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Regardless of the Outcome, Trade Wars are Now a Minus for Market Confidence

Stocks stumbled broadly with the worst loss for May since 2010 as U.S. trade negotiations hit the wall in China. President Trump jolted the markets at month end with an unexpected new threat of an escalating tariff aimed at giving the U.S. bargaining power to stop the rising flow of illegal immigration from Mexico. Regardless of the outcome, the trade wars are now a minus for market confidence.

Softening U.S. and world economic data and the tariff wars have also fueled concerns over a U.S. recession and have inverted the yield curve by driving the U.S Treasury ten year note yield down from 2.51 to 2.14 percent during May. Additionally, August West Texas Intermediate crude oil futures dropped sixteen percent during the month as U.S. production hit a record 12.3 million barrels a day.

The most recent FOMC minutes released in late May confirmed that the Fed expects the current slowdown in inflation to be transitory and that monetary policy is appropriate although an escalation in the trade war is an economic risk. In a speech generally echoing the FOMC minutes on the morning of May 30, prior to Mr. Trump’s Mexico tariff tweet that night, Fed Vice Chairman Clarida said the Fed is prepared to adjust policy should the economic outlook deteriorate.

Some of the more prominent and complex pending deals in the merger arbitrage pipeline at the end of May include the $66 billion takeover of Celgene by Bristol-Myers Squibb, the $34 billion deal for Anadarko Petroleum by Occidental Petroleum and the $28 billion bid for Sprint by T-Mobile US Inc. On May 21 industrial products maker Crane Co (CR) announced it made a $45 all cash deal proposal for CIRCOR International (CIR). As long term owners of both companies, GAMCO’s proxy voting committee was surprised that CIRCOR’s Board had received the offer on April 30 with no subsequent disclosure until after the offer was first publicized by Crane. Since the end of May, we have continued to see strong deal activity with discussions surrounding United Technologies and Raytheon as well as Salesforce.com, Inc acquiring Tableau Software, Inc.

We continue to scour the market for great companies to invest in and are focused on fundamental opportunities globally. The small and mid-cap space continues to be well valued and the long term upside, thanks to financial engineering, serves to be fruitful for investors.

Column by Gabelli Funds, written by Michael Gabelli

To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:

GAMCO MERGER ARBITRAGE

GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.

Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.

Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.

Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.

Class I USD – LU0687944552
Class I EUR – LU0687944396
Class A USD – LU0687943745
Class A EUR – LU0687943661
Class R USD – LU1453360825
Class R EUR – LU1453361476

GAMCO ALL CAP VALUE

The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.

GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.

Class I USD – LU1216601648
Class I EUR – LU1216601564
Class A USD – LU1216600913
Class A EUR – LU1216600673
Class R USD – LU1453359900
Class R EUR – LU1453360155

Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to ﬁnd out what those restrictions are and observe them.

Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reﬂect the manager’s current view of future events, economic developments and ﬁnancial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.

Brad Rutan (MFS IM): “Some Believe Over 300 Billion US Dollar of BBB Rated Debt Could be Downgraded to High Yield”

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The key to navigating the credit cycle, according to Brad Rutan, Investment Product Specialist at MFS Investment Management, is anticipating inflections, repositioning early and being patient. As the credit cycle ages, the lending conditions loosen, the leverage rises and there is a tight dispersion in spreads across sectors and rating tier. It is getting late in the credit cycle, and investors should be reducing their risk exposure before there is a cycle contraction and the liquidity dries up.

“This late in the credit cycle, if investors wait to reduce risk until spreads start to dramatically widen, there will be no buyers for their risk. During a cycle contraction, the credit availability tightens, the refinancing risk increases, and the default rates spike. There is a “flight to quality” in credit and the weaker credits underperform, if not incur in default. Investors need to have their fixed income portfolios prepared for that event,” explained Rutan.
Over the past decade, while high yield corporate spreads have been declining, spread widening events have been smaller and shorter in length. In 2011, spreads reached a peak during the European debt crisis, in 2015 and 2016, spreads widened when commodity prices fell apart, and more recently, in the summer of 2018, spreads peaked again. Despite these mini-cycles have created opportunities for active managers, in each of these mini-cycles, the high yield corporate spreads have been peaking at a lower point, confirming the declining trend in spreads and indicating that the cycle is “running out of gas”.

Where are the risks at this point in the cycle?

There have been significant changes in the composition and quality of the investment grade universe of bonds. In the last two decades, the credit quality composition of the Bloomberg Barclays US Credit Index has changed dramatically.

“Over the last 20 years, the AA debt universe has been cut in half, from 20% to 10%, the single A debt universe dropped by 8 percentage points, from 44% to 36%, the BBB debt universe has grown 15 percentage points, from 30% to 45%. Why is the BBB debt universe so big today? Looking at the AA and A debt universes, one can see that there has been a massive downgrade cycle as companies have increased their debt levels. US companies have been playing the game with rating agencies, knowing how much debt they can accrue and what promises they can make to not to get downgraded to the next step below BBB, which is high yield bonds. Some investors believe over 300 billion US dollar of BBB rated debt could be downgraded to high yield, but they are not being downgraded because, normally, the rating agencies are very reluctant to downgrade at this last step to BB debt”, described Rutan.

