utah school and institutional trust funds board … · ammar dalal derivative operations analyst...
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UTAH SCHOOL AND INSTITUTIONAL TRUST FUNDS
BOARD PRESENTATION
FOR ONE-ON-ONE USE ONLY
Presented to: Utah SITFO Board
Presented by: Ryan Labs Asset Management
Presented on: March 26, 2019
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
PREAMBLE
2
Certain performance returns reflected in this presentation are based on simulated and
hypothetical performance results that do not reflect the actual performance of any client
account. The performance of the “Historical Model” is back tested, which means that it
reflects the retroactive application of the investment program to historical data for
periods during which the investment program did not exist. The performance of the
“Production Model” reflects the application of the investment program for the period
following its development.
Important disclosures regarding the simulated and hypothetical performance returns
contained herein, including the inherent limitations of simulated and hypothetical
returns, are provided at the end of this presentation. Please consider these important
disclosures when reviewing the contents of this presentation.
This material is intended for one-on-one presentation to qualified eligible persons only.
There can be no assurance that the program discussed herein will achieve profits or
avoid incurring substantial losses, or that the investment program will achieve its stated
goals.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
Providing a diverse range of insurance, wealth
and asset management solutions
$763BAssets under management
.
26Countries with
SLF offices
$24BMarket capitalization
Our strategy is
focused on four key
pillars of growthCanada U.S. Asia A leader in global asset management1 2 3 4
PART of the SUN LIFE FINANCIAL GLOBAL ORGANIZATION
3This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
SUN LIFE INVESTMENT MANAGEMENT
Solutions across traditional and alternative asset classes
Public fixed income
Global investment grade bonds – high yield bonds and
loans, structured products, municipals, derivatives
Private fixed income
Corporate Finance, Project Finance, Private Real Estate
Finance, Middle Market Finance, Private Securitization
Finance
Real estate
Commercial mortgages, real estate equity
$160BAsset management
business
800+Institutional client
base
4This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
STABILITY
Stability of a leading, global
financial services organization
with over $759 billion in AUM;
operating through a balanced
and diversified model focused
on asset management
INFRASTRUCTURE
Leverage key operational
infrastructure and investment
capabilities across the Sun Life
Investment Management
companies
ALIGNMENT OF INTERESTS
Benefit of seed capital for new
market ventures; potential
opportunities to co-invest
alongside Sun Life
BENEFIT OF PARTNERSHIP
5This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
A full disclosure presentation is an integral part of this report, and is attached in the appendix. Returns shown are total returns gross of fees.
Short/Intermediate
Core
Long
Assets Under Management (US$)*
$9.2
billion
Corporate Public
Union/Taft-Hartley Foundations/Endowments
Healthcare Insurance
Special Purpose
Client Accounts*
169
INTEGRATED ASSET MANAGEMENT
CONSISTENT RETURNS over market
cycles with high information ratios
Run over $2.65B billion in Treasury
securities including over $800 million in
STRIPS
Core strategy has OUTPERFORMED
Bloomberg Barclays US Aggregate Index
over the last consecutive 17 years
RYA N L A B S A S S E T M A N A G E M E N TF I R M O V E RV I E W
6This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
*Assets under management and number of client accounts are as of 3/8/2019.
A full disclosure presentation is an integral part of this report, and is attached in the appendix. Returns shown are total returns gross of fees. 7
SUN L IFE PROVIDES OVERLAY CAPABIL IT IES
48%30%
19%
2% 1%
Corporate Securitized Treasury
Agency Municipals Cash
Total AUM: $8.33B
54%
34%
10%
2%
Interest Rate Hedges Foreign Exchange Hedges
Equity Hedges Credit Hedges
Overlay positions
Total Notional: $48B*
42 total investment professionals
10 overlay professionals
*12/31/2018 RL AUM and 9/30/2018 Sun Life AUM with notional values in USD based on 9/30/2018 CAD/USD rate. Includes only portions of Sun Life Investment operations
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
RYAN LABS ASSET MANAGEMENT TEAMExecutive Committee
Richard Familetti, CFA, President & Chief Investment Officer (2009 | 1986)
Thomas Keresztes, Chief Operations Officer & Chief Compliance Officer (2015 | 1987)
Chris Adair, Senior Managing Director - Head of Sales, Client Service & Strategy (2005 | 1992)
(Ryan Labs Start | Industry Start)
Tail Hedging and Overlay Strategies
Brett Pacific, CFA, Senior Managing Director, Portfolio Manager (2004 | 1993)
Peng Zhou, PhD., FSA, CFA, Managing Director, Portfolio Manager (2003 | 2003)
John Bichajian, CFA, Director (2009 | 2003)
Rawan El-Khatib, Director (2008 | 2008)
Kyle Chang, CFA, Director (2014 | 2012)
Operations, Research, & Indexes
Thomas Keresztes, Chief Operations Officer & Chief Compliance Officer (2015 | 1987)
Terry Lombardo, Director (2000 | 2000)
Theresa Arata, Director (2012 | 1985)
Dhruv Trivedi, Director (2017 | 2004)
Thomas Watson, Director (2017 | 2012)
James Lizotte, CFA, Associate Director (2014 | 2014)
Alex Zambelli, Associate Director (2015 | 2015)
Jean Mimy, Analyst (1999 | 1988)
Leveraged Finance Group
Mark Pelletier, CFA, Senior Managing Director, Portfolio Manager (2018 | 1988)
Michael Cerullo, Managing Director, Portfolio Manager (2018 | 1988)
Christian Toro, CFA, CPA, Managing Director, Portfolio Manager (2018 | 1997)
Dana Dratch, CFA, Managing Director, Portfolio Manager (2018 | 1995)
Juan Estela, Managing Director, Portfolio Manager (2018 | 1999)
Shelly-Ann Glover, Director (2018 | 2000)
Client Service & Strategy
Chris Adair, Senior Managing Director - Head of Sales, Client Service & Strategy (2005 | 1992)
Bradley D. Jacob, Managing Director (2008 | 2003)
