Introduction to Alternative Investments

Q1, 2011

INVESTMENT PRODUCTS: • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
 IMPORTANT DISCLOSURES
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Before investing in any fund, you must review and be familiar with the fund’s offering materials, including the private placement memorandum or prospectus,
which will include important information about investment objectives, terms, significant risks, and conflicts of interest.
Alternative investments can be highly illiquid, are speculative and not suitable for all investors. Investing in alternative investments is only intended for
experienced and sophisticated investors who are willing to bear the high economic risks associated with such an investment. Investors should carefully review
and consider potential risks before investing. Certain of these risks may include loss of all or a substantial portion of the investment due to leveraging, short-
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restrictions on transferring interests in a fund, potential lack of diversification and resulting higher risk due to concentration of trading authority when a single
advisor is utilized, absence of information regarding valuations and pricing, complex tax structures and delays in tax reporting, less regulation and higher fees than
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investment programs that will vary from fund to fund.
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2
 Table of Contents

I. Introduction to Alternative Investments

II. Hedge Funds

III. Fund of Hedge Funds

IV. Managed Futures

V. Private Equity

VI. Real Estate

VII. Exchange Funds

VIII. Appendix

3
 I. Introduction to Alternative Investments

¾ The name "alternative investments" suggests new and obscure investments, however
alternative investments have existed and been established for decades
• Hedge Funds (1949)*, Modern Venture Capital (1946)**, Real Estate (centuries old)

¾ Alternative investments often share a few principal characteristics that help identify
them as such:
• Historically low to moderate correlation with traditional asset classes (stocks and bonds)***
• Not listed on an exchange
• Private investment funds available only to high net worth and institutional investors
• Reduced liquidity

*Source: Mark Anson, Handbook of Alternative Assets, (New York: John Wiley & Sons, Inc., 2002), p. 12. **Source: Mark Anson, Handbook of Alternative Assets, (New York: John Wiley & Sons,
4 Inc., 2002), p. 262. ***Past correlations do not guarantee future correlations. Real results may vary.
 I. Major Alternative Asset Classes*

Basic Descriptions

Negotiated private investments in (most often) non-public companies at different

Private Equity
stages of maturity with the objective of reselling at a higher price in the future

Investment funds investing primarily in the global equity and fixed income
Hedge Funds markets and typically employing sophisticated trading strategies, using leverage
and derivative instruments
Actively managed portfolios of hedge funds and other alternative investments
Fund of Funds
products

Negotiated private investments in real estate assets with the objective of

Real Estate
generating current income and/or reselling at a higher value in the future

Investments in global markets including futures, options and forwards on

Managed Futures
traditional commodities, financial instruments and currencies

5
*Please see the Appendix for Risk Considerations.
 I. Alternative Investments Differ From Traditional Investments

Traditional
Traditional Investments
Investments Alternative Investments

Relative performance objective* Absolute performance objective*

Generally no leverage May use leverage

Performance dependent primarily on Performance dependent primarily on

market returns advisor skill

Historically high correlation with Historically low to moderate correlation

market indices with market indices

Typically offers daily liquidity Typically have reduced liquidity ranging

from monthly to 12+ year lock-ups

Fixed management fee on assets Generally higher fees which may include
under management performance fees

*There is no guarantee that these objectives will be met.

6
Please see the Glossary for key definitions and Appendix for Risk Considerations.
 I. Large College Endowments Are Heavily Invested In Alternatives

Portfolio Allocations for Fiscal Years 2009 and 2010

Total $501 Million - $101 - $500 $51 - $100 $25 - $50 Under $25
Institutions Over $1 Billion $1 Billion Million Million Million Million
Number of Institutions 842 850 52 60 60 66 219 226 164 169 137 145 210 184

2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010
Asset Class
Traditional 49% 48% 39% 40% 57% 55% 67% 65% 78% 76% 82% 83% 87% 88%
Alternative Strategies 51% 52% 61% 60% 43% 45% 33% 35% 22% 24% 18% 17% 13% 12%

Average Five- and 10-Year Net Returns for Fiscal Years 2009 and 2010
Total $501 Million - $101 - $500 $51 - $100 $25 - $50 Under $25
Institutions Over $1 Billion $1 Billion Million Million Million Million
Number of Institutions 842 850 52 60 60 66 219 226 164 169 137 145 210 184

2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010
5-Year Net Return 2.7% 3.0% 5.1% 4.7% 3.5% 3.6% 2.6% 3.0% 2.7% 2.7% 2.1% 2.6% 2.1% 2.2%
10-Year Net Return 4.0% 3.4% 6.1% 5.0% 4.3% 3.6% 3.7% 3.3% 3.7% 3.3% 3.4% 2.9% 3.9% 2.8%

Source: National Association of College and University Business Officers (NACUBO) 2010 study of 850 institutions published January 2011. Portfolio returns are based on data ending June 30,
2010.This study does not indicate the percentage of portfolio returns attributable to the allocation to alternatives. Note: The larger the endowment, the better the ability to diversify.
Past performance does not guarantee future results. Real results may vary. Traditional Strategies include Equity, Fixed Income and Cash. Alternatives Strategies include Real Estate,
Hedge Funds, Private Equity, Venture Capital, Natural Resources and Other.

7
For Illustrative Purposes Only
 I. Some Recognized Academic Leaders Have Been Significantly Invested
in Alternatives
Strategic
Strategic Asset
Asset Allocations
Allocations

2% 4%
13%
20% 17%

33%
20% 24%

Fixed Income
Equities
Private Equity
13%
24% Hedge Funds
26%
Real Assets

16%

32%
26%
23%

Stanford (2010) Yale (2009) Harvard (2010)

Note: The allocations represented here are for illustrative purposes only. Alternative investments are not suitable for all investors.

Source: Stanford University 2010 Annual Report, Yale Endowment 2009 Annual Report, Harvard Management Company Endowment Report 2010. Stanford’s portfolio includes a 6%
8 allocation to cash and equivalents and Harvard’s Portfolio includes a 2% allocation to cash and equivalents.
For Illustrative Purposes Only
 II. Hedge Funds

What is a Hedge Fund?

