Security In Uncertain Times

Transcription

1 Security In Uncertain Times Cane Capital Management 8440 Jefferson Hwy, Suite 402 Baton Rouge, LA T: (225)

2 TABLE OF CONTENTS Investment Objectives History of Cane Capital The Cane Advantage Active Risk Budgeting Strategy Summary Rules-Based Investments Portfolio Construction Directional Futures Relative Value Arbitrage Global Asset Allocation Quantitative Value Drawdown and Recovery Institutional Support About Cane Capital Strategic Advisory Board Disclosures There is no guarantee any investment strategy will achieve its objectives, generate profits or avoid losses. Cane Capital Management 8440 Jefferson Hwy, Suite 402 Baton Rouge, LA T: (225)

3 INVESTMENT OBJECTIVES Security In Uncertain Times Cane Capital Management was founded in 2007 with two primary objectives: capital preservation and capital appreciation in both rising and falling markets. INVESTMENT STRATEGIES economic analysis + quantitative market dynamics + implemented through directional macro exposures PROPRIETARY MODELS in-depth quantitative research + rigorous ongoing testing + performance in multiple markets + adapt to both long and short opportunities This approach makes Cane Capital a leader in building investment strategies to increase potential return, protect investor capital, and minimize risk in volatile markets. 1

4 A HISTORY OF PERFORMANCE Cane Capital Management and Cane Global Master Fund Launched 2007 Discretionary Fixed Income Trader 1999 First Systematic Futures Model Implemented 2001 Long Term Futures Model Implemented 2003 Equity Value Model, Momentum Model and FX Relative Value Model Implemented 2005 FOMC Policy and Global Allocation Models Added 2009 CDMIX Developed 2013 Bollinger Family Office Partners with CCM Discretionary Fixed Income and Currency Trader 2004 Equity Factor Modeling Developed 2010 RRM Partners with CCM 2014 Cane Global Master Fund Converted to a 40 Act Mutual Fund, CDMIX 2002 Quantitative Trading Models Developed 2006 Arbitrage Model Developed 2008 Equity and Arbitrage Models Enhanced 2012 ETF or Mutual Fund Offering Explored 2016 Additional Volatility Trading Strategies Developed A 9 Year Track Record 2

5 THE CANE ADVANTAGE The Building Block of Wealth Preservation Our proprietary research helps drive the decisions you make. Competitive Opportunities Long and short positions Non-correlated strategies Diversified across stocks, bonds, currencies and commodities Seeks positive performance in market volatility Objective to mitigate downside risk Multiple alpha-generating models nucleus noun nu cle us 1. The central and most important part, forming the basis for its activity and growth. 3

6 ACTIVE RISK BUDGETING Safeguard Your Future Strategies Non-correlated, tactical strategies with a fraction of the market volatility. Implemented across multiple, non-correlated asset classes. Parameters built into each model during R&D phase. Managing losses and portfolio drawdown is essential to compounding returns. Portfolio is systematically rebalanced. Each asset class analyzed for position and sector concentration. Futures monitored for risk at each level portfolio, sector, individual. Stop-losses engaged for each futures position. Profit and volatility targets used daily in the futures book. Position sizes reduced at various intervals of volatility and profit. Because Risk Is Unexpected 4

7 STRATEGY SUMMARY Cane Seeks to Provide: Daily liquidity 1940 Act regulation 1099 tax reporting LEFT TAIL MEAN + MEAN RIGHT TAIL + CANE ALTERNATIVE STRATEGIES FUND CANE ALTERNATIVE STRATEGIES FUND FOMC POLICY GLOBAL ASSET ALLOCATION DIRECTIONAL FUTURES QUANTITATIVE VALUE FX CARRY EQUITY VOLATILITY STRATEGY VOLATILITY LEFT TAIL RISK RISK BALANCE There is no guarantee the Fund will achieve its investment objective. 5

