P R E M I A 2 . 0 · Premia linked to flows and investor constraints: Ex: The volatility premia in U.S. markets, which stems from: 1. Investor risk aversion 2. Structural flows linked

P R E M I A 2 . 0

A NEW APPROACH TO DELIVERING DIVERSIFICATION & ALPHA

La Française Investment Solutions

Luc Dumontier: Head of Factor Investing

A P R I L 2 7 , 2 0 1 7

FOR DISCUSSION PURPOSES ONLY. STRICTLY PRIVATE AND CONFIDENTIAL FOR USE OF RECIPIENT ONLY. ONLY FOR PROFESSIONAL CLIENTS WITHIN THE MEANING OF MARKETS IN FINANCIAL

INSTRUMENTS DIRECTIVE 2004/39/CE OR CANADIAN INVESTORS WHO ARE AN “ACCREDITED INVESTOR”, AS DEFINED IN NATIONAL INSTRUMENT 45-106 AND A “PERMITTED CLIENT” AS DEFINED IN

NATIONAL INSTRUMENT 31-103. FOR ATTENDEES AT THE CANADIAN ALTERNATIVE INVESTMENTS IN PENSIONS CAIP EAST 2017. NOT FOR ONWARD DISTRIBUTION.

2 -

L A F R A N Ç A I S E G L O B A L I N V E S T M E N T S O L U T I O N SSpeaker: Luc Dumontier – Head of Factor Investing

Luc Dumontier

Head of Factor

Investing and

Senior Portfolio

Manager

Luc joined LFIS in September 2013. Prior to LFIS, he was Head of Absolute Return Management at HSBC

AM. From 2004 to 2011, Luc was in charge of Absolute Return Management at Sinopia where he

developed quantitative strategies including Global Bond Market Neutral, Currency Overlay, Global Tactical

Asset Allocation and Multi Government Bonds. He started his career in 1998 as an equity portfolio

manager. Luc has led a “Portfolio Management” class at the SFAF (French Society of Financial Analysts)

since 2002 and at the AFG (French Asset Management Association) since 2011.

Luc holds a Master’s degree of Economy and a Master’s degree in money, bank and finance from Paris-

Sorbonne University.

3 -

P R E M I A 2 . 0Agenda

The “Death” of Diversification?

Factor Investing: A Different Approach to Capturing Performance

The Principal Challenges

LFIS’ 10 Commandments for Premia Investing

4 -

T H E “ D E A T H ” O F D I V E R S I F I C A T I O N ?The Limits of Traditional Asset Allocation Methods (1/2)

On average, traditional asset allocation approaches have failed to deliver:

DIVERSIFICATION … OR PERFORMANCE

Sophisticated investors are not immune to this “re-correlation trap”:

Research by renowned U.S. academics demonstrated that the investment portfolio of the world’s largest sovereign wealth fund,

Norway’s Government Pension Fund Global carries 99% exposure to a single risk – equities

An inability to deliver uncorrelated performance drove the largest public pension fund in the U.S., the California Public Employees’

Retirement System(“CalPERS”), to instead focus on an index-based approach

Correlation vs. Equity

Betavs. Equity

Sharpe Ratio

Equity Markets 100% 1.00 0.22

Flexible Funds 76% 0.26 0.24

Global Asset Allocation Funds 80% 0.33 0.19

Balanced Funds 81% 0.29 0.18

Alternative Funds 72% 0.25 -0.26

Flexible Funds

Global Asset Allocation Funds

Balanced Funds

Alternative FundsEquity Markets Flexible Funds: BAIF – UCITS / Open-ended / Flexible funds

Global Asset Allocation Funds: BAIF – UCITS / Open-ended / Flexible funds

Balanced Funds: BAIF – UCITS / Open-ended / Flexible funds

Equity Markets: MSCI World

Alternative Funds: HFRX Global

Sources: Bloomberg, La Française Investment Solutions.

All Indices are converted in euros.

