Mesirow Financial Investment Management, Inc. : Extended Markets Alpha Program

Summary

The Extended Markets Alpha Programme commenced trading in April 2004 as a managed account for an institutional client to provide a blended exposure to the strategies offered by The Cambridge Strategy. Performance since inception refers to an equal weighted average of the managed accounts invested via the Extended Markets Alpha Programme. The Extended Markets Alpha Programme offers investors a diversified exposure to the global currency markets (including Developed and Developing markets) and aims to profit from short and medium term moves in various currency pairs. To achieve this, the firm employs a systematic approach designed to perform across diverse market environments. The process combines three decision making tools: a Systematic Technical Strategy, a Systematic Fundamental Strategy and a Market Information Strategy.

Investment Strategy

During periods of higher volatility, the Systematic Technical Strategy uses a series of proprietary trading algorithms operating over multiple timeframes. The algorithms combine trend continuation and trend reversal signals. During periods of lower volatility, the Systematic Fundamental Strategy (used in the Developing markets segments of our portfolios) reflects a predetermined set of positions designed to reflect “market? views on the relative attractiveness of currencies versus the US dollar thereby realising the inherent benefits of the carry trade. The Market Information Strategy leverages the experience and global network of our portfolio managers to understand and exploit the behaviour of other market participants and to participate in hedging and investment flows.

Risk Management

The Cambridge Strategy believes that long run success is achieved through successful mitigation of downside returns (with risk controlled at the portfolio, strategy and individual trade levels). While a daily VAR limit is enforced at both the aggregate portfolio and sub-strategy level, a further layer of risk mitigation is incorporated within each strategy. For the Systematic Technical and Market Information Strategies “left side” tail risk is monitored at the trade and portfolio level using a proprietary methodology grounded in Extreme Value Theory. Within the Systematic Fundamental Strategy, the aggregate! net US dollar exposure is maintained at zero.