8 RULES-BASED INVESTMENTS Multiple Models Independent Strategies Quantitative Value Fundamental, factor-based models used to identify opportunities within individual U.S equities. FX Relative Value Relative value between G-10 currencies. Arbitrage Arbitrage opportunities in volatility. Time and volatility premium on S&P 500 Index puts and calls. Exploit inefficiencies in the VIX index futures curve. Directional Futures Rules-based techniques to identify opportunities in Commodities, Currencies, Equities, and Fixed Income. Global Asset Allocation Quantitative, statistical models identify long term opportunities within Commodities, Equities, Fixed Income, Real Estate, and Cash. FOMC Policy Quantitative models attempt to identify periods of active FOMC Policy and invest in the short-term fixed income curve. All strategies may not be engaged simultaneously. There is no guarantee any investment strategy will achieve its objectives, generate profits or avoid losses. 6

9 PORTFOLIO CONSTRUCTION A Stabilized Portfolio Market Synergy Managing Risk FOREIGN EXCHANGE EQUITY VOLATILITY EQUITIES EQUITIES VOLATILITY FIXED INCOME FIXED INCOME COMMODITIES CURRENCIES COMMODITIES Preserving Your Wealth 7

10 DIRECTIONAL FUTURES Strategies Short-Term Momentum Driven Medium-Term Trendfollowing Price Driven Long-Term Trendfollowing Momentum Driven Techniques All models are applied symmetrically across all traded markets. Positions sizes are based on volatility and equalized across all markets. Advantages Investments are made both long and short to take advantage of directional moves within commodities and financial futures. Multiple models are traded across multiple time frames. Long and short futures trades positions the portfolio to capture fat tail events, which typically have adverse effects in the equity and fixed income markets. Stop-Losses are put in place upon trade entry. Market selection is driven by liquidity and diversification. FOMC Policy Quantitative models attempt to identify periods of active FOMC Policy and invest in the shortterm treasury curve. This model takes positions in the direction of THE MOST IMPORTANT COMPONENT we manage is underlying risk. We constantly monitor total portfolio risk, sector risk, and individual position risk, especially in leveraged positions like futures contracts. FOMC policy or in the predicted direction of future policy moves. The use of Futures contracts involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. 8

11 RELATIVE VALUE Advantages G-10 currencies are held both long and short on a relative value, carry basis. Interest rate risk is sometimes hedged by buying or selling fixed income futures in the U.S., Japan, and Europe in the directional futures book. Technical overlay may at times neutralize exposure through the directional futures book. Long term, there is a low correlation between the returns of employing these strategies and the returns gained from investing in more traditional asset classes, such as equities and bonds. G-10 Currencies Australian Dollar British Pound Canadian Dollar Euro Japanese Yen New Zealand Dollar Norwegian Krona Swedish Krona Swiss Franc U.S. Dollar Currency strategies may subject the Fund to currency trading risks that include market risk, credit risk and country risk. 9

12 ARBITRAGE Potential Advantages Exploit inefficiencies in equity index volatility (implied vs. realized), time, and volatility premium in put and call options, and VIX Index futures curve. Structured through the use of options. Options on volatility are used for protection against extreme market events. Creates cashflow and minimizes volatility of directional strategies. HISTORICALLY, directional strategies perform better in high volatility regimes. As volatility diminishes, volatility arbitrage increases in profitability, therefore offsetting many of the whipsaw losses in the directional strategies. 10

13 GLOBAL ASSET ALLOCATION Potential Advantages Algorithms are used to identify which of the five major asset classes in which we invest. The models are typically engaged in long term secular trends, while avoiding the prolonged downside of the asset classes. Allocations change over time and market cycles. The directional futures models typically participate in the shorter-term down trends in the above asset classes on an individual security level. Foreign investing involves risks not associated with U.S. investments, including adverse fluctuations in foreign currency values, and adverse political, social and economic developments. The Fund may incur a loss as a result of a short position if the price of the short position instrument increases in value between the date of the short position sale and the date on which the Fund purchases an offsetting position. Real Estate Asset Classes Equities U.S. Fixed Income Commodities U.S. 5 7 Year Treasury GSCI Commodity Foreign Developed U.S Year Emerging Markets Real Estate U.S. 10+ Year Treasury Public REITS Markets Treasury Equities Commodities Index Fixed Income All asset classes may not be invested in simultaneously. Cash is used when not invested. Representative if model is fully engaged. For illustration purposes only. 11

