The Hedge Fund Industry What are the new trends?

Transcription

1 The Hedge Fund Industry What are the new trends? Central Bank Seminar Aude LAGEY, Alternative Investment Specialist, Dexia AM April 2012

2 The Hedge Fund Industry: What are the new trends? Table of contents Introduction to the Alternative Management Overview of the Hedge Fund Industry The different Hedge Funds strategies Hedge Funds Performances Hedge Funds Risks & Solutions New trends in the Hedge Fund Industry Alternative Investments within Dexia AM 2 For any specific request, please contact the Alternative Investment Specialists Team alternativespecialist-dam@dexia.com

3 Introduction to the Alternative Management Three different families Hedge Funds vs. Traditional Funds Key historical steps

4 Introduction to the Alternative Management Three different families With a low correlation to traditional asset classes (equities-bonds), alternative investments aim to offer investors: An attractive risk / reward profile, with an absolute return target Management objective focused on capital protection A source of diversification in a global portfolio allocation Three different families Long-only Funds on alternative asset classes High Yield Corporate Credit, Convertible Bonds, Real Estate, Commodities Structured products Focus on Capital Protection Hedge Funds Take advantage of market inefficiencies through arbitrage strategies (long / short positions) There are individual Hedge Funds (single-strategy) and Funds of Hedge Funds (multi-strategy) 4

5 Introduction to the Alternative Management Hedge Funds vs. Traditional Funds Main differences between alternative and traditional portfolio management Traditional management Alternative management Strategies Long-only positions Long & Short positions Performance target Outperform the benchmark Absolute return Performance Bull markets Bull & Bear markets Leverage effect Occasional use of derivatives Recurrent use of leverage and derivatives Risk measurement Tracking Error Volatility Drawdown Capacity Unlimited Limited Correlation High Low Liquidity High Limited (depending on strategy) 5

6 Introduction to the Alternative Management Key historical steps s s 1990 s 2000 s 2010 s Alfred Wilson Jones creates the 1st Hedge Fund, with both leverage and short selling to hedge his portfolio First Alternative Funds of Funds Family offices give a new boost to the Alternative Management Development of the Alternative Management in Europe Entry of institutional investors in the Alternative Management Financial crisis HF called into question Regulation 140 Funds registered with the SEC 610 Funds 39 bn$ AUM Funds 491 bn$ AUM Funds bn$ AUM* Famous Asset Managers start their business J. Robertson Tiger Management G. Soros The Quantum Fund Evolution of the sector has been facilitated by various factors: - Globalization Enlargement of countries of investment - Sophistication of trading technicals Arbitrage - Computer technology Quantitative strategies and models To a new era for Hedge Funds? 6 Sources: HFR, Dexia AM * Data as of Year End 2011

7 Overview of the Hedge Fund Industry Estimated Assets / # Funds Net Asset Flows Shape and size of the industry: more concentration Estimated Fund Domicile Registration Estimated strategy composition by Assets Under Management

8 Overview of the Hedge Fund Industry Estimated Assets / # Funds A resurgence in AUM as of 2009, with levels higher than in 2007 (pre-lehman) Assets under Management Est. Assets in USD Billion $2 500 $2 400 $2 300 $2 200 $2 100 $2 000 $1 900 $1 800 $1 700 $1 600 $1 500 $1 400 $1 300 $1 200 $1 100 $1 000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 Hedge Funds Fund of Hedge Funds Number of Hedge Funds -25% +42% Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Q Q Q Q Despite a tough environment in 2011 AUM increased by + 4.7% (vs. 2010) 8 Sources: HFR, Dexia AM Data as of Year End

9 Overview of the Hedge Fund Industry Net Asset Flows Total net inflows in 2011 ($ 71Bn) are above 2010 levels ($ 55 Bn), driven by the single strategies $250 Historical Net Asset Flows - Hedge Fund industry Single Strategies Hedge Funds Funds of Hedge Funds $200 $150 $100 USD Billion $50 $0 -$50 -$100 -$150 -$ Q Q Q Q Sources: HFR, Dexia AM Data as of Year End 2011

10 Overview of the Hedge Fund Industry Shape and size of the industry: more concentration Ongoing trend toward high concentration 5% Hedge Fund managers manage 78% of Total Assets Hedge Fund managers with assets > $ 5 Billion collected 72% of Net Asset Flows in 2011 Estimated number of Funds launched and closed $2 500 $2 000 Estimated Number of Funds Launched / Liquidated Number of Funds $1 500 $1 000 $500 $0 -$500 -$ (109) 261 (52) (115) (57) (71) (92) (162) (176) (296) (848) (717) (563) (743) (775) (1023) -$ $2 000 (1471) Launches Liquidations Sources: HFR, Dexia AM Data as of Year End 2011

