This presentation is only for qualified attending the Liquid Alternative event.

The importance of liquid alternatives in a portfolio context

Industry Overview – Schroder GAIA & GAIA II Update

Andrew Dreaneen | Head of Schroder GAIA Product & Business Development

For professional investors and advisers only. Agenda

 Global fund landscape

 Drivers for allocations and common misconceptions

 Available strategies & setting a framework

 Thoughts and considerations for choosing UCITS hedge funds

 Schroders capabilities in liquid alternatives

 Conclusions

1 Global hedge fund landscape Global hedge fund assets

Source: HFI Global Autumn Review 2016

3 Global hedge fund assets

Source: HFI Global Autumn Review 2016

4 Drivers for hedge fund allocations and common misconceptions Demand for Alternatives Substantial growth forecasted over the next five years

Global alternative assets Global alternative assets Global alternative assets (US$ in trillions) by asset class type (US$ in trillions) by sector (US$ in trillions) by region

20,0 20,0 20,0 18.1 18.1 18.1 Middle East 18,0 18,0 Sovereign 18,0 Commodities and Africa wealth funds 1.0 Latin America 2.1 Liquid Insurers 16,0 16,0 16,0 14.6 alternatives 14.6 14.6 Institutional High-net-worth 14,0 14,0 2,5 14,0 -Pacific loans

12,0 12,0 12,0 10.8 10.8 10.8 Real estate

10,0 0.9 10,0 5,6 Mass affluent 10,0 Europe 0.5 8.1 8.1 8.1 8,0 8,0 1,5 8,0 4,8 Hedge funds

6,0 6,0 2,8 6,0 3,2 4,0 4,0 Pension funds 4,0 North America Private equity 2,0 2,0 2,0

0,0 0,0 0,0 2012 2015F 2018F 2020F 2012 2015F 2018F 2020F 2012 2015F 2018F 2020F

Source: Strategy and PWC 2015

6 $Bn Club of UCITS Investors Reasons for Allocating

Investment considerations for Allocating MSCI AC ML High MSCI Reduced S&P 500 Asia Yield HFRI duration risk; World Providing Pacific index 2% uncorrelated Simply look for returns to Egerton 0.47 0.50 - - 0.68 outperformance overall ; 22% portfolio; 55% Sirios 0.42 0.47 - - 0.60

Indus - 0.66 0.79 - 0.74

Paulson 0.24 0.28 - - 0.39

Managing cash BSP - - - 0.03 0.08 to offset illiquid instruments; 7% NGA 0.54 - - 0.71 0.65

Substitute for BlueTrend 0.00 0.03 - 0.03 0.14 fix income exposure; 8% Two -0.23 -0.23 - -0.18 -0.16 Reduce equity Sigma* ; 6% Cat Bond -0.08 -0.02 - 0.09 -0.02

Source: Absolute Return UCITS Survey Results November 2015. 155 Respondents with Absolute Return UCITS AUM: $91bn Source: Schroders as at 30 September 2016 (strategy inception for each manager). *Please not is based on simulated returns, please refer to the full simulated performance disclaimers at the back of the presentation

7 8 by AUM dominated Asset Managers75%: Who are the main providers of liquid alternatives today?

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The $5 billion dollar hedge fund club Many of the largest hedge fund managers now available in UCITS

US Based Managers Abrams Capital Management GMT Capital Adage Capital Management GoldenTree Asset Management Anchorage Capital Group Angelo, Gordon & Co.. HBK Capital Management Apollo Management Highfields Capital Management JANAJANA Partners Kayne Anderson Capital Advisors BainBain Capital/Brookside Capital/Brookside CapitalCapital Partners Partners King Street Capital Management BalyasnyBalyasny Asset ManagementManagement Lone Pine Capital Luxor Capital Group Magnetar Capital BlueMountain Capital Management Marathon Asset Management Bracebridge Capital MarinerMariner Investment Group Group Mason Capital Management CarlsonCarlson Capital Millennium Management Monarch Alternative Capital Centerbridge Partners Moore Capital Management Cerberus Capital Management MSD Capital Citadel Pennant Capital Management Coatue Capital Perry Capital Convexity Capital Management Pershing Square Capital Management Corvex Management PinePine RiverRiver Capital ManagementManagement D.E. Shaw Group PointState Capital Davidson Kempner Capital Management Discovery Capital Management Samlyn Capital DW Partners Scopia Capital EJF Capital Senator Investment Group Element Capital Silver Point Capital EllingtonEllington Management Group Group Soroban Capital Partners Elliott Management Corporation Steadfast Capital Management UK Based Managers EmergingEmerging Sovereign Group Group Taconic Capital Advisors Capula LLP Eton Park Capital Management Third Point Lansdowne Partners Management The Children's Fir Tree Partners Trian Fund Management 75% AKO First Quadrant ValueAct Capital Management Asset Management LLP Glenview Capital Management Cheyne Capital Management AQR Capital Management Maverick Capital AQR Capital Management Maverick Capital 20% CQS (UK) LLP Beach Point Capital Management MKP Capital Management Beach Point Capital Management MKP Capital Management Egerton Capital Blackstone Group/GSO Capital Partners Och-Ziff Capital Management Group Blackstone Group/GSO Capital Partners Och-Ziff Capital Management Group LLP Omega Advisors Odey Asset Management Fortress Investment Group Paulson & Co.. Winton Capital Management Limited Graham Capital Management Tudor Investment Corp Man GLG Grantham, Mayo, Van Otterloo Two Sigma Investments Halcyon Asset Management Visium Asset Management IndusIndus CapitalCapital PartnersPartners