5 -

T H E “ D E A T H ” O F D I V E R S I F I C A T I O N ?The Limits of Traditional Asset Allocation Methods (2/2)

Traditional asset allocation approaches have two major flaws:

ALLOCATING BY CAPITAL RATHER THAN RISK OVERRELIANCE ON TRADITIONAL “ALTERNATIVES”

Risk Parity (ERC)

Continental European Model: 30%/70%

equity/bond allocation = Equity Risk Allocation

of 90% to 100%Anglo-Saxon Model: 60%/40%

equity/bond allocation

SINCE 2005, “ALTERNATIVE” ASSET CLASSES HAVE LARGELY

FAILED TO DELIVER DIVERSIFICATION VERSUS EQUITY MARKETS

Average correlation of 80%

Practically systematic simultaneous extreme drawdowns

Sources: Bloomberg, La Française Investment Solutions.

FACTOR INVESTING

A Di f fe ren t Approach to Captu r ing Per fo rmance

7 -

A F A C T O R - B A S E D A P P R O A C HAn Established Framework – Newly Relevant Today

Asset classes are comprised of factors which explain most of their risk and return characteristics

The approach to portfolio construction is at fault, rather than an absence of diversification

“Factors are to assets what nutrients are to food”Professors John Cochrane and Andrew Ang

Academics and investment professionals have identified three major types of factors:

Macroeconomic factors: Inflation, growth, etc.

Microeconomic factors: Company size, valuation multiples, etc.

Behavioral Factors: Risk aversion, flows, momentum, regulation, etc.

These factors offer remuneration (a premia) for:

The assumption of an additional structural, non-diversifiable risk “Risk Premia”

The operational capacity to implement strategies that profit from certain behavioral biases of market participants linked to

investment constraints and flows “Style Premia”

8 -

F R O M F A C T O R S T O P R E M I AMacroeconomic Risk Premia

Low or Falling Growth High Growth

High or Rising Inflation High Inflation

Inflation linked Bonds (TIPS) Real AssetsCommodities real estate, timberland,Infrastructure farmland, energy, …

Low Growth High Growth

Low Inflation or Deflation Low Inflation

Cash EquityGovernment Bonds Corporate Debt

Economic Growth

Infl

ati

on

Sources: Callan, La Française Investment Solutions.

RISKY ASSET CLASSES VS. ECONOMIC GROWTH

GOVERNMENT BONDS VS. INFLATION

ASSET CLASSES VS. MACROECONOMIC FACTORS

Traditional asset classes remunerate investors for

bearing macroeconomic risks

As the number of macroeconomic factors is limited, asset

classes tend to be highly correlated

Complementary sources of diversification are

needed

Sources: Bloomberg, La Française Investment Solutions - Based on U.S. data.

9 -

F R O M F A C T O R S T O P R E M I AMicroeconomic Risk Premia

Some securities with common microeconomic characteristics outperform others

Long/short strategies can be created to capture the outperformance, which is independent of market moves

Outperformance remunerates an additional structural, non-diversifiable risk

Market

Undervalued small capswith strong operating profits

Overvalued large caps

Overvalued large capswith low operating profits

Large caps

Small caps

Undervalued small caps

Sources: Database from Kenneth French on the U.S. market, La Française Investment Solutions.

CUMULATIVE PERFORMANCE (%)

GROUPS OF EQUITIES WITH COMMON CHARACTERISTICS SMART BETA VS. RISK PREMIA

10 -

F R O M F A C T O R S T O P R E M I AStyle Premia

Premia linked to behavioral biases:

Ex. the tendency of investors to react only

progressively to new information (anchoring)

creates the momentum phenomenon

Premia linked to flows and investor constraints:

Ex: The volatility premia in U.S. markets, which stems from:

1. Investor risk aversion

2. Structural flows linked to hedging of variable annuity products

Sources: Bloomberg, La Française Investment Solutions.Sources: La Française Investment Solutions proprietary methodology. Series based on a volatility of 1%.

