water and power employees’ retirement plan...2. source: aip hedge fund solutions team & hfr...
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Confidential - For the Exclusive Use of Water and Power Employees’ Retirement Plan
Water and Power Employees’ Retirement Plan Hedge Fund of Funds – Convergent Portfolio Investment Manager Presentation August 31, 2017 November 8, 2017 Meeting
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Confidential - For the Exclusive Use of Water and Power Employees’ Retirement Plan
Table of Contents
Company Overview Section 1
Investment Team Section 2
Hedge Fund Market Environment Section 3
Investment Approach Section 4
Review of Mandate • Performance • Portfolio Construction • Compliance
Section 5
Additional Information • Key Contacts • Fee Schedule • Glossary
Appendix A
Confidential - For the Exclusive Use of Water and Power Employees’ Retirement Plan
Company Overview
SECTION 1
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Morgan Stanley Overview
AUM as of June 30, 2017. Fund of Fund assets represent assets under management and assets under supervision. Direct private investing assets represents the basis on which the firm earns management fees, not the market value of the assets owned.
James Gorman – Chairman and Chief Executive Officer
Colm Kelleher President of Morgan Stanley
Investment Management Dan Simkowitz
Wealth Management
Institutional Securities Group
Years of History 40+
Total AUM $435Bn
Investment Professionals 586
Investment Teams 27
Countries 20
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Morgan Stanley Investment Management (“MSIM”)1
Total AUM
$435Bn
1. AUM figures within each business line may not sum to total AUM due to rounding. Data as of June 30, 2017. Fund of Fund assets represent assets under management and assets under supervision. Direct private investing assets represents the basis on which the firm earns management fees, not the market value of the assets owned.
$58Bn SOLUTIONS & MULTI-ASSET
• Portfolio Solutions • Global Multi-Asset • Hedge Fund Solutions • Managed Futures • Applied Equity Advisors • Fundamental Equity Advisors • Private Structured Credit
Solutions
$94Bn ACTIVE FUNDAMENTAL EQUITY
• International Equity • Growth • Global Emerging Markets • European Equity
$47Bn REAL ASSETS
• Global Listed Real Assets • Private Real Estate Investing • Private Infrastructure
$16Bn PRIVATE CREDIT & EQUITY
• Credit Partners • Private Equity Asia • Capital Partners • Expansion Capital • Energy Partners • AIP Private Markets • Tactical Value Investing
$154Bn GLOBAL LIQUIDITY
• Money Markets • Ultra-Short Income
$66Bn GLOBAL FIXED INCOME
• U.S. Fixed Income • Global Fixed Income • Emerging Markets Debt • European Fixed Income
Investment Expertise Across Public and Private Markets
$23.3 B
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AIP Hedge Fund Solutions Overview
• Flexible and innovative approach to partnering with clients • $23.3 billion in assets under management and advisement1 • One of few platforms to experience significant organic AUM growth since 20082
• Ranked among the top ten fund of hedge funds according to InvestHedge Billion Dollar Club Survey3
AIP Hedge Fund Assets ($ Millions) AUM of FOHF2 Industry ($ Billions)
1. Data as of June 30, 2017. AIP Hedge Fund Group’s hedge fund’s total assets comprises approximately $13.6 billion assets under management (“AUM”) and approximately $9.7 billion assets under advisement
2. Source: AIP Hedge Fund Solutions Team & HFR Global Hedge Fund Industry Report –Second Quarter 2017 (FOHF Industry Assets) 3. As reported by Hedge Fund Intelligence on March 6, 2017 with data as of December 31, 2016
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AIP Hedge Fund Assets (Left Hand Side & Bars) FOHF Industry Assets (Right Hand Side & Line)
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Organizational Chart
Operational Due Diligence
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Mark van der Zwan, CFA CIO and Head of AIP Hedge Fund Solutions Team
Investments 27
Risk & Quantitative Analysis
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Client Engagement
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Operations 18
As of June 30, 2017 Headcount figures include group heads. CIO included in Investments headcount, COO included in Operations. Gray boxes reflect shared resources.