¾ Hedge Funds are not new – they have been in existence for over 50 years

¾ Typically, Hedge Funds seek an absolute return*

• Unlike traditional vehicles, which manage to a relative benchmark

¾ Primarily invest in publicly-traded securities

• Stocks/Bonds/Commodities/Currencies

¾ Employ return enhancement tools such as leverage and derivatives, which typically also
involve greater risk

¾ Typically treated as a limited partnership for tax purposes for U.S. taxable investors and
as a corporation domiciled in a low-tax/no-tax jurisdiction for U.S. tax-exempt investors
and non-U.S. persons

9
*There is no guarantee that this objective will be met.
 II. Hedge Fund Managers Seek Flexibility

A manager's ability to generate alpha* is primarily based on its investment strategy

These strategies will often utilize:

• Leverage
These tools, strategies and securities are used by hedge fund managers with the
• Short-selling objective of enhancing returns and reducing risks, however they also increase the
• Derivatives risk of losses
• Illiquid securities

Increased
Increased flexibility
flexibility for
for the
the manager
manager may
may increase
increase risks
risks to
to the
the investor
investor

Individual funds will have specific risks related to their investment programs that will vary from fund to fund. Please review and be familiar with the
fund’s offering materials, including the private placement memorandum or prospectus.

10 * Please see Glossary for key definitions and Appendix for Risk Considerations
 II. How Traditional Portfolios may benefit from Hedge Fund Allocations
Hypothetical Portfolio Allocations Using Index Returns
January 1991 – December 2010

9.75%
90% U.S. Stocks, 10%
9.50% Hedge Funds

9.25%
Annual Compounded Return

45% Bonds, 45% U.S.

9.00% Stocks, 10% Hedge Funds
100% U.S. Stocks
8.75%
8.50%
8.25% 90% Bonds, 10%
Hedge Funds 50% Bonds, 50% U.S. Stocks
8.00%
7.75%
7.50%
7.25%
7.00%
100% Bonds
6.75%
2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00%

Annualized Standard Deviation

U.S. Stocks represented by the S&P 500 Index; Bonds represented by the Barclays Aggregate Bond Index; Hedge Funds represented by the HFRI Fund Weighted
Composite Index. Sourced from PerTrac Financial Solutions, LLC (Memphis, TN). Indices are unmanaged and investors cannot directly invest in them. Composite
index results are shown for illustrative purposes and do not represent the performance of a specific investment. Indices of hedge funds have material inherent
11 limitations. Reference the Appendix for index descriptions and key definitions. This information is for ILLUSTRATIVE PURPOSES ONLY and is not intended to
represent the performance of any specific investment. Past performance is no guarantee of future results.
 II. Hedge Fund Risk Return Comparison (January 1990 to December 2010)
20.00%

18.00% Distressed
Global Macro
Long/Short Equity
16.00%
Emerging Markets
Return
Annualized Return

14.00%
Relative Value
Event Driven
12.00%
% Annualized

Emerging Markets
Hedge Funds ex-Asia Real Estate
Merger Arbitrage
10.00% Convertible Arbitrage
US Equity
Fixed Income
%

8.00% Equity Market Neutral

US Bonds
6.00% Managed Futures
Global Equity
Fund of Funds

4.00%
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00%
% Annualized Risk

*Source: HFR Global Hedge Fund Industry Report – Year End 2010, Bloomberg, PerTrac. Past performance does not guarantee future results. Real results may vary.
Indexes are unmanaged and investors cannot directly invest in them. Composite index results are shown for illustrative purposes and do not represent the performance of a specific investment.
12 Data point descriptions are on the following page. Please see Appendix for index descriptions and key definitions.
For Illustrative Purposes Only
 II. Hedge Fund Risk Return Comparison: List of indices used
U.S. Equity S&P 500
Global Equity MSCI EAFE USD
U.S. Bonds Barclays Aggregate Bond Index
Managed Futures Barclay CTA Index
Real Estate FTSE Nareit Composite
Equity Market Neutral HFRI EH: Equity Market Neutral Index
Event Driven HFRI Event-Driven (Total) Index
Distressed HFRI ED: Distressed/Restructuring Index
Merger Arbitrage HFRI ED: Merger Arbitrage Index
Macro HFRI Macro (Total) Index
Long/Short Equity HFRI Equity Hedge (Total) Index
Hedge Funds HFRI Fund Weighted Composite Index
Fund of Funds HFRI Fund of Funds Composite Index
Emerging Markets HFRI Emerging Markets (Total) Index

Emerging Markets ex-Asia HFRI Emerging Markets: Asia ex-Japan Index

Fixed Income HFRI RV: Fixed Income-Corporate Index
Relative Value HFRI Relative Value (Total) Index
Convertible Arbitrage HFRI RV: Fixed Income-Convertible Arbitrage Index