By sectors, Telecom companies accrue the largest amount of BBB debt that were previously rated as single A or higher, followed by Health Care companies and Utilities.

“The high yield market is already worth a trillion US dollar. If, eventually, this 300 billion US dollar of BBB rated debt is downgraded to high yield, it will be adding a 30% of bonds supply to a market already illiquid, probably implying a very messy price discovery process”, he added.
On top of that, during the last six years and unlike previous periods, there has been a big disconnection between the high yield spreads, the compensation of high yield over Treasuries, and the corporate debt levels, measured by the corporate debt to GDP ratio.

“Since 2012, corporate debt levels have been growing steadily, being now over the last peaks set in the last previous recessions of 2001 – 2002 and 2008 – 2009. Meanwhile, the high yield spreads are moving in the opposite direction. Spreads should be above their current levels and getting to the point they should be is going to be an ugly process.”

Are investors compensated for high yield risk today?

When the risk of default is considered, reducing the spreads of the CCC rated high yield debt over Treasuries by the expected losses, the loss-adjusted spread is negative. That is the reason why MFS IM has sold all their positions with CCC rating in their total return bond strategy.
Also, the search of yield and higher rates have increased the demand for banks loans, but this asset class is not as attractive as many investors think it is. Their quality has been declining, they offer less protection to the creditors and they have lowered their projected recoveries.

“Bank loan’s attractiveness lies on that they are floating rate instruments and they provide a great hedge against rising rates. They also sit above bonds in the capital structure of a company, if the company defaults, the bond investor should take the first hit and the bank loan investor should have a buffer against losses. But, unfortunately, 60% of high yield companies have a loan-only capital structure, therefore, there are no bonds to act as a buffer. Regarding credit quality, the percentage of issuers that are rated single B or lower has risen over 65% in 2018 from 48% in 2006. In addition, about 75% of the bank loan market lacks sufficient covenants which diminishes the protection of creditors and the projected rates of recovery are below the average historical recovery rates.”

Why investors should be positioned ahead of volatility?

Credit spreads across asset classes and geographies are low, investors are getting lower compensations for the same amount of risk and it is getting much more difficult for asset managers to identify and properly risk bonds.

Moreover, the market has grown in size, but less participants are willing to make a market. Since the Dodd-Frank reform was enacted on July 2010, the inventories of the primary dealers have decreased by 90%. The assets of corporate bond mutual fund and ETFs have grown by 136% and the average trading volume per year has increased by 85%, but the primary dealers have gone, and this may represent a liquidity problem in the case of a stressed credit event.

Where are the opportunities?

At the short end of corporate curve, investors can better withstand higher yields before they incur in losses. The breakeven yield is currently higher at the short end part of the curve. That is where investors have the best protection against raising rates and where they are more compensated for the risk that they are taking.

Also, the diversification benefits have been more pronounced in traditional fixed income sectors. Investment grade corporate bonds, municipal bonds, and the Bloomberg Barclays US Aggregate Bond Index have had a lower correlation with equity in the last five years than high yield bonds, bank loans and emerging market debt. A lower correlation with equity translates into higher average returns whenever the equity market experiences a pullback of 5% of greater.

Robert Almeida (MFS IM): “The Sector of Beer, Wine or Liquors Are the Candidates to Lose Market Share to Marijuana”

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Looking at the number of years it took for different products and technologies to reach 50 million users, one can deduce that the pace of adoption by society has accelerated exponentially. For example, it took 46 years for electricity to be used by more than 50 million households, while Facebook reached the same number of users in 4 years, WeChat in 1 year, Fortnite in 4 months, and Apex Legends, a new Electronic Arts game, only took 1 month to reach 50 million users. But why this acceleration? According to Robert Almeida, global investment strategist at MFS Investment Management, in his presentation during the 2019 MFS Americas Advisor Investment Forum in Miami, this slowdown is due to the considerable reduction in the price of new technologies, which sometimes becomes free, in exchange for consumer data and information.

Thus, the manager assessed the sectors, industries and companies that have generated a profile of above-average margins that are not sustainable, because they have lost competitiveness and are only achieving growth in their profits through acquisitions and cost cutting.

Excess Supply of Content in the Media

An example of this type of companies are those belonging to the media, whose value proposition has changed significantly in recent years. “Today, Hollywood produces about 500 films a year, about 1,000 hours of film per week. While YouTube, which is a free channel with 2 billion users, produces 48 hours of content per minute. YouTube produces in 20 minutes the same length of content in hours as Hollywood produces in a year. Of course, quality is debatable, but when in economics you significantly increase the supply curve and there is no change in demand, prices decline. And it’s precisely these companies that are subject to price pressures that we want to avoid,” Almeida said.

“For example, SpongeBob has been the most monetized children’s program in cartoon history.In the future, I don’t know if the kids will continue to attend this program, but if they do, they will do it through YouTube or Netflix, for $13 a month,” he added.

In this context, the main issue, according to the manager, is the selection of titles. There will be a number of companies that will not continue to add value and there will be another number of companies that will achieve greater value because of their scarcity. In the next decade, the current abundance of margins will not be such and those companies that cannot offer tangible value to society will decline and become extinct.

The Retail Sector

We all know that the disruption of e-commerce has had a strong effect on retailing, but that does not mean that department stores will be eliminated. In Almeida’s opinion, there will be shopping centres, but these will have to offer a value proposition or they will be dispensable.

