hedge fund strategy - credit suisse · indicators of current or future performance november 2016...
TRANSCRIPT
INVESTMENT SOLUTIONS & PRODUCTS
Hedge Fund Strategy
Investment Strategy
November 2016
IS&P Alternative Investment Strategy
Tobias Merath, Anand Datar
This document represents the views of the Investment Strategy Department of CS and has not been prepared in accordance with the legal requirements designed to promote the independence of investment research. It is not a product of the Credit Suisse Research Department even if it contains published research recommendations.
Section Page
1. Hedge Funds Key Observations 3
2. Investment Strategy Overview and Strategy Outlook 4
3. Hedge Funds (Broad) 9
4. Special Topic: Hedge fund drawdowns and correlations 20
5. Fundamental: Overview (23) & Long Short Equity (25) 23
6. Fundamental: Emerging Markets 33
9. Fundamental: Event Driven Overview (39) & Merger Arbitrage (42) 39
8. Fundamental: Event Driven - Distressed 49
10. Tactical Trading: Overview (53) & Global Macro (55) 53
11. Tactical Trading: Managed Futures 62
13. Relative Value: Overview (68) & Fixed Income Arbitrage (70) 68
12. Relative Value: Convertible Arbitrage 76
13. Relative Value: Equity Market Neutral 81
14. Appendix 84
Table of Contents
2
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Key Observations
Source: Hedge Fund Research, Bloomberg, Credit Suisse
The relationship between hedge fund flows
and performance
The hedge fund industry saw outflows of nearly USD 28 billion during the last quarter. Interestingly though, the quarter also saw the best performance gains for hedge funds (USD 102 bn) since Q4 2013.
Over the 1-year time horizon and longer, a positive relationship exists between
hedge fund performance and investor flows. Given the performance of the last months, the recent outflows look quite a bit
overdone when comparing them with the historical pattern between flows and performance.
Since performance has continued to improve recently and since our hedge fund barometer is in supportive territory we would expect a reversal of recent investor outflows the coming quarters.
Fund flows into smaller funds
There is some evidence of larger funds underperforming smaller funds this
year, highlighted by the outperformance of fund-weighted hedge fund indices (HFRI Fund-weighted index up 4.1% YT-September) compared to asset-weighted hedge fund indices (HFRI Asset-weighted index +0.6% YT-
September). The performance divergence is also reflected in fund flows. Hedge funds
managing more than USD 1 bn (which account for more than 83% of
industry AUMs) saw USD 52.1 bn in outflows YTD 2016 (vs. industry-wide outflows of USD 51.4 bn), highlighting investors continue to increase
allocations to smaller funds.
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Hedge Fund Strategy Outlook at a glance (arrows show relative strategy preferences)
Strategy Fundamental View Nov 16
View
FU
ND
AM
EN
TA
L
Long Short
Equity
Close to average market volatility, as well as low inter-stock correlations are supportive for short-term performance of the style. While corporate
earnings are more or less flat YoY in Q3 2016, consensus earning growth expectations are probably too high leaving the market vulnerable, particularly as valuation is close to expensive. As a result we expect limited support from broader equity market beta, given political and macro risks and have a neutral outlook for Long/Short equity strategies. Within Long/Short equity we prefer funds with opportunistic or lower net exposure.
Emerging
Markets
Recent economic data in EMs has been better, while capital inflows have been strong. Equity valuations of EMs lower than for developed markets
and EMs should be relatively immune from a Brexit related slowdown in UK/ Europe. The recent stabilization of the US dollar index and of commodity prices is helpful. We have a neutral view on the strategy noting attractive opportunities in countries with reform momentum.
Risk
(Merger)
Arbitrage
Deal activity continues to grow at moderate levels, which provides a reasonable opportunity set. Meanwhile, deal spreads stay tighter, which is
supportive of performance of existing trades. Pressure to grow top-line revenue, industry consolidation opportunities in stressed sectors and large cash levels still keep the case for M&A intact. We view the low directionality and net exposure of the strategy favorably.
Distressed The number of issuers under distressed conditions stay near average levels, suggesting a reasonable opportunity set. Default rates are expected to rise modestly, adding to opportunity set. Given strong performance recently, we stay neutral, awaiting better entry-points. An unexpected outcome
of any of the upcoming event risks may weigh on valuations of speculative grade issuers.
TA
CTIC
AL T
RA
DIN
G
Global
Macro
Global macro managers should be able to benefit from a good set of trading opportunities – US elections, BREXIT consequences, the timing of the next Fed rate hike, the future of unconventional monetary policy in Europe, Japan and elsewhere, the stabilization of commodity and emerging
markets to name just a few. Inflation expectations are rising, having a cross-asset impact. The current market combination of sufficient market liquidity and benign volatility is also supportive. We have a positive view on the style and see its tactical nature and low exposure to market directionality as additionally appealing.
Managed
Futures
(CTA)
Though volatility levels are still modest, trend strength rose from very low levels across most asset classes in October. Strong trends were observed in some major US instruments (US treasuries, S&P 500, US dollar index) with markets factoring in a December Fed rate hike. Going forward, an unexpected outcome from event risks may spur higher volatility and directional movement. We view managed futures positively since they are typically less correlated to other strategies and can benefit from an increase in volatility.
RE
LA
TIV
E V
ALU
E
Fixed
Income
Arbitrage
Repricing of Fed rate hike expectations, ECB easing, as well as negative rates in several economies provide opportunities for classical fixed income
arbitrage strategies. The recent drop in fixed-income volatility is also supportive of performance. The search for yield and continued ECB/BoJ
easing is supportive of credits. We are positive on Fixed-Income Arbitrage strategies, preferring corporate arbitrage and structured credit related styles over classic fixed income arbitrage funds which are vulnerable to a potential volatility spike.
Convertible
Arbitrage
With implied volatility rising, the valuation case for convertible bonds is more neutral now. Yet, yield differentials are better compared to traditional
bonds, while equity market delta is at reasonable levels. The search for yield is supportive for convertible bonds. However, with limited return expectations from equities, we prefer to stay neutral and wait for better entry opportunities.
Equity
Market
Neutral
We have a positive stance on the strategy. Very low net exposure to broader markets help reduce drawdowns during corrections and also provides uncorrelated returns. Low inter-stock correlations are also supportive. Overall we maintain our positive stance. However, an unexpected event
outcome could lead to a volatility spike and remains a risk factor.
4
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016 5
Investment Strategy overview
Source: Credit Suisse
Comment
We remain neutral on fixed income. Long-dated government bond yields rose over the past month, in part driven by a continued rise in inflation expectations (especially in UK due to a depreciating pound and concerns over a “hard Brexit”). However, given dull growth and productivity outlook, we see less
upside in government bond yields. Within the asset class, financial and emerging market debt is best positioned for now
Fixed Income
Asset Category
Equities We keep the negative view on global equities amid political risks and looming Fed tightening. The
consensus earnings outlook (around 13% over next twelve months) also seems too optimistic and is likely to be downgraded. EM, Australia and Switzerland remain our preferred regions. We recently
closed our underperform view on the UK, while keeping the underperform view on EMU.
Financial market fundamentals have improved, with global growth momentum continuing to pick-up since February. Emerging markets (EMs) have stabilized further on the back of more resilient commodity prices and EM currencies. Advanced economies continue to witness only modest growth levels though. Arguably, political concerns weigh on sentiment. Meanwhile, US headline inflation is set to rise meaningfully, with the Fed expected to hike once in December and twice over 2017
Overview
Foreign Exchange Although the Fed is likely to hike this year, the tightening path should remain shallow. It is therefore still too early to become bullish on USD, in our view. We maintain our neutral GBP view versus USD, EUR and CHF. We expect less urgency for the Bank of England to expand its already very accommodative
monetary policy and GBP’s cheap valuation should limit further weakness. We are positive on the EM FX index, driven by a supportive valuation and positive technicals.
Alternative Investments Notwithstanding several key event risks until year-end, our hedge fund barometer suggests
fundamentals stay favorable. Expansionary business sentiment, range-bound volatility levels and low systemic risk levels all contribute to a positive backdrop. The view is neutral on commodities as the
rebalancing process takes time and carry is an obstacle. We are neutral on real estate overall, as attractive yield spreads to government bonds are offset by the sector’s interest-rate sensitivity.
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
1 Performance Financial Markets
Source: Datastream, Credit Suisse / IDC 6
Indices (Regions) Price Chg 1M Chg 6M Chg YTD Chg 1 Y Chg 3 Y PE Ratio Indices (Sectors) Price Chg 1M Chg 6M Chg YTD Chg 1 Y Chg 3 Y PE Ratio
S&P 500 2'085 -3.0 % 1.7 % 2.0 % -0.8 % 17.9 % 19.7* DJS Banks 146.1 3.5 % 2.0 % -20.0 % -24.5 % -24.0 % 17.6
Dow Jones Industrials 17'888 -1.5 % 1.3 % 2.7 % 0.1 % 14.4 % 18.7 DJS Oil and Gas 279.0 -3.3 % 3.9 % 6.4 % -6.1 % -17.5 % 50.9
DJ Euro Stoxx 50 (P) 2'955 -2.5 % 0.5 % -9.6 % -14.1 % -3.5 % 20.7 DJS Health Care 420.0 -6.3 % 1.0 % -2.0 % -5.0 % 5.0 % 24.2
FTSE 100 6'693 -5.4 % 9.5 % 7.2 % 4.4 % -1.0 % 30.0 DJS Industrials 396.8 -6.2 % 1.4 % -1.5 % -3.9 % 8.3 % 24.5
Nikkei 225 16'905 1.0 % 4.7 % -11.2 % -10.7 % 19.0 % 15.5 DJS Utilities 271.6 -4.9 % -6.1 % -10.6 % -14.4 % -2.8 % 24.1
DAX 10'259 -3.4 % 4.4 % -4.5 % -5.4 % 13.5 % 14.82* DJS Telecom 280.1 -5.5 % -9.6 % -19.3 % -22.8 % -5.3 % 38.2
CAC 4'377 -2.8 % 1.2 % -5.6 % -11.5 % 2.1 % 17.66* DJS Basic Resources 340.4 1.7 % 24.6 % 39.0 % 9.8 % -17.1 % 46.2
SMI 7'593 -7.7 % -2.1 % -13.9 % -15.2 % -7.2 % 20.9* DJS Food & Beverage 594.6 -8.5 % -2.1 % -7.7 % -9.2 % 20.3 % 27.7
Hang Seng 22'643 -4.4 % 10.3 % 3.3 % -1.8 % -2.4 % 11.3 DJS Chemicals 778.9 -4.5 % 1.8 % -5.6 % -9.9 % 7.3 % 19.9
Shanghai SE Comp 3'125 4.0 % 4.5 % -11.7 % -9.7 % 45.4 % 17.7 DJS Household 731.1 -6.5 % -0.5 % -3.3 % -8.5 % 25.4 % 21.5
Brazil Bovespa 61'598 3.8 % 17.2 % 42.1 % 29.1 % 13.2 % 18.1* DJS Technology 331.9 -10.5 % 6.0 % -6.7 % -6.6 % 19.5 % 24.0
Russian RTS $ 971 -3.0 % 6.4 % 28.3 % 9.6 % -34.2 % 8.3 DJS Construction 391.9 -5.6 % 3.3 % 0.7 % 0.6 % 24.1 % 21.7
India Sensex 27'274 -3.7 % 8.7 % 4.4 % 2.7 % 28.7 % 17.6 DJS Retail 300.6 -2.4 % -0.8 % -10.7 % -17.9 % -8.4 % 20.0
CBOE Volatility (%) 22.5 65.2 % 40.2 % 23.6 % 45.1 % 74.1 % DJS Insurance 232.0 -1.3 % -4.6 % -18.8 % -19.0 % 5.8 % 12.3
* Datastream calculated
Government bond rates Yield Chg 1M Chg 3M Chg 6M Chg YTD Chg 1 Y Short term rates Yield Chg 1M Chg 3M Chg 6M Chg YTD Chg 1 Y
US Generic Govt 10 Y 1.78 % 0.10 % 0.28 % -0.00 % -0.49 % -0.44 % USD Generic 3 Months 0.37 % 0.05 % 0.11 % 0.18 % 0.20 % 0.33 %
US Generic Govt 5 Y 1.24 % 0.02 % 0.22 % 0.00 % -0.40 % -0.39 % EUR Deposit 3 Months -0.30 % -0.01 % -0.01 % -0.05 % -0.22 % -0.22 %
German Generic Govt 10 Y 0.06 % 0.22 % 0.22 % -0.15 % -0.58 % -0.54 % JPY T-Bills 3 Months -0.29 % 0.11 % -0.06 % 0.00 % -0.24 % -0.28 %
German Generic Govt 2 Y -0.64 % 0.05 % -0.02 % -0.16 % -0.31 % -0.33 % UK T-Bills 3 Months 0.28 % -0.04 % -0.09 % -0.23 % -0.27 % -0.28 %
UK Generic Govt 10 Y 1.14 % 0.39 % 0.39 % -0.39 % -0.82 % -0.86 % CHF LIBOR 3 Months -0.79 % 0.01 % 0.02 % 0.00 % 0.03 % 0.00 %
Japan Generic Govt 10 Y -0.06 % 0.00 % 0.01 % 0.04 % -0.32 % -0.38 %
Switzerland Generic Govt 10 Y -0.36 % 0.18 % 0.18 % -0.09 % -0.28 % -0.09 % Credit Spreads Level Chg 1M Chg 3M Chg 6M Chg YTD Chg 1 Y
Brazil Generic Govt 11.57 % -0.12 % -0.28 % -1.15 % -4.92 % -4.00 % Itraxx Europe Generic 5Y 76.1 2.0 7.3 -1.3 -1.2 6.2
Russia Generic Govt 8.62 % 0.49 % 0.12 % -0.38 % -1.12 % -1.14 % Itraxx Europe Crossover 5Y 338.6 4.1 16.1 11.2 24.0 49.6
China Generic Govt 2.74 % 0.00 % -0.04 % -0.16 % -0.10 % -0.39 % JPM Emerging Market Spread 367.8 31.9 0.2 -28.8 -42.3 -6.9
Hedge Funds & Private Equity Price Chg 1M Chg 3M Chg 6M Chg YTD Chg 1 Y Real Estate Yield Chg 1M Chg 3M Chg 6M Chg YTD Chg 1 Y
HFR Global Index 1172.8 -1.4 % -0.7 % 2.0 % -0.1 % -2.3 % S&P Global Property Index TR 403.5 -5.0 % -8.1 % -2.6 % 3.3 % 2.7 %
HFR Equal Weighted Strategies 1192.61 -0.9 % -0.1 % 2.7 % 1.7 % -0.1 % S&P Switzerland BMI Property P 1068.2 -3.4 % -6.5 % -2.1 % 7.2 % 9.2 %
HFR Convertible Arbitrage 739.79 0.1 % 1.3 % 4.5 % 5.4 % 3.0 % S&P Asia Pacific Property Index TR 573.7 -2.1 % -2.4 % 2.2 % 10.3 % 11.3 %
HFR Distressed Securities 1027.18 0.8 % 2.9 % 11.8 % 14.6 % 6.6 % S&P Eurozone BMI Property P 206.5 -7.6 % -9.9 % -5.8 % 0.0 % -2.0 %
HFR Equity Hedge 1122.28 -2.3 % -0.4 % 1.0 % -2.8 % -3.9 % S&P United Kingdom BMI Property 243.2 -8.7 % -11.1 % -23.0 % -29.7 % -34.8 %
HFR Equity Market Neutral 992.51 -1.0 % -1.0 % -0.7 % -4.6 % -3.9 % Commodities Level Chg 1M Chg 3M Chg 6M Chg YTD Chg 1 Y
HFR Event Driven 1494.79 -1.1 % 0.5 % 7.5 % 6.1 % 3.1 % DJ-UBS Total Return Index 168.3 -2.2 % -0.6 % 0.1 % 6.3 % -3.4 %
HFR Macro 1125.02 -2.6 % -4.0 % -3.5 % -3.8 % -3.7 % Rogers International Comm TR 2156.7 -2.8 % 0.6 % 0.8 % 6.1 % -5.6 %
HFR Merger Arbitrage 1787 -0.2 % 0.2 % 1.0 % 2.8 % 4.2 % Gold Spot 1303.8 1.6 % -4.4 % 1.7 % 22.7 % 17.0 %
HFR Relative Value Arbitrage 1123.97 -0.1 % 0.4 % 1.8 % -0.5 % -4.6 % Crude Oil 44.1 -9.5 % 5.1 % 0.7 % 19.0 % -4.9 %
HFR US Absolute Return 1022.79 -0.8 % -0.8 % 0.2 % -0.2 % -1.1 % DJ-UBS Energy 33.1 -10.2 % -2.4 % -2.6 % -4.3 % -22.7 %
HFR US Market Directional 1167.99 -2.8 % 0.2 % 8.0 % 4.8 % -1.7 % DJ-UBS Agriculture 56.5 1.5 % 3.9 % 0.1 % 6.6 % 2.7 %
DJS Private Equity 20 Index 3385.02 -3.2 % 4.4 % 13.0 % 8.9 % 9.2 % DJ-UBS Grains 37.8 1.7 % 2.5 % -10.1 % -4.6 % -11.2 %
LPX50 TR Private Equity 1775.1 -3.3 % -0.5 % 5.6 % 0.1 % -4.6 % DJ-UBS Industrial Metals 104.0 3.6 % 4.1 % 8.3 % 15.0 % 8.4 %
DJ-UBS Precious Metals 180.8 2.9 % -6.4 % 2.6 % 24.6 % 17.9 %
November 7, 2016
Alt
ern
ati
ve
In
ve
stm
en
ts
Market Scoreboardas of
Eq
uit
ies
Rate
s &
Cre
dit
s
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
1 Macro Global Activity
• Despite the fact that market volatility is currently fairly benign, the rest of the year is likely to be rather eventful for financial markets. Political and macro events
including the US Presidential Elections consequences, Brexit negotiations, Italian referendum and a likely US rate hike should all have at least some influence on
financial markets - especially in case of unexpected outcomes.