*Source: HFR Global Hedge Fund Industry Report – Year End 2010, Bloomberg, PerTrac. Indexes are unmanaged and investors cannot directly invest in them. Composite index results are shown
13 for illustrative purposes and do not represent the performance of a specific investment. Please see Appendix for index descriptions and key definitions.
 III. Hedge Fund Strategy Annual Investment Returns (1998 – 2010)
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
HFRI Emerging HFRI ED: HFRI RV: Barclays HFRI Emerging HFRI ED: HFRI Emerging HFRI Emerging HFRI Emerging Barclays HFRI RV:
S&P 500 S&P 500
Markets Merger Arb ConvertArb Gov't/Credit Markets Distressed Markets Markets Markets Gov't/Credit ConvertArb
28.59% 55.86% 18.02% 13.37% 12.10% 39.36% 18.89% 21.04% 24.26% 24.92% 6.09% 60.17% 15.08%
HFRI Equity HFRI Equity HFRI EH: Eq HFRI ED: HFRI RV: HFRI ED: HFRI Emerging HFRI Equity HFRI ED: HFRI Emerging HFRI RV:
HFRI Macro HFRI Macro
Hedge Hedge Mrkt Ntrl Distressed ConvertArb Distressed Markets Hedge Distressed Markets ConvertArb
15.98% 44.22% 14.56% 13.28% 9.05% 29.56% 18.42% 10.60% 15.94% 11.11% 4.83% 40.24% 13.07%
Barclays HFRI Fund HFRI RV: HFRI Event- HFRI Event- HFRI Fund HFRI Equity HFRI ED: HFRI ED: HFRI Emerging
HFRI Macro S&P 500 S&P 500
Gov't/Credit Wghtd Comp ConvertArb Driven Driven Wghtd Comp Hedge Merger Arb Distressed Markets
12.00% 31.29% 14.50% 12.18% 7.44% 28.67% 15.01% 9.30% 15.78% 10.48% -5.36% 28.13% 11.96%
HFRI EH: Eq HFRI FOF HFRI Relative HFRI Emerging HFRI Relative HFRI Event- HFRI ED: HFRI Event- HFRI FOF HFRI EH: Eq HFRI Relative
S&P 500 S&P 500
Mrkt Ntrl Composite Value Markets Value Driven Distressed Driven Composite Mrkt Ntrl Value
8.30% 26.47% 13.41% 10.36% 5.44% 25.33% 10.86% 8.27% 15.33% 10.25% -5.93% 26.47% 11.73%
HFRI RV: HFRI Event- Barclays Barclays HFRI ED: HFRI Fund HFRI FOF HFRI ED: HFRI Fund HFRI Relative HFRI Relative HFRI Event-
HFRI Macro
ConvertArb Driven Gov't/Credit Gov't/Credit Distressed Wghtd Comp Composite Merger Arb Wghtd Comp Value Value Driven
7.77% 24.33% 13.27% 9.40% 5.28% 21.42% 9.03% 7.49% 14.24% 9.96% -18.04% 25.80% 11.53%
HFRI ED: HFRI Equity HFRI Relative HFRI Emerging HFRI Equity HFRI Equity HFRI Event- HFRI Fund HFRI Relative HFRI Fund HFRI Event- HFRI ED:
S&P 500
Merger Arb Hedge Value Markets Hedge Hedge Driven Wghtd Comp Value Wghtd Comp Driven Distressed
7.23% 21.03% 9.09% 8.92% 3.70% 20.54% 7.68% 7.29% 12.89% 8.94% -19.02% 25.04% 11.26%
HFRI Event- HFRI FOF HFRI Fund HFRI FOF HFRI Relative Barclays HFRI FOF HFRI Equity HFRI Equity
HFRI Macro HFRI Macro HFRI Macro HFRI Macro
Driven Composite Wghtd Comp Composite Value Gov't/Credit Composite Hedge Hedge
6.19% 17.62% 6.74% 6.87% 1.02% 19.55% 6.86% 6.79% 12.37% 7.75% -21.36% 24.55% 10.58%
HFRI Relative HFRI ED: HFRI Fund HFRI EH: Eq HFRI EH: Eq HFRI FOF HFRI Relative HFRI ED: HFRI RV: HFRI ED: HFRI Event- HFRI Fund HFRI Fund
Value Distressed Wghtd Comp Mrkt Ntrl Mrkt Ntrl Composite Value Merger Arb ConvertArb Merger Arb Driven Wghtd Comp Wghtd Comp
2.81% 16.94% 4.98% 6.71% 0.98% 11.61% 5.58% 6.25% 12.17% 7.05% -21.82% 19.98% 10.49%
HFRI Fund HFRI Relative HFRI FOF HFRI Fund HFRI ED: HFRI RV: HFRI EH: Eq HFRI Equity HFRI Event- HFRI ED: HFRI ED:
HFRI Macro HFRI Macro
Wghtd Comp Value Composite Wghtd Comp Merger Arb ConvertArb Mrkt Ntrl Hedge Driven Distressed Merger Arb
2.62% 14.73% 4.07% 4.62% -0.87% 9.93% 4.63% 6.22% 11.71% 6.61% -25.20% 11.63% 8.61%
HFRI Event- HFRI RV: HFRI ED: HFRI FOF HFRI Fund HFRI Relative Barclays HFRI Relative HFRI FOF HFRI Equity HFRI FOF Barclays
S&P 500
Driven ConvertArb Distressed Composite Wghtd Comp Value Gov't/Credit Value Composite Hedge Composite Gov't/Credit
1.70% 14.41% 2.78% 2.80% -1.45% 9.72% 4.54% 6.02% 10.39% 5.49% -26.65% 11.46% 6.99%
HFRI ED: HFRI ED: HFRI ED: HFRI Event- HFRI ED: HFRI EH: Eq HFRI RV: HFRI RV: Barclays HFRI FOF
HFRI Macro S&P 500 HFRI Macro
Distressed Merger Arb Merger Arb Driven Merger Arb Mrkt Ntrl ConvertArb ConvertArb Gov't/Credit Composite
-4.23% 14.34% 1.97% 2.76% -4.30% 7.47% 4.15% 4.91% 8.15% 5.33% -33.71% 4.81% 5.60%
HFRI FOF HFRI EH: Eq HFRI Equity HFRI Equity Barclays HFRI ED: Barclays HFRI EH: Eq HFRI EH: Eq HFRI ED:
S&P 500 S&P 500 HFRI Macro
Composite Mrkt Ntrl Hedge Hedge Gov't/Credit Merger Arb Gov't/Credit Mrkt Ntrl Mrkt Ntrl Merger Arb
-5.11% 7.09% -9.09% 0.40% -4.71% 5.07% 4.08% 2.55% 7.32% 5.29% -36.99% 4.37% 4.60%
HFRI Emerging Barclays HFRI Emerging HFRI EH: Eq HFRI RV: HFRI RV: Barclays HFRI ED: HFRI Emerging HFRI EH: Eq HFRI EH: Eq
S&P 500 S&P 500
Markets Gov't/Credit Markets Mrkt Ntrl ConvertArb ConvertArb Gov't/Credit Distressed Markets Mrkt Ntrl Mrkt Ntrl
-32.96% -2.40% -10.71% -11.85% -22.09% 2.44% 1.18% -1.86% 4.07% 5.08% -37.26% 1.43% 3.16%

Source: Hedge Fund Research, Inc. Note: The colored square at the top of the page represents the strategy that delivered the best performance for that year. The other strategies are shown in descending
order of performance results. Past performance does not guarantee future results. Real results may vary. Indexes are unmanaged and investors cannot directly invest in them. Composite index
14 results are shown for illustrative purposes and do not represent the performance of a specific investment.
For Illustrative Purposes Only
 III. Fund of Hedge Funds
Fund of Hedge Funds Characteristics1 Hypothetical Fund of Hedge Fund Allocation

• Invests in multiple hedge fund strategies • Professional management

while circumventing single manager Fund of • Manager sourcing
concentration risk Hedge Fund • Rigorous due diligence
Manager • Portfolio construction
• Diversification across different: strategies, • On-going monitoring
managers, and investment styles

• Low correlation with traditional securities

markets

Merger Arbitrage

Credit Arbitrage

Emerging Mkts
Market Neutral
Global Macro

Commodities

Distressed

Short Bias

L/S Equity
Activist
• An additional layer of fees for professional
investment allocation

• Business risk and operations due diligence

• Ongoing monitoring and risk management

• Potential to access closed and/or exclusive • Diversified across multiple

managers managers/strategies
• Allocations are
rebalanced according to a
targeted risk budget
1 Thehypothetical allocations above are for illustrative purposes and do not represent the allocations of a specific investment. Reference the Glossary for strategy descriptions and key definitions.
15
Please see the Appendix for Risk Considerations.
 III. Rationale for Professional Hedge Fund Selection

Hedge funds offer many appealing characteristics to Fund of hedge fund managers are uniquely
investors. At the same time, there are certain attributes specialized and resourced to evaluate and select quality
of hedge funds that require careful consideration and hedge funds for the purpose of constructing a portfolio
assessment that should be conducted by highly skilled of hedge fund strategies. See the below table for certain
professionals following a detailed research process. hedge fund characteristics and considerations.