MOMENTUM PREMIA WITHIN MAIN ASSET CLASSESIMPLIED VS. REALIZED VOLATILITY (1-MONTH)

ON THE S&P500 INDEX

11 -

F R O M F A C T O R S T O P R E M I AAcademic Premia Are Embedded in All Asset Classes

Traditional / Long-Short

Equity ApproachPremia / Cross-Asset Approach

Bonds (NGB)Government bond allocation

L/S positions – Overall zero exposure

Implementation via futures, interest rate

swaps

Currencies (FX)FX allocation

Long / short positions

Implementation via exchange forwards,

non-deliverable forwards

Commodities (CDY)Intra-curve allocation

Commodity allocation

Implementation via total return swaps

→ 10-yr nominal yield - 1-yr expected

inflation and GDP growth

→ Relative PPP, productivity

differential

→ Relative slope of the forward

curves (backwardation vs. contango)

→ Current carry: 10-yr - 3-mth slope

→ Expected carry: short-term

dynamic of the slope

→ Current carry: 3-mth interest rate

differential

→ Expected carry: interest rate term

structure, economic surprise index

→ Spread contract depending on the

term structure curvature for each

commodity

→ Price momentum and economic

data momentum

→ Reversal: past week / month

→ Price momentum, order flows,

economic momentum


→ Long short maturities / short long

maturities, country and duration

neutral

→ Carry time spreads ahead and after

the congested traditional roll period

ASSET CLASSES

Equities (EQY)Country allocation and stock selection

Long / short positions - Overall zero

exposure

Implementation via futures, equity swaps

Value→ Price/ER, P/Book Value, P/Sales,

P/Free Cash Flow

Carry

ST Reversal /

MT Momentum

→ Price and earnings momentum


Low Risk /

Quality

→ Long leveraged low risk stocks /

short high risk stocks

→ ROE, CF Margin, earnings growth

Liquidity → Recent trend of most liquid stocks

THE PRINCIPAL CHALLENGES

13 -

T H E P R I N C I P A L C H A L L E N G E SUnder Which Conditions Does A Premia Approach Work?

Increasing the number of premia in a contemplated portfolio only increases the potential Sharpe ratio if

the premia are decorrelated

Source: La Française Investment Solutions - theoretical calculations provided for illustrative purposes only.

If correlation is not minimized the

Sharpe ratio will level out –

irrespective of the number of

additional premia added

Addition of uncorrelated premia can

allow for steady augmentation of

the Sharpe ratio

Individual Sharpe ratio = 0.4

Paiwise correlation between premia = 0%

Sharpe ratio = 0.6 / Correlation = 30%

Sharpe ratio = 0.6 / Correlation = 70%

Number of premia included in the portfolio

Ove

rall

Sh

arp

e r

ati

o o

f th

e e

qu

alri

sk

we

igh

ted

po

rtfo

lio

14 -

T H E P R I N C I P A L C H A L L E N G E S Recorrelation Risk

Realized contemplated portfolio volatility is a function of the level of effective correlation between underlying

strategies

Source: La Française Investment Solutions.

Theoretical calculations provided for illustrative purposes only;

Re-correlation can dramatically

increase risk levels

and the associated risk of loss

Effective pairwise correlation between premia

Eff

ecti

ve

vo

lati

lity

of

the o

ve

rall

po

rtfo

lio 30 premia

20

5

10

15 -

T H E P R I N C I P A L C H A L L E N G E SPossible Drivers of Recorrelation for Academic Premia

2 Premia may be sensitive to a common risk: Example – Macroeconomic Risk

2 Premia may have the same embedded positons: Example - De-Peg of the Swiss Franc

Sources: Deutsche Bank, La Française Investment Solutions.

Forced selling / de-leveraging: Example –

Equity Factors during the “Quant Crisis” (7-9 Aug. 2007)

Sources: JP Morgan, La Française Investment Solutions.