“E-commerce is easier and more convenient, you don’t have to go to the mall, you don’t need a parking space to get there, with just one click, the purchase is done. But what happens when you introduce more offer in the market? A price war begins. The difference now is that retailers have realized the need to build an online sales platform similar to Amazon’s, so they are increasing their capital expenditures rather than their operating expenses to increase their sales. At that point are companies like Macys, Sears, JC Penny and ToysRUs. When will be the next time you go to RadioShack to buy a product? Probably never, you will make your purchase online,” he argued.

“The market tells us that there are survivors and dinosaurs. Among the survivors is Costco, whose profits are growing by 5% while other retailers are experiencing losses by the same percentage. That’s because even Amazon can’t compete with its price-based value proposition. On the other hand, Tiffany, LVMH or Nike are also offering a different value proposition. These companies have recognized brands, intellectual property and pricing power.

The Marijuana Value Proposition

Although only two countries have legalized the recreational use of cannabis, with Uruguay being the first country in 2014, followed by Canada in 2018. In the United States, the situation is somewhat complicated. In 10 states, medical and recreational use is allowed, while at the federal level it is illegal.
“Two-thirds of the U.S. population has access to medical marijuana and one-fifth has access to recreational marijuana. By regularly increasing the legal amount available, the adoption curve is being transformed from an S-shaped curve, as was the case with the electricity mentioned above, which took 46 years to be massively adopted, to a J-shaped curve, like Facebook, which took only 4 years to get 50 million users,” he said.

“Another point of view must also be considered: households have budgets. People often formulate a budget in relation to how much they can spend on vacations, shopping or meals during the week. If the cannabis adoption curve increases, what share of consumption will the budget take? What categories of products could be at risk if the cannabis market grows? In our opinion, the beer, wine and spirits sectors are the candidates to lose market share to marijuana. We are evaluating the model closely and examining the potential results. This does not change our view of Diageo, Philipp Morris or Altria, but it is something we are discussing and observing. That’s what active management is all about,” he concludes.

Robert Almeida (MFS IM): “We Try to Avoid Companies that Suffer from the Innovator’s Dilemma”

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At this point in the economic cycle and the market cycle, in the opinion of Robert M. Almeida, global investment strategist at MFS Investment Management, it is necessary to shift from an emphasis on performance to an emphasis on risk. According to the manager, in his presentation during the 2019 MFS Americas Advisor Investment Forum in Miami, the economic cycle of the last ten years has been characterized by being longer in length, but lower than the average growth magnitude. While the market cycle has been markedly higher than the average in magnitude of growth and certainly, it has also been longer in duration. These two premises are the starting point for understanding market expectations and valuations, as well as where to find alpha opportunities today.

Market Expectations

Universally, in all market sectors, a massive transition is being seen as technology is weakening the value proposition of companies at a hitherto unknown pace. This, Almeida said, is important because when a company stops producing or providing services in a competitive way, margins erode and stock prices tend to follow.

“From my point of view, there is only one important issue when valuing the price of an asset in the long term: free cash flows. And what do these cash flows depend on? It depends on the number of items and the price at which they are sold minus the cost of production. If a company cannot sell more items or the price of these items is decreasing because a competitor is doing something similar or cheaper, then current margin and free cash flow levels will erode. We try to avoid those companies that we think are overvalued, but not simply from the standpoint that market prices have risen by 300% in the last 10 years but because they have ceased to be useful to society and investor expectations of cash flows are too high. These companies have become dinosaurs, melting icebergs or cubes,” explained Almeida.

“By avoiding companies that suffer from the innovator’s dilemma, that close their eyes to the potential of technology and disruption, we create performance in the portfolio. In our industry we tend to think about creating alpha, but over the years, I believe that success in active management, like most aspects of life, comes not because of what you’ve done, but because of the mistakes you’ve been able to avoid,” he adds.
The manager then explained that we are facing a regime change, from a period with above-average returns driven by above-average margins, to a period with below-average returns, driven in turn by below-average margins. This translates into lower returns vs recent years or long-term averages.
In order to assess performance expectations over the next 10 years, MFS Investment Management uses an average reversal model with variables such as sales, pricing power, margins and valuations. In this model, the balanced global portfolio, with 60% equity and 40% fixed income allocation, yields an unsatisfactory return of 4%. This figure is difficult to explain for the pension plan community, advisors and trustees that make up the asset management industry.

The Level of Valuations

When examining the Shiller P/E ratio based on the average inflation-adjusted profits of the last 10 years, Almeida acknowledged that valuations do not usually predict returns, especially if the previous 12 months or 12 months ahead are taken into account, their level of prediction is almost nil.
However, an examination of the US Shiller P/E ratio shows that, at levels close to 30 times, this is the third highest Shiller ratio in US history. According to Almeida, this is due to the fact that, during this cycle, yields have exceeded the average, because margins have been above the average, but profit growth has remained below.

“To get out of the global financial crisis, companies laid off workers and refinanced their debt at lower interest rates, then saw the rehabilitation of the market structure. Then investment in fixed assets, consumer spending and the GDP of the economy should have improved, but they did not. I could talk about macroeconomic and political motives, but in my opinion, there is a simpler explanation, dematerialization,” Almeida explained.