• While US manufacturing and consumer activity levels have picked-up recently, macro data suggests only a modest GDP pickup compared to Q2 2016. The
economic recovery in the Eurozone is expected to continue, and the ECB will likely extend its easing program at its December meeting. Meanwhile, UK macro
data has been much resilient than expected, though a meaningful slowdown still remains our base case.
• In China, the pace of the slowdown is moderating, with increased government spending and consumption offsetting manufacturing weakness.
Global GDP growth and contributions Global manufacturing PMIs
Rate hike expectations (derived from OIS) World macro momentum indicator
40
45
50
55
60
2010 2011 2012 2013 2014 2015 2016
Global USA Eurozone China 50-threshold
Index
-3
0
3
6
1993 1996 1999 2002 2005 2008 2011 2014
China Developing Asia USAJapan Eurozone Latin AmericaEastern Europe Other countries World
% YoY, contributions, PPP based
Global PMIs
7 Source: PMI Premium, DataStream, Bloomberg. Credit Suisse / IDC
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
-60
-40
-20
0
20
40
60
Fed ECB BoE SNB BoJ BoC RBA RBNZ
Expected change in short-term interest rates over 12 months, current
7 days ago
1 month ago
basis points*
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
Brazil China Germany India Japan Russia USA others total
#Std Dev
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
1 Macro and Traditional Assets Financial Markets
Equities Fixed Income
• Our cross-asset risk indicator has been at the lowest level for this year, before rebounding into the US election. Risk indicators for Japan and EMs have falling, with volatility staying particularly low in gold and copper (as of end-October). Global liquidity levels stay rather moderate
Credit Suisse Global Financial Market Risk Indicator Implied volatilities across asset classes
Credit Suisse Risk Appetite Indicator Credit Suisse Liquidity Indicator*
0
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Jan 05 Jan 07 Jan 09 Jan 11 Jan 13 Jan 15
Global Risk Indicator Median
Average of 1Y, 3Y, 5Y rolling percentiles of 1-month implied volatilites across asset classes and regions
Source: Datastream, Credit Suisse / IDC
Market Stress
8
0
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Jan 14 May 14 Sep 14 Jan 15 May 15 Sep 15 Jan 16 May 16 Sep 16
Equity Risk Indicator Rates Risk Indicator Credit Risk Indicator Commodities Risk Indicator FX Risk Indicator
Last reading
Equity
Rates
Credit
Cmdty
Global
FX
0.70
0.36
0.48
0.47
0.65
0.53
Aggregate of 1y, 3y, 5y percentile of 30D
implied volatilitypercentile
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
-8
-6
-4
-2
0
2
4
6
Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15
Alternative Investment Strategy
Source: Datastream, Credit Suisse / IDC
Broad Hedge Funds
60
70
80
90
100
110
120
130
140
Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15
Credit Suisse Hedge Fund IndexHFRX Global IndexHFRI Fund of Funds Composite IndexHFRU Hedge Fund Composite IndexSimple average of CS Hedge Fund, HFRX Global, HFRI FoF and HFRU (in USD)
Indexed performance in USD, December 2007 = 100
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
CS: Table Hedge Fund Index Statistics
2 Hedge Funds (broad) Performance Review
Total Return Performance by Style
0
100
200
300
400
500
600
700
1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
CS Hedge Fund Index Directional Event-driven Tactical Relative Value
8.2% 6.2%
8.1% 7.7%
7.8% 10.3%
7.8% 6.9%
CAGR* Risk**
5.5% 6.6%
*compound annual growth rate
**annualized volatility
Upside/ Downside Capture Ratios Hedge Fund exposure to Equity and Bonds
• The Credit Suisse Hedge Fund index gained 0.1% in September, with YTD returns slightly in the positive territory
• The CS Liquid Alternative Beta (LAB) gained 0.45% in September and 0.07% in October bringing YTD returns to 3.69% at the end of October
• The HFRX Global Hedge Fund index (asset-weighted) gained 0.6% in September, losing 0.6% in October with YTD returns at +0.8%
• The HFRU hedge fund composite index (in USD) gained 0.3% in September, losing 0.1% in October with YTD returns at +1.3%
Source: DataStream, Bloomberg. Credit Suisse / IDC 10
Last datapoint: 30.09.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
-1.00
-0.80
-0.60
-0.40
-0.20
0
0.20
0.40
0.60
0.80
1.00
Jan 05 Jan 07 Jan 09 Jan 11 Jan 13 Jan 15
52w rolling beta
HFRX net long exposure to MSCI AC World
HFRX net long exposure to Barclays Government Bond Index
41%
-18%
15%
-33%
-40%
-20%
0%
20%
40%
60%
During positive months of MSCI AC
World
During negative months of MSCI AC
World
% CS Hedge Fund Index returns as percentage of MSCI
AC World returns
Since 1999 Last 12 months
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
2 Hedge Funds (broad) Performance Review
Source: DataStream, Bloomberg. Credit Suisse / IDC 11
Last datapoint: 30.09.2016
Hedge Fund performance compared to global equity and bond market performance
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD
Hedge Funds (average index of CS Hedge Fund, HFRX Global Index, HFRI FoF and HFRU (in USD)
MSCI AC World TR in USD
Barclays Global Aggregate
Annual total return across asset classes
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
2 Hedge Funds (broad) Positioning
Hedge Funds: Positioning
-60
-40
-20
0
20
40
60
S&P 500
2YR T-Note
5YR T-Note
10YR T-Note OIL
COPPERGOLD
SILVEREUR
USDCHF
JPY
02.11.2016 05.10.2016
%
Hedge Funds: Positioning
Future WoW % Change 02. Nov 4W % Change 05. Okt
S&P 500 Decreased Long 0.00 i S&P 500 Increased Long 0.8 h
2YR T-Note Shifted Short to Long 3.52 M 2YR T-Note Decreased Long -3.5 ii
5YR T-Note Decreased Short 1.38 i 5YR T-Note Increased Short -0.6 h
10YR T-Note Increased Long 0.25 h 10YR T-Note Decreased Long -2.0 i
OIL Decreased Long -0.13 i OIL Increased Long 1.6 h
COPPER Decreased Short 0.19 i COPPER Shifted Long to Short -6.9 L
GOLD Decreased Long -0.33 i GOLD Decreased Long -4.2 ii
SILVER Decreased Long -1.88 i SILVER Decreased Long -12.3 iii
EUR Decreased Short 0.00 i EUR Increased Short -2.1 h
USD Increased Long 5.27 hh USD Increased Long 37.9 hhh
CHF Decreased Short 0.00 i CHF Increased Short -21.0 hhh
JPY Decreased Long 0.00 i JPY Decreased Long -14.6 iii
Change one week as of 02.11.2016
Positioning Positioning
Change over last 4 weeks since 05.10.2016
Hedge Funds: Leverage
• Hedge funds (as measured on CS prime services platform) continue to maintain slightly above average leverage levels compared to the past year • Speculators are cutting back on long positions in US government bonds • Speculators have increased long positions in the US dollar, while reducing long positions in precious metals ahead of a potential rate hike in December
Source: CS Prime Services, CFTC, Bloomberg. Credit Suisse / IDC 12
* Based on funds on CS Prime services platform
Last datapoint: 30.09.2016
1.8
2.0
2.2
2.4
2.6
2.8
3.0
3.2
Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15
Leverage ratio
Hedge fund leverage (Average levels)
3.13
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
2 Hedge Funds (broad) Assets
Hedge Funds Launched/Liquidated Hedge fund redemptions
Hedge Fund Strategy Distribution (by Number) Assets managed by hedge funds (incl. FoF)
• According to HFR, performance gains continued to be the main driver of growth in hedge fund AUMs for the second consecutive quarter. Hedge funds saw
AUMs rising USD 73.5 bn in Q3 2016, with a USD 101.7 bn performance gain offset by USD 28.2 bn in hedge fund redemptions (See Key Observations Page
for more details)
Source: HFR, SS&C GlobeOp. Bloomberg. Credit Suisse / IDC 13
47%
12%
21%
20%
Equity Hedge Event Driven
Macro Relative ValueLast datapoint: 31.10.2016
Last datapoint: 31.12.2015
Last datapoint: 31.06.2016
Last datapoint: 31.10.2016
328
673
1087 1094
1435
2073
1518
1197
659784
9351113 1108 1060 1040
(71) (92) (162) (176)(296)
(848)(717)
(563)
(1471)
(1023)
(743) (775)(873) (904) (864)
968
(979)
-2000
-1500
-1000
-500
0
500
1000
1500
2000
2500
2000 2002 2004 2006 2008 2010 2012 2014
Launches Liquidations
No. of funds
Data as of Dec. 2015
300
350
400
450
500
550
600
Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
CS Hedge Fund Index Redemption Indicator inverse (r.h.s.)
3.40%
CS Hedge Fund Index Redemption Indicator (%)
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
2 Hedge Funds (broad) Equity Exposure of Hedge Fund Strategies
Beta exposure by strategy
Long exposure to MSCI World: Fundamental Long exposure to MSCI World: Tactical and Relative Value
Source: HFR, Credit Suisse / IDC 14
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
00.100.200.300.400.500.60
36m rolling beta Stock Market Exposure* by Strategy
Sept. 2015 Sept. 2016
* vs. MSCI AC World
0
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16
36m rolling betaLong exposure to MSCI World: Fundamantal Strategies
Long/Short Equity Emerging Market Event Driven Index
Distressed Debt Index Merger Arbitrage Index
-0.60
-0.40
-0.20
0
0.20
0.40
0.60
0.80
1.00
1.20
Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16
36m rolling beta Long exposure to MSCI World: Tactical and Relative Value
Global Macro Managed Futures Equity Market Neutral Index
Convertible Arbitrage Index Fixed Income Arbitrage Index
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Business Cycle Systemic Risks Volatility Liquidity
Hedge Fund Barometer [2.55]
Source: Bloomberg, Datastream, Credit Suisse/IDC
2 Hedge Funds (broad) Hedge Fund Barometer
15
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016 Source: Bloomberg, Datastream, Credit Suisse/IDC
16
2 Hedge Funds (broad) Hedge Fund Barometer
Hedge Fund Barometer and CS Hedge Fund Index returns
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016 Source: Bloomberg, Datastream, Credit Suisse/IDC
Volatility Volatility regimes and style performance
Liquidity regimes and style performance Liquidity conditions
2 Hedge Funds (broad) Hedge Fund Barometer (Risk Factor Set I)
0
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Jan 92 Jan 96 Jan 00 Jan 04 Jan 08 Jan 12 Jan 16
Liquidity composite 13w MAV composite
Liquidity tight
Liquidity plentiful
Percentile rank value
17
Last datapoint: 30.09.2016
Last datapoint: 30.09.2016
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
9%
-4%
-7%
-12%
17%15%
12%
6% 6% 6%
3%1%
20%
16%
12%
8%
Tactical Tra
din
g
Rela
tive
Valu
e
Eve
nt D
rive
n
Directional
Directional
Eve
nt D
rive
n
Rela
tive
Valu
e
Tactical Tra
din
g
Rela
tive
Valu
e
Eve
nt D
rive
n
Directional
Tactical Tra
din
g
Directional
Eve
nt D
rive
n
Tactical Tra
din
g
Rela
tive
Valu
e
High volatility
(increasing)
High volatility
(decreasing)
Low volatility
(increasing)
Low volatility
(decreasing)
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Global manufacturing PMIs
Systemic risk overview
PMI regimes and style performance
Conclusion
Source: Bloomberg, Datastream, Credit Suisse/IDC
2 Hedge Funds (broad) Hedge Fund Barometer (Risk Factor Set 2)
The Hedge fund barometer stays in favorable territory going into the event risk period (2.55).
Analysts have continued to upgrade corporate earnings
expectations with the expansionary business sentiment aiding barometer readings.
The relatively benign volatility environment continued to be
supportive, though markets appear too complacent considering event risks looming.
Liquidity levels are slightly lower due to recent uptick in bond yields. Yet we are not too worried, given accommodative stance of most central banks.
Systemic risks stay low. Modest beta exposure to equities should result in more uncorrelated returns and better diversification.
40
45
50
55
60
2010 2011 2012 2013 2014 2015 2016
Global USA Eurozone China 50-threshold
Index
18
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
12% 12%
9%8%
12%
6%5% 5%
1%1%
-5%
-9%
17%16%
13%
2%
Eve
nt
Drive
n
Directional
Rela
tive
Valu
e
Tactical Tra
din
g
Tactical Tra
din
g
Directional
Rela
tive
Valu
e
Eve
nt
Drive
n
Tactical Tra
din
g
Eve
nt
Drive
n
Directional
Rela
tive
Valu
e
Directional
Eve
nt
Drive
n
Rela
tive
Valu
e
Tactical Tra
din
g
PMI > 50
(increasing)
PMI > 50
(decreasing)
PMI < 50
(decreasing)
PMI < 50
(increasing)
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016 Source: Bloomberg, Datastream, Credit Suisse/IDC
Strategy return dispersion Correlation between strategy returns
Beta sensitivity Performance differential between top and bottom quartile managers
2 Hedge Funds (broad) Hedge Fund Barometer (Systemic Risk Components)
19
Last datapoint: 30.09.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
Last datapoint: 30.09.2016
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
Dec 97 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 11 Dec 13 Dec 15
%
Return Dispersion Among Hedge Fund Strategies
0
0.1
0.2
0.3
0.4
0.5
0.6
Dec 97 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 11 Dec 13 Dec 15
36M rolling beta
CS Hedge Fund Index Beta Exposure to MSCI World
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Dec 97 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 11 Dec 13 Dec 15
Percentile
Performance differential between top- and bottom- quartiles hedge fund managers
0
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Dec 97 Dec 99 Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 11 Dec 13 Dec 15
12M pairwise correlations between monthly returns of Hedge Fund Strategies
Special topic: Hedge Fund drawdowns
and correlations
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
3 Special Topics Hedge fund drawdowns vs. global equities
• Over the last 12 months hedge funds had an above average participation in negative equity returns. They captured more than 30% of negative equity market
performance. This is significantly above the longer-term average. At the same time however funds were not able to capture the upside to the same extent. The
participation during positive months was much lower. Hedge funds only captured 11% of realized upside in equity markets over the last year. This is significantly
below the historical average and is one reason for poor performance recently.
• One reason for this suboptimal performance is that we only had very brief equity market rallies that turned abruptly. So when managers adjusted their exposure
when markets improved, the rally already turned again. This flip-flopping in market performance and the lack of longer-term trends make it difficult for managers
to react. As a result of this, mangers have generally scaled down their exposure to equity markets.
• For hedge fund performance to improve, we would need longer lasting trends and less abrupt market turns. We stick to our total return expectation of 2-4% for
the Credit Suisse Hedge Fund Index for the full year 2016 and now have a balanced view across styles.
Source: Bloomberg, Datastream, Credit Suisse/IDC 21
Last datapoint: 30.05.2016
Hedge Funds during months of negative equity market performance Hedge Funds during months of positive equity market performance
0%
5%
10%
15%
20%
25%
30%
35%
Last 5 years Last 3 years Last 12 months
Average participation of hedge funds to World Equities in months ofnegative equity market performance
0%
5%
10%
15%
20%
25%
30%
35%
Last 5 years Last 3 years Last 12 months
Average participation of hedge funds to World Equities in months of positiveequity market performance
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
3 Special Topics Hedge fund correlations vs. global equities and bonds
• The correlation between hedge funds (as measured by the Credit Suisse Hedge Fund Index) and equities (as measured by MSCI AC world) has declined slightly
over the last years, while their correlation with bonds has increased. Apparently, hedge funds have reduced risk.
• Greater institutional asset flows have led to a more conservative investment profile. Increased concentration of assets at top firms also help explain this trend.
Source: Bloomberg, Datastream, Credit Suisse/IDC 22
Last datapoint: 31.12.2015
Hedge fund correlation with equities and bonds
Hedge fund correlation with equities Hedge fund correlation with bonds
between monthly returns of CS Hedge Fund Index vs. MSCI AC World and Barclays Global Aggregate Bond Index
between monthly returns of CS Hedge Fund Index vs. MSCI AC World between monthly returns of CS Hedge Fund Index vs. Barclays Global Aggregate Bond Index
Fundamental Strategies
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Opportunities
Long/Short Equity
• Temporary volatility spikes create attractive
opportunities in fundamentally sound
companies
• Very low inter-stock correlations support
stock-picking strategies.
