STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
J.P. Morgan Asset ManagementGlobal Multi-Asset Group
Factor Analysis of Massachusetts PRIM Hedge Funds
2013
For professional investors only. Not for retail use or distribution
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Overview
Performed factor analysis encompassing both traditional and alternative factors for each underlying hedge fund within the Massachusetts PRIM portfolio– We seek to determine the level of alpha vs alternative beta delivered by the individual managers– We also examine whether there is evidence of factor timing
Two main types of analysis:– Rolling factor analysis attempts to test for evidence of factor timing in each hedge fund – Factor analysis for entire period attempts to see if there are consistent, significant exposures during the entire window
studied (Given the short period studied, analysis of the entire period gives us more statistical rigor)
Assumptions:– Rolling window was set to 30 months of data
2
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Funds: Summary Merger arbitrage premium is statistically significant in 5 of the 6 funds in both the single time period regression
As a group, event-driven hedge funds have the highest explanation of return variance by common alternative beta exposures
All funds analyzed could be decomposed into a combination of equity beta, alternative equity factors, convertible arbitrage, merger arbitrage, and credit spread factors
Highest potential for substitution with alternative beta factors; only two funds generate consistent, statistically significant alpha at the 90% confidence level
3
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund A
4
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Event-Driven Fund A (actual performance)Event-Driven Fund A (rolling factor replication)Event-Driven Fund A (static factor exposure)
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Rolling Factor Exposure
Value Momentum Small capMerger Arb CB Arb Equity BetaCredit Spread
Alpha (annualized) Momentum Merger Arb CB Arb Equity Beta Credit SpreadCoefficient 2.06% 0.03 0.30 0.08 0.07 0.20 p-value 0.16 0.12 0.04 0.18 0.07 0.00 Regression r-squared 0.70
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund A: continued
5
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
80.00
90.00
100.00
110.00
120.00
130.00
140.00
Event-Driven Fund A (actual performance)Event-Driven Fund A (static factor exposure)
The risk factors of momentum, merger arbitrage, convertible arbitrage, equity beta, and credit spread explain this particular event-driven fund’s performance very well
Rolling factor exposures remain consistent
1 2 3 4 5 0%
10%
20%
30%
40%
50%
60%
70%
80%Principal Component Analysis of Event-Driven Fund A
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund B
6
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
Event-Driven Fund B (actual performance)Event-Driven Fund B (rolling factor replication)Event-Driven Fund B (static factor exposure)
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
Rolling Factor Exposure
Value Momentum Small capMerger Arb CB Arb Equity BetaCredit Spread
Alpha (annualized) Value Momentum Small cap Merger Arb CB Arb Equity Beta Credit SpreadCoefficient 5.35% 0.07 (0.04) (0.14) 0.31 (0.14) (0.11) 0.41 p-value 0.01 0.29 0.14 0.05 0.12 0.10 0.05 0.00 Regression R-squared 0.54
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund B: continued
7
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
160.00
170.00
Event-Driven Fund B (actual performance)Event-Driven Fund B (static factor exposure)
This particular event-driven fund is a standout as it generates statistically significant alpha
The strongest factor loading is to Credit Spread
Very strong, consistent performance post 2008 crisis
1 2 3 4 5 6 7 8 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Event-Driven Fund B
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund C
8
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
85.00
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Event-Driven Fund C (actual performance)Event-Driven Fund C (rolling factor replication)Event-Driven Fund C (static factor exposure)
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Rolling Factor Exposure
Value Momentum Small capMerger Arb CB Arb Equity BetaCredit Spread
Alpha (annualized) Merger Arb CB Arb Equity Beta Credit SpreadCoefficient -1.16% 0.67 0.12 0.08 0.11 p-value 0.62 0.00 0.23 0.17 0.25 Regression R-squared 0.53
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund C: continued
9
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
80.00
85.00
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
Event-Driven Fund C (actual performance)Event-Driven Fund C (static factor exposure)
A combination of merger arbitrage, convertible bond arbitrage, equity beta, and credit spread only can explain about half the variation in fund returns
Nonetheless, merger arbitrage loads very significantly throughout
1 2 3 4 5 0%
10%
20%
30%
40%
50%
60%
70%
80%Principal Component Analysis of Event-Driven Fund C
