CTA MANAGED FUTURES October 2012
2
Agenda The CTA (managed futures) market Brunia Capital Philosophy Process Brunia SA Managed Futures Fund Performance characteristics Latest developments Global equivalent 3
Managed futures (CTA) Long the BOOM, short the BUST Well established alternative investment strategy Sub category of Global Macro Hedge Funds Analyse asset prices Using mathematical algorithms To identify the development of short, medium or long term trends Diversify across many markets Tools required Liquid markets Cheap leverage Tools required Cheap trading Ability to short sell 4
Managed Futures market growth CTA was one of the fastest growing global hedge fund asset classes this decade Source: BarclayHedge Almost non-existent in South Africa 5
Managed Futures market size Source: Pertrac 6
Philosophy Markets trend Identify and trade in direction of the trend Diversify across various markets and time horizons Emotions are a trader s worst enemy Jessie Livermore, Reminiscences of a Stock Operator 7
Process Proprietary Trend Indicators PTIs Creative Research: Analyse asset prices Develop new algorithms Trading systems Quantitative Development: Implement and monitor algorithms in various markets (no discretion) Brunia trading programme Portfolio construction: Risk allocation Drawdown analysis 8
Brunia SA managed futures fund SA Fund Risk budget: 100% Bonds (20%) Top40 Index Futures (55%) Individual Equities (10%) Dollar - Rand (16%) R157 (PTi1) : 20% I1 (PTi3) : 25% TBS (PTi6) : 20% Z1 (PTi2) : 25% R157 (PTi6) : 20% I2 (PTi2) : 25% ASA (PTi4) : 20% Z2 (PTi4) : 25% R157 (PTi7) : 20% I3 (PTi6) : 25% GFI (PTi4) : 20% Z3 (PTi6) : 25% R157 (PTi4) : 20% I4 (PTi4) : 25% NPN (PTi5) : 20% Z4 (PTi10) : 25% R186 (PTi8) : 10% SBK (PTi4) : 20% R186 (PTi2) : 10% 9
Risk limits and leverage Number of systems Risk per bucket (% of total WVAR) WVAR budget (historic close to close worst case) Implied MAX leverage Mandate leverage limits Fixed Income JSE Spot R157 and R186 6 20% 7.7% 111% (based on R208 rpp) 200% Index Futures JSE ALSI futures Individual Equities RMB CFDs Currency USD/ZAR Yield-X futures 4 55% 20.6% 110% 200% 5 10% 4.0% 20% 30% per single stock 4 15% 5.6% 41% 100% Total 19 100% 37.8% (40% max) 281% 400% Equates to max 95% 1 day VAR of 4.9% (based on close-to-close data since Jan 1996) 10
Performance (ZAR) BRUNIA SA CTA -ZAR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2012-1.3% 0.0% 2.3% -1.5% -2.1% 0.7% -2.8% 1.5% 0.1% -3.1% 2011 0.5% 1.8% 1.0% 2.1% -1.3% -0.3% -4.5% 10.9% 2.3% 0.3% -0.2% -2.3% 9.9% 2010 0.4% 2.1% 1.2% -2.1% -2.3% 1.9% -4.5% -3.7% 5.6% 2.4% -0.5% 1.3% 1.4% 2009 9.1% 0.1% 6.3% 3.0% -2.9% 0.9% 4.3% 1.0% -5.4% 6.7% 0.8% 1.2% 27.1% 2008 4.1% 2.2% 1.7% 3.8% 3.7% 1.3% -6.4% 5.8% 1.9% 10.5% 11.2% 5.7% 54.9% 2007-8.1% 5.7% -1.4% 4.8% 6.8% 1.1% 8.0% -20.4% 1.1% -2.5% 6.2% 0.1% -2.2% 2006 4.0% 6.6% -0.1% -8.6% 11.2% 4.1% 3.3% -7.0% 3.1% -1.3% -7.5% 5.3% 11.6% 2005 0.7% -1.4% 1.2% 1.4% 8.1% -2.7% -7.5% 9.6% 7.5% 6.4% 6.3% 0.9% 33.3% 2004-4.8% -1.2% 6.6% 3.3% 16.6% -13.8% -12.3% 14.4% -4.1% 8.3% 2.1% -2.3% 8.2% 2003 7.2% -17.3% 23.9% 6.4% 4.1% -5.3% 6.0% -2.1% -1.0% -6.6% -4.3% -6.7% -1.4% 2002 2.3% -2.1% 2.0% 14.7% 15.3% -1.6% 32.9% 15.6% pa since inception after fees Ave 3y rolling return of cash + 9%pa Note: 0.3% pa exclvat Nautilus MAP fee not included 11
500 450 400 350 300 250 200 150 100 50 Performance since inception Correlation to JSE Allshare: - 5.8% 12 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Jun 02 Sep 02 Dec 02 Mar 03 Jun 03 Sep 03 Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 + 100% ALSH + 100% Brunia_SA
500 450 400 350 300 250 200 150 100 50 Diversification benefits (since inception) 13 Jun 02 Sep 02 Dec 02 Mar 03 Jun 03 Sep 03 Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 + 100% ALSH + 100% Brunia_SA + 50% Brunia_SA + 50% ALSH
