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Pictet Alternative Advisors SA An introduction to funds

April 2018

Hedge funds gained a reputation for preserving ’ capital and generating relative outperformance in crises. Carefully selected hedge funds provide an alternative exposure with diversification and enhanced return potential over the term.

Contents

2 Executive summary

3 Part I - Hedge funds in perspective The beginning of hedge funds Definition of hedge funds The industry today Hedge fund strategies Equity hedge Tactical trading

8 Part II - Investing in hedge funds The case for hedge funds Investors’ concerns Myth and reality The value-added of hedge funds Fund of hedge fund model

12 Part III - Pictet: a strategic partner for hedge funds Pictet Alternative Advisors SA Investment philosophy construction – Manager selection – Strategy allocation – management

14 Glossary

An introduction to hedge funds

1 Executive Summary

Hedge funds gained a reputation for preserving understand the manager’s and investors’ capital and generating relative outper- assess whether it is likely to be successful in a given formance in market crises. Carefully selected hedge macroeconomic environment. funds provide an exposure Our team of hedge fund investment professionals with diversification and enhanced return potential helps clients to understand these demanding aspects over the long-term. and offer a set of hedge fund investment solutions. At Pictet Alternative Advisors SA, in addition to Clients may choose from Pictet’s various commingled an extensive know-how of other alternative funds of hedge funds, diversified across several pro - such as and real estate, we have been minent managers, or opt for a tailor-made mandate. selecting hedge funds for private and institutional In each case, our investment philosophy is based clients since the 1990s. on the same key investment principles and rules, Selecting the best hedge fund managers means derived from best industry practices and our long ex - that we invest in only a small portion of all the funds perience. We search for the best talents and allocate we screen worldwide. Finding hedge fund managers capital according to our macroeconomic views. Our who are able to achieve genuine, provable and repea - portfolio construction integrates the three main ele - table performance requires extensive research and ments of our investment process: strategy allocation, skill, as well as careful qualitative and quantitative manager selection and . monitoring. Correctly assessing sources of risk is perhaps even more important than analysing sources of per - formance. Operational, credit and market are just a few aspects that need to be grasped before any investment in a hedge fund. Investors need to fully

An introduction to hedge funds

2 Part I Hedge funds in perspective

The beginnings of hedge funds In addition, hedge funds often It is generally said that the first the following characteristics: known hedge fund was an investment ——They are often formed as an unre - partnership established more than gulated investment pool and are 60 years ago by . generally domiciled offshore. He sought to separate the two risks inherent in investing in : ——They measure their performance in 1) defined as the general absolute terms (i.e., independent of change in due to market market direction and uncorrelated influences and 2) Specific risks related to any benchmark). to factors particular to each individual ——They usually charge a performance stock. fee. The first hedge fund was launched Jones’ partnership held a in 1949 in a basket of stocks as ——They require high minimum in- against a downturn in the vestments. market, “hedging” to some extent ——Their subscription and redemption the systematic risk. Jones’ fund was policies are fairly restrictive and unique in that it combined unconven- may even impose lock-up periods tional characteristics such as market or gates. neutral exposure and incentive fees. According to , ——Hedge fund managers usually in- however, the first person to manage vest their own capital along with a hedge fund was none other than their clients. , who used long, as well as short positions and charged an incentive fee as early as the mid-1920s. Benjamin Graham is considered by many to be the father of financial ana - lysis and .

Definition of hedge funds There are various definitions in use, but broadly speaking, a hedge fund is any type of or private partnership that uses the fol- lowing instruments and techniques: ——Long or short positions across classes. ——Derivatives, such as options (call or put), futures, swaps, etc. ——Financial .