Source: Schroders analysis and HFI data based on US and UK headquartered hedge fund centric managers with $5bn+ AUM data as at 01 January 2015. Those launched UCITS funds in blue as at 31 May 2016.

9 Despite limitations, liquid alts can provide similar benefits to hedge funds

Performance comparison UCITS vs. offshore hedge funds Opportunity set 30% HFRI HFRU 20% Number of 2,200 500 10% funds

0% Regulatory Flexible UCITS regime -10%

-20%

-30% 2008 2009 2010 2011 2012 2013 2014 2015 2016

HFRI Fund Weighted Composite Index HFRU Hedge Fund Composite Index Industry performance

Correlation Annualised Annualised Index YTD 2016 F/Y2015 F/Y 2014 Drawdown Months to Recover to S&P 500 (5 Return Volatility years) Traditional Hedge Fund HFRI Offshore Hedge Fund 4.2% -1.1% 3.0% 2.6% 6.4% -20.1% 14 0.85 Weighted Composite Index Liquid Alternatives HFRU UCITS Hedge Fund 0.5% 1.5% 4.7% 1.9% 3.3% -6.3% 10 0.68 Composite Index

Source: HFR as of 30 September 2016

10 Available strategies & setting a framework A broad range of liquid alternatives strategies are now available Main constraints: liquidity, leverage and eligible assets Morningstar – 443 Funds, 19 Categories Citywire – 675 Funds, 13 categories 4 2 1 1 8 6 11 Multi-Strategy 13 11 Long / Debt Long / Short Equity Multi-Strat 20 14 88 31 Bond Strategies 15 Long / Short Equity Global Long / Short Equity Europe 31 189 Fund of Funds 16 16 Market Neutral Equity 41 Multi-Strategy Systematic Futures 18 Long / Short Equity US Global Macro Long / Short Equity Emerging Markets 55 Managed Futures 57 Long / Short Equity UK 27 Event Driven Currency Event Driven Currency Voltatilty 28 Debt 57 90 Volatility Emerging Market Equity 39 Fund of Funds Equity 28 60 Commodities Diversified Arbitrage 74 30 37 Fund of Funds (other) Convertibles Long / Short Equity (other) Alix Capital – 756 Funds, 11 Categories Kepler – 417 Funds, 13 Categories 2 14 1 1 Equity Long / Short 24 25 11 7 Credit 32 Long / Short Equity 20 Global Macro Global Macro 41 233 26 Managed futures Equity Market Neutral 154 Market Neutral 49 CTA 30 Multi-Strategy Emerging Markets Event Driven 59 Multi-Strategy 30 Multi-Asset Event-Driven Currency Currency 61 Volatility Volatility 112 32 Commodities Commodities 106 Replication Strategies 46 57 Source: Morningstar, Citywire, Alix Capital, Kepler. As at 31 July 2015.

12 Evolution of portfolio construction with liquid alternatives A simple but effective approach to diversification

Equity Fixed Income Other

Sovereign Small/Mid/Large Cap Investment Grade Core Growth/Value/Blend Cash High Yield Sector Specific Aggregate

Equity diversifiers: Bond diversifiers: Portfolio diversifiers: Liquid Alternatives Equity Long Short Absolute Return Event Driven Market Neutral Credit Long Short CTA/Macro Relative Value Catastrophe Bonds

Source: Schroders as at 30 September 2016

13 Liquid alternatives Equity Diversifiers

Return 6,00% Long equity index with Sirios 5,00%

4,00% Long equity index with equity long short

3,00%

2,00% Long equity index 1,00%

0,00% 4,00% 6,00% 8,00% 10,00% 12,00% 14,00% 16,00% 18,00% Volatility

Annualised Annualised Sharpe Maximum Correlation* Return Volatility Ratio Drawdown

100% World Stocks 1.71% 15.67% -0.04 -55.37% -

50% World Stocks, 50% Equity Hedge Fund Index 3.82% 11.87% 0.13 -44.08% 0.84

50% World Stocks, 50% Schroder GAIA Sirios US Equity 5.32% 10.72% 0.29 -37.07% 0.47

