Deep In The Money · Renovatio Asset Management is structured as a registered investment advisor limited liability company located in Newport Beach, California offering investment

Deep-In-The-Money Hedge Strategy Monthly

October 2011, Issue #3

www.RenovatioAM.com

Prepared by: Pj de Marigny, DITMo Strategies Page 2 ©2011 RENOVATIO ASSET MANAGEMENT, LLC

Contents

Disclosure……………………………………..page 3

Universe Batting Average………………page 4

Manager Commentary………………….page 4

Correlations (1,3,5,10 Year)………pages 5-6

Scattergram (Month Risk/Return)...page 7

Probabilities (Risk/Return)………..pages 8-9

Bar Charts (1,3,5,10 Year)………pages 10-11

Return Ranking Matrices……………..page 12


DISCLOSURE

“Deep-In-The-Money” Hedge Strategy Monthly report is intended for educational and discussion purposes only. Renovatio Asset Management is

structured as a registered investment advisor limited liability company located in Newport Beach, California offering investment management services.

Renovatio is not a wealth advisory or financial planner, neither is this material intended to offer financial advice or recommend any investment.

The material herein is offered without charge, fees, or expectation of receiving any remuneration, to financial professionals, students, industry

associations, and other interested parties. This material is offered without guarantee of accuracy in methodology or calculation and is not meant to imply

recommendation of any strategy reflected in this report. Source of thirteen Hedge Categories data provider is Edhec Risk Institute. Data provider for SPX

(SP500), BXM (CBOE SPX at-the-money Covered Call Index), WFBIX (proxy for Lehman/Barclay Aggregate Bond Index) and CSHY (Credit Suisse

High Yield Index) is Bloomberg, LP. DITMo Model Index is a customized “Deep-In-The-Money” Buy/Write index provided by Renovatio Asset

Management and prepared by Pj de Marigny.

Risk/Return Probabilities, Scattergram, Bar Charts, Correlation Matrices, and Color Coded Return Matrices methodologies and calculations were

developed and prepared by Peter J. de Marigny, DITMo Strategies Portfolio Manager and Risk Manager for Renovatio Asset Management Alternative

Strategies. Pj de Marigny is a Director of GARP, Southern California Chapter. He holds an M.S. in Banking & Financial Services Management (Boston

Univ.), an M.B.A. with QI Concentration (Colorado State Univ.), a B.A. in Biblical Studies (Ambassador College, Pasadena CA), and a B.S. in

Accounting (St. Francis College, NYC). Pj is a member of the Wharton CPD Circle with certifications specific to Hedge Funds including, CAIA and

FRM. Pj has 15 years experience in Portfolio Management and he is a Columnist for HedgeCo (W. Palm Beach, FL Hedge Fund Data/Services Provider).

DITMo® is a Deep-In-The-Money Buy-Write Model Index that is reflective of a risk averse version of a covered call strategy. The methodology for

calculation is meant to capture changing sensitivity to the underlying long equity value and is calculated as follows:

DITMo MODEL METHODOLOGY:

This attribution is drawn solely from the sample model portfolio. Return attributions reflected here involved stress-testing the sample portfolio using Algorithms, then using those results in the formulation of a return series based solely on the results of SP500 performance to capture up and down participation that differs within various return ranges typical of a covered call strategy payoff. The portfolio includes 70 to 100 SP500 equity “Buy/Writes” typically written at a strike price below the market price of the underlying equity with intention to have the underlying equity called away thereby creating a cash flow composed of exercised options, option premium, dividends and interest. There is no guarantee that the portfolio will exhibit similar attributes to this model or that the portfolio holdings will be similar to the portfolio holdings reflected here. This is intended for one-on-one discussion purposes only. The model was constructed using equity ask price and short call bid price that would represent the minimal acceptable trade net of execution and management fees.

The strategy is both a bottom-up and top-down approach contrived to target less than a one-third market beta (market risk) and an after-fee 8-10% return that are solely dependent on market performance. Risks of strategy underperformance includes, but is not limited to a scenario of SP500 excessive performance within a month that will result in a muted upside capture of that performance. Similarly, downside excessive loss of the SP500 in a given month is muted only within limited bounds cushioning only a moderate drawdown of the market in any given month. The strategy should be considered by those willing to tradeoff upside participation for a limited amount of loss mitigation in any given month.

