The Salus Alpha Fund Range

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1 The Salus Alpha Fund Range An investment for all seasons This brochure has been designed for financial intermediaries & professional investors only

2 Contents Take a closer look 1 How to achieve alpha 1 An investment for all seasons 2 What are the benefits of investing in UCITS compliant hedge funds? 3 Which funds are right for your clients? 4-5 What is the investment process for these funds? 6-7 The Salus Alpha Fund Range 8-11 Key facts Glossary 14-17

3 Take a closer look at PDL International a global distributor of specialist and alternative investments We believe investors around the globe are looking for innovative investment solutions that maximise their investment return, but at the same time help protect their wealth. As a result our aim is to offer a range of risk managed investments, across a number of asset classes, which will help investors secure their financial futures. PDL International has a network of distributors across the globe able to support professional advisers and their clients. This gives us unparalleled access and local knowledge to many diverse regions and markets such as Europe, The Middle and Far East and South America. For more information please visit us at How to achieve alpha A critical component for achieving alpha is selecting the right fund manager and strategy. That s why PDL International has chosen to partner with Salus Alpha in offering financial advisers and their clients the opportunity to invest in a range of UCITS compliant hedge funds designed to deliver positive returns in all market conditions. Salus Alpha was the first company to obtain UCITS status for a range of hedge funds, due to an innovative approach of creating proprietary hedge indices and then investing in them with their UCITS funds. This has paved the way for a diverse range of UCITS compliant hedge solutions available for institutional as well as retail investors. Salus Alpha is a Swiss based alternative investment manager with offices in over nine countries and assets of over US$1.2bn under management. For more information please read the Salus Alpha prospectus for each fund. Important This brochure has been designed for financial intermediaries and professional investors only and should be read in conjunction with the prospectus for each respective fund. For additional copies of this material please go to our website at Please note that in the UK Retail investments into Salus Alpha funds can currently only be placed via PDL International. The Salus Alpha Fund Range 1

4 An investment for all seasons What is the Salus Alpha Fund range about? The underlying rationale for investing in hedge funds is the search for alpha. Alpha is the extra return a skilled manager can produce over and above the market return (or beta ). Whereas many conventional fund managers simply aim to outperform their chosen benchmark index, hedge fund managers seek to produce positive gains in all market conditions. The ability to achieve investment performance in all market conditions will be particularly appealing to those investors looking to diversify, as well as maximise their investment returns, but who are also concerned about where to put their money during these more uncertain times. Within this attractive product proposition, we ve identified four areas and/or styles which we believe will appeal to private investors around the world: Salus Alpha Directional Markets Fund: enables investors to take advantage of global trends and economic cycles in order to generate investment returns. Its multi-asset managed futures portfolio is able to produce positive absolute returns in rising and falling markets. The Salus Alpha Directional Markets Fund is part of a category called CTA (Commodity Traded Adviser) funds. Salus Alpha Commodity Arbitrage Fund: offers good return potential from a market-neutral exposure to a wide range of commodities. Its very low volatility will be appealing to investors who wish to benefit from commodities investment returns, but don t want to have to worry about this asset class s extreme cyclicality. This fund also follows a CTA strategy. Salus Alpha Real Estate Fund: This REITS fund enables investors to benefit from capital growth and dividends of European and North American real estate stocks, independent of the property circle. Property is also generally considered to be an uncorrelated asset class to traditional capital markets. Salus Alpha Multi-Style Fund: offers an actively managed, ready made diversified portfolio of hedge fund strategies. It combines various styles, as well as the strengths of different managers. In a way it could be called a hedge fund for beginners. The Salus Alpha Fund Range 2

