NewGen Trading Fund Equity long-short trading strategy

Transcription

1 NewGen Trading Fund Equity long-short trading strategy

2 Disclaimer The information in this document is furnished on a confidential basis exclusively for your use and retention and, by accepting this document, you agree not to transmit, reproduce or make available to any other person (other than your legal, tax, accounting and other advisers) all or any part of this document without the express written permission of NewGen Asset Management Limited ( NewGen ). This document is protected by copyright of NewGen and other laws, all rights reserved. It is not intended as and does not constitute an offer to sell any securities to any person or a solicitation of any person of any offer to purchase any securities. Such an offer or solicitation can only be made by the confidential offering documents of the investment fund and no offer will be made in Canada, the United States of America or, any jurisdiction in which it would be unlawful to do so without the need for registration or other legal requirements. This information omits most of the information material to a decision whether to invest in an investment fund. No person should rely on any information in this document, but should rely exclusively on the offering documents in considering whether to invest in an investment fund. NewGen s analysis and projections regarding portfolio company operating and investment results are subject to many risks, uncertainties and assumptions that are difficult to predict. Therefore, actual returns from an investment in any such company could differ materially and adversely from those expressed or implied in any forward looking statements, as a result of those various factors. NewGen s expected results and projections are provided for information regarding NewGen s investment analysis, not as any guarantee or expectation of investment results for any fund's investment portfolio. No representation is made on the accuracy or completeness of the information contained in this report, and the sender does not accept liability for any errors or omissions in the contents of this report. NewGen does not guarantee the appropriateness of any investment approach or security referred to for any particular investor. NewGen, its affiliates and/or its clients may have an investment position in a security or strategy (or related or opposing security or strategy) discussed in this information, and may change that position without notice at any time. This material is provided for informational purposes only and is not investment advice or a recommendation for the purchase or sale of any security. 2

3 Overview Toronto based investment manager of equity long/short strategies Registered with OSC as a Portfolio Manager/Investment Fund Manager/ EMD Investment Advisor: NewGen Trading Fund LP NewGen Trading Fund RRSP NewGen Trading Fund Offshore Strategy AUM - C$80 million Investment Team 3 portfolio managers Generalist and resource sector focused backgrounds Complementary trading and fundamental research experience on both the Buy-Side and Sell-Side 3

4 Why NewGen? NewGen Philosophy: We fundamentally believe that equity markets are inefficient over near term time horizons. Our strategy seeks to exploit those inefficiencies to deliver a true alternative investment option to investors: Produce superior risk adjusted returns Preserve investor capital in protracted downturns truncate the downside Generate a unique return stream to diversify investor portfolios 1. Inception July 2012; performance reported net of all fees for Class A Series 1 Units; effective February 1, 2013 the Fund changed its base currency from USD to CAD, presentation of performance data prior to this date assumes USD hedged to CAD 2. The Sharpe Ratio is a hypothetical measure of excess return and the US 5-year Treasury yield is used for the risk-free rate in its calculation 3. As of presentation date, combined Assets Under Management (AUM) includes the NewGen Trading Fund, NewGen Trading Master Fund, NewGen Trading Fund LP and the Polaris Resource Trading Fund 4

5 Market Opportunity The End of Prop Desks Largely eliminated from financial institutions due to Volker Rule (prohibits banks from engaging in trading that is not at the behest of its clients) Growth of Algorithms and High Velocity Trading Creating frequent errors and price distortions Price Inefficiencies To Exploit Diminished Liability Trading Banks are now allocating far less capital for liability trading, creating less efficient markets Long Biased/Buy & Hold/Value Focused Unsophisticated Market Participants Certain sectors require specialist knowledge (i.e. mining, energy, technology, etc) 5

6 NewGen L/S Trading Strategy Employ an opportunistic long-short equity trading strategy (broad sector exposure) Ideas are derived from a bottom up approach based on fundamental research Implementation of any specific idea typically requires: a pre-determined catalyst within set time horizons profit/loss assessments liquidity analysis and an exit strategy. Fund strategies include: event-driven trades, pairs trades, IPO/secondary offering participation, index additions/deletion predictions, clean-up/block trades, momentum/technical trades and risk arbitrage. Seek to consistently monetize trading gains derived from catalysts Broad portfolio risk including net and gross exposures, sector exposure, volatility, and correlations are monitored to ensure the portfolio adheres to the Fund s mandate. Adaptive Risk Management - Ability to drastically reduce portfolio exposure in difficult market environments 6