The model return series and resulting attributes were constructed according to the following methodology (per month):

SPX DITMo(Y) =<-10% +3.26% + .69(SPX)

-5% to –10% -.62% + .11(SPX)

-5% to 5% +.68% + .25(SPX)

=>5% +1.67% + .02(SPX)


Universe Batting Average (UBA)

BXM Covered Call

Convertible Arbitrage

CTA Global

Distressed Securities

DITMo Emerging Markets

Equity Mkt Neutral

Event Driven

Fixed Income Arbitrage

Funds Of Funds

Global Macro

High Yield Lehman

AGG Long/Short

Equity Merger

Arbitrage Relative

Value Short

Selling SP500

10 Year (2002-2011 end August) .412 .488 .435 .753 .582 .747 .388 .659 .500 .394 .524 .582 .224 .529 .447 .524 .306 .506

5 Year (2007-2011 end August) .353 .576 .482 .576 .588 .565 .435 .612 .588 .353 .529 .576 .306 .506 .494 .482 .294 .506

3 Year (2009-2011 end August) .451 .843 .235 .863 .549 .588 .333 .627 .725 .196 .314 .863 .216 .412 .373 .608 .333 .804

1 Year (YTD ending Aug 2011) .353 .765 .118 .824 1.000 .176 .647 .412 .882 .059 .235 .588 .471 .294 .529 .706 .000 .941

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0100200300400500600700800900

1,000 10 Year (2002-2011 end August)5 Year (2007-2011 end August)3 Year (2009-2011 end August)1 Year (YTD ending Aug 2011)

Summary

For the October 2011 Issue, I added the “Universe Batting Average” a new metric. The number represents the “Batting Average” of the strategy over the 4 time periods indicated (10,5,3,1 Years), but

instead of a yes/no attribution vis-a-vis to a single index or benchmark (aka, “Batting Average),” the “UBA” is a numerical term for how often the strategy beats the other strategies in the universe.

The Charts above reflect the “UBA” for the 18 strategies listed. Blue = 10 Yrs; Brown = 5 Yrs; Green = 3 Yrs; Purple = YTD (ending August 2011). The highest ranked strategies for their respective time

periods are highlighted. I believe the “UBA” is a unique measure that is more useful than a quartile number and the universe may be customized. As a summary measurement, the “UBA” may be

useful to Private Wealth Managers, Private Bankers, CIOs, Consultants, and Institutions in devising their Hedge Fund Strategy.

The 3rd 2011 calendar quarter was a bust for hedge funds overall. Notably, we see an increasingly poor ranking for FoHF. Sold as risk diversifiers with low correlations, the danger of the asset class

is in viewing “CORRELATION” as a risk metric, it is not. “There is no intrinsic asset class correlation” (Ray Dalio, Highbridge Capital in a recent Bloomberg Interview). Those who have used FoHF for

portable alpha or for low correlation are viewing risk inappropriately. Generally, Private Wealth professionals choose portfolios with a lower Beta to be added to a present portfolio for diversifica-

tion and to improve risk-return metrics. Portfolio strategies with the lowest correlation have the most sensitivity to increasing Beta, as the Beta measure is the Correlation measure multiplied by the

ratio of standard deviations of the portfolio being considered to the market. Additionally, Correlation is a measure that defines the FACTOR or FACTORS of risk. One should use significance tests for

both Correlation and Beta, otherwise it is meaningless to use either in evaluation. It may be more desirable for a high correlation, low beta strategy than a low correlation, low beta strategy simply

due to the fact that the low correlation strategy has a higher gamma (sensitivity).

One should consider the basic nature of the strategy. Certain metrics are more conducive to particular strategies. For instance, Market Neutral strategies (more properly, Quantitative Measures of

Risk), the risk of no return is more highly considered than massive drawdowns. Higher moments analysis is different for Arbitrage than for L/S or Emerging Markets. One may perceive that Emerg-

ing Markets has a great sensitivity to IMF and the EC where there is considerably a higher probability today of dislocation—that is hidden from return data. Going forward, one may perceive that

the outperformance of Distressed and High Yield in the past does not consider the HY Funds presently raising cash protectively.

“UBA” Methodology: The universe are the 18 strategies listed above. The methodology is simple: Create a universe of assets, count the number in that universe, deduct one and use that for the denominator. The numerator is how many strategies

were beaten (for 18 strategies, the top strategy for the time period would receive a 17/17 ranking score with a computed Universe Batting Average of 1000). For multiple periods use the average of the ranking score.


HEDGE FUND STRATEGIES 10-YEAR CORRELATION MATRIX (Monthly 10Y ending 8/11)

Convertible CTA Distressed Emerging Equity Mkt Event Fixed Inc Global Long/Short Merger Relative Short Funds Of DITMo SP500 WFBIX BXM CSHY

Arbitrage Global Securities Markets Neutral Driven Arbitrage Macro Equity Arbitrage Value Selling Funds CovdCall Index Lehman

AGG CovdCall High Yld

Convertible Arbitrage 1.00 0.05 0.78 0.71 0.49 0.77 0.87 0.49 0.67 0.60 0.86 (0.47) 0.74 0.53 0.52 0.17 0.52 0.81

