investing in volatilitycdn.36south.com/kohinoorpresentationdecember2014.pdf · • kohinoor creates...

Kohinoor Strategy From 36 South Capital Advisors LLP

Maya A.Z. Rodriguez Head of Sales & Investor Relations

December 2014

36 South Capital Advisors LLP About us

Professional investors only. Private and confidential. Not for public distribution. Please see the full disclaimer at the end of the document. 2

• Founded in 2001, headquartered in London

• Dedicated volatility and tail risk hedging specialist 13 year track record

• Left tail strategies: +204% in 2008, +101% in 2011

• Regent: +47% p.a. in the US$ Fund and +39% p.a. in the NZ$ Fund 2004 to 2011

• Kohinoor: +10% p.a. since inception in 2002 (Kohinoor Series) Outstanding results*

• Four-member investment team consists of longtime option traders: Jerry Haworth, Richard Hollington, Neale Jackson, and Ant Limbrick - creator of the GIVIX indices

90+ years combined experience

• 36 South has received numerous awards including Best Options Strategies Hedge Fund and New Fund of the Year (see appendix)

Multi-award winning

• Long volatility bias, multi-directional approach, monthly liquidity • Invest in put (and call) options to profit in falling (and rising) markets; providing

protection, long term positive and uncorrelated expected returns

Strategy snapshot

*All performance in the document is reported net of fees. Please note that past performance is not indicative of future performance. Please see the full disclaimer regarding Kohinoor Series strategy performance at the end of this document.

Anthony Limbrick Head of Quantitative Research

Ant has 25 years of experience in the financial markets.

Prior to joining 36 South in March 2006, Anthony worked for a variety of global financial organisations including Deutsche Bank and HSBC in Sydney, Credit Lyonnais in Tokyo, and Bank of New Zealand in Wellington. His experience lies across directional and relative value trading, fixed income and credit, foreign exchange, commodities, derivatives and quantitative analytical research.

Richard Hollington Head of Trading & Execution

Richard has 27 years of experience in the derivatives markets.

Richard established the FX options desk at First National Bank in South Africa and became the country’s first market-maker in rand/dollar options. He extended the FX business to incorporate gold hedging for the South African mining houses and market-making long dated currency options for corporate hedging. Later he joined Commonwealth Bank of Australia where he assisted in establishing a gold derivatives desk. In 1999 he relocated to New Zealand where he began trading for his own account with Jerry Haworth, and co-founded 36 South Investment Managers in March 2001. The firm moved to London, UK, in 2009, and operates as 36 South Capital Advisors LLP.

Richard (Jerry) Haworth CEO, CIO

Jerry has 27 years of

experience in the financial markets.

Jerry was instrumental in the establishment of the futures and options market in South Africa. He also traded government bonds for a large discount house before being appointed Head of Equity Derivatives for one of South Africa’s largest and most successful merchant banks, Investec Ltd. In 1996, Jerry founded Peregrine Holdings Ltd. The company offered a range of services but its main niche was designing derivative strategies for institutional clients. Peregrine enjoyed early success under his management culminating in a stock exchange listing In 1998. In March 2001, Jerry co-founded 36 South Investment Managers Limited. The firm moved to London, UK, in 2009, and operates as 36 South Capital Advisors LLP.

3

Investment Management Committee (IMC)

Neale Jackson Portfolio Manager

Neale has 13 years of experience in the financial markets.

Neale joined the 36 South team in July 2013. His previous role was Head of Equities at OMF Financial in New Zealand. He has been also a free-lance researcher and published his investment ideas in “Quantitative Musing”; a freelance options-focused report that explored micro or macro economic fundamentals. Before embarking on his career in the financial markets, Neale was a maths teacher.

The Investment Management Committee The IMC meets regularly to make decisions regarding the content of the portfolio. All members of the IMC constantly scan the global markets and look for mis-valued assets and present their investment ideas for consideration by other IMC members.

Professional investors only. Private and confidential. Not for public distribution. Please see the full disclaimer at the end of the document.

Why consider Kohinoor?

