Alternative UCITS Barometer

Quarter 4, 2011

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Introduction ML Capital Asset Management, the investment manager and promoter of the MontLake UCITS platform, is delighted to present the 4th edition of the quarterly ML Alternative UCITS Barometer (ML Barometer). ML Capital surveyed a diverse range of active investors in Alternative Investments, who collectively manage over €80 billion and today invest upwards of €30 billion of those assets into Alternative UCITS Funds. Questions are aimed at discovering their forthcoming strategy allocations and are asked each quarter to the same respondents in order to track asset flows between UCITS strategies. The range of allocators surveyed is purposely diverse, to reflect the widening of the Alternative UCITS investor base as hedge funds move from the offshore periphery to the onshore mainstream. Respondents range from insurance and pension funds to private banking organisations, with a significant constituent of financial advisers that deal with the primary source of alternative UCITS inflows, the mid-net-worth investor. Commenting on the latest survey, John Lowry, Co-Founder and Chairman of ML Capital; “The latest barometer results confirm a rapidly growing demand for well managed alternative investments that offer a strong element of protection on the downside and decorrelation. However Investors recognise the need for a wider range of experienced Hedge Fund managers to enter the UCITS market in order to broaden the choice of varying strategies.” We hope the Barometer will provide a useful insight into this new and rapidly growing area of alternatives. Our thanks go out to all the survey respondents. Cyril Delamare, CEO

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Investors appear to remain in a maximum state of trauma as a result of the global financial crisis

Allocations to CTA’s and Global Macro strategies are set to continue to increase

dramatically. The largest increase in allocations are to Global Macro systematic and CTA strategies, which both saw demand almost double over the last quarter from 30% to just under 60%.

Demand for developed equity market hedge strategies has declined noticeably since the beginning of 2011 and interest in Event Driven strategies has also been quite negative.

Interestingly, despite the fall off in demand for the main equity hedge sectors, there seems

to be a big drive into emerging markets funds – with 39% of respondents indicating a desire to raise their flows into global emerging markets UCITS funds.

The two least popular categories this quarter are UK L/S and distressed, although UK L/S

has performed reasonably. Distressed funds are a tough strategy to run within the UCITS rules.

Commenting on the latest survey, John Lowry, Co-Founder and Chairman of ML Capital: “During this quarter, where respondents’ allocations to UCITS rose dramatically from 10 to 30 billion, the increase in market volatility has seen a big shift towards those strategies that offer the potential to make money, or at least protect a significant element of the markets’ risk.”

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Profile of Respondents

Primary Country of Business

8%

7%

8%

41%

18%

12% 6%

Bank

Family Office

Insurance / PensionFundWealth Manager

Fund of Funds

Private Bank

Other

27%

31%

13%

5% 4%

5% 15%

Switzerland

United Kingdom

France

Spain

Italy

Germany

Other

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Long Short Equities

Demand for all the key equity hedge fund strategies has taken a big hit as the patience of investors is in short supply at present. Specifically, only 22% of investors surveyed plan to raise their exposures to global long short funds, in contrast to 50% at the start of the year.

• MORE • SAME • LESS

Long Short Equities Evolution

• MORE • LESS

22%

53%

25%

Global L/S

27%

49%

24%

US L/S

6%

61%

33%

UK L/S

0

10

20

30

40

50

60

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Global L/S

0

10

20

30

40

50

60

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

US L/S

0

5

10

15

20

25

30

35

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

UK L/S

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Long Short Equities

• MORE • LESS

Long Short Equities Evolution

An even more dramatic trend has been the drop in demand for European equity funds, down from 45% in Q1 to a mere 16% at present, an almost two thirds fall off in demand.

• MORE • SAME • LESS

16%

53%

31%

European L/S

10%

57%

33%

Japan L/S

0

10

20

30

40

50

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

European L/S

0

5

10

15

20

25

30

35

Q1 Q2 Q3 Q4

Pe

rce

nta

ge C

han

ge

Japan L/S

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Emerging Markets

• MORE • SAME • LESS

Emerging markets funds fared by far the best of all of the equity hedge strategies this quarter. Demand is either steady or has risen across the three primary categories, Global Emerging, Asian and Latin funds – which appears for the first time to be rivaling pan asia as the most popular emerging region.

Emerging Markets Evolution

• MORE • LESS

39%

43%

18%

Global Emerging

27%

57%

16%

Pan Asia

23%

61%

16%

Lat Am

0

10

20

30

40

50

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Global Emerging

0

10

20

30

40

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Pan Asia

0

5

10

15

20

25

30

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Lat Am

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Relative Value

• MORE • SAME • LESS

Within the relative value category, which attempts to hedge out market risk, diverging trends are apparent. There is most interest in the recently popular market neutral sector with 35% planning to increase their current levels of exposure. By contrast, convertible arbitrage is showing a big fall off in demand – with only 12% planning to raise their allocations. In contrast, Fixed Income from a low Q2 has also seen a big rise in interest – with a third of respondents now planning to raise their investments, up from 23 % in April. Relative Value Evolution

• MORE • LESS

35%

53%

12%

Market Neutral

12%

63%

25%

Convertible Arbitrage

33%

51%

16%

Fixed Income

0

10

20

30

40

Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Market Neutral

0

10

20

30

40

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Convertible Arbitrage

0

10

20

30

40

50

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Fixed Income

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Event Driven

Demand for each of the key event-driven strategies has fallen, with the distressed sector in most trouble (demand has now dropped from 21% in Q3 down to 10% in Q4). With unusually high levels of market volatility, only 28% of investors plan to commit more to the merger arbitrage space as investors view the current environment to be poor for corporate takeover deals. This is in stark contrast to just three months ago when 49% of respondents planned to increase their exposures to the area.