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund D
10
Alpha (annualized) Merger Arb CB Arb Equity BetaCoefficient 0.07% 0.70 0.21 0.35 p-value 0.98 0.01 0.04 0.00 Regression R-squared 0.71
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Rolling Factor Exposure
Value Momentum Small capMerger Arb CB Arb Equity BetaCredit Spread
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
Event-Driven Fund D (actual performance)Event-Driven Fund D (rolling factor replication)Event-Driven Fund D (static factor exposure)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund D: continued
11
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
75.00
80.00
85.00
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
Event-Driven Fund D (actual performance)Event-Driven Fund D (static factor exposure)
The risk factors of Momentum, Merger Arbitrage, Convertible Arbitrage, and Equity Beta explain a large portion of the variation in fund returns
Rolling factor exposures remain consistent; alpha term is statistically insignificant
1 2 3 4 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%Principal Component Analysis of Event-Driven Fund D
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund E
12
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
100.00
110.00
120.00
130.00
140.00
150.00
Event-Driven Fund E (actual performance)Event-Driven Fund E (rolling factor replication)Event-Driven Fund E (static factor exposure)
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
0.00
0.50
1.00
1.50
2.00
2.50
Rolling Factor Exposure
Value Momentum Small capMerger Arb CB Arb Equity BetaCredit Spread
Alpha (annualized) Small cap Equity BetaCoefficient 9.35% 0.48 0.47 p-value 0.09 0.02 0.00 Regression R-squared 0.51
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund E: continued
13
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
75.00
95.00
115.00
135.00
155.00
175.00
195.00
Event-Driven Fund E (actual performance)Event-Driven Fund E (static factor exposure)
Event-Driven Fund E generates statistically significant alpha at the 90% confidence level
The small cap and equity beta factors can still explain half of the variation in fund returns
1 2 3 0%
10%
20%
30%
40%
50%
60%
70%
80%Principal Component Analysis of Event-Driven Fund E
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund F
14
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
130.00
Event-Driven Fund F (actual performance)Event-Driven Fund F (rolling factor replication)Event-Driven Fund F (static factor exposure)
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
Rolling Factor Exposure
Value Momentum Small capMerger Arb CB Arb Equity BetaCredit Spread
Alpha (annualized) Momentum Merger Arb Equity Beta Credit SpreadCoefficient 0.58% (0.13) 0.33 0.40 0.15 p-value 0.85 0.01 0.24 0.00 0.19 Regression R-squared 0.77
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Event-Driven Fund F: continued
15
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
70.00
80.00
90.00
100.00
110.00
120.00
130.00
Event-Driven Fund F (actual performance)Event-Driven Fund F (static factor exposure)
Event-Driven Fund F can mostly be explained by the momentum, merger arbitrage, equity beta, and credit spread risk factors
Static exposures track actual fund performance very well throughout the entire history of the window
1 2 3 4 5 0%
10%
20%
30%
40%
50%
60%
70%
80%Principal Component Analysis of Event-Driven Fund F
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Funds: Summary
As expected, all funds exhibit significant factor exposure to equity beta
Four of five funds (Funds B, C, D, E) load positively on global alternative equity factors
Three out of five funds (Funds A, B, D) also exhibit factor exposure to credit spread
Three of five funds (A, C, E) appear to exhibit positive alpha
16
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund A
17
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
Equity Long/Short Fund A (actual performance)Equity Long/Short Fund A (rolling factor replication)Equity Long/Short Fund A (static factor exposure)
Alpha (annualized) Momentum Equity Beta Credit SpreadCoefficient 0.97% 0.07 0.07 0.16 p-value 0.59 0.01 0.09 0.01 Regression R-squared 0.33
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.50
-0.40
-0.30
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
0.50
Rolling Factor Exposure
Value Momentum Small capAccruals Equity Beta Credit Spread
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund A: continued
18
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Equity Long/Short Fund A (actual performance)Equity Long/Short Fund A (static factor exposure)
1 2 3 4 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Equity LS Fund A
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund B
19
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Equity Long/Short Fund B (actual performance)Equity Long/Short Fund B (rolling factor replication)Equity Long/Short Fund B (static factor exposure)
Alpha (annualized) Equity Beta Credit Spread Global ValueCoefficient -3.89% 0.24 0.20 0.24 p-value 0.19 0.00 0.05 0.02 Regression R-squared 0.54