4

• Kohinoor is a simple, repeatable value-driven strategy

• Kohinoor uniquely brings together our macro views with the counterintuitive and mean reversion

characteristics of the volatility cycle

• Kohinoor creates an actively managed options portfolio that invests in mis-valued volatility across four

asset classes

• Kohinoor has generated one of the strongest performances in risk aversion events and has one of the

longest track records

Kohinoor can allow investors to:

1. Generate convex and uncorrelated positive returns to both traditional and alternative assets

2. Lower portfolios’ overall risk

3. Mitigate drawdown risk in market stress

4. Play offensive, be liquid and exploit distressed assets in crises and achieve long term growth

The success of the strategy lies in our robust investment process and countercyclical approach buying only

when volatility is cheap and having the patience to ride out the cycle.


Positive cycles are driven by greed: Investors prefer to sell rather than buy.

Volatility is cyclical but counterintuitive

"Run Up"

Decreasing Volatility

Markets Bubbles

"Overconfidence Overshoots"

Rising Volatility

Market Reversals

Return to "Normalcy"


Market Calms

State of "Normalcy"

Low Volatility

Hidden Risks

"Threat Response"

Rising Volatility

Hidden Risks Exposed

"Post traumatic stress"

High volatility

Market Uncertainty

Return to “Normalcy"


Market Calms

State of "Normalcy"

Low Volatility

Hidden Risks

Sources: Kaminski (2010) Managed Futures and Volatility: Decoupling a “Convex Relationship with Volatility Cycles” available online at < http://www.altavra.com/docs/thirdparty/managed-futures-and-volatility.pdf>; Coates, Gurnell, and Sarnyai

(2010) “From molecule to market: steroid hormones and financial risk taking,” The Philosophical Transactions for the Royal Society o f Biological Sciences, (365, 331-343); and Coates and Herbert (2008) ”Endogenous steroids and financial risk

taking on a London trading floor,” Proceedings of the National Academy of Sciences, USA (105, 6167-6172).

The two latter publications examine the role of steroids hormones and their role in financial risk taking using physiological data as well as performance data from real traders on a London trading floor. They show that testosterone is directly linked to

return while cortisol (the stress hormone) is directly linked to uncertainty (as measured by implied volatility) and risk taking (variance in the P&L of market participants). Their research may help provide the link between economics and

neuroscience. Cycles in hormone production have often been used by biologists to explain animal behavior in competitive settings.

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Negative volatility cycles are driven by fear: Investors rush to buy rather than sell.


Volatility is mean-reverting and therefore predictable

There is an overlooked qualitative element

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Faulty, over-simplified pricing models

Potential for huge upside returns

Smart low-cost hedge

Options are generic Repeatable alpha

Overreliance on normal distribution:

Flaws are exacerbated over the long term

Cheap optionality combined with proxy

investing helping maintain a low cost to

the hedge

Combining global macro

trending/consolidation cycle views for a more pragmatic approach

Positive convexity: Gaining only positive

leverage with a bounded downside

Providing for super-diversification

from uncorrelated sources of volatility in

most markets

Large market with few value investors and

high barriers to entry – ISDA, data, multiple

markets

The opportunity set


Our edge is understanding the nature of volatility and combining it with our global macro views.

Why now?

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• The search for yield is unstainable. Risk is being mis-valued

• Volatility is an undervalued asset class where significant positive exponential returns can be harvested


S & P 500 Spot 1125 Five year option strike 810

Multiples made on tail risk event

Volatility range

+3 standard deviations 1.1



Mean 6.5

-1 standard deviations 16.7



Value in out of the money options importance of buying when volatility is low

Source of above chart: 36 South Capital Advisors LLP as at 31st July 2014

More convexity

Less convexity

• Traditional diversification is a very saturated trade and heavily reliant on correlations

• Significant short volatility programs are being put in place

Uncertainty can have a devastating impact on portfolios. Cost should not be a logical reason to ignore it.

Introducing 36 South Kohinoor Strategy Performance & attribution

Kohinoor

Core

Bunds

& Cash

Kohinoor

Series Three

9

Professional investors only. Private and confidential. Not for public distribution.

Kohinoor strategy Multi-asset class volatility solutions – Irish QAIFs & Cayman funds

Invests up to 95% in options

Invests 30% in Kohinoor Core

ABSOLUTE RETURNS / LONG VOLATILITY

Bi-directional, target zero to negative correlation with equities & capital protection with positive carry

9 Professional investors only. Private and confidential. Not for public distribution. Please see the full disclaimer at the end of the document.

• The Kohinoor strategy is an absolute return, long volatility strategy.