Diversification benefits (inception) 20% 15% + 50% Brunia_SA + 50% ALSH + 25% Brunia_SA + 75% ALSH + 75% Brunia_SA + 25% ALSH + 100% ALSH + 100% Brunia_SA Return pa 10% STeFI ALBI 5% 0% 0% 5% 10% 15% Down deviation pa 14
50% Equity snail trail 36m rolling returns 40% 30% Return pa 20% 10% 0% 0% 5% 10% 15% 20% 25% 30% -10% Standard deviation pa + 100% TOP40 + 100% BrT40 15
50% Equity snail trail 36m rolling returns 40% 30% Return pa 20% 10% 0% 0% 5% 10% 15% 20% 25% 30% -10% Standard deviation pa + 100% TOP40 + 100% BrT40 + 50% BrT40 + 50% TOP40 16
Investment holding period 80% 12m rolling returns 60% 40% 20% 0% Jun 03 Dec 03 Jun 04 Dec 04 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12-20% -40% -60% + 100% ALSH + 100% Brunia_SA + 50% Brunia_SA + 50% ALSH 17
Investment holding period 50% 36m rolling returns 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 + 100% ALSH + 100% Brunia_SA + 50% Brunia_SA + 50% ALSH 36m Brunia return = cash + [-2%, +20%] Ave 36m return = cash + 9.0% 18
600 550 500 450 400 350 300 250 200 150 100 50 Drawdown analysis: Allshare TRI 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50% 19 Jun 02 Oct 02 Feb 03 Jun 03 Oct 03 Feb 04 Jun 04 Oct 04 Feb 05 Jun 05 Oct 05 Feb 06 Jun 06 Oct 06 Feb 07 Jun 07 Oct 07 Feb 08 Jun 08 Oct 08 Feb 09 Jun 09 Oct 09 Feb 10 Jun 10 Oct 10 Feb 11 Jun 11 Oct 11 Feb 12 Jun 12 DRAWDOWN + 100% ALSH HWM + 100% ALSH + 100% ALSH
600 550 500 450 400 350 300 250 200 150 100 50 Drawdown analysis: Brunia SA CTA 0% -5% -10% -15% -20% -25% -30% -35% -40% -45% -50% 20 Jun 02 Oct 02 Feb 03 Jun 03 Oct 03 Feb 04 Jun 04 Oct 04 Feb 05 Jun 05 Oct 05 Feb 06 Jun 06 Oct 06 Feb 07 Jun 07 Oct 07 Feb 08 Jun 08 Oct 08 Feb 09 Jun 09 Oct 09 Feb 10 Jun 10 Oct 10 Feb 11 Jun 11 Oct 11 Feb 12 Jun 12 DRAWDOWN + 100% Brunia_SA HWM + 100% Brunia_SA + 100% Brunia_SA
Drawdown analysis: Allshare + Brunia 600 0% 550-5% 500-10% 450-15% 400 350 300 250-20% -25% -30% 200-35% 150-40% 100-45% 50-50% 21 Jun 02 Oct 02 Feb 03 Jun 03 Oct 03 Feb 04 Jun 04 Oct 04 Feb 05 Jun 05 Oct 05 Feb 06 Jun 06 Oct 06 Feb 07 Jun 07 Oct 07 Feb 08 Jun 08 Oct 08 Feb 09 Jun 09 Oct 09 Feb 10 Jun 10 Oct 10 Feb 11 Jun 11 Oct 11 Feb 12 Jun 12 DRAWDOWN + 50% Brunia_SA + 50% ALSH HWM + 50% Brunia_SA + 50% ALSH + 50% Brunia_SA + 50% ALSH
100% 80% 60% 40% 20% 0% -20% -40% -60% -80% -100% 3-year rolling correlation Demonstrable alpha with zero correlation 22 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 36m corr: SymmHFI 36m corr: ALSI 36m corr: ALBI
Latest fund developments Brunia Global Fund Brunia SA + Brunia Global 23
Global Programme (Guernsey regulated) Brunia Global Fund Risk budget: 100% Deutche Bund (30%) Eurostoxx 50 (70%) Currencies Commodities DB1 (PTi4) : 25% E1 (PTi6) : 25% Curr1 Comm 1 DB2 (PTi6) : 25% I2 (PTi4) : 25% Curr 2 Comm 2 DB3 (PTi9) : 25% I3 (PTi7) : 25% DB4 (PTi10) : 25% I4 (PTi9) : 25% Curr n Commn 24
Brunia Global Fund Performance (EUR) BRUNIA GLOBAL FUND -EUR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2012-1.1% 1.1% 1.4% -1.1% -1.3% -4.4% 6.7% 0.6% 0.6% 2.2% 2011-0.7% 0.1% -5.9% 3.2% 0.0% -1.4% 8.3% 5.2% 1.8% -9.2% 2.6% 6.5% 9.7% 2010-1.9% 2.9% 0.1% 0.1% 2.3% -0.5% 1.2% 2.0% 1.0% -0.9% -7.0% -1.4% -2.5% 2009 3.5% 8.2% 8.9% 4.6% 1.2% -0.6% 7.6% 3.4% 3.2% -2.9% 3.6% 2.6% 52.1% 2008 16.0% 1.4% -4.1% -4.3% -3.8% 6.9% 4.2% 1.2% 10.2% 14.9% 13.7% 3.1% 73.6% 2007-0.3% 2.2% 1.2% 1.1% -1.2% -1.8% 4.6% 0.7% 1.4% 0.0% 1.0% -3.6% 5.4% Returns prior to Sep 11 are pro forma based on current system suite and actual market data. Sep 12 return is based on soft NAV calculation BarclayHedge CTA index 2012 YTD return = 0.95% (USD) 25
