EFTA00556664.pdf

4 Wit I I contact@qarmin.net June 2012 Confidential EFTA00556664 Table of Contents 3 4 5 6 7 11 13 33 Introduction Executive Summary Competitive Advantages Investment Process Strategies Description Performance Appendix 4ARMIN EFTA00556665 Introduction Founded in October 2010, QARMIN is a small Paris-based Prop Trading House that specializes in quantitative systematic fully automatized strategies with a focus on listed and highly liquid instruments (Europe and US) and medium frequency strategies. First stage of development was dedicated to development and live-testing of our proprietary trading platform including automated strategies, backtesting tools, risk management engine and execution algorithms. We have gone live with the founders' private funds and are now looking for a business partner to operate on a larger scale. QARMIN June 2012 - Confidential EFTA00556666 Executive Summary J Primary objective is to achieve consistent risk-adjusted returns throughout different market cycles, taking advantage of a flexible dynamic allocation process relying on 3 largely uncorrelated investment axes: multi-asset directional, market neutral and volatility arbitrage. We typically target a minimum Sharpe Ratio of 2, with an annualized Return to Max Drawdown of 3. J Custom trading platform: Research and Development, backtesting and deployment run on a unified platform, hence making possible process streamlining. We're maintaining an extensive historical database of prices and fundamentals for 6000+ instruments listed on US and European exchanges, going back more than 15 years. QARMIN is a team of experienced prop traders and developers who have committed a significant amount of their wealth in the project, and have worked extensively together in the past. Each team member has a strong academic background in mathematical finance and has extensive experience in the derivatives market. A diversified strategy portfolio with high pre-leverage target returns QARMIN June 2012 - Confidential itARMIN EFTA00556667 Competitive Advantages K Strong methodology and flexible platform allow industrialization of idea generation and testing: time to market from R&D to production is low K Capacity to create and manage several uncorrelated bets by creating nonstandard coherent underlyings (basket, synthetic instruments) K Large existing (and growing) library of uncorrelated single models/strategies displaying low pairwise correlation (-5% average correlation over 10yr period) within each investment axis Extensive menu of allotment between each of those models benefiting from our proprietary allocation model therefore increasing Sharpe Ratio compared to any given single strategy's Sharpe Total liberty to switch off strategies with low prospective returns K Active hedging method for tail risks via quantitative process involving long only cheap OTM long-term options; focus on macro picture, top down approach and exogenous stimuli analysis therefore departing from the historical bias and enhancing the capital preservation capacity of the portfolio QARMIN June 2012 - Confidential EFTA00556668 Investment Process 77 Strategy i Development I Alpha Discovery Historical Validation Expected Returns Portfolio Allocation Bottom-Up Top•Down Strategy Development (cf. Appendix p15) • Underlying idea stemming from market experience (risk premium location) • Historical validation (backtesting, choice of relevant parameters, observed returns) • Data-mining bias correction (reality check, expected returns, coherence with market fundamentals — is the edge still in place?) Portfolio Allocation (cf. Appendix p16) • Bottom-up approach using customized allocation algorithms at each allocation step • Top-Down approach adjusting marginal weights of single models and investment axes via our own proprietary