• Kohinoor is a buy and hold strategy looking to generate asymmetric returns from buying implied volatility cheaply, and having it return to its long-run mean, and also by tail events occurring in the underlying assets.

• Kohinoor invests in long dated, mainly out of the money options across FX, commodities, equities and interest rates.

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Superior performance over 13 years Delivering uncorrelated returns in volatile environments

Returns since inception (USD)

Fund performance versus indices & equity volatility

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (cumulative) Since

Inception Dec YTD

Kohinoor Series -7.66% 61.36% 12.39% 28.82% -7.99% 7.06% 73.30% -1.87% 0.44% 4.66% -7.41% -4.51 2.25% -0.04% 9.77%

MSCI World -19.9% 33.1% 14.72% 9.49% 20.07% 9.04% -40.71% 29.99% 2.26% -5.54% 15.83% 26.68% 2.00% 6.66% 6.42%

HFRX Global Hedge 5.92% 13.23% 0.58% 6.24% 8.24% 0.58% -20.78% 12.15% 5.80% -8.87% 3.51% 6.72% 0.33% 0.17% 2.15%

Source of charts: 36 South Capital Advisors LLP as at 31st December 2014. Since inception returns are annualised. All returns are net of fees. Past performance is not a reliable indicator of future results. Please see the full disclaimer regarding Kohinoor Series strategy performance at the end of this document.


0

1000

2000

3000

4000

Dec 01 Dec 03 Dec 05 Dec 07 Dec 09 Dec 11 Dec 13

Kohinoor

MSCI World

JP Morgan Bond Index

HFRX Global Hedge

VIX Index

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A multi-asset class approach With a unique correlation profile

• A multi-asset class approach allows the portfolio to capture global volatility alpha whilst minimising theta bleed.

Source: 36 South Capital Advisors LLP and Bloomberg as at 31st December 2014. All returns are net of fees. Past performance is not a reliable indicator of future results. Returns prior to 2005 were made primarily from currencies. The portfolio has evolved due to AUM growth and opportunity and the above chart represents this.

Performance attribution for the Kohinoor Series strategy

Rolling Annual Correlation of Each GIVIX Component Against an Average of Other Components

• Benefiting from the de-coupling of correlation in volatility between asset classes outside systemic crises.


Source: 36 South Capital Advisors LLP, and Bloomberg as at 30th November 2014. Past performance is not a reliable indicator of future results.

-1.00

-0.50

0.00

0.50

1.00

Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14

Interest Rates Commodities Equities Currencies

-10%

0%

10%

20%

30%

40%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Interest rates Equities Commodities Currencies

12

Kohinoor Core

Kohinoor Core Portfolio (Directional asset allocation) Allocations are based on current valuation. Portfolio is always net long volatility.


Source of charts: 36 South Capital Advisors LLP as at 31st December 2014. All returns are net of fees. Past performance is not a reliable indicator of future results.

Kohinoor Core Fund

EUR Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD

2014 1.62% -1.39% -0.73% -1.32% -1.81% -0.15% -1.74% -1.81% -2.03% 2.84% 8.87% 3.02% 4.91%

2013 -5.07% 2.21% 0.86% 6.78% 2.76% -2.19% -8.84% -0.31% -1.93% -0.08% 1.00% -4.89% -10.14%

2012 -6.30% -7.50% -1.82% 1.65% 16.85% -4.98% 1.05% -2.56% -5.27% -5.46% -4.85% -3.33% -22.12%

2011 4.69% -0.23% -4.20% -2.87% 3.46% 12.93% 8.77% -7.73% 7.60% 3.22% 26.58%

Please note cash and German government bonds account for the remaining 48.6% of current valuation.

2.3% 1.1%

9.1% 7.6% 7.1%

0.1%

24.1%

Interest rates long Interest rates short Equity long Equity short Commodities long Commodities short Currencies

0%

25%

• BRIC theme • US Property rises • Volatility falls • Commodity boom

• Global liquidity • Housing bubble • Credit bubble • Over-leveraging • Oil boom

• Global credit crunch • Housing Bust • Equity markets meltdown • Interest rates fall rapidly worldwide

• Equity market stagnation post bubble and 9/11 • Low interest rates • Large scale USD money supply growth • USD deterioration

13

An excellent track record on winning macro calls

2003 - 2005 2006 - 2007 2002 2008

Long AUD Call

Long equity puts Long receiver swaptions Long gold calls

Long WTI crude calls Long Yen Puts Long S&P calls Long USD swaptions Long Wachovia puts

Long gold calls Long Yen puts Long AUD calls Long Nikkei calls

Please note this is a selection of portfolio themes, not an exhaustive list.