5 What are the benefits of investing in UCITS compliant hedge funds? Typically hedge funds are neither as liquid, nor are they as transparent as traditional funds, such as Open Ended Investment Companies (OEICs) or Luxembourg-style SICAVs. In fact, many are unregulated and domiciled offshore in countries such as the Cayman Islands. Generally, hedge funds are: designed to provide low volatile capital appreciation with an emphasis on capital preservation. outside UCITS only available to high net worth investors. popular with institutional investors. In contrast to this the Undertakings for Collective Investment in Transferable Securities (or UCITS) provides significant investor protection whilst allowing fund managers sufficient investment latitude to pursue high return strategies. The Salus Alpha Fund range is domiciled in Europe and is able to offer investors the opportunity to invest in a fully UCITS compliant range of hedge funds with all the benefits both institutional and retail investors are looking for. In comparison to offshore/unregulated hedge funds, these benefits include: Lower minimum investment amounts. Investors are able to start with as little as 5,000/ 4,500. Greater liquidity. Salus Alpha funds also have daily dealing with no minimum holding periods. This means that investors can withdraw their money at any time. UK tax treatment. Profits will be taxed as capital gains under a secured reporting status, whereas for most offshore hedge funds the gains are treated as income.* Who are the Salus Alpha funds suitable for? The Salus Alpha Fund range is suitable for investors: who have a medium to high risk profile and who look to maximise their investments in all market conditions. who want a higher level of liquidity but are able to remain invested for at least 3 5 years. This is because the strategies offer long term capital appreciation with relatively lower volatility to traditional hedge fund strategies and low correlation to capital markets. who are looking to diversify their portfolio into alternative investments. Perhaps they are willing to invest a greater proportion than is usually allocated to these strategies, due to the UCITS structure and daily liquidity that these funds offer. who want exposure to a broad cross section of assets classes. Within the Salus Alpha Fund range your clients can have exposure to equities, global commodities, fixed interest, forex and global property. * Reporting status was applied for in Q The Salus Alpha Fund Range 3

6 Which funds are right for your clients? All Salus Alpha Funds are about alternative strategies. They are available within a UCITS wrapper and are daily dealing hedge funds, with one of the funds investing directly into a number of REITS and listed Real Estate stocks. Hedge Funds Many UCITS regulated hedge funds stormed on the scene in 2009 and 2010 as a direct consequence of the financial crisis in 2008, e.g. in the wake of the Madoff scandal. Most of these funds are spin-offs of unregulated Cayman domiciled funds. Whilst they are better regulated, they tend to underperform their unregulated peers due to various investment and risk limitations, set out by the UCITS regulations for leveraged transferable securities. Salus Alpha funds on the other hand have chosen a different route to manage their strategy within a UCITS framework which provides investors with the same level of regulation, but a higher degree of investment freedom, typically leading to better returns. What is more, Salus Alpha launched their funds earlier than most Newcits competitors, leading to a long and strong track record. Commodity Trading Advisor (CTA) Funds The two Salus Alpha CTA funds PDL International has introduced to the UK and other markets, the Salus Alpha Directional Markets and the Salus Alpha Commodity Arbitrage Fund, use managed futures to achieve their investment returns. Futures are standardised contracts, traded on stock exchanges, where a market participant can take a long (buy) or short (sell) position. This is how CTA funds try to profit from both rising and falling prices of its underlying securities. Salus Alpha Multi-Style Fund A Hedge Fund for Beginners Probably the first hedge fund any private investor should consider is one with a higher degree of diversification. Factors limiting an investor s risk are about liquidity, regulation and diversification. All of the Salus Alpha funds provide daily dealing and UCITS regulation, but the Salus Alpha Multi Style Fund also provides a high degree of diversification across hedge fund strategies and managers. Salus Alpha Fund researchers spent most of their time identifying the best hedge managers and strategies they can find, whether they are located in New York, London or Paris. The Salus Alpha Fund Range 4