Re-correlation to the underlying market: Example – Equity Factors in the years 2008 and 2009

Sources: Deutsche Bank, La Française Investment Solutions.

Sources: JP Morgan, La Française Investment Solutions.

LFIS’ 10 COMMANDMENTS

FOR PREMIA INVESTING

17 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G1. Go Beyond the Academic (1/3)

Efficiently capture a large number of investable premia by taking long and short positions across several

asset classes while avoiding any structural bias

Carry

Value

Carry

Momentum

Volatility

Long assets with the highest carry / Short assets with the lowest carry

Long most undervalued (less overvalued) assets / Short most overvalued (less undervalued)

Long assets that have outperformed (medium-term) / Short assets that have underperformed

Reversal

Quality / Low Risk Long leveraged less risky assets / simultaneously short riskier assets

AcademicPremia

Plain Vanilla

Instruments

Implied

Premia

Derivatives

Relative value strategies between equity index implied dividends and spots

Relative value strategies: buy volatility that is deemed cheap and sell volatility deemed rich (between

assets of the same class and/or different classes)

Correlation

Arbitrage

Strategies

Liquidity / Carry Premia on

Liquid Assets

Cash and Derivative

Instruments

Bond/CDS Basis

Implied Equity Index Repo Rate

Convertible Arbitrage

Long assets that have underperformed (short-term) / Short assets that have outperformed

Dividends

Dispersion strategies: volatility of an index vs. volatilities of index constituents, volatility spread

between customized baskets

18 -

G O B E Y O N D T H E A C A D E M I CCase Study: Silver (XAGUSD) vs. Gold (XAUUSD) (1)

Transaction Details: Volatility spread silver vs. gold(both quoted in USD)

Buy implied volatility spread and receive the realized volatility

spread at maturity (both silver minus gold)

A mean-reversion strategy based on the historically observed

relationship between the implied and realized volatility spreads

Transaction done at the launch of the Fund (Dec. 2013)

Historically attractive entry point (traded spread)

Rationale

Systematic market flows overstate implied volatility of gold:

Continuous purchase of call options on gold by

investors to hedge against potential tail risks

Continuous purchase of put options by gold producers

to hedge their holdings

The relatively expensive implied volatility on gold reduces

the implied volatility spread silver minus gold

Creating an attractive entry point

Historical Observations (December 2006 to May 2016)

Entry at a point of high dislocation makes the expected

mark to market (based on historical observations)

manageable, even during the Global Financial Crisis

Sharpe ratio of 1.8

(1) Historical data – for information only. Past performance is not necessarily an indication of future results. There can be no guarantee that this transaction will generate a comparable Sharpe ratio in the future.

Understandable

Attractive

Investable

0

5

10

15

20

25

30

1Y HV Spread 1Y IV Spread Entry Level

Entry Point

19 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G2. Do not Invent Factors

Cochrane, 2011 Premia Selection Process

Sourcing

On-going sourcing of premia

Selection

Strict qualification criteria

Attractive (after transaction

costs)

Understandable

Investable

Robust

Orthogonal / Diversifying

Internal Research

Market Research

Universe of Premia Opportunities

Eligible Premia

Sources: Campbell R. Harvey, Yann Liu and Heqing Zhu.

“Now we have a zoo of factors”

20 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G3. Understand the Underlying Rationale

Sources of Premia

Rational / Economic

Compensation for bearing systematic risk

Behavioral

Compensation for processing information better

Institutional / Market Microstructure

Compensation for having fewer constraints

Value Remuneration of the “value trap” risk Lottery golden ticket effect: Investors overestimate

the capacity of “glamour” assets to generate profits

Investors’ VAR constraints lead them to avoid

poorly performing investments

Reversal (ST) /

Momentum (MT)

