NEWS - 33

The large hedge funds die

Dec 02, 2014, By Anneliese Proissl

World's 461 Hede Fund had to give up alone until mid-year. The industry rubs up between fluctuation-poor markets, offer little chance of price gains, low interest rates and failed bets on macroeconomic development. Two particularly bloody years behind the industry.

Already the first half of the year was a disaster for hedge funds. Fund research 461 Hede Fund had to give up according to HFR hedge US consulting company alone until mid-year. Already in the previous year, the air went out 904 Fund due to persistent lack of success. Only 2009 as 1.023 from the financial crisis have been swept away, it was worse.

The latest victim in the futile struggle of returns: Brevan Howard Asset Management. The Fund managed by Stephane Nicolas had $630 million available to multiply the money of the investors. Only the gains remained, out despite some risky investment strategies. So the investors in the Fund have lost journals of Wall Street more than four percent in the past two years, according to data. Before the Fund pulled the ripcord, the yield has fallen by ten percent, even in September. The company's two funds have closed this year. One of the most famous cases in the German-speaking countries, in which a hedge fund was closed, was the DWS, which already 2010 has retreated from the hedge fund business.

Macroeconomic policies brought to many Fund case

Many hedge funds, which have speculated on macroeconomic trends and this year an average came to less than a percent yield, have given up. As one of the main reasons they called most, that it is difficult in an environment with low interest rates and little price volatility to earn money.

Minor restrictions, high risk

Many of the funds that were not in the position to offer positive returns, investors pursuing a global macro strategy, include also speculation on interest rates according to Bloomberg. Global macro Fund set up the fewest restrictions. You want to benefit economically unjustified price differences around the world. Basically you worldwide for all markets are open. However, many funds focus on foreign exchange and interest rate markets. The most famous representatives of this Guild: George Soros and his quantum Fund. He had thus specialized in currency speculation and plunged into severe turbulence so all Governments such as those England, who was thus forced to devalue the pound strong. Soros earned at that time roughly a billion dollars with the bet on the falling pound.

45 billion dollars are bet on a rising dollar currently

In the recent past have speculated this global macro Fund, for example, on a depreciation of the euro. But for two years the currency appreciates continuously and vigorously. But the hedge fund managers do not give up. The prospect of a devaluation seem finally reach. In the first week in November, have become the new bullish trend bets on the dollar further and reached a record high of $45.7 billion. That emerges from current data of the CFTC's futures supervision. The euro is sold, however, solid. 28 billion dollars will be used on short positions. This corresponds to around 62 percent of betting dollars. The market was so pessimistic since August 2012 no longer. A more popular speculation at the beginning of the Greece crisis: The bet on the sovereign default. The problem: You strengthen a trend, through their considerable financial strength which can have a negative effect on the economic situation of a country.

Many Austro hedge funds in the minus

Many funds for the little guy, which are available in this country and pursue alternative hedge fund strategies, are affected. So many in this country popular hedge funds of funds on an annual basis is deep red. The Espa alternative global markets of the erste Sparinvest lost this year already 6.6 per cent, the strategic commodity Fund of Spängler Bank recorded a decline of 6.5 percent. But there are also hedge fund managers that their ship successfully through the storm manövieren. The Salus Alpha directional brand of Valartis Bank has this year 16.8 percent, in the previous year were 15.4 percent. The Fund seeks tendencies on the global markets profitably capitalize (interest rates, currencies, bonds, commodities and/or stocks).

News @ format.at

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NEWS - 32

Interview: Oliver Prock – Salus Alpha

Nov 20, 2014,

Mr. Oliver Prock,
Founder, CEO & CIO of Salus Alpha

Stockholm (HedgeNordic) – Founded in 2001, Swiss based Salus Alpha was an early adopter in terms of offering hedge funds in a UCITS compliant format. Thanks to their UCITS wrappers, Salus was brought into the Swedish premium pension system PPM in 2009 as one of only a very few hedge fund companies. The company´s flagship strategy, Salus Alpha Directional Markets (DMX), is a Managed Futures strategy that has been trading live since 2003 with highly competitive performance numbers for its niche. HedgeNordic took the opportunity to let Oliver Prock, the founder of Salus Alpha explain the strategy in more detail. And here is what he had to say:

HedgeNordic: What is the current AuM of the strategy, how much is in the fund/managed accounts? What is the split between institutional and retail investments?