Further development 36m correlations: Alsi EuroStoxx 50 R 157 10y Bund USD/ZAR EUR/USD Brent Gold Maize Wheat Alsi 100% 71% 27% -55% -53% 66% 51% 32% 43% 20% Eurostoxx 50 71% 100% 2% -56% -52% 55% 30% -1% 25% 8% R 157 27% 2% 100% 26% -33% 20% -2% 38% 43% 21% 10y Bund -55% -56% 26% 100% 31% -46% -43% 3% -16% -4% USD/ZAR -53% -52% -33% 31% 100% -60% -41% -38% -38% -20% EUR/USD 66% 55% 20% -46% -60% 100% 52% 39% 49% 30% Brent 51% 30% -2% -43% -41% 52% 100% 24% 30% 26% Gold 32% -1% 38% 3% -38% 39% 24% 100% 49% 15% Maize 43% 25% 43% -16% -38% 49% 30% 49% 100% 46% Wheat 20% 8% 21% -4% -20% 30% 26% 15% 46% 100% 26
450 400 350 300 250 200 150 100 50 80% Brunia SA + 20% Global (ZAR hedged) 27 Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 + 100% Br_SA_ZAR + 20% Br_GL_ZAR_hedged + 80% Br_SA_ZAR
80% Brunia SA + 20% Global (ZAR hedged) 36m rolling returns vs std dev 35% 30% 25% Return pa 20% 15% 10% 5% 0% 0% 5% 10% 15% 20% 25% 30% Standard deviation pa + 100% Br_SA_ZAR + 20% Br_GL_ZAR_hedged + 80% Br_SA_ZAR 28
Disclosures, disclaimers and confidentiality Brunia Capital (Pty) Limited ( Brunia ) Company registration no 2002/029798/07 (South Africa) Authorised Financial Services Provider no 7410 Licenced as Discretionary Financial Services Provider and Hedge Fund Financial Services Provider Physical address: PSG House, Alphen Park, Constantia Main Road, Constantia, 7848, South Africa. Postal address: Private Bag X3, Constantia, 7848, South Africa. Contact person: Jean-Pierre Matthews or Phillip van Blerk Telephone: +27 217998063 +27 217998120 Email: jp.matthews@bruniacapital.com phillip.vanblerk@bruniacapital.com Brunia Capital is an Authorised Hedge Fund Financial Services Provider. However, the Funds described in this document are Hedge Funds that are not regulated by the Collective Investment Schemes Control Act of South Africa. This presentation is intended only to provide salient information regarding the Brunia hedge fund activities. This presentation does not constitute an offer or an invitation to any person, whether a member of the public or not, to acquire an interest in any Brunia fund. This document is confidential and issued for the information of the addressee and of clients of Brunia and its subsidiaries only. It is subject to copyright and may not be reproduced in whole or in part without the written permission of Brunia. Past performance of Brunia funds of is no guarantee of future investment returns. Brunia funds do not offer any implied or explicit return guarantees. Please read the appropriate risk disclosure statement before considering an investment in any hedge fund. 29
Disclosures, disclaimers and confidentiality Statutory hedge fund risk disclosures It is important that all investors know and understand the risks associated with hedge fund investments. Please see attached a copy of Board Notice 571 of 2008 of the Financial Advisory and Intermediary Services ( FAIS ) Act with a list of all the statutory risk disclosures in this regard. Should, for any reason, these risk disclosures not be attached to this presentation, please notify us and will provide you with a copy. Alternatively, you may find a copy of the Board Notice 571 on www.fsb.co.za/faisdep/legislations.htm. Conflicts of interest Brunia Capital has no contractual obligations with any of its service providers. Brunia staff members may from time to time own a direct or indirect minority shareholding (less than 2%) in one or more the following companies that are linked to current service providers: ABSA Group Ltd, FirstRand Group Ltd, Investec Group Ltd, JSE Ltd, Momentum Group Ltd, Prescient Group Ltd, Peregrine Group Ltd, PSG Group Ltd and PSG Konsult Ltd. Execution brokers may provide Brunia Capital with data and information services such as Reuters and Bloomberg that are used as research and execution tools in our investment process for the benefit of our investors. Additional service fees Apart from Brunia management fees, the Brunia funds may be liable to pay additional service fees that may include, independent administrator fees, audit fees, custodian fees, bank charges and platform fees. Professional Indemnity and Fidelity Cover Brunia Capital complies with prescribed minimum Professional Indemnity and Fidelity Cover prescribed by the FAIS ACT. 30