7 Target Portfolio Composition & Characteristics Market Risk Market-neutral Long-bias Typical net exposure range -10% to 50% (avg ~30%) Alpha focus, minimal equity beta Concentration Concentrated Diverse core positions on average (long / short) 3-5% core position size Liquidity Illiquid Highly liquid Highly liquid portfolio, all positions evaluated relative to underlying liquidity (avg position size vs ADV = 5-15%) Risk Tolerance Capital preservation Capital appreciation Active risk management Target significant short attribution Leverage No leverage Use of leverage Typical gross exposure range % (avg ~150%) Bottom-up opportunity driven Turnover Passive Active Active portfolio management Expected turnover of 5-6x per year Time Horizon Short Long Trades are generally short-term in nature (i.e day holding periods) Market Cap Small-cap Large-cap Portfolio represented by all market caps, but general bias towards small and mid-caps as liquidity permits 7

8 Value Proposition Returns (14.9% Annualized) Demonstrated ability to generate performance through alpha, rather than beta Sharpe(1.7) Risk (8% SD) Strategy seeks to remove this unwanted market and systemic risk Uncorrelated Return (.29 Cor) Unique return stream uncorrelated to broad equity markets Liquid and Nimble Able to tactically move across markets, sectors and strategies depending on the market opportunities Strict adherence to liquidity bias Preserve Capital Aim to minimize downside through balanced portfolio of long & short ideas No individual oversized positions No reliance on privates or derivatives to generate return Adaptive Risk Management - quickly reduce exposures under sub-optimal market conditions 8

9 Risk Management 9

10 Risk Management 10

11 Risk Management 250% 200% 150% 100% 50% 0% -50% 11 Jul-12 Oct-12 Jan-13 Exposure (%) Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Net exposure Gross Exposure

12 Trading Strategy Up/Down Capture 6,000 NGTF Return Vs TSX in both Up & Down Months 5,000 4,000 3,000 Cumulative Monthly Return (Bps) 2,000 1, ,000-2,000 Average Month +143bps Average Month +152bps Average Month Average +190bps Month +186bps Average Month Month +66bps +95bps Average Average Month Month -217bps -212bps -3,000-4,000 NGTF S&P/TSX Composite -5,000 Months when TSX is Positive (28) Months when TSX is Negative (17) 12

13 Trading Strategy Performance Snapshot Value of $10,000 Invested in Trading Strategy Since Inception 3 Comparative Performance Statistics for Trading Strategy 1. Performance reported net of all fees for Class A Series 1 Units; effective February 1, 2013 the Fund changed its base currency from USD to CAD, presentation of performance data prior to this date assumes USD hedged to CAD 2. July and August 2012 are internal estimates since the Administrator combined July (partial month) and August 2012 in their calculation 3. The Scotiabank Canadian Hedge Fund Index (SCHFI), Equity Hedge Equal Weighting and S&P/TSX Composite Index comparative performance is provided for illustrative purposes only they are both widely followed indices but are not considered benchmarks due to differing holding composition as compared to the NGTF 4. Partial year starting July Standard deviation is a form of hypothetical performance data and the Sharpe Ratio is a hypothetical measure of excess return (uses US 5-year Treasury yield for the risk-free rate in its calculation) 13

14 Trading Strategy Performance Snapshot Value of $10,000 Invested in Trading Strategy Since Inception 3 1. Performance reported net of all fees for Class A Series 1 Units; effective February 1, 2013 the Fund changed its base currency from USD to CAD, presentation of performance data prior to this date assumes USD hedged to CAD 2. July and August 2012 are internal estimates since the Administrator combined July (partial month) and August 2012 in their calculation 3. The Scotiabank Canadian Hedge Fund Index (SCHFI), Equity Hedge Equal Weighting and S&P/TSX Composite Index comparative performance is provided for illustrative purposes only they are both widely followed indices but are not considered benchmarks due to differing holding composition as compared to the NGTF 4. Partial year starting July Standard deviation is a form of hypothetical performance data and the Sharpe Ratio is a hypothetical measure of excess return (uses US 5-year Treasury yield for the risk-free rate in its calculation) 14