seeking alternatives to traditional fixed income strategies · s&p / lsta us leveraged loan...
TRANSCRIPT
Seeking Alternatives to Traditional Fixed Income Strategies
John Cocke, Co-Portfolio Manager of Credit Strategies, Corbin Capital Partners
May 2019
1
Wide And Diverse Credit Universe
2
Source: Bank of America Merrill Lynch Global Research (The Fixed Income Digest‐Educational Series‐Primer of Bond Investing), Federal Reserve Flow of Funds, East Lodge Capital, SIFMA, Bloomberg. All financial information is estimated and rounded. Bond segment effective yield (%) is estimated and approximated as of April 30, 2019. Total amount outstanding ($) information is estimated and approximated as of 2018. Please note Municipals and Preferreds yields represent YTM. Above graph does not include all U.S. bond market segments. GSEs represents Government‐Sponsored Enterprises and MBS represents Mortgage‐Backed Securities. Different sources may have define bond market segment/sector classifications differently. Shown for discussion and illustrative purposes only. Please see Corbin endnotes and risk disclosures for important information.
U.S. Bond Segment Yields vs. Total Amount Outstanding ($ trillions)
U.S. Bond Market:~$40 trillion
vs.U.S. Equity Market:
~$30 trillion
Yiel
d
Corporate Capital Structure Example
3Please see Corbin endnotes and risk disclosures for important information.
Large Cap Investment Grade-rated U.S. Corporate Credit
1
2
3
4
5
6
7
8
Highest
Lowest
Prio
rity
of
Repa
ymen
t RiskinessLowest
Highest
Super Senior Debt (Revolving credit facility)
Senior Secured Debt(Bank Loans, first lien loans and bonds)
Secured Debt(Second lien and mezzanine loans)
Senior Unsecured Debt(Corporate bonds)
Subordinated Debt(Subordinated bonds and loans)
Hybrid Securities(Preferred equity, convertible bonds)
Common Equity
Rights, Warrants and Options
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
0%
100%
200%
300%
400%
12/01 1/03 3/04 5/05 7/06 9/07 11/08 1/10 2/11 4/12 6/13 8/14 10/15 12/16 2/18 4/19
Barclays US Corporate HY Total Return Index S&P 500 Total Return Index
Barclays US Treasury Total Return Unhedged Fed Funds Rate
Post-Financial Crisis Monetary Policy Significantly Distorted Asset Prices
4Source: Corbin, Bloomberg as of 4/30/2019. Performance results will differ for other time periods. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. Please see Corbin endnotes and risk disclosures for important information.
In response to the U.S. Fed’s actions, equities, credit and Treasuries moved in the same direction
Going forward, countries pursuing independent monetary and fiscal paths should create compelling investment opportunities
Post-2008, asset price bull markets have largely been driven by Central Bank policies
Market Reactions to Loosening Monetary PolicyHY, SPX, and Treasuries Indexed Price Performance Fed Funds Rate
Fed Funds Rate
High Yield Credit Market Over Time
5Source: Corbin, Bloomberg. Data as of 4/30/2019. Please see Corbin endnotes and risk disclosures for important information.
Current levels are unattractive, particularly given expected slowing economic growth and geopolitical concerns These factors may cause spreads to widen in 2019
0
500
1000
1500
2000
2500
12/99 4/01 7/02 11/03 2/05 6/06 9/07 1/09 4/10 7/11 11/12 2/14 6/15 9/16 1/18 4/19
BofA Merrill Lynch US HY Index Yield to Worst
Yield to Worst
Current yield:
618 bps
(In bps)
Cumulative Return
Annualized Return
5-Year +26.8% +4.9%
7-Year +53.8% +6.4%
High Yield Market Pricing Dispersion: Risk Appetite
6Source: Corbin, Bloomberg. Data as of 4/30/2019. BB to CCC Spread measured as the difference in yields between the Bank of America Merrill Lynch BB US High Yield Index and the Bank of America Merrill Lynch CCC & Lower US High Yield Index. Please see Corbin endnotes and risk disclosures for important information.