FAISAct Hedge Fund FSP risk disclosures 1.The risks and characteristics contained in this schedule and outlined immediately hereunder represent some of the more general risk and characteristics prevalent in hedge fund portfolios.the list below should not be seen as exhaustive. As more risk and characteristics are identified that were notinitially mentioned in this schedule, then such risk and characteristics will, as they become prevalent, be included herein. 1.1Investment strategies may be inherently risky Hedge fund strategies may include leverage, short-selling and short term investment. In addition, hedge fund portfolios often invest in unlisted instruments, low-grade debt, foreign currency and other exotic instruments. All of these expose investors to additional risk. However, not all hedge fund managersemploy any or all of these strategies and it is recommended that investors consult their advisers in order to determine which strategies are being employed by the relevant manager and which consequent risk arise. 1.2 Leverage usually means higher volatility Hedge fund manager may use leverage. This means that the hedge fund manager borrows additional funds, or trades on margin, inorder to amplify his investment decisions. This means that the volatility of the hedge fund portfolio can be many times that of the underlying investments. The degree to which leverage may be employed in any given hedge fund portfolio will be limited by the mandate the client has with the manager. The limits laid down by the mandate should be carefully reviewed in making an investment decision. 1.3 Short-selling can lead to significant losses Hedge fund management may borrow securities in order to sell them short, in the hope that the price of the underlying instrumentwill fall. Where the price of the underlying instrument rises, the client can be exposed to significant losses, given that the manager is forced to buy securities (to deliver to the purchaser under the short sale) at high prices. 1.4 Unlisted instruments might be valued incorrectly Hedge fund manager may invest in unlisted instrument s where a market value is not determined by willing buyers and sellers. The hedge fund manager may have to estimate the value of such instruments, and these estimates may be inaccurate, leading to an incorrect impression of the fund`s value. Investors should ensure that objective valuations are performed for all instruments in a portfolio and that the manager utilizes the services of a competent administrator. 1.5 Fixed income instruments may be low-grade Hedge fund managers may invest in low-grade bonds and other fixed interest investments. These investments are more likely to suffer from defaults on interest or capital. They are also more likely to have volatile valuations when the market changes its view on credit risk. The mandate should also limit the extent (i.e. lowest acceptable rating and maximum percentage exposure) to which low grade debt can be acquired by the client. Investor should review the mandate to gain an appreciation of the maximum possible exposure applicable to the relevant mandate. 