true portfolio diversification
TRANSCRIPT
This presentation does not constitute an offer or solicitation of an offer for the purchase or sale of any securities.
The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in consideration of your overall financial condition. The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
In some cases, managed commodity accounts are subject to substantial charges for management and advisory fees. It may be necessary for those accounts that are subject to these charges to make substantial trading profits to avoid depletion or exhaustion of their assets. The disclosure document contains a complete description of the principal risk factors and each fee to be charged to your account by the commodity trading advisor (CTA). The regulations of the Commodity Futures Trading Commission (CFTC) require that prospective clients of a CTA receive a disclosure document at or prior to the time an advisory agreement is delivered and that certain risk factors be highlighted. This document is readily accessible from the CTA. This brief statement cannot disclose all of the risks and other significant aspects of the commodity markets. Therefore, you should proceed directly to the disclosure document and study it carefully to determine whether such trading is appropriate for you in light of your financial condition. You may request delivery of a hard copy of the disclosure document, which will be provided to you at no cost. The CFTC has not passed upon the merits of participating in this trading program nor on the adequacy or accuracy of the disclosure document. Other disclosure statements are required to be provided before a commodity account may be opened for you.
Past performance is not necessarily indicative of future results.
11
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
Executive Summary
Commodity Trading Advisor (CTA)
Trade 40+ liquid global futures markets
Lexington “Edge” includes:
Systems Research and Technology
Management Depth and Breadth
Diligent Risk Management
Trade based on systems, or algorithmsDesigned to profit from directional price movement
Focused on absolute, risk adjusted returns
2
Investment Strategy
Systematic, trend following
Disciplined, no EGO (emotion, greed or opinion)
No long or short bias
Profit potential in any economic or market environment
Asset allocation determined by the systems
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
3
Systems Research and Technology
Research firm that trades, not a trading firm that researches
Always looking for new, better and different systems
Determined by backtesting up to 30 years of dataEvaluated based on risk adjusted return and “robustness”
Current systems are a result of 20+ years of research
State of the art trading and research platform
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
4
Systems Research and Technology
Crude Oil Buy System
Our unique filter disallows the acceptance of trade entrysignals when market conditions are not favorable (red bars).The red “dotted” line represents stop levels where the tradewill exit.
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
5
Systems Research and Technology
Crude Oil Sell System
In this “sell” or short system, the filter allows trade signals during the periods shown as red bars. Again, the red dotted line represents the buy stop levels to exit the short trade.
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
6
Risk Management
Portfolio Risk Management
Stop loss orders for every trade
Systematic volatility adjustment
Deep and broad diversification
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
7
Risk Management
Intrinsic diversification among marketsExecutive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
8
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Total
-0.20%
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
1.40%
1.60%
Zinc Systems - 2008
We traded 26 different systems for Zinc in 2008. The return for each profitable system is less than 0.20% and somesystems produced a small loss. When aggregated, however, the overall return was over 1.4% (green bar).This diversification within each market is designed to produce superior returns, while minimizing the negative contribution from lagging systems.
Risk Management
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
9
There is risk of loss with trading commodities. Past performance is not necessarilyindicative of future results.
Risk Management
Operational Risk Management
Third party oversight for accounting & legal functions Accounting – Futures and Hedge Fund Services Audit – Spicer & Jeffries Legal – Henderson & Lyman
CFTC and NFA regulatory oversight and audits
Disaster recovery plan in place
Redundant trading platforms and backup trading personnel
Internal financial checks and balances
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
10
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2009 -0.99% 2.38% -8.10% -3.02% 8.22% -0.30% 0.67% 4.77% -0.71% 2.07%
2008 13.07% 18.55% -2.61% -6.14% 2.54% 0.65% -7.20% 0.31% 5.73% 22.90% 0.75% 0.76% 55.25%
2007 -1.27% -1.87% -4.25% 0.10% -4.84% 1.22% 3.19% -4.98% 9.27% 6.24% 0.79% 0.60% 3.23%
2006 -0.64% -0.04% -2.81% -3.47%
Performance
Past performance is not necessarily indicative of future results.
Lexington Keystone Trading Program
Performance is presented after all fees and expenses.
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
11
Inception to Date Annualized Return 16.45%Average Winning Month 5.13%Average Losing Month -3.11%Largest Winning Month 22.90%Largest Losing Month -8.10%# of Winning Months/Losing Months 20/16Annualized Sortino Ratio 1.49Calmar Ratio 1.02
Performance
Sep-06
Nov-06Jan
-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07Jan
-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08Jan
-09
Mar-09
May-09
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
S&P 500Lexington Keystone50/50
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
Past performance is not necessarily indicative of future results.
12
Performance
Lexington Keystone Dow Jones S&P 500 NASDAQ CRB Index
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%50.8%
-27.2%-31.2%
-21.4%-17.2%-15.4%
-49.3% -52.6% -51.8% -54.3%
Total Return Max DD
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
Past performance is not necessarily indicative of future results.
Total Return and Maximum Drawdown, Oct., 2006 - May, 2009
13
Management Biographies
Mark Helweg – Chief Research and Technology OfficerMark has been involved in futures trading, trading system development and CTA management since 1988. His engineering background serves as a foundation for the quantitative research methodology he uses to design and test superior trading systems. Mark has authored books and several articles regarding systematic futures trading. He is a graduate of the University of Memphis and earned a B.S. in Mechanical Engineering and a minor in Mathematics.
Rob Hounshell, CFA - President Rob has been a hands-on investment portfolio manager for over 20 years with various large financial institutions. He oversees and participates in all areas of Lexington Asset Management, and is also the principal trader. Rob is a graduate of Wake Forest University with a B.S. in Business, earned his MBA from Xavier University and holds the Chartered Financial Analyst (CFA) designation.
Sam Varner – Chief Marketing Officer Sam has performed various duties during his extensive managed futures career, including commodities research, new business development and administration. Sam’s focus with Lexington Asset Management is client acquisition and retention. Sam is a graduate of the University of Mississippi with a B.A. in Marketing.
Drew Day - Chief Operations Officer Drew leads the operational activities of Lexington Asset Management. He is responsible for compliance and operations management, human resources, accounting, and annual audits. He also assists with business development initiatives. He started his investment career with Landmark Asset Management in 2003. He also has served as a relationship manager and trainer for personal bankers at Branch Banking & Trust Co. Drew is a graduate of Union University with a Bachelor of Sciences in Business Administration degree in Management.
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
14
Terms and Contact Information
Executive Summary
Investment Strategy
Systems Research and Technology
Risk Management
Performance
Management Biographies
Terms and Contact Information
Investment Terms
• Management Fee 2%• Incentive Fee 20%• Hurdle Rate None• High Water Mark Yes• Lockup None• Entry Points Monthly• Redemptions Monthly• Notice Period for Redemptions 30 Days• Minimum for Keystone Fund $100,000• Minimum for Segregated Account $10 million• Current Assets Under Management $30 million
Contact Information
Rob Hounshell, [email protected] Office919.414.8678 Cellwww.lexingtonam.com
15