An introduction to hedge funds

3 The industry has grown more than The hedge fund industry today growth, rising from around 500 hedge 20-fold in the past decade The hedge fund industry is generally funds in 1990 to approximately 8,335 estimated to have grown from about at the end of December 2017. USD 40 billion in assets under mana - So far, the number of new funds has gement in 1990 to over 3.0 trillion in continued to grow despite approxima- December 2017. tely 10% of hedge funds closing each However, it is believed that the year because of their inability to raise amount of assets actually managed far sufficient assets or deliver satisfactory exceeds the figures officially reported. performance. No standard classification of Nevertheless, although assets continue hedge fund strategies to grow significantly, the size of the hedge fund industry remains small compared to the industry and global financial markets. In terms of the number of funds, the industry has experienced similar

HEDGE FUND INDUSTRY GROWTH

3500 9000

8000 3000

7000 2500

6000

2000 5000

4000 1500

3000 1000

2000 500 1000

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Number of Funds (ex FoFs) Assets

Source: HFR Global Hedge fund industry report - Q4 2017

An introduction to hedge funds

4 Hedge fund strategies Arbitrage There are many ways of classifying the Relative value investment strategies of hedge fund Relative value is an investment strate - managers. Moreover, some managers gy that aims to exploit pricing inef - combine several strategies in what are ficiencies between related financial instruments such as stocks or bonds. AUM BREAKDOWN BY HEDGE FUND STRATEGIES Relative value managers will value the fundamentals of related instruments and go long and/or short expecting prices to converge towards a norm. As managers profit from the convergence 1990 2017 of relatively small differentials, this strategy can be leveraged in order to enhance returns.

Relative Value (15%) Relative Value (26%) arbitrage Equity Hedge (41%) Equity Hedge (29%) the implied Event Driven (26%) Event Driven (11%) volatility versus the historical volati- Macro (33%) Macro (19%) lity on the same asset across different strike prices or maturities expecting Source: HFR Global hedge fund report - Q4 2017 an increase in the fluctuations of the ’s . often referred to as “multi-strategy funds”. The table illustrates the three broad strategic approaches of hedge Managers using this strategy seek funds and the underlying investment to profit from pricing inefficiencies strategies. identified using mathematical models. Statistical arbitrage strategies are HEDGE FUND STRATEGIES based on the premise that prices will return to their historical norms. Arbitrage Equity Hedge Tactical Trading Fixed-income arbitrage Relative Value Long Short Equity This strategy seeks to exploit mis- – Volatility Arbitrage – pricings developed between related – Statistical Arbitrage – Short Sellers classes of securities such as and trading, often neutralising exposure Fixed Income Distressed Trading to risk. – Credit Arbitrage Advisors (CTA) – Arbitrage – Credit arbitrage Credit arbitrage seeks to take advan- Event Driven Emerging Markets tage of pricing inefficiencies between – Merger Arbitrage the credit sensitive securities of diffe - – Special Situations rent issuers. Instruments commonly traded in- clude CDOs (collateralised obliga- tions) and CDSs (credit swaps). Source: Pictet Alternative Advisors SA

An introduction to hedge funds

5 Capital structure arbitrage an undervalued stock. A manager can Capital structure arbitrage aims to either be a generalist or focused on profit from the pricing inefficien- specific regions, sectors, industries or cies across the issuing firm's capitalizations. They can also structure with the expectation that specialize in types of stocks such as the pricing disparity between the two value and growth. securities will converge. Market neutral Convertible arbitrage Market neutral managers seek to ex- This strategy captures inefficiencies ploit investment opportunities unique in the pricing of convertible securities to some specific group of stocks while relative to its underlying stocks. maintaining a neutral exposure to Typically, a manager goes long broad groups of stocks defined for the convertible and shorts its example by sector, industry, market common stock, effectively hedging capitalization, country or region. the equity risk. Credit default swaps These portfolios minimise market then allow the credit exposure to be risk by being simultaneously long and hedged. short, and produce one single source of returns (the rule of one ). Equity Hedge Long/short equity Short sellers This style accounts for the majority Short selling seeks to profit from of the strategies used by hedge fund declines in the value of stocks. The managers today. This directional strategy consists in borrowing a stock strategy combines both long and and selling it on the market with the short positions in stocks with a simple intention of buying it back later at a objective to minimize exposure to the lower price. By selling the stock short, market. A manager would typically short an overvalued stock and go long