Schroders, as at 31 March 2016 * Correlation given between World Stocks and Equity Hedge Fund Index, and World Stocks and Schroder GAIA Sirios US Equity. Source: World Stocks: MSCI World, Equity Hedge Fund Index :HFRI Equity Hedge, GAIA Sirios: From July 1999 to February 2013 the Sirios offshore fund is used, from March 2013 onwards Schroder GAIA Sirios US Equity C Acc USD is used 14 Liquid alternatives Portfolio Diversifiers - CTA

Return 6% Traditional portfolio with BlueTrend 5%

4% Traditional portfolio with CTA index 3% Traditional portfolio

2%

1%

0% 4,00% 4,50% 5,00% 5,50% 6,00% 6,50% 7,00% 7,50% 8,00% Volatility

Annualised Annualised Sharpe Maximum Correlation* Return Volatility Ratio Drawdown

20% Cash, 40% World Stocks, 40% World Bonds 3.59% 7.37% 0.25 -25.97% -

32% World Stocks, 32% World Bonds, 16% Cash, 20% CTA Index 3.62% 6.16% 0.30 -19.24% 0.05

32% World Stocks, 32% World Bonds, 16% Cash, 20% Bluetrend 5.13% 6.81% 0.49 -16.43% 0.12

Schroders, as at 31 March 2016 *Correlation given between a portfolio of 20% Cash, 40% World Stocks, 40% World Bonds and CTA index, followed by Bluetrend. Source: Cash :USD 1M LIBOR, World Stocks: MSCI World, World Bonds: Barclays Global Aggregate, CTA Index: Newedge CTA Index, Bluetrend: BlueTrend Fund Limited (Class A USD) inception date was 1 April 2004. The management fee for Class A Shares was 1.5% from inception to 30 June 2011 and 2% from 1 July 2011 to 31 July 2014. 15 Thoughts and considerations for choosing UCITS hedge funds UCITS Hedge Fund vs. Offshore Hedge Fund High level considerations

UCITS hedge fund Offshore hedge fund

Prime broker Requirement to have an independent custodian Prime broker so typical prime broker arrangement is not possible Eligible Assets Prescribed includes by of way of example cash, Flexible transferable securities, derivatives, funds Commodities, Property Excludes commodity futures, limited to equities, Can also invest in derivatives on individual ETFs, commodities, properties, and physical and financial indices property/commodities Borrowing Limited to 10% on a temporary basis Can borrow e.g. up to 200% on a permanent basis Leverage 200% global exposure or prescribed VaR limit Flexible

Short sales Short sales not permitted, can only seek short Short sales permitted exposure via derivatives Diversification 5/10/40 Flexible

Minimum dealing/ Twice monthly (typically weekly) Annually although most monthly or quarterly valuation frequency

17 Rigorous manager selection process and monitoring Overview

Strategy selection

Investment due diligence

Operational due diligence

Ongoing risk management

Source: Schroders, 30 September 2016

18 Strategy selection Offering products that fit within the UCITS framework

Source: Schroders as at 30 September 2016. Note: this chart is meant to be indicative only. There will be different types of funds within each of these strategies which may or may not be eligible for UCITS. Each hedge fund needs to be evaluated on a case by case basis. Sophisticated UCITS funds can potentially permit high leverage, so long as VaR limits are respected

19 Investment manager selection Full due diligence performed based on key requirements for a given strategy

Preliminary regulatory Investment due diligence Operational due diligence compatibility assessment

 Experience  Risk management  Initial review of available capabilities regulatory, marketing, and  Track record and skill personnel materials  Fit with regulatory  Investment process requirements  Full documentation review covering all key business  Integrity – Investment diversification rules – Asset eligibility areas – Market & liquidity risks  Size  Onsite visit including thorough validation of all  Reputation points and processes raised in the documentation review

GAIA Investment Committee

Source: Schroders, as at 30 September 2016

20 Group due diligence Independent group due diligence process

DD Pre-full Full DD and Onsite conclusion DD review RFI review review and ongoing monitoring

 Full background check Detailed review of:  A full review and  Post DD visit, review on entire firm and discussion with the conclusion report issued  Organisational structure employees investment manager to senior management  Investment  Initial high level RFI risk/Operational risk  On-desk review of end-  Integration planning and  Key financial and framework including to-end processes. launch of product policy capabilities of managing Testing of processes commences with Lux verification undertaken a regulated fund and output validation and Manager  Challenging the RFI  Group policy dictates  Internal stakeholder  Compliance: Key review and sign off policies and procedures responses where annual RFI review with to be provided appropriate (based on an on-site visit every two internal review) years  Operation: How a fund is managed in a regulated  Explanation of how environment GAIA operates and how the Manager will need to  Full IT//BCP to adapt to its framework ensure minimum Schroders/industry best practices