Event Driven / Merger Arbitrage:
• Consolidation opportunities in sectors
undergoing structural changes
• Tepid top-line growth, limited opportunities to
deploy cash and low funding costs for top-
rated companies keep the case for M&A
growth intact.
Event Driven / Distressed:
• Stable commodity prices are supportive of
valuations of related issuers
Challenges
Long/Short Equity
• Equity beta returns are likely to be unsupportive,
alpha (stock selection) remains a key source of
returns.
• Macro uncertainty may spill over to equity
markets more pronouncedly, potentially arising
from US presidential elections, a Fed rate hike
and Brexit negotiations
• Earning growth has been tepid, and valuations
are not cheap.
Event Driven Distressed:
• Speculative-grade issuers vulnerable to re-
pricing (especially after strong run-up), given
tighter lending standards, lower recovery rates,
especially in case of a risk-off environment
• Liquidity remains a concern in certain Fixed
Income and credit segments.
Event Driven Merger Arbitrage:
• Deal activity shows signs of deceleration from
high levels. Crowded individual deals are a risk.
4 Fundamental Strategies Opportunities and challenges
24
80
100
120
140
160
180
200
220
Sep 04 Sep 06 Sep 08 Sep 10 Sep 12 Sep 14 Sep 16
CS Long/Short Equity CS Allhedge Long/Short Equity
Index
Alternative Investment Strategy
Source: Datastream, Credit Suisse / IDC
Long Short Equity
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
4 Long Short Equity Market exposure
10
15
20
25
30
35
40
45
50
55
60
Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15
0.10
0.20
0.30
0.40
0.50
0.60
0.70
VIX Index Long/short ratio of long/short equity funds (r.h.s.)
Level (VIX) Long/short ratio
-100
100
300
500
700
1991 1994 1997 2000 2003 2006 2009 2012 2015
20%
25%
30%
35%
40%
45%
50%
AUM: Equity long short
Net capital flows: Equity long short
% of industry assets
USD bn % Assets
Assets & Capital flows
Long/short ratio (Long Short Equity)
Volatility of Long / Short Equity Strategy Returns
Net Long Exposure to Index
Source: CS Prime Services, HFR, Bloomberg, Datastream, Credit Suisse/IDC
0
5
10
15
20
25
Jun 94 Jun 98 Jun 02 Jun 06 Jun 10 Jun 14
Standard deviation of CS Long/Short Equity Index Returns
Long-Term Average
6M rolling standard deviation (%)
26
Last datapoint: 30.09.2016 Last datapoint: 30.06.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
• Market exposure of long-short equity funds stays modest (on aggregate), preventing larger drawdowns, while also limiting participation in the recovery.
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Sep 03 Sep 05 Sep 07 Sep 09 Sep 11 Sep 13 Sep 15
36m rolling beta
CS Long/Short Equity Index net long exposure to MSCI AC World
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
4 Long Short Equity Equity Markets
Stylized business cycle and typical asset class performance Credit Suisse Macro Momentum Indicator
Over-heating Slowdown Contraction Recovery
Sto
cks
Co
mm
Bo
nd
s
Cash
Bo
nd
s
Sto
cks
Co
mm
Cash
Bo
nd
s
Co
mm
Sto
cks
Cre
dit
s
Cash
Co
mm
Bo
nd
s
Outperform
Underperform
-2.5
-2.0
-1.5
-1.0
-0.5
0
0.5
1.0
Feb 00 Feb 02 Feb 04 Feb 06 Feb 08 Feb 10 Feb 12 Feb 14 Feb 16
World Macro Momentum Indicator Long-Term Average
Real-time indicator of economic momentum
Yield Difference – US equities versus US long-term Treasuries P/E ratio of US equities
-202468
1012141618
Nov
76
Nov
80
Nov
84
Nov
88
Nov
92
Nov
96
Nov
00
Nov
04
Nov
08
Nov
12
Nov
16
Spread UST 10Y yield S&P 500 Dividend yield
%
5
10
15
20
25
Nov 86 Nov 90 Nov 94 Nov 98 Nov 02 Nov 06 Nov 10 Nov 14
S&P 500 NTM PE Average +/- 1 STD
12-month forward P/E
27 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
• Macroeconomic and political risks are still highest in the UK and the Eurozone, due to Brexit. We are therefore maintaining our negative view on these two
markets over the next 3–6 months.
• We continue to prefer emerging markets, Switzerland, and Australia, amid improved fundamentals.
• Additionally, we continue to prefer IT and healthcare, and expect consumer discretionary, consumer staples and industrials to underperform.
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
4 Long Short Equity Equity Markets
MSCI All Country World dividend yield
MSCI All Country World 12M forward EPS growth
MSCI All Country World 12M forward PE Ratio
MSCI All Country World 12M forward EPS revisions
Source: Bloomberg, Datastream, Credit Suisse/IDC 28
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
4 Long Short Equity Return Drivers
Correlation of US stocks Correlation of Eurozone stocks
US stocks return dispersion and long/short equity performance
* Measured as the standard deviation among S&P 500 index
29 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
• Inter-stock correlations stay below average, keeping conditions favorable for stock-picking. Declining return dispersion among stocks is additionally supportive.
• However, we expect greater macro influence on equities as political and macro risks stay high (given imminent Fed rate hike and US presidential elections).
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
4 Long Short Equity Return Drivers
Equity sector performance
Source: Bloomberg, Datastream, I/B/E/S, Credit Suisse/IDC
Equity valuations
Equity performance by country Equity performance by style
30
12.5
14.0
16.8
15.014.5
17.1
11.0
15.1
13.9
11.912.0
14.7
10
12
14
16
18
20
22
USA Eurozone UK Switzerland Japan Emerging Markets
Current P/E-Ratio Average P/E-Ratio over last 10Yr
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
-12
-10
-8
-6
-4
-2
0
2
4
MSCI W
ORLD
MSCI E
nerg
y
MSCI M
ater
ials
MSCI I
ndus
trials
MSCI C
ons. D
iscre
tiona
ry
MSCI C
ons. S
taple
s
MSCI H
ealth
Car
e
MSCI F
inanc
e
MSCI I
T
MSCI T
eleco
m S
ervs
.
MSCI U
tilitie
s
3M % Change 1M % Change
% in USD
-10
-5
0
5
10
15
MSCI W
orld
MSCI E
MU
MSCI S
witzer
land
MSCI U
K
MSCI G
erman
y
MSCI N
. Amer
ica
S&P 500
INDEX
MSCI J
apan
MSCI E
M
MSCI E
M E
ast.
Europ
e
MSCI E
M A
sia
MSCI E
M L
at. A
mer
ica
MSCI B
razil
MSCI C
hina
MSCI I
ndia
MSCI R
ussia
3M % Change 1M % Change
% in USD
QoQ % performance
-10%
-5%
0%
5%
10%
15%
20%
Cyc
licals
Defe
nsi
ves
Larg
e C
aps
Sm
all
Caps
Valu
e
Gro
wth
Hig
h Q
ualit
y
Low
Qualit
y
Mom
entu
m
Contr
arian
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
4 Long Short Equity Return Drivers
Trading volume and performance of US stocks
Investor sentiment
Implied Volatility: S&P 500 vs. Eurostoxx 50 vs. Nikkei
-60
-40
-20
0
20
40
60
Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16
AAII bulls minus bears AAII bulls minus bears (3-weeks moving average)
Bearish signal
Bullish signal
Options skew
31 Source: Bloomberg, Datastream, Credit Suisse/IDC
300
400
500
600
700
800
900
1000
Nov 11 May 12 Nov 12 May 13 Nov 13 May 14 Nov 14 May 15 Nov 15 May 16
1'000
1'200
1'400
1'600
1'800
2'000
2'200
S&P 500 Up Days Volume (20d ma) S&P 500 Down Days Volume (20d ma) S&P 500 Index (r.h.s)
(millions)
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
10
15
20
25
30
35
40
45
50
Apr 15 Jun 15 Aug 15 Oct 15 Dec 15 Feb 16 Apr 16 Jun 16 Aug 16 Oct 16
VIX - S&P 500 imp Vol V2X - EuroStoxx50 imp Vol VNKY - Nikkei imp Vol
%
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
4 Long Short Equity Performance Review
Upside / Downside capture ratios
Performance vs. MSCI World Return history
12-month performance vs. MSCI World
32 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
• Range-bound market volatility, declining return dispersion among stocks as well as low inter-stock correlations are supportive for short-term performance of the
style. However while corporate earnings are more or less flat YoY in Q3 2016, consensus earnings growth expectations are too high in our view , leaving the
market vulnerable, particularly as valuation multiples are at the higher end of the normal range.
• As a result we are expecting limited support from broader equity market beta and now have a neutral outlook for Long/Short equity strategies. Political and
macro risks are not insignificant. Within Long/Short equity we prefer funds with opportunistic or lower net exposure.
0
100
200
300
400
500
600
700
Dec 93 Dec 97 Dec 01 Dec 05 Dec 09 Dec 13
-15
-10
-5
0
5
10
15
Returns: CS Eq. Long Short Index (r.h.s.)CS Eq. Long Short IndexCS Hedge Fund IndexMSCI World Index
Sep 2016Until:
Index Monthly returns in %
58%
-35%22%
-66%-80%
-40%
0%
40%
80%
During positive months of MSCI
AC World
During negative months of MSCI
AC World
% CS Long/Short Equity Index returns as percentage of
MSCI AC World returns
Since 1999 Last 12 months
-0.10
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.10
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
85
90
95
100
105
110
115
CS Long/Short Equity Index(r.h.s.) MSCI World TR(r.h.s.)
monthly returns in % Index rebalanced (t-12)
11.36% (volatilty) :
(volatilty) :
MSCI World TR:
CS Long Short Equity Index : -1.70%
13.40%
4.76%
Net ROR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1994 1.20% -2.47% -3.90% -1.56% 0.57% -2.31% 1.29% 1.64% 0.25% 0.27% -2.85% -0.35% -8.10%
1995 -0.74% 3.04% 0.81% 1.36% 2.03% 3.51% 5.15% 2.26% 1.11% -1.82% 2.29% 2.09% 23.03%
1996 1.97% 1.35% 1.21% 4.14% 2.13% -1.53% -3.80% 2.38% 2.50% 1.93% 3.07% 0.82% 17.12%
1997 3.49% -1.58% -2.27% 0.01% 5.14% 2.28% 7.03% 0.62% 5.91% -0.84% -1.22% 1.55% 21.46%
1998 -0.93% 5.64% 5.03% 1.14% -1.69% 3.40% 0.61% -11.43% 3.47% 1.74% 3.74% 6.56% 17.18%
1999 4.97% -3.14% 3.76% 3.29% -0.82% 4.65% 1.54% -0.27% 0.60% 4.39% 8.31% 13.01% 47.23%
2000 0.52% 11.14% -3.98% -7.46% -3.45% 6.13% -0.63% 4.90% -0.71% -2.54% -3.80% 3.42% 2.08%
2001 -0.58% -2.42% -1.94% 0.77% 0.40% 0.42% -0.72% 0.45% -1.57% -0.80% 1.10% 1.24% -3.65%
2002 -0.60% -0.99% 0.91% 0.61% 0.80% -1.26% -2.95% 1.01% -0.47% 0.08% 0.57% 0.76% -1.60%
2003 -0.07% -0.21% 0.43% 2.44% 3.68% 0.79% 0.27% 1.04% 1.21% 2.46% 1.70% 2.40% 17.27%
2004 2.00% 1.75% 0.20% -1.40% -0.36% 0.66% -1.42% 0.09% 2.36% 1.44% 3.24% 2.57% 11.56%
2005 -0.84% 2.03% -1.14% -1.55% 0.51% 1.91% 2.68% 1.12% 2.02% -2.29% 2.22% 2.78% 9.68%
2006 4.18% 0.14% 2.45% 2.34% -2.84% -1.01% -0.05% 1.54% 0.09% 2.19% 2.60% 2.08% 14.38%
2007 1.15% 0.71% 1.87% 2.90% 2.31% 0.42% -0.69% -1.38% 3.31% 3.73% -1.71% 0.42% 13.66%
2008 -4.05% 2.06% -2.06% 2.20% 2.91% -1.33% -3.43% -2.11% -7.81% -7.13% -1.41% 1.06% -19.76%
2009 -0.17% -1.34% 1.86% 2.54% 5.23% -0.04% 2.99% 1.42% 3.23% -1.21% 1.92% 1.69% 19.47%
2010 -1.50% 1.32% 2.99% 0.29% -4.13% -2.07% 2.53% -1.12% 5.09% 2.00% 0.46% 3.42% 9.28%
2011 0.27% 1.72% 0.28% 1.70% -1.68% -1.49% -0.41% -4.44% -5.22% 4.45% -1.48% -0.88% -7.31%
2012 3.91% 2.64% 0.50% -0.46% -4.53% 0.35% 0.55% 1.51% 1.57% -0.21% 0.73% 1.58% 8.21%
2013 3.54% 0.12% 1.38% 1.26% 1.19% -0.63% 1.95% -1.11% 2.64% 2.54% 1.85% 1.80% 17.74%
2014 -0.08% 2.88% -1.19% -1.03% 1.51% 1.01% -0.97% 1.29% -0.18% 0.01% 1.89% 0.35% 5.55%
2015 0.28% 1.99% -0.42% -0.02% 2.15% -0.46% 1.52% -1.91% -1.12% 1.72% -0.12% -0.01% 3.55%
2016 -2.78% -1.76% 0.67% -0.70% 1.38% -1.87% 1.30% 0.44% 0.13% -3.23%
Alternative Investment Strategy
Source: Bloomberg, Datastream, Credit Suisse/IDC
Emerging Markets
80
100
120
140
160
180
200
220
Sep 04 Sep 06 Sep 08 Sep 10 Sep 12 Sep 14 Sep 16
CS Emerging Markets Index CS Allhedge Emerging Markets Index
Index
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
AUM of EM hedge funds
26%
1%
14%
3%
55%
1%
Asia (ex Japan) Africa Russia/East Europe
Latin America Multiple EM Middle East
Exposure to Developed equities
Volatility of Emerging Market Strategy Returns Hedge Fund Assets: Emerging Markets
-20
30
80
130
180
230
1991 1994 1997 2000 2003 2006 2009 2012 2015
2%
3%
4%
5%
6%
7%
8%
9%
AUM: Emerging markets
Net capital flows: Emerging markets
% of industry assets
USD bn % Assets
5 Emerging Markets Market Exposure
Source: HFR, Bloomberg, Datastream, Credit Suisse/IDC 34
Last datapoint: 30.09.2016 Last datapoint: 30.06.2016
Last datapoint: 30.06.2016 Last datapoint: 30.09.2016
0
5
10
15
20
25
30
Jun 94 Jun 98 Jun 02 Jun 06 Jun 10 Jun 14
Standard deviation of CS Emerging Market Index returns Long-Term Average of Risk
Standard Deviation, in %
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Sep 03 Sep 05 Sep 07 Sep 09 Sep 11 Sep 13 Sep 15
36m rolling beta
CS Emerging Market Index net long exposure to MSCI AC World
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
• Recent economic data in EMs has been better, while capital inflows have been strong. Equity valuations of EMs lower than for developed markets and EMs
should be relatively immune from a Brexit related slowdown in UK/ Europe.
• The stabilization in the US dollar index and in commodity prices is also helpful for performance, especially for commodity exporting countries. We upped our view
on the strategy to neutral recently noting attractive opportunities in countries with reform momentum.
• A potential Chinese slowdown and a renewed drop in commodity prices are key risk factors.
