Red Star Asset Management, LP

Transcription

1 Red Star Asset Management, LP Red Star Funds, SPC Absolute Return Long/Short Relative Value INVESTMENT OBJECTIVE, STRATEGY, RATIONALE, PROCESS Investment Objective Absolute Returns Red Star will seek to achieve: consistent positive returns on an absolute basis, independent of market performance, focused on Eastern Europe, Russia and the FSU; returns that exceed by the Russian long bond yield and are less volatile than those from the region s equity markets; and, preservation of capital. l Investment Strategy Double Alpha The Double Alpha investment objective is based on a core portfolio for beta and a satellite portfolio for alpha. The latter uses a variety of traditional hedge fund strategies, including: Relative value equity, both long and short; Equity market neutral pair trades; Carry trades; Capital structure arbitrage; and, Event driven arbitrage. Investment Rationale The markets of the region are overlooked and under-loved by global investors, resulting in value and market inefficiency. Historically, positive performance has been attributed more to value. In the future, this is likely to shift towards growth. Over the last 10 years, beta has provided attractive returns. This will likely continue in the years ahead, although to a lesser extent. Due to market inefficiencies, alpha is more plentiful in the region than in developed markets. Extracting alpha requires local talent, knowledge, fundamental analytical capabilities and modern portfolio management skills. Investment Process: Top Down and Bottom Up Top Down because the region has heavy reliance on commodities and because political factors can have a strong influence on markets within the region. Via our Moscow office, we conduct regular meetings with company management. Rigorous analysis of financial statements and corporate governance issues. Develop DCF models on every issuer, updated regularly and on significant events. Utilize multi-factor approach to calculating cost of capital (i.e., CAPM plus APT). Utilize in-house research, comparative multiples and broker consensus price targets. Determine fair value. Evaluate and aggregate fair value discount / premiums to market price for forecasting. Weekly investment committee meetings. Decrease / increase short / long exposure when the market is at a premium / discount to forecast fair values.

2 Use liquidity of the core portfolio for seizing arbitrage opportunities. Know precise fair value and price targets to move quickly when an opportunity arises. RISK MANAGEMENT Systemic risk While the core long-only portfolio will have beta and be exposed to systemic risk, the Double Alpha satellite portfolios will reduce overall exposure to systemic risk. Diversification While the markets of the region have disproportionately high amounts of natural resources, Double Alpha will actively allocate assets and over-weight non-oil and gas sectors. The core and satellite method also permits a dynamic approach to style and strategy diversification. Risk metrics Risk reports are prepared and reviewed frequently to ensure that investment strategies remain within acceptable risk / return ranges. Limits The portfolio is constrained to leverage of 3x and 20% net longs per issuer. Process The research and analysis, portfolio management and investment committee methodology help to ensure rational decisions. Controls Fund weightings are reconciled to target strategy weightings on a weekly basis, and variances requiring rebalancing are highlighted in deviation reports. Liquidity RSAM will generally seek to maintain an 80% weighting in the 50 most liquid stocks. Counterparty - The use of local brokerage firms will be carefully monitored. Limits are established and monitored systematically for each firm. Counterparty Reconciliations of assets held at local brokerage firms will be conducted by the administrator. Counterparty The principals will utilize combined experience and relationships with local brokerages/banks in determining how and where to allocate trades. Execution RSAM will rely upon the services of a number of local and global brokerage firms.