• US credit rating downgraded •Fears over European sovereign debt crisis

2011

Long receiver swaptions Long EUR put


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Dynamic correlations Providing genuine diversification benefits

• Returns tend to become negatively correlated in bear markets and positively correlated in bull markets.

• Volatility is a priced and investable risk factor.

Realised low to negative correlation with global indices since inception

Source for above three charts: 36 South Capital Advisors LLP as at 31st December 2014. *Past performance is not a reliable indicator of future results.

Equities are represented as the MSCI World TR Net USD index and Bonds are represented as the JP Morgan US Aggregate Bond Index.

Kohinoor* Equities /Bonds

Annualised return since

inception

Annualised volatility

Sharpe Ratio

0% 60% / 40% 6.21% 9.44% 0.66

5% 55% / 40% 6.44% 8.63% 0.75

10% 50% / 40% 6.65% 7.88% 0.84

20% 45% / 35% 7.10% 7.29% 0.97

Capturing returns from the volatility risk premium Two year weekly rolling correlations since inception

to MSCI World

S&P 500 HFRX Global Hedge MSCI World JP US Agg. bonds GSCI Commodities HFRI WI VIX

-0.129 -0.176 -0.098 0.044 -0.165 -0.075 0.132


-0.8

-0.6

-0.4

-0.2

0.0

0.2

Feb04

Feb05

Feb06

Feb07

Feb08

Feb09

Feb10

Feb11

Feb12

Feb13

Feb14

Opportunity

Cost

Volatility investing: the opportunity vs. cost


Source : 36 South Capital Advisors LLP as at 31st December 2014. All returns are net of fees. *Past performance is not a reliable indicator of future results. All performance on this slide relates to Kohinoor Series strategy.

Please see the full disclaimer regarding Kohinoor Series strategy performance at the end of this document.

The opportunity:

• Superior risk adjusted returns (10% p.a. since inception)*

• Performance in bear and bull markets

• Positive convexity with bounded downside

• Sustainable and repeatable strategy

• Implied insurance in normal markets

• Implicit tail risk protection with positive expected return

• Gap risk coverage

• Proven diversification benefits, correlation tends to -1 in

crises

Cost:

• Lumpy returns but with more positive years than negative*

• Worst year -7.99% (2006)

• Worst month -4.99% (Jun 2006)

• Low theta bleed (41bps monthly on average)

Investment Process Kohinoor Strategy

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Repeatable alpha extraction model A complete qualitative & quantitative process

Underlying asset price:

i. Asset technicals and fundamentals

known but go through cycles.

ii. Market flaws are exacerbated in the

long term.

Implied volatility:

i. It is mean-reverting and cyclical

in nature and therefore should

be eminently predictable.

ii. It is a collective market guess.

To paraphrase Oscar Wilde: people know the price of everything and the value of nothing.

Investment committee • Expertise, long track record of

excellent performance

• Trade selection, sizing & execution

GIVIX (Vol Index) In-house global volatility

indicator

Help set allocation guidelines

Quadrivium approach Volatility, Thematics,

Sentiment and Technical indicators

Investment committee Expertise, long track record of

excellent performance

Trade selection, sizing & execution

Trade ideas are generated from a scan of asset volatilities and then refined through the Quadrivium

approach as volatility and asset price are the biggest determinants of an option’s price:


18

The GIVIX is a series of proprietary volatility indices that help isolate best value strategies by combining data

analysis across markets 64 indices spanning four asset classes.

1. Top down/the Global Implied Volatility Index

Source: 36 South Capital Advisors LLP as at 30th November 2014. Available on Bloomberg (TSIX <Go>). All rights reserved.