Oliver Prock: We currently have a strategy AUM of $250million of which around $50million is in the UCITS fund. The balance is split between single managed accounts and investors who have come in via the DB Select platform. We are pretty evenly split between institutional and retail investors although we are proud of the infrastructure that we have in place that has been found more than satisfactory by the most sophisticated institutional investors. In addition, our regulated UCITS fund continues to pave the way in the face of ever tightening regulation in the CTA space.

HedgeNordic: What fees are charged on the fund level? (If differences in fees charged for different share classes kindly mention these)

Oliver Prock: Our fee structure is very simple. For single managed account investors and investors via DB Select they are 1.25/20. Fees for investors into the UCITS fund are 2.25%.

The DMX strategy is described as “adaptive” going from trend to countertrend and short-term to more longer term depending on your forecasting. In what periods do you expect the strategy to over/underperform a more traditional trend following strategy?

Being “adaptive” means that we have demonstrated over our 11 year track record that we outperform a traditional trend follower in almost every market environment. 2008 was a great year for most traditional trend followers, as it was for us and we returned 63% net to our investors. In 2009 when most trend followers gave back a large portion of their returns earned in 2008, we ended the year again in positive territory, thereby demonstrating how we successfully protect capital during periods that are otherwise unfavourable to traditional trend followers. This we would say would be an important differentiator between how we behave and how most other CTAs behave. A traditional trend follower looks for trends and it is then that it makes it’s returns. When there are no trends it will often lose money, hoping to make up these losses when trends return. Directional Markets on the other hand also enjoys trending markets but when the market is trading sideways or is “whipsawing” our strategy is behaving in a contrarian fashion, reducing exposure, and we continue to generate returns.

HedgeNordic: How do you exlpain your outperformance in 2004?

Oliver Prock: I guess the answer is in the adaptive style being able to trend follow and being able to be contrarian

HedgeNordic: You have been trading the strategy since 2003, has the system undergone any significant changes over time and if so what are these changes?

Oliver Prock: Since 2003 the strategy itself has remained largely unchanged. We have added some markets but the strategy has stayed true to its design, being able to adapt to different market environments. Before 2011, we would have said that there was no market environment that we could not handle. Since 2011, as has been widely discussed in the CTA world, global markets have structurally changed with the most important difference being the politically motivated manipulated environment that has caused problems for many systematic managers. We have dealt with these changes proactively; not by changing our model but by changing the way we execute our trades in terms of optimizing time to place an order to market. This “enhancement”, that we implemented in 2012 has had a profound impact as it has enabled the model to effectively deal with the new manipulated market environment. Our adaptive strategy is now, once again able to apply itself “full throttle” to the new environment. Being “adaptive”, we are not locked into pre-determined time frames as many CTAs are. We use no technical analysis in our trading. We are a statistical, price-forecasting model that alters its style of trading according to the market conditions that it finds itself in.

HedgeNordic: The performance of CTAs has been “flatish” ever since the record year in 2008. This year however CTAs are once again in the spotlight with many strategies outperforming the hedge fund industry as well as global equities. What do you see as the explanation to the long period of non-performance and the sudden pick up?

Oliver Prock: The simple explanation for the “flattish” period and the recent pick-up in performance of many CTAs is the recent reduction in outside influences in the markets. QE is coming to an end. Politicians are less involved in the markets and frankly, trends are being allowed to run their course.

HedgeNordic: What do you see as the unique characteristics with the DMX?

Oliver Prock: Without wanting to repeat what I said earlier, what makes us unique is that we broke away from the approach of using technical analysis more than a decade ago. Our stratgey is based on probabilities and uses statistics to forecast future prices. The accuracy of those forecasts help determine our level of conviction to each of the 70-100 managed futures markets that we trade. The net result of this process is that we cannot be described only as a long-term or short-term trend follower or as contrarian. What makes us unique is that we are all of these but only when it is appropriate to be so. We adapt our trading style depending on the environment that we find in each market that we trade. Our portfolio is built on a bottom-up basis so at any one time part of the portfolio could be trending and part could be contrarian. We know of no other manager that can do this, and we believe that our risk-adjusted returns are as a result superior to other managers. Not only this, but our correlation to other managers tends to be very low, due to the very different, yet proven way that we trade.

HedgeNordic: What is currently the strength of your forecasting signals, what kind of market environment is the models telling you lies ahead?

Oliver Prock: We do not look further out than tomorrow’s prices, but the strategy will quickly react to whatever environment it encounters. It has done so now for eleven years and we see every reason for it to continue to do so. This year so far, for example, we coped brilliantly with what was widely considered a tricky market environment in the first six months. We consistently put in good returns whilst others were finding it tough. We are now +18% to end of October and are confident that the pattern will continue.