The Effects of Dematerialization

As Almeida argued, advances in technology have allowed the world the opportunity to rent rather than own. “Companies that needed to increase their technological infrastructure to expand their business have rented it from Amazon, Google, Microsoft or Alibaba, instead of buying it. Instead of buying music, consumers have rented it from Spotify. Faced with the need to buy a car, consumers have used Uber’s services. And the same when buying a film, that consumers have chosen to rent it on Netflix. The shift from a property economy to a rental economy has had two fundamental consequences. The first is deflation of pricing power and the second has made the price of goods less expensive. From an accounting point of view it has been a shift from capital expenditures to operating expenses,” he added.

Carol Geremia (MFS IM): “Investors Are Out of Sync with Active Investment”

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The asset management industry is reaching maturity. It currently manages close to 100 trillion dollars in investable assets, with a much higher positioning in risk assets than what was necessary a few years ago in order to obtain similar returns. 80% of these assets are managed by institutional investors: Sovereign funds, pension funds and mutual funds, while this percentage was only 35% 25 years ago. In addition, the asset management chain is now much longer, the proportion of investors purchasing direct stock is much smaller than in the past. These are some of the conclusions that Carol Geremia, President of MFS Investment Management and Head of the company’s Global Distribution Division, shared during the 2019 MFS Americas Advisor Investment Forum in Miami. She also spoke about the need to align asset managers’ and advisors’ interests with those of the investors, and about the dangers of a short-term mindset.

The Misalignment

The business is now highly intermediated by asset managers, advisors, consultants or institutional investors, but despite the professionalization of the industry, investors feel that there is a disconnect between their interests and those of their asset managers.

“I’m in contact with many investors from different markets at global level, from the large pension funds to sovereign funds, and with advisors. The market has matured and has become a global market which, as we hear daily on the news, is certainly facing a large number of threats. But I believe this is where we are losing sight of something important. Firstly, investors are not syncing with active management. The debate between passive and active management is certainly not very relevant and opportunities to talk with investors about the misalignment of interests are being lost. We have lost our bearings. What’s really important is the result in the long term, and yet, we have only measured the data in the short term, giving a false sense of comfort, when in reality, risks are increasing and the gap with responsible investment is widening,” explained Geremia.

“We need to change our tune and stop dealing independently with the importance of ESG factors and sustainability. It’s all connected, and linked to the future of investment management,” she added.

In that regard, Geremia argued that many opportunities are being lost due to a lack of communication and dialogue to avoid misalignment. But how did that happen? There are many different reasons and many parts of the industry are involved, starting with the market’s low interest rates. But perhaps the most obvious example of disconnection is the lack of alignment between asset managers’ time horizon and that of investors.

“Measured from peak to peak or valley to valley, the industry usually defines a complete market cycle as 3 or 5 years, but in fact, we can state that, after conducting several studies, it has been observed that this estimate is actually half of a market cycle. If we look at the last 100 years, a complete market cycle is defined in a range of between 7 and 10 years. Most investors usually say that a cycle is set at between 7 and 10 years, but their tolerance to below-index returns is set at 3 years.”

The dangers of a short-term mindset

In Carol Geremia’s opinion, the short-termism adopted by the markets is a terrifying issue for investors. In the past, an annual yield of around 7.5% could be obtained with a balanced fund. Currently, investors must take 7 times the same amount of risk in order to obtain that return, not to mention the complexity of the vehicles needed to obtain it.

“Because interest rates have been at very low levels for a long time, all investors have sought a higher return on riskier assets. But we have forgotten that when you take a risk, the best way to manage it is by understanding its time horizon. In conversations with clients, we talk about the need to have a long-term mindset, but nobody defines it correctly.”

Asset allocation

In the current environment where all players are undertaking more risk and adopting greater complexity in their investments, having a conversation with investors about the allocation of their assets is not an easy task. Thus, Geremia presented four baskets of risk. The first is the “bulk” beta basket, which includes the ETFs, the indexed funds, and factor investment funds, that is, passive investment. A second basket contains liquid alpha vehicles, which includes mutual funds and traditional active management. A third, with alpha illiquid vehicles, including private equity, investment in infrastructure, real estate and hedge funds. Finally, a fourth basket contains the ESG investment, with long-term responsible investment vehicles.

“Most investors tell me that the reason why they opt for passive versus active investment, apart from the price of commissions, is that they are not allowed the sufficient time required in order to obtain a good performance in the markets,” she said.

On the other hand, and in view of increasing diversification, investment in alternative assets has also increased enormously, but the expert from MFS reminds us to bear in mind that alternative assets are an illiquid alpha.

“Alternative assets are a way to extend the investment horizon, renouncing liquidity in return, which is why there is a yield premium. If these points are not discussed with investors there will be huge disappointment in the future, both for having renounced the superior returns of traditional active management, and for having underestimated the importance of liquidity,” she explained.

“Finally, it’s essential to have a conversation about sustainable investment with institutional investors. Clients will stop asking how much money has been obtained to ask how it has been obtained,” she concluded.

