8 4 B R O O K S T R E E TM AY FA I R , LO N D O N W 1 K 5 E H

M E K E T A I N V E S T M E N T S L O N D O N L T D.

www.meketagroup.com

Edmund WalshDirector

February 9, 2016European Family Office Winter Symposium

FIXED INCOME & EQUITIES:LIQUIDITY, VOLATILITY, AND LONG-TERM

INVESTMENTS

Meketa Investments London, Ltd.

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Deteriorating Liquidity?

Deteriorating Liquidity Has Been of Increasing ConcernU.S. Treasury Market Example

Source:Bloomberg, Meketa Investments London

Meketa Investments London, Ltd.

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Liquid Until It Isn’t

Treasury Futures Bid-Ask Spread vs. Turbulenceby Year

Source:Bloomberg, Meketa Investments London

Meketa Investments London, Ltd.

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A Day Under the Microscope

Treasury Futures MetricsAugust 24, 2015

Source:Bloomberg, Meketa Investments London

0:01 2:15 4:27 6:39 9:07 11:3614:0416:27$0.00$0.02$0.04$0.06$0.08$0.10$0.12$0.14

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Bid-Ask Spread Volume

Time of Day

Bid

Ask

Spre

ad

Volu

me

Meketa Investments London, Ltd.

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VolatilityTheory vs. Reality

Distribution of ReturnsTheory vs. Reality

Source: Meketa Investments London. Turbulence is a multivariate distance that captures unusual volatile events and changes in correlations across assets in a single number. Defined as the standardised residuals from a Vector Auto-Regression of market assets.

Meketa Investments London, Ltd.

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Volatility Clusters when System-Wide Risk Spikes

Source: Bloomberg, Meketa Investments London. Systemic Risk is defined as the sum of squares from an analysis of variance among market assets. Intuitively, the risk driven by a single market source.

Meketa Investments London, Ltd.

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Value at RiskTheory vs. Reality

Source: Meketa Investments London. Traditional Value-At-Risk is defined as the 99 th percentile expected worst outcome from a lognormal distribution. Turbulent Regime Adjusted Value-At-Risk is defined as the 99 th percentile expected worst outcome from a two-state distribution (Normal/Turbulent) using Systemic Risk to determine the probability of each state. Values are annualised after 12 months.

Meketa Investments London, Ltd.

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Solutions for Long-Term Investors

Exposures for Portfolios Created Jan-2005

Resulting Performance During 2008

Source: Bloomberg, FRED, Meketa Investments London. The example macro factors shown are U.S. Real GDP, U.S. CPI, 10 Year U.S. Treasuries, and the Trade-Weighted U.S. Dollar. Exposures are calculated via Ordinary Least Squares to surprises in these factors. Surprises are defined as the errors to an auto-regressive of order 1 model forecaster. Optimal Factor Diversification is defined as the highest possible Sharpe ratio per factor exposure and across all factors.