CCC-rated securities command a higher yield compared to BB-rated securities Current spread (593 basis points) is approximately equal to long-term average
Pricing Dispersion Between BB and CCC-Rated Securities
0%
5%
10%
15%
20%
25%
12/11 6/12 12/12 6/13 12/13 6/14 12/14 5/15 11/15 5/16 11/16 5/17 11/17 5/18 10/18 4/19
HY BB Yield to Worst HY CCC Yield to Worst
4.73%
10.66%
Current spread: 5.93%
2,100
2,200
2,300
2,400
2,500
2,600
2,700
2,800
2,900
3,000
3,100
4/12 4/13 4/14 4/15 4/16 4/17 4/18 4/19
S&P / LSTA US Leveraged Loan Total Return Price
Markets can change quickly, highlighting the importance of being flexible in order to capitalize on evolving market opportunities
4%
5%
6%
7%
8%
9/12 1/14 5/15 9/16 1/18 4/19
S&P / LSTA US Leveraged Loan Weighted Average Yield
Leveraged Loans vs. Historical Levels
7Source: Corbin, Bloomberg as of 4/30/2019. Please see Corbin endnotes and risk disclosures for important information.
U.S. Leveraged Loan Yield U.S. Leveraged Loan Total Return Price
Cumulative Return
Annualized Return
5-Year +21.3% +2.8%
7-Year +35.9% +3.4%
Q4 2018 Q1 2019 2019 YTD 5-Year VolHigh Yield (4.67%) 7.40% 8.90% 5.49%Leveraged Loans (3.45%) 4.00% 5.71% 3.02%
90
95
100
105
09/18 11/18 12/18 01/19 02/19 03/19 04/19
ICE BofAML High Yield S&P/LSTA Levered Loan 100 Index
Corporate Credit Market Dislocation
Source: Corbin, Bloomberg as of 4/30/2019. Please see Corbin endnotes and risk disclosures for important information. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Leveraged loans sold off sharply in November and December
Investors were likely selling as a result of interest rate views, not underlying credit concerns, which created an attractive buying opportunity via CLOs
Many managers viewed the performance in loans as technical in nature, which has seemingly been validated given the significant rally in leveraged loans and CLOs
Asset Allocation Implementation
2.06%
3.82%
High Yield vs. Leveraged Loan Performance
8
What Is Opportunistic Credit?
9Please see Corbin endnotes and risk disclosures for important information.
Asset sales: strategies focused on purchasing distressed assets from banks and other forced sellers
New loan originations: lending opportunities from difficulties in accessing capital
Orphaned markets: new regulatory requirements make many markets cost-prohibitive
Asset Sales: Post Financial Crisis (2009-2012)
Distressed
o U.S. Distressed (Corporate and Structured Credit)
o European Non-Performing Loans
Performing & Non Coreo Banks offload non-core lending platforms and
“scratch & dent” loan pools as they are typically uneconomic for banks to hold for regulatory reasons
Market Normalization: Fewer Market Participants
Withdrawals: Banks and insurance companies retreating due to regulation and non-bank entrants taking market share Examples:o Some asset classes orphaned by banks due to high
costs of regulatory capitalo Lack of market making and proprietary trading
increases returns for liquidity providerso Corporate: Transitional Bridge and Lower Middle Market Loans
o Commercial Real Estate (Acquisition)o Residential Mortgage, Auto (non-prime or non-QM)o Marketplace Lending
ORIGINALLY TODAY
Changes in credit markets coupled with regulatory pressures on banks have created attractive opportunities
Corporates Private Credit Structured Credit
Collateralized Loan Obligations (CLOs)
Asset-Backed Securities (ABS)
Residential Mortgage Backed Securities (RMBS)
CommercialReal Estate (CRE) and Commercial Mortgage Backed Securities (CMBS)
Sovereign/Government
Positioning Examples
Bank loans (leveraged loans)Bonds (High Yield, Investment Grade)Trade claimsOther distressed debt
Lower middle marketGrowth capexAcquisition loanTransition loan
Collateralized Debt Obligations (CDOs)Vintage multi-assetMarketplace lendingConsumerSmall Market Enterprise (SMEs)Student loans
Vintage CLO MezzanineNew issue (2.0)o Equityo Mezzanine
Leases, railcars, credit cards, planes, auto, etc.Esoteric ABS
Non-agency RMBSSubprime seniors Credit IOsWhole loansAgency MBS
CRE loanso Acquisition
FinancingCMBSo Vintage
Distressedo Post-crisis B-
pieces residuals
Government Sponsored Entities (GSE) deals
Sovereign debtEvent-Driven Distressed
Thesis Example
Senior-secured debt of both traditional and off-the-run issuers; good alpha and liquidity
One of the highest quality risk-rewards available by earning illiquidity premium. Equity-like return with credit-like risk profile
CDO’s discounted to underlying asset value due to the complexity premium of the CDO structure
Exposure to pools of corporate loans; structure provides cheap, non recourse term leverage
Portfolio of leases which have steady cash flows; the business exhibits debt-like characteristics
Benefits from demand for high yield assets with high credit enhancement and optionality on improved housing market
Privately originated or secondary debt and equity investment in high quality real estate assets
Sovereign debt of restructuring governments
Credit Investment Examples
10Please see Corbin endnotes and risk disclosures for important information.