April Proved Possitive for Merger Arbitrage

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Merger performance in April was bolstered by deals that progressed towards completion, as well as a new investment in Anadarko Petroleum that received an overbid shortly after announcing an agreement to be acquired by Chevron. More specifically:

On April 12, Anadarko Petroleum (APC-NYSE) agreed to be acquired by integrated energy company Chevron for $16.25 cash and 0.3869 shares of Chevron common stock per share of Anadarko, in a deal valued at about $48 billion. Anadarko is an explorer and producer of oil and natural gas globally, but with prized assets in U.S. shale formations. On April 24, shortly after announcing its tie-up with Chevron, Anadarko received an unsolicited bid to be acquired by Occidental Petroleum for $38 cash and 0.6094 shares of Occidental per share of Anadarko, which valued APC at about $55 billion. It was later revealed that Warren Buffett’s Berkshire Hathaway committed $10 billion to back Occidental’s bid to acquire Anadarko against Chevron, which has an enterprise value 5 times greater than Occidental. Anadarko is currently evaluating Occidental’s proposal. We benefited from our investment in Anadarko in April.
Versum Materials (VSM-NYSE), a manufacturer of chemicals and components that are used to make semiconductors, LED displays and other technological applications, agreed to be acquired by Merck KGaA under improved terms. In January 2019, Versum agreed to be acquired by Entegris in an all-stock transaction that valued Versum at about $37 per share. In late-February Merck made an unsolicited proposal to acquire Versum for $48 cash per share, which led to an agreement in April for Versum to be acquired by Merck for $53 cash per share, or about $6 billion. The transaction is expected to close in the second half of 2019.

Other notable events in April included:

Altaba (AABA-NASDAQ) announced its intention to liquidate and distribute cash and shares from its 11% ownership stake in Chinese online retailer Alibaba. Altaba is a closed-end investment fund that owns shares of Alibaba, cash and intellectual property and traces its roots to online services provider Yahoo! Inc. The company estimates total proceeds from liquidation are expected to be approximately $40 billion and the liquidation is subject to Altaba shareholder approval.
Goldcorp, Inc. (GG-NYSE), a gold-mining company with global operations, was acquired by Newmont Gold in an all-stock transaction valued at $12 billion. While the Goldcorp acquisition was pending, Newmont received an unsolicited proposal to be acquired by Barrick Gold, but Newmont and Barrick instead agreed to form a joint venture of the companies’ gold mining assets in Nevada.
Belmond Ltd. (BEL-NYSE), an owner and operator of luxury hotels worldwide, was acquired by luxury goods group LVMH Moet Hennessy Louis Vuitton for $25.00 cash per share, or about $4 billion.

Thanks to a robust market place, we expect ongoing deal activity will provide further prospects to generate returns uncorrelated to the market.

Column by Gabelli Funds, written by Michael Gabelli

To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:

GAMCO MERGER ARBITRAGE

GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.

Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.

Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.

Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.

Class I USD – LU0687944552
Class I EUR – LU0687944396
Class A USD – LU0687943745
Class A EUR – LU0687943661
Class R USD – LU1453360825
Class R EUR – LU1453361476

GAMCO ALL CAP VALUE

The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.

GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.

Class I USD – LU1216601648
Class I EUR – LU1216601564
Class A USD – LU1216600913
Class A EUR – LU1216600673
Class R USD – LU1453359900
Class R EUR – LU1453360155

Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to ﬁnd out what those restrictions are and observe them.

Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reﬂect the manager’s current view of future events, economic developments and ﬁnancial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.

Compensation, Ownership, and Organization Are the Main Drivers of FA Migration from Wire-houses to Independent Models

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Bolton Global Capital feels confident that the migration of FA to Regionals and Independents will continue. Both their assets under management and revenue have been growing steadily while the market share of the four major Wire-houses has seen important decreases over the last 10 years. Ray Grenier, CEO of Bolton Global pointed out at the firm’s annual advisor conference in Miami that investors are more and more looking at the independent business model to the point that independent’s AUM are almost the same as those of major wire-houses.

During the conference, Greiner mentioned that Compensation, Ownership, and Organization are the main reasons why wirehouse migrations will continue. Given Bolton’s strong value proposition with a premium brand, customized solutions, global capabilities and higher compensation models, he is certain more and more FA will join their model where “everyday we have to win your business”.

The conference was held at the Four Seasons Hotel in Miami, where Bolton will be moving its Miami headquarters within in the next 12 months. The event included close to 100 advisor attendees with representation from Uruguay, Argentina, Brazil, Panama, New York, Florida, Texas, Massachusetts and Maine. Guests were treated to a lively economics discussion during the Portfolio Strategist Panel, which featured Claus te Wildt , Senior VP, Capital Markets Strategy, Fidelity Institutional Asset Management, Paresh Upadhyaya, Director of Currency Strategy, Amundi/Pioneer, Antonio Miranda, Head of Asset Management and CIO, Compass Group, Investec, Carlos Asilis, Co-Founder and CIO, Glovista Investments and moderator Oscar Isoba, Senior Vice President and Regional Head, Nuveen Investments.

Later in the afternoon, Sergio Alvarez-Mena, Partner, Jones Day outlined the regulatory, compliance and tax landscape. Matt Beals, Chief Operating Officer, Kathy Sargent, Managing Director of Transitions and Business Development at Bolton, and Sean Power, Customer Success Manager, Agreement Express reviewed several new products and technologies being rolled out by Bolton. These include an end-to-end e-signature and document management system, Envestnet’s SMA platform and Latam ConsultUs Research.