11 Overview of the Hedge Fund Industry Estimated Fund Domicile Registration Q Source: HFR

12 Overview of the Hedge Fund Industry Estimated strategy composition by Assets Under Management Significant changes in the mix by strategy Decrease in Equity Hedge allocation to the benefit of the other three strategies $2 250 Equity Hedge Event-Driven Macro Relative Value $2 000 $ % Estimated Assets in USD Billion $1 500 $1 250 $1 000 $750 23% 17% 21% 22% 25% $500 $250 38% 27% $ Sources: HFR, Dexia AM Data as of Year End 2011

13 The different Hedge Funds strategies Global overview Equity Hedge strategies Event-Driven strategies Macro strategies Relative Value strategies Various strategies for various environments

14 The different Hedge Funds strategies Global overview Single-Manager Hedge Funds Multi-Manager Funds Equity Hedge Event-Driven Macro Relative Value Fund of Funds Equity Market Neutral Activist Active Trading Fixed Income Asset Backed Conservative Fundamental Growth Credit Arbitrage Commodity Fixed Income Convertible Arbitrage Diversified Fundamental Value Distressed / Restructuring Agriculture Fixed Income Corporate Market Defensive Quantitative Directional Merger Arbitrage Energy Fixed Income Sovereign Strategic Sector Private Issue / Regulation D Metals Multi Volatility Energy / Basic Materials Special Situations Currency Yield Alternatives Technology / Healthcare Multi-Strategy Discretionary Energy Infrastructure Short Bias Systematic Real Estate Multi-Strategy Discretionary Thematic Multi-Strategy Systematic Diversified 14 Source: HFR Multi-Strategy

15 The different Hedge Funds strategies Global overview In the Alternative Management, we can distinguish two categories: Discretionary management: mainly based on fundamental and qualitative analysis Ex: Long / Short Equity strategies, Merger Arbitrage Systematic management: investment decisions are generated by quantitative models Ex: Managed Futures strategies (called also CTA s) Strategic mandates by AUM The Long / Short Equity strategy stays the most common but, over the last 4 years, we saw a prominent trend of decline. Managers employing the Long / Short Equity mandate have lost 11% of their share since 2008, primarily due to aggressive sell-offs in the underlying markets during the financial crisis, and the volatile performance of these funds. Sources: Eurekahedge 15

16 The different Hedge Funds strategies Equity Hedge strategies Energy / Basic Materials Technology / Healthcare Equity Hedge Equity Market Neutral Fundamental Growth Fundamental Value Quantitative Directional Sector Equity Hedge strategies maintain positions both long and short in primarily equity and equity derivative securities A wide variety of investment processes can be employed to arrive at an investment decision, including both quantitative and fundamental techniques These strategies can be broadly diversified or narrowly focused on specific sectors These strategies can range broadly in terms of levels of net exposure, leverage employed, holding period, concentrations of market capitalizations Equity Hedge managers would typically maintain at least 50%, and may in some cases be substantially entirely invested in equities, both long and short Short Bias Multi-Strategy 16 Sources: HFR Data: End of February 2012

17 The different Hedge Funds strategies Event-Driven strategies Event-Driven Activist Credit Arbitrage Distressed / Restructuring Merger Arbitrage Private Issue / Regulation D Event-Driven managers maintain positions in companies currently or prospectively involved in corporate transactions of a wide variety: Mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security issuance or other capital structure adjustments Security types can range from most senior in the capital structure to most junior or subordinated, and frequently involve additional derivative securities Event-Driven exposure includes a combination of sensitivities to equity markets, credit markets and idiosyncratic, company specific developments Investment theses are typically predicated on fundamental characteristics (as opposed to quantitative), with the realization of the thesis predicated on a specific development exogenous to the existing capital structure (so Event-Driven ) Special Situations Multi-Strategy 17 Sources: HFR Data: End of February 2012

18 The different Hedge Funds strategies Macro strategies Macro Active Trading Commodity Agriculture Energy Metals Multi Currency Discretionary Macro managers trade a broad range of strategies in which the investment process is predicated on movements in underlying economic variables and the impact these have on equity, fixed income, hard currency and commodity markets Managers employ a variety of techniques: Both discretionary and systematic analysis, combinations of top down and bottom up theses, quantitative and fundamental approaches Long and short-term holding periods Macro strategies (based on predicted or future movements in the underlying instruments) are distinct from Relative Value strategies (based on the realization of a valuation discrepancy between securities = inefficiency), and distinct from Equity Hedge strategies (based on the fundamental characteristics of a company, which are the most significant and integral to this investment thesis) Systematic Discretionary Thematic Systematic Diversified Multi-Strategy 18 Sources: HFR Data: End of February 2012