Dedicated Team of 64 Professionals Based in New York, West Conshohocken, London, Mumbai and Tokyo
Information Technology
Product Development Operations
Compliance Legal Human Resources
Marketing Tax
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Assets by Investment Type Assets by Client Type Assets by Geography
A Highly Diverse Client Base (1)
42%
43%
7% 8%
73%
25% 31%
69% Custom
Advisory
Strategy- Specific
Multi- Strategy
Institutional
High Net Worth
Internal, 2% Other, 1%
Rest of World
North America
1. Data as of June 30, 2017.
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% Funds (2) by Investment Style % Funds (2) by Firm AUM
Key Platform Statistics
• ~66% of our manager relationships have a fee discount, an MFN, favorable liquidity terms, or a combination thereof
• 17% of approved managers are hard-closed
• ~9 managers covered per analyst
% Funds (2) by Regional Focus (Look-Through)
Broad Investable Universe of 172 Managers (1)
Long/Short Equity 30.2%
CTA/Managed Futures 8.7%
Macro 15.1%
Event Driven 18.6%
Relative Value 20.3%
Multi-Strategy 7.0%
13.4%
8.7%
22.1%
14.0%
41.9%
<$1Bn
$1 – 2Bn
$2 – 5Bn
$5 – 10Bn
>$10Bn
28.6%
71.4%
1. As of August 1, 2017. Based on all approved funds. 2. Diversification does not eliminate the risk of loss.
North America
Rest of World
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AIP Awards and Recognition (1)(2)
2016
HFMWeek
Riverview Global Macro Fund = 2016 Best Fund of
Hedge Funds Overall
2016
AIP Macro Registered Fund = 2016 Best Fund of Hedge Funds
40 Act-Compliant Strategy
2016
InvestHedge
Morgan Stanley Opportunistic Fund (3) Winner – Global Multi-Strategy Fund (Three Years)
2015
InvestHedge
Winner – 2015 Group of the Year
2015
InvestHedge
Riverview Global Macro Fund, Winner – 2015 Global Macro
Award (Five Years)
2015
InvestHedge
Morgan Stanley Opportunistic Fund (3), Winner – Global Multi-
Strategy Fund (Five Years)
2015
Hedge Funds Review
AIP Absolute Return Fund, Winner – Best Diversified Fund
of Hedge Funds (One-Year)
2014
Hedge Funds Review
Winner – 2014 Best Overall Fund of Hedge Funds Group and
Best Bespoke Fund of Hedge Fund Provider
2014
InvestHedge
AIP Global Macro Fund, Winner – 2014 Global Macro and Managed Futures Award
2014
Hedge Funds Review
Morgan Stanley Opportunistic Fund (3), Winner – 2014 Best Diversified
Fund of Hedge Funds (Three-Years)
2014
HFMWeek
AIP Select Mortgage Fund, Winner – 2014 Best Fund of
Hedge Fund Newcomer
2013
InvestHedge
Winner – 2013 Group of the Year Award (Five-Years)
2013
HFM Awards
Morgan Stanley Opportunistic Fund (3), Winner – 2013 Best
Fund of Funds Overall
2013
InvestHedge
AIP Global Macro Fund, Winner – 2013 Global Macro and Managed Futures Award
HFMWeek
1. For illustrative purposes only. Past performance is not indicative of future results. Please see the important disclaimers at the end of this Presentation. 2. As of June 30, 2017 3. Effective October 1, 2016, the fund’s name changed to Riverview Opportunistic Fund LP This is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy or fund. The terms of any investment shall be governed by definitive agreements. Any decision to invest should be made solely in reliance upon such agreements.