• MORE • SAME • LESS

Event Driven Evolution

• MORE • LESS

29%

47%

24%

Multi-Strategy

10%

53%

37%

Distressed

28%

41%

31%

Merger Arbitrage

0

10

20

30

40

50

60

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Multi-Strategy

0

10

20

30

40

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Distressed

0

10

20

30

40

50

60

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Merger Arbitrage

10

Macro & CTA

Allocations to CTAs and Global Macro strategies are set to continue their dramatic rise. The biggest rise is for Global Macro systematic and CTA strategies, which both saw demand almost double over the last quarter from 30% to just under 60%.

• MORE • SAME • LESS

Macro & CTA Evolution

• MORE • LESS

61%

31%

8%

Global Macro-Discretionary

59% 33%

8%

Global Macro-Systematic

57% 37%

6%

Managed Futures / CTA

0

20

40

60

80

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Global Macro-Discretionary

0

20

40

60

80

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Global Macro-Systematic

0

20

40

60

Q1 Q2 Q3 Q4

Pe

rcen

tage

Ch

ange

Managed Futures / CTA

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Tables

Long/Short Equity

More Same Less

Global L/S Equity 22% 53% 25%

UK L/S Equity 6% 61% 33%

US L/S Equity 27% 49% 24%

European L/S Equity 16% 53% 31%

Japan L/S Equity 10% 57% 33%

More Same Less

Global

Emerging

39% 43% 18%

Latin America 23% 61% 16%

Pan Asia 27% 57% 16%

More Same Less

Fixed Income 33% 51% 16%

Convertible

Arbitrage

12% 63% 25%

Market Neutral 35% 53% 12%

More Same Less

Multi-

Strategy

29% 47% 24%

Distressed 10% 53% 37%

Merger

Arbitrage

28% 41% 31%

More Same Less

Global Macro-

Discretionary

61% 31% 8%

Global Macro-

Systematic

59% 33% 8%

Managed Futures /

CTA

57% 37% 6%

Emerging Markets

Relative Value Event Driven

Macro & CTA

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ML Capital is an independent and privately-owned financial services group specialising in advising on and delivering alternative investment solutions and strategies for the investment industry. ML Capital provides a truly global service for its clients from its headquarters in Malta and operations centres in London, Dublin and Geneva. Today, ML Capital is one of Europe’s leading creators and distributors of alternative investment products and solutions. Utilising the extensive skills and experience of our carefully selected investment professionals and our expansive network of contacts, we aim to deliver innovative investment solutions to our clients meticulously tailored to meet their specific requirements. ML Capital prides itself on delivering exceptional client service premised on a detailed understanding of the needs of its clients matched with a proven track record in providing sound investment advice. Our senior partners have a combined experience of over 70 years in the investment-management industry in key areas incorporating manager due diligence, portfolio management, operations and risk management.

About ML Capital

The MontLake UCITS Platform, domiciled in Ireland and regulated by the Central Bank of Ireland provides investment managers with a turnkey solution for launching a UCITS fund under its umbrella structure. Typical time to market is 10 weeks, or less, with the platform offering immediate access to a wide range of investors through ML Capital’s distribution network. Funds placed on the platform by ML Capital will benefit from top-tier service providers including Citi for custody, administration and trustee services, KPMG for audit, and Bridge Consulting for oversight and directorships. ML Capital has also ensured that managers utilising the MontLake UCITS Platform will have unfettered access to a network of the leading prime brokerage firms. For more information on ML Capital please visit our website www.mlcapital.com or our platform website www.montlakeucits.com.

About The MontLake UCITS Platform

Malta Suite 5 Tigne Palace Bisazza Street Sliema +356 2133 6821

UK Dorland House 20 Regent Street London SW1Y 4PH +44 (0)20 7766 8310

Switzerland Rue de la Cloche 8 1201 Geneva +41 (0)22 318 56 70

info@mlcapital.com www.mlcapital.com

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DISCLAIMER

FOR INVESTMENT PROFESSIONALS ONLY

This financial promotion is issued by ML Capital Limited. This document is not intended as an offer to acquire or dispose of any security. Information given in it has been obtained from, or based upon, sources believed by us to be reliable and accurate although ML does not accept liability for the accuracy of the contents. This information is not intended to constitute a basis for any specific investment decision. For Addressee only. The distribution of this report does not constitute an offer or solicitation. Past performance is not a guide to future performance. The value of investments can fall as well as rise. You should ensure you understand the risk profile of the products or services you plan to purchase. The services provided by ML Capital Limited are available only to investors who come within the category of the Eligible Counterparty or Professional Client as defined in the Financial Services Authority’s Handbook they are not available to individual investors, who should not rely on this communication. Information given in this document has been obtained from, or based upon, sources believed by us to be reliable and accurate although ML Capital does not accept liability for the accuracy of the contents. ML Capital does not offer investment advice or make recommendations regarding investments.