7 Salus Alpha Directional Markets Fund Taking advantage of rising and falling markets This fund allows investors to benefit from Salus Alpha s unique quantitative investment process which has been developed and refined for nearly a decade. This CTA fund invests in a multitude of asset classes, be it North American equities or frozen orange juice contracts, using a model based on price forecast technique. Crucially, this flagship fund can generate investment returns in both rising and falling market at relatively low levels of volatility and capital market correlation. Salus Alpha Commodity Arbitrage Fund Profiting from commodity investing with no market risk Having started out originally as a carve-out of Salus Alpha s successful Directional Markets Fund, this strategy focuses entirely on investments in commodity contracts. However, contrary to conventional long-only exposure to commodities, this Fund aims to be completely market-neutral, in other words it has a beta close to zero and therefore almost no market correlation at all. The investor benefits entirely form alpha generated through arbitrage between different types of commodities or differences in forward pricing of one particular commodity. This provides your client with pure alpha from an exciting asset class at very low volatility. Salus Alpha Real Estate Fund Liquid investing through the property cycle This fund enables investors to access investment returns from international properties in a risk-controlled way at daily liquidity. Contrary to most of the other Salus Alpha fund this is not a pure hedge, but an absolute return fund which does not use shorting as one of its primary strategies. Instead, this fund achieves its objectives of alternative returns at low levels of volatility by being invested in its underlying (European and North American REITs) to varying degree, holding the balance in cash. The fund, like other Salus Alpha funds, is managed according to a proprietary quantitative model. Overview of Salus Alpha Funds offered by PDL International Multi Style Hedge Funds Commodity Trading Adviser (CTA) Directional Markets Commodity Arbitrage Absolute Return funds Real Estate Fund The Salus Alpha Fund Range 5

8 What is the investment process for these funds? The two main strategies are*: Price Forecast based mainly on trend-following strategies for individual holdings Optimisation of Portfolio Allocation making changes of proportional allocations to different asset classes. Price Forecast Salus Alpha Directional Markets apply a quantitative process whereby daily price levels are forecasted based on historic prices. This is done with the assumption that all relevant market information is incorporated in the price. In the case of the Directional Markets strategy this process produces with 250 trading days a year and 100 markets 25,000 forecasts a year which is statistically significant. The better the forecast quality in an environment for individual markets, the more trust is put into the forecast and the more aggressively the target weights per market are adjusted. Hence, if the forecast quality is good, the target weight will be increased aggressively with a positive return forecast, and reduced aggressively with a negative forecast. Optimisation of Portfolio Allocation The starting point is that based on Salus Alpha s price forecast model maximum nominal position sizes of +/- 10% are established. The actual position size depends on price trends (strong price trend bigger position) and volatility (increasing volatility decreasing position size). How does Salus Alpha achieve UCITS compatibility? All of the investors money is deposited into a cash account which constitutes the UCITS fund. At the same time Salus Alpha (and in the case of the Multi Style Fund their chosen Hedge Fund manager) manage their investment strategies on a multimanager platform, operated by well-known, large financial institutions, such as Deutsche Bank. The representation of these strategies for UCITS purposes is achieved with proprietary indices, listed on the Vienna stock exchange. These indices are a mirror image of the performance of the multimanager platform investments and enable the funds to receive a daily NAV. Both positive and negative performance is swapped between the hedge counter-party and the UCITS (cash) fund, i.e. the fund at no time holds the actual underlying securities. This is one of the reasons why the Salus Alpha funds can offer daily liquidity. * With the exception of the Salus Alpha Multi Style Fund The Salus Alpha Fund Range 6

9 INVESTORS invest MULTIMANAGER HEDGE PLATFORM Investors cash Managed account 1 Managed account 2 Managed account 3 Cash accounts UCITS fund manage cash swap manage manage Investment Advisor Investment Advisor Investment Advisor return swap manages Proprietary index listed on Vienna stock exchange NAV= + /- Performance Total Return Swap BANK The Salus Alpha Fund Range 7