risk index Risk Management (cf. Appendix p18) • Single model dedicated risk management (stop-loss, volatility/VaR adjusted size by instrument) • Specific risk manager for each investment style (directional, market neutral, volatility arbitrage) • Global aggregation for ultimate capital preservation constraint Execution Management (cf. Appendix p21) • Specific algorithms for each investment style • Transaction costs analysis (brokerage, slippage, rebates) for best execution algorithm selection and trades/performance reconciliation Identification of alpha at each step of the process QARMIN June 2012 - Confidential ARMIN EFTA00556669 Strategies Description Overview • 3 Investment axes whose relative weights are controlled via a proprietary portfolio allocation model; directional, market neutral and volatility arbitrage are effectively uncorrelated through different market cycles Investment Axis Description Technical and fundamental short/medium term pattern finance, market macro/micro structure and directional events Asset Class Equities, Equity Index, Fixed Income, Commodity, Currency Futures and ETFs. Options on these asset coherent with behavioural From 2 hours to classes. Geographic positioning: Europe, US and Emerging Markets (via ETF) Horizon several weeks Directional Market Neutral Adaptive statistical analysis to capitalize on local divergence and mean reversion nature of risk neutral baskets Equities, Equity Index, Fixed Income Futures Geographic positioning: Europe, US From 10 minutes to 2 weeks Volatility Arbitrage Arbitrage of the volatility curve mispricing (local vol, skew, kurtosis, term structure) of an underlying compared to its peers, both using fundamental and statistical approach Equities: main indices and their stock components, VIX, V2X, Main Currencies, Commodities, ETF Volatilities VXX, VXZ, Listed vanilla options Geographic positioning: Europe, US and Emerging Markets (via ETF) From 1 week to 1 month ARMIN EFTA00556670 Strategies Description Directional Directional Strategy Sample* Mean Reversion Strategy Description Take advantage of short term negative autocorrelation using specific volatility analysis Underlyings Large Cap Equities Equity Futures Horizon 1 to 5 days Trend Following Exploit long term trend following nature of capital markets; overlay via tactical options writing Equity Index Futures Commodity Futures FX Futures Fixed Income Futures Emerging Market ETFs 5 days to several weeks Macro Events Capitalize on over/under-reaction of various indices around macroeconomic announcements Equity Index Futures Fixed Income Futures 2 to 10 hours Gap Exploit statistical patterns of gaps at open Equity Index Futures 2 to 10 hours Seasonality Benefit from intraday and extraday seasonality due to structural imbalances Equities Equity Index Futures 2 hours to 5 days non-exhaustive list of currently available live strategies QARMIN June 2012 - Confidential '')QARMIN EFTA00556671 Strategies Description Market Neutral Market Neutral Strategy Sample* Equity vs. Volatility Arbitrage Strategy Description Exploit local relative mispricing of equities and volatility as an asset class Underlyings Volatility Index Futures Equity Index Futures Horizon 10 minutes to 1 day Equity Statistical Arbitrage Take advantage of temporary divergence within a bespoke basket constructed via various statistical methods Equities 1 day to 2 weeks Cross Asset Futures Arbitrage Take advantage of temporary divergence within a bespoke basket of instruments from different asset classes constructed via adequate statistical methods Equity Index Futures Commodity Futures FX Futures Fixed Income Futures 2 hours to 3 days ' non-exhaustive list of currently available live strategies QARMIN June 2012 - Confidential ARMIN EFTA00556672 Strategies Description Volatility Arbitrage