19 The different Hedge Funds strategies Relative Value strategies Relative Value Fixed Income Asset Backed Fixed Income Convertible Arbitrage Fixed Income Corporate Fixed Income Sovereign Volatility Relative Value managers maintain positions in which the investment thesis is predicated on realization of a valuation discrepancy in the relationship between multiple securities (inefficiency). Managers employ a variety of fundamental and quantitative techniques to establish investment theses, and security types range broadly across equity, fixed income, derivative or other security types. The strategies are typically quantitative Relative Value strategies (based on a potential pricing discrepancy between related securities) are distinct from Event-Driven strategies (based on the outcome of a corporate transaction) Yield Alternatives Energy Infrastructure Real Estate Multi-Strategy 19 Sources: HFR Data: End of February 2012

20 The different Hedge Funds strategies Various strategies for various environments Uncertainty Deleveraging M&A Visibility Volatility Dispersion Restructuring Growth Market turmoil Bear market Market recovery Equity market Distressed Emerging Event Driven Credit Volatility Arbitrage Short Bias Long Short Equity Leveraged Loans Equity Market Neutral Index Arbitrage CTAs Global Macro 20

21 Hedge Funds Performances HFRI Indices Annual Investment Returns vs. Equities & Bonds Long-Term view Short-Term view

22 Hedge Funds Performances HFRI Indices Annual Investment Returns vs. Equities & Bonds ( ) 22 Sources: HFR Data as of Year End 2011

23 Hedge Funds Performances Long-Term view ( ) HFRI Fund Weighted Composite Index vs. Equities, Bonds & Money Markets 23 Sources: HFR Data as of Year End 2011

24 Hedge Funds Performances Long-Term view (2000 March 2012) HFRI Fund of Hedge Funds Composite Index vs. Equities & Money Markets Positive asymmetry in favour of the HFRI FoHF Index Controlled downside-risks N Positive months Volatility MSCI World 55% 17% HFRI FoF 64% 6% US Govies 67% 5% Best month Worst month MSCI World 11% -19% HFRI FoF 5% -7% US Govies 5% -4% 24 Sources: Dexia AM, Bloomberg Data as of March 31, 2012

25 Hedge Funds Performances Short-Term view: all weather strategies meet the expectations An All-Weather strategy example: CTA / Managed Futures A directional alternative strategy example: Long Short Equity 25 Sources: Dexia AM, Bloomberg, HFR Data as of March 31, 2012

26 Hedge Funds Risks & Solutions Common criticisms of the Hedge Funds 2008, the end of the Alternative Management industry? Main issues faced in 2008: What went wrong? UCITS III regulation: A route to invest in Alternative strategies UCITS III Alternative Funds: A very strong growth Looking ahead: More segmentation to answer Clients needs

27 Hedge Funds Risks Common criticisms of the Hedge Funds 27 Leverage Hedge Fund can borrow money (Investment Bank / Prime Broker), using the capital invested by clients as collateral. Certain funds borrow sums many times greater than the initial investment. If a Hedge Fund has borrowed $9 for every $1 received from investors, a loss of only 10% of the value of the investments of the Hedge Fund will wipe out 100% of the value of the investor's stake in the fund, once the creditors have called in their loans. Short selling Due to the nature of short selling, the losses that can be incurred on a losing bet are theoretically limitless, unless the short position directly hedges a corresponding long position. Volkswagen example Appetite for risk Hedge Funds are culturally more likely than other types of funds to take on underlying investments that carry high degrees of risk, such as high yield bonds, distressed securities and collateralized debt obligations based on sub-prime mortgages. Lack of transparency Hedge Funds are secretive entities with few public disclosure requirements. It can therefore be difficult for an investor to assess trading strategies, diversification of the portfolio and other factors relevant to an investment decision. Lack of regulation Hedge Funds are not subject to as much oversight from financial regulators as regulated funds, and therefore some may carry undisclosed structural risks. Hedge Fund Gross Leverage (source : Columbia University study, Ivy AM, July 2010) The Volkswagen case

28 Hedge Funds Risks 2008, the end of the Alternative Management industry? After years of double digit growth, the Industry faced a major crisis Negative Performances Fraud Collapse of large Financial Institutions Gates Liquidity Issues Side Pockets Liquidations High Correlation 28 Sources: HFR, Dexia AM Data: End of February 2012