Hedge Fund Characteristic Consideration

Investment flexibility Hedge funds allow for the use of trading strategies such as short selling, options and
other derivative instruments, as well as hedging techniques and use of leverage, which,
while potentially increases investment returns, can be highly volatile and increase an
investor’s risk of investment loss. Significant investment expertise and experience is
often required to perform a meaningful fund evaluation.

Ability to be opportunistic in changing market Hedge fund managers can exercise their judgment without most traditional constraints,
environments making it challenging to evaluate and forecast investment risk.

Intended to generate alpha or excess return Alpha* identification is difficult due to:
delivered by an investment manager - Complexity of trading strategies,
- Reduced transparency,
- Valuation challenges,
- Changing strategies and changing conditions.

Exclusive access Hedge funds often have high investment minimums and at times may be inaccessible
due to limited capacity.

Individual funds will have specific risks related to their investment programs that will vary from fund to fund. Please review and be familiar with the fund’s offering materials, including the private
16
placement memorandum or prospectus. Please see the Glossary for key definitions and Appendix for Risk Considerations.
 III. The Emergence of Registered Funds of Hedge Funds

Registered funds of hedge funds have recently gained more visibility to

investors looking to invest in alternative investments. Registered funds are
registered as an investment company under the Investment Company Act of
1940 and offer some unique benefits to investors when compared to non-
registered funds:

¾ They generally offer lower investment minimums

¾ No limit to the number of investors in the fund

¾ They can be sold to a much broader range of investors

¾ Registration generally means there is increased transparency when compared

to unregistered funds

¾ Registered funds of hedge funds still use similar investment strategies as

traditional hedge fund strategies

Individual funds will have specific risks related to their investment programs that will vary from fund to fund. Please review and be familiar with the fund’s offering materials, including the private
17
placement memorandum or prospectus. Please see the Glossary for key definitions and Appendix for Risk Considerations.
 III. Funds of Hedge Funds Performance compared to Large Cap Equities

Index Growth Comparison

Monthly Cumulative Rate of Return
January 1, 2000 - December 31, 2010
80.00%

60.00%

40.00%

20.00%

0.00%
Se 0

Se 1

Se 2

Se 3

Se 4

Se 5

Se 6

Se 7

Se 8

Se 9

Se 0
M 0

M 1

M 2

M 3

M 4

M 5

M 6

M 7

M 8

M 9

M 0
Ja 0

Ja 1

Ja 2

Ja 3

Ja 4

Ja 5

Ja 6

Ja 7

Ja 8

Ja 9

10
-0

-0

-0

-0

-0

-0

-0

-0

-0

-0

-1
0

0
0

1
p-

p-

p-

p-

p-

p-

p-

p-

p-

p-

p-
n-

n-

n-

n-

n-

n-

n-

n-

n-

n-

n-
ay

ay

ay

ay

ay

ay

ay

ay

ay

ay

ay
Ja

-20.00%

-40.00%

-60.00%
Funds of Hedge Funds U.S. Large Cap Equities

Funds of Hedge Funds: HFRI Fund of Funds Composite Index, source: Hedge Fund Research, Inc. U.S. Large Cap Equity: S&P 500 Index with the reinvestment of dividends, source: Bloomberg.
The HFRI Fund Weighted Index is net of fees and expenses. Indexes are unmanaged and investors cannot directly invest in them. The composite index results above are for illustrative purposes
and do not represent the performance of a specific investment. Volatility as measured by annual standard deviation. Past performance is no guarantee of future results. Reference the
Appendix for index descriptions and disclosures.
18
For Illustrative Purposes Only
 IV. Managed Futures

What are Managed Futures?

» An alternative investment vehicle
» Limited liability investment vehicles that trade futures, forwards and options on futures
and forwards
» Use professional portfolio management
» Offer potential global market exposure through a single investment vehicle
» Assets allocated to professional trading managers called Commodity Trading Advisors
(“CTAs”)

What is a CTA?
» A professional trading manager who manages customer money in the futures, forwards,
and options markets
» CTAs use tested trading methods and money management techniques in their attempt to
achieve profits and control risk

19
Please see Appendix for Risk Considerations.
 IV. Markets Traded
Not all markets are traded in any given Morgan Stanley Smith Barney managed futures funds. Markets
traded may include, but are not limited to:

Stock Indices Interest Rates Foreign Exchange Agriculturals Metals

AEX Australian Bank Bill Australian dollar Barley Aluminum

All Share Australian Treasury Bonds Brazilian real Cocoa Copper
CAC 40 British Long Gilt British pound Coffee Gold
DAX British Short Sterling Canadian dollar Corn Lead
Dow 30 Canadian Bankers Acceptances Chilean peso Cotton Nickel
FTSE 100 Canadian Government Bond Chinese Yuan Feeder cattle Palladium
Euro Stoxx 50 Euribor Colombian peso Lean hogs Platinum
Euro Stoxx 600 Eurodollar Czech koruna Live cattle Silver
H-Shares European Bonds Euro Lumber Tin
Hang Seng Euroyen Hong Kong dollar Milk Zinc
IBEX 35 Japanese Government Bond Hungarian forint Oats
MIB 30 Muni Bond Index Indian rupee Orange juice
NASDAQ 100 New Zealand Bill Israeli shekel Pork bellies
Nikkei 225 Swapnotes Japanese yen Rapeseed
NYSE Composite Swiss Government Bond Korean won Rough rice
OMX 30 U.S. Treasury Bonds Mexican peso Rubber Energies
Russell 2000 U.S. Treasury Notes New Zealand dollar Soybean meal
S&P Canada 60 Norwegian krone Soybean oil Brent crude oil
S&P/MIB Philippine peso Soybeans Crude oil
S&P Midcap Polish zloty Sugar Gas oil
S&P Nifty Russian ruble Wheat Gasoline
S&P 500 Singapore dollar Heating oil
Singapore Free South African rand Kerosene
SPI 200 Swedish krona Natural gas
Taiwan Swiss franc
Topix Taiwan dollar
Turkish lira
U.S. dollar

20
For Illustrative Purposes Only
 IV. Managed Futures vs. Stocks
Since 1980, stocks have declined more than 10% on six occasions, with an average decline of 28.6% on these
occasions. Managed futures has had an average rate of return of 18.6% during those six periods.