5 Emerging Markets Emerging markets Equities
MSCI EM dividend yield
MSCI EM relative earnings sentiment
MSCI EM 12M forward PE Ratio
MSCI EM relative 12M forward EPS revisions
Source: Bloomberg, Datastream, Credit Suisse/IDC 35
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
EM equity performance relative to Developed Markets EM equities relative regional performance
5 Emerging Markets Return Drivers
EM Risk Sentiment Index EM relative valuation index
70
80
90
100
110
120
130
140
150
160
Nov
13
Mar
14
Jul
14
Nov
14
Mar
15
Jul
15
Nov
15
Mar
16
Jul
16
MSCI World (rebased to 100) MSCI EM (rebased to 100)
Rebased to 100
40
50
60
70
80
90
100
110
120
130
Nov 11 May 12 Nov 12 May 13 Nov 13 May 14 Nov 14 May 15 Nov 15 May 16 Nov 16
MSCI Latin America MSCI EM Asia MSCI EM EMEA
36 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
-6.0
-4.0
-2.0
0
2.0
4.0
6.0
Oct 96 Oct 98 Oct 00 Oct 02 Oct 04 Oct 06 Oct 08 Oct 10 Oct 12 Oct 14 Oct 16
EM Risk Sentiment Indicator +/-1 Stdev
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
India EPS Revisions Valuation of major markets compared to long-term average
5 Emerging Markets Return Drivers
MSCI Russia forward P/E Ratio vs. EM and EMEA peers Hang Seng Index: Forward P/E ratio vs. long-term average
6
8
10
12
14
16
18
20
22
24
Nov 96 Nov 98 Nov 00 Nov 02 Nov 04 Nov 06 Nov 08 Nov 10 Nov 12 Nov 14
HSI 12M Fwd PE +/- 2 Std Dev +/- 1 Std Dev Average
x
2
4
6
8
10
12
14
16
Nov
06
Nov
07
Nov
08
Nov
09
Nov
10
Nov
11
Nov
12
Nov
13
Nov
14
Nov
15
Nov
16
MSCI RUSSIA MSCI EM MSCI EMEA
12M forward P/E
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Russia China EM India Mexico Brazil
12m Fwd P/E, current %-ile back to 1988
-20
-15
-10
-5
0
5
10
Nov 08 Nov 09 Nov 10 Nov 11 Nov 12 Nov 13 Nov 14 Nov 15
MSCI India 12M EPS change (3M%) +/- 2 Std Dev +/-1 Std Dev Average
37 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Net ROR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1993 0.00%
1994 10.54% -1.14% -4.61% -8.36% -0.73% 0.47% 5.81% 16.42% 5.20% -3.51% -1.42% -4.21% 12.51%
1995 -9.98% -7.88% -5.51% 7.25% 1.34% 0.78% 2.22% 0.98% 1.88% -5.66% -3.13% 0.74% -16.91%
1996 7.86% -0.57% -0.93% 5.06% 4.51% 5.36% -2.68% 3.56% 1.57% 1.70% 2.60% 2.43% 34.50%
1997 9.46% 7.69% -0.78% 1.97% 2.97% 6.81% 6.46% -3.65% 2.78% -7.86% -4.76% 4.30% 26.59%
1998 -5.90% 2.00% 3.63% -0.18% -9.78% -4.68% 0.08% -23.03% -7.40% 1.68% 4.68% -3.84% -37.66%
1999 -2.92% 1.17% 7.43% 6.49% -1.23% 4.90% -1.55% -2.66% -0.65% 3.66% 9.29% 15.34% 44.82%
2000 -1.52% 6.04% 3.10% -7.76% -4.13% 5.53% 0.58% 4.32% -6.79% -2.47% -3.64% 2.32% -5.52%
2001 4.35% -2.89% -1.29% -0.52% 2.39% 1.63% -2.95% -1.08% -4.38% 2.19% 3.96% 4.82% 5.84%
2002 2.76% 2.89% 3.95% 0.12% -0.73% -3.75% -1.19% 1.26% -1.98% 2.38% 2.24% -0.53% 7.36%
2003 -0.45% 1.02% 1.00% 3.89% 5.01% 2.02% 0.56% 2.98% 2.65% 2.25% 1.17% 3.56% 28.75%
2004 2.53% 1.39% 1.83% -3.31% -1.81% 0.87% -0.14% 1.83% 2.33% 2.40% 2.69% 1.39% 12.49%
2005 1.13% 3.35% -1.88% 0.28% 0.67% 2.01% 2.30% 2.29% 4.12% -2.78% 2.43% 2.44% 17.39%
2006 5.76% 1.56% 1.37% 3.82% -5.02% -0.14% 1.99% 1.42% -0.45% 2.86% 3.15% 2.84% 20.49%
2007 0.08% 1.13% 1.96% 2.24% 1.72% 1.83% 2.55% -2.37% 4.77% 5.48% -1.85% 1.32% 20.26%
2008 -2.67% 1.78% -3.30% 0.17% 2.14% -1.59% -2.84% -4.00% -8.93% -13.63% -1.87% 0.22% -30.41%
2009 -0.14% -2.10% 2.24% 5.17% 6.96% 0.69% 3.83% 1.06% 4.94% 0.90% 1.37% 1.97% 30.03%
2010 -0.76% -0.45% 3.89% 1.01% -4.28% -0.03% 3.52% 0.12% 4.77% 2.21% -0.38% 1.50% 11.34%
2011 -0.39% -0.07% 2.12% 2.32% -1.10% -0.65% 1.67% -3.15% -7.47% 3.70% -2.69% -0.70% -6.68%
2012 3.74% 2.92% -0.70% 0.15% -3.79% -0.13% 0.96% 0.84% 2.21% 0.35% 1.10% 2.38% 10.28%
2013 3.45% 0.49% 0.55% 1.62% -0.20% -2.64% -0.09% -0.24% 1.28% 2.01% 1.08% 1.28% 8.81%
2014 -2.27% 1.79% -1.51% -0.58% 1.35% 1.14% 0.45% 0.31% 0.14% -1.12% 1.71% 0.19% 1.53%
2015 0.66% -0.04% 0.74% 3.36% 0.37% -2.25% -2.01% -2.86% -0.80% 2.75% 0.15% -0.12% -0.22%
2016 -3.45% -0.87% 3.19% 1.21% -0.21% 0.77% 1.79% 1.80% 0.57% 4.74%
CS Emerging Markets Index vs. MSCI World CS Emerging Markets: Table returns
Upside / Downside capture ratios 12-month performance vs. MSCI EM
5 Emerging Markets Performance Review
0
100
200
300
400
500
600
Dec 93 Dec 97 Dec 01 Dec 05 Dec 09 Dec 13
-25
-20
-15
-10
-5
0
5
10
15
20
Returns: CS Emerging Markets Index (r.h.s.) CS Emerging Markets Index CS Hedge Fund Index MSCI World Index
Sep 2016Until:
Index Monthly returns in %
38 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
47%
-31%
36%
-27%
-40%
0%
40%
80%
During positive months of MSCI
EM
During negative months of MSCI
EM
% CS Emerging Markets returns as percentage of MSCI
EM returns
Since 1998 Last 12 months
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
70
80
90
100
110
120
130
140
CS Emerging Markets Index(r.h.s.) MSCI EM Index(r.h.s.)
monthly returns in % Index rebalanced (t-12)
MSCI EM Index :
CS Emerging Markets Index :
14.07%
7.67%
(volatality) : 18.42%
(volatality) : 6.03%
Alternative Investment Strategy
Source: Bloomberg, Datastream, Credit Suisse/IDC
Event Driven
100
120
140
160
180
200
220
Sep 04 Sep 06 Sep 08 Sep 10 Sep 12 Sep 14 Sep 16
CS Event Driven Index CS Allhedge Event Driven Index
Index
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
-50.0
-40.0
-30.0
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
1999 2001 2003 2005 2007 2009 2011 2013 2015
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
DJ CS Hedge Fund Index MSCI World Index
DJ CS Event Driven Index 12-month correlation Event Driven vs MSCI
Return (in %) Correlation
Exposure to Developed Equities
23%
2%
15%
48%
0%
9%3%
Distressed/Restructuring Credit Arbitrage Activists
Special Situations Private Issue Multi-Strategy
Merger Arbitrage
Strategy Decomposition
Correlation vs. MSCI World
6 Broad Event Driven Market Exposure
-100
0
100
200
300
400
500
600
700
800
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
10%
12%
14%
16%
18%
20%
22%
24%
26%
28%
AUM: Event driven Net capital flows: Event driven % of industry assets
USD bn % Assets
Hedge Fund Assets: Event Driven
40 Source: HFR, Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.06.2016
Last datapoint: 30.09.2016 Last datapoint: 30.06.2016
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
Sep 03 Sep 05 Sep 07 Sep 09 Sep 11 Sep 13 Sep 15
36m rolling beta
CS Event Driven Index Index net long exposure to MSCI AC World
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Net ROR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1994 3.68% -0.15% -1.29% -0.66% -0.15% -0.13% 0.54% 0.82% 0.75% -0.73% -1.06% -0.78% 0.75%
1995 0.51% 2.41% 0.85% 2.10% 1.13% 1.30% 2.25% 1.54% 1.87% -0.26% 1.13% 2.18% 18.34%
1996 3.49% 0.58% 1.22% 2.57% 1.66% 1.00% 0.24% 2.16% 2.23% 1.39% 2.54% 1.88% 23.06%
1997 2.30% 1.49% 0.18% 0.33% 2.91% 1.70% 3.58% -0.26% 2.50% 0.45% 1.33% 1.91% 19.96%
1998 1.73% 2.56% 2.48% 0.73% -1.20% -0.79% 0.04% -11.77% -2.96% 0.66% 2.77% 1.70% -4.87%
1999 1.88% -0.05% 2.39% 3.07% 2.17% 2.93% 1.32% 0.11% 1.04% 0.35% 2.04% 3.09% 22.26%
2000 0.51% 2.30% 0.60% -0.73% 0.02% 1.94% 0.50% 1.71% 0.61% -0.05% -0.77% 0.42% 7.26%
2001 2.46% 1.59% 0.12% 0.93% 1.10% 1.03% 0.47% 1.55% -1.54% 1.35% 0.85% 1.07% 11.50%
2002 1.18% -0.34% 1.19% 0.74% 0.12% -2.93% -3.10% 0.27% -0.20% -0.18% 2.57% 0.99% 0.16%
2003 2.27% 0.63% 1.01% 2.51% 2.35% 1.80% 0.95% 0.86% 1.80% 1.53% 1.21% 1.49% 20.02%
2004 2.16% 0.95% 0.45% 0.51% 0.09% 0.96% 0.00% 0.45% 1.27% 1.24% 3.27% 2.28% 14.47%
2005 0.20% 1.59% 0.57% -0.64% 0.55% 1.29% 2.27% 0.85% 1.07% -1.82% 1.28% 1.45% 8.95%
2006 2.92% 0.34% 1.50% 1.75% -0.09% 0.75% 0.04% 1.05% 0.60% 2.23% 2.09% 1.58% 15.73%
2007 2.06% 1.55% 1.27% 1.52% 3.24% 0.73% 0.97% -1.88% 1.60% 2.91% -1.68% 0.32% 13.20%
2008 -2.44% 0.85% -1.72% 0.51% 1.89% -0.15% -2.53% -0.16% -5.75% -5.09% -3.21% -1.26% -17.74%
2009 0.79% -1.13% 0.16% 1.48% 4.22% 1.02% 2.33% 2.17% 2.89% 0.43% 2.16% 2.28% 20.38%
2010 1.42% 0.44% 2.85% 1.89% -3.07% -1.58% 1.56% -0.40% 3.20% 1.80% 0.15% 3.93% 12.63%
2011 1.80% 1.44% -0.26% 1.14% -0.61% -2.16% -0.78% -5.37% -5.06% 2.56% -1.05% -0.81% -9.09%
2012 2.80% 1.58% 0.79% -0.23% -1.32% -0.18% 0.74% 1.18% 1.67% 0.91% 0.30% 1.98% 10.63%
2013 2.15% 0.46% 2.11% 1.20% 2.27% -1.31% 1.51% -0.04% 1.45% 1.45% 1.68% 1.61% 15.47%
2014 0.29% 2.75% -0.14% 0.03% 1.07% 1.66% -0.59% 0.12% -1.37% -2.16% 0.55% -0.55% 1.57%
2015 -1.00% 2.25% 0.36% 0.85% 0.85% -1.24% 0.18% -2.81% -3.44% 0.14% -1.17% -1.30% -6.29%
2016 -3.04% -1.81% 0.30% 1.67% 1.01% -0.55% 1.52% 1.33% 0.09% 0.41%
CS Event Driven Index vs. MSCI World CS Event Driven: Table returns
Upside / Downside capture ratios
6 Broad Event Driven Performance Review
Event Driven 12 month performance
0
100
200
300
400
500
600
700
Dec 93 Dec 97 Dec 01 Dec 05 Dec 09 Dec 13
-12
-10
-8
-6
-4
-2
0
2
4
6
Returns: CS Event Driven Index (r.h.s.) CS Event Driven Index CS Hedge Fund Index MSCI World Index
Sep 2016Until:
Index Monthly returns in %
41 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
42%-14%27%
-79%
-120%
-80%
-40%
0%
40%
80%
During positive months of MSCI
AC World
During negative months of MSCI
AC World
% CS Event Driven Index returns as percentage of MSCI
AC World returns
Since 1999 Last 12 months
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
80
85
90
95
100
105
110
115
120
CS Event Driven Index(r.h.s.) MSCI World TR(r.h.s.)
monthly returns in % Index rebalanced (t-12)
MSCI World TR (return) :
Event Driven :
11.36%
-1.91%
(volatality):
(volatality) :
13.40%
5.80%
Alternative Investment Strategy
0
100
200
300
400
500
600
Dec 93 Dec 97 Dec 01 Dec 05 Dec 09 Dec 13
CS Merger Arb. Index CS Hedge Fund Index MSCI World Index
Sep 2016Until:
Index Monthly returns in %
Source: Bloomberg, Datastream, Credit Suisse/IDC
Event Driven: Merger Arbitrage
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Exposure to Developed Equities Correlation vs. MSCI World
Volatility of Strategy Returns
7 Merger Arbitrage Market Exposure
Hedge Fund Assets: Event Driven
43 Source: HFR, Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.06.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
-10
-5
0
5
10
15
20
25
1991 1994 1997 2000 2003 2006 2009 2012
0.00%
0.50%
1.00%
1.50%
2.00%
AUM: Merger arbitrage
Net capital flows: Merger arbitrage
% of industry assets
USD bn % Assets
0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
Jun 94 Jun 98 Jun 02 Jun 06 Jun 10 Jun 14
Standard deviation of CS Risk Arbitrage returns Long-Term Average of Risk
0
0.05
0.10
0.15
0.20
0.25
0.30
Sep 03 Sep 05 Sep 07 Sep 09 Sep 11 Sep 13 Sep 15
36m rolling beta
CS Merger Arbitrage Index Index net long exposure to MSCI AC World
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Corporates under pressure to grow top line
7 Merger Arbitrage Return Drivers
M&A Global (proxy)
M&A rolling average deal size vs. S&P 500
M&A Global (proxy)
• The number and the value of M&A transactions globally has slowed down somewhat in 2016. However the opportunity set for merger arbitrage managers
remains sufficiently large and provides a reasonable opportunity set. Meanwhile, deal spreads stay tighter, which is supportive of performance of existing trades.
• Tepid top-line growth, limited capex opportunities, consolidation opportunities in stressed sectors and high corporate cash levels keep the case for M&A growth
intact. We view favorably the low directionality and net exposure of the strategy
0
2
4
6
8
10
12
1980 1985 1990 1995 2000 2005 2010 2015
Global M&A(12m sum), % of market cap
12'000
14'000
16'000
18'000
20'000
22'000
24'000
26'000
Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16
MSCI World total sales value
USD bn
44 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Nov 82 Nov 86 Nov 90 Nov 94 Nov 98 Nov 02 Nov 06 Nov 10 Nov 14
0
500
1'000
1'500
2'000
2'500
Average deal size 12 month moving average S&P 500 index (rhs)
USD bn Index
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
M&A Asia Pacific (proxy) M&A Emerging Markets (proxy)
M&A North America (proxy)
7 Merger Arbitrage Return Drivers
M&A Western Europe (proxy)
45 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Average Deal Premiums Premiums paid
7 Merger Arbitrage Return Drivers
Payment type summary Deal type summary
46 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
US corporates (except financial sector): cash/total assets
7 Merger Arbitrage Return Drivers
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
55 59 63 67 71 75 79 83 87 91 95 99 03 07 11 15
US corporates (except financial sector): cash/total assets
in %
47 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 15.10.2016
US corporates (except financial sector): cash/total assets
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Upside / Downside capture ratios
CS Risk Arbitrage Index vs. MSCI World
7 Merger Arbitrage Performance Review
12-month performance vs. MSCI World
CS Risk Arbitrage: Table returns
Source: HFR, Bloomberg, Datastream, Credit Suisse/IDC 48
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
Last datapoint: 30.09.2016
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1994 0.57% (0.44%) 1.86% (0.96%) 0.25% 0.18% 0.57% 1.69% 0.38% 0.20% 0.61% 0.26% 5.25%
1995 1.61% 1.88% 0.63% (0.45%) 0.61% 2.07% 1.56% 0.60% 1.14% 0.16% 1.68% (0.16%) 11.90%
1996 1.02% 1.57% 0.63% 2.00% 1.09% 0.28% 1.05% 1.23% 2.15% 0.45% 0.45% 1.12% 13.81%
1997 1.28% 0.22% (0.42%) (1.67%) 1.31% 2.39% 1.21% 0.57% 1.48% 0.02% 1.09% 2.01% 9.84%
1998 (0.54%) 3.81% 2.38% 1.64% 0.23% (0.53%) (0.37%) (6.15%) (0.65%) 2.41% 2.04% 1.55% 5.58%
1999 (1.51%) (1.37%) 2.56% 3.39% 2.47% 1.22% 0.16% 0.80% 2.16% 1.75% 0.52% 0.47% 13.23%
2000 0.15% 3.52% 0.05% 1.81% 0.68% 1.43% 1.58% 1.57% 1.01% 0.35% 0.28% 1.39% 14.69%
2001 1.91% 1.49% 0.33% 0.50% 1.31% (0.43%) 0.68% 1.01% (2.65%) (0.01%) 0.81% 0.67% 5.68%
2002 0.29% (1.22%) 1.00% 0.88% 0.03% (1.17%) (2.73%) (1.23%) (0.56%) 0.52% 0.21% 0.53% (3.46%)
2003 (0.39%) (0.71%) (0.27%) 1.52% 2.56% 0.75% 0.48% 1.16% 0.95% 1.21% 0.42% 1.00% 8.98%
2004 0.83% 0.50% 0.73% (0.58%) 0.44% 0.25% (1.52%) 0.18% 0.63% 0.92% 1.67% 1.32% 5.45%
2005 (0.09%) 0.46% 0.09% (0.54%) 0.32% 0.79% 0.46% 0.60% 0.23% (1.12%) 1.01% 0.85% 3.08%
2006 1.63% 0.58% 0.97% 0.30% (0.15%) 0.20% 0.46% 0.35% 0.22% (0.16%) 3.01% 0.49% 8.15%
2007 0.20% 1.15% 1.29% 2.15% 0.04% (0.00%) 0.43% (0.65%) 3.22% 2.13% (0.80%) (0.63%) 8.77%
2008 (0.10%) 1.26% 1.62% 0.88% (0.18%) (0.12%) (0.39%) (1.16%) (3.49%) (3.06%) (0.02%) 1.60% (3.27%)
2009 0.38% 0.69% 1.65% 0.72% 1.85% 0.89% 1.12% 0.95% 1.60% 0.16% 1.03% 0.38% 12.00%
2010 0.40% 0.30% 0.69% (0.10%) (1.52%) 0.10% 1.61% 0.31% 2.31% (0.62%) (1.44%) 1.14% 3.17%
2011 0.89% 0.79% 0.59% 1.74% (1.05%) (0.04%) (0.77%) (0.92%) (1.63%) 1.91% (0.27%) (0.39%) 0.80%
2012 0.97% 0.92% 0.18% (0.47%) (1.53%) 0.53% (0.51%) 0.52% 0.41% (0.77%) 1.05% 1.51% 2.82%
2013 (0.03%) (0.06%) 0.39% 0.65% 0.80% 0.17% 0.99% 0.01% 0.81% 0.57% 0.10% 0.39% 4.89%
2014 0.49% 0.93% (0.68%) 0.55% 0.56% 1.27% (1.40%) 0.22% (1.49%) (2.35%) 0.57% 0.08% (1.32%)
2015 (0.85%) 1.50% 0.04% 0.81% 1.06% (0.17%) (0.76%) (0.67%) (1.31%) (0.01%) (0.49%) 1.31% 0.42%
2016 0.59% 0.21% 1.31% (0.23%) 0.48% 0.33% 0.56% 1.07% 0.66% 5.08%
0
100
200
300
400
500
600
Dec 93 Dec 97 Dec 01 Dec 05 Dec 09 Dec 13
CS Merger Arb. Index CS Hedge Fund Index MSCI World Index
Sep 2016Until:
Index Monthly returns in %
23%
-4%
17%
20%
-10%
0%
10%
20%
30%
During positive months of MSCI
AC World
During negative months of MSCI
AC World
% CS Risk Arbitrage returns as percentage of MSCI AC
World returns
Since 1999 Last 12 months
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
80
85
90
95
100
105
110
115
120
CS Merger Arbitrage Index(r.h.s.) MSCI World TR(r.h.s.)