Momentum premia remunerates the risk of a

severe turn in the economic cycle

Short-term reversal due to the disposition effect

Medium-term momentum due to anchoring

Indexed and portfolio insurance strategies

mechanically reinforce price momentum

Low Risk Volatility is the greatest opposing force to

compound returns

Riskier assets are overpaid due to a preference for

lotteries and representativeness

Certain constraints (leverage, capital,

benchmark) reinforce demand for risky assets

which have become expensive

Carry Compensation for negative skew / crash risk Investors minimize the probability of potential losses

on uncertain parts of transactions

Remuneration for being a provider of liquidity in

stressed periods

Volatility /

Correlation

The volatility premia remunerates for the

asymmetric nature of realized volatility

Investors tend to skew towards purchasing

protection against spikes in volatility

Volatility: Demand/supply imbalances create

distortions

Correlation: Index protection makes the index

volatility expensive vs. its components, etc.

Carry / Liquidity Compensation for the risk of realizing a negative

mark-to-market if a strategy is unwound early

Stop loss behavior, especially in times of crisis,

tends to increase the volatility of liquidity-based

positions but accentuate the opportunities

Primary flows may create distortions that

arbitrageurs are now unable to capture due to

regulatory uncertainties

21 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G4. Avoid Data Mining or Over-Fitting

Simulated Performance ≠ Actual Performance Verify that premia are resilient when

parameters change:


Sources: A. Suhonen, M. Lennkh and F. Perez.

Distribution of Sharpe ratios

Distribution of correlations

Investment banking strategy performance

Ensuring the robustness of the equity low risk premia strategy

22 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G5. Control Exposure to Underlying Asset Classes

Factorial Approach to Portfolio Construction

Source: La Française Investment Solutions - Principal Component Analysis (“PCA”) is run on a monthly basis using 1-year rolling weekly data since 2001. As of December 31, 2016.

PCA WITHIN ASSET CLASSES

80%

70%

60%

50%

40%

30%

20%

Government Bonds (G10)

Currencies (G10)

Equities (OECD countries)

Commodities(BCOM)

Firs

t P

CA

Ris

k Fa

cto

r

25%

20%

15%

10%

5%

Government Bonds (G10)

Currencies (G10)

Equities (OECD countries)

Commodities(BCOM)

Seco

nd

PC

A R

isk

Fact

or

PCA AMONG G10 CURRENCIES

23 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G6. Control Exposure to Other Alternative Premia in the Portfolio

VOLATILITY BUDGET MANAGEMENT

Manage the volatility budget to maintain room

in the event that premia generally re-correlate

0%

7%

Target

Typical Initial

Volatility Budget


PORTFOLIO ORTHOGONALISATION OF THE LOW RISK PREMIA

24 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G7. Minimize Idiosyncratic Risks


LFIS LOW RISK SIMULATIONS BY GEOGRAPHIC ZONE: 2000 to 2015

-2

0

2

4

6

8

10

12

14

16

18

1999 2001 2003 2005 2007 2009 2011 2013 2015

Euro Zone

US

UK

25 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G8. Monitor Correlations in Specific Situations

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15

Carry / Implied Carry / Academic Implied / Academic

ROLLING CORRELATION BETWEEN THE THREE PREMIA FAMILIES


Past performance is not indicative or constitutes a representation or guarantee as to future results or performance. The historical investment results and performance data described in this material are not an

indicator nor a guide of future investment results. Such simulations are intended only to give recipients information concerning the general experience of LFIS and is not intended as a representation or warranty by

LFIS, or any other person or entity as to the actual composition of or performance of any future investments. No statement in this document is intended to be nor may be construed as a profit forecast and there can

be no assurance that the assumptions described herein, the returns and targets indicated herein will be achieved.

26 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G9. Beware of the Temptation to Time Factors

ILLUSTRATION OF THE SHORTFALL IN DIVERSIFICATION WITH 5 UNCORRELATED FACTORS

CONSERVATIVE TACTICAL ALLOCATION

Conservative versus the strategic allocation to preserve

the diversification power of the strategy

For illustration purposes only.