10 The Salus Alpha Fund Range The Salus Alpha Multi-Style Fund Via PDL International Objectives: The fund employs a multi-manager multi strategy approach by investing in globally traded derivatives in equities, fixed income, currencies, and commodities via the Salus Alpha proprietary Multi Style Index (MSX) listed on the Vienna Stock Exchange. The fund is targeted to achieve positive returns by diversifying across these key asset classes via (up to) 20 hedge fund managers, taking advantage of global market trends or economic cycles i.e. commodities. Within the Salus Alpha Multi-Style fund there are a number of different managers employing different hedge strategies whose returns contribute to the overall return. By employing this strategy the fund aims to generate positive returns whether the overall market is rising or falling. Salus Alpha Multi-Style Fund S&P 500 Source: Salus Alpha (27th May 2011) Index start Fund launch Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 What are the benefits for my clients? The fund is designed for investors who are looking for consistent long term returns in all market conditions. Investors money is diversified across four global asset classes equities, fixed income, currencies, and commodities, different managers and various types of hedge fund strategies. The fund strategy can reduce market risk (beta) and increase absolute return (alpha). The fund can help to reduce an investors overall portfolio risk by diversifying into alternative markets such as commodities and currencies. For more information please read the Salus Alpha Multi-Style Fund prospectus. The Cascade Portfolio 8

11 The Salus Alpha Fund Range Via PDL International The Salus Alpha Directional Markets Fund Objectives: The fund employs a single manager/single strategy approach by investing in globally traded derivatives in equities, fixed income, currencies, and commodities via the Salus Alpha proprietary Directional Markets Index (DMX) listed on the Vienna Stock Exchange. The Salus Alpha Directional Markets Fund is one of the very first UCITS compliant fund offering an investment in single manager Managed Futures with daily liquidity. The fund is targeted to achieve positive returns by diversifying across these key asset classes and taking advantage of global market trends or economic cycles i.e. commodities. By employing this strategy the fund aims to generate positive returns whether overall markets are rising or falling Index start Fund launch Salus Alpha Directional Markets Fund S&P 500 Source: Salus Alpha (27th May 2011) Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 What are the benefits for my clients? The fund is designed for investors who are looking for consistent long term returns in all market conditions. Investors money is diversified across four global asset classes equities, fixed income, currencies, and commodities. The fund can move in and out of asset classes, depending on which is the most attractive at any given time. The fund strategy can reduce market risk (beta) and increase absolute return (alpha). The fund can help to reduce an investors overall portfolio risk by diversifying into alternative markets such as commodities and currencies. For more information please read the Salus Alpha Directional Markets Fund prospectus. The Cascade Portfolio 9

12 The Salus Alpha Fund Range Via PDL International The Salus Alpha Commodity Arbitrage Fund Objectives: The fund aims to profit from price inefficiencies prevalent in the global commodity markets via the Salus Alpha proprietary Commodity Arbitrage Index (CAX) listed on the Vienna Stock Exchange. The Salus Alpha Global Commodity Arbitrage fund is the only UCITS compliant fund offering an investment in Commodity arbitrage strategies with daily liquidity. The fund is targeted to achieve positive returns by tracking the performance of rule-based arbitrage strategies applied to globally traded commodities futures contracts, taking advantage of price inefficiencies arising from situations like shortterm supply issues, seasonality etc. By employing this strategy the fund aims to generate positive returns whether the overall market is rising or falling. Salus Alpha Commodity Arbitrage Fund S&P 500 Source: Salus Alpha (27th May 2011) Fund launch 50 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 What are the benefits for my clients? The fund is designed for investors who are looking for consistent long term returns in all market conditions. Investors can take advantage of price inefficiencies prevalent in the global commodity markets, e.g. oil, at any given time. The fund strategy can reduce market risk (beta) and increase absolute return (alpha). The fund can help to reduce an investors overall portfolio risk by diversifying in to alternative markets such as global commodities. For more information please read the Salus Alpha Commodity Arbitrage Fund prospectus. The Salus Alpha Fund Range 10