Mark Monroe, Managing Director (2012 | 1997)
John Linder, CFA, CPA, Managing Director (2018 | 1996)
Robert Shrekgast, Director (2018 | 1993)
Melissa Spadafora, Director (2016 | 2012)
Pawel Krasowski, Associate Director (2015 | 2015)
Joshua Hassell, Associate (2018 | 2018)
Mark Stefaniak, Analyst (2017 | 2017)
Vincent Spoleti, Analyst (2018 | 2018)
Asset Management
Richard Familetti, CFA, President & Chief Investment Officer (2009 | 1986)
Michael P. Donelan, CFA, Managing Director, Portfolio Manager (2003 | 1988)
Matthew Salzillo, Managing Director, Portfolio Manager (2004 | 2004)
Philip Mendonca, Managing Director, Portfolio Manager (2003 | 2003)
Daniel J. Lucey, CFA, Managing Director, Portfolio Manager (2009 | 2003)
Raghava Vudata, Director (2008 | 2008)
Annette Serrao, CFA, Director (2010 | 2010)
Shera Abella, Director (2017 | 2008)
Kenneth Szal, Director (2009 | 2009)
Marina Mestres, Analyst (2016 | 2016)
Alyssa Barchetta, Analyst (2018 | 2018)
8This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
M I D D L E O F F I C E B A C K O F F I C E
Brett Pacific, CFA
Derivatives and Quantitative
Strategies and LLC
Senior Managing Director
Derivative Trading
Glenn Barry, CFA, FRM
Head Derivative Trader,
Managing Director
Interest Rate Equity FX
Beth Lee
Derivative Trader
Senior Director
Andrew Poston, CFA, FRM
Derivative Trader
Director
Peng Zhou, PhD, FSA, CFA
Portfolio Manager,
Managing Director
John Bichajian, CFA
Portfolio Manager,
Senior Director
Rawan El-KhatibPortfolio Manager,
Director
Shekhar Shastri, CFA
Valuations Manager,
Managing Director
Martin Chmiel
Derivative Operations
Manager
Aleksandar Popic
Derivative Collateral
Manager
Derivative Valuation Derivative Operations Derivative Collateral
Duan Wang, PhD
Quant
Associate Director
Johan NacoQuant
Senior Analyst
Tihomir Lukic
Derivative Operations
Senior Associate
Chris Raposo
Derivative Operations
Senior Associate
Boris Korenak
Derivative Collateral
Analyst
Jas Dhamrat
Derivative Operations
Senior Associate
Ammar Dalal
Derivative Operations
Analyst
Deanna Pulley
Derivative Operations
Associate
Roslyn SkanesDerivative Operations and
Collateral Director
Matthew BoehnerDerivative Analyst
OVERLAY TEAM OVERVIEW
F R O N T O F F I C E
9This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
Synthetic Beta
Equity
Currency
Duration
O V E R L A Y
S O L U T I O N S
Return
Enhancement
Credit
Cash equalization
Protective equity
O V E R L A Y
S O L U T I O N S
Tail Risk
Equity
Interest rate
Defensive risk premia
O V E R L A Y
S O L U T I O N S
OVERLAY OVERVIEW
10This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
Active
dialogue with
top dealers in
each market
Execute on
large number
of derivative
exchanges
Connect via
leading
electronic
platforms
ROBUST PLATFORM
11This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
PORTFOLIOS ARE DOMINATED BY GROWTH RISK -
TREASURIES OFFSET THE WORST EQUITY SELLOFFS
12
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
ALL INSTITUTIONAL PORTFOLIOS ARE
GROWTH RISK DOMINATED
1. Equities typically represent the largest source of growth risk
2. For the typical portfolio weighting of 60/40 between equities and bonds
1. US equities have an annualized volatility of 15%, bonds have an annualized
volatility of 4%
2. Over time, 96% of risk (volatility) can be attributed to equity movements*
because equities are so much more volatile than the bond allocation
3. The determinant of portfolio movement is the equity allocation
40%
60%
Bonds Equity
Asset Allocation Risk Contribution
*Prepared for illustrative purposes only from portfoliovisualizer.com. Data since Jan 1987, rebalancing quarterly.Uses VTSMX (Vanguard US Stock Market ETF) and VBMFX (Vanguard Total Bond ETF) data as representative equity and bond returns.
4%
96%
Bonds Equity
13This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
0.9
1.0
1.1
1.2
1.3
1.4
Po
rtfo
lio V
alu
e
S&P 500
S&P 500 withDrawdowns Eliminated
0.8
0.9
1.0
1.1
1.2
1.3
1.4
Po
rtfo
lio V
alu
e
S&P 500
S&P 500 with Drawdowns Eliminated0.4
0.6
0.8
1.0
1.2
1.4
Po
rtfo
lio V
alu
e
S&P 500
S&P 500 with Drawdowns Eliminated
14
EQUITY DRAWDOWNS DAMAGE PORTFOLIOS
1. Equities are a significant portion of most portfolios
2. Large drawdowns do occur, interfering with portfolio objectives
3. Offsetting large drawdowns allows portfolios to compound at higher rates
3
Offsetting Large Equity Market Declines is Beneficial
(April 2007 – December 2018)
Dec 2007 – June 2009 Dec 2010 – June 2012 Dec 2015 – June 2017
6.30
2.17
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 15
SOLUTIONS TO ADDRESS THIS PROBLEM
1. Adding additional, sizable, offsetting risk exposures to the portfolio
2. In order to offset equity risk, such an allocation must be:
Liquid ✓
Scalable ✓
Impactful (volatile like equities) ✓
Transparent ✓
Cost Effective ✓
Positive Expected Return ✓
NEGATIVELY CORRELATED TO EQUITIES WHEN EQUITIES DRAW DOWN
✓
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 16
THIRD PARTY VALIDATION OF FLIGHT TO QUALITY
ATTRIBUTES OF TREASURIES
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
When Diversification Fails Sébastien Page, CFA, and Robert A. Panariello, CFA
Financial Analyst Journal (Vol. 74, No. 3), Third Quarter 2018, Page 19
During large stock market selloffs:
STOCKS PRICES
TREASURY PRICES
= Negative Correlation
LESS CONCERNED WITH CORRELATIONS WHEN STOCKS ARE DOING WELL
As Equity Selloffs Get Worse, Treasury Returns Become More Positive
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
FLIGHTS TO QUALITY, TRIGGERED BY EQUITY
SELLOFFS, ARE LIKELY TO RECUR PERIODICALLY
17
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 18
FLIGHT TO QUALITY / LIQUIDITY PREMIUM
(SHORT DURATION EVENT) STOCKS RATES
• In times of economic distress, investors tend to rebalance portfolios, selling risk assets and
buying more liquid/less risky assets (Treasuries rally)
• Premium increases during large risk asset sell-offs (typically short duration event lasting
several days) and price correlation becomes more negative as volatility increase
Israel, R., & Maloney, T. (2014). Understanding Style Premia. The Journal of Investing, 23(4).