27 -

1 0 C O M M A N D M E N T S F O R P R E M I A I N V E S T I N G10. Invest in People and Infrastructure (High Barriers to Entry)

LFIS’ Unique

Investment

Infrastructure

Efficient Implementation

while Minimizing

Transaction Costs

Robust network of counterparties

and agreements

Wide panel of agreements from

supervisory authorities

Numerous ISDAs

Direct access to listed instruments

Low negotiated transaction costs

Attractive refinancing facilities

28 -

L F I S P R E M I A F U N D SResearch Focus

Luc Dumontier

Head of Factor

Investing, Senior

Portfolio Manager

Guillaume Garchery

Head of Quantitative

Research and

Development, Senior

Portfolio Manager

Find the latest LFIS research on our website:

https://www.lafrancaise-gis.com

The persons referenced herein may not necessarily continue to be employed by LFIS and may not perform or continue to perform services for LFIS, the premia team or the teams mentioned above.

https://www.lafrancaise-gis.com/

APPENDIX

30 -

L F I S P R E M I A S T R A T E G I E S T E A MPortfolio Management Team (1)

(1) Information regarding the background and experience of LFIS personnel is provided for information purposes only. Such persons may not necessarily continue to be employed by LFIS and may not continue to

perform services for the teams mentioned above.

(2) New employees identified and to be announced shortly.

Chairman, CEO and CIO of LFISSofiene Haj-Taieb

Quant. Research & DevelopmentGuillaume Garchery 4 Professionals (+1) (2)

Absolute ReturnGuillaume Dupin

Guillaume Garchery

22 years of experience

Last position: Deputy Head of Global Markets at

Société Générale Corporate and Investment Banking


Last Position:

Quantitative Portfolio Manager

at Avenir Finance Investment

Managers

Yann Yeramian


Last Position:

Credit and Convertible Bond

Trader at BRED Banque

Populaire

Yann Le Her


Last Position:

Head of Equity Derivatives

Trading - Americas at HSBC

Implied and Liquidity / Carry Premia

Guillaume Dupin

Factor InvestingLuc Dumontier

Simon Lepine


Last Position:

Portfolio Manager – Fund

Solutions at LFIS

Academic Premia

Luc Dumontier

To Be Announced (2)

To Be Announced


Last position: Global Head of Equity Derivatives Structured and Flow Trading at Crédit Agricole Corporate

and Investment Banking


Last position: Head of Absolute Return Management at HSBC Asset

Management - France

31 -

I M P O R T A N T N O T I C E

This material (the “Material”) is being provided by La Française Investment Solutions in good faith on a strictly confidential and non-reliance basis, solely at the recipient’s request for information and for discussion purposes

only. It may not be copied or circulated, in whole or in part, without the prior written consent of La Française Investment Solutions or any of its affiliates (“LFGIS”). This Material is solely for the use of the recipient who has

received it directly from LFGIS. It is not for use by retail customers under any circumstances. This Material does not constitute an offer or solicitation, nor is it the basis for any contract for the purchase or sale of any

investment, security or product or for participating in any investment strategy. LFGIS disclaims any and all liability relating to a decision based on or for reliance on this Material.

This Material has not been reviewed, approved or disapproved by any federal or state securities commission, state administrator or any other regulatory authority in any jurisdiction. The distribution of this Material in certain

jurisdictions may be restricted by law. The recipient represents that it is able to receive this Material without contravention of any applicable legal or regulatory restrictions in the jurisdiction in which it resides or conducts

business. LFGIS does not accept any responsibility for ensuring that a recipient complies with applicable laws and regulations. The Material does not constitute, and may not be used for or in connection with, an offer or

solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation.