Volatility Arbitrage Strategy Sample* Single Stocks Relative Value Short term options expiration effect Event Driven Strategy Description Benefit from implied volatility curve mispricing of an underlying compared to its peers (L/S volatility, Dispersion) Take advantage of large time decay effect for short term options around expiration; identify behaviours of underlyings on expiration date deriving from large options positions hedging Exploit volatility curve dislocation around idiosyncratic events Underlyings Equity Options Equity Index Options Equity Options Equity Options Horizon 1 week to 1 month 1 day to 1 week 1 week to 1 month • non-exhaustive list of currently available live strategies QARMIN June 2012 - Confidential 4ARMIN EFTA00556673 Performance 1/2 Consistent risk-adjusted returns over a 10yr backtest period with no sign of abating in the recent past Sharpe 3.92 Yearly Return to Max DD 5.34 Avg Yearly Return 22.8% Profitable Days % 59% Avg Daily Return 0.08% StDev Daily Return 0.37% Best Daily Return 2.91% Worst Daily Return -2.24% Worst DD -4.27% Max DD Duration 136 days Avg Worst 10 DD Duration 62.9 days Directional/Market Neutral Historical Drawdown Directional/Market Neutral Equity Curve e e CtARMIN EFTA00556674 Performance 2/2 45% 40% 35% 30% 25% 20% 15% Badctested Yearly Returns (Post-Transaction Costs, Unleyeraged) • 2007 2008 2009 2010 2011 2012 Yearly Returns — — — Average Backtested Returns 23.5% — — — Target Return 15% Y2012 performance has been frozen as of May 31,1 and extrapolated for the remainder of the calendar year The backtest is presented with an equal-weighted allocation method; live allocation will tweak the relative weights of each strategies and each investment style, hence improving the risk profile of the portfolio; weight of any given axis will never represent more than 50% at any given time with the exception of Volatility Arbitrage which will be limited to 25% relative weight Volatility Arbitrage investment axis is not represented on this chart as backtesting remains difficult to achieve; however the expected performance is in line with the above-presented result and should add an extra layer of diversification, therefore improving the overall profile of the portfolio 1 Margin of safety built into target performance has the last 10; it is a large 7.8% target return expectations average over the entire period moving forward; 15% yearly been reached 9 years out of (or 0.85 std dev) below 15% target return is coherent with 4.27% max backtested drawdown, hence allowing us to construct a portfolio with an expected Return to max drawdown higher than 3 Strategy can be leveraged up to 5 times (margin to equity < 100%) to achieve an iso return-to-max-drawdown couple with no significant foreseeable loss of performance (besides marginal funding costs) QARMIN June 2012 - Confidential EFTA00556675 Appendix 14 Team Bio Strategy Development 15 16 Portfolio Allocation 17 Risk Management 20 Execution Management 21 Technical Platform 28 Performance Details QARMIN June 2012 - Confidential 4ARMIN EFTA00556676 Team Bio Li Bertrand LOUVARD, Founding Partner Bertrand joined Societe Generale in 2000 as a trader on the US Indices Derivatives Trading Book in NY. In 2003, he became Head of the US Indices Flow Business Trading Book before being appointed Head of the US Equity Flow Business Trading Book in 2005. He expanded the Hedge Fund Client Business in the US for vanilla derivatives products. He then joined the Lyxor Structured Product Solutions team in 2009 to develop the structured products active management offer within the Quantitative Asset Management team of Lyxor. Bertrand Louvard is a graduate of the tcole Centrale Paris and has a Master's degree in Mathematics, Probability and Statistics from the University of Jussieu (Paris VI). Li