13 The Salus Alpha Fund Range Via PDL International The Salus Alpha Real Estate Fund Objectives: The fund actively invests in a portfolio of real estate securities in accordance to a proprietary quantitative model. The Salus Alpha Real Estate fund is the only UCITS compliant fund offering modeldriven investments into a number of REITS and Real Estate Stocks with daily liquidity. The model generates a portfolio based on the lowest risk and highest return characteristics. In certain circumstances the Fund can be 100% invested in properties, but in many cases the model suggests an allocation to the underlying at less than 100% with the balance held in risk-neutral assets. If no portfolio satisfies the model s risk and return thresholds can be found, the fund portfolio will hold 100% into risk-neutral assets. By employing this strategy the fund aims to generate positive returns whether the overall market, i.e. the global property market, is rising or falling. 450 Fund launch Dec 02 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Salus Alpha Real Estate Fund EPRA / NAREIT Index Source: Salus Alpha (27th May 2011) What are the benefits for my clients? The fund is designed for investors who are looking for consistent long-term returns in all market conditions. Investors can take advantage of long-term trends and cycles in the property markets. A model driven approach can reduce the impact of human error from the investment. The ability to be 100% in risk neutral assets reduces the volatility in the investors portfolio without reducing the potential returns. The fund strategy can reduce market risk (beta) and increase absolute return (alpha). The fund can help to reduce an investors overall portfolio risk by diversifying in to a largely uncorrelated asset class. For more information please read the Salus Alpha Real Estate Fund prospectus. The Salus Alpha Fund Range 11

14 Key Facts Minimum Investment Size 5,000/ 4,500 Minimum Top-up 100/ 90 Currency Euro Tax UK reporting status (reporting status was applied for in 2011) Fund Structure UCITS Liquidity Daily Distribution FSA registration for sale Fund Manager Salus Alpha Capital Ltd Promoter PDL International, a trading name of Absolute Assigned Policies Limited, regulated by the FSA. Salus Alpha Directional Markets Fund Underlying Directional Markets Index (DMX) Target Correlation: Equities: -25% to +25% Bonds: -20% to +20% Target Return: 15 20% p.a. Target Sharpe Ratio: Target Volatility: 0.5 x Target Return Index Start: Fund Launch: 01/03/03 01/12/08 Fees (Euro share class) TER (est.): 2.76% per annum Performance fee: None Initial charge: Max. 5.5% Redemption fee: Max. 4.45% All NAVs and performance data are net of annual fees Salus Alpha Commodity Arbitrage Fund Underlying Commodity Arbitrage Index (CAX) Target Correlation: Equities: 0% Bonds: 0% Target Return: 10 12% p.a. Target Sharpe Ratio: Target Volatility: 0.5 x Target Return Index Start: Fund Launch: 01/03/07 01/12/09 Fees (Euro share class) TER (est.): 2.26% per annum Performance fee: 20% (high water mark) Initial charge + redemption fee: Max. 6% All NAVs and performance data are net of annual fees The Salus Alpha Fund Range 12

15 Salus Alpha Real Estate Fund Investment Universe Real Estate Investment Trusts (REITS), Real Estate Stocks Target Correlation: Equities: -20% to +20% Bonds: -20% to +20% Target Return: 10 15% p.a. Target Sharpe Ratio: Target Volatility: 5% p.a. Index Start: Fund Launch: 01/03/03 21/01/08 Fees (Euro share class) TER (est.): 1.97% per annum Performance fee: 20% (high water mark) Initial charge: Max. 5.5% Redemption fee: None All NAVs and performance data are net of annual fees Salus Alpha Multi-Style Fund Underlying Managed Style Index (MSX) Target Correlation: Equities: -15% to +15% Bonds: -15% to +15% Target Return: 7 14% p.a. Target Sharpe Ratio: 1.0 Target Volatility: 6 12% p.a. Index Start: Fund Launch: 01/03/03 01/04/09 Fees (Euro share class) TER (est.): 1.52% per annum Performance fee: None Initial charge: Max. 5.5% Redemption fee: Max. 2.25% All NAVs and performance data are net of annual fees The Salus Alpha Fund Range 13