GIVIX sample snapshot

Log of index showing two and three upside/downside deviations


GIVIX sample snapshot

Relative Value in Implied Volatility by Geography

0%

10%

20%

30%

40%

50%

60%

Feb

-99

Au

g-00

Feb

-02

Au

g-03

Feb

-05

Au

g-06

Feb

-08

Au

g-09

Feb

-11

Au

g-12

Feb

-14

50%-60%

40%-50%

30%-40%

20%-30%

10%-20%

0%-10%

2.3

2.5

2.7

2.9

3.1

3.3

3.5

3.7

3.9

Jan-9

5

Jan-9

6

Jan-9

7

Jan-9

8

Jan-9

9

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

Jan-0

8

Jan-0

9

Jan-1

0

Jan-1

1

Jan-1

2

Jan-1

3

Jan-1

4

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2. Bottom up/the 36 South Quadrivium methodology Rules-based process making it robust and repeatable

Long term technicals

Strong trends vs speculative movement

Structural market flaws: - Supply/demand imbalances - Structured products - Hedging - Government intervention - Or plain irrationality

Irrational/polarised investor sentiment

The “Spec Report”

Flat or inverted Smile curves

Anomalies in macro-economic fundamentals

Underlying multi-year trends

Volatility Assets


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Sample winning market opportunities J & J – 2012 (Av. return 576%*) & NZD – 2008 (Total return 900%*)

Johnson and Johnson calls NZD 2 years swap and volatility curves

Entry (Feb 08)

Exit (Jan 09)

Example of trend following trade Example of contrarian trade

The holding period of a winning trade is generally between 12 and 18 months.

*Past performance is not a reliable indicator of future results.


Source of chart: Bloomberg as at 8th August 2013 Source of chart: Bloomberg as at 27tt August 2008

Entry (July 12)

Exit (May 13)

21

• A proprietary - ratchet type profit lock-in methodology to help capture convexity whilst not letting

returns.

• Tight risk controls despite the long dated nature of the instruments utilised and their low delta.

Losing trades

- The managers have discretion to sell any position that has less than 12 months until expiry. Unprofitable trades may be sold at this point unless there is no real salvage value.

Quarterly review

- The managers have discretion to sell up to 10% of risk positions per quarter. This is rarely used.

Trade moves Profit lock in trigger

3X Initial premium 60% below 3X






>8X Initial premium Discretionary

Portfolio management

This methodology is for a delta 0.10 option, it is one of a range of proprietary algorithms

used to harvest the profitability of trades. Source: 36 South Capital Advisors LLP.

Winning trades - Winning trades are under a ratchet

methodology to protect profits

- Once the gain exceeds the 8X multiple trades are still bound by two rules:

i. The 10% stop regardless of further gains.

ii. If the underlying asset moves 3 standard deviations above its 200 day moving average the trade is closed.


The OTC market alone has a total nominal trading value of US $68 trillion.*

As Kohinoor makes its best money in risk aversion periods when banks are usually in times of

duress, the liquidity increase significantly as positions become more and more profitable for us.

Kohinoor’s liquidity features include:

A monthly redemption cycle

Investment in liquid instruments

Optional levels of cash balances

More liquidity in the portfolio in risk aversion periods

Automated exit methodology turning vanilla options into a type of “ratchet” option

High likelihood of (re-)selling OTC options to banks in times of duress

Never been locked or gated

22

Liquidity management

*Source: Bank for International Settlements Global OTC derivatives market, Dec 2014.


Summary

• Volatility is not a good proxy for risk. Volatility risk premium is.

• Volatility is misunderstood and its profound impact on portfolios can be underestimated.

• The reality of investment is different: Modern Portfolio Theory is seriously flawed. • Long volatility strategies are not automatically a cost: negative carry vs. positive

expected returns.

• We never doubt ourselves about fire, home or car insurance so why not have one for our portfolios?

“Have a long term ROBUST plan to protect capital and stick to it.”


Appendix

25

• In addition to the Kohinoor strategy (Series Three and Core), 36 South has previously managed:

– The left tail strategy*: +204% in 2008, +101% in 2011

– The Regent (Gold Bullion) strategy*: +47% p.a. in the US$ Fund and +39% p.a. in the NZ$ Fund 2004 to 2011

• During its 13-year track record, 36 South has received numerous awards, including:

WINNER 2011 New Fund of the Year -

Relative Value & Macro

RUNNER UP New Hedge Fund of the Year

FINALIST Best Convertible Arbitrage/

Volatility HF

FINALIST 2010 Best Specialist Fund 2011 Best New Fund

FINALIST 2009 Australian HF of the Year 2009 Best Emerging Manager

WINNER Best Options Strategies HF (April 2008 to March 2009)

36 South Capital Advisors LLP Additional 36 South projects & awards


*Past performance is not a reliable indicator of future results.