CTA Global 0.05 1.00 0.09 0.12 0.24 0.11 0.05 0.64 0.18 0.12 0.07 0.02 0.30 (0.08) (0.06) 0.19 (0.12) (0.10)

Distressed Securities 0.78 0.09 1.00 0.81 0.66 0.93 0.81 0.58 0.82 0.67 0.89 (0.64) 0.86 0.69 0.68 (0.05) 0.63 0.79

Emerging Markets 0.71 0.12 0.81 1.00 0.61 0.88 0.72 0.75 0.91 0.72 0.92 (0.67) 0.91 0.73 0.74 0.03 0.71 0.74

Equity Mkt Neutral 0.49 0.24 0.66 0.61 1.00 0.66 0.53 0.56 0.63 0.48 0.62 (0.34) 0.71 0.37 0.40 (0.20) 0.44 0.47

Event Driven 0.77 0.11 0.93 0.88 0.66 1.00 0.74 0.67 0.94 0.85 0.95 (0.76) 0.92 0.73 0.77 (0.07) 0.72 0.79

Fixed Inc Arbitrage 0.87 0.05 0.81 0.72 0.53 0.74 1.00 0.49 0.62 0.54 0.83 (0.42) 0.73 0.60 0.51 0.19 0.51 0.77

Global Macro 0.49 0.64 0.58 0.75 0.56 0.67 0.49 1.00 0.74 0.60 0.66 (0.40) 0.80 0.39 0.43 0.15 0.37 0.42

Long/Short Equity 0.67 0.18 0.82 0.91 0.63 0.94 0.62 0.74 1.00 0.82 0.91 (0.80) 0.92 0.76 0.82 (0.10) 0.74 0.70

Merger Arbitrage 0.60 0.12 0.67 0.72 0.48 0.85 0.54 0.60 0.82 1.00 0.80 (0.70) 0.79 0.64 0.67 0.03 0.66 0.64

Relative Value 0.86 0.07 0.89 0.92 0.62 0.95 0.83 0.66 0.91 0.80 1.00 (0.72) 0.91 0.76 0.77 0.01 0.74 0.84

Short Selling (0.47) 0.02 (0.64) (0.67) (0.34) (0.76) (0.42) (0.40) (0.80) (0.70) (0.72) 1.00 (0.61) (0.80) (0.90) 0.17 (0.79) (0.67)

Funds Of Funds 0.74 0.30 0.86 0.91 0.71 0.92 0.73 0.80 0.92 0.79 0.91 (0.61) 1.00 0.64 0.64 (0.01) 0.59 0.66

DITMo CovdCall 0.53 (0.08) 0.69 0.73 0.37 0.73 0.60 0.39 0.76 0.64 0.76 (0.80) 0.64 1.00 0.92 (0.02) 0.86 0.71

SP500 Index 0.52 (0.06) 0.68 0.74 0.40 0.77 0.51 0.43 0.82 0.67 0.77 (0.90) 0.64 0.92 1.00 (0.10) 0.90 0.69

WFBIX Lehman Agg 0.17 0.19 (0.05) 0.04 (0.20) (0.07) 0.20 0.16 (0.09) 0.03 0.02 0.17 (0.01) (0.02) (0.10) 1.00 (0.09) 0.13

BXM CovdCall 0.52 (0.12) 0.63 0.71 0.44 0.72 0.51 0.37 0.74 0.66 0.74 (0.79) 0.59 0.86 0.90 (0.09) 1.00 0.71

CSHY High Yld 0.81 (0.10) 0.79 0.74 0.47 0.79 0.77 0.42 0.70 0.64 0.84 (0.67) 0.66 0.71 0.69 0.12 0.71 1.00


Convertible CTA Distressed Emerging Equity Mkt Event Fixed Inc Global Long/Short Merger Relative Short Funds Of DITMo SP500 WFBIX BXM CSHY



Convertible Arbitrage 1.00 (0.01) 0.85 0.84 0.50 0.86 0.93 0.57 0.79 0.71 0.93 (0.63) 0.81 0.67 0.65 0.23 0.65 0.88

CTA Global (0.01) 1.00 0.07 0.18 0.23 0.14 (0.07) 0.70 0.26 0.11 0.09 0.01 0.33 (0.02) 0.04 (0.01) (0.01) (0.10)




Event Driven 0.86 0.14 0.97 0.91 0.69 1.00 0.85 0.70 0.95 0.84 0.96 (0.78) 0.94 0.75 0.79 (0.01) 0.74 0.81

Fixed Inc Arbitrage 0.93 (0.07) 0.87 0.84 0.54 0.85 1.00 0.53 0.76 0.68 0.92 (0.62) 0.80 0.72 0.66 0.19 0.65 0.86

Global Macro 0.57 0.70 0.61 0.79 0.56 0.70 0.53 1.00 0.80 0.59 0.70 (0.45) 0.83 0.46 0.53 0.11 0.46 0.45