Confidential - For the Exclusive Use of Water and Power Employees’ Retirement Plan
Investment Team
SECTION 2
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Summary of Key Strengths – AIP Hedge Fund Team
1. RESOURCES
• 64 professionals
• Five teams dedicated by function
– Portfolio Management
– Investment Analytics
– Quantitative Analysis
– Operational Due Diligence
– Middle Office functions
2. EXPERIENCE AND ORGANIZATION
• Seven portfolio managers, with average 19 years of experience
• Specialized by strategy; knowledgeable across sectors
• Independent research combines with collaborative decision making
3. ALIGNMENT OF INTERESTS
• Compensation is tied to investment performance
• Formal revenue share agreement with parent
1. As of June 30, 2017.
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Eban Cucinotta: Head of Quantitative Research
Patrick Reid, CFA: Portfolio Advisor
Peter Vasiliadis: Head of ODD
Christopher Morser, CFA: Head of Portfolio Advisor Group
Matthew Graver: COO
Radha Thillainatesan, CFA*: Portfolio Manager
Jarrod Quigley, CFA*: Portfolio Manager
Lawrence Berner, CFA*: Portfolio Manager
Eric Stampfel, CFA, CAIA, CMT*: Portfolio Manager
Paresh Bhatt*: Portfolio Manager
Jose Gonzalez-Heres, CAIA*: Portfolio Manager
Mark van der Zwan, CFA*: CIO
Years with AIP HFS Years of Prior Experience Total
Stability of Key Personnel Helps Foster a Strong Investment Culture
* Denotes member of the Investment Committee As of June 30, 2017 The statements above reflect the opinions and views of the AIP Hedge Fund Solutions Team as of the date hereof and not as of any future date and will not be updated or supplemented. All forecasts are speculative, subject to change at any time and may not come to pass due to economic and market conditions. . .
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Hedge Fund Market Environment
SECTION 3
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(30%)
(20%)
(10%)
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1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016
Active vs. Passive Outperformance Over Time % of Large Blend Managers Outperforming vs. Long-term Average
Rolling 3-Year data as of December 31, 2016
Source: Morgan Stanley, Bloomberg, Factset. Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
Active Outperforms: Interest rate at a then-record low of 5%...
Active Outperforms: 17 consecutive interest rate hikes from 2004 to 2007...
Active Outperforms: Financial crisis of 2007-2008
Active Outperforms: Collapse of the tech bubble, early 2000s recession and 9/11...
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2012 2013 2014 2015 2016 2017
November 7, 2016
Dramatic Drop in Correlations May be Significant for Hedge Funds Morgan Stanley Global Correlation Index (January 2012 – June 2017)
(%)
Source: Bloomberg
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Current Market Environment
AIP EXPECTATION STRATEGY IMPACT
• Delays in execution of Trump policies may lead to increased market volatility Equity Long/Short
High Hedge
Macro
• CBOE Volatility Index (VIX) may spike from recent lows
– Average of 11.43% in Q2 2017 was lowest quarterly average since 2006
Equity Long/Short High Hedge
Macro
• Decline in equity markets correlations potentially reverses
– Lowest since 2000, last time was this low was 2007, just preceding financial crisis
Equity Long/Short High Hedge
Macro
• Elevated levels of global mergers and acquisition volumes persist due to improved regulatory environment and slow organic growth conditions
Event Driven Equity
Merger/Risk Arbitrage
Equity Long/Short Opportunistic
Event Driven Credit
Event Driven Credit
Event Driven Equity
Equity Long/Short Opportunistic
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Investment Approach
SECTION 4
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An informed market view coupled with top-down strategy analysis can refine portfolio strategy • Strategic weightings • Tactical shifts Identifying the sources of hedge fund returns is the best way to identify alpha-producing managers • Quantitative analysis • Qualitative analysis Each hedge fund must offer attractive risk / reward potential • Stand-alone investment • Portfolio level
Investment Philosophy
The statements above reflect the opinions and views of the AIP Hedge Fund Solutions Team as of the date hereof and not as of any future date and will not be updated or supplemented. All forecasts are speculative, subject to change at any time and may not come to pass due to economic and market conditions.
