Diamond Peak Capital LLC : Northstar (2x) program

Summary

Northstar is an equity index-focused, long/short systematic trading program. It targets mean reversion swing trades, while utilizing trend following filters which aim to only take those trades in the direction of the long-term trend. Trade duration is typically 3 days on average. The program applies strict money management rules, disciplined entry and exit criteria, and stops on all positions. Northstar is uncorrelated with equity/CTA/hedge fund indexes, and is generally uncorrelated to other CTAs. Clients must be QEPs as Diamond Peak Capital operates under the Section 4.7 exemption. The above return information is generated from accounts DPC LLC deems representative of the program's overall performance. October 2008-August 2009 performance is the Northstar aggressive program, net of fees, trading Rydex mutual funds, and was calculated by Fleming Financial Services, P.C. Results September 2009 - present are a performance composite of client futures accounts. The futures returns were generated using Hedgefacts Analytics software and are calculated per NFA guidelines.

Investment Strategy

Northstar is a quantitative, statistically-driven investment approach that combines our many years of experience trading both equity and futures markets. It employs short-term trading, with 1-7 day holding periods, and targets high win/loss ratios, while taking profits quickly. The program spends significant time out of the market altogether, ie 70% of days flat/in a cash position. DPC believes a disciplined & systematic approach to trading can be more profitable over the long-term than discretionary trading. The strategy was developed through rigorous research and back-testing of market data back to 2001. The portfolio manager's preferred trading style is swing trading, which attempts to avoid deep and lasting draw-downs, as well as the onus of continuous, intra-day trading. We believe in creating strategies that can be adhered to and executed in both good times and bad.

Risk Management

Risk management is considered at every level of strategy creation and portfolio construction. Northstar's risk mgt algorithms were updated October of 2011 as follows: the aggressive trading systems were removed, intra-day trading systems were removed, and money management stops were tightened. Please see the Northstar Presentation for further details. Risks are mitigated in the following ways: • Frequent cash position reduces overall market exposure by 70% on average • Stops on all positions • Focus on high probability trades with 65% to 85% win ratios • Take profits quickly, short-term holding period • Scale into positions • Three uncorrelated trading systems, each market has different buy/sell criteria • Take positions only in the direction of the trend