Relative Value 0.93 0.09 0.94 0.95 0.63 0.96 0.92 0.70 0.93 0.81 1.00 (0.75) 0.93 0.79 0.79 0.11 0.76 0.87

Short Selling (0.63) 0.01 (0.75) (0.70) (0.40) (0.78) (0.62) (0.45) (0.80) (0.72) (0.75) 1.00 (0.65) (0.81) (0.91) 0.03 (0.80) (0.73)

Funds Of Funds 0.81 0.33 0.88 0.93 0.70 0.94 0.80 0.83 0.94 0.80 0.93 (0.65) 1.00 0.68 0.69 0.02 0.64 0.68

DITMo CovdCall 0.67 (0.02) 0.76 0.75 0.40 0.75 0.72 0.46 0.76 0.67 0.79 (0.81) 0.68 1.00 0.92 0.19 0.88 0.76

SP500 Index 0.65 0.04 0.77 0.77 0.46 0.79 0.66 0.53 0.83 0.69 0.79 (0.91) 0.69 0.92 1.00 0.08 0.91 0.74

WFBIX Lehman Agg 0.23 (0.01) (0.04) 0.10 (0.34) (0.01) 0.19 0.11 (0.00) 0.12 0.11 0.03 0.02 0.19 0.08 1.00 0.08 0.17

BXM CovdCall 0.65 (0.01) 0.72 0.74 0.52 0.74 0.65 0.46 0.76 0.66 0.76 (0.80) 0.64 0.88 0.91 0.08 1.00 0.76

CSHY High Yld 0.88 (0.10) 0.83 0.77 0.50 0.81 0.86 0.45 0.74 0.68 0.87 (0.73) 0.68 0.76 0.74 0.17 0.76 1.00



Convertible CTA Distressed Emerging Eqty Mkt Event Fixed Inc Global Long/Short Merger Relative Short Funds Of DITMo SP500 WFBIX BXM CSHY



Convertible Arbitrage 1.00 (0.09) 0.86 0.90 0.54 0.90 0.94 0.64 0.84 0.86 0.96 (0.67) 0.90 0.71 0.69 0.29 0.71 0.91

CTA Global (0.09) 1.00 (0.00) 0.06 0.04 0.07 (0.15) 0.62 0.19 0.09 (0.01) (0.04) 0.20 (0.01) 0.10 0.04 0.00 (0.12)

Distressed Securities 0.86 (0.00) 1.00 0.91 0.68 0.97 0.90 0.65 0.90 0.78 0.94 (0.79) 0.92 0.80 0.80 0.02 0.75 0.85



Event Driven 0.90 0.07 0.97 0.93 0.69 1.00 0.88 0.75 0.96 0.87 0.97 (0.82) 0.96 0.78 0.83 0.09 0.77 0.86

Fixed Inc Arbitrage 0.94 (0.15) 0.90 0.89 0.57 0.88 1.00 0.58 0.79 0.79 0.94 (0.65) 0.88 0.77 0.69 0.27 0.72 0.89

Global Macro 0.64 0.62 0.65 0.78 0.45 0.75 0.58 1.00 0.83 0.69 0.72 (0.60) 0.82 0.57 0.67 0.25 0.58 0.58

Long/Short Equity 0.84 0.19 0.90 0.94 0.63 0.96 0.79 0.83 1.00 0.87 0.94 (0.86) 0.94 0.80 0.89 0.13 0.81 0.80


Relative Value 0.96 (0.01) 0.94 0.96 0.62 0.97 0.94 0.72 0.94 0.88 1.00 (0.79) 0.95 0.81 0.82 0.22 0.80 0.91

Short Selling (0.67) (0.04) (0.79) (0.79) (0.52) (0.82) (0.65) (0.60) (0.86) (0.74) (0.79) 1.00 (0.75) (0.84) (0.93) (0.07) (0.83) (0.74)

Funds Of Funds 0.90 0.20 0.92 0.93 0.64 0.96 0.88 0.82 0.94 0.86 0.95 (0.75) 1.00 0.76 0.78 0.17 0.73 0.80

DITMo CovdCall 0.71 (0.01) 0.80 0.81 0.44 0.78 0.77 0.57 0.80 0.73 0.81 (0.84) 0.76 1.00 0.91 0.31 0.89 0.78

SP500 Index 0.69 0.10 0.80 0.84 0.54 0.83 0.69 0.67 0.89 0.75 0.82 (0.93) 0.78 0.91 1.00 0.17 0.92 0.73

WFBIX Lehman Agg 0.29 0.04 0.02 0.23 (0.30) 0.09 0.27 0.25 0.13 0.34 0.22 (0.07) 0.17 0.31 0.17 1.00 0.18 0.22