50% B a rc lay C T A In d e x S & P 5 00 In d e x

3 8 .8 %
40%

30%
2 3 .1 %
1 8 .6 %
20% 1 6 .0 %
9 .7 %
10% 5 .6 %

0%

-1 0 %

-14.7% -15.4%
-2 0 % -16.5%
F irs t G ulf Rus s ian
-3 0 % Ram pant W ar Debt
-29.6%
Inflation Default
-4 0 % S toc k Tec h
M ark et B ubble
Credit
B urs ts -44.7%
-5 0 % Cras h Cris is
-51.0%
-6 0 %
D e c 8 0 -Ju l 8 2 Se p 8 7 -No v 8 7 Ju n 9 0 -O ct 9 0 Ju l 9 8 -Au g 9 8 Se p 0 0 - Se p 0 2 No v 0 7 -F e b 0 9

Data: January 1980 – December 2010. Monthly returns for the S&P 500 Index provided by PerTrac Financial Solutions, LLC (Memphis, TN) and monthly
returns for the Barclay CTA Index provided by Barclay Hedge, Ltd. (Fairfield, IA). Managed futures investments do not replace equities or bonds but rather act
as a complement to help in potentially smoothing overall portfolio returns. Monthly returns for the Barclay CTA Index reflect the composite fee structure of the
representative commodity trading advisors, and therefore, may be higher or lower than those fees applicable to any one particular managed futures fund.
Indexes are unmanaged and investors cannot directly invest in them. Composite index results are shown for illustrative purposes and do not represent the
performance of a specific investment. Please see Appendix for Index descriptions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
21
For Illustrative Purposes Only
 IV. Annualized Return of Managed Futures vs. Stocks
(January 1980 – December 2010)

International
Jan-1980 to Dec-2010 U.S. Stocks U.S. Bonds Managed Futures
Stocks

Average Annual Return 11.4% 8.7% 10.1% 11.6%

Annualized Standard Deviation 15.6% 5.8% 17.8% 15.3%

Worst Draw Down -51.0% -9.0% -56.4% -15.7%

Best /Worst 12 Month Return 61.2% / -43.3% 35.2% / -5.1% 103.7% / -49.9% 63.7% / -7.9%

% Positive 12 Month Periods 78.1% 94.5% 71.5% 87.0%

Return / Risk 0.73 1.51 0.57 0.76

In the performance table above, average annual return is based on annualized compounding of monthly returns. The standard deviation statistic
measures the dispersion of monthly returns about the mean and is used to represent the volatility or risk. The worst drawdown is the largest
percentage loss incurred from the highest value to its lowest value for the given time period. The Return/Risk statistic is related to the Sharpe
Ratio, return divided by the standard deviation and is unadjusted for the risk-free Treasury Bill rate. Statistical comparisons on a 12-month holding
period basis are based on monthly data from January 1980 through December 2010, producing 355 observations. Sources: U.S. Stocks (S&P 500
Index), U.S. Bonds (Barclays Aggregate Bond Index), International Stocks (MSCI EAFE Index)—PerTrac Financial Solutions, LLC (Memphis, TN);
Managed Futures (Barclay CTA Index)—Barclay Hedge, Ltd. (Fairfield, IA). Monthly returns for the Barclay CTA Index reflect the composite fee
structure of the representative commodity trading advisors, and therefore, may be higher or lower than those fees applicable to any one particular
managed futures fund. Indexes are unmanaged and investors cannot directly invest in them. Composite index results are shown for illustrative
purposes and do not represent the performance of a specific investment. Please see Appendix for index descriptions.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
22
For Illustrative Purposes Only
 V. Private Equity

¾ Private equity can be broadly defined as privately negotiated investments in (most often)
non-public companies

¾ Private equity managers are stand-alone, fully integrated organizations that may take an
active role in a company's management seeking to create value and exit profitably

Private equity includes the following categories/strategies:

Seed/Startup
Seed/Startup Development
Development Expansion
Expansion Buyout
Buyout Restructuring
Restructuring

VENTURE
VENTURE CAPITAL
CAPITAL ("VC")
("VC")

LEVERAGED
LEVERAGED BUYOUTS
BUYOUTS ("LBO")
("LBO")

MEZZANINE
MEZZANINE

DISTRESSED
DISTRESSED DEBT
DEBT

23
 V. Private Equity: Typical Roles and Responsibilities

Entrepreneurs
Entrepreneurs
General
General
Limited
Limited Partners
Partners Operators
Operators
Partner/Sponsor
Partner/Sponsor Companies
Companies
• Typically contribute 95-99% • Identify and screen • Venture idea
of the fund's capital opportunities
• Attempt to build
• Typically receive a preferred • Structure deals the business
return (8% - 10%) and 80% of
• Active board membership • Manage operations
the profits
& participation
• Own stake in the business
• Co-invest with GPs in specific
• Manage the investment
deals (optional)
• Earn management fees
(approximately 1% - 2%)
and a "carried interest",
typically 20% of the profits
• Generally contribute 1% to
5% of the capital

24
For Illustrative Purposes Only
 V. Potential Advantages Of Private Equity Investing

Opportunity • Access to companies not typically accessible via traditional public markets,
however these companies are typically less tested than their publicly-traded
counterparts
• Potentially lower valuations due, in part, to reduced liquidity, however
reduced liquidity limits the opportunity to exit a troubled investment

Access To Information • Detailed due diligence and analysis

• Direct contact/interactions with management and customers

Potential For Control • Active role on boards provides ability to influence strategy/
change management
• Private and public sale options controlled by investors
• Structured to attempt to mitigate risk (e.g., liquidation
preferences, ratchets)

Ongoing Involvement • Private equity firms' financial interest tied to successful investing
• Value-added operating expertise

Long-term Return and • Historically, enhanced return versus the public market
Diversification Potential • Historically, lower correlation with major market indices

Individual funds will have specific risks related to their investment programs that will vary from fund to fund. Please review and be familiar with the fund’s offering materials, including the private
placement memorandum or prospectus. Please see the Glossary for key definitions and Appendix for Risk Considerations. Past performance does not guarantee future results. Real results may
25
vary.
 VI. Real Estate
Benefits to Real Estate investing when compared to traditional investments.

Traditional
Traditional Investments
Investments Real
Real Estate
Estate

• Relative performance objective* • Internal Rate of Return objective*

• No leverage • Leverage (typically 0 to 75%)

• Historically, high correlation with market indices • Historically, low correlation with market indices

• More volatility than real estate, even during periods • Less volatility compared to equities and
of out performance fixed income

• Financial asset • Physical asset

• Highly liquid • Relatively illiquid

• Historically vulnerable to inflation • Potential inflation hedge

*There is no guarantee that these objectives will be met.