Performance of US Treasuries is inverse to the change in Treasury Yield. Data since 1979. Source: Bloomberg.
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
0.50
0.60
-10.00% -8.00% -6.00% -4.00% -2.00% 0.00% 2.00% 4.00%
Co
rrel
atio
n
Equity Return
Correlation Between Equity Returns and Treasury Yield
Rolling 5-Day Correlation
Rolling 30-Day Correlation
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 19
FLIGHT TO QUALITY / LIQUIDITY PREMIUM RELATIONSHIP
Recent Evidence STOCKS RATES Relationship Intact
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
When Equites Selloff, Treasury Rates Decline => Treasuries Rally
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
0.80
1.00
-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5%
Intr
ad
ay C
orr
ela
tio
ns
Daily Equity Returns
All Days Sept 1, 2018 through March 8, 2019
Equity Treasury Correlation vs Equity Returns
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
TRACK RECORD OF $2.65B WITHIN TREASURIES
THROUGH ALL PORTFOLIOS
20This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
Cell
Sample Long Duration Portfolio (3/8/2019) Custom Liability Benchmark Difference
Weight
(%)MDur
MTD
Return
QTD
Return
YTD
Return
Cumm
Return
Weight
(%)MDur
MTD
Return
QTD
Return
YTD
Return
Cumm
Return
Weight
(%)MDur
MTD
Return
QTD
Return
YTD
Return
Cumm
Return
Cash 0.72 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.72 0.00 0.00 0.00 0.00 0.00
Treasury 33.78 0.47 2.02 0.79 0.79 5.39 30.07 0.55 2.03 0.51 0.51 4.77 3.71 -0.08 -0.01 0.29 0.29 0.63
Agency 1.41 0.02 0.82 3.99 3.99 2.97 0.00 0.00 0.00 0.00 0.00 0.00 1.41 0.02 0.82 3.99 3.99 2.97
Local Authority 0.70 0.07 1.46 3.08 3.08 3.08 0.00 0.00 0.00 0.00 0.00 0.00 0.70 0.07 1.46 3.08 3.08 3.08
Sovereign 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Supranational 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Industrial 25.26 0.02 0.66 3.38 3.38 3.68 42.90 0.03 0.65 2.69 2.69 3.51 -17.64 -0.01 0.02 0.69 0.69 0.16
Utility 11.34 0.21 0.89 2.60 2.60 2.81 12.15 0.13 0.87 2.25 2.25 2.95 -0.81 0.08 0.03 0.35 0.35 -0.14
Finance 16.75 0.04 0.43 3.25 3.25 3.95 14.89 0.04 0.51 2.92 2.92 3.36 1.87 0.00 -0.08 0.34 0.34 0.59
MBS Pass Thru 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Asset Backed 2.47 0.03 0.21 0.79 0.79 3.86 0.00 0.00 0.00 0.00 0.00 0.00 2.47 0.03 0.21 0.79 0.79 3.86
CMBS 6.35 0.06 0.68 2.18 2.18 5.76 0.00 0.00 0.00 0.00 0.00 0.00 6.35 0.06 0.68 2.18 2.18 5.76
Covered 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
CMO 1.21 0.08 0.62 1.24 1.24 2.62 0.00 0.00 0.00 0.00 0.00 0.00 1.21 0.08 0.62 1.24 1.24 2.62
Other 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL 100.00 0.20 1.10 2.24 2.24 4.38 100.00 0.20 1.06 2.02 2.02 3.84 0.00 0.00 0.03 0.22 0.22 0.54
Notes: Based on a Representative Account
% Weight = Percent of Total Portfolio Weight
Daily Return = Total Return For the Day
MTD Return = Total Return Since End Of Previous Month
QTD Return = Total Return Since End of Last Calendar Quarter
YTD Return = Total Return Since End Of Previous Year
Cumm Ret = Cumulative Total Return Since 3/8/2018
• Ryan Labs manages $2.65B in US
Treasury securities as of 3/8/2019
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
TRACK RECORD OF >$800MM WITHIN STRIPS
THROUGH ALL PORTFOLIOS
21
Cell
Sample Long Duration Portfolio
Structure by Industry (3/8/2019)
Weight
(%)
Market
Value
Coupon
(%)
YTW
(%)
MDur
(%)
Cash 0.73 1,723,686 - - -
Treasury 33.88 80,262,950 0.38 3.06 23.05
Agency 1.41 3,344,595 3.61 3.90 9.24
Local Authority 0.70 1,667,681 6.70 4.29 13.02
Sovereign - - - - -
Supranational - - - - -
Industrial 25.22 59,743,324 3.87 3.72 9.24
Utility 11.34 26,861,938 4.02 3.78 10.21
Finance 16.72 39,607,925 3.80 3.57 6.39
MBS Pass Thru - - - - -
Asset Backed 2.47 5,845,369 3.50 3.51 2.11
CMBS 6.34 15,020,355 3.46 4.46 8.14
Covered - - - - -
CMO 1.21 2,855,053 3.29 3.58 11.73
Other - - - - -
TOTAL 100.00 236,932,877 2.64 3.50 13.29
CUSIP Issuer Maturity Price YTW Market
Value
Weight
(%)
912833Y46 19YR US Coupon STRIP 5/15/2037 58.69 2.91 1,349,824 0.57
912833Z52 19YR US Coupon STRIP 8/15/2037 58.14 2.96 1,947,824 0.82
912833Z60 19YR US Coupon STRIP 2/15/2038 57.15 2.98 4,000,640 1.69
912834AT5 20YR US Coupon STRIP 8/15/2038 56.38 2.97 1,014,822 0.43
912834AU2 20YR US Coupon STRIP 2/15/2039 55.40 2.98 3,711,666 1.57
912834FB9 21YR US Coupon STRIP 2/15/2040 53.31 3.03 2,638,598 1.11
912834JB5 22YR US Coupon STRIP 8/15/2040 52.18 3.06 2,400,464 1.01
912834JP4 22YR US Coupon STRIP 2/15/2041 51.31 3.06 3,181,158 1.34