14 QUANTITATIVE VALUE Potential Advantages The equity portfolio is directional in nature and long-biased within the core of the portfolio. Both qualitative and quantitative processes are used in constructing the portfolio and monitoring risk. We employ the use of futures and derivatives or strategic broad market shorts to hedge the portfolio against extended broad market sell-offs. This type of hedging is more efficient and effective, versus holding only companies perceived as weak as shorts. HERE S WHY: Shorting is becoming very competitive with the rise of assets in alternative funds. We believe this type of alpha is diminishing and becoming harder to find and extract. There is potential for short squeezes. The profit potential for non-leverage short is only 100% if the company goes bankrupt. The success of the Fund s hedging strategy will be subject to the Adviser s ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the investments in the portfolio being hedged. 12

15 QUANTITATIVE VALUE The Cane Capital Process Reconstitute the portfolio. Screen for the largest 1,000 companies by market capitalization. Rank companies by internal factors to include in the portfolio. Analyze by searching and quantifying factors within companies, which increase the probability of increased earnings and ROC. A Fund That Makes Your Job Easier 13

16 DRAWDOWN AND RECOVERY Percent Drawdown Percent Return to Recover Years to Recover at 8% ROR Years to Recover at 15% ROR 5% 5% % 11% % 18% % 25% % 33% % 43% % 67% % 100% % 150% % 233% % 400% % 900% The above table is general market hypothetical mathematical illustration and does not reflect actual trading results, nor does it represent fund performance. 14

17 INSTITUTIONAL SUPPORT Distributor Northern Lights Distributors, LLC Member FINRA/SIPC Transfer Agent Gemini Fund Services, LLC Legal Counsel Thompson Hine, LLP Custodian MUGF Union Bank, N.A. Independent Registered Public Accountant BBD, LLP 15

18 ABOUT CANE CAPITAL Leaders in Uncertain Times Cane Capital Management is built on two decades of experience in the futures industry. The firm was founded in 2007 by David Fontenot, and brought on Jason Fontenot as lead Quantitative Analyst later that year. With his background in portfolio management and in-depth quantitative research, David created Cane Capital s core trading strategies and proprietary models which are still used today. Jason specialized in portfolio construction, investment analysis, and manager due diligence, reviewing Cane Capital s portfolio and risk management reports and managing the back office. Cane Capital operated for several successful years as a hedge fund before expanding. In 2013 Cane developed its Alternative Strategies Fund (CDMIX), and converted to a 40 Act Mutual Fund the following year. Over its history, the principals of Cane Capital have created numerous proprietary trading models and brought on several investment partners. The firm continues to focus on enhancing its portfolio through in-depth quantitative research and rigorous ongoing testing. Today Cane Capital maintains its core mission: build investment strategies to increase potential return, protect investor capital, and minimize risk in volatile markets. Security in Uncertain Times. 16

19 WHO WE ARE Portfolio Management DAVID S. FONTENOT is the Managing Partner of Cane Capital and has two decades of experience in the futures industry. In 2007 David launched Cane Capital Management and Cane Global Master Fund, operating the successful hedge fund for seven years. David developed CDMIX in 2013 and converted to a 40 Act Mutual Fund the following year. Over two decades he has built the firm s core trading strategies and proprietary models that are still used today. Prior to founding Cane Capital David spent 10 years as a proprietary trader and Portfolio Manager, researching and allocating capital to hedge fund managers to pursue diversity for the portfolio s risk. David earned a B.B.A. from Millsaps College in 1998 and an M.B.A. from Millsaps College in

20 STRATEGIC ADVISORY BOARD BUDDY ROEMER is the founder and former CEO of Business First Bank in Louisiana. After operating for five years Business First Bank has exceeded $800,000,000 in asset size. Prior to this he co-founded and later served as CEO of The Business Bank of Baton Rouge, which was the largest de nova bank in the history of Louisiana. Buddy was elected Governor of the State of Louisiana where he served from 1988 to Prior to this he served four terms in the U.S. House of Representatives, from 1980 to 1988, and sat on the Banking, Budget, and Small Business Committees. Buddy earned his BA from Harvard College in 1964 and his MBA from the Harvard Business School in CHARLES E. ROEMER, IV is the President of Roemer, Robinson, Melville & Co. For the past 12 years Mr. Roemer has been a leader in the senior housing industry throughout the United States, serving as a consultant to senior housing developers and as a part owner, senior vice-president, and board member of CRSA. CRSA is one of the nation s leading developers and managers of senior housing, developing over $2 billion in senior housing projects and operating in 21 states. Charles also serves as one of eight elected members to Louisiana s State Board of Education. He graduated with honors from Harvard University in