Source: Schroders, as at 30 September 2016

21 Schroder GAIA risk management framework Several layers of risk management oversight for each hedge fund

Governance meetings . Monthly GAIA risk meetings . Monthly monitoring by Schroder GAIA Investment Committee . Quarterly monitoring by Schroder GAIA II Board Operational due diligence . Initial detailed operational due diligence . On-going monitoring of original due diligence findings . Annual update of initial report, biennial formal update including on site visit NGA Investment manager risk controls . Pre-trade compliance . Daily reviews . Portfolio limits/risk controls (leverage, liquidity, sector, single position, VaR)

Independent regulatory risk and compliance monitoring . Post-trade compliance monitoring . Investment risk monitoring: counterparty risk, liquidity, global exposure, VaR

Independent daily risk oversight . Performed by specialist hedge fund analysts in conjunction with multi asset risk team . Investment guidelines/stress tests/style drift/exposures/performance

Robust risk management with independent oversight and governance

Source: Schroders, 30 September 2016 22 Extensive global and local distribution support Over 250 distribution professionals servicing clients in >30 countries

US offshore Netherlands Italy Denmark Portugal Germany France Switzerland Sweden Austria Finland UK Norway Luxembourg Greece Spain Belgium China Ireland Korea Japan Brazil Taiwan Colombia Chile Peru Panama Uruguay Argentina Mexico

Israel Dubai

Source: Schroders, as at 31 August 2016

23 Transparent client-friendly marketing materials Ensures investors are well informed

Sales support

 Targeted fund information for investors globally

 Active support for global intermediary partners Comprehensive marketing information

 Fund launch video

 Dedicated website

 Monthly factsheets

 Quarterly letters

 Quarterly webcasts

 Peer analysis

 Specialised client reports

 Explanatory sales documents

Source: Schroders, as at 30 September 2016

24 Introducing Schroder GAIA Schroder GAIA and Schroder GAIA II Overview of sub-funds

Schroder GAIA Launch date Manager Fund Strategy Geographic focus AUM (USD)

25 Nov 2009 Schroder GAIA Egerton Equity* Equity long short Global 1,377m

27 Feb 2013 Schroder GAIA Sirios US Equity Equity long short Predominantly US 1,366m

21 Oct 2013 Schroder GAIA Cat Bond Catastrophe Bonds Global 1,099m

US, Canada and 25 Jun 2014 Schroder GAIA Paulson Merger Arbitrage Merger Arbitrage 503m Western Europe

17 Jun 2015 Schroder GAIA BSP Credit Credit long short Predominantly US 35m

9 Dec 2015 Schroder GAIA BlueTrend Global 350m

Pan Asian including 6 Jul 2016 Schroder GAIA Indus PacifiChoice Equity long short 92m Japan

Equity Market Neutral / 24 Aug 2016 Schroder GAIA Two Sigma Diversified Predominantly US 325m Systematic Macro Schroder GAIA II Launch date Manager Fund Strategy Geographic focus AUM (USD)

2 Mar 2016 Schroder GAIA II NGA Turnaround Distressed Predominantly US 12m

Source: Schroders as at 30 September 2016 *Hard closed, but subject to Capacity Restricted Dealing. Total AUM 5,159m

26 Schroder GAIA Egerton Equity Equity long short fund with significant outperformance over time

Egerton Capital Limited: AUM $14.6bn Performance objective

 Independent money management firm based in London, founded in 1994 The strategy aims to deliver equity type returns with less volatility than the by John Armitage market over the medium to long term

 Experienced investment team of 16 professionals

 Employee investments account for c. 7% of total firm assets Performance analysis (Egerton’s equity long short strategy*)  Key to success is research-intensive stock picking. ‘Bottom-up’ approach to stock selection creates a portfolio that is dynamic, eclectic, and 2000% uncorrelated 1500% Fund key features 1000%  Fundamental long short equity fund, typically long-biased

 Straightforward, liquid strategy investing predominantly in large cap equities 500%

 Opportunistically invest in corporate bonds 0%  Uses little or no leverage

 Reduces volatility through the use of shorts, hedges (e.g. index put

1995 1996 1998 1999 2000 2001 2002 2003 2003 2005 2006 2008 2009 2011 2012 2013 2014 2015 1997 2004 2007 2010 2014 options) and cash 1994 Schroder GAIA Egerton Equity Strategy MSCI World  Avoids large drawdowns Portfolio Manager John Armitage, Egerton Strategy* Index

Inception date 25 November 2009 Annualised return 13.3% 6.7% Base currency EUR Annualised volatility 9.6% 14.0%