26

Credit and Regulatory

Risk

Market Risk

Operational Risk

• FCA (UK) authorised and regulated as AIFM • Registered with SEC (USA) as Investment Advisor • ISDAs with multiple counterparties. Currently working with – JP Morgan, Credit Suisse, CBA, Deutsche Bank, Goldman Sachs, Barclays, SocGen, Nomura, Morgan Stanley, Citibank, BNP Paribas and UBS • Maximum individual counterparty exposure of 25% of portfolio (net initial premium paid) •Two way CSAs with majority of counterparties

• Administration and revaluation: SEI Investments • Secure internal dealing procedures - Risk Manager sign-off • Dealing and settlement separation - Chinese walls • Settlements – require Manager and Administrator sign off • Offsite disaster recovery • Real time off-site back-up

Robust risk management The three pillars of risk management


Kohinoor Core

Individual position limit 30% of NAV

Asset class limit 50% of NAV

VAR 16% loss, 95% confidence level (daily)

Vega exposure 28% fund NAV for 10% move in implied volatility

Theta limit Earning 60 bps or paying 80 bps per day

Total short volatility positions Maximum loss 20% of NAV (Short & Long positions)

The Kohinoor Series Three Fund gains options exposure through its investment in the Kohinoor Core Fund, and its adherence to the above risk limits.

Product terms: Kohinoor Irish funds


* 20% of the appreciation in the Net Asset Value per Share of the each Class of Shares during each AU tax year provided the Net Asset Value per Share of the relevant Class exceeds the Peak Net Asset Value per Share. * * Anti dilution levy covers bid-offer spread and is paid to the Fund, not the managers. This is in place to protect existing investors. The fee of 5% may be reduced by

netting when there are redemptions and subscriptions on same dealing date.

Fund Kohinoor Series Strategy Kohinoor Core

Share classes EUR, USD, GBP EUR, USD

Minimum initial Investment

€100,000 or equivalent €100,000 or equivalent

Subscription frequency Monthly Monthly

Redemption frequency Monthly (30 day notice period) Monthly (30 day notice period)

Management fee 1.75% 2%

Performance fee* 20% p.a. over high water mark 20% p.a. over high water mark

Anti-dilution levy** on subscription

Up to 1.50% Up to 5%

Anti-dilution levy** on redemption


Inception date 1 January 2002 1 March 2011

Domicile Ireland Ireland

Administrator SEI Investments - Global Fund Services SEI Investments - Global Fund Services

Custodian SEI Investments Trustee and Custodian

Services SEI Investments Trustee and Custodian

Services

Product terms: Kohinoor Cayman funds


* 20% of the appreciation in the Net Asset Value per Share of the each Class of Shares during each AU tax year provided the Net Asset Value per Share of the relevant Class exceeds the Peak Net Asset Value per Share. * * Anti dilution levy covers bid-offer spread and is paid to the Fund, not the managers. This is in place to protect existing investors. The fee of 5% may be reduced by

netting when there are redemptions and subscriptions on same dealing date.

Fund Kohinoor Series (Cayman) Kohinoor Core (Cayman)

Share classes USD USD

Minimum initial Investment

$100,000 $100,000

Subscription frequency Monthly Monthly

Redemption frequency Monthly (30 day notice period) Monthly (30 day notice period)

Management fee 1.75% 2%

Performance fee* 20% p.a. over high water mark 20% p.a. over high water mark

Anti-dilution levy** on subscription


Anti-dilution levy** on redemption


Inception date 3 November 2014 10 May 2013

Domicile Cayman Islands Cayman Islands

Administrator SEI Investments - Global Fund Services SEI Investments - Global Fund Services

Custodian Bank of America Merrill Lynch Bank of America Merrill Lynch

36 South & contact details

29

36 South Capital Advisors currently employs 17 staff working within six departments.* The Senior Management group includes:

Richard (Jerry) Haworth, Co-Founder, CEO, CIO

Richard Hollington, Co-Founder, Head of Trading & Execution

Anthony Limbrick, Head of Quantitative Research

Maya Rodriguez, Head of Sales & Investor Relations

Mike Tasker, COO, Risk Manager & Chief Compliance Officer

Hamish Limbrick, Head of I.T. and Information Systems

Contact details Sales & Investor Relations [email protected] Tel. +44 20 3205 3004 www.36south.com