Due to its simplification, this Material is partial and thus the information can be subjective. The information set forth herein does not purport to be complete and is subject to change without notice. This Material does not take

into account the recipient’s objectives, financial situation or needs. This Material shall not be deemed to constitute investment advice and/or tax, accounting, regulatory, legal or other advice and it should not be relied upon

as the basis for a decision to enter into a transaction or as the basis for an investment decision. The recipient should make its own appraisal of the risks. The recipient is urged to consult with its own advisers with respect to

legal, tax, regulatory, financial, accounting and other matters concerning any investment decision. Investments in any fund or product managed and/or advised by LFGIS are accepted from eligible investors only, on the

basis of the relevant current prospectus, information memorandum or final documentation (as amended or supplemented from time to time). Potential investors should be aware that any direct or indirect investment in any

investment vehicle described herein is subject to significant risks, including total loss of capital, such investments may be highly volatile, and there are significant restrictions on transferability and redemption of an interest in

such investment vehicle. Liquidity of an investment described herein is not guaranteed and there are circumstances under which such liquidity may be restricted or may not be possible. Investors should be able to bear the

financial risks and limited liquidity of this investment. Alternative investments such are suitable only for sophisticated investors who are able to sustain a loss of their entire investment. No assurance can be given that the

investment objectives of the investment vehicles presented herein will be achieved or that an investor will not lose all or substantially all of his or her investment. Investment managers may use investment strategies and

financial instruments that, while affording the opportunity to generate positive returns, also provide the opportunity for increased volatility and significant risk of loss. The investments described herein are also subject to the

risk of counterparty or issuer default. This brief statement does not disclose all the risks and other significant aspects in connection with transactions of the type described in the Material. Any decision to enter into any

transaction should be made after reviewing carefully and rely solely on the relevant prospectus or information memorandum (in particular, for further explanation of the risks and conflicts of interest associated with the types

of investments illustrated herein), conducting such diligence and investigations as the investor deems necessary and consulting the investor’s own legal, accounting and tax advisors in order to make an independent

determination of the suitability and consequences of any investment.

Analysis and conclusions express the views of LFGIS and may be subject to change without notice. All information, analysis and conclusions herein present LFGIS’s current knowledge and market estimation at the time of

its production. Nevertheless it can come to unintended erroneous statements or presentations and the information may change at any time without previous announcements and/or notices to the recipient of this Material.

Thus, a liability or guarantee for the up-to-datedness, correctness and completeness of the allocated information, estimation and opinion cannot be assumed. Information contained herein may vary from previous or future

published versions of this Material. Information regarding the background and experience of personnel of LFGIS are provided for information purposes only. Such persons may not necessarily continue to be employed by

LFGIS and may not perform or continue to perform services for LFGIS. The reference to league tables and awards are not an indicator of the futures places in league tables or awards. Unless otherwise noted, information

provided herein is current as of the date of this Material.

The data including but not limited to scenarios and investment guidelines set forth in this Material are presented for illustrative purposes only and such data could vary significantly from the final investment policy and/or

actual results. Where past performance, past experience and track record information is provided, this is not necessarily representative of future results: performance is not constant over time and the value of investments

may fall as well as rise. No representation is made that any results or other figures indicated in this Material will be achieved and that investments will achieve comparable results that targeted returns. Investment may be

subject to gearing and should be considered higher risk than a similar ungeared investment. Investment returns may be subject to foreign currency exchange risks. Actual results on unrealized investments described herein

will depend on, among other factors, future operating results, the value of the assets and market conditions at the time of disposition, legal and contractual restrictions on transfer that may limit the liquidity, any related

transactions costs and the timing and manner of sale, all of which may differ materially from the assumptions and circumstances on which the valuations used in the prior performance data contained herein are based.

Some statements and analysis in this Material and some examples provided are based upon or derived from the hypothetical performance of models developed by LFGIS and/or third parties. In particular, in connection with

certain investments for which no external pricing information is available, LFGIS will rely on internal pricing models, using certain modeling and data assumptions. Such valuations may vary from valuations performed by

other parties for similar types of investments. Models are inherently imperfect and there is no assurance that any returns or other figures indicated in this Material and derived from such models will be achieved. LFGIS

expressly disclaims any responsibility for (i) the accuracy of the models or estimates used in deriving the analyses; (ii) any errors or omissions in computing or disseminating the analyses; or (iii) any uses to which the

analyses are put.