Francois-Charles SCAPULA, Founding Partner Francois-Charles was a fellow associate at the CEREG between 2001 and 2004 and a professor of Econometrics and Quantitative Techniques at University Paris IX Dauphine. He has spent the last 7 years as a prop trader for Fortis and Societe Generale focusing on quant equity derivatives strategies, where he traded listed and OTC stock and index options, variance swaps, futures from all asset classes. He was also responsible for setting up the trading platform at Lyxor for the quant asset management department. Francois-Charles is a graduate of the Ecole Normale Superieure and ESSEC. He has an « Agregation » in Economics, a Master's degree in Applied Mathematics and a Master's degree in Finance from Paris IX Dauphine. He was a PhD candidate in Mathematical Finance at the University of Paris IX Dauphine. Sylvain Rey, Founding Partner As a graduate of Telecom SudParis with a specialty in parallel and distributed system, Sylvain has been a Software Consultant in the San Francisco Bay Area from 2000, then in Paris, France from 2003. As a seasoned Application and Systems Architect, he has designed and developed many solutions for various banking and financial institutions such as BNP Paribas, AXA Investment Managers, Banque de France and the European System of Central Banks. Each Partner has committed a substantial amount of his personal wealth to the venture. Sylvain and Bertrand have known each other for more than 15 years. Bertrand and Francois Charles were working together at Societe Generale. Sylvain, Bertrand and Francois Charles have founded QARMIN in October 2010 and have worked extensively since then to build a cutting edge systematic platform. QARMIN June 2012 - Confidential EFTA00556677 Strategy Development Top-down process IDEA GENERATION Risk Premium Intuited Asset Class/Universe/Instruments defined Systematic Rule Formulated 1. Entry / Exit 2. Specific Risk Management (Size, Stop Loss, Overlay) Database 1. Prices 2. Volumes 3. Fundamentals 4. Derivatives 5. Proprietary Data uputrun parameters set dnu weights Data Mining Correction Yes Config 8acktesting Data-Mining Engine Engine Observed performance set satisfactory? Yes Are observed results coherent with market experience? Selection Criterion 1 Average Return 2 Sharpe 3 Ret on drawdown 4. Ret. on VaR sys emauc rule ITOM observed data sets. Yes SINGLE STRATEGY READY Bottom-up process Integrate Strategy In Library ° IQ ARMIN EFTA00556678 STEPWISE PROCESS INITIAL STEP 0 STEP 1 INTERMEDIATE RESULT 1 STEP 2 BOTTOM UP CONTROL Single Strategy Generation Process CI Strategy Development STATISTICAL EQUITY CURVES ANALYSIS Including: 1. Mean Variance Optimization over various horizons 2. Maximum diversification under performance constraint 3. Maximization of various performance measures in walk forward process STATISTICAL EQUITY CURVES ANALYSIS Kelly Criterion, Markowitz Portfolio Allocation INTERMEDIATE RESULT 2 DIRECTIONAL LIBRARY Direct. I Direct. i 1 Alloc. Directional n Direct. virec:Lionai aggregation PORTFOLIO ALLOCATION MARKET NEUTRAL LIBRARY Neut. 1 Alloc. Market Neutral Allocation aggregation VOL ARB UBRARY Alloc. volatility mroitrage aggregation TOP DOWN CONTROL Single Strategy Generation Process q. Strategy Development EXOGENEOUS CRITERIA ANALYSIS Including: 1. Strength of Risk Premia underlying each of the single strategies (e.g. IV %Ile vs. RV, frequency of channel borders crossing, high volume in bear market, etc.) 2. Liquidity of traded instruments EXOGENEOUS CRITERIA ANALYSIS Including: 1. Macro/Flow Environment (e.g. Economic Indicators) 2. Volatility/Credit Conditions (VIX, iTraxx) 3. Fear/Greed Index, Deal Index (Proprietary index) 4. Crowding out trades (recent HF performance vs. LT mean) Decision to tilt allocation towards better historically performing strategies