HedgeNordic: Looking at the margin exposure, almost half of the risk is within equities, is that by design or a reflection of current trends (ie is the graph  a snapshot or a longer term average?)

Oliver Prock: Let me correct you here, please. Our portfolio is always very diversified and will within certain risk management constraints, go to where it sees, on a “probability” basis, the most likelihood of being able to predict the future price of that market. Our presentation contains a snapshot of a portfolio of Sector Margins divided by total margin. Here is an example: You have three sectors A,B,C with 10% total margin and 3.33% margin each. So your cake will show 33% Sector A, B and C. Now you close Sector C which is actually a risk reduction and now there is only 6.67% total margin with 3.33% margin in Sector A and B. Your cake will now show 50% Sector A and B looking like more Exposure to Sector A and Sector B but actually it means you have less total risk in the portfolio.

In reality, the portfolio is very active and can alter dramatically over a short timeframe but generally will include a broad number of sectors, without special emphasis on any one. If equities are strongly trending then we may put a higher allocation to them but this is certainly not the current case. An integral part of our inbuilt risk management is that returns are smoothed out by diversification. Unlike some other managers we have not put special emphasis on eg cash equities but our track record reflects the same model with the same rules governing diversification since inception.

HedgeNordic: Looking at past events, how quick is the system to close down position/sector/portfolio? When was the portfolio last closed out?

Oliver Prock: We have a control within the strategy that will, on certain conditions, immediately close out positions, then sectors and lastly the entire portfolio. Fukashima was a good example of this control being put to work. 9/11 was another example. We have never had to liquidate the entire portfolio in one go.

HedgeNordic: Finally, do you have any market wisdom to share with us?

Oliver Prock: Investors believe that CTA’s only made money being long in bonds in the past twenty years. I do not think it is so simple but next year could be an interesting year to test that statement. We think that even though there will be no pressure on bonds prices since the FED will instead of selling off the bonds from the balance sheet prefer to let them mature, there will be some technical opportunity next year and we will very likely see falling bonds prices. In any case it looks like we are probably positioned more on contrarian side and not so much on trend side in 2015. I am looking forward to talking to you about this in a year.

News @ hedgenordic.com

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NEWS - 31

Capital weighted benchmarks might have a negative effect on managed futures, says Salus Alpha's Ritesh Jain

By Ritesh Jain

June 5th, 2014

Ritesh Jain, analyst at Salus Alpha Capital, has looked at views on bench-marking as they affect managed futures funds.

Equity markets are today scaling new highs after a six year bull run, and many are asking how long it will continue. Commodity markets are struggling with high volatility and most trend-following managed futures funds are presently underperforming equities. Given the current risk-on/risk-off environment, systematic, trend-following strategies are struggling to perform. But does this mean there are no trends in the current low interest rate environment that they could be profiting from?

Paul Tudor Jones, a billionaire veteran of the industry, recently called the trading environment "as difficult as I've ever seen in my career." Tudor Investment Corp's main fund is down about 4% this year.

Most trend-following hedge funds have lost money, possibly because they were not able to be on the right side of the trend in a rallying market with a strong run-up in several commodities this year.

Sol Waksman, founder and president of BarclayHedge, says "trendless zigzagging equity markets, volatile commodity markets, and a difficult bond market" have contributed to poor performance this year.

The Newedge Trend index is down -2% this year as of end of May. The Newedge Trend Index is comprised of the largest 10 trend following managers based on assets under management.

So finding a managed futures strategy that produces robust risk-adjusted returns in this present environment is proving to be relatively challenging. Managed futures are not necessarily on a down-trend but investor expectations seem to be misguided. The principle role of managed futures funds, one could argue, is diversification rather than equity outperformance. But should they not also be capable of generating positive return in the current environment?

There is much data showing that the addition of CTAs to a diversified portfolio improves diversification as they tend to be uncorrelated to wider markets. Indeed, a portfolio without managed futures could be viewed like driving a car without insurance. But as in any type of insurance there are some you should buy and others you should not. So to extend the analogy; investing in managed futures funds with negative returns is like buying the wrong insurance policy.

Frank Seidel of Amandea Asset Management AG says that "virtually all systematic trend followers are stuck in a corrective phase, although the lows should be overcome in the meantime."

But these views look highly biased given that the data shows that the biggest guys are the ones that have been mostly down. Academic findings show that excessive assets under management have a negative influence on performance.