BXM CovdCall 0.71 0.00 0.75 0.80 0.61 0.77 0.72 0.58 0.81 0.75 0.80 (0.83) 0.73 0.89 0.92 0.18 1.00 0.78

CSHY High Yld 0.91 (0.12) 0.85 0.87 0.60 0.86 0.89 0.58 0.80 0.79 0.91 (0.74) 0.80 0.78 0.73 0.22 0.78 1.00


Convertible CTA Distressed Emerging

Equity

Mkt Event Fixed Inc Global

Long/

Short Merger Relative Short Funds Of DITMo SP500 WFBIX BXM CSHY

Arbitrage Global Securities Markets Neutral Driven Arbitrage Macro Equity Arbitrage Value Selling Funds CovdCall Index

Lehman


Convertible Arbitrage 1.00 0.47 0.90 0.73 0.83 0.92 0.88 0.57 0.86 0.86 0.94 (0.82) 0.84 0.92 0.87 (0.32) 0.80 0.88

CTA Global 0.47 1.00 0.48 0.63 0.48 0.53 0.32 0.94 0.59 0.49 0.52 (0.47) 0.75 0.53 0.60 (0.01) 0.52 0.54


Emerging Markets 0.73 0.63 0.81 1.00 0.92 0.86 0.58 0.81 0.91 0.77 0.87 (0.87) 0.92 0.82 0.85 (0.25) 0.77 0.81


Event Driven 0.92 0.53 0.99 0.86 0.94 1.00 0.85 0.69 0.97 0.92 0.99 (0.93) 0.95 0.98 0.94 (0.35) 0.94 0.91

Fixed Inc Arbitrage 0.88 0.32 0.82 0.58 0.79 0.85 1.00 0.42 0.74 0.83 0.85 (0.72) 0.72 0.85 0.76 (0.14) 0.78 0.83

Global Macro 0.57 0.94 0.62 0.81 0.68 0.69 0.42 1.00 0.77 0.63 0.69 (0.69) 0.88 0.67 0.76 (0.09) 0.70 0.64


Merger Arbitrage 0.86 0.49 0.90 0.77 0.89 0.92 0.83 0.63 0.89 1.00 0.91 (0.89) 0.85 0.95 0.94 (0.36) 0.88 0.84

Relative Value 0.94 0.52 0.96 0.87 0.94 0.99 0.85 0.69 0.97 0.91 1.00 (0.94) 0.94 0.98 0.96 (0.35) 0.93 0.90

Short Selling (0.82) (0.47) (0.88) (0.87) (0.93) (0.93) (0.72) (0.69) (0.96) (0.89) (0.94) 1.00 (0.90) (0.91) (0.95) 0.42 (0.92) (0.76)

Funds Of Funds 0.84 0.75 0.91 0.92 0.91 0.95 0.72 0.88 0.97 0.85 0.94 (0.90) 1.00 0.92 0.93 (0.27) 0.90 0.87

DITMo CovdCall 0.92 0.53 0.97 0.82 0.94 0.98 0.85 0.67 0.95 0.95 0.98 (0.91) 0.92 1.00 0.94 (0.37) 0.92 0.89

SP500 Index 0.87 0.60 0.90 0.85 0.89 0.94 0.76 0.76 0.96 0.94 0.96 (0.95) 0.93 0.94 1.00 (0.40) 0.93 0.81

WFBIX Lehman Agg (0.32) (0.01) (0.41) (0.25) (0.34) (0.35) (0.14) (0.09) (0.41) (0.36) (0.35) 0.42 (0.27) (0.37) (0.40) 1.00 (0.29) (0.04)

BXM CovdCall 0.80 0.52 0.91 0.77 0.85 0.94 0.78 0.70 0.94 0.88 0.93 (0.92) 0.90 0.92 0.93 (0.29) 1.00 0.80

CSHY High Yld 0.88 0.54 0.89 0.81 0.84 0.91 0.83 0.64 0.85 0.84 0.90 (0.76) 0.87 0.89 0.81 (0.04) 0.80 1.00


-2.00%

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Annualized Monthly Standard Deviation

Hedge Fund Model Indexes (10Y ending 8/11)


CTA Global


Emerging Markets

Equity Market Neutral

Event Driven


Global Macro

Long/Short Equity

Merger Arbitrage

Relative Value

Short Selling

Funds Of Funds

DITMo

SP500

Lehman AGG

BXMCovdCall

High Yld


Annualized HEDGE FUND RETURN Discrete PROBABILITY CHART (Monthly 10Y ending 8/11)

Mo. Return Convertible CTA Distressed Emerging Equity Mkt Event Fixed Inc Global Long/Short Merger Relative Short Funds Of DITMo SP500 WFBIX BXM CSHY