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Investment Process
Review and re-evaluate
• Manager-level
• Portfolio-level
• Risk triggers
– Quantitative
– Qualitative
• Investment Committee action
Identify potential investments
• ~6,800 fund return streams screened by our proprietary monitoring system
• ~1,700 funds actively monitored
• ~200 funds analyzed in-depth each year
• ~35 funds approved for investment each year (3)
Combine top-down and bottom-up views
• Attribution
• Forecasting
• Optimization
• Investment Committee Review
Evaluate and decide
• Four phase manager selection process
1. Identify
2. Determine suitability
• Quantitative assessment
• Investment due diligence
• Operational due diligence
3. Conduct due diligence
4. Complete due diligence
Monitoring
Sourcing
Investing
Analyzing
1. Subject to confidentiality obligations, information barriers established by Morgan Stanley to manage potential conflicts of interest, and applicable allocation policies. 2. As of June 30, 2017. 3. Subject to available capacity. The statements above reflect the opinions and views of the AIP Hedge Fund Solutions Team as of the date hereof and not as of any future date and will not be updated or supplemented. All forecasts are speculative, subject to change at any time and may not come to pass due to economic and market conditions
Confidential - For the Exclusive Use of Water and Power Employees’ Retirement Plan
Review of Mandate
SECTION 5
• Performance
• Portfolio Construction
• Compliance
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Convergent Portfolio – Summary Overview
• Key overall hedge fund program guidelines
– Enhance the Plan’s long-term risk-adjusted total return
– Add diversification benefits to overall investment program
– Hedge against long-term liabilities (inflation)
– Absolute return orientated, while emphasizing preservation of capital
– Implement via the construction of two separate complimentary hedge fund portfolios: Convergent & Divergent
– Transparency – 100% on Risk Metrics
• Mandated characteristics of the Convergent Portfolio are
Water and Power Convergent Fund Ltd. is a Cayman Islands based hedge fund of one portfolio, created specifically for WPERP, and referred to as the “WPERP Portfolio” in this presentation
CONVERGENT
Return Objective 90-day T-BilI index+ 3% over a full market cycle
Volatility Medium to low, 5% standard deviation over full market cycle
Correlation 0.7 or less to Russell 3000 and MSCI ACWI Ex U.S.
Leverage None at portfolio level; 2x aggregate max. in underlying HFs
Liquidity 12 mos. max. for full redemption; and/or avg. of 6 mos.
Diversification Max. single manager 10% (at cost) or 14% (at mkt) Max. new emerging manager 5% (at cost) or 7% (at mkt)
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5.28%
6.07%
1.34% 1.66%
4.74% 5.26%
0.57% 0.88%
2.50%
3.64% 3.31% 3.27%
0%
1%
2%
3%
4%
5%
6%
7%
YTD One Year Three Years Since Inception
Since inception 3/1/2014 Gross and Net of fees1
1. Net of fees returns are estimated, unaudited and based upon information received from underlying funds or their service providers as of the date above. Prior month returns are based on the reported net asset value and will not be changed in future months for subsequent non-material revisions to estimated valuations received from underlying managers. If such revisions have a material impact on a prior month’s net asset value, the net asset value, unit value and monthly return will be restated. Otherwise, prior month valuation revisions will be accounted for in the current month’s net asset value and return. No assurance can be given that any positive return can be achieved by Water and Power Convergent Fund Ltd. and past performance may not be indicative of future results.
WPERP Portfolio Gross Citigroup US Treasury Bills Index +3% WPERP Portfolio Net
Gross and Net Performance as of August 31, 2017
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Performance Track Record (%) As of August 31, 2017
Comparative Performance
1. Net of fees returns are estimated, unaudited and based upon information received from underlying funds or their service providers as of the date above. Prior month returns are based on the reported net asset value and will not be changed in future months for subsequent non-material revisions to estimated valuations received from underlying managers. If such revisions have a material impact on a prior month’s net asset value, the net asset value, unit value and monthly return will be restated. Otherwise, prior month valuation revisions will be accounted for in the current month’s net asset value and return. No assurance can be given that any positive return can be achieved by Water and Power Convergent Fund Ltd. and past performance may not be indicative of future results.
