Alternative Investments in Russia and the CIS Valuable addition or dangerous addiction? Hedge fund manager selection for private wealth portfolio Olga Kokareva Head of.
Download ReportTranscript Alternative Investments in Russia and the CIS Valuable addition or dangerous addiction? Hedge fund manager selection for private wealth portfolio Olga Kokareva Head of.
Slide 1
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 2
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 3
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 4
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 5
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 6
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 7
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 8
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 9
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 10
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 11
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 12
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 13
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 2
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 3
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 4
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 5
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 6
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 7
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 8
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 9
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 10
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 11
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 12
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13
Slide 13
Alternative Investments in Russia and the CIS
Valuable addition or dangerous addiction?
Hedge fund manager selection for private wealth portfolio
Olga Kokareva
Head of Marketing and Investor Relations
Da Vinci CIS Opportunities Fund
[email protected]
Private Banking in Russia & CIS, 10-11 March 2011
HNWIs regain their risk appetite
Breakdown of HNWI Financial Assets, 2006-2011F
100%
10%
9%
7%
14%
18%
6%
8%
18%
14%
90%
80%
24%
13%
70%
17%
17%
Real estate
21%
60%
14%
Cash/deposits
31%
50%
27%
40%
Alternative investments
21%
Fixed income
31%
29%
Equities
30%
20%
31%
33%
2006
2007
25%
10%
29%
35%
0%
2008
2009
2011F
*Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010
2
Return enhancement + diversification
Adding hedge funds to the portfolio of traditional investments improves efficient frontier
Traditional and alternative investments
• Reduction of portfolio volatility
Expected return
• Low correlation with traditional investment strategies
Traditional investments only
• Absolute return
• Profitability in different economic climates
• Diversification
Expected volatility
For illustrative purposes only, not drawn to scale.
*Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio
By Baird’s Advisory Services Research
3
Skill-based strategies
Traditional assets
Hedge funds
Median return of managers by strategy
Annualized return
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
4.1%
7.2%
Annualized return
Median return of managers by asset class
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Inter-quartile range of managers within asset class
Inter-quartile range of managers within strategy
10%
8%
6%
5%
4%
3%
2%
1%
0%
4.1%
Annualized return
Annualized return
7%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
* “Are Funds of Funds simply multi-strategy managers with extra fees?” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007
4
Formal approach is not enough anymore
5
Client is concerned about
Return OF
ON investments
Based on 100 hedge funds failures investigations*:
50% failures were caused by operational risks
38% investment risk
6% business risk
6% due to multiple problems
* Study by Capco partners Chris Kundro and Stuart Feffer
6
from private banker’s perspective
HNW investors are not loyal to firms or banks – they are loyal to advisors
In-house products
lack of diversification
limited universe of
instruments to chose from
Third-party products
lack of transparency
In-house due diligence
7
The reverse of selection process cornerstones
Fund size
too-much-money problem
capacity limits
Fund track record
vs fund manager track record
Big name
talent retention problem
= less operational risk
affiliated infrastructure risk
8
Highly underestimated source of potential risk:
Manager’s ego
How does the manager deal with success?
How does the manager react when things are going wrong?
Does the manager respect the market?
9
Hedge fund selection is about seeking stars not stamps
Advisor’s choice decides if adding a hedge fund to the client’s portfolio
turns it into a poisoned cocktail or optimal mix of diversified investments.
10
Da Vinci CIS Opportunities Fund
A fundamental multi-strategy hedge-fund focused on Russia and the CIS
11
Investment Philosophy and Fund Edge
Investment Philosophy
Da Vinci Hedge Fund Edge
Respect the Market
Information is asymmetric
With western and local presence, we know
both outside perception and domestic reality.
Inefficiencies create opportunities
Excellent knowledge of Russian and CIS
markets and practices as well as flexible
mandate allows us to identify those
inefficiencies quickly and exploit them.
Look for upside, protect downside
Using derivatives allows us to enhance
return while limiting downside risk.
12
Track Record in the CIS
Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management
GmbH. Wermuth Asset Management GmbH (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006).
Net Return, MTD
Jan
Feb
1998
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,00%
0,10%
-3,87%
-1,26%
0,63%
-5,32%
6,08%
1,44%
7,34%
0,95%
5,56%
1999
0,43%
-4,97%
6,13%
5,89%
-4,03%
6,20%
2,79%
1,89%
17,19%
15,88%
2,78%
12,44%
79,68%
2000
-4,66%
10,47%
5,21%
-6,83%
-4,83%
-1,09%
2,89%
6,22%
-9,31%
-1,72%
-10,56%
2,02%
-13,62%
2001
8,69%
1,28%
-1,44%
2,51%
5,79%
6,24%
-1,47%
-0,74%
-7,04%
5,10%
7,14%
6,25%
35,97%
2002
5,64%
7,41%
4,72%
11,29%
1,15%
-9,91%
-6,88%
1,65%
-2,70%
6,47%
4,57%
-0,27%
23,23%
2003
-0,31%
9,52%
-3,64%
9,20%
7,38%
-0,19%
-0,28%
7,88%
12,93%
-1,10%
0,29%
4,87%
55,60%
2004
3,85%
7,49%
3,30%
-5,41%
-0,84%
1,16%
0,95%
0,76%
7,52%
3,77%
1,71%
0,69%
27,17%
2005
2,19%
14,36%
-6,65%
0,07%
-2,03%
0,00%
7,29%
12,65%
3,91%
-6,37%
4,99%
9,63%
44,76%
2006
20,57%
4,33%
-0,11%
12,63%
-7,88%
-3,75%
0,07%
1,81%
-7,78%
2,81%
6,65%
3,53%
33,83%
Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management
fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009.
Net Return, MTD
Jan
2008
2009
-2,3%
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
0,2%
3,6%
3,1%
2,9%
-1,8%
0,9%
-3,6%
18,7%
0,1%
8,1%
-2,4%
31,87%
0,9%
17,6%
26,1%
25,7%
-6,5%
5,3%
10,9%
23,6%
7,0%
165,35%
Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009
performance is audited
Net Return, MTD
Jan
Feb
2009
2010
7.45%
-1,97%
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
YTD
6,85%
15,97%
15,61%
0,23%
3,97%
-5,71%
8,09%
6,84%
-0,67%
3,98%
88,2%
11.76%
0.68%
-6.96%
-1.38%
7.12%
-3.41%
3.64%
4.1%
1.97%
6.5%
31.7%
13