in identified conditions EFTA00556679 Risk Management 1/2 Ex-ante and ex-post approaches Ex-ante approach K Portfolio allocation taking decisions based on past performance analysis under risk constraints • Variance minimization of the portfolio for a given performance target via Var-Covar matrix for strategies equity curves and underlyings historical return • Minimum ex-ante diversification required for inclusion of a given strategy in the meta-portfolio K Sentiment Index adjusting notional at risk based on fundamental and technical data keeping the margin to equity relatively constant (and targeting stable risk return profile) K Hedging macro picture with "long-only" cheap long term OTM options via fundamental and quantitative screening of underlyings with available derivative markets (see focus) Ex-post approach K Single position aggregation and real-time dedicated risk metrics for each business line... • Multi Directional: Tenor notional exposure (via Var-Covar Matrix for underlying return) • Market Neutral: Notional Replication, Spread Risks • Volatility Arbitrage: Volatility, Kurtosis/Skew Exposure (Tail Risks) K ...and at the global level for ultimate risk control and capital preservation • Greeks, beta-adjusted notional exposure, dispersion risks K Stress-testing of all positions via adverse relevant / historical scenarios, VaR, etc. QARMIN Ju 2012 - nfidential EFTA00556680 Risk Management 2/2 Macro Picture - Options K « Buy only» long dated out-of-the-money options K For a wide variety of asset classes and instruments, identify cheap options in terms of current implied volatility vs. universe (universe-relative cheapness at a given time) and long term average (self-relative cheapness over time) K Analyze technicals, fundamentals and sentiments, leveraging our platform and proprietary database via a quantitative process that allows us to screen hundreds of assets Come up with a list of instruments in a position to capitalize on high potential global macro situations K « Be fearful when others are greedy and greedy when others are fearful » (W. Buffet) • Market psychology is the motor of the performance: we try and benefit from fear, greed, hysteria and mania • Options are often mispriced during periods of irrationality hence providing great risk/reward opportunities K Actively manage options • Long term only options in order to reduce adverse time decay impact: we do not keep options with time to maturity lower than 1 year • Profit-taking/Stop-loss methodology: we seek to return 5/10 times the original investment on any given bet; as soon as intermediary targets are reached, we deleverage part of the bet K Risk management/performance enhancement process • Our general investment philosophy is to look for statistical anomalies and capitalize on it by designing systematic strategies; although an adaptive process, it is bound to be historically biased • These strategies are often - not always- based on cashing in risk premia (implicit or explicit) • Buying cheap OTM options allows us to hedge both biases (historical and short risk/premium) via a deductive approach that covers any unpredictable events that June fall out of historical scope QARMIN June 2012 - Confidential EFTA00556681 STEPWISE PROCESS INTERMEDIATE RESULT 2 STEP 3 INTERMEDIATE RESULT 3 STEP 4 INTERMEDIATE RESULT 4 BOTTOM UP CONTROL RISK MANAGEMENT NO CONTROL Risk ex-ante has been measured and calibrated at STEP 2 NO CONTROL Risk ex-ante has been measured and allocated at STEP 2 Directional Risk Engine Market Neutral aggregation Market Neutral Risk Engine Volatility Arbitrage aggregation Volatility Arbitrage Risk Engine Global Aggregation Global Risk Engine Throat Dacitinne TOP DOWN CONTROL RISK CONTROL BASED ON CALCULATED MEASURES Including: 1. VaR, Capital at risk under adverse scenarios 