However it seems that investors are still pilling money into a handful of managers. And it appears that these managers are failing to deliver returns even when trends are predominantly noticeable. This is a problem of benchmarking. Investors are afraid to deviate from the benchmark and take decisions. But the opportunity is there.

Oliver Prock CIO of Salus Alpha says: Being up around 17% YTD, for us the year is excellent. We do not share the widespread complaints about the recent environment since there were huge positive trends in commodities and bonds while equities were stable so far this year. But maybe we are doing simply better than others since our model is adaptive and can switch between long term and short term and trend following and contrarian.

Capital weighted benchmarks or benchmark indices that equal weight the biggest managed futures funds in the industry seem to be a victim of their own success. The biggest managed futures models are deteriorating now due to the mere fact that they need to allocate huge capital. Smaller funds that tried to mimic the successful models of the big funds are also affected.

The investor challenge is obvious, but the solution may too be obvious: Picking smaller proven managed futures funds with proven ability to perform in all market environments might reward investors handsomely who deviate from the benchmark.

News @ InvestmentEurope.net

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NEWS - 30

Salus Alpha managed futures strat surges to 17% YTD

By Matt Smith

June 2nd, 2014

Salus Alpha has defied the struggles of the trend-following sector to return nearly 17% in its managed futures strategy over the first five months of the year, latest returns show.

The Salus Alpha Directional Markets strategy, which manages roughly $240m, hit a third consecutive month of gains in May, up 2.54%, to bring its YTD advance to 16.8%.

It comes as average YTD returns for the largest CTA managers climb into the black for the first time this year, according to Newedge’s benchmark index. However the largest trend-followers remain, on average, in the red.

Liechtenstein based Salus Alpha Capital, a pioneer in developing Ucits hedge funds, believes that while the principle role of managed futures strategies is diversification rather than equity outperformance, they should be capable of generating positive return in the current environment.

Low interest rates, the risk on/risk off environment, trendless zigzagging equity markets, volatile commodities and a difficult bond market, have been variously cited as reasons for lacklustre managed futures returns this year.

CIO Oliver Prock said: “I cannot share in widespread complaints about the recent environment since trends that you can identify and profit from are clearly there.

“Our approach is very different to most CTA’s and is designed not only to provide huge insurance payoffs in times of stress but also enables us to make positive returns in market environments that seem to be tough for our peers.

“Our ability to generate returns in seemingly tough market conditions is like taking out car insurance but having your premium more than just repaid when you don’t make a claim.”

Salus’ Directional Markets Strategy is fully systematic and adaptive to market environments, switching between trend-following and contrarian approaches and short and long term time frames across 100 futures markets worldwide.

The strategy is offered on Deutsche Bank’s dbSelect platform or as an Ucits fund gaining exposure to eligible components of the Vienna Stock Exchange listed DMX – Directional Markets Index.

News @ HFM Week
News @ CTA Intelligence

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NEWS - 29

Salus Alpha Diversified CTA "Directional Markets" continues to outperform the market. Performance is Ranked #1 in 2014 ytd by db Select Managed Account Platform.

(Vienna / Mauren, 2014-04-15) The Salus Alpha diversified CTA strategy "Directional Markets" (DMXUSD) has delivered an outstanding start to 2014 in terms of performance, according to the db select Manager Performance Flash Report – March 2014, produced by leading Deutsche Bank independent Managed Investment Platform db Select. The strategy delivered +4.12% in March 2014 which led to the result of being Ranked 1st YTD 2014 and Ranked 3rd Trailing 12 Month return of established managers on DB Select Platform and therefore yet again outperforming the world's biggest CTA managers. The significantly below average trailing 12 Month Volatility of 11.47% provides clear evidence that Directional Markets' risk management is dealing with the current environment and is producing very strong risk-adjusted as well as absolute returns to investors. Regarding current market conditions we expect the strong performance to continue since at the time of writing YTD performance reached already 12% by Mid April. We remain highly uncorrelated to other CTAs, which means a an improvement in returns and risk ratios for e.g multi manager portfolio. Mr. Prock, CEO and CIO of Salus Alpha Capital said:   "Investors have asked whether we have changed anything but what we have done is think about when we run our model and when we execute our trades. We have not changed the model at all. The model has consistently performed every year since inception in 2003. Effectively, we have merely put on the traction control so that we can apply the power of our engine to the track" CTA & Global Macro Manager Name 2014 YTD Return Trailing 12 Month Return Trailing 12 Month Sharpe Ratio Salus Alpha Directional Markets Strategy (DMXUSD) 7.30% 5.46% 0.48 NuWave Combined Futures Portfolio 2x -2.69% -4.47% -0.43 Winton -0.40% 4.74% 0.55 Brevan Howard Systematic Trading Program * -6.32% -5.63% -0.61 Aspect Diversified Programme -5.02% -8.64% -0.74 Lynx -5.02% 1.37% 0.08 Table 1 – Performance comparison (dbSelect Manager Performance Flash Report - March 2014) About Salus Alpha Salus Alpha Capital is a sophisticated Investment Manager and has established itself as a top expert in Alpha and Smart Beta Asset Management over the past decade. Our extensive Know-How in the space is characteristic of our company and our employees. The client base of Salus Alpha consists of institutional clients in Europe, Asia and in the USA. Salus Alpha operates from a network of global offices including Switzerland, Liechtenstein, Austria, the Netherlands, Singapore, India, and Hong Kong. We offer tailored solutions for clients and their financial needs, such as white label funds, managed accounts and structured products. For more information on Salus Alpha Capital, please visit http://sac.salusalpha.com  For inquiries please contact either Andrea Moritz or speak to your individual contact within the firm Andrea Moritz Public.relations@salusalpha.com +43 1 9572587 43 Link 1