3 FIRM B ACKGROUND RSAM was recently formed by James Fenkner, Tim McCarthy, Tim Seymour (the Principals ) and a large global hedge fund partner who has seeded the fund with $50 million. The three Principals of RSAM have: Worked together for the last 7 years Troika Dialog 27 years combined experience in the markets of the region A common view on the market Complimentary skill sets RSAM, via affiliates, has offices in New York and Moscow with a team of analysts. RSAM will launch an absolute return fund with a long/short relative value strategy, focused on Eastern Europe, Russia and the former Soviet Union. Launch date June 1, 2005 PRINCIPALS James Fenkner recently left his position as Chief Strategist and Head of Research at Troika Dialog, one of Russia s leading investment brokerages, to co-found Red Star Advisors, Ltd. He joined Troika Dialog in September 1998 as Chief Strategist. Under his direction, Troika Dialog s Research department focused on corporate governance and the opportunities and risks that changes in corporate governance create for investors, as well as building a robust methodology for tracking Russian equities. From February 1999 to July 2002, Mr Fenkner managed the Troika Dialog model portfolio. By 2002, he had been promoted to Head of Research at Troika Dialog and was responsible for overseeing 14 analysts and 8 support staff. In the Thompson Extel awards for 2001, 2003 and 2004, local portfolio managers named the team the Best Research House in Russia. Mr Fenkner has been regularly rated in the Institutional Investor surveys. He commentates on Russia frequently on CNN, Bloomberg and Associated Press television and is widely quoted in the main financial press in Russia and abroad. Prior to joining Troika Dialog, Mr Fenkner was Head of Research at AIOC Capital and Robert Flemings (CIS) in Moscow. He first moved to the former Soviet Union in 1993 as a Soros Foundation lecturer in Economics at Vilnius University in Lithuania. He began his investment career in 1991 as a fixed income research analyst at Fidelity Investments in Boston. Mr Fenkner holds a BA in Economics from California State University in Sacramento and an MA in Economics from Tufts University in Boston. He is also a Chartered Financial Analyst and a Founding Member of the Russian CFA Society. Tim McCarthy recently left the position of Chief Investment Officer (CIO) at Troika Dialog Asset Management (TDAM) to co-found Red Star Advisors, Ltd. He joined TDAM in 1998 as a portfolio manager responsible for the quantitative, hedging and arbitrage aspects of fund management. He was promoted to Chief Investment Officer in early 1999 after his hedging and

4 arbitrage strategies performed well during the 1998 financial crisis. As CIO, Mr McCarthy was responsible for all assets under management, which grew from $10 million in 1999 to more than $675 million as of March 1, During this time, the number of funds increased from 2 to 6 and the number of separate accounts grew from 0 to over 400. Clients of TDAM included retail and high net worth individuals, corporate and state pension funds, insurance companies and local banking institutions. As Chairman of the TDAM Investment Committee, Mr McCarthy oversaw every investment decision and broadened the number of investment strategies from two in 1999 to eight in One of the mutual funds that Mr McCarthy managed during his tenure at TDAM was Dobrynia Nikitich, with assets of over $110 million. Prior to joining TDAM, Mr McCarthy was Executive Director at Alfa Asset Management, where his responsibilities included new products and quantitative investment management. Before this, he was Co-Founder and Director of investment advisory services at Capital Regent Securities, the local investment advisor to Foreign & Colonial, which launched the first SICAV fund to invest in Russia. Before moving to Moscow in 1994, Mr McCarthy was a Senior Consultant at Deloitte & Touche Management Consulting in New York, where he worked with Wall Street s leading banking and brokerage institutions. Mr McCarthy has an MBA with a concentration in Finance and a BS in Economics from the State University of New York. Tim Seymour recently resigned as a Partner from Troika Dialog and President of Troika Dialog USA to launch Red Star Advisors, Ltd. He joined Troika Dialog in 1998 as Head of Fixed Income Sales in Moscow and was later appointed Global Head of Sales for all products. At the company, he was instrumental in leading the focus on hedge fund derivative solutions in the aftermath of Russia s 1998 financial crisis. In January 2000, Mr Seymour moved to New York to found Troika Dialog USA, a full-service NASD/SEC regulated brokerage firm and subsidiary of Troika Dialog Group. There, he focused the institutional business on hedge funds active in the Emerging Market asset class and brought global investors into key Russian sectors, including oil and gas, utilities and precious metals. At the time of his departure, Troika Dialog USA was the largest Russian brokerage operating in the US in terms of total volume turnover in equity, fixed income and derivative products. He also oversaw the development of the corporate finance business, working with multinationals seeking strategic partnerships and greenfield projects in Russia as well as Russian companies looking for opportunities in the US. Before joining Troika Dialog, Mr Seymour focused on G-15 debt (cash, swaps, forex) in a specialized hedge fund group at Union Bank of Switzerland / UBS (New York). Mr. Seymour completed the firm s MBA training program in capital markets and where we was hired into institutional international fixed income sales. Mr Seymour holds an MBA from Fordham Graduate School of Business with a concentration in International Finance and a BSBA in Marketing from Georgetown School of Business Administration. He comments regularly on developments in Russia s capital markets on CNBC, Bloomberg and CNN, and is also a keynote speaker at Russia-dedicated conferences.