2. Greeks 3. Notional replication, spread risks 4. Tenor Notional on uncorrelated instruments Each axis is managed separately as they are incurring different types of risk RISK CONTROL BASED ON CALCULATED MEASURES Risks are aggregated at the top level to ensure global capital preservation EFTA00556682 STEPWISE PROCESS INTERMEDIATE RESULT 4 STEP 5 FINAL ORDERS BOTTOM UP CONTROL SLIPPAGE & TCA FOR ALL EXECUTIONS METHODS 1. Simulated 2. Real We allocate more to the best recent execution method while keeping minimum diversification. Those measures give us a hint as to what the street is doing in regards to our trading signals. EXECUTION MANAGEMENT Target Positions Directional library Execution Algorithm Library Market Neutral library Volatility Arbitrage library Combination of algorithmic orders for single instruments Pair trading and basket algorithms Aggressive vs. passive algorithm for directional trades TOP DOWN CONTROL LIQUIDITY, LEVEL 2, BOOK ANALYSIS Analysis of book order, market microstructure, number of trades at the bid/offer over last relevant bar EFTA00556683 Technical Platform Architecture and flows overview Monitoring and Reporting tools Q Reporting Database L- I IIIICLIdSt Pricing, Corporate Actions and Fundamental Data Aggregator I QARMIN Custom indicators I Bloomberg Pricing Fundamental data Corporate Actions fi Real-time Data Aggregator Activ Financials Real-time data I Custom API / FIX Prime Broker FIX UHF Trader Engine Strategy Packages 11 QARMIN Trading Framework Additional Providers Real-time data QARMIN June 2012 - Confidential ARMIN EFTA00556684 Technical Platform Features 1/2 K Custom integrated Platform • Fully mastered internally • Modern software methodologies • Every team member is a developer • Code base is managed, factorized and peer reviewed • Fast development cycles using agile methodologies K Based on QuantServer / QuantOffice from Deltix La • • • Well renown software, powering various Institutionals, Funds and Proprietary Trading Houses Complex Event Processing architecture Heavily parallelized, high performance system C a) a • Modern foundation with highly optimized, managed processes • Tight technical partnership with Deltix K Modern tools for business development • Instrument / Universe / Calendar Managers • Strategy Manager • Integrated Development Environment based on Microsoft Visual Studio • Visual Alpha tool for fast prototyping • Strategy Runner for backtesting • Database administration tools QARMIN June 2012 - Confidential EFTA00556685 Technical Platform Features 2/2 K QARMIN interoperability layer • Flexible architecture allowing us to plug-in within various environments • Real-time data connectors • Pricing, corporate actions and fundamental data connectors • Proprietary engine for index and scoring indicators generation K QARMIN Trading Framework • Extensive financial and mathematical library La • • Integrated with well established Econometry, Statistical, Financial and Solver libraries. • QARMIN own library with custom indicators Signal Instrument facility, providing directly usable meta instruments for signal processing (chain management, corporate action adjustment, pairs, baskets) C a) a a • State-of-the-art Meta Models facility for static and dynamic discovery/aggregation/allocation of strategies • Real-time Risk Engines, enabling proactive decisions • Order Processors, with custom execution algorithms and operational costs management K Monitoring / Reporting tools • Integrated within Hyperic HQ monitoring suite / alert center • Real-time Trading Console • Reporting engine with realtime charts • Audit trails / logs QARMIN June 2012 - Confidential EFTA00556686 Technical Platform Database Features • a• . o • if •• !tan • OOOOO MOO 0.111S1 .1 . an. s.e..•••••,.•fie ~~~~¢~~4~44#~~i~#~~~4~~49~~ 0n. kora Wm. ••••11•1 no •••••1110.1 %PA. 