Individual funds will have specific risks related to their investment programs that will vary from fund to fund. Please review and be familiar with the fund’s offering materials, including the private
26
placement memorandum or prospectus. Please see the Glossary for key definitions and Appendix for Risk Considerations.
 VI. Various Real Estate Products Offer A Spectrum Of Risk/Return Options

Lower Risk/Lower Return Potential

¾ Core, unleveraged properties in a commingled real estate fund
¾ Diversified across property types

Moderate Risk/Return Potential

¾ Value added properties in a commingled real estate fund with leverage

Moderate Return/Higher Risk Potential

¾ REITs (Real Estate Investment Trusts)

High Risk/High Return Potential

¾ Opportunity fund investments with high leverage 65%-85%
¾ Speculative development (highest risk)

Individual funds will have specific risks related to their investment programs that will vary from fund to fund. Please review and be familiar with the fund’s offering materials, including the private
27
placement memorandum or prospectus. Please see the Glossary for key definitions and Appendix for Risk Considerations.
 VI. Why Invest in Commercial Real Estate (“CRE”)
» U.S. real estate is a huge asset class – over $4.0 trillion as the second quarter of 2010*

» Provides diversification to traditional investments

» Generally less volatility compared to traditional investments

» Historically lower correlation with equity and bond markets

» Potential for risk-adjusted returns – especially given current global credit crisis

» Potential inflation hedge

Some Risk Considerations (please refer to the Appendix for a more complete description)

» Real Estate Ownership: fluctuations and cycles in value and market conditions may result in
reductions in the value and the income associated with real property interests
» Real Estate investments may use leverage
» Interest Rate Risk
» Illiquid Investments
» Competition for Investments
*2011 Emerging Trends in Real Estate. Source: Roulac Global Places, from various sources, including American Council of Life Insurers, Commercial Mortgage Alert, Federal Reserve
Board, FannieMae.com, IREI, NAREIT, PricewaterhouseCoopers, and Real Capital Analytics.

Individual funds will have specific risks related to their investment programs that will vary from fund to fund. Please review and be familiar with the fund’s offering materials, including the
28
private placement memorandum or prospectus. Past performance does not guarantee future results. Real results may vary. Please see Appendix for Risk Considerations.
 VII. Exchange Funds

» Private placement vehicles enabling holders of concentrated single-stock positions to

exchange those stocks for a diversified portfolio
» Typically comprised largely of equities, exchange funds may also include other qualifying
assets such as real estate or commodities

» Investors may benefit from:

» Greater diversification by exchanging a concentrated stock position for fund shares without
triggering a taxable event

Considerations
» Dividends are pooled
» Investors forfeit their stock voting rights
» Investment may be illiquid for several years
» Investments may be leveraged or contain derivatives
» Significant early redemption fees may apply
» Changes to the U.S. tax code which could be retroactive (potentially disallowing the favorable tax
treatment of exchange funds)
» Investment risk and potential loss of principal

Individual funds will have specific risks related to their investment programs that will vary from fund to fund. Please review and be familiar with the fund’s offering materials, including the private 31
29
placement memorandum or prospectus. Please see the Appendix for Risk Considerations.
 VIII. Appendix
Risk Considerations
Investing in Alternative Investments can involve a high degree of risk. These are speculative securities. Diversification does not eliminate
market risks. Before you decide to invest, read the entire prospectus carefully.
Alternative Investments
Valuation Risk Certain alternative investment funds often trade in esoteric and/or illiquid securities. In normal markets it is sometimes difficult to price these
instruments, causing managers to estimate market values. In stressed markets this problem may be magnified, leaving investors with an imprecise understanding
of a portfolio's Net Asset Value. Valuations for investments for which market quotations are not available may at times be estimates, which may affect the amount
of the management and incentive fees
Specialized Trading Special investment techniques such as leveraging, short-selling and investing in derivatives, including options and futures, may result in
significant losses
Manager Risk Investing in a fund exposes investors to risks particular to that fund manager. These risks can include poor decision making, key personnel
departures or fraud, among others. In the case of a fund of funds, although the Investment Manager selects managers it believes are prudent and reliable,
managers could perform poorly or reach capacity
Liquidity Risk Interests in certain alternative investment funds are generally not readily marketable and not redeemable. Interests in a fund generally are not
transferable except in limited circumstances. Accordingly investors have to bear the risks of investing for the full duration of the lock-up period
Investment Process/Model Risk The Investment Manager's investment process may be heavily dependent on the Investment Manager's analysis of historical
data. No assurance can be given that these analyses will accurately predict future results
Market Risk The value of securities, commodities, and currencies may fluctuate reflecting a variety of factors, including changes in investor outlook and political
and economic environments.
Strategy Risk Investments in diverse and sometimes complex strategies are affected in different ways and at different times by changing market conditions.
Strategies may at times be out of market favor for considerable periods, with adverse consequences for the portfolio.
Incentive Compensation Managers will, in general, receive performance compensation, which may give the managers incentives to make investments that carry
greater risk or more speculative than might be the case if no performance compensation were paid.
Hedge Funds
Specialized Trading Special investment techniques such as leveraging, short-selling and investing in derivatives, including options and futures, may result in
significant losses.
Market Risk The value of securities, commodities, and currencies may fluctuate reflecting a variety of factors, including changes in investor outlook and political
and economic environments.
Strategy Risk Hedge Funds trade in diverse complex strategies that are affected in different ways and at different times by changing market conditions. Strategies
may at times be out of market favor for considerable periods, with adverse consequences for the portfolio.
Manager Risk Although Citigroup Alternative Investments selects advisors it believes are prudent and reliable, advisors could perform poorly or reach capacity.
Incentive Compensation Managers will, in general, receive performance compensation, which may give the managers incentives to make investments that carry
more risk or more speculative than might be the case if no performance compensation were paid.
Liquidity Risk Funds of Hedge Funds may have limited redemption dates. Underlying advisors may also have lock-up periods and infrequent redemption dates,
thereby limiting the Investment Manager's ability to reallocate assets as market and advisor performance change.
30
 VIII. Appendix
Valuation Risk Hedge Funds may trade in esoteric securities, often in illiquid markets. In normal markets it is sometimes difficult to price these instruments, causing
managers to estimate market values. In stressed markets this problem may be compounded, leaving investors with an imprecise understanding of the NAV of a
multi-strategy portfolio. Valuations for investments for which market quotations are not available may at times be estimates, which may affect the amount of the
Management and Incentive Fees.
Conflicts of Interest Citi Alternative Investments is an indirect wholly-owned subsidiary of Citigroup,
and some or all Placement Agents and the Administrator also are affiliates of Citigroup and Citi Alternative Investments. Certain conflicts of interest may arise within
the
Citigroup organization.
Investment Process Risk Citi Alternative Investments' strategy allocation methodology is heavily dependent on its analysis of historical data and, in particular,
statistical volatility, return, and correlation characteristics. No assurance can be given that the financial parameters will accurately predict future characteristics.
Reliance on Industry Data For purposes of its analysis, Citi Alternative Investments utilizes indices compiled by Hedge Fund Research, Inc. ("HFR") based on
information from the hedge funds that it tracks. The information underlying the indices and the classification of the underlying funds have not been independently
verified by either HFR or Citigroup, neither of which make any representations as to their accuracy.
Managed Futures
Leverage Trading of commodity interests is speculative, volatile and involves a high degree of leverage. A small change in the market price of a contract can
produce major losses for the Fund. You could lose all of your investment. Leverage is inherent in futures trading. In order to enter into a futures contract, a trader
needs to post with the exchange only a small security deposit, or 'margin', sufficient to cover any daily fluctuations in the value of the positions, which is adjusted daily
to account for changes in value. The low initial outlay, typically ranging from about 5% to 20% of the value of the contract, allows the investor continued use of most
of his capital for the duration of the contract, while at the same time controlling positions with much greater value than the initial amount invested. This inherent
leverage amplifies the effect of price fluctuations, creating greater gains and losses, as a percent of the actual amount invested and resulting in increased volatility.
Fees & Expenses Regardless of trading performance, the Funds will incur fees and expenses, including brokerage and management fees. Substantial incentive
fees may be paid to one or more trading advisors even if the Fund experiences a net loss for the full year
Lack of Liquidity Your ability to redeem units is limited. In many cases, you may only redeem units after an initial three-month holding period and then only on a
monthly basis
Conflicts of Interest The Funds may be subject to conflicts of interest: the general partner and broker may be affiliates; each of the trading advisors, the commodity
broker and their principals and affiliates may trade in commodity interests for their own accounts; and your Smith Barney financial consultant will receive ongoing
compensation for providing services to your account
Diversification Benefit is Uncertain The Funds will not provide any benefit of diversification of your overall portfolio unless it is profitable and produces returns that
are independent from stock and bond market returns
Strategy Risk The advisors' trading strategies may not perform as they have performed in the past. The advisors have from time to time incurred substantial losses
in trading on behalf of clients
Taxation You will be taxed on your share of each Fund's income, even though the Fund does not intend to make any distributions
Manager Risk The general partner at any time may select and allocate the Fund's assets to advisors that are not described in the prospectus. You may not be
advised of such changes in advance. You must rely on the ability of the general partner to select advisors and allocate assets among them
Lack of Liquidity Your ability to redeem units is limited. In many cases, you may only redeem units after an initial three-month holding period and then only on a
monthly basis

