Next Edge CIA Disciplined Growth Portfolio · TSX:PCD.UN
Next Edge CIA Disciplined Growth Portfolio — Next Edge AHL Fund — Investor Presentation (December 2018)
42 slides from Next Edge CIA Disciplined Growth Portfolio's investor presentation, December 2018
Slide 1: Next Edge AHL Fund
Next Edge AHL Fund December 2018 1
Slide 2: Important Notes
Important Notes The ‘Next Edge AHL Fund’ or ‘Fund’ means the ‘Next Edge AHL Fund’. Capitalized terms not defined in this presentation are defined as set forth in the prospectus of the Fund (the ‘Prospectus’). This communication is not, and under no circumstances is to be construed as, an invitation
Slide 3: Important Notes: Forward Looking Statements
Important Notes Cautionary Note Regarding Forward Looking Statements The following presentation may contain forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that Next Edge Capital Corp., AHL Partners LLP or any affi
Slide 4: Certain Risks of Investing in Next Edge AHL Fund
Certain Risks of Investing in Next Edge AHL Fund There are risks associated with an investment in the Fund, as a result of, among other considerations, the nature and operations of the Fund. An investment in Units should only be made after consultation with independent qualified sources of investmen
Slide 5: Certain Risks of Investing in Next Edge AHL Fund
Certain Risks of Investing in Next Edge AHL Fund Insufficient Trading Capital The Investment Advisor manages risk to ensure that the Underlying Assets risk are within predetermined levels. Nevertheless, in the event of an exceptional decline in value of the underlying portfolio’s trading capital to
Slide 6: Investors and Borrowers
We are an alternative investment fund manager and a leader in the structuring and distribution of Alternative and Private Credit fund products in Canada. Next Edge Capital specializes and focuses on providing unique, non-correlated pooled investment vehicles to the retail marketplace – access to wha
Slide 7: Next Edge Capital Corp.
Next Edge Capital Corp. Formed in July 2006, was renamed Next Edge Capital Corp. after the spinout of Man Investments Canada Corp. from Man Group plc (“Man”) in June 2014. Licensed as an Exempt Market Dealer, Portfolio Manager and Investment Fund Manager. Management team responsible for raising over
Slide 8: An overview of Man Group
An overview of Man Group1 Entrepreneurial fund management within an institutional framework ●● A global investment management firm focused on delivering performance for clients through a diverse spectrum of specialist active investment disciplines, empowered by the latest technology. ●● Individual p
Slide 9: Man AHL: Institutional Solutions
Man AHL Asset class specialisation reinforces development of our flagship programmes Client facing Programme FUM (programme AUM) Traditional Alpha ($4.8bn) / Trend & $6.5bn Diversified ($1.7bn) AHL’s broadest momentum trading programme (also in UCITS format) Momentum Evolution Momentum trading on OT
Slide 10: Why invest in Managed Futures?
Introduction Why invest in Managed Futures? Investor Requirements Managed Futures Performance Has delivered positive returns over 40 years through economic cycles Simplicity Core strategy identifies and profits from price trends Liquidity Liquid portfolio holdings at all times Portfolio enhancement
Slide 11: Providing access to the AHL Diversified Programme
Introduction Providing access to the AHL Diversified Programme Systematic trend following around 500 markets Strategy Access to many unique markets through AHL Evolution Programme Diversification across trend-following models and time horizons Investors looking for: Target investors ─ divers
Slide 12: Overview of trend following
AHL Diversified Programme Overview of trend following Momentum models use proprietary algorithms to identify trends: Across a universe of around 500 highly liquid futures, FX, OTC and cash equity markets Downward Lasting a few days to many months trend Upward trend Able to profit from both up
Slide 13: Example: Momentum on a typical futures market
AHL Diversified Programme Example: Momentum on a typical futures market 1 Man AHL aims to Trade example exploit the upward and downward trends over 1 2 3 a range of timescales Price 2 Small losses during range-bound markets 3 Positions are adjusted to control risk – when Volatility volatility increa
Slide 14: Portfolio construction as at December 2018
AHL Diversified Programme Portfolio construction as at 31 December, 2018 AHL Diversified Conventional Long term sector allocations¹ Number of Programme market CTA portfolio Sector markets examples markets Treasuries, Stocks Fixed income Interest Rate Swaps across Bunds, 21.2% 21.0% Fixed Income 116