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Fab. tyylOORRYNA. day ARMIN EFTA00556689 Technical Platform Monitoring tools ••••••••••• IIIII•a••••••••••••0 Ina 0 •• ••••••••• II•m•m.•••••••••• ••• wisp. 0.•• 0000.42•••••••••• ••••••••••••• .....•••••••• •IIIIIS•••••••••• . „ Alert Center •- .• • • •••••••• ••• I•••• ..... ••••:••• III Ole ••••• ••••• Imm• •••••••• na. ••• nom. ••••••• ITN ,. .....'...-.........., ,...... .....--,--..........-, — .......—......—. — —....- -.. -,... —.--...... . Audit trail Trading Console • •••••• ••• I " I - , • . . 1 - n . I • 4 A . r • w.rklm-a.+YJ•• , • ..• /IA.,. W... COW I. • • ••••• ••••IO ••••••••I Ilepflegiell• r ft,rnat_.........)-o.5 atoren,x rt P., CSC „,.......„.„,.), .,..I ROOOSakrotelp • eadoe....”.1,K00.. Iwo. KO Obaker4001 • a . egole1.48 it .V1,10,...0 ,, . Nutec.c"I III .1; ZIX amid ..‘,...............> ...n IS OloceatiNIO .....****J*3> A . :I.a.:Ili:O. (NIlla ..toy In? i i pkeake . d•le '‘.........vaPainilluell ..... llefenoioiroC.. PM i . ._.. ._ , . . :s,.. _. 4.sw 0.4 ,000 7.7 ... ,... ......Kale(6 ik.n.) lipi.gcase.1110 “traJmndmv.KAJ0004.5 .4n.....1 101,~41/00/• I., nahl.for..tonpfttlioll WM:. • air *vow. • I•1•0!••••• I...liars:See Mel .- 6f.• -•••.•• 0.49.. in Mal* fr; IMO %Wet. I r•ZiaIX ES( • OAKUM • -Jr Juus.cters.va_003016 Pe auto, IW°M e r et. etke. • eI ,..:.tert apse Yw • I cowl. I j (awe • Stag*., It) • e in.. • • •Ot tIIIt =I' Id (AY INipl•••••• III••••••• 11....at s —N Teul Path., In *Meld wrtudnIMS //MA mune:4V iX Realtime charts Is ARMIN EFTA00556690 Backtested Performance Directional Focus 1/2 Sharpe 3.22 Yearly Return to Max DD 3.18 Avg Yearly Return 28.90% Profitable Days % 57% Avg Daily Return 0.10% StDev Daily Return 0.57% Best Daily Return 5.85% Worst Daily Return -4.62% Worst DD -9.08% Max DD Duration 136 days Avg Worst 10 DD Duration 75.6 days Performance measurement reflects how the directional pocket of the model portfolio would have performed. Projected performance is likely to be slightly degraded as part of the data-mining bias is bound to remain in the backtested performance. Expected out-sample performance is expected to come in 20-25% lower than the presented observed performance (while keeping volatility constant). 1003 4040 14(0) NOM Directional Historical Drawdown Ot 4e 4/ 4e 0t 4P 0# 4r 0° de 4/ -se / 4I 4/ 4*.s. ./ i s 409 Directional Equity Curve 1.0)1130 WOW 3011CCO #1 0°' it' it 4, 40, 4' 4' / -P 4i, 4, 1 4' 40c• -P 00G QARMIN June 2012 - Confidential X -o C a) a 414ARMIN EFTA00556691 Backtested Performance Directional Focus 2/2 Directional Strategy Benchmark Yearly Performance* HFR Macro/CTA Index S&P 500 2003 24.67% 14.61% 26.38% 2004 17.22% -0.32% 8.99% 2005 33.99% 6.67% 3.00% 2006 44.24% 5.61% 13.62% 2007 27.07% 3.19% 3.53% 2008 27.60% 5.61% -38.49% 2009 35.64% -8.78% 23.45% 2010 37.84% -1.73% 12.78% 2011 15.95% -4.88% 0.00% 2012 24.30% -1.25%* 3.94%* Average Std. Dev. 28.85% 1.87% 5.72% 9.04% 6.68% 17.85% Key Points U Average Net Return of 28.85% per year in the past 10 years (assuming margins to equity 15-20%) U 100% of years with positive return U Daily returns correlation of 19.0% with S&P 500 since backtesting inception U Strategies pairwise correlation of 7.30% since backtesting inception LI Outperformed HFR Macro/CTA Index by an average of 19.5% per year when reduced to similar volatility * Y2012 performance has been frozen as of May 31" and extrapolated for the remainder of the calendar year QARMIN June 2012 - Confidential ARMIN EFTA00556692 Backtested Performance Market Neutral Focus 1/2 Sharpe 3.82 Yearly Return to Max DD 6.41 Avg Yearly Return 30.20% Profitable Days % 59% Avg Daily Return 0.10% StDev Daily Return 0.50% Best Daily Return 3.76% Worst Daily Return -2.62% Worst DD -4.63% Max DD Duration 125 days Avg Worst 10 DD Duration 