The evening ended with cocktails and hors d’oeuvres, followed by an elegant dinner at the Four Seasons.

On Friday, attendees enjoyed a breakfast event followed by technical sessions with Bolton Staff and the conference’s many sponsors.

Former UBS Advisors Launch Portland RIA

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Leading wealth advisors Steven Tenney, Joseph Powers, Helen Andreoli and Jack Piper announced that they have partnered with Dynasty Financial Partners to form an independent wealth management firm called Great Diamond Partners. All four advisors had previously worked at UBS.

Based in Portland, Maine, the firm has a total staff of seven professionals, including four financial advisors. Joining from UBS are the following professionals:

Mr. Tenney is the CEO and Founding Partner of Great Diamond Partners. Mr. Tenney has worked at UBS since 1993, most recently as Senior Vice President and Senior Portfolio Manager. He is a Certified Portfolio Manager™ and a Certified Exit Planning Advisor™ (CEPA®).
Joseph Powers leads the Financial Planning and Insurance Strategies focus for Great Diamond Partners. He worked at UBS as a Private Wealth Advisor since 2000. He is a Certified Financial Planner ™ (CFP®), a Chartered Life Underwriter (CLU) and a Certified Exit Planning Advisor (CEPA®)
Helen Andreoli is the Chief Financial Officer and a Founding Partner of Great Diamond Partners. A 20-year veteran of the financial services industry, having worked at Morgan Stanley, Merrill Lynch and UBS Financial Services, she is a Certified Financial Planner™ (CFP®).
As a Founding Partner of Great Diamond, Jack Piper works with individuals and families, helping them to craft a plan to reach their financial goals. He also works on the investment team in developing and managing client portfolios. Mr. Piper worked as a financial advisor at UBS Wealth Management for four years. Prior to that, he worked at Bainco International Investors in Boston, holding a variety of positions before ultimately serving as a portfolio strategist.

Great Diamond Partners is an independent wealth management firm based in Portland, Maine. The firm integrates disciplined investment consulting with personalized advanced planning, superior technology and a boutique client experience. Consistent with their focus on families, many of whom are or have been business owners, the firm has deep expertise with business transition planning. Great Diamond Partners helps owners prepare for and execute successful transitions, whether that is an intergenerational wealth transfer, outright business sale or other possible outcome. Great Diamond Partners’ advisors are Certified Exit Planning Advisors and Certified Financial Planners, all skills needed to execute a successful transition.

“We have always maintained that every element of what we do needs to be in our clients’ best interests. Now we recognize the unquestionable benefits to clients in working as an independent firm, and the Dynasty structure allows us to execute on our vision,” according to Mr. Tenney. “We will be able to provide an even better client experience due to vastly improved technology, advanced planning resources and tools and the fiduciary environment when making recommendations. Finally, the expanded resources are tremendous – everything from advanced planning software to investment banking, investment consulting and business management.”

Great Diamond Partners plans to expand their footprint by recruiting like-minded advisors who may be seeking to join an independent advisory firm.

“The breakaway movement is reaching a tipping point. Again and again, some of the best advisors in the industry are seeking true independence as the model that is best for their clients, their employees, and themselves. We are seeing veteran advisors with 20 plus years at their firms choosing to take the road to independence and this movement is accelerating,” said Shirl Penney, CEO of Dynasty Financial Partners. “Specific to Great Diamond Partners, they are deeply committed to our home state of Maine. As someone who was born and raised in Maine, I am particularly proud to partner with high-caliber advisors like Steve, Joe, Helen and Jack and their remarkable team, and we welcome them to our Network of independent advisors. I am excited to have one the largest and leading financial advisory teams in Maine on the Dynasty platform and look forward to partnering with them to grow their business.”

Great Diamond Partners has partnered with Dynasty Financial Partners to leverage Dynasty’s wealth management services, people, leading technology, and capital support. The firm will be using Dynasty’s award-winning integrated Core Services platform for independent advisors and using Dynasty’s turn-key asset management platform (TAMP). They will have access to leading technology, including Dynasty’s proprietary advisor desktop, in-house specialists, home office support, and will benefit from the firm’s significant scale in the industry.

Among its other resource partners, Great Diamond Partners has selected Schwab to provide custody services for its clients’ assets and Black Diamond for consolidated asset and performance reporting.

For more information, please visit www.greatdiamondpartners.com.

BNY Mellon’s Pershing Reimagines INSITE, Its Flagship Event

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BNY Mellon’s Pershing’s annual INSITE conference will take place Wednesday, June 12, through Friday, June 14, at the Phoenix Convention Center in Phoenix, Arizona.

INSITE 2019 will bring together financial experts, leaders, influencers, and innovators for three days of inspiration, education and networking. According to Pershing, this year, attendees can expect more breakouts, more variety in session formats, and more networking and learning opportunities, all of which are designed to make the conference more impactful, productive and interactive than ever before.

“As our industry continues to evolve, we are constantly looking to reinvent ourselves,” said Jim Crowley, chief operating officer of Pershing. “For 20 years, INSITE has been the quintessential conference for the financial advice community. This year, we have reimagined our flagship event to deliver our clients an exceptional experience and a multitude of opportunities to learn from, engage with and be inspired by each other. These enhancements are further proof of our commitment to listening to our clients and advancing their ongoing evolution in a complex business environment.”