Different Methods to Access Opportunistic Credit
Size of bubbles represent number of positions generally held in these types of funds; bubbles not drawn to exact size. Target returns represent targets over a full market cycle. Target returns and average life of asset statistics are based on Corbin estimates and are subject to change without further notice. Life of fund may exceed average life of asset. Please see Corbin endnotes and risk disclosures for important information. 11
Note: Life of fund may exceed average life of asset
0%
4%
8%
12%
16%
-1 0 1 2 3 4 5 6 7 8
Targ
et F
und
Retu
rn
Average Life of Asset (Years)
Typical Plan Actuarial Return
Open-Ended Opportunistic Credit Funds
(200+ positions)
Private Hybrid/Multi-Manager
(125-150 loans)
Single Private Credit Fund
(10-30 loans)
Mezz / Private Equity Fund
(25-35 positions)
Fixed Income
High Yield
(no loss)
Opportunistic Credit Characteristics
12Please see Corbin endnotes and risk disclosures for important information.
Niche
Patient Capital
Specialization
Premium
Idiosyncratic, off-the-run, higher barriers to entry and less-followed situations
Medium-duration, often self-liquidating
Rewarded for embedded structural complexity and illiquidity
Experience, expertise and deep knowledge of underlying assets required
Downside Protection Credit structures provide less volatility and risk than equity strategies
The continued search for yield has generated interest for credit investments that “fall between the cracks”
Opportunistic Credit Investing- Key Considerations
13Source: Corbin. Please see Corbin endnotes and risk disclosures for important information.
Characteristics to prioritize when evaluating credit opportunities
Neglected & Impaired Credit Market
Segments
Niche Segments & Situations Requiring
Specialized Knowledge, Expertise,
Deep Research
Capitalize on Changing Regulatory
Environment
Pricing Dislocation(definable supply > demand dynamics)
“Loan to Payback” not “Loan to Own”
Cash Flow Distributions
Downside Protection
Senior Structural Security
Appropriate Duration
Self-Liquidating Exits
Idiosyncratic & Macro Risks at Asset
Level/Tail Risks
Portfolio Correlation Benefits
Difficult to Source Ideas
Structural Complexity
Market Dynamics Structuring Considerations Holding Period Other
Minimize Execution, Operational, Legal,
Regulatory, Tax, Business Risks
Partner’s Experience/Expertise
(as needed)
Barrier to Entry/Complexity
Return Premium
0250500750
100012501500175020002250
9/07 9/08 9/09 9/10 10/11 10/12 10/13 10/14
Citi US CMBS AM Spread
Asset Class Example: CMBS Performance
14Source: Bloomberg as of 4/30/2019. Note: varying dates are due to data availability on Bloomberg. Please see Corbin endnotes and risk disclosures for important information.
Dynamic capital allocation is important given volatility in CMBS market
100
120
140
160
180
9/10 12/11 2/13 5/14 8/15 11/16 1/18 4/19
Bloomberg Barclays US CMBS AM/AJ Return
Bloomberg Barclays US CMBS AM/AJ Performance
+64%
Bloomberg Barclays US CMBS AAA Yield
1%
2%
3%
4%
9/10 12/11 2/13 5/14 8/15 11/16 1/18 4/19
Bloomberg Barclays US CMBS AAA Yield
Cumulative Return
Annualized Return
5-Year +13.1% +2.6%
7-Year +32.2% +4.2%
Citi US CMBS AM Spread
Asset Class Example: Collateralized Debt Obligations (“CDOs”) Example
15Source: Corbin, Citigroup. Please see Corbin endnotes and risk disclosures for important information.