912834KV9 23YR US Coupon STRIP 11/15/2041 49.81 3.10 1,095,864 0.46
912834LB2 23YR US Coupon STRIP 2/15/2042 49.31 3.11 3,624,212 1.53
912834LX4 24YR US Coupon STRIP 11/15/2042 48.06 3.12 4,806,300 2.03
912834MZ8 25YR US Coupon STRIP 11/15/2043 46.47 3.13 2,602,264 1.10
912834NF1 25YR US Coupon STRIP 2/15/2044 46.06 3.13 2,302,950 0.97
912834PB8 26YR US Coupon STRIP 11/15/2044 45.05 3.13 2,004,770 0.85
912834PH5 26YR US Coupon STRIP 2/15/2045 44.73 3.13 1,051,179 0.44
912834KB3 27YR US Coupon STRIP 5/15/2045 44.45 3.12 10,224,190 4.32
912834PT9 27YR US Coupon STRIP 11/15/2045 43.71 3.12 4,808,210 2.03
912834PZ5 27YR US Coupon STRIP 2/15/2046 43.41 3.12 5,773,530 2.44
912834QH4 28YR US Coupon STRIP 5/15/2046 43.14 3.12 1,639,206 0.69
912834RB6 28YR US Coupon STRIP 2/15/2047 42.17 3.11 2,951,760 1.25
912834RR1 29YR US Coupon STRIP 8/15/2047 41.34 3.13 4,995,456 2.11
TOTAL 47.43 3.10 67,573,027 29.15
US STRIPS
within
representative
portfolio
• Across 169 portfolios and $9.2B in
AUM, Ryan Labs manages $800MM
in STRIPS as of 3/8/2019
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
The securities identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The reader
should not assume that an investment in the securities identified was or will be profitable.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
DEFENSIVE RISK PREMIUM DYNAMIC CAPTURE -
PROCESS OVERVIEW
22
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 23
DYNAMIC HEDGING PROCESS
STEP I
Risk signalSTEP II
Equity signalSTEP III
Treasury signalSTEP IV
Scaling ratio
Hedge off
yes yes yes
no no no
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
8 9 10 11 12 13 14 15 16 17 18 19 21 23 25 27 29
Retu
rn
Implied Equity Volatility (VIX)
Equity and Treasury Return vs Risk Sentiment Level
Avg. 3D Annualized SPX Return
Avg. 3D Annualized Treasury Return (Detrend)
Avg. 3D Annualized Treasury Return
RELATIONSHIP DRIVING THE RISK SIGNAL WE CHOSE:
FLIGHT TO QUALITY / LIQUIDITY PREMIUM VS VIX
As risk sentiment (VIX Index) increases above 16
• Equity return becomes more negative
• Treasury return becomes more positive
• Avoid hedging when market is generally optimistic
24
Source: Bloomberg. Data since 1/1/1990.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
• Potential active periods require elevated risk sentiment, trending higher
25
Source: Bloomberg. Presented for illustrative purposes only. Data since 1/1/2007.
STEP I - RISK SIGNAL TEST
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 26
DESIGN OF EQUITY AND TREASURY SIGNALS
STEPS II & III
Run Daily Univariate
Regressions
Select two indicators
with highest
confidence
• Capturing wide cross-section of market risk premia
• 26 Indicators
• Recent trailing data
• Select strongest two indicators
• Models responds to current market conditions
Run Daily
Multivariate
Regression
• Is the confidence threshold met?
• If yes, signal is on
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
DRP IS TRIGGERED WHEN ALL THREE SIGNALS ARE “ON”
27
Past performance is no guarantee of future results. Please see additional disclosures at the end of this presentation regarding model and back tested performance.
*The “DRP Production” period reflects the application of the DRP overlay trading program in a paper portfolio for the period following the program’s development and prior to Ryan Labs’ management of client assets in the program (January 1,
2016 to June 30, 2016). The “DRP Live” period reflects the period in which client assets were managed in the DRP overlay trading program (July 1, 2016 to present). Small modifications to the DRP overlay trading program model were
implemented taking effect July 1, 2018, and these small modifications have been incorporated in the “Hypothetical” period reflecting the application of the DRP overlay trading program over periods during which the DRP overlay trading program
did not exist (April 30, 2007 – December 31, 2015). THESE RESULTS ARE BASED ON SIMULATED OR HYPOTHETICAL PERFORMANCE RESULTS THAT HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE THE RESULTS SHOWN IN
AN ACTUAL PERFORMANCE RECORD, THESE RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, BECAUSE THESE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THESE RESULTS MAY HAVE UNDER-OR OVER-
COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED OR HYPOTHETICAL TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY
ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THESE BEING SHOWN.