16 Glossary Alpha Alpha is a measure of selection risk (also known as residual risk) of a mutual fund in relation to the market. A positive alpha is the extra return awarded to the investor for taking a risk, instead of accepting the market return. For example, an alpha of 0.4 means the fund outperformed the market-based return estimate by 0.4%. An alpha of -0.6 means a fund s monthly return was 0.6% less than would have been predicted from the change in the market alone. In a Jensen Index, it is a factor to represent the portfolio s performance that diverges from its beta, representing a measure of the manager s performance. Arbitrage Arbitrage is the practice of taking advantage of a price difference between two or more markets or securities: striking a combination of matching deals that capitalise upon the imbalance, the profit being the difference between the market prices. When used by academics, an arbitrage is a transaction that involves no negative cash flow at any probabilistic or temporal state and a positive cash flow in at least one state; in simple terms, it is the possibility of a risk-free profit at zero cost. In principle and in academic use, an arbitrage is risk-free; in common use, as in statistical arbitrage, it may refer to expected profit, though losses may occur, and in practice, there are always risks in arbitrage, some minor (such as fluctuation of prices decreasing profit margins), some major (such as devaluation of a currency or derivative). In academic use, an arbitrage involves taking advantage of differences in price of a single asset or identical cash-flows; in common use, it is also used to refer to differences between similar assets (relative value or convergence trades), as in merger arbitrage. Beta The Beta (β) of a stock or portfolio is a number describing the relation of its returns with those of the financial market as a whole. An asset has a Beta of zero if its returns change independently of changes in the market s returns. A positive beta means that the asset s returns generally follow the market s returns, in the sense that they both tend to be above their respective averages together, or both tend to be below their respective averages together. A negative beta means that the asset s returns generally move opposite the market s returns: one will tend to be above its average when the other is below its average. Correlation A correlation is a statistical measure of how two securities move in relation to each other. Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. Perfect positive correlation (a correlation coefficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move in the opposite direction. If the correlation is 0, the movements of the securities are said to have no correlation; they are completely random. In real life, perfectly correlated securities are rare, rather you will find securities with some degree of correlation. The Salus Alpha Fund Range 14

17 Glossary CTA A commodity trading advisor (CTA) is an asset manager who follows a set of systematic investment strategies in futures contracts and options on futures contracts. The advisors originally operated predominantly in commodities markets, but today they invest in any liquid futures market. They are responsible for the trading of managed futures accounts. The two major types of advisors are technical traders and fundamental traders. Technical traders may use computer software programs to follow price trends and perform quantitative analysis. Fundamental traders forecast prices by analysis of supply and demand factors and other market information. Some advisors may use a combination of these two techniques for their managed futures programs. Hedge Funds A hedge fund is a private investment fund that participates in a range of assets and a variety of investment strategies intended to protect the fund s investors from downturns in the market while maximising returns on market upswings. As a class, hedge funds undertake a wider range of investment and trading activities than traditional long-only investment funds, and invest in a broader range of assets, including equities, bonds and commodities. By taking a long position on a particular asset the manager is asserting that this position is likely to increase in value. When the manager takes a short position in another asset they would be asserting that the asset is likely to decrease in value. Most hedge fund investment strategies aim to secure positive return on investment regardless of overall market performance. Managed Futures A managed futures account or managed futures fund is a type of alternative investment. They are standardised forward contracts, traded on stock exchanges, where a market participant can take a long (buy) or short (sell) position. With the ability to go both long and short, managed futures are highly flexible financial instruments with the potential to profit from rising and falling markets. Moreover, many managed future funds have virtually no correlation to traditional asset classes, enabling them to enhance returns as well as lower overall volatility. Performance Fee A performance fee is a fee that an investment fund may be charged by the investment manager that manages its assets, calculated by reference to the increase in the fund s net asset value (or NAV ), which represents the value of the fund s investments. Performance fees are widely used by the investment managers of hedge funds, which typically charge a performance fee of 20% of the increase in the NAV of the fund. The Salus Alpha Fund Range 15