1.6 Exchange rates could turn against the fund A hedge manager might invest in currencies other than the base currency. For example, a South Africa hedge fund manager mightinvest in UK or US shares. The portfolio is therefore exposed to the risk of the rand strengthening or the foreign currency weakening. 1.7 Other complex investments might be misunderstood In addition to the above, hedge fund managers might invest in instruments such as but not limited to futures, forward, swaps,options and contracts for difference. Many of these will be derivatives, which could increase volatility. Many will be over-the-counter, which could increase counterparty risk. Many exotic instruments may also be challenging for the manager to administer and account for properly. Investor should enquire into how these instruments are objectively and independently valued. 31
FAISAct Hedge Fund FSP risk disclosures 1.8 The client may be caught in a liquidity squeeze Given their often short term nature, hedge fund managers need to be able to disinvest from or close certain positions quicklyand efficiently. But market liquidity is not always stable, and if liquidity were to decrease suddenly, the hedge fund managers might be unable to disinvest from or close such positions rapidly or at a good price, which may lead to losses. 1.9 The prime broker or custodian may default Hedge fund managers often have special relationships with so-called prime brokers. These are stock-brokers that provide the required leveraging and shorting facilities. Prime brokers usually require collateral for these facilities, which collateral is typical provided using assets of the relevant client, and consequently such collateral might be at risk if the prime broke were to default in some way. A similar situation could with the custodian of the client`s funds. 1.10 Regulations could change Legal, tax and regulatory changes could occur during the term of the investor`s investment in a hedge fund portfolio that mayadversely affect it. The effect of my future legal, tax and regulatory change or any future count decision on a hedge fund portfolio could be substantial and adverse. 1.11 Past performance might be theoretical Hedge fund portfolios are on occasion marketed using theoretical or paper track records. Past performance is seldom a reliable indicator of future performance. Theoretical past performance is often an even less reliable indicator, and investor s should place on these. 1.12 The manager may be conflicted The hedge fund manager might be managing other hedge fund portfolios or other traditional investment fund. The investor should ensure that sufficient controls are in place to manage any conflicts of interest between the different funds. 2. The other differences in hedge fund portfolios 2.1 Hedge fund structures are often complex As mentioned above, hedge fund structures are not fully regulated and they are often housed in legal structures not originally meant for pooled funds, for example partnership and companies. Given the many risks listed above, investors need to ensure that any structure is robust enough to contain any unlimited losses. 2.2 Manager accountability may be vague Hedge fund portfolio are often managed by specific individuals and investors should ensure that sufficient controls are in placefor the time when the manager is being covered for by colleagues. In addition, a hedge fund structure (for example, a fund of funds) and its managers or advisors may rely on the trading and/or investing expertise and experience of third-party managers or advisors, the identity of which may not be disclosed to investors. This constitutes an additional risk for investors, which they must take into account. 2.3 Fees might be high Hedge fund structures fees may be significantly higher than the fees charged on traditional investment funds. Investments shouldbe made only where the potential returns justify the higher fees. 32