monthly returns in % Index rebalanced (t-12)
MSCI World TR :
Merger Arbitrage Index :
11.36%
5.93%
(volatality) :
(volatality) :
13.40%
2.55%
Alternative Investment Strategy
Source: Bloomberg, Datastream, Credit Suisse/IDC
Event Driven: Distressed
Last datapoint: 30.06.2016
0
100
200
300
400
500
600
700
800
Dec 93 Dec 97 Dec 01 Dec 05 Dec 09 Dec 13
CS Distressed Index CS Hedge Fund Index MSCI World Index
Sep 2016Until:
Index Monthly returns in %
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Exposure to Developed Equities Correlation vs. MSCI World
Volatility of Strategy Returns
8 Event Driven - Distressed Market Exposure
Hedge Fund Assets: Event Driven
50 Source: HFR, Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.06.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
-20
30
80
130
180
230
1991 1994 1997 2000 2003 2006 2009 2012 2015
3%
4%
5%
6%
7%
8%
9%
10%
AUM: ED distressed debt
Net capital flows: ED distressed debt
% of industry assets
USD bn % Assets
0
2
4
6
8
10
12
14
16
Jun 94 Jun 98 Jun 02 Jun 06 Jun 10 Jun 14
Standard Deviation of CS Distressed Index returns Long-Term Average of Risk
6M rolling standard deviation, in %
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Sep 03 Sep 05 Sep 07 Sep 09 Sep 11 Sep 13 Sep 15
36m rolling beta
CS Distressed Debt Index Index net long exposure to MSCI AC World
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Number of Distressed Issuers Default Rate Forecasts
Source: S&P LCD, Credit Suisse / IDC
Speculative-grade bond spreads: Deviation from average levels Upgrades-to-Downgrades Ratio of US and EUR high yield issuers
8 Event Driven - Distressed Return Drivers • The number of issuers under distressed conditions stay near average levels, suggesting a reasonable opportunity set.
• However, performance of distressed strategies continues to benefit from higher valuations of speculative issuers with the fundamental back-drop improving
recently.
• Default rates are expected to rise modestly, adding to opportunity set. However, low recovery rates are a concern. Given strong performance recently, we stay
neutral, awaiting better entry-points. An unexpected outcome in one of the upcoming event risks may weigh on valuations of speculative grade issuers.
51
Last datapoint: 31.10.2016
Last datapoint: 31.07.2016
Last datapoint: 26.08.2016
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
CS Distressed Index: Table returns
8 Event Driven - Distressed Performance Review
CS Distressed Index vs. MSCI World
12-month performance vs. CS High yield Index Upside / Downside capture ratios
Source: Bloomberg, Credit Suisse / IDC 52
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
Last datapoint: 30.09.2016
0
100
200
300
400
500
600
700
800
Dec 93 Dec 97 Dec 01 Dec 05 Dec 09 Dec 13
CS Distressed Index CS Hedge Fund Index MSCI World Index
Sep 2016Until:
Index Monthly returns in %
71%
-33%
20%
-42%
-80%
-40%
0%
40%
80%
During positive months of CS High
Yield Index
During negative months of CS High
Yield Index
% CS Distressed Index returns as percentage of CS
High Yield Index returns
Since 1999 Last 12 months85
90
95
100
105
110
115
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
CS Distressed Index(r.h.s.) CS High Yield Index(r.h.s.)
monthly returns in % Index rebalanced (t-12)
CS High Yield (return) :
Distressed Debt (return) :
12.47%
0.24%
(volatality):
(volatality):
8.49%
3.48%
Net ROR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1994 3.94% -0.34% -1.83% -0.71% -0.84% -0.95% 1.80% 2.04% 1.11% -0.35% -2.40% -0.63% 0.67%
1995 0.44% 2.89% 2.92% 2.78% 1.96% 2.33% 3.87% 0.96% 1.55% -1.31% 1.28% 3.89% 26.12%
1996 4.10% 0.36% 1.30% 2.69% 1.09% 0.67% -0.33% 2.74% 2.84% 1.80% 3.61% 2.19% 25.55%
1997 2.42% 2.16% 0.38% 0.52% 3.45% 1.13% 3.53% -0.91% 2.97% 1.22% 1.84% 0.39% 20.73%
1998 3.76% 2.80% 1.27% 0.51% -1.41% 0.31% 0.39% -12.45% -1.43% 0.89% 3.17% 1.55% -1.68%
1999 2.22% 0.07% 2.89% 3.14% 2.43% 2.49% 1.96% 0.19% 1.73% -0.30% 1.55% 1.90% 22.18%
2000 0.42% 0.49% 0.15% -1.32% 0.00% 2.02% -0.24% 1.77% -0.31% -0.09% -1.06% 0.14% 1.95%
2001 2.89% 1.92% 1.38% 0.99% 2.42% 2.65% 1.00% 1.25% -0.79% 2.35% 0.76% 1.62% 20.01%
2002 1.58% -0.63% 1.23% 0.89% 0.19% -3.79% -4.27% 0.28% -0.25% -0.72% 3.91% 1.17% -0.69%
2003 3.12% 0.89% 1.19% 3.27% 2.27% 2.63% 1.14% 1.02% 2.21% 1.98% 1.21% 1.73% 25.12%
2004 2.42% 0.89% 0.59% 0.66% 0.26% 1.06% 0.52% 0.56% 1.23% 1.86% 2.67% 1.92% 15.62%
2005 0.55% 1.55% 0.65% -0.06% 0.13% 1.21% 1.65% 1.00% 1.24% -0.10% 1.63% 1.73% 11.74%
2006 2.52% 0.21% 1.73% 1.52% 0.39% 0.76% -0.09% 1.15% 0.50% 2.65% 1.59% 1.68% 15.58%
2007 1.71% 1.21% 1.27% 1.57% 2.08% 0.95% -0.24% -1.73% 1.14% 1.41% -1.30% 0.06% 8.35%
2008 -1.70% 0.17% -1.04% 0.24% 1.50% -0.51% -2.59% -0.07% -5.18% -5.66% -5.00% -2.54% -20.48%
2009 -0.06% -1.20% 0.12% 1.80% 4.15% 1.44% 2.25% 2.12% 3.38% 0.71% 2.08% 2.51% 20.95%
2010 2.02% 0.29% 2.64% 1.69% -2.50% -1.10% 1.10% -0.64% 2.07% 1.32% 0.33% 2.73% 10.26%
2011 1.90% 0.86% -0.10% 1.14% 0.01% -0.70% -0.26% -4.41% -3.28% 1.99% -1.20% -0.05% -4.24%
2012 2.40% 1.89% 1.48% 0.14% -1.24% -0.23% 0.95% 0.88% 1.78% 1.03% 0.26% 1.91% 11.77%
2013 1.69% 1.04% 2.18% 1.34% 2.38% -0.86% 1.31% -0.48% 1.38% 1.53% 1.55% 1.94% 16.00%
2014 0.40% 2.04% 0.60% 0.37% 1.45% 1.41% -0.19% -0.48% -0.70% -1.96% 0.14% -0.49% 2.55%
2015 -1.05% 1.23% 0.09% 0.57% 0.31% -1.22% -0.74% -1.44% -1.37% -0.30% -0.75% -0.71% -5.30%
2016 -1.36% -1.16% 0.57% 1.62% 0.80% -0.48% 1.07% 0.99% 0.67% 2.71%
Tactical Trading
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Opportunities
• Volatility levels are expected to stay near average
levels in the base case, though unexpected
outcomes from event-risks could spur an
increase
• The UK vote to leave the EU increases downside
risks to developed market growth with increased
contagion risks, primarily across the EU. Market
distortions may create opportunities.
• Stabilizing commodity prices may translate into
macro trading opportunities related to commodity
importers vs exporters, particularly in EMs.
• US elections and referendums in some European
countries in the coming months could open
opportunities.
• Changing compositions of stimulus programs in
Eurozone and Japan could have cross-asset
implications
• Inflation expectations are rising in the US, having
a cross-asset impact.
Challenges
• Increased uncertainty over US rate hike
trajectory, with frequently changing rate hike
probabilities
• Increased central bank activity curbs strong
trend-strength.
• Commodities could be in a choppy sideways
trading range for the remainder of the year,
which could limit the opportunity set for
trend-followers.
9 Tactical Trading Opportunities and Challenges
54
Alternative Investment Strategy
Source: Bloomberg, Datastream, Credit Suisse/IDC
Global Macro
Source: Datastream, Credit Suisse / IDC
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Correlation vs. MSCI World
Volatility of Strategy Returns Hedge Fund Assets: Global Macro
9 Global Macro Market Exposure
-50
-40
-30
-20
-10
0
10
20
30
40
1999 2001 2003 2005 2007 2009 2011 2013 2015
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
CS Hedge Fund Index MSCI World Index
CS Global Macro Index 12-month correlation Global Macro vs MSCI
Return (in %) Correlation
-50
0
50
100
150
200
250
300
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
AUM: Macro Net capital flows: Macro % of industry assets
USD bn % Assets
Net exposure to developed equities and government bonds
56 Source: HFR, Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.06.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
0
2
4
6
8
10
12
14
16
Jun 94 Jun 98 Jun 02 Jun 06 Jun 10 Jun 14
Standard Deviation of CS Global Macro Index returns Long-Term Average of Risk
6M rolling standard deviation, in %
-0.80
-0.60
-0.40
-0.20
0
0.20
0.40
0.60
0.80
1.00
Sep 03 Sep 05 Sep 07 Sep 09 Sep 11 Sep 13 Sep 15
36m rolling beta
CS Global Macro Index net long exposure to MSCI AC World
CS Global Macro Index net long exposure to Barclays Agg. Bond Index (Unhedged)
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Policy rates in developed economies
9 Global Macro Return Drivers
• Global macro managers should be able to benefit from a good set of trading opportunities – US election consequences, BREXIT consequences, the timing of
the next Fed rate hike, the future of unconventional monetary policy in Europe, Japan and elsewhere, the stabilization of commodity and emerging markets to
name just a few. Inflation expectations are rising, which has a cross-asset impact. The current market combination of sufficient market liquidity and benign
volatility is also supportive.
• We have a positive view on the style and see its tactical nature and low exposure to market directionality as additionally appealing.
