FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

WORLD VIEWS OF INVESTMENT MANAGEMENT

2

The World is Flat

Prudent Man Rule

The World is Round

MPT and 60/40 Allocation

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

MODERN PORTFOLIO THEORY

3

Traditional60/40 Allocation

A popular 1986 study found that the policy mix or asset allocation explained 93.6% of the portfolio variation. Most advisors built their advisor practice around the study.

MPT (Modern Portfolio Theory) was developed in the 1950’s. The emphasis is on diversification, combining different non-correlating asset classes and assets are mixed for the best risk and return trade-off.

MPT - Harry Markowitz won a Nobel Prize for its acceptanceAsset Allocation - Brinson, Singer Bebower Study 1986

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

PROBLEM 1: RECENT INVESTOR EXPERIENCE

-50% -56%

+100%

+80%

Secular Bear Market Example 1999 - Present

A static 60% Asset Allocation to Stocks is Hard to Maintain and has NOT Provided Success to Investors

Why have the Same allocation to Stocks when the PE ratio is 20X versus 12X?

4

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

InternetBubble

Cumulative returns of Russell 1000 from January 1, 1995

Growth Stocks

THE PAST HAS NOT FAVORED LONG ONLY, INDEX BASED INVESTING

And Bust

PROBLEM 1: RECENT INVESTOR EXPERIENCE

0

50

100

150

200

250

300

350

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

5

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

Loss AversionKeeps People InvestedFor Their Long Term Goals

Loss Gain

Pleasure

Pain

SmallPleasure

BigPain

People React Emotionally to Losses Twice as Much as they do to Gains

PROBLEM 2: HUMAN BEHAVIORWe are wired to think differently about gains and losses

Source: Amos Tversky and Daniel Kahneman, 1992 – Nobel Prize Awarded in 2002

6

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

11.9%

3.0%3.9%

9.7%

1.8%

Barclays U.S. AggregateBond Index

Averagebond-fundinvestor

Investors have under-performed benchmarksIndex returns are not investor returns as timing and emotion play a large part

Averagestock-fundinvestor

InflationS&P 500

Source: DALBAR

Annualized Returns1986–2005

PROBLEM 2: HUMAN BEHAVIOR

7

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.8

0.50

0.92

0.83

Correlation to S&P 500High correlation 1.0

GSCI Commodity Index

Source: International Traders Research Data thru 2009

3 Year Correlation

0.09

0.53

0.72

20 Year Correlation

PROBLEM 3: INVESTMENTS ARE BECOMING MORE CONNECTEDA Better Balance is Needed

EAFE – International Stocks

Real Estate Investment Trusts

No correlation 0.0

8

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

Most of the portfolio movement is not caused by asset allocation but by the market movement itself. In the Ibbotson analysis, upwards of three quarters (75%) of a fund’s variation is caused by market movements.

If we know now that both the friend and enemy to investing is market movements, then that is where we should be focusing our efforts and energy.

Solution – Become More Flexible with Asset Allocation.Hire managers that demonstrate ability to move

between sectors within their discipline.

"The time has come for folklore to be replaced with reality“ Roger G. Ibbotson

Source of Study: The Importance of Asset Allocation, Roger G. Ibbotson, Financial Analysts Journal, Volume 66, Number 2

9

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.Source: Yale Endowment, 2007

Where can I find non-correlating investments?

MODERN ASSET ALLOCATION So what is an investor to do?

Institutional Investors have fared MUCH better during the recent Bear Market

10

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

The World is Not Flat

It is Not Round

The post-modern asset allocation is one third each:one third long-only stock, one third long-only bond and one third flexible

(absolute return, long-short, commodity and alternatives)

Source: John Mauldin

11

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

ASSET ALLOCATION IN THE NEW ORDER OF THE WORLD American Independence Product Offerings

One Third: Long-Short, Flexible, Non-Traditional Strategies

One Third:Long-Only Equity

One Third:Long-Only Fixed Income

American IndependenceTotal ReturnFixed Income

American IndependenceLarge – Cap Value

Large – Cap GrowthTarget Date “Nest Egg”

American IndependenceBull/Bear Fixed Income, Fusion Fund, TIPS Fund

12

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

HOW CAN WE HELP YOU AND YOUR PRACTICE?

Experienced Investment Teams and Firm Management Active Management Return Oriented in both Fixed Income and Equity Consistent Alpha Production in Key Asset Classes Transparent, High Quality and Liquid Portfolios Traditional Core and Non-traditional programs

What are the Largest Questions in Investment Management Today?

Where are Interest Rates Going? Inflation / DeflationHow Do I Analyze and Value Financial Stocks?

American Independence has solutions to these questions!

13

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

AMERICAN INDEPENDENCE

• Assets under management are approximately $1 billion

• American Independence Fund family is currently comprised of 15 funds featuring the Stock Fund:

Morningstar’s July 11, 2010, “Large Cap Funds on Winning Streaks”, lists the Stock Fund as one of 9 funds that have beaten the S&P 500 Index in successive years since 2005.

First in its Morningstar category for 3 year performance (1241 managers), second for 5 year (1153 managers) and first for ten year (839 managers) as of July, 2010

• Nest-Egg Target Date Funds and Traditional Core Disciplines

• Alternative Fixed Income and Equity Strategies

• AIFS has a strong SMA business featuring the Total Return Bond, Absolute Return Bull/Bear tactical fixed income strategies, Value and Growth portfolios.

14

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.

THANK YOU FOR YOUR INTEREST IN AMERICAN INDEPENDENCE

15

PEOPLE

PHILOSOPHY

PROCESS

PEOPLEPERFORMANCE

Contact:

American Independence Financial Services

335 Madison Avenue, MezzanineNew York, NY 10017Direct: 646.747-3477

Toll-Free: 800.985.8984

www.americanifs.com

FOR INVESTMENT PROFESSIONAL USE ONLY.

NOT TO BE USED WITH THE GENERAL PUBLIC.16