Next Generation Alternative Strategies May 2014 Private and Confidential Investing in novel, innovative and unconventional strategies

Private & Confidential 2 Orthogonal Partners LLP 2 Diversification is the closest thing to a “free lunch” DIVERSIFICATION + Returns = “VALUE” Why do we diversify? – to manage risk The world is risky - we don’t put all your eggs in one basket Or do we? Why seek Next Generation Alternative Strategies? Confidential

Private & Confidential 3 Orthogonal Partners LLP 3 Over time our allocations are becoming MORE correlated – they are riskier! Err……… Confidential

Private & Confidential 4 Orthogonal Partners LLP 4 Unexpected Financial Shocks Confidential 1987 Stock Market Crash 1990 Nikkei Crash 1990 High Yield Tumbles 1992 European Currency Crisis 1994 US Interest Rate Hike Mexican Peso Crisis 1996 Latin American Crisis 1997 Asian Crisis 1998 Russian Crisis 1998 LTCM 1999 Brazil Crisis 2000 Tech Meltdown 2001 Tech Meltdown 9/11 Terrorist Attacks 2002 Bubble Bursts 2003 Fannie Mae Fannie Mac Blackout of Global Financial Crisis 2014 Ukraine? Next Bubble?

Private & Confidential 5 Orthogonal Partners LLP 5 Declining attractiveness of traditional PE/HF strategies No surprise -$3 Trillion in HF /$3 Trillion in PE Issues around access, alignment of interest, fees, succession in established brands You better hope things work out well But as we know “hope is not a good strategy” What should we do? Houston we have a problem Confidential

Private & Confidential 6 Orthogonal Partners LLP 6 Invest in misunderstood, under-researched, niche strategies Inefficiencies due to scarcity of institutional capital Return drivers independent of traditional financial markets The “brand names” of today were the “next generation” of yesterday Go where others can’t or won’t go (Yet) Confidential

Private & Confidential 7 Orthogonal Partners LLP 7 Novel, innovative and unconventional Misunderstood, under-researched, niche strategies Inefficiencies due to scarcity of capital Returns which behave differently in times of stress to anything else in your portfolio Return drivers independent of traditional financial markets Entrepreneurial solutions to market problems Next generation alternatives – example characteristics Confidential

Private & Confidential 8 Orthogonal Partners LLP 8 New sources of return are undercapitalised and inefficient New ways of creating assets and adding value Low correlation with existing investments Often targeting generating absolute return Opportunity for enhanced economics - significant influence on terms, structure, transparency Attractions of investing in next generation alternatives Confidential

Private & Confidential 9 Orthogonal Partners LLP 9 Examples of next generation alternatives Confidential Weather Electricity Intellectual property rights / music / film / video games / photography Aircraft part-out Litigation strategies Niche direct lending and trade finance obligations

Private & Confidential 10 Orthogonal Partners LLP 10 Where to find the ideas? Not in databases, unknown to consultants, may not have track records Next generation strategies may have:  Sophisticated strategies  Complexity  Start up and operational risk  Need active support with structuring and governance  Never have managed third party money Due diligence requires dedicated resources, experience and expertise Very limited pool of experience May need to outsource this activity Confidential Barriers to entry - Investing in next generation alternatives

Private & Confidential DIVERSIFICATION + Returns = “VALUE” Investors need new sources of return Adding “next generation” strategies can reduce risk and increase returns Difficult to successfully execute strategy without help May be cost effective to outsource such an activity 11 Confidential Summary – Benefit from Orthogonal returns Orthogonal Partners LLP 11

Private & Confidential Orthogonal Partners LLP 12 Confidential Any Questions?

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