57 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016
0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Feb 05 Feb 07 Feb 09 Feb 11 Feb 13 Feb 15
United States Canada Australia Japan Denmark Eurozone Sweden UK Switzerland
0
2
4
6
8
10
12
14
16
18
20
Aug 05 Aug 07 Aug 09 Aug 11 Aug 13 Aug 15
Brazil Russia Indonesia Turkey India South Africa China Mexico Korea
%
Policy rates in emerging economies
Last datapoint: 31.10.2016
Probability of Fed Funds rate hike by December 2015
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
-200
-150
-100
-50
0
50
100
150
200
Jan 90 Jan 94 Jan 98 Jan 02 Jan 06 Jan 10 Jan 14
US 10Y generic yield - Germany 10Y generic yield
Bps
Correlation between equities, bonds and commodities
9 Global Macro Return Drivers: Equities and Bonds
58 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016
US vs Germany 10Y spread evolution
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
Jun 02 Jun 04 Jun 06 Jun 08 Jun 10 Jun 12 Jun 14 Jun 16
Correlation of CSCB and the S&P 500
Correlation of CSCB and JPM Global Aggregate Bond Index
Correlation of JPM Global Agg. and the S&P 500
6-month rolling correlation between daily returns
10Y Yields in advanced economies
FOMC dots vs. Fed fund futures
Last datapoint: 31.10.2016 Last datapoint: 30.09.2016
Last datapoint: 31.10.2016
-1.0
-0.5
0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Nov 11 May 12 Nov 12 May 13 Nov 13 May 14 Nov 14 May 15 Nov 15 May 16 Nov 16
USA Germany Switzerland UK
%
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Speculative positioning in major instruments
GBP/USD has undershot spreads EM FX interest rate differential (carry)
9 Global Macro Return Drivers: FX
FX Fair Value vs. EUR
-60
-40
-20
0
20
40
60
S&P 500
2YR T-Note
5YR T-Note
10YR T-Note OIL
COPPERGOLD
SILVEREUR
USDCHF
JPY
02.11.2016 05.10.2016
%
59 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 20.10.2016 Last datapoint: 31.10.2016
Last datapoint: 02.11.2016 Last datapoint: 02.11.2016
-20
-15
-10
-5
0
5
10
15
20
25
NO
K
JP
Y
SE
K
GB
P
CA
D
US
D
NZ
D
AU
D
CH
F
2-Nov-16
Overvaluation vs. EUR
Undervaluation vs. EUR
Deviation in %
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Correlation between commodities and equities / bonds
-0.4
-0.2
0
0.2
0.4
0.6
0.8
Jun 02 Jun 04 Jun 06 Jun 08 Jun 10 Jun 12 Jun 14 Jun 16
Correlation between the Credit Suisse Commodity Benchmark and the S&P 500
Correlation between the Credit Suisse Commodity Benchmark and JPM Global Aggregate Bond Index
6-month rolling correlation between daily returns
Cross-commodity correlations
Commodity fair value
-4.0
-3.0
-2.0
-1.0
0
1.0
2.0
Gaso
line
Nic
kel
Copper
WTI C
rude o
il
Bre
nt C
rude o
il
US
Nat
ura
l gas
Wheat
Gold
Alu
min
um
BC
OM Tin
Lead
Corn
Pla
tinum
Coff
ee
Cotton
Silv
er
Pal
ladiu
m
Coco
a
Soyb
eans
Sugar
Zin
c
2-Nov-16 -1 Stdev +1 Stdev
Overvalued
Undervalued
Deviation from fair value in number of standard deviations
9 Global Macro Return Drivers: Commodities
Gold speculative positioning vs price
60 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
-20
-10
0
10
20
30
40
50
60
70
Feb 91 Feb 95 Feb 99 Feb 03 Feb 07 Feb 11 Feb 15
30-day avg. pairwise correlation between GSCI sectors (agriculture, energy, industrial metals, preciousmetals)1-year moving average
in %
'900
1'000
1'100
1'200
1'300
1'400
1'500
Nov 13 Mar 14 Jul 14 Nov 14 Mar 15 Jul 15 Nov 15 Mar 16 Jul 16
0
50
100
150
200
250
300
350
Net speculative position (rhs) Gold price
USD/oz 000 contracts
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1994 0.17% (5.65%) (4.27%) (1.59%) 3.80% (0.92%) (0.35%) 2.75% 0.25% (2.22%) 2.09% 0.50% (5.72%)
1995 (2.47%) 0.07% 5.96% 0.91% 0.99% (0.68%) 2.24% 10.60% 0.20% 1.00% 4.87% 4.05% 30.67%
1996 10.46% (7.07%) 1.22% 3.00% 1.99% 3.23% (6.97%) 2.93% 3.01% 5.31% 8.13% (0.76%) 25.58%
1997 8.21% 1.82% (2.17%) 5.95% (2.02%) 2.10% 10.13% (2.41%) 4.63% (1.89%) 3.46% 5.14% 37.11%
1998 (2.18%) 0.21% 10.16% 1.57% 3.37% 3.28% 1.80% (4.84%) (5.12%) (11.55%) (1.08%) 2.34% (3.64%)
1999 (2.88%) (1.60%) (2.00%) 1.79% (0.05%) 3.02% (1.91%) (2.85%) (3.18%) 2.44% 4.40% 9.24% 5.81%
2000 (2.42%) 4.43% (2.45%) (5.35%) 2.32% 1.32% 1.81% 2.92% (0.87%) 1.26% 3.63% 5.05% 11.67%
2001 3.32% 0.99% 2.74% 0.69% 2.14% 1.03% 0.69% 1.00% 1.17% 1.18% (0.37%) 2.47% 18.38%
2002 2.64% 0.52% (0.19%) 1.70% 0.78% 1.42% 2.15% 1.22% 0.76% 0.72% 1.23% 0.85% 14.66%
2003 2.03% 1.87% (0.66%) 2.16% 2.96% 1.63% (0.11%) 1.30% 3.04% 0.09% 0.55% 1.86% 17.99%
2004 1.45% 1.19% 0.97% 0.14% 0.05% 0.48% 0.82% (0.75%) (0.49%) 1.22% 2.42% 0.72% 8.49%
2005 0.69% 1.40% 0.51% (0.25%) 0.07% 0.52% 1.04% 0.71% 2.43% (0.86%) 1.08% 1.58% 9.25%
2006 3.37% 1.23% 1.06% 2.86% (0.60%) 0.44% 1.36% (0.77%) 0.02% 1.08% 1.44% 1.36% 13.53%
2007 1.29% 0.50% 1.21% 1.71% 1.79% 1.22% 0.96% (0.62%) 4.10% 2.72% (0.17%) 1.50% 17.36%
2008 4.44% 4.11% (1.70%) (1.59%) 1.80% 2.00% (2.64%) (1.37%) (6.63%) (5.13%) 1.54% 1.11% (4.62%)
2009 2.33% 0.21% 0.03% 0.19% 1.47% (0.85%) 1.78% 0.86% 2.77% 0.21% 3.52% (1.43%) 11.55%
2010 1.07% 1.10% 0.38% 1.65% (0.63%) 0.56% 0.65% 1.48% 2.72% 1.62% (0.52%) 2.67% 13.47%
2011 (0.77%) 1.28% 0.15% 2.46% (0.63%) (1.11%) 2.53% 1.91% (0.07%) 0.18% (0.03%) 0.43% 6.44%
2012 1.22% 0.79% (0.43%) (0.25%) 0.19% (1.37%) 2.14% 0.38% 0.60% (0.73%) 0.72% 1.27% 4.58%
2013 0.88% 0.29% 0.97% 1.77% (0.05%) (2.48%) 0.26% (0.92%) 0.84% 1.01% 1.03% 0.71% 4.32%
2014 (1.05%) 0.69% (0.24%) 0.01% 1.02% 0.53% (0.01%) 1.13% 0.54% (0.92%) 1.65% (0.25%) 3.11%
2015 2.69% 0.42% 1.30% (0.75%) 0.71% (1.76%) 1.26% (2.63%) (1.57%) 1.29% 1.41% (2.05%) 0.18%
2016 (0.57%) (1.55%) (0.13%) 0.25% (0.23%) 0.69% 0.29% 0.18% 0.11% (0.97%)
CS Global Macro Index vs. MSCI World CS Global Macro: Table returns
Upside / Downside capture ratios 12-month performance vs. MSCI World
9 Global Macro Performance Review
0
100
200
300
400
500
600
700
800
900
1000
Jan 94 Jan 98 Jan 02 Jan 06 Jan 10 Jan 14
-15
-10
-5
0
5
10
15
Returns: CS Global Macro Index (r.h.s.) CS Global Macro Index CS Hedge Fund Index MSCI World Index
Sep 2016Until:
Index Monthly returns in %
61 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
33%3%
8%
-21%
-40%
-20%
0%
20%
40%
During positive months of MSCI
AC World
During negative months of MSCI
AC World
% CS Global Macro Index returns as percentage of
MSCI AC World returns
Since 1999 Last 12 months
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
85
90
95
100
105
110
115
CS Global Macro Index(r.h.s.) MSCI World TR(r.h.s.)
monthly returns in % Index rebalanced (t-12)
MSCI World TR :
CS Global Macro Index :
11.36%
-0.36%
(volatality) :
(volatality) :
13.40%
3.67%
Alternative Investment Strategy
Source: Bloomberg, Datastream, Credit Suisse/IDC
Managed Futures
100
110
120
130
140
150
160
170
180
190
Sep 04 Sep 06 Sep 08 Sep 10 Sep 12 Sep 14 Sep 16
CS Managed Futures Index CS Allhedge Managed Futures Index
Index
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Correlation vs. MSCI World Crisis Alpha: Managed Futures
Volatility of strategy returns Hedge Fund Assets: Managed Futures
10 Managed Futures Market Exposure
50
100
150
200
250
300
Jan 97 Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11 Jan 13 Jan 15
CS Managed Futures Index Crisis period CS Managed Futures (w/o Crisis) 3m Treasury yield
Index
-50
-40
-30
-20
-10
0
10
20
30
40
1999 2001 2003 2005 2007 2009 2011 2013 2015
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
CS Hedge Fund Index MSCI World Index
CS Managed Futures Index 12-month correlation Managed Futures vs MSCI
Return (in %) Correlation
-50
0
50
100
150
200
250
300
1991 1994 1997 2000 2003 2006 2009 2012 2015
2%
4%
6%
8%
10%
12%
14%
16%
AUM: Systematic diversified
Net capital flows: Systematic diversified
% of industry assets
USD bn % Assets
63 Source: HFR, Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.06.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
0
2
4
6
8
10
12
14
16
Jun 94 Jun 98 Jun 02 Jun 06 Jun 10 Jun 14
Standard Deviation of CS Managed Futures Index Returns Long-Term Average of Risk
6M rolling standard deviation, in %
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Directional Strength across major asset classes* Performance of long- and short-term managed futures sub-strategies
30-day GSCI Sector Correlations vs. 1yr mov. average Rolling correlation of USD/ EM FX with US 10Y Treasury yield
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
Dec 00 Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Dec 14
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
EMEA-UST ASIA-UST LATAM-UST US 10Y Treasury yield (r.h.s)
Rolling correlation of 10Y US Treasury yield with USD/ EM currency basket in %
10 Managed Futures Return Drivers • Though trading ranges are narrow, trend strength rose from very low levels across most asset classes in October. Strong trends were observed in some major
US instruments (US treasuries, S&P 500, US dollar Index) with markets factoring in a December Fed rate hike. Cross-asset correlations stay high
• Going forward, an unexpected outcome from event risks may spur higher volatility and directional movement. Brexit risks too are unfolding gradually, having an
impact on GBP assets.
• We view managed futures positively since they are typically less correlated to other strategies and can benefit from an increase in volatility.
64 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 * For major traded instruments
-20
-10
0
10
20
30
40
50
60
70
Feb 91 Feb 95 Feb 99 Feb 03 Feb 07 Feb 11 Feb 15
30-day avg. pairwise correlation between GSCI sectors (agriculture, energy, industrial metals, preciousmetals)1-year moving average
in %
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Directional strength and trading range: Commodity futures
10 Managed Futures Return Drivers
Directional strength and trading range: Currencies
65 Source: Bloomberg, Datastream, Credit Suisse/IDC
* Minor changes in directional strength reflect historical data changes from the provider
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Directional strength and trading range: Bond futures
10 Managed Futures Return Drivers
Directional strength and trading range: Equity futures
66 Source: Bloomberg, Datastream, Credit Suisse/IDC
* Minor changes in directional strength reflect historical data changes from the provider
* Minor changes in directional strength reflect historical data changes from the provider
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Net ROR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1994 0.22% 1.20% 2.60% 0.86% 0.76% 4.15% -1.01% -0.27% 2.03% 1.18% 1.65% -1.89% 11.95%
1995 -0.08% -1.27% 9.46% -0.33% -4.70% -5.74% 3.05% -0.32% -9.35% -1.06% -0.27% 4.59% -7.10%
1996 2.82% -4.50% 0.11% 3.12% -1.99% 0.20% 0.10% 0.78% 3.22% 5.59% 4.21% -1.83% 11.97%
1997 3.00% 1.43% -0.95% -2.69% -0.76% 0.21% 5.69% -7.27% 3.63% -0.73% -0.68% 2.82% 3.12%
1998 0.87% -0.28% 1.06% -4.03% 3.25% 0.91% -1.12% 9.95% 6.87% 1.21% -1.80% 2.80% 20.64%
1999 -3.14% -0.54% -1.07% 2.67% -2.93% 2.76% -0.72% -0.32% 1.81% -4.82% -0.52% 2.35% -4.69%
2000 0.01% -2.10% -1.31% -2.28% 0.58% -1.12% -2.05% 1.23% -3.34% 0.76% 6.68% 7.76% 4.24%
2001 -0.03% 0.15% 4.88% -5.49% 0.83% -0.84% 0.15% 2.52% 3.65% 3.40% -8.62% 2.15% 1.90%
2002 -1.27% -2.40% -0.91% -1.61% 3.51% 8.63% 6.12% 3.36% 4.11% -5.03% -2.09% 5.50% 18.33%
2003 6.07% 6.43% -6.10% 1.39% 5.14% -2.21% -2.75% 1.06% -1.60% 0.78% 0.54% 5.42% 14.13%
2004 1.09% 6.89% -0.86% -6.46% -1.05% -2.84% -1.95% -1.53% 1.96% 4.82% 5.83% 0.72% 5.97%
2005 -5.39% 0.08% 0.37% -3.45% 3.62% 4.22% 0.78% -0.87% 1.38% -1.97% 4.17% -2.53% -0.11%
2006 2.71% -2.62% 4.08% 2.92% -2.70% -2.04% -2.43% 1.39% -1.15% 1.73% 2.22% 4.05% 8.05%
2007 2.26% -4.38% -2.54% 4.02% 5.13% 3.03% -4.79% -4.61% 5.13% 4.06% -0.95% 0.32% 6.01%
2008 4.13% 6.61% -0.53% -2.15% 1.44% 4.79% -4.20% -2.48% -0.57% 4.96% 3.22% 2.37% 18.33%
2009 -0.56% -0.16% -2.18% -3.24% 0.85% -2.32% -0.43% 0.92% 2.97% -2.17% 4.94% -5.00% -6.57%
2010 -3.81% 1.81% 4.25% 1.89% -4.03% 0.42% -1.50% 4.87% 2.77% 4.29% -4.11% 5.42% 12.22%
2011 -0.82% 2.60% -2.76% 5.40% -4.44% -3.07% 4.03% 0.25% -0.78% -5.06% 0.18% 0.79% -4.19%
2012 1.15% 1.21% -2.96% 0.43% 2.38% -3.56% 4.68% -1.55% -1.37% -4.64% 0.58% 1.08% -2.93%
2013 2.67% -0.77% 1.74% 3.50% -4.98% -5.42% -1.06% -2.77% -0.15% 2.96% 2.09% 0.10% -2.56%
2014 -3.42% 0.94% -1.82% 0.42% 3.09% 1.54% -1.03% 5.02% 1.72% 1.81% 7.50% 1.67% 18.37%
2015 6.02% -1.15% 2.40% -4.29% -0.84% -5.81% 4.33% -2.76% 2.87% -2.48% 3.73% -2.19% -0.93%
2016 4.02% 3.23% -2.83% -3.04% -3.20% 4.19% 1.61% -3.09% -1.72% -1.26%
CS Managed Futures Index vs. MSCI World CS Managed Futures: Table returns
36-month rolling performance 12-month performance vs. MSCI World
10 Managed Futures Performance Review
-20
-10
0
10
20
30
40
50
Jan
97
Jan
99
Jan
01
Jan
03
Jan
05
Jan
07
Jan
09
Jan
11
Jan
13
Jan
15
Managed Futures 3 YR Rolling Performance (up)
Managed Futures 3 YR Rolling Performance (down)
3YR rolling performance (in %)
67 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
0
100
200
300
400
500
600
Dec 93 Dec 97 Dec 01 Dec 05 Dec 09 Dec 13
-10
-8
-6
-4
-2
0
2
4
6
8
10
Returns: CS Managed Futures Index (r.h.s.)CS Managed Futures IndexCS Hedge Fund IndexMSCI World Index
Sep 2016Until:
Index Monthly returns in %
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
85
90
95
100
105
110
115
CS Managed Futures Index(r.h.s.) MSCI World TR(r.h.s.)
monthly returns in % Index rebalanced (t-12)
MSCI World TR :
CS Managed Futures Index :
11.36%
-2.30%
(volatility) :
(volatility) :
13.40%
10.94%
Relative Value
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Opportunities
• Convertible bonds benefit from the search for
yield. Equity market deltas are reasonable.
• ECB purchases of corporate bonds, ABS may
lead to robust issuance and increased
opportunities. Spread widening risks appear more
contained in the Eurozone than elsewhere.
• Since large share of German bonds have become
ineligible for ECB purchases, a potential change
in ECB QE program parameters to address the
‘scarcity issue’ may open attractive opportunities
in beneficiary countries.
• Given better fundamental backdrop, the risks of a
very large, detrimental spike in volatility is low,
supportive of arbitrage and market neutral
strategies.
Challenges
• After a strong rally across the fixed-income
spectrum, returns may be more idiosyncratic
going forward with reduced tailwinds from
benchmarks.
• Unexpected event risk outcomes can lead to
higher volatility levels – at least temporarily.
• Liquidity remains a key factor, and
conditions have deteriorated post-Fed hike,
especially in the credit space.
• Limited directionality in equities limit return
expectations of convertible bonds.
• Prepayments may rise if US rates continue
to decline for a sustained period.
11 Relative Value Opportunities and Challenges
69
Alternative Investment Strategy
Source: Bloomberg, Datastream, Credit Suisse/IDC
Fixed Income Arbitrage
60
70
80
90
100
110
120
130
140
150
160
Sep 04 Sep 06 Sep 08 Sep 10 Sep 12 Sep 14 Sep 16
CS Fixed Income Arbitrage Index CS Allhedge Fixed Income Arbitrage Index
Index
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Fixed income volatility
Net exposure to developed equities and government bonds Correlation vs. MSCI World
-50
-40
-30
-20
-10
0
10
20
30
40
1999 2001 2003 2005 2007 2009 2011 2013 2015
-0.4
-0.2
0
0.2
0.4
0.6
0.8
DJ CS Hedge Fund Index MSCI World Index
DJ CS FI Arbitrage Index 12-month correlation FI Arbitrage vs MSCI
Return (in bps) Correlation
11 Fixed Income Arbitrage Market Exposure
Volatility of strategy returns
0
50
100
150
200
250
300
Dec 02 Dec 04 Dec 06 Dec 08 Dec 10 Dec 12 Dec 14
MOVE (FI volatility) Index
Index
71 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
0
2
4
6
8
10
12
14
16
Jun 94 Jun 98 Jun 02 Jun 06 Jun 10 Jun 14
Standard Deviation of CS Fixed income Arb. returns Long-Term Average of Risk
-0.20
-0.10
0
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
Sep 03 Sep 05 Sep 07 Sep 09 Sep 11 Sep 13 Sep 15
36m rolling beta
CS Fixed Income Arbitrage Index Index net long exposure to MSCI AC World
CS Fixed Income Arbitrage Index Index net long exposure to Barclays Agg. Bond Index (Unhedged)
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Bond performance by sector
US Aggregate Bond performance by maturity Fixed-income broad benchmarks
11 Fixed Income Arbitrage Fixed-Income Benchmarks
US Aggregate Bond performance by rating
72 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
11 Fixed Income Arbitrage Return Drivers
• Repricing of Fed rate hike expectations, ECB easing, as well as negative rates in several economies provide opportunities for classical fixed income arbitrage
strategies. The BoJ’s ‘yield curve control’ policy provides an anchor to nominal long-term yields and seeks to dampen market volatility
• The search for yield and continued ECB/BoJ easing is supportive of credits.
• We are positive on Fixed-Income Arbitrage strategies, preferring corporate arbitrage and structured credit related styles over classic fixed income arbitrage funds
which are vulnerable to a potential volatility spike.