For the Period March 1, 2014 (Inception) – August 31, 2017 YTD 2017 (%) ONE-YEAR (%) THREE YEARS (%)
ANNUALIZED SINCE INCEPTION (3/1/2014)
(%)
WPERP Portfolio – Gross 5.28 6.07 1.34 1.66
WPERP Portfolio – Net 4.74 5.26 0.57 0.88
Hedge Fund Benchmark
HFRI FoF Conservative Index 2.44 4.53 1.67 1.77
Benchmarks
Citigroup 3M U.S. Treasury Bill Index + 3% 2.50 3.64 3.31 3.27
Barclays US Aggregate Index 3.63 0.49 2.64 3.05
MSCI AC World Index 15.03 17.11 5.58 6.68
Russell 3000 TR Index 11.20 16.06 9.08 10.04
S&P GSCI Commodity Total Return Index (6.85) 2.60 (22.04) (20.19)
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YEAR
2014 Net (0.67) (0.51) 1.22 1.40 (0.52) 0.48 (0.21) (1.19) 0.70 (0.03) 0.64
2015 Net (0.36) 1.92 0.94 0.38 0.73 (0.78) (0.45) (1.14) (2.20) 0.13 (0.43) 0.12 (1.20)
2016 Net (2.11) (1.16) (0.01) 0.24 0.65 (0.33) 1.13 0.15 0.17 0.29 (0.35) 0.40 (1.00)
2017 Net 1.05 0.74 0.55 0.15 1.22 (0.54) 0.87 0.62 4.74
NAV: $95,890,504
Number of Funds: 22
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• Each of the six strategies produced positive results in the period
• Event Driven Equity funds impacted by strong performance by Third Point (+13.4%) and Sachem Head (10.6%).
• Statistical arbitrage funds generated strong alpha led by Renaissance (+10.6%)
• Equity Long/Short Opportunistic and Equity Long/Short High Hedge funds profited from advance in global equity markets.
For the Period January 1, 2017 to August 31, 2017
Strategy Level Performance and Attribution – YTD 2017 WPERP Portfolio
YTD 2017
IMPACT (%) RETURN (%)
Event Driven Equity 1.35 12.39
Statistical Arbitrage 0.98 7.73
Equity L/S High Hedge 0.91 5.29
Equity L/S Opportunistic 0.87 2.79
Mortgage Arbitrage 0.58 5.82
Multi Strategy 0.54 6.03
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Relative Value 42.3% Equity L/S High Hedge 13.6% Statistical Arbitrage 13.4% Mortgage Arbitrage 11.1% Relative Value Credit 1.9% Fixed Income Arbitrage 1.8% Convertible Arbitrage 0.4%
Event Driven 13.5% Event Driven Equity 10.4% Merger / Risk Arbitrage 2.3% Private Placements 0.4% Event Driven Credit 0.2% Distressed 0.2%
Directional 36.6% Equity L/S Opportunistic 33.4% CTA/Managed Futures 1.3% Other Directional 0.8% Macro 0.7% Commodities 0.5%
Cash and Other 7.6%
NAV: $95,890,504
Number of Funds: 22
Strategy Allocation
Strategy Allocation (1)
As of August 31, 2017
WPERP Portfolio
42.3%
13.5%
36.6%
7.6%
1. The percent of net asset value is determined by dividing the value of investment in an underlying fund by the net asset value as of the date above. Water and Power Convergent Fund’s actual portfolio may vary from that described above, not all of the strategies listed above may be utilized at any given time, and additional strategies not listed above may be utilized by Water and Power Convergent Fund at any given time. The chart above includes investments in Multi-Strategy funds, which invest in more than one strategy at any given time. Multi-Strategy funds are not included as a separate strategy. Rather, Morgan Stanley AIP GP LP attempts to “look through” to the strategies of these funds’ holdings, relying on strategy breakdowns from managers of the underlying Multi-Strategy funds when such strategy breakdowns are provided by such managers and otherwise attempting to estimate such strategy breakdowns internally when breakdowns are not provided by such managers.