31
 VIII. Appendix
Competition for Investments Results depend on the availability of real estate investments and the Manager's ability to identify and consummate such transactions.
There can be no assurance that the Manager will be able to find attractive investments to invest all or substantially all of the Company's capital. In addition, the timing
which an investor makes investments will have a significant impact on returns
Conflicts of Interest The Funds may be subject to conflicts of interest: the general partner and broker may be affiliates; each of the trading advisors, the commodity
broker and their principals and affiliates may trade in commodity interests for their own accounts; and your Smith Barney financial consultant will receive ongoing
compensation for providing services to your account
Diversification Benefit is Uncertain The Funds will not provide any benefit of diversification of your overall portfolio unless it is profitable and produces returns that
are independent from stock and bond market returns
Strategy Risk The advisors' trading strategies may not perform as they have performed in the past. The advisors have from time to time incurred substantial losses in
trading on behalf of clients
Taxation You will be taxed on your share of each Fund's income, even though the Fund does not intend to make any distributions
Manager Risk The general partner at any time may select and allocate the Fund's assets to advisors that are not described in the prospectus. You may not be
advised of such changes in advance. You must rely on the ability of the general partner to select advisors and allocate assets among them
Private Equity
Valuation As Private Equity Funds generally will invest in securities that are not readily marketable, the securities generally will be carried at the values provided to the
Fund or at cost. These valuation procedures are subjective in nature, do not conform to any particular industry standard and may not reflect actual values at which
investments are ultimately realized
Liquidity Risk Interests in a Private Equity Fund are generally not readily marketable and not redeemable. Interests in a Fund generally are not transferable except in
limited circumstances. Accordingly investors have to bear the risks of investing in the Fund for the full duration of the Fund
Speculative Investment The investment strategies utilized may include highly speculative investment techniques, highly concentrated portfolios, control and non-
control positions and illiquid investments. Because of the specialized nature of the investment, it is not suitable for certain investors and, in any event, an investment in
a Private Equity Fund should constitute only a limited part of an investor's total portfolio. There can be no assurance that a Fund will return investors' capital or that
cash will be available for distributions
Default Remedies If an investor fails to Fund a capital call from a fund when due, the Fund may exercise various remedies with respect to such investor and its
interest including, but not limited to, causing the investor to forfeit or sell all or a portion of its interest in the Fund or requiring that the investor immediately pay up to
the full amount of its remaining capital commitment
Real Estate
Real Estate Ownership Real estate historically has experienced significant fluctuations and cycles in value and local market conditions may result in reductions in the
value and the income associated with real property interests, including possible loss of principal investment
Leverage Most real estate investments employ leverage. Leverage has the effect of magnifying both gains and losses, including potential loss of principal
Interest Rate Risk Real estate investments may or may not include the use of floating rate leverage. Floating rate leverage increases the volatility of real estate
returns, including increasing the potential loss of principal. Other risks related to interest rates include the risk associated with refinancing properties
Illiquid Investments Many non-REIT real estate investments are illiquid, and are not listed on any exchange. Investments should generally be regarded as fixed and
long term. Generally, there are no liquidity provisions and no mechanisms in place for sale of partial interests in non-realized real estate funds. There are often
significant restrictions on transfer