73 Source: IS Fixed Income Strategy, Bloomberg, Credit Suisse/IDC
US Yield Curve FOMC projections vs. futures curve
Investment grade bonds fair value 2Y Government Bond yields in advanced economies
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Last datapoint: 30.09.2016 Last datapoint: 31.10.2016
-1.5
-1.0
-0.5
0
0.5
1.0
1.5
2.0
Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16
USA Germany UK Japan Switzerland
Yield in %
-1.0
-0.5
0
0.5
1.0
1.5
2.0
2.5
3.0
Jan 89 Jan 93 Jan 97 Jan 01 Jan 05 Jan 09 Jan 13
10Yr-2Yr Yield Spread (US Treasuries)
%
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
30Y mortgage rates Home prices across major US cities
Refinancing applications vs. 30Y mortgage rates US speculative yield vs. US 10Y yield
11 Fixed Income Arbitrage Return Drivers
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2000 2002 2004 2006 2008 2010 2012 2014 2016
30 Year Mortgage Current Coupon (FNMA)
Yield / Bid
74 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
-20
-15
-10
-5
0
5
10
Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16
US existing home prices (%YOY)
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Net ROR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1994 1.30% -2.00% -1.68% -0.20% 0.79% -0.40% -0.18% -0.09% 0.70% 0.89% 0.69% 0.57% 0.31%
1995 0.27% 0.65% -0.44% 2.02% 2.01% 0.52% 1.12% 0.77% 1.04% 1.14% 1.68% 1.07% 12.50%
1996 1.43% 1.06% 0.77% 1.35% 1.09% 1.25% 1.34% 1.04% 1.47% 1.16% 1.17% 1.75% 15.93%
1997 1.48% 1.10% 0.72% 1.24% 1.01% 0.87% 1.09% 0.82% 1.15% -1.58% 0.40% 0.71% 9.34%
1998 -0.84% 0.81% 1.61% -0.01% -0.21% -1.08% 0.48% -1.46% -3.74% -6.96% 1.55% 1.73% -8.16%
1999 1.90% 1.52% 1.34% 1.63% 0.88% 0.75% 0.49% -0.41% 0.74% 0.91% 0.78% 0.97% 12.11%
2000 0.54% 0.57% -0.15% 0.93% 0.02% 0.93% 0.55% 0.67% 0.75% 0.29% 0.70% 0.32% 6.29%
2001 1.42% 0.53% 0.24% 1.32% 0.52% 0.50% 0.91% 0.64% 0.18% 1.55% -0.27% 0.23% 8.04%
2002 1.03% 0.87% 0.63% 1.35% 1.44% 0.65% 1.08% 1.23% -1.14% -2.27% -0.53% 1.32% 5.75%
2003 1.26% 0.99% 0.42% 1.25% 1.28% 0.34% -0.98% 0.21% 1.16% 0.46% 0.52% 0.80% 7.97%
2004 1.23% 0.87% -0.49% 1.34% 0.63% 0.71% 0.70% -0.41% -0.78% 1.14% 1.12% 0.61% 6.86%
2005 0.09% 0.91% 0.27% -0.63% -1.24% -0.52% 1.00% 0.51% 0.12% 0.27% -0.58% 0.45% 0.63%
2006 1.42% 0.06% 0.57% 2.05% 0.81% 0.62% 0.24% -0.02% -0.02% 0.74% 1.16% 0.72% 8.66%
2007 0.12% 1.21% 0.90% 1.00% 0.24% 0.21% -1.96% -0.87% 1.85% 1.15% -0.25% 0.21% 3.83%
2008 0.28% -0.66% -6.43% 2.07% 1.26% -0.47% -0.37% -0.70% -6.80% -14.04% -5.60% -0.80% -28.82%
2009 0.48% 1.01% 1.74% 1.93% 4.33% 1.83% 3.65% 2.38% 2.77% 1.94% 1.71% 0.76% 27.41%
2010 2.02% 0.07% 1.44% 1.75% -0.79% 0.92% 1.20% 1.24% 1.55% 1.10% 0.74% 0.61% 12.51%
2011 1.68% 0.93% -0.31% 0.92% 0.21% 0.06% 0.55% -0.27% -0.19% 0.14% 0.50% 0.38% 4.69%
2012 1.17% 1.00% 0.74% 0.69% 0.24% 0.76% 1.62% 1.02% 1.26% 0.87% 0.48% 0.68% 11.04%
2013 1.06% 0.49% 0.61% 0.34% 0.01% -1.14% 0.38% 0.21% 0.51% 0.61% 0.50% 0.18% 3.80%
2014 1.00% 0.66% 0.41% 0.44% 0.45% 0.40% 0.30% 0.18% 0.42% -0.10% 0.21% -0.07% 4.37%
2015 -0.81% 0.74% -0.08% 0.63% 0.48% -0.21% 0.30% -0.04% -0.45% -0.20% 0.08% 0.15% 0.59%
2016 -0.76% -1.05% 0.59% 1.42% 0.12% -0.50% 1.08% 0.76% 0.75% 2.39%
CS Fixed Income Arb. Index vs. MSCI World CS Fixed Income Arbitrage: Table returns
Upside / Downside capture ratios 12- month performance vs. Barclays Global Agg.
11 Fixed Income Arbitrage Performance Review
0
100
200
300
400
500
600
Dec 93 Dec 97 Dec 01 Dec 05 Dec 09 Dec 13
-15
-10
-5
0
5
Returns: CS Fixed Income Arb. Index (r.h.s.)CS Fixed Income Arb. IndexCS Hedge Fund IndexMSCI World Index
Sep 2016Until:
Index Monthly returns in %
75 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
43% 12%12%
27%
0%
40%
80%
During positive months of Barclays
Global Agg.
During negative months of Barclays
Global Agg.
% CS Fixed Income Arbitrage Index returns as
percentage of Barclays Global Agg.Index returns
Since 1999 Last 12 months
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
92
94
96
98
100
102
104
106
108
CS Fixed Income Arbitrage Index(r.h.s.) Barclays Global Aggregate Total Return(r.h.s.)
monthly returns in % Index rebalanced (t-12)
Barclays Global Agg. (return) :
Fixed Income Arbitrage :
6.54%
2.42%
(volatality) :
(volatality) :
2.17%
2.56%
Alternative Investment Strategy
Source: Bloomberg, Datastream, Credit Suisse/IDC
Convertible Arbitrage
60
70
80
90
100
110
120
130
140
150
160
Sep 04 Sep 05 Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16
CS Convertible Arbitrage Index CS Allhedge Convertible Arbitrage Index
Index
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Correlation vs. MSCI World
12 Convertible Arbitrage Market Exposure
-60
-40
-20
0
20
40
60
1999 2001 2003 2005 2007 2009 2011 2013 2015
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1.0
CS Hedge Fund Index MSCI World Index
CS Conv. Arbitrage Index 12-month correlation Conv. Arbitrage vs MSCI
Return (in %) Correlation
Net exposure to developed equities and HY bonds
Volatility of strategy returns Convertible Index
90
100
110
120
130
140
150
160
170
Nov
11
May
12
Nov
12
May
13
Nov
13
May
14
Nov
14
May
15
Nov
15
May
16
Nov
16
ML Global 300 Convertible (TR) Barclays Global Aggregate (TR)
MSCI World (TR)
77 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 31.10.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
0
2
4
6
8
10
12
14
16
18
20
Jun 94 Jun 98 Jun 02 Jun 06 Jun 10 Jun 14
Standard Deviation of CS Convertible Arbitrage Index Returns Long-Term Average of Risk
6M rolling standard deviation, in %
0
0.20
0.40
0.60
0.80
1.00
1.20
Sep 03 Sep 05 Sep 07 Sep 09 Sep 11 Sep 13 Sep 15
36m rolling beta
CS Convertible Arbitrage Index Index net long exposure to MSCI AC World
CS Convertible Arbitrage Index Index net long exposure to Barclays Global HY Bond Index
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Global convertible bond issuance
12 Convertible Arbitrage Return Drivers
• With implied volatility rising somewhat, the valuation case for convertible bonds is more neutral now. Yet, yield differentials are better compared to traditional
bonds, while equity market delta is at reasonable levels. The search for yield is also broadly supportive for convertible bonds.
• With limited return expectations from equities, we prefer to stay neutral at this point and wait for better entry opportunities.
78 Source: Bloomberg, Thomson Reuters, Credit Suisse/IDC
Convertible bond index performance
Convertible bond index implied volatility YTM differentials between convertible bonds and aggregate
bonds
Last datapoint: 31.10.2016
Last datapoint: 29.08.2016 Last datapoint: 31.10.2016
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Convertible bond index equity sensitivity (delta)
12 Convertible Arbitrage Return Drivers
79 Source: Bloomberg, Thomson Reuters, Credit Suisse/IDC
Last datapoint: 31.10.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Net ROR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1994 0.36% 0.15% -0.97% -2.52% -1.02% 0.21% 0.14% -0.04% -1.19% -1.36% -0.17% -1.92% -8.07%
1995 -0.62% 1.18% 1.32% 2.28% 1.65% 1.90% 0.86% 0.77% 1.12% 1.29% 2.31% 1.39% 16.57%
1996 2.07% 1.18% 1.50% 1.34% 1.59% 1.45% 1.36% 1.31% 1.12% 1.44% 1.35% 0.85% 17.87%
1997 1.03% 1.33% 0.94% 1.02% 1.68% 2.09% 2.11% 1.75% 1.03% 0.46% -0.82% 1.01% 14.48%
1998 0.84% 1.63% 1.42% 1.27% 0.65% -0.37% 0.52% -4.64% -3.23% -4.68% 2.06% 0.35% -4.41%
1999 2.27% 1.22% 1.04% 2.14% 1.89% 0.81% 1.09% 0.23% 1.39% 0.70% 1.30% 0.90% 16.04%
2000 2.59% 3.37% 3.46% 3.57% 1.94% 1.97% 1.46% 1.69% 2.02% 1.09% -0.47% 0.44% 25.64%
2001 2.68% 2.12% 1.42% 1.22% 0.69% 0.13% 1.08% 1.50% 0.74% 1.11% 0.71% 0.32% 14.58%
2002 1.12% -3.15% -0.02% 1.21% 0.23% -0.33% -1.55% 0.60% 1.37% 1.03% 1.92% 1.66% 4.05%
2003 3.02% 1.39% 0.95% 1.42% 1.76% -0.62% -0.35% -0.91% 1.97% 1.67% 1.25% 0.70% 12.90%
2004 1.42% 0.29% 0.42% 0.46% -1.33% -0.76% -0.20% 0.28% -0.07% -0.29% 1.08% 0.69% 1.98%
2005 -0.80% -0.31% -1.63% -3.13% -1.55% 0.96% 1.71% 0.72% 1.10% -0.07% -0.43% 0.96% -2.55%
2006 2.75% 1.18% 1.48% 0.75% 0.76% 0.35% 0.79% 1.01% 1.15% 0.68% 1.06% 1.49% 14.30%
2007 1.20% 1.16% 0.68% 0.56% 1.19% 0.28% -1.11% -1.08% 1.97% 2.18% -1.48% -0.40% 5.17%
2008 -0.53% -1.29% -5.93% 1.11% 1.50% -0.36% -2.14% -0.66% -12.26% -12.59% -1.88% -0.98% -31.59%
2009 5.72% 0.75% 1.14% 4.52% 5.81% 4.05% 5.80% 3.39% 3.23% 2.16% 0.80% 2.22% 47.35%
2010 0.97% 0.47% 2.06% 1.69% -2.51% 0.01% 2.22% 1.35% 1.11% 1.98% 0.04% 1.16% 10.95%
2011 2.16% 2.90% -0.61% 0.06% 0.02% -0.86% -0.14% -1.73% -1.77% 1.18% -0.60% 0.62% 1.13%
2012 2.36% 1.88% 0.55% -0.23% -0.84% 0.33% 0.86% 0.44% 0.40% 0.25% 0.22% 1.38% 7.82%
2013 2.01% -0.07% 0.72% 0.14% 1.30% -0.33% -0.08% 0.72% 0.24% 0.92% -0.20% 0.54% 6.03%
2014 2.09% 0.14% 0.22% 0.33% -0.52% 0.05% 0.06% -0.28% -0.69% -1.79% -0.10% -1.15% -1.68%
2015 -0.21% 0.95% -0.27% 2.73% 0.52% -0.75% -1.04% -0.24% -0.25% 0.94% -0.73% -0.78% 0.81%
2016 -1.97% -0.09% 1.70% 1.48% 0.58% 0.56% 1.48% 1.26% 1.04% 6.16%
12 Convertible Arbitrage Performance Review
Upside / Downside capture ratios
Performance vs. MSCI World
12-month performance vs. Thomson Reuters Convert. Index
CS Convertible Arb.: Table returns
80 Source: Bloomberg, Thomson Reuters, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
46%
-13%
54%
-30%-40%
0%
40%
80%
During positive months of Global
Convertible Index
During negative months of Global
Convertible Index
% CS Convertible Arbitrage Index returns as % of
Thomson Reuters Global Convertible Index returns
Since 1999 Last 12 months
0
100
200
300
400
500
600
Jan 94 Jan 98 Jan 02 Jan 06 Jan 10 Jan 14
-15
-10
-5
0
5
10
Returns: CS Convertible Arb. Index (r.h.s.)CS Convertible Arb. IndexCS Hedge Fund IndexMSCI World Index
Sep 2016Until:
Index Monthly returns in %
85
90
95
100
105
110
115
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
CS Convertible Arbitrage Index (r.h.s) Thomson Reuters Global Convertible (r.h.s)
monthly returns in % Index rebalanced (t-12)
CS Convertible Arbitrage Index
Thomson Reuters Global Convertible
Return: -0.05% / Standard Dev.: 4.28%
Return: -3.21% / Standard Dev.: 9.47%
Alternative Investment Strategy
Source: Bloomberg, Datastream, Credit Suisse/IDC
Market Neutral
70
80
90
100
110
120
130
140
Sep 04 Sep 06 Sep 08 Sep 10 Sep 12 Sep 14 Sep 16
CS Equity Market Neutral Index CS Allhedge Equity Market Neutral Index
Index
Last datapoint: 30.09.2016
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
-10
0
10
20
30
40
50
60
1991 1994 1997 2000 2003 2006 2009 2012 2015
1%
3%
5%
7%
9%
AUM: Equity market neutral
Net capital flows: Equity market neutral
% of industry assets
USD bn % Assets
Net exposure to developed equities
-50
-40
-30
-20
-10
0
10
20
30
40
1999 2001 2003 2005 2007 2009 2011 2013 2015
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1.0
CS Hedge Fund Index MSCI World Index
CS Eq. Market Neutral Index 12-month correlation Market Neutral vs MSCI
Return (in %) Correlation
13 Equity Market Neutral Market Exposure
Correlation vs. MSCI World
Hedge Fund Assets: Equity Market Neutral S&P 500 inter-stock correlations
82 Source: HFR, Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016 Last datapoint: 30.06.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
0
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
Sep 03 Sep 05 Sep 07 Sep 09 Sep 11 Sep 13 Sep 15
36m rolling beta
CS Equity Market Neutral Index Index net long exposure to MSCI AC World
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Net ROR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
1994 -0.52% 0.24% -0.24% 0.25% -0.11% 0.70% -1.00% -0.99% -0.94% -0.37% -0.30% 1.27% -2.00%
1995 0.47% 0.94% 2.92% 2.27% 0.41% 1.52% 0.55% 0.68% -0.57% 0.28% 0.29% 0.81% 11.04%
1996 2.10% 1.59% 1.65% 1.29% 1.14% 0.24% 0.60% 1.48% 1.32% 1.11% 2.00% 0.95% 16.60%
1997 3.17% 1.97% -1.15% 1.21% 3.03% 1.18% 3.26% -0.92% 1.81% 0.81% -0.38% 0.04% 14.83%
1998 0.91% 1.85% 1.97% 0.29% 1.31% 0.47% -0.10% -0.85% 0.95% 2.48% 2.10% 1.24% 13.31%
1999 0.69% 0.61% 1.35% 2.02% 1.44% 1.92% 1.66% 1.11% 0.22% 0.82% 1.56% 0.96% 15.33%
2000 1.42% 0.79% 2.24% 1.44% 1.46% 1.82% 1.23% 1.43% -0.14% 0.81% 0.28% 1.28% 14.99%
2001 2.13% 0.89% 0.92% 1.44% 0.64% 0.29% 0.22% 1.01% -0.05% 0.72% 0.82% -0.08% 9.31%
2002 0.12% 0.03% 0.80% 0.53% 1.29% 0.52% 1.84% 0.57% -0.03% 0.41% 0.31% 0.82% 7.42%
2003 0.31% -0.06% 0.79% 0.40% 1.22% 0.46% 0.68% 0.06% 1.06% 0.67% 0.33% 0.93% 7.07%
2004 0.82% 0.79% -0.11% -0.34% 0.21% 0.84% 0.31% 2.13% 0.54% 0.03% 0.26% 0.86% 6.48%
2005 0.35% 1.02% 0.43% -0.22% -0.34% 0.21% 0.33% 0.86% 0.90% 0.83% 0.18% 1.44% 6.14%
2006 1.40% 0.50% 1.62% 2.02% 0.82% 0.27% 1.26% 0.31% 0.20% 0.39% 0.97% 0.88% 11.15%
2007 0.61% 0.47% 1.65% 1.01% 0.75% 0.56% 0.40% -0.39% 1.30% 1.50% 0.56% 0.48% 9.27%
2008 0.69% 1.07% 0.01% 0.31% 1.10% 0.55% -0.06% -0.59% -1.41% -1.83% -40.45% 0.41% -40.32%
2009 1.14% -5.61% 1.10% 1.29% 3.63% -0.21% 1.79% 1.31% 0.96% -0.35% 0.08% -0.87% 4.05%
2010 0.10% -1.35% 0.54% 0.43% -3.30% -0.99% 1.67% -1.55% 3.66% 0.93% -2.51% 1.74% -0.85%
2011 1.79% 0.52% 1.11% 3.37% -1.03% -0.29% -0.18% -0.89% -2.22% 2.76% 0.09% -0.49% 4.49%
2012 0.17% 1.33% -0.15% -0.41% -3.18% 0.93% -0.40% 1.25% 0.56% -0.42% 0.39% 0.86% 0.85%
2013 1.99% -1.28% 0.05% 1.01% 0.40% 0.57% 2.02% -1.72% 0.91% 1.17% 2.59% 1.30% 9.27%
2014 0.08% 0.26% -0.59% -0.70% -0.27% 0.70% -0.70% -0.02% -0.28% 0.45% 0.57% -0.69% -1.19%
2015 -0.37% -1.90% -0.21% -0.44% 1.00% 1.55% 0.56% 0.95% 0.62% -0.59% -1.03% 1.60% 1.69%
2016 -1.17% -0.73% 1.56% -0.87% 0.21% -2.53% 0.86% 0.10% 0.62% -1.98%
CS Equity Market Neutral Index vs. MSCI World CS Equity Market Neutral: Table returns
13 Equity Market Neutral Performance Review
Upside / Downside capture ratios 12-month performance vs. MSCI World
83 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
• Very low net exposure to broad equity indices enables much lower drawdowns and more uncorrelated returns. The currently low inter-stock correlations are
• supportive for the strategy.