More than 140 sponsors, including asset managers and technology providers, along with 2,000 attendees will participate in INSITE 2019.

At the main stage, attendees will hear from highly respected business leaders and visionaries, including BNY Mellon Chairman and CEO Charlie Scharf, as well as:

Alan Mulally, former president and CEO of the Ford Motor Company,
Steve Nash, two-time National Basketball Association (NBA) Most Valuable Player, eight-time NBA All-Star, and an inductee of the Naismith Memorial Basketball Hall of Fame, and
Simon Sinek, optimist and best-selling author.

This year, the main stage will also feature a panel of powerhouse female leaders, including Valerie Brown, executive chairman, Advisor Group, Inc.; Catherine Keating, CEO, BNY Mellon Wealth Management; and Megan Smith, CEO, Shift7, and third chief technology officer of the United States. The “Futureproofing Your Business” panel will cover topics including technology, developing next-gen and millennial talent, competition, and personal stories of the panelists’ rise to success.

Breakout sessions will feature industry leaders and influencers such as Dale Brown, CEO of FSI, and Michael Kitces, partner and director of wealth management at Pinnacle Advisory Group.

Among the key topics covered in the sessions will be disruptive trends shaping the industry, strategies for driving business growth, and deploying technology to deliver a better client experience and realize greater efficiencies. Examples of breakout sessions include:

Bridging the Gap to the Next Generation of Advisors and Clients
Driving Gender Balance
Harnessing Digital Technology to Personalize the Client Experience
Growth Opportunities in the LatAm Wealth Management Industry
What’s on the Mind of the Regulators?
Role of Alternative Investments in Volatile Markets
Cybercrime and Privacy and How to Be a Defender

Further, INSITE 2019 will feature a host of enhancements, including:

A reimagined Exhibit Hall, featuring a brand new “Tech Central” area, which will showcase cutting-edge fintech solutions from leading providers and offer hands-on demonstrations.
A new Learning Hub in the technology area of the Pavilion located in the center of the Exhibit Hall.
The Learning Hub will feature 22 classes throughout the event, providing attendees with an opportunity to get hands-on training on Pershing’s NetX360® platform.

An expanded variety of session formats, which—in addition to keynotes and the traditional panel breakouts—will include:

Showcase sessions, which are 20-30 minute TED-style talks,
Workshops, which are two-hour action-oriented, hands-on professional development sessions, and
One-on-ones with industry leaders and influencers.

Attendees at the event will also be able to fulfill their continuing education requirements for CFP® Certified Financial Planner™ and IWI Investments & Wealth Institute™ (formerly IMCA®) by attending qualifying sessions.

Finally, attendees will have the opportunity to attend various evening receptions throughout the three-day event and a closing night celebration at The Duce.

For more information about INSITE 2019—including a full agenda of speakers, sessions and events—or to register, please visit bnymellonINSITE.com.

Buffett is Looking for Deals in the UK and Europe

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The U.S. stock rally continued in April topping off the best April return since 2009 while setting four record closing highs with three in a row at month end.

Despite political pressure to cut rates, ‘transitory’ below target inflation, and surging U.S. job growth, monetary policy remains on hold. The Fed’s dual mandate of maximum employment and stable prices is currently being met as the long-lived U.S. economic expansion and its reflective bull market rolls onward.

Global announced deals in April had a combined value of about $338 billion, the third highest in the last ten years, according to industry data. Total 2019 year to date M&A was $1.3 trillion compared to the record high of $1.6 trillion for the same period in 2018 when lots of mega merger-and-acquisition activity occurred. Takeovers of UK companies dropped sharply in April due to Brexit uncertainties.

On the M&A trail at the Berkshire Hathaway annual shareholders’ meeting in Omaha, Nebraska, Warren Buffett said “I would like to see Berkshire Hathaway better known in the UK and Europe…I would hope they would think of Berkshire more often when businesses are for sale…We’re hoping for a deal in the UK and or in Europe no matter how Brexit comes out.” Berkshire has been on the hunt for mega deals with its $100 billion plus in M&A cash…stay tuned.

Commenting on Berkshire’s flexibility to move quickly to commit on deals such as its April 30 controversial offer of $10 billion in financing for Occidental Petroleum’s proposed acquisition of Anadarko Petroleum, Mr. Buffett said “We’re very likely to get the call because we can do something that no other institution can do… If somebody wants a lot of certain money for a deal, they’ve seen I can get a call on a Friday afternoon, and Saturday they have a date with me, and Sunday it’s done.” BRK’s outsized Apple position may be a cash source. We see more deals globally on the horizon coupled with an election looming, corporates will likely become aggressive, and GAMCO’s risk arbitrage team will stand to take advantage of these opportunities and trends.