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
Rolling Factor Exposure
Equity Beta Credit SpreadValue (GMAG) Momentum (GMAG)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund B: continued
20
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
65.00
75.00
85.00
95.00
105.00
115.00
125.00
Equity Long/Short Fund B (actual performance)Equity Long/Short Fund B (static factor exposure)
1 2 3 4 0%
10%
20%
30%
40%
50%
60%
70%
80%Principal Component Analysis of Equity LS Fund B
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund C
21
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Equity Long/Short Fund C (actual performance)Equity Long/Short Fund C (rolling factor replication)Equity Long/Short Fund C (static factor exposure)
Alpha (annualized) Momentum Small cap Accruals Equity Beta Global ValueCoefficient 3.58% 0.09 0.20 0.22 0.32 0.44 p-value 0.29 0.07 0.12 0.16 0.00 0.00 Regression R-squared 0.40
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
0.00
0.10
0.20
0.30
0.40
0.50
0.60
Rolling Factor Exposure
Momentum Small cap AccrualsEquity Beta Credit Spread Value (GMAG)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund C: continued
22
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
95.00
105.00
115.00
125.00
135.00
145.00
Equity Long/Short Fund C (actual performance)Equity Long/Short Fund C (static factor exposure)
1 2 3 4 5 6 7 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Equity LS Fund C
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund D
23
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
100.00
110.00
120.00
130.00
140.00
150.00
160.00
Equity Long/Short Fund D (actual performance)Equity Long/Short Fund D (rolling factor replication)Equity Long/Short Fund D (static factor exposure)
Alpha (annualized) Equity Beta Credit Spread Global Value Small Cap(GMAG)Coefficient -8.31% 0.32 1.02 0.38 0.23 p-value 0.08 0.00 0.00 0.02 0.29
Regression R-squared 0.77
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
Rolling Factor Exposure
Equity Beta Credit SpreadValue (GMAG) Small Cap(GMAG)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund D: continued
24
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
45.00
65.00
85.00
105.00
125.00
145.00
165.00
185.00
Equity Long/Short Fund D (actual performance)Equity Long/Short Fund D (static factor exposure)
1 2 3 4 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%Principal Component Analysis of Equity LS Fund D
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund E
25
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
Equity Long/Short Fund E (actual performance)Equity Long/Short Fund E (rolling factor replication)Equity Long/Short Fund E (static factor exposure)
Alpha (annualized) Accruals Value (GMAG)Coefficient 5.60% 0.23 0.46 p-value 0.28 0.18 0.01 Regression R-squared 0.09
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
Rolling Factor Exposure
Momentum Accruals Equity BetaCredit Spread Value (GMAG)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Equity Long/Short Fund E: continued
26
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
95.00
105.00
115.00
125.00
135.00
145.00
155.00
Equity Long/Short Fund E (actual performance)Equity Long/Short Fund E (static factor exposure)
1 2 3 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Equity LS Fund E
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Global Macro Funds: Summary As a group, Global Macro has most amount of return variation not readily explained by our defined alternative beta factors
27
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Global Macro Fund A
28
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Global Macro Fund A (actual performance)Global Macro Fund A (rolling factor replication)Global Macro Fund A (static factor exposure)
Alpha (annualized) Term Premium FI Carry Duration Credit SpreadCoefficient 11.47% 0.16 0.32 0.18 0.20 p-value 0.00 0.26 0.04 0.31 0.00 Regression R-squared 0.16
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Rolling Factor Exposure
FX Carry Cmdty MOM Term PremiumFI Carry Duration Credit Spread
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Global Macro Fund A: continued
29
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
105.00
125.00
145.00
165.00
185.00
205.00
Global Macro Fund A (actual performance)Global Macro Fund A (static factor exposure)
Possible window size issue in rolling factor exposure analysis with backwards variable selection unable to find significant factor loading for the better part of 2012
Generates large statistically significant alpha
1 2 3 4 5 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Global Macro Fund A
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Global Macro Fund B
30
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
Global Macro Fund B (actual performance)Global Macro Fund B (rolling factor replication)Global Macro Fund B (static factor exposure)
Alpha (annualized) Accruals FX Mom Duration GSCI Value (GMAG)Coefficient 5.32% 0.22 0.20 0.56 0.12 0.34 p-value 0.11 0.04 0.25 0.01 0.01 0.00 Regression R-squared 0.24