Institutional share class fee 1.25%/20% Sharpe ratio 1.1 0.3

Liquidity Weekly (on Wed) and month end Maximum drawdown -28.3% -50.8%

Source: Schroders and Egerton as at 31 August 2016. *Performance shown for chain-linked track record of Egerton long short Equity B1 USD since its inception in September 1994. Egerton’s offshore fund has been used from December 1994 to November 2009. From December 2009 onwards Schroder GAIA Egerton Equity C Acc USD Hedged has been used. MSCI World Index is used. Performance is shown net of fees, NAV to NAV. 27 Egerton Long/Short vs. Schroder GAIA Egerton Equity Similarities and differences between GAIA Egerton UCITS and Cayman fund

Schroder GAIA Egerton Egerton Long/Short 190 Equity 180 Investment manager John Armitage, Egerton Capital

Investment strategy Market directional equity long short 170

Portfolio liquidity Liquid portfolio focussed on mid/ large cap securities 160 Leverage/ gross Max 150% exposure 150

Typical number of Longs 40 – 60 positions 140 positions Shorts 60 – 100 positions 130 Long exposure Mainly physical securities/ occasionally synthetic (single securities) 120 Mainly physical Short exposure Always synthetic (UCITS securities/occasionally requirement) 110 (single securities) synthetic 100 Options Occasionally used for hedging (single name and indices)

Institutional fees 1.00%/15% performance fee 1.25%/15% performance fee 90 nov/09 nov/10 nov/11 nov/12 nov/13 nov/14 nov/15 Dealing frequency Monthly (30 days notice) Weekly (3 days notice) Schroder GAIA Egerton Equity C Acc EUR

Minimum investment $1m $500,000 Egerton European Equity Fund Ltd - Class B

The Egerton Long/Short strategy can operate comfortably within the UCITS framework. However, there will be performance divergence through time as a result of the differences outlined above Source: Sirios as at 30 September 2015 28 Schroder GAIA Paulson Merger Arbitrage Superior risk-adjusted returns that are uncorrelated to the broader markets

Paulson & Co. AUM $11.1bn* Performance objective

 Globally renowned hedge fund founded by John Paulson in 1994 The fund targets an absolute return of 8 – 10% net of fees  Strategies include merger arbitrage, event-driven, credit and special situations’. Performance analysis (Paulson Partners LP**)  The merger funds have one of the longest and most successful track records, compounding at 11.2% over the last 22 years** 1400%  Proven team of 54 experienced investment professionals consisting of both sector and M&A transaction specialists 1200%

1000% Fund key features 800%  An absolute return focused merger arbitrage UCITS fund looking at opportunities in US, Canada and Europe 600%  Predominantly listed equities with opportunistic exposure to credit 400%  Aims to deliver returns in all market cycles by using different strategies. ie; cash/stock deals, topping bids, bankruptcies, restructurings 200%  High potential for alpha generation given sophisticated investment approach seeking unique and complex merger situations 0% 1994 1996 1998 1999 2001 2003 2005 2006 2008 2010 2012 2013 2015  Capital preservation, low correlation to markets and low volatility – just 2 Schroder GAIA Paulson Merger Arbitrage down years since inception in 1994 and returned +7.9% in 2008 Strategy

Ann. Ret. Ann. Vol. Correlation to Paulson Portfolio Managers John Paulson, Andrew Hoine, Jim Hoffman Inception Date 25 June 2014 Paulson Merger Arbitrage** 11.2% 9.5% 1.00 Base Currency USD S&P500 9.5% 14.9% 0.24 Institutional share class fee 1.25%/20% HFRI Merger Arbitrage 7.1% 3.5% Liquidity Weekly (on Wed) and month end Index 0.43

Source: Schroders as at 31 August 2016. * Paulson as at 1 September 2016. **Inception July 1994 . Performance shown for Paulson Partners LP from July 1994 until June 2014 and Schroder GAIA Paulson Merger Arbitrage C Acc USD has been used from July 2014 onward. Performance is shown net of fees, NAV to NAV. 29 Paulson Partners LP vs. Schroder GAIA Paulson Merger Arbitrage Main similarities and differences between GAIA Paulson UCITS and US Onshore fund

Schroder GAIA Paulson Merger Paulson Partners LP Arbitrage 110 Investment manager John Paulson, Paulson & Co.

Investment strategy Merger Arbitrage 105

Portfolio liquidity Liquid portfolio focussed on mid/ large cap securities 100 Leverage of up to 1.5x of the long Leverage/gross market value in the portfolio and 2.0x 200% exposure of the long plus short market value in 95 the portfolio

Typical number of 30 – 60, diversified across geography, sector and instrument type 90 positions

Long exposure Mainly physical Mainly synthetic 85 (single securities) securities/occasionally synthetic securities/occasionally physical

Short exposure Mainly physical Always synthetic (UCITS 80 (single securities) securities/occasionally synthetic requirement)

Predominantly listed equity with Bank debt, commodities and 75 Asset classes opportunistic private/restricted equity are not exposure to credit permitted within UCITS 70 Issuer Size (at cost) <12% Concentration Restricted by UCITS 5/10/40 rule Issuer Size (at market) <18%