• Volatility looks set to remain close to average levels in the base case. We thus have a positive on the strategy. However, an unexpected event outcome could
lead to a temporary volatility spike and thus remains a risk factor.
24%
-13%9%
-39%-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
During positive months of MSCI
AC World
During negative months of MSCI
AC World
% CS Equity Market Neutral Index returns as percentage
of MSCI AC World returns
Since 1999 Last 12 months
0
100
200
300
400
500
600
Jan 94 Jan 98 Jan 02 Jan 06 Jan 10 Jan 14
-50
-40
-30
-20
-10
0
10
Returns: CS Eq. Market Neutral Index (r.h.s.) CS Eq. Market Neutral Index CS Hedge Fund Index MSCI World Index
Sep 2016Until:
Index Monthly returns in %
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Sep 15 Nov 15 Jan 16 Mar 16 May 16 Jul 16 Sep 16
85
90
95
100
105
110
115
CS Market Neutral Index(r.h.s.) MSCI World TR(r.h.s.)
monthly returns in % Index rebalanced (t-12)
MSCI World return :
Market Neutral return :
11.36%
-2.02%
(volatility) :
(volatility) :
13.40%
4.11%
Appendix
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
14 Appendix Global Activity
Global economy – Inflation and interest rates
Inflation forecasts Inflation: Current vs. averages
Rates expectations (derived from OIS) 5-year real rates
85 Source: PMI Premium, Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 30.09.2016
Last datapoint: 30.09.2016 Last datapoint: 30.09.2016
Last datapoint: 30.09.2016
-1.0
-0.5
0
0.5
1.0
1.5
2.0
2.5
Eur
ozon
e
Fra
nce
Ger
man
y
Italy
Spa
in
Uni
ted
Kin
gdom
Sw
itzer
land
Uni
ted
Sta
tes
Can
ada
Japa
n
Aus
tral
ia
Current inflation 7Y historical avg.
-3
-2
-1
0
1
2
3
4
5
6
Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16 Jan 18
USA Euro area USA forecast Eurozone forecast
%YoY
-3
-2
-1
0
1
2
3
4
5
Sep 06 Sep 07 Sep 08 Sep 09 Sep 10 Sep 11 Sep 12 Sep 13 Sep 14 Sep 15 Sep 16
5Y EM real rates 5Y US real rates 5Y G3 real rates
5Y real rates (in%)
-60
-40
-20
0
20
40
60
Fed ECB BoE SNB BoJ BoC RBA RBNZ
Expected change in short-term interest rates over 12 months, current
7 days ago
1 month ago
basis points*
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
14 Appendix Global Activity
US homebuilder confidence and housing starts US car sales
Unemployment rates US consumer confidence
0
40
80
120
160
2000 2002 2004 2006 2008 2010 2012 2014 2016
40
60
80
100
120
US Consumer Confidence, Conference Board US U Michigan Consumer Confidence Index, rhs
Index Index
0
5
10
15
20
25
30
1990 1994 1998 2002 2006 2010 2014
%
Spain
Greece
USA
Switzerland
Germany
86 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016 Last datapoint: 30.09.2016
Last datapoint: 31.10.2016
8
10
12
14
16
18
20
22
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
US car sales (monthly) US car sales (3mma)
in million units
Last datapoint: 31.10.2016
US economy
0
10
20
30
40
50
60
70
80
Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10 Jan 12 Jan 14 Jan 16
0
500
1'000
1'500
2'000
2'500
Homebuilder confidence (NAHB) New housing starts (rhs)
Index 1'000 units
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
14 Appendix Global Activity
Eurozone PMIs Eurozone IP momentum
Eurozone unemployment rates Eurozone new car registrations
25
30
35
40
45
50
55
60
65
Jul 06 Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Jul 13 Jul 14 Jul 15 Jul 16
Germany France Italy Spain
Index
600
700
800
900
1'000
1'100
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
-10
-5
0
5
10
15
3M/3M growth rate (rhs) New passenger car registrations (Eurozone)
1'000 units % 3M/3M
-2.0
-1.0
0
1.0
2.0
3.0
2010 2011 2012 2013 2014 2015 2016
Germany France Italy Spain Netherlands Austria Others Eurozone
% QoQ
0
5
10
15
20
25
30
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Eurostat Unemployment Eurozone Germany Unemployment Rate SA
Unemployment Rate France Unemployment Rate Spain
%
87 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 31.10.2016 Last datapoint: 30.09.2016
Last datapoint: 31.10.2016 Last datapoint: 31.10.2016
Eurozone
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
14 Appendix Correlations among Hedge Fund Strategies
Correlations among Hedge Fund Strategies (Broad)
88 Source: Bloomberg, Datastream, Credit Suisse/IDC
Last datapoint: 29.07.2016
Past 10Y Returns CorrelationsCS Hedge
Fund
CS
Long/Shor
t Equity
CS
Emerging
Market
CS Global
Macro
CS
Managed
Futures
CS Merger
Arbitrage
CS
Distressed
CS
Convert.
Arbitrage
CS Market
Neutral
CS Fixed
Income
Arbitrage
CS Multi-
strategy
CS Short
bias
Bonds
(Barclays
Global
Aggregate)
Equities
(MSCI AC
World)
CS Hedge Fund 1.00
CS Long/Short Equity 0.92 1.00
CS Emerging Market 0.89 0.87 1.00
CS Global Macro 0.70 0.53 0.60 1.00
CS Managed Futures 0.29 0.17 0.12 0.54 1.00
CS Merger Arbitrage 0.68 0.70 0.68 0.46 0.07 1.00
CS Distressed Debt 0.89 0.81 0.78 0.44 0.02 0.60 1.00
CS Convertible Arbitrage 0.77 0.67 0.76 0.52 -0.07 0.55 0.73 1.00
CS Market Neutral 0.42 0.29 0.26 0.04 -0.04 0.20 0.43 0.20 1.00
CS Fixed Income Arbitrage 0.73 0.59 0.70 0.49 -0.07 0.46 0.69 0.86 0.36 1.00
CS Multi-strategy 0.93 0.84 0.84 0.57 0.11 0.62 0.86 0.85 0.44 0.79 1.00
CS Dedicated Short bias -0.55 -0.66 -0.58 -0.14 0.05 -0.44 -0.57 -0.38 -0.21 -0.36 -0.46 1.00
Bonds (Barclays Global Aggregate) 0.29 0.27 0.42 0.38 0.20 0.51 0.14 0.22 0.00 0.22 0.18 -0.17 1.00
Equities (MSCI AC World) 0.80 0.87 0.84 0.38 0.02 0.66 0.75 0.63 0.33 0.60 0.72 -0.77 0.43 1.00
Historical performance indications and financial market scenarios are not reliable indicators of current or future performance
November 2016
Risk warning Every investment involves risk, especially with regard to fluctuations in value and return. If an investment is denominated in a currency other than your base currency, changes in the rate of exchange may have an adverse effect on value, price or income. For a discussion of the risks of investing in the securities mentioned in this document, please refer to the following Internet link: https://research.credit-suisse.com/riskdisclosure This document may include information on investments that involve special risks. You should seek the advice of your independent financial advisor prior to taking any investment decisions based on this document or for any necessary explanation of its contents. Further information is also available in the information brochure “Special Risks in Securities Trading” available from the Swiss Bankers Association.
Past performance is not an indicator of future performance. Performance can be affected by commissions, fees or other charges as well as exchange rate fluctuations.
Financial market risks
Historical returns and financial market scenarios are no guarantee of future performance. The price and value of investments mentioned and any income that might accrue could fall or rise or fluctuate. Past performance is not a guide to future performance. If an investment is denominated in a currency other than your base currency, changes in the rate of exchange may have an adverse effect on value, price or income. You should consult with such advisor(s) as you consider necessary to assist you in making these determinations. Investments may have no public market or only a restricted secondary market. Where a secondary market exists, it is not possible to predict the price at which investments will trade in the market or whether such market will be liquid or illiquid.
Emerging markets
Where this document relates to emerging markets, you should be aware that there are uncertainties and risks associated with investments and transactions in various types of investments of, or related or linked to, issuers and obligors incorporated, based or principally engaged in business in emerging markets countries. Investments related to emerging markets countries may be considered speculative, and their prices will be much more volatile than those in the more developed countries of the world. Investments in emerging markets investments should be made only by sophisticated investors or experienced professionals who have independent knowledge of the relevant markets, are able to consider and weigh the various risks presented by such investments, and have the financial resources necessary to bear the substantial risk of loss of investment in such investments. It is your responsibility to manage the risks which arise as a result of investing in emerging markets investments and the allocation of assets in your portfolio. You should seek advice from your own advisers with regard to the various risks and factors to be considered when investing in an emerging markets investment.
Alternative investments
Hedge funds are not subject to the numerous investor protection regulations that apply to regulated authorized collective investments and hedge fund managers are largely unregulated. Hedge funds are not limited to any particular investment discipline or trading strategy, and seek to profit in all kinds of markets by using leverage, derivatives, and complex speculative investment strategies that may increase the risk of investment loss. Commodity transactions carry a high degree of risk and may not be suitable for many private investors. The extent of loss due to market movements can be substantial or even result in a total loss. Investors in real estate are exposed to liquidity, foreign currency and other risks, including cyclical risk, rental and local market risk as well as environmental risk, and changes to the legal situation.
Interest rate and credit risks
The retention of value of a bond is dependent on the creditworthiness of the Issuer and/or Guarantor (as applicable), which may change over the term of the bond. In the event of default by the Issuer and/or Guarantor of the bond, the bond or any income derived from it is not guaranteed and you may get back none of, or less than, what was originally invested. Volatility Volatility is a measure for variation of price of a financial instrument. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realized. .
89
MARKETING MATERIAL – THIS IS NOT INVESTMENT RESEARCH
Please contact your Credit Suisse representative for more information
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November 2016
Investment Strategy Department
Investment Strategists are responsible for multi-asset class strategy formation and subsequent implementation in CS’s discretionary and advisory businesses. If shown, Model Portfolios are provided for illustrative purposes only. Your asset allocation, portfolio weightings and performance may look significantly different based on your particular circumstances and risk tolerance. Opinions and views of Investment Strategists may be different from those expressed by other Departments at CS. Investment Strategist views may change at any time without notice and with no obligation to update. CS is under no obligation to ensure that such updates are brought to your attention. From time to time, Investment Strategists may reference previously published Research articles, , including recommendations and rating changes collated in the form of lists. All Research articles and reports detailing the recommendations and rating changes for companies and/or individual financial instruments are available on the following internet link: https://investment.credit-suisse.com For information regarding disclosure information on Credit Suisse Investment Banking rated companies mentioned in this report, please refer to the Investment Banking division disclosure site at:
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90
MARKETING MATERIAL – THIS IS NOT INVESTMENT RESEARCH
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November 2016
Investment Strategy Department
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Except as otherwise specified herein, this report is distributed by Credit Suisse AG, a Swiss bank, authorized and regulated by the Swiss Financial Market Supervisory Authority. Australia: This report is distributed in Australia by Credit Suisse AG, Sydney Branch (CSSB) (ABN 17 061 700 712 AFSL 226896) only to "Wholesale" clients as defined by s761G of the Corporations Act 2001. CSSB does not guarantee the performance of, nor make any assurances with respect to the performance of any financial product referred herein. Austria: This report is distributed by CREDIT SUISSE (LUXEMBOURG) S.A. Zweigniederlassung Österreich. The Bank is a branch of CREDIT SUISSE (LUXEMBOURG) S.A., a duly authorized credit institution in the Grand Duchy of Luxembourg with address 5, rue Jean Monnet, L-2180 Luxemburg. 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Italy: This report is distributed in Italy by Credit Suisse (Italy) S.p.A., a bank incorporated and registered under Italian law subject to the supervision and control of Banca d’Italia and CONSOB, and also distributed by Credit Suisse AG, a Swiss bank authorized to provide banking and financial services in Italy. Jersey: This report is distributed by Credit Suisse (Channel Islands) Limited, Jersey Branch, which is regulated by the Jersey Financial Services Commission for the conduct of investment business. The address of Credit Suisse (Channel Islands) Limited, Jersey Branch, in Jersey is: TradeWind House, 22 Esplanade, St Helier, Jersey JE4 5WU. Lebanon: This report is distributed by Credit Suisse (Lebanon) Finance SAL (“CSLF”), a financial institution incorporated in Lebanon and regulated by the Central Bank of Lebanon (“CBL”) with a financial institution license number 42. Credit Suisse (Lebanon) Finance SAL is subject to the CBL’s laws and regulations as well as the laws and decisions of the Capital Markets Authority of Lebanon (“CMA”). CSLF is a subsidiary of Credit Suisse AG and part of the Credit Suisse Group (CS). The CMA does not accept any responsibility for the content of the information included in this report, including the accuracy or completeness of such information. The liability for the content of this report lies with the issuer, its directors and other persons, such as experts, whose opinions are included in the report with their consent. The CMA has also not assessed the suitability of the investment for any particular investor or type of investor. Investments in financial markets may involve a high degree of complexity and risk and may not be suitable to all investors. 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All related financial products or services will only be available to Business Customers or Market Counterparties (as defined by the Qatar Financial Centre Regulatory Authority (QFCRA) rules and regulations), including individuals, who have opted to be classified as a Business Customer, with liquid assets in excess of USD 1 million, and who have sufficient financial knowledge, experience and understanding to participate in such products and/or services. Spain: This report is distributed in Spain by Credit Suisse AG, Sucursal en España, authorized under number 1460 in the Register by the Banco de España. United Kingdom: This material is issued by Credit Suisse (UK). Credit Suisse (UK) Limited, is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The protections made available by the Financial Conduct Authority and/or the Prudential Regulation Authority for retail clients do not apply to investments or services provided by a person outside the UK, nor will the Financial Services Compensation Scheme be available if the issuer of the investment fails to meet its obligations. To the extent communicated in the United Kingdom (“UK”) or capable of having an effect in the UK, this document constitutes a financial promotion which has been approved by Credit Suisse (UK) Limited which is authorized by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority for the conduct of investment business in the UK. The registered address of Credit Suisse (UK) Limited is Five Cabot Square, London, E14 4QR. Please note that the rules under the UK’s Financial Services and Markets Act 2000 relating to the protection of retail clients will not be applicable to you and that any potential compensation made available to “eligible claimants” under the UK’s Financial Services Compensation Scheme will also not be available to you. Tax treatment depends on the individual circumstances of each client and may be subject to changes in future. UNITED STATES: NEITHER THIS REPORT NOR ANY COPY THEREOF MAY BE SENT, TAKEN INTO OR DISTRIBUTED IN THE UNITED STATES OR TO ANY US PERSON (WITHIN THE MEANING OF REGULATION S UNDER THE US SECURITIES ACT OF 1933, AS AMENDED). This report may not be reproduced either in whole or in part, without the written permission of Credit Suisse. Copyright © 2016 Credit Suisse Group AG and/or its affiliates. All rights reserved. 16C008A_IS
MARKETING MATERIAL – THIS IS NOT INVESTMENT RESEARCH
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