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
Rolling Factor Exposure
Accruals FX Carry FX MomCmdty MOM FI Carry DurationGSCI Value (GMAG)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Global Macro Fund B: continued
31
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
95.00
105.00
115.00
125.00
135.00
145.00
155.00
165.00
175.00
Global Macro Fund B (actual performance)Global Macro Fund B (static factor exposure)
Static factor exposure shows significant loadings notably to Commodities and Duration with a Value tilt
1 2 3 4 5 6 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Global Macro Fund B
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Global Macro Fund C
32
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Global Macro Fund C (actual performance)Global Macro Fund C (rolling factor replication)Global Macro Fund C (static factor exposure)
Alpha (annualized) Accruals FX Mom Cmdty MOM Duration GSCI Value (GMAG)Coefficient 0.74% 0.26 0.28 0.69 0.65 0.12 0.15 p-value 0.85 0.05 0.18 0.00 0.01 0.03 0.23 Regression R-squared 0.32
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-1.00
-0.50
0.00
0.50
1.00
1.50
Rolling Factor Exposure
Accruals FX MomCmdty Roll Yield Cmdty MOMTerm Premium FI CarryDuration GSCIValue (GMAG) Momentum (GMAG)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Global Macro Fund C: continued
33
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
95.00
105.00
115.00
125.00
135.00
145.00
Global Macro Fund C (actual performance)Global Macro Fund C (static factor exposure)
Persistent loading on Momentum, Commodities and Duration
1 2 3 4 5 6 7 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Global Macro Fund C
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Credit Funds: Summary
Funds B, C, and D have statistically significant exposure to Value based Credit
Funds A and D generate substantial, statistically significant alpha
34
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Credit Fund A
35
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
Credit Fund A (actual performance)Credit Fund A (rolling factor replication)Credit Fund A (static factor exposure)
Alpha (annualized) Value (GMAG)Coefficient 8.01% 0.18 p-value 0.00 0.01 Regression R-squared 0.11
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.60
-0.50
-0.40
-0.30
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
Rolling Factor Exposure
Credit Spread Value (GMAG)Small Cap(GMAG) Credit Spread (BarCap)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Credit Fund A: continued
36
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
95.00
105.00
115.00
125.00
135.00
145.00
155.00
165.00
Credit Fund A (actual performance)Credit Fund A (static factor exposure)
All traditional factors do a poor job of explaining variation in fund performance
The only factor loads significantly is Global Value
Generates substantial, statistically significant alpha
1 2 3 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Credit Fund A
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Credit Fund B
37
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Credit Fund B (actual performance)Credit Fund B (rolling factor replication)Credit Fund B (static factor exposure)
Alpha (annualized) Momentum Equity Beta Credit SpreadCoefficient 2.91% 0.06 0.07 0.35 p-value 0.30 0.18 0.25 0.00 Regression R-squared 0.42
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
Rolling Factor Exposure
Value Momentum AccrualsTerm Premium FI Carry Equity BetaCredit Spread
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Credit Fund B: continued
38
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
95.00
105.00
115.00
125.00
135.00
145.00
Credit Fund B (actual performance)Credit Fund B (static factor exposure)
Statistically significant exposure to Credit Spread with a bias towards momentum
Substantial fund outperformance relative to static exposure post-crisis
1 2 3 0%
10%
20%
30%
40%
50%
60%
70%
80%Principal Component Analysis of Credit Fund B
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Credit Fund C
39
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Credit Fund C (actual performance)Credit Fund C (rolling factor replication)Credit Fund C (static factor exposure)
Alpha (annualized) Term Premium Credit Spread Value (GMAG)Coefficient -0.11% 0.12 0.47 0.27 p-value 0.96 0.27 0.00 0.00
Regression R-squared 0.66
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.80
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
1.20
Rolling Factor Exposure
Term Premium EM DebtCredit Spread Value (GMAG)Momentum (GMAG)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Credit Fund C: continued
40
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
Credit Fund C (actual performance)Credit Fund C (static factor exposure)
Credit Fund C is the most readily explainable credit fund by alternative beta; loads significantly on Value biased Credit Spread
Little evidence of alpha beyond these alternative beta terms
1 2 3 4 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Credit Fund C
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Credit Fund D
41
