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The case for liquidity 08.08.13

John Robertson
John Robertson

The document discusses the Hilltop Decorrelated Fund and its approach to managing liquidity risk. The fund invests predominantly in liquid strategies trading traditional asset classes on international exchanges. It only considers funds that can liquidate their entire holdings within their dealing period. The fund must invest a minimum of 75% of its assets in funds with monthly liquidity or better to protect investors from liquidity risks while still seeking decent returns.

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Numerous recent articles in the financial press report yet another alternative fund suspension due to liquidity constraints arisingfromincreasedredemptionorders. The Hilltop fund selection process, will not consider any fund that does not have acceptable liquidity in its underlying assets. It is our view that funds investing in illiquid asset classes, especially those that are marked to model, carry unacceptable inherent risk for investors. All is well as long as subscriptions are greater than redemptions. When this reverses even in the short term (as is inevitable from time to time with any fund), it almost always has fatal consequences for those that lack sufficient liquidity. The Hilltop Decorrelated Fund, launched in October 2012, is specifically targeted at those investors who are seeking alternative investments delivering consistent returns, with very low volatility. The Hilltop Decorrelated Fund delivers this, without the accompanying liquidity or pricing risk that is inherent in so many other strategies. In order to seek decent returns, while adequately protecting investors from liquidity risk, the Hilltop Decorrelated Fund: invests predominantly in strategies trading traditional asset classes, on international exchanges with high levels of liquidity (equities, bonds, FX, commodities); only invests in funds that demonstrate matched liquidity which means they must be able to liquidate their entire book within their dealing period if necessary; must invest a minimum of 75% of its assets in funds with monthly liquidity or better. The remainder can be invested in funds with quarterly dealing or better; cannot gate or suspend trading in response to increased redemption levels.* 息 2013 Hilltop Fund Management LLP | Regulated and authorised by the Financial Conduct Authority | +44 (0)20 7788 7799 | www.hilltop.co.uk The Hilltop Decorrelated Fund The importance of liquidity The Hilltop Decorelated Fund invests 75% of assets in monthly traded funds or better Monthly Monthly Monthly Monthly Monthly Monthly Quarterly Quarterly Quarterly Monthly Monthly Monthly Monthly Monthly August 2013 Contact Aron Sharman International Sales Director The Synergy Partnership +60 12 667 0133 aronsharman@thesynergypartnership.com Andy Doyle Director The Synergy Partnership +60 12 296 1953 andy.doyle@thesynergypartnership.com Cressida St Aubyn Investor Relations Hilltop Fund Management +44 (0)20 7788 7799 cressida.staubyn@hilltop.co.uk Volatility arbitrage Trade finance Volatility arbitrage Activist micro-cap equity Relative value commodity Equity long/short non-directional Fixed income arbitrage Long/short convertibles Long/short mortgages Fixed income arbitrage Commodity spread arbitrage Long/short commodity Long/short commodity equities Activist credit Macro volatility Portfolio snapshotPortfolio liquidity
息 2012 Hilltop Fund Management LLP | Regulated and authorised by the Financial Services Authority | +44 (0)20 7788 7799 | www.hilltop.co.uk 2 This document does not constitute or form part of, and may not be used for the purpose of, an offer or solicitation to anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Shares in the Hilltop Decorrelated Fund (the Fund) will not be offered to the general public. This document may not be distributed in any jurisdiction where it is unlawful to do so. A subscription for shares in the Fund may only be made in reliance on the private placement memorandum and relevant supplement of Hilltop Funds PCC Limited by persons who are eligible to subscribe as set out in such documents. While the information in this document has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by the Fund or Hilltop Fund Management LLP (Hilltop) or by any of their respective members, officers, employees or agents in relation to the accuracy or completeness of the information contained in this document and any such liability is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any future projections, management estimates, prospects or returns contained in this document. Actual results may vary from estimates. Hilltop is not acting for any recipient of this document. Hilltop is not responsible to such a recipient for providing protections afforded to clients of Hilltop and Hilltop is not advising such a recipient in respect of investing in Hilltop Funds PCC Limited. Past performance is not a guide to future performance. Disclaimer * The exception, if an underlying fund were to gate the Hilltop Decorrelated Fund.