Mortgage-Backed Security (“MBS”): CDOs are securities backed by mortgage loans to corporations that are selected by a credit manager, housed in a tiered structure and sold to investors
Static Pool of Selected Mortgage
Loans
Typical Structure for a Non-Agency Deal
UnratedSUB “Equity”
AAA “Bonds”
AA “Bonds”
A “Bonds”
BBB “Bonds”
Credit “Tranching”
Inve
stm
ent G
rade
SUB
Mezzanine Classes
BB “Bonds”
B “Bonds”
First-Loss Piece
Senior Class
Maturity “Tranching”
Collateralized Mortgage Obligation (“CMO”)
Bonds
Returns of Loans: Typically L+3% -5%
Inverse Interest Only (“IO”) Strip
Floater
Asset Class Example: Collateralized Loan Obligations (“CLOs”) Example
16
Source: Corbin, S&P, Wells Fargo “CLO Salmagundi: CLOs versus Corporate 8/14/15,” JP Morgan Dataquery CLOIE BB Yield‐to‐Maturity comparison to JP Morgan HY BB Yield‐to‐Maturity over the last 12 months. Expected Returns are estimated and may not reflect future performance. Corbin generally tends to invest in lower‐rated tranches. Lower‐rated tranches represent lower degrees of credit quality and pay higher spreads over treasuries to compensate for the attendant risks. Structured securities are extremely complex and are subject to risks related to, among other thing, changes in interest rates, the rate of defaults in the collateral pool, the exercise of redemption rights by more senior tranches and the possibility that a liquid market will not exist when a Corbin managed fund seeks to sell its interest in a structured security. The examples above are intended merely to be illustrative of the types of material CLO opportunities Corbin has recently decided to participate in. There is no assurance that any of these investments will be profitable or that these types of opportunities or other similar opportunities will present themselves going forward. Please see Corbin endnotes and risk disclosures for important information.
CLOs are securities backed by bank loans to corporations that are selected by a credit manager, housed in a tiered structure and sold to investors
Senior Secured
Bank Loans to
Corporations
CLO Manager
“Loan Purchaser”
Pool of Selected
Loans
CLO Investors
AAA “Bonds”(36.5% sub)
AA “Bonds”(24.5% sub)
A “Bonds”
(18.5% sub)
BBB “Bonds”
(12.5% sub)
BB “Bonds”(8.0% sub)
SUB “Equity”
Principal & Interest
Returns of Loans: Typically L+3.25% - 3.75%
CLO Manager actively trades portfolio
CLO “Mezz”: 8.75% – 9.50%
CLO “Equity”: 12% – 14%In
vest
men
t Gra
deSU
B
Average Cost of Debt: L+2.00%
BBB: 6.00% – 6.50%
A: 5.00% – 5.50%
AA: 4.25% – 4.50%
AAA: 3.50% – 4.00%
1-Year Forward Expected Return
AAA “Bonds”(36.5% sub)
AA “Bonds”(24.5% sub)
A “Bonds”
(18.5% sub)
BBB “Bonds”
(12.5% sub)
Asset Class Example: CLO Mezzanine Bond Performance
17Source: Bloomberg as of 4/30/2019. Please see Corbin endnotes and risk disclosures for important information.
Post-crisis CLO BB bonds have performed well
50
100
150
200
250
JPM CLO BB Post-Crisis Total Return
JPM CLO BB Post-Crisis Performance
+116%
6%
8%
10%
12%
14%
12/1
1
6/12
12/1
2
6/13
12/1
3
6/14
12/1
4
5/15
11/1
5
5/16
11/1
6
5/17
11/1
7
5/18
10/1
8
4/19
JPM CLO BB Post-Crisis Yield
JPM CLO BB Post-Crisis Yield
Cumulative Return
Annualized Return
5-Year +44.4% +7.6%
7-Year +92.9% +9.8%
Current yield:9.2%
Asset Class Example: Direct Lending Example
Source: Corbin. Please see Corbin risk disclosures and endnotes for important information.
As the need for liquidity remains, hedge funds and other non-bank lenders have filled the void
Often structured as transition lending, which is short-term financing used until a person or company secures permanent financing (1-3 years)
o Typically highly structured with high coupons, shorter durations and stronger covenants
Recent regulatory changes have limited bank lending activity, creating opportunities for non-bank lenders
BUSINESS
TRADITIONAL LENDING
BUSINESS
DIRECT LENDING
HEDGE FUNDS
Increased regulatory requirements have resulted in decreased lending activity by banks, despite projected new loan demands, creating attractive supply/demand imbalances
18
Asset Class Example: Commercial Real Estate Bridge Lending
19For illustrative purposes only. Please see Corbin endnotes and risk disclosures for important information.