= or > Arbitrage Global Securities Markets Neutral Driven Arbitrage Macro Equity Arbitrage Value Selling Funds CovdCall Index Lehman AGG CovdCall High Yield

14% 0% 2% 4% 25% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 1% 0% 1% 8%

13% 0% 3% 9% 34% 0% 1% 0% 0% 0% 0% 0% 0% 0% 0% 2% 0% 1% 14%

12% 1% 7% 18% 45% 0% 2% 0% 0% 1% 0% 0% 0% 0% 0% 3% 0% 2% 21%

11% 2% 12% 33% 55% 0% 6% 0% 1% 2% 0% 0% 0% 0% 0% 4% 0% 4% 30%

10% 6% 20% 51% 66% 0% 13% 0% 5% 5% 0% 1% 1% 0% 2% 6% 0% 7% 41%

9% 11% 30% 69% 75% 0% 26% 2% 17% 11% 0% 5% 1% 0% 7% 9% 0% 10% 52%

8% 21% 42% 83% 83% 0% 44% 9% 38% 20% 1% 14% 2% 1% 20% 13% 0% 15% 64%

7% 34% 56% 92% 89% 0% 63% 24% 63% 34% 6% 33% 4% 4% 40% 17% 0% 22% 74%

6% 49% 69% 97% 94% 4% 79% 47% 84% 50% 26% 57% 6% 11% 64% 22% 0% 29% 83%

5% 64% 80% 99% 97% 22% 90% 72% 95% 66% 61% 79% 9% 27% 84% 28% 0% 38% 89%

4% 78% 88% 100% 98% 59% 96% 89% 99% 80% 88% 93% 14% 48% 95% 35% 0% 48% 94%

3% 88% 94% 100% 99% 89% 99% 97% 100% 90% 98% 98% 19% 71% 99% 42% 3% 58% 97%

2% 94% 97% 100% 100% 99% 100% 100% 100% 95% 100% 100% 26% 87% 100% 50% 14% 68% 98%

1% 98% 99% 100% 100% 100% 100% 100% 100% 98% 100% 100% 35% 96% 100% 58% 39% 76% 99%

0% 99% 100% 100% 100% 100% 100% 100% 100% 99% 100% 100% 44% 99% 100% 65% 71% 83% 100%

-1% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 54% 100% 100% 73% 91% 89% 100%

-2% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 63% 100% 100% 79% 99% 93% 100%

-3% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 72% 100% 100% 84% 100% 96% 100%

-4% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% 100% 100% 89% 100% 98% 100%

-5% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 86% 100% 100% 92% 100% 99% 100%

-6% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 91% 100% 100% 95% 100% 99% 100%

-7% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 94% 100% 100% 97% 100% 100% 100%

-8% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 97% 100% 100% 98% 100% 100% 100%

-9% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 98% 100% 100% 99% 100% 100% 100%

-10% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99% 100% 100% 99% 100% 100% 100%

© 2011 RENOVATIO ASSET MANAGEMENT Highlight is the Annualized Return at > or = 95% Confidence Data Source: Edhec Risk Institute; SPX/BXM/WFBIX/CSHY Data by Bloomberg, LP; DITMo provided by Renovatio Asset Mgt


Annualized HEDGE FUND RISK Discrete PROBABILITY CHART (Monthly 10Y ending 8/11) Std Dev. Convertible CTA Distressed Emerging Equity Mkt Event Fixed Inc Global Long/Short Merger Relative Short Funds Of DITMo SP500 WFBIX BXM CSHY

is less than: Arbitrage Global Securities Markets Neutral Driven Arbitrage Macro Equity Arbitrage Value Selling Funds CovdCall Index Lehman Agg CovdCall High Yield

26% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99% 100% 100% 96% 100% 99% 100%

25% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 99% 100% 100% 95% 100% 99% 100%

24% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 98% 100% 100% 93% 100% 99% 100%

23% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 97% 100% 100% 91% 100% 99% 100%

22% 100% 100% 100% 99% 100% 100% 100% 100% 100% 100% 100% 97% 100% 100% 88% 100% 98% 100%

21% 100% 100% 100% 99% 100% 100% 100% 100% 100% 100% 100% 95% 100% 100% 84% 100% 97% 99%

20% 100% 100% 100% 99% 100% 100% 100% 100% 100% 100% 100% 93% 100% 100% 79% 100% 96% 99%

19% 100% 100% 100% 98% 100% 100% 100% 100% 100% 100% 100% 91% 100% 100% 73% 100% 94% 99%

18% 100% 99% 100% 97% 100% 100% 100% 100% 100% 100% 100% 87% 100% 100% 66% 100% 92% 98%

17% 100% 99% 100% 96% 100% 100% 100% 100% 100% 100% 100% 82% 100% 100% 57% 100% 88% 97%