32
 VIII. Appendix
Referenced Indices
• HFR Indices are compiled by Hedge Fund Research, Inc. ("HFR"), an industry service provider. They are based on the performance of hedge
funds in various strategies as reported by the hedge fund managers to HFR. While the HFRI Indices are frequently used, they have limitations
(some of which are typical of other widely used indices). These limitations include survivorship bias (the returns of the indices may not be
representative of all the hedge funds in the universe because of the tendency of lower performing funds to leave the index); heterogeneity (not
all hedge funds are alike or comparable to one another, and the index may not accurately reflect the performance of a described style); and
limited data (many hedge funds do not report to indices, and the index may omit funds, the inclusion of which might significantly affect the
performance shown. The HFRI Indices are based on information self-reported by hedge fund managers that decide on their own, at any time,
whether or not they want to provide, or continue to provide, information to HFR Asset Management, L.L.C. Results for funds that go out of
business are included in the index until the date that they cease operations. Therefore, these indices may not be complete or accurate
representations of the hedge fund universe, and may be biased in several ways. All data is net of all fees, denominated in U.S. dollar and equal-
weighted. The information underlying the indices and the classification of the underlying funds have not been independently verified by either
HFR or Morgan Stanley Smith Barney, and neither HFR nor Morgan Stanley Smith Barney make any representation as to their accuracy. Past
performance does not guarantee future results. Real results may vary.
• The specific indices used in this document are comprised of hedge funds following the investment strategies as described below
• HFR Fund Weighted Composite Index: Includes over 2000 constituent funds, equal-weighted index, no fund of funds included in the index, and
the constituent funds must have at least $50 million under management or have been actively trading for at least twelve months.
• FR Equity Hedge Index (Long/Short Equity): Equity Hedge investing consists of a core holding of long equities hedged at all times with short sales
of stocks and/or stock index options
• HFR Convertible Arbitrage Index (Convertible Arbitrage): Convertible Arbitrage involves purchasing a portfolio of convertible securities, generally
convertible bonds, and hedging a portion of the equity risk by selling short the underlying common stock
• HFR Merger Arbitrage Index (Merger Arbitrage): Merger Arbitrage, sometimes called Risk Arbitrage, involves investment in event-driven
situations such as leveraged buy-outs, mergers and hostile takeovers
• HFR Equity Market Neutral Index (Equity Market Neutral): Equity Market Neutral investing seeks to profit by exploiting pricing inefficiencies
between related equity securities, neutralizing exposure to market risk by combining long and short positions
• HFR Event-Driven: Investment Managers who maintain positions in companies currently or prospectively involved in corporate transactions of a
wide variety including but not limited to mergers, restructurings, financial distress, tender offers, shareholder buybacks, debt exchanges, security
issuance or other capital structure adjustments.
• HFR Macro Index (Global Macro): Macro involves investing by making leveraged bets on anticipated price movements of stock markets, interest
rates, foreign exchange and physical commodities
• HFR Fixed Income Arbitrage Index (Fixed Income Arbitrage): Fixed Income Arbitrage is a market neutral hedging strategy that seeks to profit by
exploiting pricing inefficiencies between related fixed income securities while neutralizing exposure to interest rate risk
• HFR Relative Value Index: Investment Managers who maintain positions in which the investment thesis is predicated on realization of a valuation
discrepancy in the relationship between multiple securities. 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. Fixed income strategies are
typically quantitatively driven to measure the existing relationship between instruments and, in some cases, identify attractive positions in which the
risk adjusted spread between these instruments represents an attractive opportunity for the investment manager. RV position may be involved in
corporate transactions also, but as opposed to ED exposures, the investment thesis is predicated on realization of a pricing discrepancy between
related securities, as opposed to the outcome of the corporate transaction.
• HFR Statistical Arbitrage Index (Statistical Arbitrage): Statistical Arbitrage utilizes quantitative analysis of technical factors to exploit pricing
inefficiencies between related equity securities, neutralizing exposure to market risk by combining long and short positions
• HFR Distressed Securities Index (Distressed Debt): Distressed Securities strategies invest in, and may sell short, the securities of companies
where the security's price has been, or is expected to be, affected by a distressed situation
• HFR Emerging Market Index (Emerging Markets): Emerging Markets funds invest in the securities of companies or the sovereign debt of
developing or 'emerging' countries. The constituents of the HFRI Emerging Markets Indices are selected according to their Regional Investment
Focus only. There is no Investment Strategy criteria for inclusion in these indices.
• HFRI Indices (Blended): Monthly Performance Indices broken down into 37 different categories by strategy
33 • HFRI FOF Index: Listing of Top 50 FOF rankings by Rate of Return, Sharpe Ratio, and Standard Deviation Sorted by 1, 3, and 5 year intervals
 VIII. Appendix
• Baclays Aggregate Bond Index: A market-weighted, intermediate-term bond index of over 6,500 intermediate-term government bonds,
investment grade corporate debt securities and mortgage-backed securities.
• Barclays CTA Index: this benchmark is representative of performance from commodity trading advisors. There are currently 565
programs included in the calculation of the Barclay CTA Index for the year 2011, which is unweighted and rebalanced at the beginning of
each year.
• S&P 500: A capitalization-weighted index of 500 U.S. large cap stocks
• Morgan Stanley Capital International World: An index consisting of approximately 1,500 stocks in 23 countries globally and
representing a significant portion of the total market capitalization in those countries
• NAREIT (REITs): Represents the investment performance of all publicly traded REITs as compiled by the National Association of
Real Estate Investment Trusts
• NCREIF Index: The NCREIF Index is an index of the quarterly total returns of the commercial real estate properties held for tax-exempt
institutional investors by the members of NCREIF (National Council of Real Estate Investment Fiduciaries)
• The NASDAQ Composite Index: NASDAQ Covers 4,500 stocks traded over the counter. It represents many small company stocks but
is heavily influenced by about 100 of the largest NASQ stocks. It is a value-weighted index calculated on price change only and does not
include income

34
 VIII. Appendix
Glossary
Alpha: A mathematical value indicating an investment's excess return relative to a benchmark. Measures a manager's value added
relative to a passive strategy, independent of the market movement

Beta: A quantitative measure of volatility of a security or strategy relative to a market index. An investment with a beta less than 1.0
is less volatile than the market while an investment with a beta greater than 1.0 is more volatile than the market

Correlation: A measure of the degree to which two variables move in the same direction with the same impact on performance, measured in
a range of -1.0 to 1.0. A correlation of -1.0 implies that the variables move inversely with one another while a correlation of 1.0
implies that the variables move in exactly the same manner. A correlation of zero implies that there is no relationship between
the movements of the variables (therefore implying perfect diversification)

Drawdown: A measure of risk often expressed as the percentage loss of a fund's or strategy's highest value to its lowest value within a
specific time period

Optimization: A mathematical process that seeks to maximize expected portfolio return for a targeted level of risk, or minimize expected risk
for a targeted level
of return

Robustness: A measure of long-term stability among two or more investments' risk, return, and correlation characteristics

Standard Deviation: A measure of the variation of returns around the mean return. Standard deviation is the most widely used approximation of the
risk of an individual investment or portfolio

Sharpe Ratio: A measure of risk-adjusted return calculated by dividing an investment's return over the risk-free rate (i.e., Treasury bill yield) by
the investment's standard deviation

Serial Correlation: Reported hedge fund returns that are artificially consistent over time

Unsmoothing: A statistical technique that corrects for the valuation biases in reported hedge fund performance

35
Note: The definitions described above are not a complete listing of terms and are provided to define key words used in this document