* For more detailed organisational chart please see our Due Diligence Questionnaire or contact our Investor Relations team.


mailto:[email protected]

mailto:[email protected]

http://www.36south.com/

30

Kohinoor Series strategy The track record as displayed here is a combination of three track records with strategy inception in January 2002. There is no material difference between the trading strategies in these three funds. The Kohinoor Series One Fund launched in January 2002. This was a NZD denominated fund and was managed by 36 South Investment Managers Limited who were not required to register as a CPO with the NFA as there were no US investors in the pool. In the displayed track record Kohinoor Series One Fund’s NZD returns from January 2002 to July 2005 have been converted to USD, and adjusted to match the Kohinoor Series Two Limited and Kohinoor Series Three fee and tax structure. The Kohinoor Series One Fund charged management fees of 1% and performance fees of 10% and paid tax of 33% while Kohinoor Series Two Limited and Kohinoor Series Three funds charge(d) management fee of 1.75% and performance fee of 20%. Further explanation of the methodology is available on request. Although the Kohinoor Series One performance is based upon actual results, due to these adjustments, the results are considered hypothetical and as such, the following disclaimer is provided: these results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or over-compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated or hypothetical trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to these being shown. The Kohinoor Series One Fund continued to run for New Zealand based investors until it was closed in March 2008. The August 2005 to March 2008 performance is available on request, it is not displayed here as we are trying to represent a continuous investment in the Kohinoor Series strategy. Kohinoor Series Two Fund Limited ran from August 2005 to February 2011. This was a USD denominated fund with USD and GBP share classes (GBP share class was launched in November 2009). These returns are displayed and have not been adjusted. The Kohinoor Series Two Fund Limited was managed by 36 South Investment Managers Limited who registered voluntarily with the NFA as a CTA in August 2006 as the NZ Securities Commission required alternative investment managers in New Zealand to register with a body they recognized in the absence of an equivalent regulatory body for alternative managers in New Zealand. 36 South Investment Managers Limited were exempt from registering as a CPO under CFTC Exemption 4.13 (a)4. The Kohinoor Series Two Fund Limited was as an exempt pool under exemption 4.13(a)(4) in 2010 – it was not required to register before this time as it did not have any US investors. On 28 February 2011 the Fund was closed and its portfolio was transferred in specie to begin the Kohinoor Series Three Fund on 1 March 2011. From March 2011 Kohinoor Series Three Fund returns reflect returns to an investor in the USD share class. This is a EUR denominated fund with EUR, USD and GBP share classes (all launched on 1st March 2011). The Kohinoor Series Three Fund is managed by 36 South Investment Managers (Ireland) Limited following the closure of 36 South Investment Managers Limited. 36 South Investment Managers (Ireland) Limited registered with the NFA as a CPO on 1 January 2013. The portfolio management of the Fund has been delegated to 36 South Capital Advisors LLP who act as its sub-investment manager.

Disclaimer & Regulatory Information 1


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Regent strategy Regent Fund which was a NZD denominated fund and ran from February 2004 to March 2008, and Regent SPC which was a USD denominated fund and ran from September 2007 to February 2011. There is no material difference between the trading strategies in these two funds. The Regent strategy was managed by 36 South Investment Managers Limited who registered voluntarily with the NFA as a CTA in August 2006 as the NZ Securities Commission required alternative investment managers in New Zealand to register with a body they recognized in the absence of an equivalent regulatory body for alternative managers in New Zealand. 36 South Investment Managers Limited were exempt from registering as a CPO under CFTC Exemption 4.13 (a)4. The Regent Fund and Regent SPC Fund were not required to register with the NFA as they did not have any US investors. On 28 February 2011 the Regent strategy was closed as the Managers wished to concentrate on the Kohinoor strategy. Left tail strategies The Black Swan strategy returns refer to two different funds. There is no material difference between the trading strategies in these two funds. The returns in 2008 and 2011 are specifically picked as we wish to highlight ability of these tail-risk products to make returns in periods of increased volatility. The return made in 2008 was in the Black Swan SPC Fund which was a USD denominated fund and ran from January 2008 to May 2009. The Black Swan SPC Fund was managed by 36 South Investment Managers Limited who registered voluntarily with the NFA as a CTA in August 2006 as the NZ Securities Commission required alternative investment managers in New Zealand to register with a body they recognized in the absence of an equivalent regulatory body for alternative managers in New Zealand. 36 South Investment Managers Limited were exempt from registering as a CPO under CFTC Exemption 4.13 (a)4. The Black Swan SPC Fund was not required to register with the NFA as it did not have any US investors. On 31 May 2009 the Black Swan SPC Fund was closed as returns could not be reinvested at the time with positive expected return with such high volatility levels. The return in 2011 was in the 36 South Black Orlov Fund which was a USD denominated fund and ran from July 2010 to November 2012. The 36 South Black Orlov Fund was managed by 36 South Investment Managers (Ireland) Limited who were not required to register with the NFA as they relied on CFTC Exemption 4.13(a)4. The 36 South Black Orlov Fund was a single investor fund and was not required to register with the NFA as it did not have any US investors. On 30 November 2012 the 36 South Black Orlov Fund was closed as the investor decided to withdraw their investment.