29 Hedge Funds Risks Main issues faced in 2008: What went wrong? Leverage Credit freeze, collateral requirements & margin calls Concentration Single Fund or Strategy weights in Indices & Portfolios Complexity Structured Credit, VarSwaps Correlation Among alternative managers and with traditional assets Liquidity Mismatch between assets & liabilities, huge redemptions Style drift Too much bias in market neutral approach Transparency Side letters, valuation issues Lack of regulatory oversight How to restore Investor s Trust? 29

30 and Solutions UCITS III regulation: A route to invest in Alternative strategies Weakness UCITS III answer Leverage Concentration Complexity Liquidity Transparency Lack of regulatory oversight Limited Rules of diversification Specific agreement given to the AM by the regulator Minimum liquidity, no side pocket, no gate Equal treatment for all investors, no side letters Regulated, European passport Independent auditors, administrator, custodian Full information in prospectus & reporting Style drift Correlation No answer, HF Manager responsibility No answer, HF Manager responsibility UCITS III is not suitable for all alternative strategies 30 But is an Answer to restore Investor s Trust

31 and Solutions UCITS III regulation: A route to invest in Alternative strategies Alternative Strategies Characteristics and UCITS III Regulation Alternative Strategies Enabled under UCITS III Strategies Long / Short Performance target Absolute return / no benchmark Performance Bull & Bear markets Leverage effect Frequent use Yes to a certain effect (200% linear or limited by VaR level) Derivatives Frequent use Diversification Discretionary Constrained (5/10/20/40 ratios ) Capacity Limited Limited Fund Liquidity Quarterly or more Max. Monthly Eligible Assets Credit securities & derivatives Index Futures (Eqty, Rates, Commodities ) but no loans but no single commodities futures A more defined framework But No real constraint for most of alternative strategies under UCITS III regulation 31

32 and Solutions UCITS III Alternative Funds: A very strong growth UCITS III Hedge Funds have continued to post significant gains through 2011, both in terms of AUM (nearly $ 330bn) and the total number of funds (around 910 funds) UCITS III Hedge Funds have attracted proportionally greater asset flows when compared to the Global Hedge Funds sector over the last 2 ½ years Since 2008 against the backdrop of the financial crisis and some high profile frauds, Hedge Funds subscribing to the UCITS III framework have become increasingly popular as investors sought greater transparency, better risk management and more regulations from managers Global View (source: Eurekahedge, data: Feb.2012) European View (source: Eurekahedge, data: Dec.2011) 32

33 and Solutions Looking ahead: More segmentation to answer Clients needs Liquidity became a key driver of the market segmentation Liquidity is not free: Liquidity Premium is part of the return Small caps versus Large caps Distressed investing versus Long Short Equity Private Equity versus Hedge Funds From a Risk-adjusted Return to a Risk & Liquidity-adjusted Return environment 33

34 New trends in the Hedge Fund Industry Institutionalisation of the industry and the trend is set to continue A favourable environment for Alternative strategies

35 New trends in the Hedge Fund Industry Institutionalisation of the industry Institutional investors: Main clients for Alternative Investments Source: InvestHedge reports, spring 2011 Pension funds (public & private) represent 1/3 of institutions (excluding FoHF) investing in Hedge Funds ALM issues, long-term pension management encourage Pension Funds to diversify their investments and increase Hedge Funds allocations 35 Source: Preqin Ltd, Report November 2011

36 New trends in the Hedge Fund Industry and the trend is set to continue Institutional investors to increase allocations to Hedge Fund in 2012 In November, Preqin Ltd released its special report on Institutional Investor Outlook for Hedge Funds in 2012 about 53% of institutional investors will maintain their hedge fund allocations at current levels going into 2012, but 38% said they intend to increase their hedge fund investments in the coming year. Contributing to these increases, Preqin acknowledges that while the industry has embarked on a renaissance of sorts since the market crisis, including increased liquidity and transparency offered by managers which continues to be at the forefront of investors minds. Institutional Investors' Hedge Fund Allocation Plans for Source: Preqin Ltd, Report November 2011 Preqin is an alternative assets industry s leading source of data and intelligence.