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Geographic Allocation
Geographic Allocation
As of August 31, 2017
WPERP Portfolio (1)
76.0%
11.0%
4.7%
8.3%
North America
Developed Europe
Emerging/Other Regions
Developed Asia
1. Water and Power Convergent Fund Ltd. does not maintain a predetermined target allocation to U.S. and non-U.S. markets, and there is no guarantee that the assets will be allocated in the manner described above at any time other than the preceding “as of” date. Regional allocations exclude cash.
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Portfolio Holdings
WPERP PORTFOLIO (8/31/17) STRATEGY % OF NAV Third Point Offshore Fund, Ltd. Event Driven Equity 7.50 Millennium International, Ltd. Equity L/S High Hedge 6.13 Renaissance Institutional Equities Fund International L.P. Statistical Arbitrage 6.03 Anchor Bolt Offshore Fund, Ltd. Equity L/S Opportunistic 5.75 Citadel Kensington Global Strategies Fund Ltd. Multi Strategy 5.20 Shelter Growth Opportunities Fund Ltd. Mortgage Arbitrage 5.19 Atlas Enhanced Fund, Ltd. Equity L/S Opportunistic 4.98 Atlas Fundamental Trading Fund, Ltd. Equity L/S High Hedge 4.90 Sachem Head Offshore Ltd. Event Driven Equity 4.40 Shellback Offshore Fund, Ltd. Equity L/S Opportunistic 4.30 Pleiad Asia Offshore Feeder Fund Equity L/S Opportunistic 4.03 HBK Multi-Strategy Offshore Fund Ltd. Multi Strategy 4.01 Citadel Global Equities Fund Ltd. Equity L/S High Hedge 3.86 GSA QMS Fund Limited Statistical Arbitrage 3.33 HBK Quantitative Strategies Offshore Fund L.P. Statistical Arbitrage 3.14 Spitfire Qualified Fund Ltd. (The) Equity L/S Opportunistic 3.09 SPM Core Offshore Fund, Ltd. Mortgage Arbitrage 3.07 Tide Point Offshore Fund, Ltd. Equity L/S Opportunistic 3.04 Castle Hook Offshore Fund Ltd. Equity L/S Opportunistic 2.97 Ailanthus Capital Partners (QP), Ltd. Equity L/S Opportunistic 2.94 Quentec Fund, Ltd. Equity L/S Opportunistic 2.56 Rimrock Structured Product (Cayman) Fund, Ltd. Mortgage Arbitrage 1.95
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WPERP Portfolio For the Period March 1, 2014 (Inception) to August 31, 2017
Annualized Performance (Net of Fees) 0.88%
Annualized Volatility (Realized) 3.05%
Sharpe Ratio 0.21
Sortino Ratio 0.30
Maximum Drawdown -7.79%
Liquidity 100% in 12 months2
Leverage (Underlying Managers) 1.9x
Correlation to Russell 3000 Index 0.53
Correlation to MSCI All Country World Ex-USA Index 0.62
Beta to Russell 3000 Index 0.16
Beta to MSCI All Country World Ex-USA Index 0.16
Annualized Volatility of Russell 3000 Index 9.92%
Annualized Volatility of MSCI All Country World Ex-USA Index 11.73%
Maximum Drawdown of Russell 3000 Index -8.80%
Maximum Drawdown of MSCI All Country World Ex-USA Index -20.85%
1. Source: MSCI Riskmetrics, based on 1-day VaR 95% confidence interval. 2. Plus an additional three months for processing.
