EFTA02383594.pdf

From: Ari Glass <S> Sent: Wednesday, September 20, 2017 8:50 PM To: jeevacation@gmail.com Subject: shana tova Firstly and foremost I wanted to wish you a happy an= healthy new year. I hope it's a good one for you.<=p> At some point after the holiday over the next month =r two I'd like to speak about your year-end redemption.</=> When we last spoke you fairly observed that while ou= risk adjusted returns were good at some point absolute returns are needed= I took the message to heart and went about making a few changes int=nded to achieve this objective. Additionally some other opportunities have recently presented themselves to the fund th=t should result in higher returns. Before I discuss the changes, first I do want to poi=t out just how good our risk adjusted returns are. I've a ttachrd the report put out by Soc Gen which has results for approximately 1200 h=dge funds. When ranked by annualized returns over max drawdown we sit between the 98th and 99th p=rcentile of all hedge funds. I understand you can't eat lack o= risk but I thought I'd point it out because the return to risk rati= is what shows talent (even if the risk needs to be raised to achieve desired return). This is fixable, lack of talen= is not. A 2 Sortino is generally considered to be very good. =e are now north of a 7. The goal was /has always been to raise the VAR (Valu= at risk) on the portfolio to approximately 80 BPS daily (versus what we b=lieve the industry to average of 1%). We currently sit at approximat=ly 50 BPs and have averaged around that this year. It being below its target is still largely a function of =wo things: a low recent market volatility and saving room for managers in =he pipeline to be onboarded that we are excited about. However, For a good reason we will still not be very=soon reaching our risk target and that is that in the past few months (inc=uding in the coming portfolios being onboarded in the past few weeks) the =mount of "non-risk" portfolios being brought on has materially grown. This includes both our First loss b=siness which has increased by $150m this month alone and has added a lot m=re over the prior few months. It also includes a number of clever ar=itrages we have found and are growing. These represent significant expected return without much risk -preferable to ris= based strategies. They do however, suck up some balance sheet.=/o:p> I'm sure you noticed that since you put in you= redemption, our July estimate was increased by approximately 10 BPs when =inalized and more importantly our August was far and away the firms best i= existence. The main fund was up a bit over 3.3% for the month (still an estimate) bringing YTD to 7.8% (and appr=ximately 8.8% including through today, with September up approximately 1%)= We believe last year to be the aberration. It was one of the =orst years ever for platforms that have the basics of our strategy. Millennium posted its second to worst year e=er (approx. 3%), SAC had EFTA_R1_01400321 EFTA02383594 only its second down year ever, Balyasny was flat= and Leucadia's Folger Hill, Blackstone's Senfina, Deimos and =ine River basically all blew up, either officially shutting down or letting it run on fumes that will soon officially shut. L=st year was a good bad year for us. We are back to what we believe w=ll be our course, though of course we are still intending to add risk and =ncrease returns proportionately. Most importantly, to bridge investor desire f=r higher risk to generate higher returns, with our slow path to get there,=after our meeting, we immediately went to work on launching a very limited=capacity "Enhanced Fund" which started as an Enhanced Share class. The Boothbay Enhanced share class runs a= 1.5x the main fund. we meticulously went back and figured out the r=turns for each month (certain things like cost of audit and admin donc;t go up proportionately while extra cost of financing is added). The results are attached and while technically proforma, =hey are based on real numbers and not a back test. Fortunately it we=t live on August 1, so its estimated live return in its first month is north of 5% (and that would now pu= it at north of 13% TM through today). Last month is certainly an o=tlier but in general the enhanced version does help take our risk up to a =lace that while still materially lower than other similar funds, and still without meaningful market correlation,=can produce good absolute returns. We wrote about our plans to do this in our 01 quarte=ly letter and then wrote that we launched it in our Q2 letter. I app=eciate that you likely don't get around to reading the letters and m=y have been unaware of it. I'd love to find a time of mutual convenience to discuss but completely understand if you w=nt to stick with your decision and would rather not discuss. Either =ay I'm greatly appreciative of the great opportunity you gave me by =nvesting before a track record would convince someone too. III forever be in debt for that. I'm sorry =t's taken this long to reach a level of risk that would allow the re=urns to sufficiently meet a target, but am convinced that we are ironicall= now set up to do just that. Shana tova Ari PS -running out for the holiday so will send the att=chments referred to next week when I am back. Ari Glass Boothbay Management<=:p> Managing Member=/o:p> 2 EFTA_R1_01400322 EFTA02383595 The information contained in this e-mail and any attachments may be legally=privileged, proprietary and/or confidential. If you are not an intended re=ipient, you are hereby notified that any use, copying, disclosure or distr=bution of all or any portion of this e-mail and any attachments is strictly prohibited. If you received th=s e-mail in error, please notify the sender, permanently delete the e-mail=and any attachments, and destroy all hard copies immediately. This communi=ation should not be regarded as an offer, solicitation or recommendation to sell or purchase any security =r other financial product. 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