47.3 days Performance measurement reflects how the market neutral pocket of the model portfolio would have performed. Projected performance is likely to be slightly degraded as part of the data-mining bias is bound to remain in the backtested performance. Expected out-sample performance is expected to come in 20-25% lower than the presented observed performance (while keeping volatility constant). Market Neutral Historical Drawdown Market Neutral Equity Curve 0 PA0 04/ 10 1011-10 MW ll Lp.l 111.0.1.1 QARMIN June 2012 - Confidential ARMIN EFTA00556693 Backtested Performance Market Neutral Focus 2/2 Market Neutral Strategy Benchmark Quarterly Performance* HFR Equity Market Neutral Index S&P 500 Q2 - 2009 3.10% -1.01% 15.25% Q3 - 2009 2.88% -2.93% 14.98% Q4 - 2009 8.51% 0.79% 5.49% Q1— 2010 17.06% 1.01% 4.87% Q2 - 2010 -0.94% 0.91% -11.86% Q3 - 2010 3.96% -1.96% 10.72% O4 - 2010 5.21% 2.70% 10.20% Q1- 2011 0.88% 2.81% 5.42% Q2 - 2011 14.53% -0.09% -0.39% Q3 - 2011 13.87% -6.05% -14.33% Q4 - 2011 8.81% 0.60% 11.15% C11 - 2012 12.45% -1.63% 12.00% Q2 — 2012 7.64% -2.81%* -9.93%* Average Std. Dev. 7.54% 5.64% -0.59% 2.49% 4.12% 10.21% Key Points U Average Net Return of 7.54% per quarter (i.e. 30.15% per year) in the past 3 years (assuming margin to equity 15-20%) U 12 out of 13 quarters with positive return U Daily returns correlation of 2.2% with S&P 500 since backtesting inception U Strategies pairwise correlation of -2% since backtesting inception U Outperformed HFR Equity Market Neutral Index by an average of 3.90% per quarter (i.e. 15.60% per year) when reduced to similar volatility " O2-2012 performance has been frozen as of May 31" and extrapolated for the remainder of the period ARMIN EFTA00556694 Expected Performance Volatility Arbitrage - Relative Value Focus Relative Value - Long/Short Equity Volatility U 6 months or less ATM options U Expected Performance: 2 volatility points on a standardized reference volatility at 25 locked in via delta hedging and adequate rebalancing when implied volatilities have converged U Keeping margin to equity — 15-20%, expected performance translates into 20% ann. performance with 15% realized volatility ICS INDUSUIT HANE LLY US Equity Health Care PERLIS Equity Financials ACE VS faulty Financials EXPECTED REAL VOL ALL MODELS 20.04% 26.55% 25,21 NORMAUZED VOL PTS DIFFERENTIAL 6.5 0.6 POTENTIAL REAUZEDVS UNIVERSE% 84% 60% COMPOSITE SCORE 1 BLK US Equ, lnancwis 38,26% 2,6 9112, ORCl US Eray TNhnol 05 81% CO US EgWry Tcc 1,72 25 2 COY OS EAL ty licAlchCArc 28.6% 2I 95>i 04 US Equity Industrials 3077% L2 47% 201E AGN US Equity Health Caro 17.52% 53 1% 218E DES US Sq.. r, rtnarCials 32.63%. I3 43% 23% CELL r Ec uLty 're Oin010.,-, 33.2]>: 23 28% 22% WAPSAUS Equity onsumer Servla 39.610E L6 39% M US Equity onsumer Sonia 36.01% L2 46% BA US Equity Industrials 26.57E 2.3 26% 284 ALT US Equity Health Care 3018% 2.5 24% HST US &awry :consumer Good: 16.53% 34 12% 1 3: I.I.N. US El. n Gozd. 23 <0 24% SEE US Equity :consumer Good: 20.49% 2.0 33% CBS US (quay alumnae Service 36.75% 0.6 61% WUS US Equity D16 Gat 29.79% 2.0 31% 23% MSI US Equity Technology 27.85% 0.2 69% 2234 KO US Equity :assigner Gooch 13.67% 4.1 606 1604 US Equity :on um* Goo& 0 81 MIVM US (*MY • WM 61m .Nm.00M • VOMHw • 41".11101, •4•014•10• • rit‘•011.• • •)(•• KIK • ?fa. wo• noll•nalt mania ite —Snap Ilestelt• wltrl imilled 'IMMO% mmm US tomftv .1 WI Ow Mgt* la ••••••Pwconei• 11•4 Der lingo ler grown ••••••d Fore Amor* 41.91 001 • c.r•el Pmf•me Vol 32 QARMIN June 2012 - Confidential QARMIN EFTA00556695 Contact Information QARMIN 25 rue Balzac 75008 Paris, France Email: contact@qarmin.net Telephone: +33 (0)1 70 99 52 62 (office) +33 (0)6 77 20 82 95 (Bertrand) +33 (0)6 08 94 53 62 (Francois-Charles) Fax: +33 (0)1 70 99 52 91 33 QARMIN June 2012 - Confidential EFTA00556696