Fees 1.0%/20% performance fee 1.25%/20% performance fee 65 jun/14 dez/14 jun/15 dez/15 jun/16 Weekly and month end (3 days Dealing frequency Quarterly (60 days notice) notice) Schroder GAIA Paulson Merger Arbitrage C Acc USD Minimum $5m $500,000 investment Pauslon Partners LP

Source: Schroders and Paulson & Co. as at 31 July 2015

30 Schroder GAIA BlueTrend Diversified Systematic Macro Trend Following Strategy

Investment Manager: AUM $9.5 bn* Performance objective The fund aims to provide capital growth by adopting a pure systematic trend  Systematica founded in January 2015 after a decade of experience within following strategy, across global markets, based on quantitative signals with BlueCrest Capital Management multiple time horizons. It targets returns of 10-15%.  Systematica manage total assets of $9.5bn, with $7.4bn in their trend- Performance analysis (BlueTrend strategy**) following strategy* 300%  Investment team headed by Leda Braga, former President and Head of Systematic Trading at BlueCrest Capital Management 250% Fund key features 200%

 Diversified systematic trend following fund, launched in April 2004 150%

 Extremely competitive track record with average annualised return of 10%, 100% with 14% annualised volatility 50%  Positive in 9 out of the past 10 years 0%  Uncorrelated returns over time/delivered positive returns in both up and down markets -50%

 Performed well in periods of prolonged market downturns like 2008

Jul-14 Jul-07

Oct-05 Oct-12 Apr-16 Apr-09

Jan-04 Jan-11 Jun-10

Mar-05 Mar-12 Feb-15

 Feb-08

Dec-06 Dec-13 Nov-09

Aug-04 Aug-11 Sep-15

Trades the most liquid assets among equity, currency, commodity and Sep-08

May-06 May-13 fixed income BlueTrend Barclays Global Aggregate Bond Index

HFRI Fund Weighted Composite Index MSCI World Investment team Head Leda Braga Inception date 9 December 2015 Strategy Base currency USD Annualised return 9.8% Institutional share class fee 1.50%/20% Annualised volatility 14.1% Liquidity Weekly (on Wed) and month end Maximum drawdown -22.1%

Source: Systematica Investments and Schroders, as at 31 August 2016. * Systematica Investments, as at 1 August 2016. AUM data based on estimates, and is subject to change. Managed by BlueCrest Capital Management Group from inception to 1 January 2015 when Systematica Investments Limited (acting in its capacity as general partner of Systematica Investments LP) became the investment manager. **BlueTrend strategy refers to an SMA from January 2004 to March 2004 and BlueTrend Fund Limited (Class A USD) from 1 April 2004 to 31 December 2015. From 1 January 2016 onwards performance is provided for Schroder GAIA BlueTrend C Acc USD. Performance is shown net of fees, NAV to NAV. 31 BlueTrend vs. Schroder GAIA BlueTrend Main similarities and differences between GAIA BlueTrend UCITS and offshore fund

BlueTrend Master Fund Limited Schroder GAIA BlueTrend 115 Investment Systematica Investments Limited (acting as a general partner of manager Systematica Investments LP) Investment Trend Following 110 strategy

Domicile Cayman Islands Luxembourg

Portfolio liquidity Liquid and diversified portfolio across 200 markets 105

Leverage/gross 600% – 2,300% exposure Long/short Futures 100 exposures

Asset classes Commodities, FX, Bonds, Equity Indices

Government exposure 95 Government replicated through IRS (no No restrictions concentration govt. exposure over 100% per UCITS regulations)

90 1.50% / 20%** performance Fees 1.50% / 20% performance fee* fee

Weekly and month-end (3 85 Dealing frequency Monthly (30 days’ notice) days’ notice) jan/16 mar/16 mai/16 jul/16 set/16 Minimum US$1m US$500,000* Schroder GAIA BlueTrend C Acc BlueTrend Offshore investment

*For investments up to $75 million. **C share class. Please note these are the stated management and performance fees and do not include other administrative fees. Source: Schroders and Systematica Investments, as at 30 September 2016.

