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Bitcoin’s Historical Risk Premium is Unexplainable Division Investment Management 1. Bitcoin Factor Exposures and Unexplained Premium 2. Tactical Hedge Funds’ Factor Exposures and Unexplained Premium 20.0% 15.0% Annual Risk Premium w wow 6 z =f Annual Risk Premium B Equity Term LL] @ Funding Liquidity © Exchange Rate © Emerging Market Bitcoin ~341pp @ Factor Risk Premium Historical Risk Premium ii ~~ iia al Bitcoin 3.6% £132.2% 1.2% 4 ° bo x Annual Risk Premium ° ° & a x x Annual Risk Premium 1.0% + MEquity aa mTerm 6% 4 m Funding Liquidity ey Exchange Rate 0.2% + | Emerging Market 0.0% + Tactical Trading Hedge Funds 5.0% 4 2.8pp 4.0% + ™ Factor Risk Premium 3.0% | Historical Risk Premium 2.0% + 1.0% + 0.0% + Tactical Trading Hedge Funds 2.8% + 3.6% = Bitcoin’s 300%+ historical annual risk premium is idiosyncratic and cannot be explained by ISG’s multi-factor model. = An inability to understand sources of risk and return makes one incapable of predicting when performance will reverse. = For tactical hedge funds, half of the historical risk premium is explained by the factor model. (1) Peter C.B. Phillips, Shu-Ping Shi and Jun Yu, “Testing for Multiple Bubbles: Historical Episodes of Exuberance and Collapse in the S&P 500,” International Economic Review, Oct 28, 2015. Source: Investment Strategy Group, Bloomberg. 18 HOUSE_OVERSIGHT_025681