Economics Nobel Laureate William F. Sharpe developed the Sharpe ratio to measure risk-adjusted investment return. The Sharpe ratio allows us to evaluate the performance of an asset in terms of risk as well as excess return generated.

Risk-Adjusted Return: Quarterly Update

R Rf

Rf

Q1 2013

RISK ADJUSTED RETURNRISK ADJUSTED RETURNRISK ADJUSTED RETURNONE YEAR 31/03/2012 - 31/03/2013

Over the last year, Risk Parity has been the stand-out performer when measured on an excess return and risk-adjusted basis. 8 of the top 9 sharpe ratios have been in fixed income. EMD Hard Currency, UK Government Bonds (Index-Linked) and Developed Market Equities performed well when meas-ured by excess return, however on a risk-adjusted basis they fall down the table. Conversly, Invest-ment Grade Credit (US&UK) and Leveraged Loans (US) saw lower excess returns but on a risk-adjusted basis they move up the table.

*See appendix for a list of benchmarks & definitions.

RISK ADJUSTED RETURNRISK ADJUSTED RETURNRISK ADJUSTED RETURNTHREE YEAR 31/03/2010 - 31/03/2013

Over this 3-year period, 8 of the top 9 best sharpe ratios have been in fixed income, the exception being Risk Parity. Emerging Market Equities and Developed Market Equities performed compara-tively well when measured by excess return, however on a risk-adjusted basis they fall towards the bottom end of the chart.

*See appendix for a list of benchmarks & definitions.

RISK ADJUSTED RETURNRISK ADJUSTED RETURNRISK ADJUSTED RETURNFIVE YEARS 31/03/2008 - 31/03/2013

Over this 5-year period, 8 of the top 9 best sharpe ratios have been in fixed income, the exception being Risk Parity. Developed Market Equities, HF Macro and Commodities saw returns below the risk free rate over the period.

RISK ADJUSTED RETURNRISK ADJUSTED RETURNRISK ADJUSTED RETURN

*See appendix for a list of benchmarks & definitions.

Monthly Data 3 Year

DisclaimerThe information herein was obtained from various sources. We do not guarantee every aspect of its accuracy. The information is for your private informa-tion and is for discussion purposes only. A variety of market factors and assumptions may affect this analysis, and this analysis does not reflect all possible loss scenarios. There is no certainty that the parameters and assumptions used in this analysis can be duplicated with actual trades. Any historical exchange rates, interest rates or other reference rates or prices which appear above are not necessarily indicative of future exchange rates, interest rates, or other reference rates or prices. Neither the information, recommendations or opinions expressed herein constitutes an offer to buy or sell any securities, futures, options, or investment products on your behalf. Unless otherwise stated, any pricing information in this message is indicative only, is subject to change and is not an offer to transact. Where relevant, the price quoted is exclusive of tax and delivery costs. Any reference to the terms of executed transactions should be treated as preliminary and subject to further due diligence. Redington Limited is an investment consultant company regulated by the Financial Services Authority. The company does not advise on all implications of the transactions described herein. This information is for discussion purposes and prior to undertaking any trade, you should also discuss with your professional, tax, accounting and / or other relevant advisers how such particular trade(s) affect you. All analysis (whether in respect of tax, accounting, law or of any other nature), should be treated as illustrative only and not relied upon as accurate©Redington Limited 2013. All rights reserved.

Appendix

Freddie Ewer

Analyst: Investment Consulting

freddie.ewer@redington.co.uk

Jonathan Letham

Analyst: ALM & Investment Strategy

jonathan.letham@redington.co.uk

Here we look at the risk-adjusted performance across asset classes for the past one, three and five years. The calculations that underlie this analysis use monthly data sourced from Bloomberg. Excess return is taken to be the annualised return of the asset class for the relevant period above the risk free rate. The risk free rate is calculated using the Libor total return index of the currency of the corresponding index. Volatility is the standard deviation of monthly excess returns. For all asset classes apart from Investment Grade Credit and High Yield Bonds, total return indices are used to calculate the absolute returns. For Investment Grade and High Yield, interest rate hedging is assumed and the excess return over swaps is used for the excess return.

Monthly Data 1 Year

5 Year Monthly Data

Asset Class Excess Return Volatility Sharpe Ratio

Sharpe Ratio

Sharpe Ratio

Volatility

Volatility

Excess Return

Excess Return

Asset Class

Asset Class

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