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
Credit Fund D (actual performance)Credit Fund D (rolling factor replication)Credit Fund D (static factor exposure)
Alpha (annualized) Credit Spread Value (GMAG)Coefficient 5.07% 0.12 0.18 p-value 0.00 0.00 0.00 Regression R-squared 0.24
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Rolling Factor Exposure
Credit Spread Value (GMAG)
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Credit Fund D: continued
42
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
95.00
105.00
115.00
125.00
135.00
145.00
Credit Fund D (actual performance)Credit Fund D (static factor exposure)
While loading significantly on Global Value and Credit Spread, a large portion of variation in fund returns remains unexplained
Generates substantial, statistically significant alpha
1 2 3 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Credit Fund D
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
43
Market Neutral and Multi-Strategy Funds: Summary
Similar to Global Macro funds, a difficult group in generals to replicate using alternative beta because of the possibility of factor timing within the design of each fund
Multi-strategy Fund B has the best overall possibility of replication within this group
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Market Neutral Fund A
44
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
Market Neutral Fund A (actual performance)Market Neutral Fund A (rolling factor replication)Market Neutral Fund A (static factor exposure)
Alpha (annualized) Value Accruals Merger Arb CB Arb FX Mom Term PremiumCoefficient 4.87% 0.11 0.19 0.38 0.25 0.16 0.21 p-value 0.03 0.13 0.02 0.05 0.00 0.18 0.06 Regression R-squared 0.24
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
Rolling Factor Exposure
Value Small cap AccrualsMerger Arb CB Arb FX MomTerm Premium Duration
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Market Neutral Fund A: continued
45
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
95.00
105.00
115.00
125.00
135.00
145.00
155.00
Market Neutral Fund A (actual performance)Market Neutral Fund A (static factor exposure)
1 2 3 4 5 6 7 8 0%
5%
10%
15%
20%
25%
30%
35%
40%Principal Component Analysis of Market Neutral Fund A
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Multi-Strategy Fund A
46
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
92.00
94.00
96.00
98.00
100.00
102.00
104.00
106.00
108.00
110.00
Multi-Strategy Fund A (actual performance)Multi-Strategy Fund A (rolling factor replication)Multi-Strategy Fund A (static factor exposure)
Alpha (annualized) Value Momentum CB Arb FX Mom FI Carry Credit Spread GSCICoefficient 7.33% 0.16 0.06 0.24 0.11 0.18 0.11 0.04 p-value 0.00 0.01 0.05 0.00 0.32 0.07 0.08 0.16 Regression R-squared 0.31
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.20-0.100.000.100.200.300.400.500.600.700.80
Rolling Factor Exposure
Value Momentum Small capAccruals Merger Arb CB ArbFX Carry FX Mom Cmdty MOMTerm Premium FI Carry Equity BetaDuration Credit Spread REITGSCI
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Multi-Strategy Fund A: continued
47
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
85.00
95.00
105.00
115.00
125.00
135.00
145.00
155.00
Multi-Strategy Fund A (actual performance)Multi-Strategy Fund A (static factor exposure)
1 2 3 4 5 6 7 8 9 10 0%
10%
20%
30%
40%
50%
60%
70%
80%Principal Component Analysis of Multi-Strategy Fund A
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Multi-Strategy Fund B
48
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
90.00
95.00
100.00
105.00
110.00
115.00
120.00
Multi-Strategy Fund B (actual performance)Multi-Strategy Fund B (rolling factor replication)Multi-Strategy Fund B (static factor exposure)
Alpha (annualized) Momentum CB Arb FX Carry FI Carry Credit Spread GSCICoefficient 1.58% 0.04 0.11 0.13 0.12 0.32 0.06 p-value 0.28 0.05 0.06 0.25 0.14 0.00 0.03 Regression R-squared 0.75
6/1/20
10
8/1/20
10
10/1/
2010
12/1/
2010
2/1/20
11
4/1/20
11
6/1/20
11
8/1/20
11
10/1/
2011
12/1/
2011
2/1/20
12
4/1/20
12
6/1/20
12
8/1/20
12
10/1/
2012
12/1/
2012
-0.40
-0.30
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
0.50
0.60
Rolling Factor Exposure
Value Momentum Merger ArbCB Arb FX Carry Cmdty Roll YieldTerm Premium FI Carry Equity BetaCredit Spread GSCI
STRICTLY PRIVATE/CONFIDENTIAL—FOR INSTITUTIONAL USE ONLY
Multi-Strategy Fund B: continued
49
12/1/
2007
4/1/20
08
8/1/20
08
12/1/
2008
4/1/20
09
8/1/20
09
12/1/
2009
4/1/20
10
8/1/20
10
12/1/
2010
4/1/20
11
8/1/20
11
12/1/
2011
4/1/20
12
8/1/20
12
12/1/
2012
80.00
85.00
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
Multi-Strategy Fund B (actual performance)Multi-Strategy Fund B (static factor exposure)
Best overall replication in the group; consistent exposures to Momentum, Credit Spread, and Commodities with high regression r-squared for the entire period
Rolling factor analysis indicates fairly consistent exposures
1 2 3 4 5 6 7 0%
10%
20%
30%
40%
50%
60%
70%Principal Component Analysis of Multi-Strategy Fund B
Per
cent
age
of V
aria
tion
Exp
lain
ed
Principal Component Number