21 STRATEGIC ADVISORY BOARD DONALD T. BOYSIE BOLLINGER is the Chairman and CEO of Bollinger Enterprises, a single-family investment office headquartered in New Orleans. Prior to founding Bollinger Enterprises, he served as Chairman and CEO of Bollinger Shipyards, established in 1946 and the largest vessel-repair firm in the Gulf of Mexico. Boysie currently serves as Chairman of the Board of First Bank and Trust and Chairman of the Nicholls State University Foundation. He is also a board member of numerous professional and civic organizations, including the University Medical Center Management Corporation, Audubon Commission, Louisiana Workers Compensation Corporation, National World War II Museum, and Chief Executives Organization. Boysie earned his Bachelor of Science Degree in Business Administration in 1971 from the University of Louisiana, Lafayette. A. PEYTON BUSH, IV is the Chief Investment Officer of Bollinger Enterprises and oversees all investment activities and asset allocation. Peyton is responsible for the portfolio which includes publicly-traded debt and equity securities, hedge funds, and direct investments in both real estate and private equity. Prior to this he was Vice President at LongueVue Capital, a New Orleans based private equity firm. He also held roles at Highland Capital Management, a multi-strategy alternative investment firm in Dallas, TX, and JP Morgan Securities. Peyton earned his Bachelor of Science from Tulane University, his MBA from Vanderbilt University, and served four years as an Intelligence Officer in the United States Marine Corps. 19

22 DISCLOSURES The Cane Alternative Strategies Fund acquired all of the assets and liabilities of Cane Global Master Fund, LP (the Predecessor Fund ), as well as adopted its financial and performance history, in a tax-free reorganization on August 29, In connection with this acquisition, shares of the Predecessor Fund were exchanged for Class I shares of the Fund. Class I Performance from November 1, 2007 to the reorganization date reflect that of the Predecessor Fund. The Fund s investment goals, policies, guidelines and restrictions are, in all material respects, equivalent to the predecessor limited partnership. From its inception date, the predecessor limited partnership was not subject to certain investment restrictions, diversification requirements and other restrictions of the 1940 Act of the Code, if they had been applicable, it might have adversely affected its performance. In addition, the predecessor limited partnership was not subject to sales loads that would have adversely affect performance. Performance of the predecessor fund is not an indicator of future results. Investors should carefully consider the investment objectives, risks, charges and expenses of the Cane Alternative Strategies Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained at or by calling The prospectus should be read carefully before investing. The Cane Alternative Strategies Fund is distributed by Northern Lights Distributors, LLC member FINRA/SIPC. An investment in the Fund involves risk, including possible loss of principal. Commodities markets may subject the Fund to greater volatility than investments in traditional securities. Commodity prices may be influenced by unfavorable weather, animal and plant disease, geologic and environmental factors as well as changes in government regulation such as tariffs, embargoes or burdensome production rules and restrictions. Derivatives are subject to credit risk (the counterparty may default) and liquidity risk (the 20

23 DISCLOSURES Fund may not be able to sell the security or otherwise exit the contract in a timely manner). Foreign investments may be subject to the same risks as domestic investments and to additional risks which include international trade, currency fluctuation, and political, regulatory and diplomatic risks, which may affect their value. Foreign investments may also suffer from a lack of timely or reliable financial information. Emerging markets investments are more volatile and subject to additional risks due to greater political and economic uncertainties and tend to be less liquid. Futures contract positions may not provide an effective hedge because changes in futures contract prices may not track those of the securities they are intended to hedge. Leverage can magnify the Fund s potential for gain or loss. Short positions may be considered speculative transactions and involve special risks, including greater reliance on the ability to accurately anticipate the future value of a security or instrument. The Fund s losses are potentially unlimited in a short position transaction. The price of small or medium capitalization company stocks may be subject to more abrupt or erratic market movements than larger, more established companies or the market averages in general NLD-2/23/

24 Security In Uncertain Times Cane Capital Management 8440 Jefferson Hwy, Suite 402 Baton Rouge, LA T: (225)