37 New trends in the Hedge Fund Industry A favourable environment for Alternative strategies From a market point of view: 37 Less Players / Arbitrageurs Many proprietary desks have closed or scaled back their activity Use of Leverage is less common Less Liquidity and therefore higher margins for liquidity providers such as Index Arbitrageurs Low Interest Rate Environment But attractive opportunities in all other asset classes: Securities Picking and Relative Value Strategies over equities, credit, fixed income Search for Alternative investment Solutions, with specific expertise: Deep knowledge of Alpha generation Dynamic management of underlying strategies Strict risk control of portfolio volatility / capital protection More Inefficiencies Uncertainties drive higher Volatility & Dispersion and therefore many opportunities for Long Short players across all asset classes High Dispersion among Sectors and Companies Equity markets (over?) reacting to macro & micro news flows More Merger & Arbitrage (M&A) New players (BRICs companies and SWFs) Sector consolidation, Capital Increase (Equity & Debt), Deleveraging through Asset Sales, Acquisitions fostered by attractive valuations Risk Arbitrage spreads remain high, on quality deals with higher offered premium

38 New trends in the Hedge Fund Industry A favourable environment for Alternative strategies From a client point of view: Questionings about Buy & Hold strategies Strong demand for flexible and opportunist strategies Strong demand for asymmetric profile and management strategies focused on capital protection Search for a downside-risk control Corresponding to Alternative Management characteristics 38

39 Alternative Investments within Dexia AM A Regulated Asset Manager & Product Range A Diversified Product Range An Experienced, Stable & Committed Team Performing & Awarded Products

40 Dexia AM Alternative Investments 12 th European Alternative Manager* with 4.4 bn of AuM Regulated UCITS & Onshore since 1996 Diversified 16 Processes covering all asset classes Front Runner innovator with a new process launch every 18 months in average Experienced 15 Years, 47 Fund Managers Stable, Committed and Focused Teams Performing Recognized & Awarded processes Highly resilient funds in adverse markets (50% process positive in 2008 and 55% in 2011) Sharpe Ratio Above Average Liquid Daily, Weekly or Monthly liquidity No change of terms in our Single Strategies in 2007 and * The Hedge Fund Journal, July 2011

41 Dexia AM Alternative Investments A Regulated Asset Manager & Product Range A Regulated Asset Manager French (AMF) & Luxembourg (CSSF) A Regulated Product Range Ucits Funds since 1996 (a real & long track record of management under UCITS III wrappers for most of Single Strategies) Non-Ucits Funds (ARIA, Part II ) High standards of Client protection based on transparency Independent Custodian, Independent Administrators Independent Auditors In-depth monthly Reportings Independent Risk Management (11 officers) A Unique Offer for investors looking for Regulated and / or UCITS III Absolute Return Funds 41

42 Dexia AM Alternative Investments A Diversified Product Range: 16 Investment Processes (Funds 4.4 bn + Advisory 1.8bn ) ALTERNATIVE SINGLE STRATEGIES Inception year N of funds UCITS III Risk/Return Profile Process Strategies Zone Focus Liquidity Low Mid High Quantitative Strategies Fundamental Strategies Index Arbitrage Event Driven Index Arbitrage World Index Rebalancing Daily CTA Modelised Trend Following Systematic World Futures Daily Global Macro Modelized Directional Bias Global Macro World Multiple Alphas Weekly Event Driven / Risk Arbitrage Event Driven Risk Arbitrage World Long Short Market Neutral European Equities Relative Value Equity Market Neutral Long Short Credit Opportunistic Long Short Credit World Long Short Emerging Debt and Currency Opportunistic Long Short Emerging Debt Europe Emerging Markets M&A Special Situations European Equities High Grade High Yield Emerging Countries Long Short Commodities Opportunistic Other World Commodities Daily Global Macro Fundamental Directional Bias Global Macro World Discretionary Weekly Daily Daily/ Weekly Daily Weekly ALTERNATIVE ASSET CLASSES Convertibles Bonds Directional Bias Aggregate Europe Convertibles High Yield Bonds Directional Bias Corporate High Yield Daily/ Weekly Europe / World High Yield Daily Commodities Directional Bias Other World Commodities Daily Real Estate Directional Bias Other Europe Real Estate Daily Alternative Investment Solutions Internal Multi Strategies Multi-Strategies Multi-Strategies World Dexia AM Funds Weekly Mandates Multi-Strategies Multi-Strategies World Dexia AM Funds Structured Products Structured Structured World EXTERNAL MULTI MANAGEMENT Fund of Hedge Funds Multi-Strategies Multi-Strategies World Hedge Funds Bi-Monthly/ Monthly Fund of Funds Multi-Management Multi-Management Europe / World Long only Funds Weekly Advisory 42