NEWS - 28

Salus Alpha Special Situation Fund delivers strong returns

Salus Alpha RN Special Situation fund had delivered a good start to 2014 in terms of performance, according to the EXANE Report titled “Absolute Return UCITS Fund Performances – February 2014”, produced by Exane Derivatives Europe’s leading convertible research provider.

The Salus Alpha RN Special Situations fund delivered positive returns during the month of January, (Ranked 2nd out of 19 listed in the Exane Report under Event Driven UCITS) it was up by +1.90% and outperformed major peers by a positive margin of 1.35% on average during the month. The fund also enjoyed positive performance in 2013 contrary to most UCITS. Our fund was able to successfully withstand the major corrections in the equity markets taking advantage of volatility resulted from weak fundamentals across the globe. Market sentiment weakened further towards the end of the month, as the Federal Reserve announced another round of tapering which raised concerns regarding the health of the global recovery.

Mr. Prock, CEO and CIO of Salus Alpha Capital said:

“Our fund seem to repeat the January stint in February and in the coming months because our approach is unique and able to generate positive returns in all environments, since it combines an opportunistic core portfolio of selected, fundamentally attractively valued top companies with positions in short / medium - termed special situations and also the fund targets to achieve an absolute return independent of the development of the overall equity market. Therefore we are not dependant on trend as a sole source of alpha”.

About Salus Alpha

Salus Alpha Capital is a sophisticated Investment Manager and has established itself as a top expert in Alpha and Smart Beta Asset Management over the past decade. Our extensive Know-How in the space is characteristic of our company and our employees. The client base of Salus Alpha consists of institutional clients in Europe, Asia and in the USA. Salus Alpha operates from a network of global offices including Switzerland, Liechtenstein, Austria, the Netherlands, Singapore, India, and Hong Kong. We offer tailored solutions for clients and their financial needs, such as white label funds, managed accounts and structured products. For more information on Salus Alpha Capital, please visit http://sac.salusalpha.com/

For inquiries please contact

Andrea Moritz

Public.relations@salusalpha.com

+43 1 9572587 43

Appendix –

Rank	Event Driven UCITS	YTD Performance
1	MLIS - York Event Driven Ucits Fund	4.00%
2	Salus Alpha RN Special Situations	1.90%
3	MS PSAM Global Event UCITS Fund	1.80%
4	Dexia Risk Arbitrage	1.10%
5	Syquant Helium Performance	1.10%
6	Syquant Helium Opportunites	0.70%
7	CS Tremont Hedge Fund Risk Arbitrage	0.50%
8	Laffitte Risk Arbitrage	0.50%
9	Cigogne UCITS M&A Arbitrage	0.40%
10	Dexia Money + Risk Arbitrage	0.40%
11	ADI Risk Arbitrage Absolute Return	0.30%
12	CS Tremont Hedge Fund Event Driven	0.30%
13	Lutetia Patrimoine fund	0.30%
14	ADI Risk Arbitrages	0.10%
15	JP Morgan Global Merger Arbitrage Fund	0.10%
16	Pinebridge Merger Arbitrage Fund	0.00%
17	Westchester Merger Arbitrage	-0.30%
18	The Castlerigg Merger Arbitrage UCITS Fund	-0.50%
19	York Lion Merger Arbitrage Liquidity Fund UI	-0.90%

Table 1 – Performance comparison (Exane Derivatives - Absolute Return UCITS Fund Performances – February 2014)

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