Risk Characteristics
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For the Period March 1, 2014 (Inception) to August 31, 2017
BOARD OF ADMINISTRATION OF THE WATER AND POWER EMPLOYEES' RETIREMENT PLAN (ON BEHALF
OF THE RETIREE HEALTH BENEFITS FUND)
WATER AND POWER EMPLOYEES(1)
RETIREMENT PLAN
Beginning Capital $0 $0
Contributions $13,000,000 $80,000,000
Withdrawals $0 $0
Net Contributions $13,000,000 $80,000,000
Portfolio Net Return $404,049 $2,486,455
Market Value (August 31, 2017) $13,404,049 $82,486,455
Change in Market Value Summary
1. AIP total $AUM managed in discretionary HFoF portfolios at 6/30/17 totaled approximately $13.6 billion (of this amount $10.2 billion was in portfolios customized to meet individual client needs). The WPERP portfolio represents 0.7% of $13. billion.
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As of August 31, 2017 MANDATE METRICS METRIC TEST STATUS 8/31/17 VALUE
Largest single fund at cost <= 10% 6.5%
Largest single fund at market value <= 14% 7.5%
Largest emerging manager at cost <= 5% 4.8%
Largest emerging manager at market value <= 7% 5.2%
Weighted average underlying hedge fund investment leverage <= 2x 1.9
Leverage at the portfolio level <= 1x None
Funds liquid within 15 months (additional 3 months for processing) = 100% 100.00%
Weighted average liquidity (days) <= 180 154.7
Macro Strategies Not Predominate 0.7%1
Commodity Strategies Not Predominate 0.5%1
CTA/Managed Futures Strategies Not Predominate 1.3%1
Portfolio Volatility <= 5% 3.1%
Correlation to Russell 3000 TR Index <= 0.70 0.53
Correlation to MSCI AC World ex-US Index <= 0.70 0.62
Investment Guidelines and Compliance
Legend: in compliance; out of compliance.
1. Allocation results from look through to multi strategy funds. There is no direct Macro, Commodities or CTA/Managed Futures exposure.
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Additional Information
APPENDIX A
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RELATIONSHIP MANAGEMENT
Dan Gifford Head of Client Service
100 Front Street West Conshohocken, PA 19428 610.260.7617
Dan McHale Executive Director
100 Front Street West Conshohocken, PA 19428 610.260.7363
PORTFOLIO MANAGEMENT
Jose Gonzalez-Heres, CAIA Lead Portfolio Manager
100 Front Street West Conshohocken, PA 19428 610.260.7622
Key Contacts for WPERP
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• Morgan Stanley AIP earns a fixed per annum fee of 77 bps for the management of the WPERP hedge fund of funds portfolio
Fee Schedule
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Annualized Volatility represents the standard deviation of monthly returns since inception.
Beta represents the Portfolio’s volatility relative to the market. A beta of greater than 1.0 indicates that the Portfolio is more volatile than the market, and less than 1.0 is less volatile than the market. A negative beta indicates the Portfolio volatility has an inverse relationship to the market.
Correlation represents the statistical relationship between the movement of the Portfolio’s net returns and the stated variable.
Cyclically Adjusted Price / Earnings Ratio uses smoothed real earnings to eliminate the fluctuations in net income caused by variations in profit margins over a ten year period.
Price / Earnings Ratio is calculated as the stock price divided by earnings per share.
Sharpe Ratio is a risk-adjusted measure developed by William F. Sharpe, calculated by dividing the Portfolio ’s excess return relative to the risk-free rate (defined as the rate of return of the Citi Three-Month U.S. Treasury Bill Index) by the standard deviation of the Portfolio’s return.
Sortino Ratio is a risk-adjusted measure developed by Brian M. Rom, calculated by dividing the Portfolio’s excess return relative to the risk-free rate (defined as the rate of return of the Citi Three-Month U.S. Treasury Bill Index) by the downside deviation of the Portfolio’s return.