43 Dexia AM Alternative Investments An Experienced, Stable & Committed Team Fabrice CUCHET Member of the Executive Committee, Global Head of Alternative Asset Management Sophie ELKRIEF Head of Fundamental Strategies + 19 Fund Managers 8 Strategies Emmanuel TERRAZ Head of Quantitative Strategies + 9 Fund Managers 5 Strategies JG. NICOLAY, M. FERRAND Heads of External Multi Mngt + 10 Fund Managers Nagi NASR Head of Alternative Investment Solutions + 3 Fund Managers + 3 Strategies 43 DEXIA AM Alternative Investment Specialists Ludovic FERRAS & Gabriel des COURTILS + 4 Managers A dedicated team providing full marketing support on Dexia AM hedge funds towards Sales, Institutional & Private Investors, Counterparties, Databases... DEXIA AM Middle Office Business Unit Jean-Pierre LIGONNIERE + 17 Managers Middle Office Desk specialized in Securities Middle Office Desk specialized in OTC Trades Middle Office Desk specialized in Pricing & Databases DEXIA AM Quantitative Research Olivier CLAPT + 3 Analysts A dedicated quantitative research team working on the development of new decision-making models, trading strategies and valuation tools. DEXIA AM Risk Management Business Unit Olivier CORBY + 9 Risk Managers Reporting directly to Dexia AM Executive Committee Monitoring risks on a daily basis : Legal ratios, internal risks limits per fund, VaR, Counterparties Risks, Credit Risks, NAVs controls DEXIA AM Equity Finance & Cash Management Stéphane PARENT + 2 Managers Stock borrowing for short sell coverage Stock lending on open and over dividend Cash, Financing & Collateral Management for DAM Alternative funds DEXIA AM Legal Department Pierre-Guillaume VEAUX + 4 Legal Officers Management of legal risks and legal advices to all Business Units Legal engineering on mutual and hedge funds Dedicated team to OTC derivatives products

44 Dexia AM Alternative Investments An Experienced, Stable & Committed Team Fund Managers and Analysts with an average experience of 15 years A talented pool of Senior Fund Managers with various and recognized expertise Having an average experience of 17 years within the Industry Working together for more than 9 years in average Coming from various backgrounds and past experiences Holding different expertise in most of asset classes An organization based on Small Teams dedicated to one Investment Process Focused & specialized Teams Motivated Teams Ideas & Information sharing between different teams and experts Formalized once a week trough an Investment Committee to share views on all asset classes Informal on a continuously manner as a result of a long common experience Shared Support teams Equity Finance - a robust team with a long term expertise in: Securities lending and borrowing -for both alternative and traditional funds Leveraged Financing, Cash Management, Collateral and OTC derivatives management for Alternative funds Quantitative Research Permanent development of new decision-making models, trading strategies and valuation tools Macro-Economic Research Monitoring of the economic and financial situation in the major industrialized and emerging countries Prediction models covering a 1 to 2 years horizon

45 Dexia AM Alternative Investments Performing & Awarded Products Performing Products Recognized & Awarded Product Range Better Resilience than Peers in adverse years Index Arbitrage Mondohedge Awards 2012 (Best Equity Market Neutral Fund) % of Positive Strategies within DEXIA AM compared to The Industry over the last 5 years Hedgeweek Awards 2010 (Best Absolute Return Fund) Risk Arbitrage 100% 90% 80% 70% 60% 50% 40% Funds regularly nominated at the European Performance Awards of Hedge Fund Review and HFM European HF Performance Awards Credit Arbitrage and High Yield Mondohedge Awards 2012 (Best Long Short Credit Fund) Absolute Ucits (Best performing fund over 3 years) 30% 20% 10% 0% % Positive DEXIA AM Strategies % Positive HFRI trategies Absolute Ucits (Best performing fund over 2 years) HFM European Awards (Best UCITS-compliant fund) Dexia World Alternative HFM European HF Awards 2011, Dexia World Alternative Alphamax was finalist Managed Futures Nominated at the European Performance Awards of Hedge Fund Review, HFM European HF Performance Awards and The Hedge Funds World Awards in Dubai 45