Commercial real estate is often competitive, but shorter duration bridge lending can provide compelling, differentiated opportunities that are less sensitive to economic cycle risk
Shorter duration transition loans serve to bridge the gap until lenders can access cheaper financing from banks
12-24 months
Managers can provide bridge financing for land acquisition or through building
completion until bank will provide construction loan
or refinanced stabilized bank loan at more attractive rate
Overview:
Loan Originator underwrites and originates loans to borrowers seeking financing
SPV is created with strict borrower eligibility requirements to protect Corbin/partners against portfolio losses, also protected by equity cushion, with LTV based on company’s loss ratio
Corbin/partners exposed to default risk of underlying loans only if realized losses exceed equity cushion and interest profits in SPV
Asset Class Example: Specialty Finance
For illustrative purposes only; Corbin will generally work in concert with partners on specialty finance investments. Please see Corbin endnotes and risk disclosures for important information.20
We believe certain specialty finance deals may offer high quality returns and self-liquidating collateral to complement traditional private credit exposure
Loan Originator
Borrowers Interest and PrincipalLoan
Interest
First Loss Equity Cushion
Interest Income (“Excess Spread”)
Senior Secured Loan
SPV
Contribute loans
Senior Secured Loan
Q&A
21
1. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
2. Indices referenced herein are passive, and do not reflect any fees or expenses unless otherwise stated. While the performance of the Corbin funds discussed herein have been compared here with the performance of well‐known and widely recognized indices, the various indices may not represent an appropriate benchmark for the Corbin funds. The holdings of the Corbin funds discussed herein may differ significantly from the securities that comprise the various indices. Also, the performance and volatility of the indices may be materially different from that of the Corbin funds. Investors cannot invest directly in an index (although one can invest in an index fund designed to closely track such index). Index returns represent general market results, assume the reinvestment of dividends and other distributions, and do not reflect deduction for fees, expenses or taxes applicable to an actual investment.
3. The S&P 500 Index consists of 500 stocks chosen for market size, liquidity and industry group representation. It is a market‐value weighted index (stock price times number of shares outstanding), with each stockʹs weight in the Index proportionate to its market value. This Index does not reflect any fees or expenses.
4. The Bloomberg Barclays US Aggregate Bond Index represents securities that are US domestic, taxable and dollar denominated. The index covers the US investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass‐through securities and asset‐backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. This Index does not reflect any fees or expenses.
5. The ICE Bof AML US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market.
6. The Bank of America Merrill Lynch BB US High Yield Index is a subset of the Merrill Lynch High Yield Master II Index, including all securities rated BB1 through BB2, inclusive.
7. The Bank of America Merrill Lynch CCC & Lower US High Yield Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market.
8. The Barclays US Corporate High Yield Total Return Index measures the USD‐denominated, high yield, fixed‐rate corporate bond market. Securities are classified as high yield if the middle rating of Moody’s, Fitch and S&P is Ba1/BB+/BB+ or below.
9. The S&P/LSTA US Leveraged Loan Total Return Index is a market value‐weighted index designed to measure the performance of the US leveraged loan market based upon market weightings, spreads, and interest payments.
10. The CLO BB Portfolio Discount Margin is a JP Morgan Dataquery Index containing more than 600 underlying CLOs to demonstrate CLO market price action.
11. CMBS market performance is measured by the Bloomberg Barclays US CMBS: Agg‐Eligible – AM/AJ index. CMBS market yield is measured by the Bloomberg Barclays US CMBS AAA index. CMBS spread is measured by Citigroup Global Markets research.
12. Corbin will make direct investments and co‐investments. The scope, type, nature and/or amount of diligence that Corbin will perform with respect to these investments will differ depending on a number of factors, including how the investment opportunity has been presented to Corbin, the nature and structure of the investment and whether Corbin has been provided with access to independent information regarding the investment. In certain circumstances, including when co‐investments are made upon the advice or recommendation of, or alongside as a co‐investor with, or otherwise in partnership with or with the involvement of, third party investment managers, Corbin expects to rely heavily on the investment analysis and diligence conducted by the third party investment managers, and also expects to rely heavily on the third party investment managers for ongoing monitoring of such investments. In these circumstances, Corbin will review and assess the third party investment managers’ investment analysis and diligence that has been shared with Corbin, and Corbin will determine the extent to which it supplements such analysis and diligence with its own independent work. Corbin will also perform its own diligence on the third party investment managers, the scope, type, nature and/or amount of which may vary from depending on the circumstances. When Corbin has sourced a direct investment independently without the involvement of any third party investment managers, Corbin will conduct its own investment analysis and diligence, which also may vary depending upon the nature and structure of the investment, and Corbin will monitor such investments on an ongoing basis. In conducting its own investment analysis and diligence, Corbin may employ the services of third parties.