32 -

I M P O R T A N T N O T I C E

Any hypothetical illustrations, forecasts and estimates contained in this Material are forward looking statements and are based upon assumptions. Hypothetical illustrations are necessarily speculative in nature and it can be

expected that some or all of the assumptions underlying the hypothetical illustrations will not materialize or will vary significantly from actual results. Accordingly, the hypothetical illustrations are only an estimate and LFGIS

assumes no duty to update any forward looking statement. This Material may also contain historical market data; however, historical market trends are not reliable indicators of future market behavior.

Any forward looking information and past performance information contained in this Material was prepared without a view necessarily towards public disclosure or compliance or conformity with published guidelines of the

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strategies and techniques that are typically prohibited for funds registered under the ‘40 Act. Also, hedge funds are typically less transparent in terms of information and pricing and have much higher fees than registered

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Notice to Canadian investors: any potential investment in any securities or financial instruments described herein may not be suitable for all investors. Any prospective investment will require you to represent that you are an

“accredited investor”, as defined in National Instrument 45-106. The securities and financial instruments described herein may not be available in all jurisdictions of Canada. Investment vehicles described herein will not be

offered by prospectus in Canada and will not be subject to National Instrument 81-102 and National Instrument 81-106. In addition, investments in or linked to hedge funds are highly speculative and may be adversely

affected by the unregulated nature of hedge funds and the use of trading strategies and techniques that are typically prohibited for prospectus offered funds. Also, hedge funds are typically less transparent in terms of

information and pricing and have much higher fees than registered funds. Investors in hedge funds may not be afforded the same protections as investors in funds registered under the ’40 Act including limitations on fees,

controls over investment policies and reporting requirements.

Notice to Canadian investors: any potential investment in any securities or financial instruments described herein may not be suitable for all investors. Any prospective investment will require you to represent that you are an

“accredited investor”, as defined in National Instrument 45-106 and a “permitted client” as defined in National Instrument 31-103. The securities and financial instruments described herein may not be available in all

jurisdictions of Canada. Investment vehicles described herein will not be offered by prospectus in Canada and will not be subject to National Instrument 81-102 and National Instrument 81-106. Investment vehicles

described herein are offered only on the basis of the relevant current prospectus (from another jurisdiction), offering memorandum of final documentation (as amended or supplemented) (the “Offering Document”) and the

information contained herein is qualified in its entirety by the information to be contained in the Offering Document. In addition, investments in or linked to hedge funds are highly speculative and may be adversely affected

by the unregulated nature of hedge funds and the use of trading strategies and techniques that are typically prohibited for prospectus offered funds. Also, hedge funds are typically less transparent in terms of information

and pricing and have much higher fees than registered funds. Investors in hedge funds may not be afforded the same protections as investors in funds registered under the ’40 Act including limitations on fees, controls over

investment policies and reporting requirements.

This Material is not subject to the Autorité des Marchés Financiers’ (“AMF”) approval and was not submitted for approval to the AMF.

© 2017 La Française Investment Solutions and its Affiliated Companies. All rights reserved.

For forty years, La Française has been developing core competencies in third party asset management.

La Française has a multi-affiliate business model organized around four core activities: securities, real estate, investment

solutions and direct financing. The group caters to institutional and private clients throughout the world.

With 559 professionals and offices in Paris, Frankfurt, Hong Kong, London, Luxembourg, Madrid and Milan. La Française

manages close to 60 billion euros in assets.

La Française has a unique and solid shareholder structure that associates a well-known bank, Crédit Mutuel Nord Europe, with

company employees and directors and grants the group total independence in the daily exercise of its business activity.

Documents

P R E M I A 2 . 0 · Premia linked to flows and investor constraints: Ex: The volatility premia in U.S. markets, which stems from: 1. Investor risk aversion 2. Structural flows linked