46 Dexia AM Alternative Investments Our Performances: Absolute Return & Low Volatility (< 5%) Funds Absolute Return & Low Volatility Funds Product class Isin Launch date (Fund) Fund domicile Legal Form Eur ope an passport Process Strategies Zone Investment Horizon Risk Class (06) * Currency Liquidity Fund AUM date Fund AUM (in ) Perf. YTD 2012 ** Perf Perf Years Volatility ** Dexia Index Arbitrage Low Volatility FR Sep-03 France FCP UCITS III Event Driven Index Arbitrage World 3 years 1 Euro Daily Mar % + 2.1% + 1.5% 0.9% Dexia Risk Arbitrage Low Volatility FR Mar-96 France FCP UCITS III Event Driven Risk Arbitrage World 18 months 1 Euro Daily Mar % - 0.0% + 2.6% 1.8% Dexia Emerging Debt Arbitrage Dexia Long Short Credit Dexia Prime Advanced Cash + 40 Low Volatility FR Dec-06 France FCP UCITS III Directional Bias Medium / High Volatility Long Short Emerging Debt Emerging Markets World 18 months 2 Euro Weekly Mar % - 0.9% - 0.1% 1.3% FR Oct-09 France FCP UCITS III Directional Bias Credit Spread World 3 years 3 Euro Daily Mar % + 1.9% + 4.4% NA Low Volatility LU Jun-07 Luxembourg SICAV No Passport Multi-Strategies Multi-Strategies World 2 years 1 Euro Weekly Mar % - 0.1% + 0.4% 1.3% Dexia Prime Advanced Cash Low Volatility LU Jun-07 Luxembourg SICAV No Passport Multi-Strategies Multi-Strategies World 2 years 2 Euro Weekly Mar % - 2.8% + 0.7% 2.3% Dexia Multi-Strategies Low Volatility FR Nov-03 France FCP UCITS III Multi-Strategies Multi-Strategies World 18 months 2 Euro Weekly Mar % - 2.1% + 1.2% NA DWA Alpha Defensive Medium / High Volatility LU Jan-07 Luxembourg SICAV No Passport Multi-Strategies Multi-Strategies World 3 years 4 Euro Bi-Monthly Feb % - 0.8% + 2.7% 2.39% (since inception 31/01/2007) DMM Alternative Low Volatility LU Nov-10 Luxembourg SICAV UCITS III Multi-Strategies Multi-Strategies World 2 years 4 Euro Weekly Mar % - 3.3% - NA Dexia Dynamix Low Structured LU Feb-07 Luxembourg FCP UCITS III Dynamic DFP World 1 year 1 Euro Daily Mar % + 0.1% + 0.3% 0.7% Dexia Dynamix Medium Structured LU Aug-09 Luxembourg FCP UCITS III Dynamic DFP World 3 years 1 Euro Daily Mar % + 1.5% + 1.0% NA * as at 30/06/11 ** performances as at 31/03/ Sources: Dexia AM Data: End of March 2012

47 Dexia AM Alternative Investments Our Performances: Absolute Return & Mid Volatility (5-10%) Funds Absolute Return & Mid Volatility Funds Product class Isin Launch Date Dom. Legal Form European passport Process Strategies Zone Investment Horizon Risk Class (06) * Currency Liquidity Fund AUM date Fund AUM (in ) Perf. YTD 2012 ** Perf Perf Years Volatility ** Dexia Long Short Risk Arbitrage Medium / High Volatility FR Mar-99 France FCP UCITS III Event Driven Risk Arbitrage World 3 years 4 Euro Daily Mar % - 3.3% + 4.9% NA Dexia Long Short Double Alpha F Medium / High Volatility FR Apr-09 France FCP UCITS III Relative Value Equity Market Neutral Europe 3 years 3 Euro Daily Mar % - 3.4% + 0.5% NA Dexia Bonds High Spread Medium / High Volatility LU Jul-02 Luxembourg SICAV UCITS III Directional Bias Credit Spread World 3 years 3 Euro Daily Mar % + 2.2% % 6.9% Cordius Long Short Commodities Commodities LU May-11 Luxembourg SICAV No Passport Other Other World 3 years 4 Euro Daily Mar % + 1.3% - NA Dexia Diversified Futures Medium / High Volatility FR Nov-09 France FCP UCITS III Modelised Trend Follow ing Systematic World 3 years 4 Euro Daily Mar % + 3.6% - 3.7% NA Dexia Global Alpha Dexia Global Opportunities Medium / High Volatility Medium / High Volatility FR Nov-10 France FCP UCITS III Directional Bias Global Macro World 3 years 3 Euro Weekly Mar % + 3.7% + 0.6% NA FR Dec-10 France FCP UCITS III Directional Bias Global Macro World 3 years 3 Euro Weekly Mar % + 0.4% - NA Dexia Multi Gestion Alternative Medium / High Volatility FR Jan-04 France FCP No Passport Multi-Strategies Multi-Strategies World 2 years 4 Euro Monthly Mar % - 1.0% - 1.0% 3.75% (since inception 08/01/2004) DWA Alphamax Medium / High Volatility LU Jul-01 Luxembourg SICAV No Passport Multi-Strategies Multi-Strategies World 3 years 5 Euro Monthly Feb % - 1.0% + 5.3% 4.22% (since inception 31/08/2001) DWA Alpha Dynamic Medium / High Volatility LU Jul-01 Luxembourg SICAV No Passport Multi-Strategies Multi-Strategies World 3 years 5 Euro Monthly Feb % - 0.5% + 5.1% 5.04% (since inception 31/12/2002) Dexia Dynamix 93 Structured LU Jan-06 Luxembourg FCP UCITS III Dynamic DFP World 3 years 2 Euro Daily Mar % - 6.3% + 2.6% 4.0% * as at 30/06/11 ** performances as at 31/03/ Sources: Dexia AM Data: End of March 2012