ANNUALISED RISK/RETURN BY STYLE (APRIL 1994 - FEBRUARY 2018)

12

Global Macro S&P 500 TR

10 Distressed Hedge CS Ln/Sh Eq HF USD Broad HF 8 Multi Strategy Event Driven MSCI World TR USD Emerging Markets Convertible Arbitrage MSCI Emerging Markets TR USD STOXX 50 NR EUR Global Agg TR 6 Market Neutral Managed Futures 4 Annualised return (%)

Topix TR 2

S&P GSCI TR

0 5 10 15 20 25 Annualised volatility (%)

Traditional indices Hedge fund strategies

Source: Lipper, Hedge Fund Indices in USD, data as at 28.02.2018

An introduction to hedge funds

6 the seller receives interest on the cash fixed-income, and equity proceeds resulting from the sale. If the markets through either direct invest- stock advances, the short seller takes ments or futures and other a loss when buying it back to pay back products. the lender. CTA Distressed CTA stands for Commodity Trading This investment strategy generally Advisor and is also known as a Ma- consists of buying securities of compa- naged Futures strategy. This strategy nies in proceedings and/ essentially invests in futures contracts or in the process of the on financial, commodity and currency debt portion of their balance sheets. markets around the world. Trading The complexity of such operations decisions are often based on proprie- often creates mispricing opportunities tary quantitative models and technical and hence a potential to profit when analysis. prices converge. Emerging markets Event driven Emerging markets' trading strategies Event driven strategies seek to exploit include global macro and CTA mana- relative mispricings between securities gers who rapidly adjust the risk profile whose issuers are involved in mergers, of a portfolio to short term market divestures, or other conditions, regardless of long-term corporate events. The strategies can be convictions, with a bias on emerging leveraged to enhance returns. markets. Such tactical moves can be made either judgementally or with a Merger arbitrage systematic approach, and may be based Also known as , this on a wide range of data, from econo- strategy invests in merger situations. mic fundamentals to pure technical The classic merger arbitrage strategy indicators. consists in buying the stock of the target company while simultaneously selling short the stock of the acquiring company.

Special situations Also known as corporate life cycle, this strategy focuses on opportunities created by significant transactional events, such as division spin-offs, mergers, acquisitions, , reorganisations, share buybacks and management changes.

Tactical trading Global macro Global macro managers make in-depth analyses of macroeconomic trends in order to arrive at their investment strategy, taking positions on the

An introduction to hedge funds

7 Part II Investing in hedge funds

The case for hedge funds they work, the more he can set aside One of the biggest misconceptions myths and misconceptions and capi- about hedge funds is that they must talise on the advantages that hedge take excessive risks in order to gain funds offer. higher returns. The best hedge funds are specialists at minimising risk Investors’ concerns and make it an integral part of their Misconceptions about hedge funds investment plan. Conscientious risk often arise from their complex nature Over the long-term, hedge funds management serves to limit losses and and the lack of transparency that still tend to generate better promotes more consistent, generally prevails in this industry. Investors risk-adjusted returns than higher risk-adjusted returns. often regard hedge funds as “black traditional Hedge funds can serve an important boxes” that are risky by nature but and valuable role in a well-diversified offer high potential returns. For these portfolio, especially since hedge funds reasons, first-time investors tend to tend to reduce market risk by pro - opt primarily for long/short equity viding downside protection in bear strategies whose investment style is markets and upside participation in similar to that of traditional invest- bull markets. The more an ment funds. understands hedge funds and how

PERFORMANCE OF FOHFS VS MAIN INDICES (1990=100)

