1. Evolution of Hedge Funds
Leadership Forum
Managed Funds Association
Feb. 6,2006
Ginger Szala, Futures Magazine

2. Darwin and the Dollar What defines a hedge fund? 1) Leverage
2) Long/short abilities
3) Broader markets
4) Structure provides freedom for manager to pursue multiple strategies

3. Estimated Number of Hedge Funds 1990 – 2005
Extract from HFR Industry Report – Year End 2005

4. Estimated Growth of Assets / Net Asset Flow Hedge Fund Industry 1990 – 2005
Extract from HFR Industry Report – Year End 2005

5. Estimated Growth of Assets / Net Asset Flow Fund of Funds 1990 – 2005
Extract from HFR Industry Report – Year End 2005

6. In Comparison
Managed Futures Growth ($billions)

7. Comparison of performance
HFRI fund weighted comp. Index
(1.45)
Barclay CTA Index
(0.91)
(0.65)
(1.19)
9/22/2018

8. Evolution of hedge fund styles
Makeup in 1990s
Macro %
Equity Hedge %
Event Driven %
Fixed Income (total) 3.3%
Distressed securities %
Equity market neutral %
Equity non-hedge %
Merger arbitrage 0.6%
Convertible arb %
Emerging markets (total) 0.4%
Sector (total) %
Short selling %
Make up in 2005
Equity Hedge %
Event Driven %
Relative value arb %
Macro %
Fixed Income (total) 8.1%
Distressed securities 4.7%
Equity non-hedge 4.4%
Sector (total) 4.3%
Convertible arbitrage 4.3%
Emerging markets 3.5%
Equity market neutral 2.4%
Merger arb 1.5%
Market Timing 0.4%
Short selling 0.3%
Regulation D 0.2%
9/22/2018

9. Estimated Growth of Assets / Net Asset Flow Macro 1990 – 2005
Extract from HFR Industry Report – Year End 2005

10. Estimated Growth of Assets / Net Asset Flow Equity Hedge 1990 – 2005
Extract from HFR Industry Report – Year End 2005

11. Estimated Growth of Assets / Net Asset Flow Event-Driven 1990 – 2005
Extract from HFR Industry Report – Year End 2005

12. Who invests in hedge funds?
Combined U.S and Non-US
1) Fund of hedge funds 40%
2) High net worth %
3) Institutions %
4) Family Office %
5) Private Banks %
6) Foundations/Endowments %
Source: UBS, Note: Based on percentage share of assets under management world wide
9/22/2018

13. New Rules SEC registration Inside the numbers Feb. 1, 2006 deadline
Roughly 4000 managers globally, 714 registered with SEC. Another 70 pending.

14. Are we still evolving?
New worlds in hedge funds
New name?

15. Insight from insiders
Bruce Cleland, President and CEO of Campbell & Co.
John Kelly, President and CEO of Man Investments Inc.
Mark Rosenberg, Chairman and CIO of SSARIS Advisors
Mark Rzepczynski, CEO of JWH & Co.