16% 99% 98% 100% 93% 100% 100% 100% 100% 100% 100% 100% 75% 100% 100% 46% 100% 83% 95%

15% 99% 97% 100% 90% 100% 100% 100% 100% 99% 100% 100% 66% 100% 100% 35% 100% 76% 92%

14% 98% 95% 100% 85% 100% 100% 100% 100% 99% 100% 100% 55% 100% 100% 24% 100% 67% 88%

13% 97% 92% 99% 77% 100% 99% 100% 100% 98% 100% 100% 43% 100% 100% 14% 100% 55% 82%

12% 95% 87% 99% 66% 100% 99% 100% 100% 96% 100% 100% 29% 100% 100% 7% 100% 41% 73%

11% 91% 78% 98% 52% 100% 98% 100% 100% 93% 100% 100% 16% 99% 100% 2% 100% 27% 60%

10% 84% 66% 95% 36% 100% 96% 100% 100% 88% 100% 99% 7% 99% 99% 1% 100% 14% 44%

9% 72% 48% 90% 19% 100% 91% 99% 99% 78% 100% 99% 2% 97% 98% 0% 100% 5% 26%

8% 54% 28% 80% 7% 100% 83% 97% 98% 62% 100% 96% 0% 94% 96% 0% 99% 1% 11%

7% 31% 11% 63% 1% 100% 66% 93% 94% 39% 99% 91% 0% 86% 90% 0% 98% 0% 3%

6% 10% 2% 36% 0% 99% 40% 82% 84% 16% 98% 78% 0% 68% 76% 0% 94% 0% 0%

5% 1% 0% 11% 0% 96% 13% 58% 60% 2% 93% 52% 0% 38% 48% 0% 82% 0% 0%

4% 0% 0% 1% 0% 83% 1% 21% 23% 0% 74% 16% 0% 8% 13% 0% 50% 0% 0%

3% 0% 0% 0% 0% 41% 0% 1% 1% 0% 28% 0% 0% 0% 0% 0% 9% 0% 0%

2.5% 0% 0% 0% 0% 14% 0% 0% 0% 0% 6% 0% 0% 0% 0% 0% 1% 0% 0%

© 2011 RENOVATIO ASSET MANAGEMENT Highlight is 95% Confidence using 10 df annualizing monthly data Data Source: Edhec Risk Institute; SPX/BXM/WFBIX/CSHY Data by Bloomberg; DITMo provided by Renovatio Asset Mgt


-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00% Hedge Fund Strategies3Yr Returns (end 8/11)

Data Source: Edhec Risk Institute


CTA Global


Emerging Markets


Event Driven


Global Macro

Long/Short Equity

Merger Arbitrage

Relative Value

Short Selling

Funds Of Funds

DITMo

SP500

Lehman AGG

BXMCovdCall

High Yld

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

Hedge Fund Strategies1Yr Returns (end 8/11)



CTA Global


Emerging Markets


Event Driven


Global Macro

Long/Short Equity

Merger Arbitrage

Relative Value

Short Selling

Funds Of Funds

DITMo

SP500

Lehman AGG

BXMCovdCall

High Yld


-10.00%

-8.00%

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Hedge Fund Strategies5Yr Returns (end 8/11)



CTA Global


Emerging Markets


Event Driven


Global Macro

Long/Short Equity

Merger Arbitrage

Relative Value

Short Selling

Funds Of Funds

DITMo

SP500

Lehman AGG

BXMCovdCall

High Yld

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Hedge Fund Strategies10Yr Returns (end 8/11)Data Source: Edhec Risk Institute


CTA Global


Emerging Markets


Event Driven


Global Macro

Long/Short Equity

Merger Arbitrage

Relative Value

Short Selling

Funds Of Funds

DITMo

SP500

Lehman AGG

BXMCovdCall

High Yld


Date 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD 8/11

DITMo -3.02% 13.45% 10.87% 9.33% 12.01% 9.50% -8.93% 8.39% 8.66% 5.60%

SP500 -23.37% 26.38% 8.99% 3.00% 13.62% 3.53% -38.49% 23.45% 12.78% 5.00%

Fixed Income Arb 7.56% 8.35% 6.26% 4.64% 7.43% 6.01% -17.40% 24.49% 9.98% 4.51%

Distressed Securities 5.86% 27.34% 17.89% 9.23% 15.26% 7.18% -21.29% 30.40% 14.09% 3.96%

Convertible Arbitrage 8.60% 10.80% 1.10% -1.92% 12.33% 3.86% -26.50% 46.78% 12.28% 2.60%

