NuWave Investment Management, LLC : Combined Futures Portfolio

Summary

Since its inception in 2000, NuWave Investment Management has combined ingenuity, insightful research and cutting-edge technology to successfully navigate the complexities of global investing. Our unique multi-strategy approach to investing in many of the world’s most liquid financial and commodities markets offers investors the potential to achieve risk-adjusted returns (with commensurate risk) in a variety of market environments, while also providing diversification and non-correlation benefits relative to both traditional investments and other hedge fund strategies.

Investment Strategy

The Combined Futures Portfolio pursues a unique multi-strategy approach to investing in many of the world’s most liquid financial and commodities futures markets, offering investors the potential to achieve compelling risk-adjusted returns in a variety of market environments while also providing the potential for significant diversification and non-correlation benefits relative to both traditional investments and other hedge fund strategies. *As of January 1, 2017 there is an addition of a third sub-portfolio, Short Term Futures. Prior to September 1, 2015, the Combined Futures Portfolio was comprised of three distinct sub-programs: the Long-Term Pattern Recognition Program, the Intermediate-Term Pattern Recognition Program and the Short-Term Pattern Recognition Program. Commencing September 1, 2015, the Combined Futures Portfolio is comprised of the following distinct sub-portfolios: • The Matrix Portfolio pursues a multi-model trend-based approach to investing across a diverse selection of liquid financial and commodities futures markets. The portfolio seeks to provide investors with managed futures “beta” as well as the potential for enhanced “alpha” through the systematic application of approximately 50 individual pattern-based trading models, which collectively provide exposure to short-, intermediate- and long-term trading opportunities. The underlying trading models are selected based upon their individual risk/return characteristics, as well as their ability to smooth/diversify overall portfolio returns. While each of the trading models trades the same set of broadly diversified markets (with approximately 65% of market exposure being derived from financial futures (such as stock indices, fixed income and currencies) and approximately 35% of market exposure being derived from commodity futures (such as energies, metals, grains, softs and meats)), each is also differentiated by a unique trading style and time frame. The aggregate portfolio is therefore broadly diversified across markets, time horizons and trading styles. • The Commodity Value Portfolio pursues a relative value approach to investing across a selection of liquid commodities futures markets. The portfolio systematically identifies intra-market spread opportunities within the energy, metal, grain and soft commodities markets that exhibit the greatest probability of near- to intermediate-term mispricing in strip values (based upon the Investment Manager’s proprietary forecasting methodology); thereafter, the portfolio seeks to capture any such intermittent price distortions via trading in calendar spreads. The Commodity Value Portfolio is actually comprised of two trading models: one of which focuses on the identification of repetitive patterns in relative price behaviors, while the other seeks to identify key elements of non-price data generally associated with cash market trading activities. Although systematically applied, every trade is reviewed by the Investment Manager’s portfolio management team for consistency with respect to the relative value framework employed. Holding periods generally range from several days to several weeks in duration. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Risk Management

Successful investment strategies must identify complex risk relationships across an increasingly interdependent world. At NuWave, careful attention is paid to a variety of risks, including the following: Market Risk: The firm incorporates proprietary pattern recognition forecasts for each market which help define signal generation, risk control, value at risk and stress test measurements. Position sizing, risk targets and individual market exposure are managed in a manner that attempts to equalize risk across all positions. Portfolio Risk: Portfolio construction emphasizes an optimal blend of opportunistic sub-strategies that are focused on directional market cycles of varying duration. Multiple constraints are incorporated to minimize aggregate risk across the entire portfolio. Value at risk measurements, sector concentrations, individual market exposure, stress-test findings and overall leverage are each constrained so as to remain within acceptable levels. A proprietary risk overlay governs the entire portfolio, and individual trades derived from the firm’s core trading logic are systematically accepted or rejected based upon their ability to add incremental return without exacerbating portfolio risk. Execution Risk: NuWave Investment Management has developed a proprietary trading infrastructure that seamlessly integrates trade execution and risk management real-time. Trades are primarily executed via electronic trading algorithms intended to mask the firm’s “footprint” in the marketplace, and executed trades are immediately entered into the firm’s database, with the resulting impact on portfolio risk being measured accordingly.