Slide 15: The advantage of trading non-traditional markets
AHL Diversified Programme The advantage of trading non-traditional markets: AHL Evolution Programme Interest rates Diversification in energy markets 30% 11000 130 Dax Index (LHS) Electricity (RHS) US Brazil South Africa Brent Crude (RHS) 1 120 Rates in many G7 economies remain 10000 25% at all time
Slide 16: Long-term performance of momentum strategies
Long-term performance of momentum strategies Going back to the ‘60s But … most of our experience of trend following starts in the 1980s Returns of US equities and bonds since 1960 S&P 500 Total Return Index US 10yr Treasury Stocks at all-time highs Cumulative returns (log scale) Bonds at all-time hi
Slide 17: Crisis alpha: equity smile
Long-term performance of momentum strategies Crisis alpha: equity smile Returns of momCTA from worst to best equity environments (3 month window) 30 Bonds Commodities Currencies Equity Best returns in the worst 25 equity periods … also good in the best equity periods 20 Annualised returns (%) 15 10
Slide 18: Crisis alpha: bond smile too
Long-term performance of momentum strategies Crisis alpha: bond smile too Returns of momCTA from worst to best bond environments (3 month window) 30 Bonds Commodities Currencies Equity Best returns in the worst 25 bond environments too 20 Annualised returns (%) 15 10 5 0 Worst Q2 Q3 Q4 Best Average
Slide 19: Man AHL experience: Who we are
Man AHL experience Who we are ●● Systematic, quantitative alternative investment Long term track records for key programmes (net of fees)³ manager with $25.1bn AUM¹. 1250 ●● 30+ year history of delivering superior risk-adjusted AHL Alpha Programme 1000 returns to our clients, across 600+ markets. 75
Slide 20: Man AHL experience: Who we are
Man AHL experience Who we are Approximate Team headcount Overview Research and Research and develop systematic strategies across styles and asset classes ~45 Organised in nine distinct thematic teams: Alternative Markets, Core, Data Innovation, Equities, Liquid Investment Strategies, Machine Lea
Slide 21: Man AHL experience: What we believe in
Man AHL experience What we believe in People Freedom Collaboration § Highly qualified, passionate and § Search for alpha opportunities § Exchange of ideas in an open persistent professionals everywhere – any market, environment any model, any data § Diverse scientific backgrounds § Unique partnershi
Slide 22: History of Man AHL
Man AHL experience History of Man AHL: more than 30 years experience of research and innovation MODEL MILESTONES BINARY AND VOLATILITY EQUITY FX FUNDAMENTAL MACHINE ML IN TREND- BREAKOUT MODELS TRADING SECTOR MODELS LEARNING FOLLOWING TRADING (‘ML’) FLAGSHIPS 1987 1992 1995 2006 2009
Slide 23: Model features: Illustrative momentum calculation
Model features Illustrative momentum calculation Model features A Moving average signals Price Slow (longer-term average) Fast (shorter-term average) 100% systematic, with no discretion Profits from sustained periods of rising or falling markets Suffers from markets reversals May-06 Jun-06 Jul
Slide 24: Model features: Dealing with the unexpected
Model features Dealing with the unexpected Model-driven strategies rely on robust analysis of historical market behaviour, without behavioural biases But some risks don’t show up in back-tests, e.g., With yields in much of the developed world at all time lows, yield volatility is also at unprecede
Slide 25: Model features: Momentum conditioned carry
Model features Momentum conditioned carry Carry is an effective predictor in fixed income… 4.0% 12000 Older Model (RHS) …but returns are negatively skewed Enhanced reative model (RHS) US 10 Year Interest Rates (LHS) When carry and momentum agree trade slowly 3.0% 8000 When they disagree be
Slide 26: New markets and models
New markets and models New research has added value Contribution to gross performance¹ Markets Models Markets added to AHL Diversified Programme in Models added to AHL Diversified Programme in 2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018 2012 3.5% 2012 -0.5% attributed to ne
Slide 27: Better environment for trend following
New markets and models Better environment for trend following After a very strong 2008, average CTA returns were flat for five years Unprecedented central bank and government intervention (Trend reversals; ‘Risk-on, risk-off’) Portfolio diversification severely diluted, high inter-market corre
Slide 28: Highly diversified set of instruments, growing through time