700

600

500

400

300

200

100

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

HFRI Composite Index Bloomberg Barclays Global-Aggregate Total Return Index Value Hedged USD MSCI World Net Total Return USD Index

Source: Bloomberg and MPI, data as at 30.03.2018

An introduction to hedge funds

8 Myth and reality We list some of the most recurrent myths and explain why, in our view, these are indeed myths.

Myth Reality Hedge funds are often misunderstood Hedge funds are very risky and The primary objective of hedge funds is to highly volatile preserve capital by minimising volatility, which has historically been much higher on stock markets than with hedge funds

Hedge funds lack transparency in their Nowadays, most hedge funds provide portfolios and organisation investors with monthly reports containing appropriate financial details. Pressure from institutional investors has helped to increase transparency

Hedge funds use significant leverage Less than 30% of hedge fund managers employ a leverage effect greater than 2x (source: Van Hedge Fund Advisers International)

Hedge funds are always unregulated Although true for many offshore hedge investment vehicles funds, numerous investment managers are regulated by local authorities such as the SEC in the US and the FSA in the UK. Hedge funds regulation is a widely discussed matter among financial authorities in today’s world

Hedge funds offer no economic Hedge funds offer a valid alternative to added value traditional asset classes by allowing investors to optimise the return of their portfolios and the cost of capital

Hedge fund blow ups result in systemic The failure of LTCM was related to a risks (example: the failure of LTCM) combination of human failure, inappropriate risk management techniques and greed (leverage up to 28x). It was also the failure of large investment which sometimes provided unlimited leverage, incorrectly assessing the risks embedded in LTCM’s strategy

Hedge funds are a main cause of market There is no evidence that hedge funds are downturns and volatility linked to crises. Hedge funds only represent a very small amount of total worldwide

Hedge funds are only for wealthy This idea belongs to the past. Today, even private investors retail clients can invest in hedge funds via fund of hedge funds.

Source: Adapted from the journal of Global Financial Markets, Vol 2, No 4, Winter 2001 pp. 34-46

An introduction to hedge funds

9 The added value of hedge funds hedge funds can contribute signifi- As presented in Part I, the hedge fund cantly to portfolio diversification. industry is characterised by a breadth Their low correlation to equity bear of different trading strategies and markets, their participation in market Hedge funds improve styles. Individually, they upsides and low volatility profile diversification offer a diverse source of risk-adjusted assists in reducing a portfolio’s overall returns depending on the trading risk exposure while contributing to environment and economic expecta- the portfolio’s return. tions. Together, hedge funds target the The following section highlights long-term preservation of capital the main differences between traditio- regardless of broad market moves. In nal investments and hedge funds. a portfolio context, an allocation to

Traditional investments Hedge funds

Financial Managers have limited access Managers have a wide range of instruments to sophisticated instruments financial instruments and investment and hedging techniques such as techniques to choose from, allowing short selling or derivatives trading them to reduce risks and take owing to the restrictive regulatory advantage of pricing inefficiencies environment

Performance Performance is largely dictated by Performance is driven by investment drivers the direction of traditional markets style and the manager’s ability to employ it within any market environment

Performance Managers have a relative return Hedge fund managers aim to objectives objective and aim to outperform achieve risk-adjusted absolute a benchmark, hence providing returns regardless of the market little protection in times of market environment, rather than simply downturns tracking or attempting to outperform a classic benchmark

Exposure In most cases the portfolio is The manager is free to choose the fully invested investments and weightings with full discretion

Pricing Fee income depends on the Fees are based both on the assets amount of assets in the portfolio, under management and the fund’s and managers are rewarded absolute performance. Most of the for increasing assets under hedge fund manager’s remuneration management is tied to performance. Generally, fees are higher than in the rest of the industry. Most hedge fund managers stop raising new money if they perceive further growth as being detrimental to the fund’s strategy