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General Information about this Document Unless otherwise stated, the statements, views and opinions expressed in this document are those solely of 36 South Capital Advisors LLP. 36 South Capital Advisors LLP, which is authorised and regulated by the Financial Conduct Authority (FCA), has issued this document for access by professional investors and qualifying investors only and no other person should rely upon the information contained within it. Prospective investors will be required to certify they are ‘qualified investors’ upon application and certify their awareness of the risks involved in the investment and, in particular, the inherent risk of losing sums invested. Offering documentation and fund literature is only available upon request and not available on the 36 South Capital Advisors LLP’s website. As part of the subscription process the fund administrators check the eligibility of investors. This document has been provided to you in a private and confidential manner and may not be reproduced or disseminated to third parties without 36 South Capital Advisors LLP 's prior written consent. This document and any performance reports made herein are for informational purposes only and do not constitute an offer or public offering of securities or interests in any 36 South Capital Advisors LLP fund or program, nor does it constitute a general solicitation, general advertising or direct selling effort on the part of any party associated with 36 South Capital Advisors LLP. Such an offering can only be made to investors who satisfy relevant investor eligibility criteria via the Prospectus and Supplement of the appropriate 36 South Capital Advisors LLP fund or program. An investment with 36 South Capital Advisors LLP will involve a significant degree of risk, which each prospective investor must carefully consider. This document concerns certain investment strategies and does not purport to disclose details about any particular existing funds. This document is accordingly provided for informational purposes only and does not constitute investment advice. This document does not give exhaustive details about the parties, structures or investment processes. The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. Please consult independent tax, legal, accounting or other advisors in the course of assessing any strategies mentioned in this document. Restricted Investors This document is not, and under no circumstances is to be construed as, an advertisement, or any other step in furtherance of a public offering of shares in the United States or Canada. This document is not aimed at persons who are resident in the United States, Canada or any province or territory thereof, where the Funds are not authorised or registered for distribution and where no prospectus for the Companies has been filed with any securities commission or regulatory authority. Risk Warnings Shares in the Funds may or may not be suitable for all investors. 36 South Capital Advisors LLP does not guarantee the performance of the shares or funds. Any actual fund that 36 South Capital Advisors LLP manage will invest in different economic conditions, during periods with different volatility and in different securities than those incorporated in the hypothetical and other performance data used in this document. There is no representation that any fund that 36 South Capital Advisors LLP manage will perform as the hypothetical or other performance data indicate. The price of the investments (which may trade in limited markets) may go up or down and the investor may not get back the amount invested. Your income is not fixed and may fluctuate. You may lose all of your investment in funds managed by 36 South Capital Advisors LLP. Past performance is not a reliable indicator of future results. The value of the investment involving exposure to foreign currencies can be affected by exchange rate movements. We remind you that the levels and bases of, and reliefs from, taxation can change. Further, 36 South Capital Advisors LLP and/or its affiliated companies and/or their employees from time to time may hold shares or holdings in the underlying shares of, or options on, any security included in this document and may as principal or agent buy or sell securities. © 2015 36 South Capital Advisors LLP. All rights reserved.



investing in volatilitycdn.36south.com/kohinoorpresentationdecember2014.pdf · • kohinoor creates...

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