FAISAct Hedge Fund FSP risk disclosures 2.5 Transaction costs might be high Given the often short term nature of investment positions, hedge fund portfolios are often traded more aggressively. This implies more stock-broking commission and charges being paid from the portfolio, which is ultimately for the client`s account. Again investments should be made only where the potential returns make up for the costs. 2.6 Transparency might be low A hedge fund manager`s performance is often the result of unique proprietary strategies or contrarian investment positions. For obvious reasons, managers will want to keep these confidential. Managers are therefore less likely to disclose trades to their investors, and holding might be disclosed only in part or with a significant delay. 2.7 Dealing and reporting might be infrequent A hedge fund manager`s performance can often be disturbed by irregular cash flows into or out of the hedge fund structure. For the reason, hedge fund managers often limit the frequently of investments and withdrawals. Similarly, the manager may choose to report infrequently on performance and other statistics. Investors should ascertain, prior to investing, the nature and frequency of reporting. 2.8 Withdrawals might not be easy As mentioned above, the frequency of withdrawals might be limited to monthly or quarterly dates. In addition, the manager mayimpose notice periods or lock-ins in order to ensure that he has the necessary time for his investment positions to deliver their desired results. End of copy of Board Notice 571 of 2008 33
Thank you. Any questions? 34
Brunia Capital Short selling and leverage should be used in a responsible way to mitigate total portfolio risk... Previously PSG Absolute Investments Established July 2003 Previously 65% subsidiary of PSG Asset Management Holdings MBO as at 1 November 2011 Now 100% privately owned Authorised Financial Services and Hedge Fund Provider FSP7410 Category II and IIA Discretionary Fund and Hedge Fund Manager Focus on Systematic Trend Following Managed Futures (CTA) Brunia ZAR 180 million CTA AUM Brunia SA Managed Futures Fund Brunia Fixed Income carve out Brunia Global Fund Additional ZAR 400 million South Easter Fund on licence 35
People Staff Age Operational duties Qualifications Years Brunia Capital Jean-Pierre Matthews Phillip van Blerk David Venter Steven Kukard Shamima Rahim 40 37 30 26 37 Managing Director Director and Head R&D Fund manager Research Accounts and Compliance B Sc (Act Sci), CFP, CFA M Com (Math Stats) B Com (Fin Man) B Mus B Com (Accounting) 15 13 5 1 12 PSGAM mandated Christopher Henderson 39 Back Office SLA (ends 31 Oct) BCom (Hons), CFP, CA(SA) 10 36
Optimisation Process Equity index System Equity Opti index System Equity Opti index System Equity Optim index Systems Bond System Bond Optim System Bond Opti System Bond Optim Systems Currency System Currency Opti System Currency Opti System Currency Opti Systems Commodity System Commodity Opt System Commodity Opti System Commodity Opt Systems Equity index Suite Bond Suite Currency Suite Commodity Suite PROGRAMME NB: Always seek balance between max profit with lowest possible down deviation 37
Brunia SA vs Global CTA returns Annual return comparison: Brunia SA CTA (ZAR) Brunia SA CTA (USD hedged pro forma) BarclayHedge CTA Index 2004 8.2% 1.4% 3.3% 2005 33.3% 27.1% 1.7% 2006 11.6% 7.1% 3.5% 2007-2.2% -6.3% 7.6% 2008 54.9% 38.2% 14.1% 2009 27.1% 16.8% -0.1% 2010 1.4% -4.6% 7.1% 2011 9.9% 3.4% -3.1% 2012 ytd* -3.2% -6.6% 1.0% * data as at 3 Sep 2012 Source: www.barclayhedge.com 38