Liquidity Investments are usually very liquid Most hedge funds allow for monthly subscription and quarterly redemption. Some funds impose lock-up periods as well as gates. The liquidity offered to hedge fund investors often reflects the liquidity of the underlying investments in a given strategy

Alignment of Regulations may prohibit managers Managers invest part or all of their interests from investing in the same own assets in their funds and hence securities or funds as their clients bear the same risks as their clients

Incorporation Investment vehicles are often Hedge funds are incorporated domiciled in regulated jurisdictions in offshore jurisdictions which sometimes lack specific regulations

An introduction to hedge funds

10 Fund of hedge funds model several managers competent in a given A widely recognised benefit of a fund strategy (a thematic portfolio) serving of hedge funds (FoHF) is the diversifi - a specific purpose in an investors’ cation effect which comes from mini- asset mix. mising the idiosyncratic risks inherent Structurally, investors benefit from to investing directly in a handful of partnering with an asset manager that single managers. has been selecting hedge funds and Simulations show that a higher constructing portfolios for a variety number of funds reduces volatility and of different clients over different eco - drawdowns leading to an improved nomic cycles. This highly resource in- preservation of capital. FoHFs provide tensive process, developed over time, an access to a wider universe of hedge allows asset managers to optimise the funds that may otherwise be closed to terms (liquidity, operational work- new investors, or that are “under the flows, transparency, reporting). Finally, radar” and not available to the broader FoHFs allow investors to bypass the investor community. Finally, a FoHF substantial minimum investment allows an allocation to a range of generally required by individual funds. hedge fund strategies (a multi-strategy portfolio) in one single vehicle or to

CORRELATION BETWEEN DIFFERENT HEDGE FUND STRATEGIES (APRIL 1994 - FEBRUARY 2018)

Convertible Distressed Emerging Market Event Fixed Global Long/Short Multi Managed Arbitrage Markets Neutral Driven Income Macro equity Strategy Futures Arbitrage

Convertible Arbitrage

Distressed

Emerging Markets

Market Neutral

Event Driven

Fixed Income Arbitrage Global Macro

Long/Short

Multi Strategy

Managed Futures

0.75% to 1.00% 0.50% to 0.75% 0.25% to 0.50% 0.00% to 0.25% -0.25% to 0.00%

Source: Lipper, Credit Suisse Hedge Fund Indices in USD, data as at 28.02.2018

An introduction to hedge funds

11 Part III Pictet: a strategic partner for hedge funds

Pictet Group billion in its funds of hedge funds Founded in 1805 in , Pictet is and tailor- made mandates. The entire a leading asset manager in for division is located in Geneva and both private and institutional investors. employs around 59 people. As at July 2017, assets under mana - gement and in custody totalled around Investment philosophy USD 498 billion (CHF 478 billion; PAA’s mission is to provide investors EUR 405 billion). with hedge fund solutions offering Pictet Group employs more than both capital preservation and absolute 4,000 people worldwide, including performance. Over the years, PAA has 900 investment professionals, ana- developed key investment principles lysts, economists and strategists. and rules based on best industry practice and solid experience, which Pictet Alternative Advisors SA today lie at the heart of our investment Pictet's Alternative Advisors depart- philosophy. ment (PAA) is a division of the Pictet PAA follows four simple principles Group responsible for investments in in its investment philosophy. A risk hedge funds, private equity funds and aware approach, driven from the bot- real estate funds. Applying a rigorous tom-up, focusing on human capital, investment process, PAA today ma- with a long-term time horizon. nages approximately USD eleven

OUR INVESTMENT PHILOSOPHY HELPS US MAKE NO COMPROMISE AND STAY FOCUSED

RISK AWARE HUMAN CAPITAL Only take risks People before we understand processes Diversified sources Alignment of interests of risk

INDEPENDENT MINDS

BOTTOM UP LONG TERM High convictions Farm new talents Thorough understan- True partnerships ding of investment through continuity processes