48 Dexia AM Alternative Investments Our Performances: Absolute Return & High Volatility (>10%) Funds Absolute Return & High Volatility Funds Product class Isin Launch Date Dom. Legal Form Europe an passport Process Strategies Zone Investment Horizon Risk Class (06) * Currency Liquidity Fund AUM date Fund AUM (in ) Perf. YTD 2012 ** Perf Perf Years Volatility ** Dexia Long Short European Equity Medium / High Volatility FR Feb-09 France FCP UCITS III Relative Value Equity Market Neutral Europe 3 years 4 Euro Weekly Mar % % - 0.2% NA Dexia Long Short Emerging Debt Medium / High Volatility FR Sep-09 France FCP UCITS III Directional Bias Long Short Emerging Debt Emerging Markets World 3 years 4 Euro Weekly Mar % - 7.8% + 0.5% NA Dexia Bonds Euro High Yield Bonds LU Feb-99 Luxembourg SICAV UCITS III Fundamental Corporate Non Inv. Grade (HY) Europe 3 years 4 Euro Daily Mar % + 0.9% % 11.9% Dexia Bonds Global High Yield Bonds LU Sep-03 Luxembourg SICAV UCITS III Fundamental Corporate Non Inv. Grade (HY) World 3 years 4 Euro Daily Mar % + 6.5% % 8.5% Dexia Bonds Europe Convertible Dexia Bonds Convertible 2015 Convertible Bonds Convertible Bonds LU Jan-00 Luxembourg SICAV UCITS III Fundamental Aggregate Europe 4 years 4 Euro Daily Mar % % % 11.1% LU Nov-09 Luxembourg SICAV UCITS III Fundamental Aggregate Europe 6 years 2 Euro Weekly Mar % - 0.3% + 7.5% NA Dexia Equities B European Property Securities Real Estate BE Mar-03 Belgium SICAV UCITS III Other Other Europe 6 years 5 Euro Daily Mar % % % 20.2% Dexia Fund Commodities Commodities LU Apr-07 Luxembourg FCP UCITS III Other Other World 6 years 6 United States Dollar Daily Mar % - 5.8% % 19.8% Dexia Systemat DWA Global L/S Equity Medium / High Volatility Medium / High Volatility FR Jul-97 France FCIMT (French Funds of Futures) No Passport Modelised Trend Follow ing Systematic World 3 years 5 Euro Daily Mar % + 3.9% + 9.6% 11.4% LU Jul-01 Luxembourg SICAV No Passport Multi-Strategies Multi-Strategies World 3 years 5 Euro Monthly Feb % - 4.4% + 2.0% * as at 30/06/11 ** performances as at 31/03/ % (since inception 28/02/2006) 48 Sources: Dexia AM Data: End of March 2012

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50 Disclaimer This document is published purely for the purposes of information, it contains no offer for the purchase or sale of financial instruments does not comprise investment advice and it is not confirmation of any transaction unless expressly agreed otherwise. The information contained in this document was obtained from a number of different sources. Dexia Asset Management exercises the greatest care when choosing its sources of information and passing on this information. Nevertheless errors or omissions in those sources or processes cannot be excluded a priori. Dexia AM cannot be held liable for any direct or indirect damage or loss resulting from the use of this document. The contents of this document may be reproduced only with the prior written agreement of Dexia AM. The intellectual property rights of Dexia AM must be respected at all times. Warning : If this document mentions the past performances of a financial instrument or index or an investment service, refers to simulations of such past performances or contains data relating to future performances, the client is aware that those performances and/or forecasts are not a reliable indicator of future performances. Moreover, Dexia AM specifies that: in the case where performances are gross, the performance may be affected by commissions, fees and other charges; in the case where the performance is expressed in another currency than that of the investor s country of residence, the returns mentioned may increase or decrease as a result of currency fluctuations. If this document makes reference to a particular tax treatment, the investor is aware that such information depends on the individual circumstances of each investor and that it may be subject to change in the future. This document does not comprise any investment research as defined in article 24, 1 of Directive 2006/73/CE dated 10 August 2006 implementing Directive 2004/39/CE of the European Parliament and Council. If this information is a marketing communication, Dexia AM wants to clarify that it was not designed according to the legal requirements to promote the independence of investment research, and it is not subject to any prohibition on dealing prior to the dissemination of the investment research. Dexia AM invites the investors to always consult the fund prospectus before investing in a fund. The prospectus and other information relating to the fund are available on our site at 50 Money does not perform. People do.