STEP I
Risk signal
STEP IV
Scaling ratio
Hedge off
yes
no
STEP II
Equity signalyes
no
STEP III
Treasury signalyes
no
Indicators CategoryIndicator
Contribution2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Equity Volatility 5% 51% 21% 17% 26% 15% 17% 10% 45% 8% 8% 10%
High Yield Bonds 30% 4% 28% 18% 13% 16% 20% 23% 12% 22% 7% 33%
Emerging Market 5% 8% 24% 30% 12% 20% 6% 4% 6% 7% 23% 7%
Volatility Skewness 12% 15% 6% 19% 8% 11% 9% 7% 31% 3% 4% 20%
Volatility Term Structure 10% 2% 5% 2% 5% 12% 10% 4% 0% 2% 1% 0%
Cross Currency Basis 12% 4% 4% 3% 1% 9% 8% 37% 2% 19% 2% 12%
Commodity 16% 7% 3% 4% 12% 12% 7% 3% 1% 24% 48% 8%
Currency 10% 1% 4% 5% 22% 4% 23% 7% 2% 9% 0% 10%
Relative Value 1% 7% 5% 2% 2% 2% 1% 4% 0% 7% 7% 2%
# of days when Indicators over
threshold61 84 58 64 66 64 40 92 53 81 38 30
# of Days when DRP is Active 47 58 20 33 47 0 4 41 36 35 0 15
# of days of Gain/Loss 24/23 35/23 8/12 17/16 25/22 0/0 2/2 23/18 19/17 18/17 0/0 5/10
Yearly Performance (Hypothetical) 1.1% 62.8% -0.9% 5.1% 13.8% 0.0% 0.0% 1.4% 0.4% 7.4% 0.0% -4.0%
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 28
STEP IV – SCALING RATIO – BASED ON RISK
• Magnitude of potential sell-off determines scaling ratio
• Assess both level and trend of volatility
• Higher risk level increases scaling ratio
• Higher scaling ratio during extreme risk regimes
• Scaling ratio capped
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Normalized VIX
Leverage Ratio
Hedge Ratio Cap in "Extreme" Risk Period
Hedge Ratio Cap in "Elevated" Risk Period
RISK BASED
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 29
HISTORIC MODEL SIMULATION (HYPOTHETICAL)• From 4/2007 to 12/2018, hedge is on roughly 7% of the time
Hypothetical4/30/2007 – 6/30/2016
DRP Live7/1/2016 - Present
Return Since Apr 2007 Dec 2010
S&P 500 + DRP 14.12% 14.12%
S&P 500 6.86% 11.32%
DRP 6.36% 2.28%
DRP Vol 13.39% 5.96%
DRP
Production1/1/2016 –6/30/2016
Past performance is no guarantee of future results. Please see additional disclosures at the end of this presentation regarding model and backtested performance.
*The information presented assumes the DRP overlay trading program’s hypothetical, production model, and live performance record and an underlay of investments whose performance tracks the S&P 500 Index for the periods shown. It is for illustrative
purposes only.
The “DRP Production” period reflects the application of the DRP overlay trading program in a paper portfolio for the period following the program’s development and prior to Ryan Labs’ management of client assets in the program (January 1, 2016 to June 30,
2016). The “DRP Live” period reflects the period in which client assets were managed in the DRP overlay trading program (July 1, 2016 to present). Small modifications to the DRP overlay trading program model were implemented taking effect July 1, 2018, and
these small modifications have been incorporated in the “Hypothetical” period reflecting the application of the DRP overlay trading program over periods during which the DRP overlay trading program did not exist (April 30, 2007 – December 31, 2015).
THESE RESULTS ARE BASED ON SIMULATED OR HYPOTHETICAL PERFORMANCE RESULTS THAT HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE THE RESULTS SHOWN IN AN ACTUAL PERFORMANCE RECORD, THESE RESULTS DO NOT
REPRESENT ACTUAL TRADING. ALSO, BECAUSE THESE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THESE RESULTS MAY HAVE UNDER-OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS
LACK OF LIQUIDITY. SIMULATED OR HYPOTHETICAL TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY
ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THESE BEING SHOWN.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
6.32%
47.08%
15.11%8.97%
19.62%
5.38% 4.18% 3.85%7.33% 9.11%
2.08% 2.70%
-3.72%-10%
0%
10%
20%
30%
40%
50%
12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 06/16 12/16 12/17 12/18
Excess Return
1.07%
62.80%
-0.86%
5.09%
13.82%
0.00%0.03%
1.40%0.38%
7.61%
0.00% 0.00%
-3.93%-5.24%
15.72%
-15.97%
-3.87% -5.80% -5.38% -4.14% -2.45%-6.95%
-1.50% -2.08% -2.70% -0.21%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 06/16 12/16 12/17 12/18
Yearly Performance (April 2007 - December 2018)
DRP (Hypothetical)
CBOE S&P W/ 5% OTM PUTS - S&P Total Return
30
DRP VS. ALWAYS ON PUTS (HYPOTHETICAL)
CBOE PPUT - SPTR is a CBOE benchmark that tracks the S&P Total Return with constantly rolling 5% out of the money puts. The Index represents an always-on hedge for 5% downside movements in US equities. We have subtracted out the total return of the
S&P 500 to represent just the hedged portion of the Index. Past performance is no guarantee of future results. Please see additional disclosures at the end of this presentation regarding model and backtested performance.
*The “DRP Production” period reflects the application of the DRP overlay trading program in a paper portfolio for the period following the program’s development and prior to Ryan Labs’ management of client assets in the program (January 1, 2016 to June 30,
2016). The “DRP Live” period reflects the period in which client assets were managed in the DRP overlay trading program (July 1, 2016 to present). Small modifications to the DRP overlay trading program model were implemented taking effect July 1, 2018, and
these small modifications have been incorporated in the “Hypothetical” period reflecting the application of the DRP overlay trading program over periods during which the DRP overlay trading program did not exist (April 30, 2007 – December 31, 2015).