Source: Pictet Alternative Advisors SA

An introduction to hedge funds

12 Portfolio construction regions. Together, they enable the Our portfolio construction inte- team to establish a medium term grates the three main elements of allocation to hedge fund strategies. our investment process. The process Risk management in hedge funds creates the discipline necessary to base is not limited to analysis of volatility, our decisions on facts, rather than on but also focuses on higher moments sentiment which is critical in a people of the return distribution as well as . measurement of time-varying betas. In its manager selection, PAA PAA employs sophisticated risk ma- targets hedge fund managers who nagement tools throughout the entire exhibit exceptional skills in their field investment process from selecting and of expertise. Thorough due diligence monitoring managers to controlling enables us to identify managers with risk levels in each portfolio. Portfolio whom long-term relationships can be risk is controlled by means of two nurtured in an independent and risk different multi- factor approaches, conscious manner. namely principal component analysis We draw on a network Strategy allocation at PAA depends (statistical factors) and dynamic style of professionals built on a strategic and a tactical allocation. analysis (pre-defined factors). up over the years Our strategic allocation acts as our long-term neutral exposure in a multi- strategy portfolio of hedge funds. In contrast, our tactical allocation reviews and monitors the major factors and risk drivers of hedge fund returns and draws upon Pictet’s research com- mittees to assess top tier information across all asset classes and geographic

MANAGER SELECTION – 4 STEP PROCESS

Hedge fund universe Sourcing Manager selection Approved funds

c. 8'400 funds c.1,300 funds c.230 funds c. 132 funds • Exclusion criteria • Pictet partners • Due diligence Continuous monitoring – insufficient size, • Hedge funds – Qualitative • Industry consultants liquidity – Quantitative • Prime or track record – Operational • Competitors – specific strategies

Source: Pictet Alternative Advisors SA

An introduction to hedge funds

13 Glossary and useful terms

Administrator Collateralised debt Derivatives The , generally a obligation (CDO) Financial instruments or contracts , responsible for all the adminis- Sophisticated financial tools that whose value depends on the value of trative duties required to manage a repackage individual into a pro - their underlying securities, assets, or fund. duct that can be sold on the secondary variables. Examples of derivatives are market. options, warrants, futures, forwards, Alpha and swaps. Investment performance that is not explained by market returns. Alpha A bond that gives the holder the measures skill and may be derived of converting into shares The fall in the value of a unit or share from security-picking ability, suitable of the company at certain times at in a fund from peak to trough in a rotation of management styles or sec- predetermined prices during the given interval of time. tors or (see also “”). life of the bond. Exposure Arbitrage Correlation The amount of assets that a fund has The simultaneous purchase and sale The degree to which two variables invested on a market in relation to the of a security on different markets in fluctuate in sync with one another. fund’s total assets. order to profit from a temporary dis - Correlation is always expressed crepancy in prices. between –1 and +1, with –1 being Financial leverage completely inversely correlated, 0 Investments made in excess of capital Benchmark meaning no correlation and +1 being available, expressed as a percentage of A gauge of performance of a predeter- completely correlated. . mined set of securities or funds used for comparison purposes. Such sets can Credit default (CDS) Future be based on indices or specially-custo - An instrument that enables the risk A contract that provides for the sale mised to suit an investment strategy. of default to be transferred from the of financial instruments or physical holder of the fixed income security to for future delivery on a Beta the seller of the swap. commodity exchange. Investment performance that can be explained by market returns (see also Custodian Gamma trading “Alpha”). The financial institution that is A trading technique in which the responsible for the management and manager bets that the implicit Black box safekeeping of a fund’s securities. volatility of an option is different A proprietary computerized trading from the expected volatility of the system whose formulas and calcu- underlying asset. lations are not disclosed or readily accessible. Users enter information Gate and the system utilizes pre-program- Restriction limiting the amount of med logic to return output to the user, withdrawals from the hedge fund which may include trading signals and during the redemption period. other data.

