Haar Capital Management : Discretionary Commodity Trading Program

Summary

HAAR CAPITAL'S APPROACH: In managing the accounts of customers, Haar Capital uses a primarily fundamental strategy although technical analysis may also be employed to help determine specific entry and exit points and the placement of stop-loss orders. The advisor believes that commodity price changes occur due to a combination of changing fundamental factors and short-term noise resulting from normal market volatility. Haar Capital seeks to filter out the short-term noise and profit from longer-term trends. Among the fundamental factors to be analyzed will be product supply and demand outlook, projected carryout stocks as a percentage of consumption, weather developments and forecasts, economic trends, and government policies. Based on his extensive experience in managing commercial and speculative trading positions, and recognizing that future states of the world cannot be known with certainty, the advisor seeks to identify skewed risk-reward opportunities; i.e., situations in which the probability of a large gain is seen as being approximately equal to the probability of a small loss. The advisor may refrain from trading most markets at any given time, based on his assessment of neutral or unattractive risk-reward conditions. In addition to outright long and short positions, trading strategies may include inter and intra-market spread positions and the use of commodity options.

Investment Strategy

The market sectors that will be traded in this program include, without limitation, Currencies, Metals, Financials, Energies, Softs, Livestock, Grains, and Equity Indices.

Risk Management

Various risk management tools will be used by Haar Capital, including stop-loss orders. Stop-loss orders may not necessarily limit losses, since they become market orders when triggered; as a result, a stop-loss order may not be executed at the stop-loss price. Additionally, risk may be managed by varying the size of positions based in part on an assessment of market volatility. Another tool which will be used is portfolio diversification. This technique attempts to take into account the volatility and correlation across multiple markets, as well as projected price behavior in response to specific market-moving events. However, no assurances can be made that historical market correlations will occur or persist in all market conditions. Consistent with the advisor's market approach, portfolios will be managed to meet longer-term risk and volatility tolerances, rather than trading on the basis of short-term trends.