New markets and models Highly diversified set of instruments, growing through time Adding markets and models Correlation1 between traded markets (1 Jan ’06 to 31 Dec ’18) 600 0.30 Futures/FX Markets in AHL Diversified Programme Futures/FX Markets "Non-traditional" instruments "Non-traditional" instr
Slide 29: Managed Futures are a small part of hedge funds and futures markets
Better environment for trend following Managed Futures are a small part of hedge funds and futures markets Managed Futures AUM as % of Hedge Funds (1997–2017)¹ Managed futures’ participation in futures markets (2000–17)² 30% 7% CTA AUM / Total Hedge Fund AUM CTA Futures Volume / Total Futures Volume
Slide 30: Portfolio construction: Use of clustering
Portfolio construction Use of clustering seeks to reduce uncertainty around correlations Maximum Diversification Example: Diversification through hierarchical clustering Bottom-up allocation Correlation of momentum returns more predictable than means Clustering creates ‘ultra-metric’ correlati
Slide 31: Execution research yields significant benefits
Execution Execution research yields significant benefits Man AHL executes futures and FX flow using algorithms developed internally since 2002 External broker algorithms largely used for benchmarking Significant value add from tailoring to fit our trading style Example of algorithm execution i
Slide 32: Risk Management: Process and Reporting
Risk Management Process and Reporting Independent risk oversight Examples: Risk reports for each underlying strategy, as well as bespoke portfolio Factor analysis, stress testing and VaR measurement Comprehensive portfolio risk reporting CRO (rarely) intervenes to reduce portfolio risks Market
Slide 33: Crisis Alpha in the long term
Crisis Alpha in the long term Performance during equity market stress 1 January 1997 to 31 December 2018 16% Average performance during crisis periods¹ Average annual return Most hedge fund strategies lose money 12% during crises 8% Managed Futures is one of the few strategies with positive long
Slide 34: Summary
Summary AHL Diversified Programme aims to offer: access to a strategy with a proven track record the benefits of Man AHL’s 30 year experience transparency on process and model features a trend following strategy that is able to benefit from the current strong prospects more markets and str
Slide 35: Next Edge AHL Fund
Next Edge AHL Fund Investments ●● To achieve capital appreciation through investment returns that have a low correlation to traditional forms Objectives of stock and bond securities. ●● Exposure to the AHL Diversified Programme which has an 20 year proven track record and an annualized net return of
Slide 36: Performance of Next Edge AHL Fund – Class A
Performance of Next Edge AHL Fund – Class A1 December 29, 2009 to December 31, 2018 $24,000 $22,000 $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12 May-13 Oct-13 Mar-14 Aug-14 Jan-15 Jun-15 Nov-15 Apr-16 Sep-16 Feb-17 Jul-17 Dec-17 May-1
Slide 37: AHL Diversified Programme: Track record
Performance AHL Diversified Programme¹: Track record 26 March 1996 to 31 December 2018 AHL Diversified World Managed 1300 Programme1 stocks2 Futures3 AHL Diversified Programme 1 1100 Annualised 11.0% 6.6% 4.5% 900 return Index value USD (log scale) 700 Annualised 16.2% 13.9% 8.1% volatility 500 Mana
Slide 38: Historical Performance of The Strategy
Historical Performance of The Strategy Next Edge AHL Fund, Man AHL Diversified (Canada) Fund & AHL Diversified Programme March 26, 1996 to December 31, 2018 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD 2018 8.77% -11.71% -1.10% -2.70% 1.19% -1.81% -1.17% 2.51% -3.28% 0.35% -1.39% 6.30% -5.35%
Slide 39: Appendix
MM AHL Man Appendix
Slide 40: Research Process
Research Process How does a new model enter the portfolio? Informal reviews 1st Formal Review 2nd Formal Review Team head 2 independent Same reviewers Research fellows reviewers Analysis of test-trading Interested peers Head of Research Input from investment Chief Risk Officer oper
Slide 41: Biographies
Biographies Matthew Sargaison Antoine Forterre Matthew Sargaison is Co-Chief Executive Officer of Man AHL, acting Chief Antoine Forterre is Co-Chief Executive Officer of Man AHL (‘AHL’) and a member Investment Officer, and a member of the Man Group Executive Committee. of the Man Executive Committee
Slide 42: For More Information Please Contact
For More Information Please Contact: Next Edge Capital Corp. 1 Toronto Street, Suite 200 Toronto, ON M5C 2V6 Local – 416.775.3600 Toll Free – 877.860.1080 info@nextedgecapital.com www.nextedgecapital.com 42
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