Column by Gabelli Funds, written by Michael Gabelli

To access our proprietary value investment methodology, and dedicated merger arbitrage portfolio we offer the following UCITS Funds in each discipline:

GAMCO MERGER ARBITRAGE

GAMCO Merger Arbitrage UCITS Fund, launched in October 2011, is an open-end fund incorporated in Luxembourg and compliant with UCITS regulation. The team, dedicated strategy, and record dates back to 1985. The objective of the GAMCO Merger Arbitrage Fund is to achieve long-term capital growth by investing primarily in announced equity merger and acquisition transactions while maintaining a diversified portfolio. The Fund utilizes a highly specialized investment approach designed principally to profit from the successful completion of proposed mergers, takeovers, tender offers, leveraged buyouts and other types of corporate reorganizations. Analyzes and continuously monitors each pending transaction for potential risk, including: regulatory, terms, financing, and shareholder approval.

Merger investments are a highly liquid, non-market correlated, proven and consistent alternative to traditional fixed income and equity securities. Merger returns are dependent on deal spreads. Deal spreads are a function of time, deal risk premium, and interest rates. Returns are thus correlated to interest rate changes over the medium term and not the broader equity market. The prospect of rising rates would imply higher returns on mergers as spreads widen to compensate arbitrageurs. As bond markets decline (interest rates rise), merger returns should improve as capital allocation decisions adjust to the changes in the costs of capital.

Broad Market volatility can lead to widening of spreads in merger positions, coupled with our well-researched merger portfolios, offer the potential for enhanced IRRs through dynamic position sizing. Daily price volatility fluctuations coupled with less proprietary capital (the Volcker rule) in the U.S. have contributed to improving merger spreads and thus, overall returns. Thus our fund is well positioned as a cash substitute or fixed income alternative.

Our objectives are to compound and preserve wealth over time, while remaining non-correlated to the broad global markets. We created our first dedicated merger fund 32 years ago. Since then, our merger performance has grown client assets at an annualized rate of approximately 10.7% gross and 7.6% net since 1985. Today, we manage assets on behalf of institutional and high net worth clients globally in a variety of fund structures and mandates.

Class I USD – LU0687944552
Class I EUR – LU0687944396
Class A USD – LU0687943745
Class A EUR – LU0687943661
Class R USD – LU1453360825
Class R EUR – LU1453361476

GAMCO ALL CAP VALUE

The GAMCO All Cap Value UCITS Fund launched in May, 2015 utilizes Gabelli’s its proprietary PMV with a Catalyst™ investment methodology, which has been in place since 1977. The Fund seeks absolute returns through event driven value investing. Our methodology centers around fundamental, research-driven, value based investing with a focus on asset values, cash flows and identifiable catalysts to maximize returns independent of market direction. The fund draws on the experience of its global portfolio team and 35+ value research analysts.

GAMCO is an active, bottom-up, value investor, and seeks to achieve real capital appreciation (relative to inflation) over the long term regardless of market cycles. Our value-oriented stock selection process is based on the fundamental investment principles first articulated in 1934 by Graham and Dodd, the founders of modern security analysis, and further augmented by Mario Gabelli in 1977 with his introduction of the concepts of Private Market Value (PMV) with a Catalyst™ into equity analysis. PMV with a Catalyst™ is our unique research methodology that focuses on individual stock selection by identifying firms selling below intrinsic value with a reasonable probability of realizing their PMV’s which we define as the price a strategic or financial acquirer would be willing to pay for the entire enterprise. The fundamental valuation factors utilized to evaluate securities prior to inclusion/exclusion into the portfolio, our research driven approach views fundamental analysis as a three pronged approach: free cash flow (earnings before, interest, taxes, depreciation and amortization, or EBITDA, minus the capital expenditures necessary to grow/maintain the business); earnings per share trends; and private market value (PMV), which encompasses on and off balance sheet assets and liabilities. Our team arrives at a PMV valuation by a rigorous assessment of fundamentals from publicly available information and judgement gained from meeting management, covering all size companies globally and our comprehensive, accumulated knowledge of a variety of sectors. We then identify businesses for the portfolio possessing the proper margin of safety and research variables from our deep research universe.

Class I USD – LU1216601648
Class I EUR – LU1216601564
Class A USD – LU1216600913
Class A EUR – LU1216600673
Class R USD – LU1453359900
Class R EUR – LU1453360155

Disclaimer:
The information and any opinions have been obtained from or are based on sources believed to be reliable but accuracy cannot be guaranteed. No responsibility can be accepted for any consequential loss arising from the use of this information. The information is expressed at its date and is issued only to and directed only at those individuals who are permitted to receive such information in accordance with the applicable statutes. In some countries the distribution of this publication may be restricted. It is your responsibility to ﬁnd out what those restrictions are and observe them.

Some of the statements in this presentation may contain or be based on forward looking statements, forecasts, estimates, projections, targets, or prognosis (“forward looking statements”), which reﬂect the manager’s current view of future events, economic developments and ﬁnancial performance. Such forward looking statements are typically indicated by the use of words which express an estimate, expectation, belief, target or forecast. Such forward looking statements are based on an assessment of historical economic data, on the experience and current plans of the investment manager and/or certain advisors of the manager, and on the indicated sources. These forward looking statements contain no representation or warranty of whatever kind that such future events will occur or that they will occur as described herein, or that such results will be achieved by the fund or the investments of the fund, as the occurrence of these events and the results of the fund are subject to various risks and uncertainties. The actual portfolio, and thus results, of the fund may differ substantially from those assumed in the forward looking statements. The manager and its affiliates will not undertake to update or review the forward looking statements contained in this presentation, whether as result of new information or any future event or otherwise.