32 Conclusion

 Liquid Alternatives represent a new and rapidly growing asset class for investors

 Whilst UCITS has a number of constraints, many hedge fund strategies can be run comfortably within the framework

 Long short strategies make sense now to help diversify client portfolios

 Investors should consider blending long only strategies together with long short strategies, and include alternative funds within the core portfolio as opposed to an alternatives bucket

 Fund selectors should focus on established managers that have a proven track record of producing consistent risk adjusted returns

 Emphasis should be on strategies with uncorrelated returns streams, reduced volatility and proven downside protection

 Schroders offers a broad range of liquid alternative funds including a leading platform of external managers

Source: Schroders, September 2016

33 Two Sigma Diversified simulated returns Methodology

The return stream presented in the next slide seeks to reflect the simulated performance of a hypothetical portfolio focused on liquid strategies in US equity, futures and FX markets for the period referenced. Specifically, the hypothetical portfolio is constructed by allocating (a) 15% of the portfolio’s capital in support of a managed futures portfolio (the “Macro" portfolio) and (b) 85% of the portfolio’s capital in support of an equity market neutral portfolio (the "Equity" portfolio, and together with Macro portfolio, the “Adjusted Results”). The simulated performance of the hypothetical portfolio were then each further modified on a pro-forma basis to adjust performance and volatility based on certain historically-perceived variables: (i) volatility was adjusted by scaling the simulated performance of the hypothetical portfolio in a given year such that volatility is presented half-way between the hypothetical volatility result and targeted volatility (8.0%) and (ii) performance was discounted by subtracting 75% of the average monthly simulated performance of the Adjusted Results. In each case, “Gross Returns” of Class C Shares are gross of fees and estimated operating expenses and net of estimated trading expenses. "Net Returns” of Class C Shares are net of a hypothetical 1.4% annualized management fee accrued and paid monthly in advance and a hypothetical 20% performance fee (or allocation) accrued monthly and paid annually (subject to standard high water mark, where applicable), but are gross of estimated operating expenses and net of estimated trading expenses. Please note that fees vary by share class and additional fees and fund expenses apply.

The simulated strategy's settings or investment methodology may not be representative of any future portfolio due to, among other things, the addition or deletion of trading models, changes in optimization settings, changes in model weightings and other variables. The simulated and/or pro-forma performance results shown are for illustration purposes only as part of an ongoing business discussion with a sophisticated party and should not be relied upon when making an investment decision. Certain factors will likely cause the simulations to generate better performance than live trading of the associated strategy. These factors (which are further discussed on the last page of this report) include, but are not limited to, the following: (i) the simulations benefit from the use of the most recent models, research and optimizer settings used by Two Sigma (as defined below), all of which have been tested historically and in most cases have been fit to a period similar to the one shown and, therefore, benefit from portfolio settings that have been found to be optimal for such time period (e.g., more risk is taken in the simulations than would otherwise likely have been taken during periods of high volatility or deemed systemic risk); and (ii) the lack of operating expenses which, if included, would degrade performance in a compounded fashion over time. The last page of this document provides important details regarding these simulated performance statistics, which are subject to the explanations and disclaimers discussed therein. Past performance, especially simulated performance, is not an indicator or guarantee of future results

34 Important Information regarding simulated returns

The simulated performance results shown above are for illustrative purposes only and were prepared for the recipient as part of ongoing discussions. Two Sigma Advisers, LP (the “Investment Manager”) has worked with its affiliated investment adviser, Two Sigma Investments, LP (together with the Investment Manager, "Two Sigma") to engineer certain software that attempts to simulate the trading patterns that would have resulted had the Investment Manager utilized certain quantitative trading models over the period of January 1, 2005 through the date of this report. These simulated results should not be relied upon. These simulated results are based largely on historical information available from certain proprietary databases of Two Sigma compiled, in part, from multiple commercially available data sources, as well as certain assumptions made by Two Sigma about, among other things, trade execution, financing and market impact costs. While Two Sigma has expended considerable efforts attempting to clean and cross-check these inputs, Two Sigma cannot and has not independently verified the accuracy or completeness of such information, nor have the results of the simulation been independently verified or audited. Should any information used in the above simulation prove to be inaccurate, the simulated results themselves may be inaccurate. In addition, all simulated results have many inherent limitations. In particular, simulated results are often prepared with the benefit of hindsight, meaning models utilized in these simulations may have been developed explicitly with the benefit of data from the time period covered by these simulations. Additionally, simulated results do not involve financial risk or reflect actual trading under actual market conditions and do not reflect the ability to withstand losses or to adhere to an investment program despite trading losses. The simulation was also performed using only a finite number of variables. The actual performance of any trading program the Investment Manager ultimately elects to employ in the future will from time to time be dependent on, and influenced by, any number of factors, many of which (i) have not been taken into account in performing the simulation; (ii) are inherently difficult to quantify; and (iii) are outside the Investment Manager's control. Due to the nature of simulations, it is likely that actual trading performance will be materially lower than the simulated performance set forth herein.

Simulations were run using Two Sigma's tradable universe of global futures, currencies, and equities that met proprietary inclusion criteria intended to foster, among other goals, adequate liquidity and issuer uniqueness, as well as a number of other factors.