THESE RESULTS ARE BASED ON SIMULATED OR HYPOTHETICAL PERFORMANCE RESULTS THAT HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE THE RESULTS SHOWN IN AN ACTUAL PERFORMANCE RECORD, THESE RESULTS DO NOT
REPRESENT ACTUAL TRADING. ALSO, BECAUSE THESE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THESE RESULTS MAY HAVE UNDER-OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS
LACK OF LIQUIDITY. SIMULATED OR HYPOTHETICAL TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY
ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THESE BEING SHOWN.
DRP
Since
Apr
2007
Dec
2010
DRP 6.36% 2.28%
PPUT-SPTR -3.71% -3.92%
Excess 10.08% 6.20%
Hypothetical4/30/2007 – 12/31/2015
DRP Live7/1/2016 - PresentDRP
Production1/1/2016 –
6/30/2016
*
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
STRIPS UNDERLAY with
DEFENSIVE RISK PREMIA OVERLY
31
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 32
STRIPS WITH DEFENSIVE RISK PREMIA
Defensive
Risk PremiaSTRIPS
YTW(%): 3.06
Duration: 25.33
Substantial
Additional
Rate Exposure
1.25 x 19.63 = 24.53 Years Duration
1.50 x 19.63 = 29.44 Years DurationFutures Duration
Proposed
Scaling
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
As of 3/8/2019
Range of 0.00 to 1.50
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees.
12.5%
144.9%
-36.3%
15.8%
74.1%
3.3%
-20.5%
46.8%
-3.7%
30.7%
-16.9%
13.5%
-7.6%
-1.2%10.4%
54.5%
-35.7%
10.7%
56.2%
3.3%
-20.5%
44.9%
-4.0%
21.9%
-16.9%
13.5%
-4.2% -0.7%
-50%
-25%
0%
25%
50%
75%
100%
125%
150%
12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 06/16 12/16 12/17 12/18 03/19
Yearly Performance (April 30, 2007 - March 7, 2019)
Bloomberg Barclays 20 - 30 Year Equal Par STRIPS Index + Ryan Labs Defensive Risk Premia
Bloomberg Barclays 20 – 30 Year Equal Par STRIPS Index
33
STRIPS + DRP YEARLY PERFORMANCE COMPARISON
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
Past performance is no guarantee of future results. Please see additional disclosures at the end of this presentation regarding model and back tested performance. The information presented assumes the DRP
overlay trading program’s production model and live performance record and an underlay of investments whose performance tracks the Bloomberg Barclays 20 – 30 Year Equal Par STRIPS Index for the periods
shown. It is for illustrative purposes only. The “DRP Production” period reflects the application of the DRP overlay trading program in a paper portfolio for the period following the program’s development and prior
to Ryan Labs’ management of client assets in the program (January 1, 2016 to June 30, 2016). The “DRP Live” period reflects the period in which client assets were managed in the DRP overlay trading program
(July 1, 2016 to present). Small modifications to the DRP overlay trading program model were implemented taking effect July 1, 2018. THESE RESULTS ARE BASED ON SIMULATED OR HYPOTHETICAL
PERFORMANCE RESULTS THAT HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE THE RESULTS SHOWN IN AN ACTUAL PERFORMANCE RECORD, THESE RESULTS DO NOT REPRESENT
ACTUAL TRADING. ALSO, BECAUSE THESE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THESE RESULTS MAY HAVE UNDER-OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF
CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED OR HYPOTHETICAL TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED
WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THESE BEING SHOWN.
(Hypothetical)
2.12%
90.42%
-0.56%
5.17%
17.86%
0.00% 0.02% 1.82% 0.28%8.79%
0.00% 0.00%
-3.44% -0.53%-20%
0%
20%
40%
60%
80%
100%
12/07 12/08 12/09 12/10 12/11 12/12 12/13 12/14 12/15 06/16 12/16 12/17 12/18 03/19
Excess Return
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 34
DISCLOSURESPast performance is not a guarantee or a reliable indicator of future results. Swaps are a type of derivative; swaps are increasingly subject to central clearing and
exchange-trading. Swaps that are not centrally cleared and exchange-traded may be less liquid than exchange-traded instruments. Derivatives may involve
certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous.
Investing in derivatives involves leverage and could lose more than the amount invested. Currency rates may fluctuate significantly over short periods of time and
may reduce the returns of a portfolio.
The overlay strategies are only available to Eligible Contract Participants as defined in Commodity Exchange Act Section 1 (a) (18) in ECP’s conjunction with the
bond mandate described herein. This presentation only contains summary information regarding the overlay investment management approaches and is not a
complete description of the investment objectives, portfolio management and research that supports these approaches. There is no guarantee that these
investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term,
especially during periods of downturn in the market. No representation is being made that any account, product, or strategy will or is likely to achieve profits,
losses, or results similar to those shown. Hypothetical or simulated performance results have several inherent limitations. Unlike an actual performance record,
simulated results do not represent actual performance and are generally prepared with the benefit of hindsight. There are frequently sharp differences between
simulated performance results and the actual results subsequently achieved by any particular account, product, or strategy. In addition, since trades have not
actually been executed, simulated results cannot account for the impact of certain market risks such as lack of liquidity. There are numerous other factors related
to the markets in general or the implementation of any specific investment strategy, which cannot be fully accounted for in the preparation of simulated results
and all of which can adversely affect actual results.
Models Used - This presentation provide performance for a “Production Model” and a “Historical Model.” The performance of the “Historical Model” is back
tested, it reflects the application of the investment program over periods during which the investment program did not exist. The performance of the “Production
Model” reflects the application of the investment program for the period following its development. Neither the “Production Model” nor the “Historical Model”
reflects the performance of any client account. Small modifications to the DRP overlay trading program model were implemented taking effect July 1, 2018 (during
the live trading period), and these small modifications have been incorporated in the “Historical Model”.