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The case for liquidity 08.08.13

  • 1. Numerous recent articles in the financial press report yet another alternative fund suspension due to liquidity constraints arisingfromincreasedredemptionorders. The Hilltop fund selection process, will not consider any fund that does not have acceptable liquidity in its underlying assets. It is our view that funds investing in illiquid asset classes, especially those that are marked to model, carry unacceptable inherent risk for investors. All is well as long as subscriptions are greater than redemptions. When this reverses even in the short term (as is inevitable from time to time with any fund), it almost always has fatal consequences for those that lack sufficient liquidity. The Hilltop Decorrelated Fund, launched in October 2012, is specifically targeted at those investors who are seeking alternative investments delivering consistent returns, with very low volatility. The Hilltop Decorrelated Fund delivers this, without the accompanying liquidity or pricing risk that is inherent in so many other strategies. In order to seek decent returns, while adequately protecting investors from liquidity risk, the Hilltop Decorrelated Fund: invests predominantly in strategies trading traditional asset classes, on international exchanges with high levels of liquidity (equities, bonds, FX, commodities); only invests in funds that demonstrate matched liquidity which means they must be able to liquidate their entire book within their dealing period if necessary; must invest a minimum of 75% of its assets in funds with monthly liquidity or better. The remainder can be invested in funds with quarterly dealing or better; cannot gate or suspend trading in response to increased redemption levels.* 息 2013 Hilltop Fund Management LLP | Regulated and authorised by the Financial Conduct Authority | +44 (0)20 7788 7799 | www.hilltop.co.uk The Hilltop Decorrelated Fund The importance of liquidity The Hilltop Decorelated Fund invests 75% of assets in monthly traded funds or better Monthly Monthly Monthly Monthly Monthly Monthly Quarterly Quarterly Quarterly Monthly Monthly Monthly Monthly Monthly August 2013 Contact Aron Sharman International Sales Director The Synergy Partnership +60 12 667 0133 aronsharman@thesynergypartnership.com Andy Doyle Director The Synergy Partnership +60 12 296 1953 andy.doyle@thesynergypartnership.com Cressida St Aubyn Investor Relations Hilltop Fund Management +44 (0)20 7788 7799 cressida.staubyn@hilltop.co.uk Volatility arbitrage Trade finance Volatility arbitrage Activist micro-cap equity Relative value commodity Equity long/short non-directional Fixed income arbitrage Long/short convertibles Long/short mortgages Fixed income arbitrage Commodity spread arbitrage Long/short commodity Long/short commodity equities Activist credit Macro volatility Portfolio snapshotPortfolio liquidity
  • 2. 息 2012 Hilltop Fund Management LLP | Regulated and authorised by the Financial Services Authority | +44 (0)20 7788 7799 | www.hilltop.co.uk 2 This document does not constitute or form part of, and may not be used for the purpose of, an offer or solicitation to anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation. Shares in the Hilltop Decorrelated Fund (the Fund) will not be offered to the general public. This document may not be distributed in any jurisdiction where it is unlawful to do so. A subscription for shares in the Fund may only be made in reliance on the private placement memorandum and relevant supplement of Hilltop Funds PCC Limited by persons who are eligible to subscribe as set out in such documents. While the information in this document has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by the Fund or Hilltop Fund Management LLP (Hilltop) or by any of their respective members, officers, employees or agents in relation to the accuracy or completeness of the information contained in this document and any such liability is expressly disclaimed. In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any future projections, management estimates, prospects or returns contained in this document. Actual results may vary from estimates. Hilltop is not acting for any recipient of this document. Hilltop is not responsible to such a recipient for providing protections afforded to clients of Hilltop and Hilltop is not advising such a recipient in respect of investing in Hilltop Funds PCC Limited. Past performance is not a guide to future performance. Disclaimer * The exception, if an underlying fund were to gate the Hilltop Decorrelated Fund.