World Alternative Investment Summit Canada 8th Annual WAISC Qualitative Hedge Fund DueDiligence

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World Alternative Investment Summit Canada8th
Annual WAISC Qualitative Hedge Fund
Due-Diligence

• Rene Levesque
• www.mountjoycapital.com

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Why Invest Into Hedge Funds?

• Alternative strategies are meant to derive
  alternative return profiles.
• Hedge Funds are meant to derive absolute return
  and protection of capital.
• De-correlation from broad equity draw-downs.

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WARNING !!!

• Not all hedge funds
• deploy hedge funds strategies.
• and for as long as you (or your consultant) fail
  to recognize this, you shall continue to
  subsidize and provide a living to those who will
  ultimately fail you when a real hedge fund
  strategy is needed the most.

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What is a HF Manager?

• Disintermediation from banks proprietary desk
• Hedge Fund Manager Analyst PM RM Trader
  Entrepreneur Business Manager

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What is a Hedge Fund Strategy?

• More trading-oriented than an investment
  strategy
• The market is a collective perception of reality.
  It will prove you right or wrong, not the truth
  !!
• Disciplined and dynamic calibration of risks

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Key Determinants (basic)

• Background
• Alignment
• Process
• Idea Generation
• Infrastructure
• Discipline
• Pulse of Risk Return Drivers
• Unique Features/Competitive Advantages
• Underlying Liquidity

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Key Determinants (specific)

• Catalyst Push
• Market Sentiment
• Core Opportunistic Trading
• Dynamic Exposure Calibration
• Implied Strategy Skew

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Red Flags PM Firm

• Other mandates and business ventures (Long-Only,
  Broker-Dealer)
• Its a secret
• PM is not invested
• Partner/Analyst turnover
• Capacity vs. AUM
• Fee Structure, Liquidity
• Side Pockets

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Red Flags Strategy

• Attribution of return and style drift
• Clipping coupons
• Selling volatility
• Mean Reversion
• Long-Term Trend Following
• Long-Only
• Static exposures
• We manage risk through deep due diligence
  research
• Liquidity, Liquidity, Liquidity

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Background Checks

• Network of contacts
• Legal, regulatory and employment there are
  experts in this field
• If only these investors had seen Bernards
  report I have at my office

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Advice On Due Diligence

• In looking for people to hire, you look for
  three qualities integrity, intelligence and
  energy. And if they dont have the first, the
  other two will kill you.
• Warren Buffett

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Contact

• Website for more info www.mountjoycapital.com
• info_at_mountjoycapital.com
• 001 613 883 6613