18 Glossary REITS: Real Estate Investment Trusts A real estate investment trust or REIT is a tax designation for a corporate entity investing in real estate that reduces or eliminates corporate income taxes. In return, REITs are required to distribute 90% of their income, which may be taxable, into the hands of the investors. The REIT structure was designed to provide a similar structure for investment in real estate as mutual provide for investment in stocks. Like other corporations, REITs can be publicly or privately held. Public REITs may be listed on public stock exchanges like shares of common stock in other firms. REITs can be classified as equity, mortgage, or hybrid. Sharpe Ratio The Sharpe ratio or Sharpe index or Sharpe measure or reward-to-variability ratio is a measure of the excess return (or risk premium) per unit of risk in an investment asset or a trading strategy, named after William Forsyth Sharpe. The Sharpe ratio is used to characterize how well the return of an asset compensates the investor for the risk taken, the higher the Sharpe ratio number the better. Sharpe ratios, along with Treynor ratios and Jensen s alphas, are often used to rank the performance of portfolio or mutual fund managers. TER: Total Expense Ratio The Total Expense Ratio, or TER, is a measure of the total cost of a fund to the investor. Total costs may include various fees (purchase, redemption, auditing) and other expenses. The TER is calculated by dividing the total annual cost by the fund s total assets averaged over that year, and is denoted as a percentage. It will normally vary somewhat from year to year. Typically it consists of the annual management charge or AMC (the fee that the fund company charges annually to manage the fund, typically commission paid to fund managers) plus other charges incurred with running the fund. These other charges can consist of share registration fees, fees payable to auditors, legal fees, and custodian fees. Total Return Swap Total return swap, or TRS, or total rate of return swap, or TRORS, is a financial contract that transfers both the credit risk and market risk of an underlying asset. The Salus Alpha Fund Range 16

19 Glossary UCITS The Undertakings for Collective Investments in Transferable Securities (or UCITS ) are a set of European Union Directives that aim to allow collective investment schemes to operate freely throughout the EU on the basis of a single authorisation from one member state. UCITS are authorised by the respective financial services regulators in each member state, depending on where a UCITS fund is domiciled. UCITS represent the highest level of investment fund regulation in Europe and is an accepted standard also in other parts of the world (primarily Asia, South America and Africa). Volatility Volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices. An implied volatility is derived from the market price of a market traded derivative (in particular an option). It is common for discussions to talk about the volatility of a security s price, even while it is the returns volatility that is being measured. It is used to quantify the risk of the financial instrument over the specified time period. Volatility is normally expressed in annualised terms and is measured by using the fund s standard deviation of the instrument s yearly logarithmic (continuously compounded) returns. The Salus Alpha Fund Range 17

20 The small print This brochure is directed only at investment professionals (such as financial intermediaries) and must not be circulated to, relied upon or acted upon (for any purposes whatsoever) by any other person not falling within this description. Within the UK, investment professionals includes only persons as described within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (persons having professional experience in matters relating to investments). PDL International gives no representation or warranty, express or implied, in relation to any such product and as to the accuracy or completeness of the information or opinions contained in this brochure, and no liability is accepted by PDL International, or any of its directors, members, officers, employers, agents or advisors, for any such information or opinions. In particular, PDL International accepts no responsibility in respect of statements of third parties that are quoted in this brochure. The information and opinions contained in this brochure are being supplied for information purposes only and not for any other purpose, and should not be treated as financial advice, legal advice or tax advice. Investors may not get back the amount they originally invested in the products referred to in this brochure. The value of an investment and the income produced from it may fall as well as rise. Past performance is not a reliable indicator of future results. Risks are detailed in the accompanying product literature that must be made available before any investment. The amount to be reasonably invested depends on the investor s personal circumstances, personal assets and risk tolerance. Investors are advised to seek independent investment advice before investing in any of the products referred to in this brochure. Please refer to the accompanying product literature for the contact details of the product provider, and your rights to make a complaint against them if you are a purchaser or distributor of their product. Contact us PDL International T.I.S. House Spring Villa Park Edgware Middlesex HA8 7EG United Kingdom T: +44 (0) E: info@pdlinternational.com PDL International is a trading name of Absolute Assigned Policies Limited. Absolute Assigned Policies Limited is a company registered in England and Wales (company registration number ) and is authorised and regulated by the Financial Services Authority. Absolute Assigned Policies Limited s registered office is at TIS House, Spring Villa Park, Edgware, Middlesex HA8 7EG, United Kingdom. Absolute Assigned Policies Limited s VAT number is PDL 492_03/0711