The performance of the Historical Model and Production Model contains two components: (i) a underlay of investments whose performance tracks the S&P 500
and (ii) application of the Defensive Risk Premia (“DRP”) tactical hedging overlay. The tactical hedging positions will typically consist of treasury futures. The
size of the tactical hedge is continuously adjusted in response to Ryan Lab’s review of market risk indicators, which seek to determine whether volatility is
increasing risk exposure. If Ryan Labs determines that certain equities and treasures risk indicators identify a likely sell-off, it will increase hedge ratio,
potentially up to 150% of the assets of the underlay. There is no guarantee that Ryan Labs will accurately identify or respond to risk indicators.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 35
DISCLOSURESBacktested Returns - Hypothetical back tested returns have many inherent limitations. Unlike actual performance, hypothetical back tested returns do not
represent actual investment decisions for client accounts. Since investment decisions were not made, performance results may under- or over-compensate for
the effect, if any, of certain market factors, such as lack of liquidity and cash held as collateral for futures trading, and may not reflect the impact that certain
economic factors may have had on the decision-making process. Although Ryan Labs developed the hypothetical back tested performance herein according to
certain defined rules and standards, all back tested performance is developed with the benefit of hindsight. Other periods selected (if data had been available)
may have different results, including losses. There can be no assurance that Ryan Labs will achieve profits or avoid incurring substantial losses.
Ryan Labs cannot assure that the hypothetical back tested performance results will be similar to Ryan Labs’ management of the model or that the results shown
in the hypothetical back tested performance would be similar to what Ryan Labs’ performance would have been had it actually been managing the model in this
manner for the period presented. Ryan Labs believes that the back tested performance shown is reasonably representative of its expected management of the
model and is sufficiently relevant for consideration by potential clients.
Model Returns - The performance presented reflects model performance an investor may have obtained had it invested in the manner shown and does not
represent performance that any investor actually attained. The model performance presented is based upon the assumptions discussed above. Certain of the
assumptions have been made for modeling purposes and are unlikely to be realized. No representation or warranty is made as to the reasonableness of the
assumptions made or that all assumptions used in achieving the returns have been stated or fully considered. Model returns have many inherent limitations and
may not reflect the impact that material economic and market factors may have had on the decision-making process if client funds were actually managed in the
manner shown. Actual performance may differ substantially from the model performance presented. Changes in the assumptions may have a material impact on
the model returns presented. The period presented was primarily a period of rising returns. Other periods selected may have different results, including losses.
There can be no assurance that Ryan Labs will achieve profits or avoid incurring substantial losses.
Where indicated, returns are gross of advisory fees, net of transaction costs, and include the reinvestment of dividends. If the expenses were reflected, the
performance shown would be lower. Actual fees are described in Part 2A of Ryan Labs’ Form ADV and will vary depending on, among other things, the applicable
fee schedule and account size. For example, if $100,000 were invested and experienced a 10% annual return compounded monthly for 10 years, its ending value,
without giving effect to the deduction of advisory fees, would be $270,704 with annualized compounded return of 10.47%. If an advisory fee of 0.95% of the
average market value of the account were deducted monthly for the 10-year period, the annualized compounded return would be 9.43% and the ending dollar
value would be $246,355.
General discussions contained within this presentation regarding the market or market conditions represent the view of either the source cited or Ryan Labs.
Nothing contained herein is intended to predict the performance of any investment. There can be no assurance that actual outcomes will match the assumptions
or that actual returns will match any expected returns. The information contained herein is as of the date hereof, unless otherwise indicated, is subject to change,
and Ryan Labs assumes no obligation to update the information herein.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 36
DISCLOSURESThe information in this presentation may contain projections or other forward-looking statements regarding future events, targets or expectations regarding the
strategies described herein, and is only current as of the date indicated. There is no assurance that such events or targets will be achieved, and may be
significantly different from that shown here. The information in this presentation, including statements concerning financial market trends, is based on current
market conditions, which will fluctuate and may be superseded by subsequent market events or for other reason.
The indices referenced herein are broad-based securities market indices and used for illustrative purposes only. They have been selected as they are well known
and are easily recognizable. Broad-based securities indices are unmanaged and are not subject to fees and expenses typically associated with managed accounts
or investment funds. Investments cannot be made directly into an index. The performance of the indices represents unmanaged, passive buy-and-hold strategies,
investment characteristics and risk/return profiles that differ materially from managed accounts or investment funds, and in investment in a managed account or
investment fun is not comparable to an investment in such indices or in the securities that comprise the indices. Past performance is no guarantee of future
results. Investments of the managed account or investment fund may be illiquid, making, at times, fair market valuation impossible or impracticable. As a result,
valuation of the managed account or investment fund may be volatile, reducing the utility of comparison to any index whose underlying securities are priced
according to market value, such as the indices. Investors should be aware that the managed account or investment fund may incur losses both when major
indices are rising and when they are falling.
The S&P 500 Index (“S&P 500”) is comprised of a representative sample of 500 large-cap companies. The index is an unmanaged, float-weighted index with each
stock’s weight in the index in proportion to its float, as determined by Standard & Poors. The S&P 500 is one of the most widely used benchmarks of U.S. equity
performance.
The Barclays Capital Aggregate Bond Index is a broad base index which represents the performance of investment grade bonds being traded in United States.
This material contains opinions and such opinions are subject to change without notice. Information contained herein has been obtained from sources believed to
be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
Front office personnel are supervised by Ryan Labs; middle and back office personnel are supervised by Sun Life. Notional assets under management, where
shown, represent gross notional value of the overlay strategy managed by the indicated entity, and may significantly exceed the net exposure of the overlay
strategies. The indicated entity may not be responsible for securities portfolios associated with the overlay strategy.