Brunia SA vs Global CTA returns Annual return comparison (USD): 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% 2004 2005 2006 2007 2008 2009 2010 2011 2012 ytd* -10% Brunia SA CTA (USD hedged pro forma) BarclayHedge CTA Index Source: www.barclayhedge.com 39
Brunia SA vs Global CTA returns Unit price comparison: 220 200 180 160 140 120 100 80 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 2012 ytd Brunia SA CTA (USD hedged pro forma) BarclayHedge CTA Index Source: www.barclayhedge.com 40
Offshore development JSE Nautilus MAP Brunia SA CTA 100% 20% via asset swap 80% Bonds 15% Top40 Index Futures 45% Individual Equities 5% Dollar - Rand 15% Brunia Global Fund 20% Exchange control regulations compliant Regulation 28 compliant Nautilus MAP risk management applies Double fees avoided Global management and performance fees rebated to MAP EuroStoxx 50 14% Deutsche Bund 10y 6% NEW 41
Incorporating CTA technology in a traditional product environment 42
Brunia defended equity Top40 Index Futures 1 x leveraged I1 (PTi3) : 25% I2 (PTi2) : 25% Spot Top40 index tracker I3 (PTi6) : 25% I4 (PTi4) : 25% 43
Brunia defended equity Product Brunia T40 CTA Top 40 tracker Cash (STeFi) Net equity exposure Reg28 inclusion limit CISCA compliant Prudential Variable Equity (Balanced Fund) 37.5% 37.5% 25% [ 0%, 75%] 100% Yes Flexible Equity 50% 50% 0% [0%, 100%] 75% Yes Aggressive equity 75% 75% - 50% [0, 150%] 2.5% Not yet Other hybrids e.g. Brunia + Equity long only 44
500 450 400 350 300 250 200 150 100 50 Flexible Equity 45 Jun 02 Sep 02 Dec 02 Mar 03 Sep 03 Jun 03 Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 + 100% TOP40 + 100% BrT40 + 50% BrT40 + 50% TOP40
Flexible Equity 25% 20% Return pa 15% 10% + 50% BrT40 + 50% TOP40 ALBI + 100% BrT40 + 100% TOP40 STeFI 5% 0% 0% 5% 10% 15% Down deviation pa 46
50% Equity snail trail 36m rolling returns 40% 30% Return pa 20% 10% 0% 0% 5% 10% 15% 20% 25% 30% -10% Standard deviation pa + 100% TOP40 + 100% BrT40 + 50% BrT40 + 50% TOP40 47
600 550 500 450 400 350 300 250 200 150 100 50 Aggressive Equity [0% - 150%] 48 Jun 02 Sep 02 Dec 02 Mar 03 Jun 03 Sep 03 Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 + 100% TOP40 + 100% BrT40 + 75% BrT40 + 75% TOP40 + -50% STEF Note: Funding at SteFi +0.5%pa assumed
Aggressive Equity 25% 20% + 75% BrT40 + 75% TOP40 + -50% STEF Return pa 15% 10% STeFI ALBI + 100% BrT40 + 100% TOP40 5% 0% 0% 5% 10% 15% Down deviation pa 49
Aggressive Equity 50% 36m rolling returns 40% Return pa 30% 20% 10% 0% 0% 5% 10% 15% 20% 25% 30% -10% Standard deviation pa + 100% TOP40 + 100% BrT40 + 75% BrT40 + 75% TOP40 + -50% STEF 50
Jean-Pierre Matthews Founder and Managing Director Founder of PSGAI with PSG in 2003 Co-founder of PSG Quant / Brunia CTA Fund in May 2003 Active proponent of the SA hedge fund industry Focus on business development, fund management support and corporate governance Started career with PSG in 1996 on SA Bond floor Quantitative analyst trading system development Proprietary trader Established various alternative asset management businesses MBO of PSGAI in November 2011 Re-brand as Brunia Capital 100% privately owned Focus on managed futures / CTA BSc (Act Sci), CFP, CFA 51
Phillip van Blerk Director and Head of Research and Development Pioneered trend following CTA hedge funds in SA Joined PSG in 1998 Longest standing track record since May 2003 13 years experience in trend following system development and trading 6 years on proprietary trading desks of PSG Risk Managers and PSG Investment Bank Managed successful transition from prop desk to fund manager 7 years lead and senior manager of PSG Quant Fund Expert knowledge of trading system development Expert skill at implementing trading theory in real markets M Com (Mathematical Statistics) 52