An introduction to hedge funds

14 Incentive fee Short selling Manager compensation based on the A whereby an investor performance of the investment. sells a security that he does not own. The holder of a short position benefits Liquidity when the price falls. Unlike a long The degree to which a financial position, a short seller is in theory instrument can be sold or converted exposed to unlimited loss. to cash. A liquid market describes a market characterised by sufficient trading volumes to allow for buying A measure of risk-adjusted return and selling with minimum price calculated by subtracting the risk- disturbance. free rate from the annualised return and then dividing by the downside Lock-up period deviation of returns. Window of time during which investors of a hedge fund are not Stop-loss allowed to redeem or sell shares. A trading instruction in which, once a pre-determined percentage loss on any Long one position has occurred, it triggers A trading or investment strategy either a review of the position or its whereby the investor owns a security immediate closing. and benefits when its price rises. Top-down LTCM An analysis method in which the Long-Term Capital Management. manager first analyses macroeconomic A well-known hedge fund whose trends and then picks securities collapse in 1998 shook world financial that might be affected by them (see markets. bottom-up).

Management fee Volatility Manager compensation based on A measure of the variability of return assets size. of a or market. For a fund, volatility is a measure Prime of risk, generally expressed by the A broker that offers more services than standard deviation of the fund’s a classic broker. Such prime broking monthly returns, at an annual rate. services might include backoffice operations, reconciliation, financing, recordkeeping or custodian activities.

Sharpe ratio A measure of risk-adjusted return calculated by subtracting the risk- free rate from the annualised return and then dividing by the standard deviation of returns.

An introduction to hedge funds

15 Disclaimer

This document is not intended change rates may have a positive or for persons who are citizens of, negative effect on the value, the domiciled or resident in, or entities price or the income of the securi- registered in a country or a juris- ties or the related investments diction in which its distribution, mentioned in this document. publication, provision or use would Past performance must not be violate current laws and regula- considered an indicator or gua- tions. In particular, investment rantee of future performance, and funds or any other collective pla- the addressees of this document cement instruments which have are fully responsible for any invest- not been authorised for public of- ments they make. No express or fering in the investor’s country of implied warranty is given as to fu- domicile may only be offered as ture performance. Investors shall private placements to qualified in- conduct their own analysis of the vestors. Additional investment res- risks (including any legal, regula- trictions may be provided for in the tory, tax or other consequence) as- official offering documentation sociated with an investment and (available upon request). should seek independent profes- The information and data furnished sional advice. in this document are disclosed for The content of this document is information purposes only; the Pic- confidential and can only be read tet Group is not liable for them nor and/or used by its addressee. The do they constitute an offer, an invi- Pictet Group is not liable for the tation to buy, sell or subscribe to se- use, transmission or exploitation of curities or other financial instru- the content of this document. The- ments. refore, any form of reproduction, Furthermore, the information, opi- copying, disclosure, modification nions and estimates in this docu- and/or publication of the content is ment reflect an evaluation as of the under the sole liability of the date of initial publication and may addressee of this document, and be changed without notice. Infor- no liability whatsoever will be incur- mation and opinions presented in red by the Pictet Group. The this document have been obtained addressee of this document agrees from sources believed to be re- to comply with the applicable laws liable, and, although all reasonable and regulations in the jurisdictions care has been taken, the Pictet where they use the information re- Group is not able to make any re- produced in this document. presentation as to its accuracy or This document is issued by the completeness. The value and inco- Pictet Group. This publication and me of the securities or financial its content may be cited provided instruments mentioned in this that the source is indicated. document are based on rates from All rights reserved. Copyright the customary sources of financial 2018. information and may fluctuate. The market value may vary on the basis of economic, financial or political changes, the remaining term, market conditions, the volatility and solvency of the issuer or the benchmark issuer. Moreover, ex-

An introduction to hedge funds

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