The hypothetical examples shown are intended to illustrate the process and generic benefits of utilizing an overlay strategy and are not intended to represent the
returns of any actual Ryan Labs overlay strategy, or the hypothetical performance of any proposed Ryan Labs overlay strategy. The results are not reflective of
any portfolio because important factors such as risk constraints, trading costs, universe breadth, market capitalization, portfolio turnover, incremental market
impact, number of holdings, sector/country/industry weighting, and external analyst coverage which could materially influence an actual portfolio have not been
considered.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 37
DISCLOSURESThese Disclosures that are an integral part of the presentation, which is only intended for institutional investors and/or Qualified Eligible Persons.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS
DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON
THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISOR DISCLOSURE.
CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT
DOCUMENT.
The information contained herein employs proprietary projections of expected returns. The relative relationships and forecasts contained herein are based upon proprietary
research and are developed through analysis of historical data and capital markets theory. Any opinions and estimates offered constitute our judgment and are subject to
change without notice, as are statements of financial market trends, which are based on current or recent market conditions.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE
THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES
BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF BACKTESTED HYPOTHETICAL PERFORMANCE DERIVED FROM THE RETROACTIVE APPLICATION OF A MODEL IS THAT THEY ARE
GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL
TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR
TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING
RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT
ACTUAL TRADING RESULTS. RYAN LABS HAS LITTLE OR NO EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CUSTOMERS. BECAUSE THERE ARE
LITTLE OR NO ACTUAL TRADING RESULTS TO COMPARE TO THE HYPOTHETICAL RESULTS, CUSTOMERS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE
RELIANCE ON THESE HYPOTHETICAL PERFORMANCE RESULTS.
THESE RESULTS ARE BASED ON SIMULATED OR HYPOTHETICAL PERFORMANCE RESULTS THAT HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE THE RESULTS
SHOWN IN AN ACTUAL PERFORMANCE RECORD, THESE RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, BECAUSE THESE TRADES HAVE NOT ACTUALLY
BEEN EXECUTED, THESE RESULTS MAY HAVE UNDER-OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF
LIQUIDITY. SIMULATED OR HYPOTHETICAL TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF
HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THESE BEING SHOWN.
PERFORMANCE RESULTS ARE GROSS OF INVESTMENT MANAGEMENT FEES. THE DEDUCTION OF AN ADVISORY OR OTHER FEES, COMMISSIONS AND EXPENSES
REDUCES AN INVESTOR’S RETURN. ACTUAL ACCOUNT PERFORMANCE WILL VARY DEPENDING ON INDIVIDUAL PORTFOLIO SECURITY SELECTION AND THE
APPLICABLE FEE SCHEDULE.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
MARKET PARTICIPATION PRESENTS THE POTENTIAL FOR LOSS AS WELL AS PROFIT.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 38
DISCLOSURES1. Hedge Ratio
The DRP daily process, based on a volatility matrix, determines a daily Hedge Ratio that is based on a $1 portfolio value. When the Hedge Ratio
equals zero = 0, it means that no hedging position is required in Treasury futures. When the Hedge Ratio is greater than zero > 0, it means that a
hedge position of Treasury futures is required in the amount of holding Treasury future of value = $1 * hedge ratio. An example is shown as
below:
Beginning Portfolio Value = $200MM
Hedge ratio = 0.8
Hold Treasury Futures of Value = $200MM * 0.8 = $160MM
The hedge ratio varies every day. From May 2007 to December 2018, the minimum MIN Hedge Ratio was equal to 0.002, while the maximum
Hedge Ratio was 1.50, and the mean Hedge Ratio was 0.73. A hedge ratio greater than 1.0 implies more notional is being hedged than the
underlying portfolio value indicative of a more volatility environment.
2. Gearing
The use of derivative strategies allow investors to start mandates unfunded (only posting collateral however mark to market can generate daily
cash flow loses). On a standalone basis a derivative strategy has an expected return per unit of volatility and clients can choose their desired
level of volatility for the strategy. When ported onto an underlying asset, the same can be true to measure the derivative strategy relative to the
underlying asset in units of expected (historical) TE.
An example is shown below:
Beginning Portfolio Value = $200MM
Gearing = 50%
Hedge ratio = 1.25
Hold Treasury Future of Value = $200MM*1.25*50% = $125MM
Beginning Portfolio Value = $200MM
Expected TE: 1000
TE Target 750
Gearing = 75%
Hedge ratio = 1.75
Hold Treasury Future of Value = $200MM*1.75*75% = $262.5MM
Gearing is determined by client/consultant. It can be changed as requested.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations are gross of fees. 39
DISCLOSURES
3. Negative Semi-Variance
Negative Semi-Variance to S&P 500 is an average of the squared deviations of portfolio return to S&P 500 return when S&P 500 total return
is negative. Formula as below:
𝑁𝑒𝑔𝑎𝑡𝑖𝑣𝑒 𝑆𝑒𝑚𝑖𝑣𝑎𝑟𝑖𝑎𝑛𝑐𝑒 𝑡𝑜 𝑆&𝑃 500 =1
𝑛
1
𝑛
𝑅𝑃 − 𝑅𝑆𝑃∗ 2
𝑅𝑃 = 𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑈𝑛𝑑𝑒𝑟𝑙𝑦𝑖𝑛𝑔 𝐵𝑜𝑛𝑑𝑠 + 𝐷𝑅𝑃;𝑅𝑆𝑃∗ = 𝑇𝑜𝑡𝑎𝑙 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑓 𝑆&𝑃 500 𝑤ℎ𝑒𝑛 𝑡𝑜𝑡𝑎𝑙 𝑟𝑒𝑡𝑢𝑟𝑛 𝑖𝑠 𝑛𝑒𝑔𝑎𝑡𝑖𝑣𝑒
This presentation is intended for institutional investors and/or Qualified Eligible Persons. It includes important Disclosures that are an integral part of this presentation on the final pages of this Appendix. These materials have not been reviewed by or approved by the National Futures Association. All simulations and live returns are gross of fees.