16. Global assets Structured assets
Other slides
Global assets
Structured assets
9/22/2018

17. Growth of Hedge Funds and Managed Futures vs
Growth of Hedge Funds and Managed Futures vs. Global Financial Assets & Derivatives 1993 – 2004
Global Bonds +
Equities +
Banks
Pen Funds +
Insurance +
Mutual Funds
Global
OTC + ET
Derivatives
Total Global
Fin Assets &
Derivatives
Hedge
Funds
Managed
Futures
Hedge Funds +
Managed
Futures
Year
$Tn
$Tn
$Tn
$Tn
$Bn
$Bn
$Bn
1993
59.2
18.5
16.3
93.9
168 26
194
1994
66.0
20.4
20.2
106.6
167 25
192
1995
72.3
23.4
27.0
122.7
186 23
209
1996
76.3
25.8
35.5
137.5
257 24
281
1997
79.1
27.9
41.4
148.4
368 33
401
1998
88.3
31.4
94.3
214.0
375 36
411
1999
101.1
37.4
101.8
240.3
456 41
497
2000
99.2
35.5
109.5
244.2
491 38
529
2001
98.0
35.9
135.0
268.9
539 41
580
2002
103.4
32.9
165.5
301.8
626 51
677
2003
126.1
43.3
234.0
403.4
820 87
907
2004
141.8
45.9
298.4
486.1
930
132
1,062
CAGR
7.55%
7.88%
27.45%
14.68%
15.33%
14.49%
15.22%
Sources:
Bank for International Settlements • Banker Magazine • Bridgewell • Cap Gemini
Compeer • Hedge Fund Research • ING • International Financial Services London
Investment Company Institute • J.P. Morgan • Merrill Lynch • NYSE
OECD • Swiss Re

18. Evolution of hedge fund structures in the US Vehicles for investing in hedge funds
US legislation: 3(c)(1) (1949)
Maximum investors: 99
Typical minimum investment: $1 million
Investor qualifications: Accredited1
Individual
- income in excess of $200,000 in each of the preceding two years and expect the same or more this year; or
net worth (or joint net worth with spouse) of $1 million
Entity: $5 million net worth
US legislation: 3(c)(7) (1996)
Maximum investors: 4992
Typical minimum investment: $1 million
Investor qualifications: Qualified Purchasers & Accredited
Individual
- natural person to have at least $5 million in investments
certain other regulated high-net worth institutions (insurance companies, employee benefit plans, banks, etc.)
Entity: $25 million in investments
Development: Registered Hedge Funds (early 2000)
Maximum investors: Unlimited
Typical minimum investment: $25,000
Investor qualifications: Accredited
Individual
a net worth of $1 million at the time of purchase; or
income in excess of $200,000 in each of the preceding two year and expect the same income level in the current year
Entity: $1 million net worth
Source: Investment Company Act of 1940.
Schematic Illustration
1Additional qualification standards may be necessary if futures are traded.
2Although funds with an exemption under Section 3(c)(7) of the Investment Company Act of 1940, as amended, may have an unlimited number of investors, most funds will generally limit the total number of investors to 499 to avoid reporting requirements under the Securities Exchange Act of 1934, as amended. This is provided for informational purposes only and is not meant to be an exhaustive review of legal issues regarding hedge fund exemptions. Please consult with legal counsel for additional information. There are risks inherent in hedge funds and funds of hedge funds.
9/22/2018

19. HFR Industry Products & Indices
Comprised of over 5400 funds and fund of funds, HFR Database is the definitive source of hedge fund performance and information.
HFR FOF Database & Directory provides investors with up-to-the-moment quantitative data and two-page state-of-the-art analytical reports on over 1800 Global Fund of Funds from HFR Database.
HFR Industry Report – Year End 2005
Over 140 charts and graphs - a snapshot of the state of the alternative investment industry.
The leading fully-transparent hedge fund index providing daily returns from eight distinct strategies representing the entire industry.
The benchmarks of fund performance. 37 different categories by strategy, including the HFRI Fund Weighted Composite, which accounts for over 1600 funds listed on the HFR Database. Also: HFR's exclusive HFRI FOF Sub-Strategy Indices.
Hedge Fund Managers report performance to HFR Database by using HFR ManagerLink, our simple web-based interface for adding and updating fund information.