5 GENERAL FUND INFORMATION Contact Information Name: Red Star Asset Management Address: 747 Third Avenue, 38 th Floor, New York, NY Main Phone: Other/Mobile: Fax: Fund Information Firm AUM (as of date): $50 million committed by seed partner, May 2, 2005 Fund AUM (as of date): $50 million, May 2, 2005 Firm Inception Date: April 5, 2005 Fund Launch Date: June 1, 2005 Valuation Currency: Geographic Focus: Domicile: Minimum Investment: Redemptions: Redemption Notice: USD Eastern Europe, Russia and Former Soviet Union Cayman Islands $1 million Monthly 45 Days Redemption Penalty 3% w/in 12 months; 1.5% months; 0.75% months; 0% after 24 months. Additions: Lock Up: Monthly None Management Fee: 2% Performance Fee: 20% Hurdle Rate: High Water Mark: Fund Administrator (Onshore/Offshore): Listed: Auditor(s): Prime Broker(s): Legal Counsel: Regulated (If applicable): None Yes UBS Dublin ISE Listing will be sought after launch E&Y Cayman Islands UBS and CSFB Akin Gump for US, UK and Russia; Walkers in the Cayman Islands; Applebey in Bermuda The funds whose summaries are attached to this profile book (each a Fund and together, the Funds ) are customers of Credit Suisse First Boston LLC ( CSFB LLC ) and/or its affiliates or subsidiaries (together with CSFB LLC, CSFB ), and CSFB LLC may act as prime broker to such Funds. Any investment you make in a Fund may have an indirect benefit to CSFB LLC as prime broker to such Fund or to CSFB as a counterparty to a transaction with such Fund, including derivative transactions. CSFB may, to the extent permitted by law, effect transactions with or on behalf of the Funds, participate or invest in financing transactions with the Funds, perform services or solicit business from the Funds or their managers, and/or have a position, holding or other material interest in the

6 Funds. CSFB may have received or may receive in the future prime broke rage or other transaction related compensation from the Funds. The summaries in this profile book have been prepared and completed by the applicable Fund or the Fund s manager) to which the summary relates. The summaries may be forwarded to you, at your request, by CSFB for information purposes only as part of its capital introduction services. CSFB has not verified the information contained in the summaries and gives no representation or warranty as to the accuracy, completeness or otherwise of the information contained in the summaries. You should independently verify any information contained in the summaries and obtain a copy of any prospectus or other offering or subscription documents of the Funds, which contain important risk disclosures and more specific information about the Funds, prior to making any investment decision. The summaries are not sales literature. These summaries and any materials or information provided to you by CSFB do not constitute an offer to sell or a solicitation of an offer to buy an interest in any Fund or any other securities, to or from any person in any jurisdiction. Any such offer or solicitation may only be made pursuant to a confidential private placement memorandum as supplemented from time to time that relates specifically to such Fund or securities. By accepting delivery of any materials, including these summaries, you agree to the foregoing. In distributing these summaries, CSFB is not acting as your advisor. You must make your own independent assessment (based on advice from such advisors and further verifications as you deem appropriate) as to whether investment in a Fund is appropriate for you and as to whether you are able to invest in the Funds. Investments in the Funds may be speculative and involve a high degree of risk, and investors in the Funds could lose all or a substantial amount of their investments. CSFB has not made any determination on whether the Funds, or their managers, are permitted to market, promote or sell any investment to you under applicable law. CSFB makes no representation as to the accuracy or completeness of the information in the summaries and accepts no liability for loss arising from use of the information in these summaries. These summaries are confidential and may not be disclosed, redistributed, divulged or reproduced by you, in whole or in part. Notwithstanding the foregoing, you (and each of your employees, representatives, or other agents) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of (i) the Funds and (ii) any of its transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to you relating to such tax treatment and tax structure. The summaries are directed at institutional investors that are accredited investors (as defined by the U.S. Securities Act of 1933) and qualified purchasers (as defined by the U.S. Investment Company Act of 1940, as amended) only and is not intended for private customers. Where you are acting on behalf of others, references to you or your include those entities on whose behalf you are acting.