Tina Byles Williams, CEO & CIO December 10, 2008 MANAGER OF EMERGING MANAGERS STRATEGIES “Survival of the Nimble” Why Smaller Investment Managers Outperformed Large Managers Despite a Challenging Five Years for Fundamentally Based Active Management Strategies By Tina Byles Williams, CIO & Portfolio Manager, Global Equities FIS Group July 13, 2011 Presented to: Atlantic Connection’s 6 th Annual Economic & Financial Conference “Fund of Funds: Where are the Opportunities?

Macro Events that Dominated the Last Five Years Led to Heightened Volatility and Correlation “Bubble” 2

Heightened Correlations Have Diminished the Alpha Generated from Fundamental Stock Selection by Active Managers 3 Diminishing excess return troughed in 2009

What Forces Have Elevated Correlations and Will They Normalize? Structural Forces Increased use of index based products (S&P 500 futures contracts or ETFs) Increased use of high frequency trading Cyclical Forces Macro uncertainty encourages trading methods that heighten correlations (index trading and arbitrage). With greater macro certainty these trading techniques should also self-reinforce to push correlations down 4 ANSWER – YES AT SLIGHTLY HIGHER LEVELS AND THEY HAVE ALREADY BEGUN TO DO SO RESULT – ACTIVE MANAGEMENT STRATEGIES’ PERFORMANCE SHOULD IMPROVE AND HAVE ALREADY BEGUN TO DO SO Correlations averaged.27 pre 2007; peaked at.7 in the fall of 2008, early 2009, May 2010 and December 2010 and have subsequently subsided

How Have Entrepreneurial Managers Fared? 5 ENTREPRENEURIAL MANAGER defined as: Asset Class Assets no more than: Large Cap Equity$2 billion Mid/Small Cap Equity$300 million Global Ex-US Equity$2 billion

Over the last Five Years, Developing Managers have Outperformed Established Managers Without Incurring Appreciably More Risk 6

Entrepreneurial Managers’ Performance Advantage Most Pronounced in Down Markets 7

 Portfolio Structure:  Investment insight amplified through more concentrated portfolios and “Best ideas” less diluted  With smaller AUM, Entrepreneurial Managers can more efficiently invest in less liquid segments of the market opportunity set  In certain cases, they can trade more nimbly with negligible market impact  Organizational Dynamics  Compensation more directly tied to alpha production; whereas managers at established firms have greater “safety net” from baseline fee income from large asset pools and the firm’s franchise value  Passion for success and focus unencumbered by bureaucracy and “Committee think” What Characteristics lead to the Performance Advantage?

Entrepreneurial Managers Held More Concentrated Portfolios Most Entrepreneurial Managers employ active management strategies and tend to hold more concentrated portfolios 9

Tracking Error vs. Annualized Return – Large Growth Managers 10

Tracking Error vs. Annualized Return – Large Value Managers 11

Tracking Error vs. Annualized Return – Large Core Managers 12

Tracking Error vs. Annualized Return – Small Cap Managers 13

Developing Managers Incurred Greater Tracking Error which Produced More Excess Return than for Established Managers 14

15 Most Compelling Performance Advantage is the Opportunity Cost Firm AFirm BFirm CFirm D Assets Under Management$ 0 B$ 5 B$ 20 B$ 50 B Invested Positions50 Average percent of Float2.5% Annual Portfolio Turnover50% Investible UniverseR1000V Percent of Index Holdings accessible for investment100% 60%30% Opportunity CostZero Significant Very Significant Source: Huber Capital Management

Increased AUM Limits Access to Lower Liquidity Quintiles Underlying assumptions: White = 0%-5% of the float Red = 5%-10% of the float Yellow = 10% - 15% of the float Green is >15% of the float 16 Source: Huber Capital Management

But Lower Liquidity Quintiles Have Generally Outperformed 17

For Value Segments 18

And Growth Segments 19

Conclusions Heightened macro uncertainty over the last five years as well as the increased use of index trading products diminished the relationship between security price changes and fundamental characteristics. Active long-only and long-short managers have struggled to generate alpha. Increased macro certainty should be more hospitable for active management strategies going forward. Even though most Entrepreneurial Managers offer active management strategies, they outperformed their Established Manager Peers over the last five years. Entrepreneurial managers exhibited more concentrated, higher conviction portfolios with higher tracking error than their Established manager peers. Entrepreneurial firms produced more excess return per unit of tracking error for 4 of the 5 major equity categories studied (Large Value, Large Growth, Small Cap and Global Ex-US Equity). The combination of large asset pools with commonly used guidelines that limit a manager’s exposure to a maximum percentage of the outstanding shares of listed companies likely constrained Established managers’ ability to take advantage of the higher returns generated by smaller and less liquid stocks. The structural performance advantage caused by Entrepreneurial Managers’ greater flexibility to access less liquid and higher returning segments of the liquidity spectrum is likely to continue. 20