
23 A Billy Ng , ,329, , ,
24 A Chet Prabhu , , ,
25 A Paul Escott , ,
26 A Ari Raivetz Oren Monhite-Yahav , , ,
Beginning Date: 01/31/ Beginning S&P: 1, The class average is ,223.13
Ending Date: 05/06/ Current S&P: 1, The S&P500 account is ,612.69