Glossary of Investment Terms
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Additional Disclaimers HFMWeek US Hedge Fund Performance Awards, October 2016. The judging panel comprises representatives from HFM, leading institutional and private investors and industry experts. Judging decisions will be based on performance, qualitative information and structural criteria. This InvestHedge Awards, September 2016. For the InvestHedge risk-adjusted performance related awards, funds of hedge funds must submit performance data to the InvestHedge database with no pro-forma data. The three-year awards will run from July 2013 to June 2016, while the 10-year awards will run from July 2006 to June 2016. Nominations are primarily decided by those funds that achieve the strongest Sharpe Ratios for the period under review, so long as they also beat the median returns in their relevant peer groups. The eventual winners will be the funds of hedge funds that achieve the best returns, as long as they also achieve Sharpe ratios within 25% of the best of the nominees. This InvestHedge Awards, September 2015. The awards are based on quantitative factors such as Sharpe ratio, outperformance, and assets over 5-year period ending August 31, 2015. The InvestHedge database tracks approximately 1,400 active funds of hedge funds . Hedge Funds Review, July 2015. The winners of the Americas Awards 2015 were selected based on a rigorous methodology that combines quantitative and qualitative analysis. The process started with running a quantitative screen over all funds reporting to the BarclayHedge database to extract raw performance figures as well as other important metrics. Information on non-reporting funds was independently sourced. Funds that met the qualification criteria and had top-quartile returns in their category were ranked based on returns, Sharpe ratio and downside deviation. An independent panel of judges reviewed all the risk and return metrics on the top-ranked funds and selected the winners. Hedge Funds Review, July 2014. The winners of the Americas Awards 2014 were selected based on a rigorous methodology that combines quantitative and qualitative analysis. The process started with running a quantitative screen over all funds reporting to the BarclayHedge database to extract raw performance figures as well as other important metrics. Information on non-reporting funds was independently sourced. Funds that met the qualification criteria and had top-quartile returns in their category were ranked based on returns, Sharpe ratio and downside deviation. An independent panel of judges reviewed all the risk and return metrics on the top-ranked funds and selected the winners. InvestHedge Awards, September 2014 – The criteria for “Global Macro and Managed Futures” are based on global macro and managed futures fund of funds returns over a five-year period from August 2013 to July 2014. The fund must also have achieved a Sharpe ratio within 25% of the best of the nominees. HFMWeek U.S. Performance Awards, October 2014. A panel of judges comprised representatives of HFMWeek, leading institutional and private investors and industry experts. The panel considered a combination of quantitative and qualitative considerations including annual performance, volatility and risk management for the period July 2013 to June 2014. InvestHedge Awards, September 2013. The criteria for “Group of the Year” is based on various quantitative factors, including Sharpe ratio, outperformance and assets. The time frame for this award takes into account the performance over five years from August 2008 to July 2013. To be considered for “Group of the Year,” a group must have $1 billion in asset under management and at least three nominations to the InvestHedge Awards. The InvestHedge Database of Funds of Hedge Funds tracks 1,998 active funds of hedge funds run by 536 management companies globally. Preqin, 2013 Preqin Private Equity Performance Monitor, July 2013 based on a universe of 73 firms and 644 funds fulfilling the selection criteria. This information is being provided with the permission of Preqin. For informational purposes only and does not constitute an offer or solicitation of an offer, to buy or sell any security or strategy. The information is as of July 2013 and is subject to change. All investing involves risk, including the risk of loss. In compiling this ranking, Preqin considered the quartile rankings assigned to funds and top quartile funds were assigned a score of 1,and funds with vintage years 2011 - 2013 were excluded. The list of managers was restricted to active fund managers, which are managers that have raised 3 or more funds with a similar strategy, with one of those funds being raised in the past six years or currently being raised. HFMWeek U.S. Performance Awards, October 2013. A panel of judges comprised representatives of HFMWeek, leading institutional and private investors and industry experts. The panel considered a combination of quantitative and qualitative considerations including annual performance, volatility and risk management for the period July 2013 to June 2013.