20. HFRI Fund Weighted Composite Index – Historical Monthly Performance

21. HFR Database HFR FOF Database & Directory HFR Industry Reports
Media Reference Guide Alternative Investment Industry Performance and Trends
Provided courtesy of Hedge Fund Research, Inc. Date: 01/24/2006 Copyright 2006 – All Rights Reserved
HFR Database HFR FOF Database & Directory HFR Industry Reports
HFRI Indices HFRX Indices HFR ManagerLink

22. Hedge Fund Research, Inc
Hedge Fund Research, Inc. is the industry's most respected source for hedge fund data and performance information.
Our flagship product offering, HFR Database, is a comprehensive tool tailored for alternative investment professionals seeking to analyze the hedge fund universe.
The database integrates with multiple analytical software platforms and is updated bi-weekly with new fund information.
The Data The licensed/redistributed HFR Database, currently comprised of over 5400 funds and fund of funds, is available to all accredited investors. Information on our hedge fund universe of established and emerging managers is collected directly from the fund managers and/or their respective offshore administrators, while other pertinent information is culled from offering memoranda, onsite visits, and due diligence interviews. HFR Database is the foundation for the HFRI Indices, the industry's most widely utilized benchmark of hedge fund performance information. The HFRI Fund Weighted Composite alone is comprised of over 1600 funds from our database universe. Our staff Hedge Fund Research believes that accurate information on fund managers is critical to any alternative investment enterprise. To that end, our analysts have monitored and tracked performance and administrative data internally on over 9,000 domestic and international funds, offering comprehensive information not available from other commercial data providers.

23. The HFR FOF Database combines HFR’s industry-leading accurate and timely hedge fund data with an accompanying Directory of two-page state-of-the-art analytical reports providing investors with up-to-the-moment quantitative data and analysis on every FOF in the HFR Database.
HFR FOFDB Highlights:
FRESH performance data, RECENTLY submitted by a BROAD spectrum of funds EACH and EVERY update
HFR works directly with FUND MANAGERS to gain the most up-to-date and accurate fund info possible. We do not work with third party data providers. HFR FOF Database is updated bi-weekly. New FOFs added with every release
Since its commercial debut in April 2003, the Database has more than tripled its fund coverage and now includes over 1800 FOFs. Two-page custom PDF profiles provide in-depth descriptive and graphical information on each fund
State-of-the-art quantitative and qualitative analytical reports included as part of the Database. Updated reports are available bi-weekly for subscriber download. Top 50 FOFs Rankings available to subscribers
Easy to Use listings sorted by Rate of Return, Sharpe Ratio, and Standard Deviation in 1, 3, and 5 year intervals give a clear view of the best performing funds on a bi-weekly basis. Database includes full Fund Contact, ROR and AUM data in MS Access and Excel format
Exported directly from HFR Database's internal universe of over 9000 hedge funds and fund of funds.

24. HFRI Monthly Indices – 2005 Monthly Performance

25. Extracts from HFR INDUSTRY REPORTS
HFR Industry Report – Year End 2005:
Industry insiders utilize HFR Industry Reports to gain a detailed picture of current trends as well as a historical perspective of the hedge fund industry.
The Report includes:
Over 140 pages of charts and graphs provided in PowerPoint format
Year End 2005 estimated total assets and net asset flows for entire industry and by strategy
Detailed breakout of Quarterly HFRI performance
HFRI Annual Performance Matrix
Onshore and Offshore asset analysis breakouts
Risk/Return analysis by strategy: 1, 3 and 5-year summaries of Standard Deviation, Sharpe Ratio, Sortino Ratio, Up/Down Capture, Returns Distribution and Market Correlations
Supporting dataset in Excel spreadsheet format (optional)

26. HFRI Index Risk Return Comparison 2005
Extract from HFR Industry Report – Year End 2005

27. Estimated Growth of Assets / Net Asset Flow Convertible Arbitrage 1990 – 2005
Extract from HFR Industry Report – Year End 2005

28. Estimated Growth of Assets / Net Asset Flow Distressed Securities 1990 – 2005
Extract from HFR Industry Report – Year End 2005

29. Estimated Growth of Assets / Net Asset Flow Merger Arbitrage 1990 – 2005
Extract from HFR Industry Report – Year End 2005

30. Estimated Growth of Assets / Net Asset Flow Relative Value Arbitrage 1990 – 2005
Extract from HFR Industry Report – Year End 2005