Relative Value 2.77% 12.15% 5.71% 5.24% 11.85% 9.43% -14.91% 21.16% 9.97% 2.49%

Equity Mkt Neutral 4.71% 6.29% 4.71% 6.53% 7.47% 8.34% -8.36% 5.07% 5.37% 2.48%

High Yld 3.10% 27.94% 11.95% 2.26% 11.91% 2.65% -26.17% 54.22% 14.42% 2.35%

Merger Arbitrage -0.90% 8.34% 4.83% 4.95% 13.71% 9.09% -2.35% 9.97% 6.45% 2.02%

Lehman AGG 3.89% -1.18% -0.90% -2.92% -0.52% 1.56% 0.82% 0.81% 2.73% 1.97%

Event Driven -1.08% 20.48% 12.43% 7.31% 15.47% 9.62% -18.49% 25.74% 11.54% 1.82%

BXMCovdCall -7.64% 19.37% 8.30% 4.25% 13.33% 6.59% -28.65% 25.91% 5.86% 1.67%

Long/Short Equity -6.38% 19.31% 8.62% 11.33% 11.76% 10.56% -18.92% 20.01% 9.76% 0.93%

Global Macro 4.96% 17.25% 4.60% 9.49% 7.50% 12.93% -3.22% 10.39% 8.47% 0.67%

Emerging Markets 5.76% 31.27% 14.30% 17.18% 18.84% 20.79% -33.65% 37.87% 11.18% 0.21%

CTA Global 14.57% 11.64% 5.17% -0.33% 5.87% 9.91% 15.61% -1.91% 9.78% -0.25%

Funds Of Funds 1.26% 11.45% 7.08% 6.81% 11.24% 10.07% -19.72% 10.67% 5.21% -0.31%

Short Selling 27.27% -23.87% -4.66% 7.28% -8.28% 7.40% 31.52% -20.53% -16.62% -1.68%

2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD 8/11

Short Selling Emerging Markets Distressed Securities Emerging Markets Emerging Markets Emerging Markets Short Selling High Yld High Yld DITMo

CTA Global High Yld Emerging Markets Long/Short Equity Event Driven Global Macro CTA Global Convertible Arbitrage Distressed Securities SP500

Convertible Arbitrage Distressed Securities Event Driven Global Macro Distressed Securities Long/Short Equity Lehman AGG Emerging Markets SP500 Fixed Income Arbitrage

Fixed Income Arbitrage SP500 High Yld DITMo Merger Arbitrage Funds Of Funds Merger Arbitrage Distressed Securities Convertible Arbitrage Distressed Securities

Distressed Securities Event Driven DITMo Distressed Securities SP500 CTA Global Global Macro BXMCovdCall Event Driven Convertible Arbitrage

Emerging Markets BXMCovdCall SP500 Event Driven BXMCovdCall Event Driven Equity Market Neutral Event Driven Emerging Markets Relative Value

Global Macro Long/Short Equity Long/Short Equity Short Selling Convertible Arbitrage DITMo DITMo Fixed Income Arbitrage Fixed Income Arbitrage Equity Market Neutral

Equity Market Neutral Global Macro BXMCovdCall Funds Of Funds DITMo Relative Value Relative Value SP500 Relative Value High Yld

Lehman AGG DITMo Funds Of Funds Equity Market Neutral High Yld Merger Arbitrage Fixed Income Arbitrage Relative Value CTA Global Merger Arbitrage

High Yld Relative Value Fixed Income Arbitrage Relative Value Relative Value Equity Market Neutral Event Driven Long/Short Equity Long/Short Equity Lehman AGG

Relative Value CTA Global Relative Value Merger Arbitrage Long/Short Equity Short Selling Long/Short Equity Funds Of Funds DITMo Event Driven

Funds Of Funds Funds Of Funds CTA Global Fixed Income Arbitrage Funds Of Funds Distressed Securities Funds Of Funds Global Macro Global Macro BXMCovdCall

Merger Arbitrage Convertible Arbitrage Merger Arbitrage BXMCovdCall Global Macro BXMCovdCall Distressed Securities Merger Arbitrage Merger Arbitrage Long/Short Equity

Event Driven Fixed Income Arbitrage Equity Market Neutral SP500 Equity Market Neutral Fixed Income Arbitrage High Yld DITMo BXMCovdCall Global Macro

DITMo Merger Arbitrage Global Macro High Yld Fixed Income Arbitrage Convertible Arbitrage Convertible Arbitrage Equity Market Neutral Equity Market Neutral Emerging Markets

Long/Short Equity Equity Market Neutral Convertible Arbitrage CTA Global CTA Global SP500 BXMCovdCall Lehman AGG Funds Of Funds CTA Global

BXMCovdCall Lehman AGG Lehman AGG Convertible Arbitrage Lehman AGG High Yld Emerging Markets CTA Global Lehman AGG Funds Of Funds

SP500 Short Selling Short Selling Lehman AGG Short Selling Lehman AGG SP500 Short Selling Short Selling Short Selling

Documents

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