Corbin Endnotes
22
This presentation is for informational purposes only and does not constitute investment advice. This presentation does not constitute an offer to sell, or a solicitation of an offer tobuy, any interest in any investment vehicle, and should not be relied on as such. Nor does this presentation disclose the risks or terms of an investment in any investment vehiclemanaged by Corbin Capital Partners, L.P. or any of its affiliates. Solicitations can be made only with a Confidential Memorandum and only to qualified persons. Targets, rangesand expectations set forth in this presentation are approximations; actual results may differ.
Neither Corbin Capital Partners, L.P. nor any of its affiliates accepts any responsibility or liability arising from the use of this presentation. No representation or warranty, expressor implied, is being given or made that the information presented herein is accurate, current or complete, and such information is at all times subject to change without notice. Thispresentation may not be copied, reproduced or distributed without prior written consent of Corbin Capital Partners, L.P. By accepting this presentation, you acknowledge that allof the information contained in this presentation shall be kept strictly confidential by you.
Forward‐looking statements, including without limitation any statement or prediction about a future event contained in this presentation, are based on a variety of estimates andassumptions by Corbin Capital Partners, L.P., including, among others, estimates of future operating results, the value of assets and market conditions. These estimates andassumptions are inherently uncertain and are subject to numerous business, industry, market, regulatory, geo‐political, competitive and financial risks that are outside of CorbinCapital Partners, L.P.’s control. There can be no assurance that the assumptions made in connection with any forward‐looking statement will prove accurate, and actual results maydiffer materially. The inclusion of any forward‐looking statement herein should not be regarded as an indication that Corbin Capital Partners, L.P. or any of its affiliates considersforward‐looking statements to be a reliable prediction of future events.
Strategy classifications by Corbin Capital Partners, L.P. used throughout this presentation are subjective and may change at any time without notice. The strategy classificationinformation provided may not accurately correspond to your definition of certain investment strategies and in fact your definition may materially differ from ours.
With respect to the investment vehicles advised by Corbin Capital Partners, L.P. and the funds in which they invest (“underlying funds”):
Funds are speculative and involve a high degree of risk; the funds may be leveraged; the funds’ performance can be volatile; an investor could lose all or a substantial amount of hisor her investment; the fund managers have total trading authority over the funds; the use of a single advisor applying generally similar trading programs could mean lack ofdiversification and, consequently, higher risk; there is no secondary market for an investor’s interest in the funds and none is expected to develop; there may be restrictions ontransferring interests in the funds; the funds’ high fees and expenses may offset the funds’ trading profits.
The underlying funds trade a myriad of instruments. Changes in exchange rates may cause the value of an investment to increase or decrease. Some investments may be restrictedor illiquid, there may be no readily available market and there may be difficulty in obtaining reliable information about their value and the extent of the risks to which suchinvestments are exposed. Certain investments, including warrants and similar securities, often involve a high degree of gearing or leverage so that a relatively small movement inprice of the underlying security or benchmark may result in a disproportionately large movement, unfavorable as well as favorable, in the price of the warrant or similar security.In addition, certain investments, including futures, swaps, forwards, certain options and derivatives, whether on or off exchange, may involve contingent liability resulting in aneed for the investor to pay more than the amount originally invested and may possibly result in further loss exceeding the amount invested. Transactions in over‐the‐counterderivatives involve additional risks as there is no market on which to close out an open position; it may be impossible to liquidate an existing position, to assess the value of aposition or to assess the exposure to risk. Investors should carefully consider whether such investments are suitable for them in light of their experience, circumstances andfinancial resources.
This communication contains proprietary information for purposes of Section 101(k) of the United States Employee Retirement Income Security Act of 1974, as amended.
No information or communication provided herein or otherwise is intended to be, or should be construed as, a recommendation within the meaning of the U.S. Department ofLabor’s final regulation defining “investment advice.” Further, it is not intended for any such information or communication to be, and should not be construed as, providingimpartial investment advice.
There is no guarantee that the investment objectives of any investment vehicle managed by Corbin Capital Partners, L.P. will be met. Past performance is not necessarily indicativeof future results, and the value of investments and the income they might generate can fluctuate.
Risk Disclosures
23