The tradable universe of global futures, currencies and equities, as well as trading models used by Two Sigma have evolved and are likely to continue to evolve over time. There can be no assurance that the trading program pursued by the Investment Manager on behalf of any of its investment products in actual trading will be the same or substantially the same as the ones that were subjected to the above simulation. Future performance may be affected by existing and/or new events or factors, which may or may not have played any material role in the past. Therefore no assurance or guarantee can be given that the actual trading results achieved using those strategies and/or models employed during this simulation, and/or others that are being used and/or may be used in the future, are or will be as successful and/or achieve the same results as those presented above. Past performance, especially simulated performance, is not an indicator or guarantee of future results. The results of the simulation are being provided to you by the Investment Manager solely to assist you in considering your potential interest in making an investment in a potential future investment product to be managed by the Investment Manager. In the event of any conflict between this document and the prospectus, the prospectus shall prevail. The securities discussed herein shall not be offered or sold, nor shall there be any solicitation of any offer to buy such securities, in any jurisdiction in which such offer, sale or solicitation would be unlawful until the requirements of the laws of such jurisdictions have been satisfied. An investment in any investment product is speculative and involves significant risk, including the risk of a total loss of capital. Opportunities for withdrawal or transfer of interests in a strategy may be limited and therefore an may not have access to its capital when it desires. This information is being furnished to the recipient on a confidential basis, is not intended for public use or distribution, and by accepting this file, you agree to keep confidential the existence of this document and the information contained herein. The recipient should not disclose, reproduce, distribute or otherwise make available the existence of and/or all or any portion of the information contained herein to any other person (other than its employees, officers and advisors on a need-to-know basis, whom the recipient will cause to keep the information confidential) without Schroders and the Investment Manager's prior written consent.

35 Important Information

Risk Considerations For professional investors and advisers only. This material is not suitable for retail clients. This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Important Information The views and opinions contained herein are those of Schroder Investment Management (Switzerland) AG, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. The data has been sourced by Schroders and should be independently verified prior to further publication or use. No responsibility can be accepted for errors of fact or opinion. This document does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder GAIA and Schroder GAIA II (the “Companies”). Nothing in this document should be construed as advice and is therefore not a recommendation to buy or sell shares. The offering of shares in certain jurisdictions may be restricted and accordingly persons are required, by the Companies, to inform themselves of and observe any such restrictions. Subscriptions for shares of the Companies can only be made on the basis of its latest prospectus together with the latest audited annual report (and subsequent unaudited semi-annual report, if published). The prospectus, the key investor information document(s) for Switzerland (if available), the articles of association, the annual and semi-annual reports can be obtained, free of charge, at the offices of the Swiss representative, Schroder Investment Management (Switzerland) AG, Central 2, P.O. Box, CH-8021 Zurich (authorised and regulated by FINMA) and the Swiss paying agent, Schroder & Co. Bank AG, Central 2, P.O. Box, CH-8021 Zurich. Investments in the Companies entails risks, which are fully described in the prospectus. The Company has its registered office in Luxembourg and is regulated by the Commission de Surveillance du Secteur Financier. Past performance is no indication of future fund performance. This depends on the trends in markets, investment returns and exchange rates (if relevant), and how successful the asset manager is in implementing the investment policy. The performance shown does not take account of any commissions and costs charged when subscribing and redeeming units. Prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. This document is issued by Schroder Investment Management (Switzerland) AG, Central 2, 8001 Zurich For your security, communications may be taped or monitored. Third party data is owned or licensed by the data provider and may not be reproduced or extracted and used for any other purpose without the data provider's consent. Third party data is provided without any warranties of any kind. The data provider and issuer of the document shall have no liability in connection with the third party data. The Prospectus and/or www.schroders.ch contains additional disclaimers which apply to the third party data.

36 Important information

This material was prepared by Schroder Investment Management, in response to a request from the client sent to Schroder and should not be understood as an analysis of any securities, advertising material, offer to purchase or sell, offer or recommendation of any financial assets or investment. The purpose of this material is exclusively informative and does not include investment objectives, financial conditions or the particular and specific needs of any shareholders or other investors. The opinions stated in this material pertain to Schroder and may change at any time. The opinions are based on the date of their submission and do not encompass any fact that may have arisen after this date, hence, Schroder is not compelled to update this material to reflect such provisions after the submission of the same. This material is for exclusive Financial Intermediary, Institutional and Consultant and should not be used as support material by other individuals. THIS MATERIAL IS HIGHLY CONFIDENTIAL AND SHOULD NOT BE REPRODUCED OR DISTRIBUTED, ENTIRELY OR PARTIALLY, TO PERSONS OTHER THAN THE ORIGINAL RECIPIENTS. The Fund and the distribution of the shares of the same are not registered at the Brazilian Securities Commission "CVM", and therefore do not meet certain requirements and procedures usually observed in public offerings of securities registered with the CVM, with which investors in Brazilian capital markets may be familiar. For this reason, the access of the investors to certain information regarding the Fund may be restricted. SCHRODER DOES NOT GUARANTEE PERFORMANCE.

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