NuWave Investment Management, LLC : NuWave Matrix Portfolio

Investment Strategy

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. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.

Risk Management

Market Risk: The firm utilizes volatility as a key component in determining a wide variety of proprietary parameters for an individual market, including stops, signal generation, risk control, value at risk and stress test measurements. Position sizing, risk targets and individual market exposures are generally 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 an entire portfolio. Value at risk measurements, sector concentrations, individual market exposures, stress-test findings and overall leverage are each constrained so as to remain within acceptable levels. A proprietary risk overlay governs each portfolio, and individual trades derived from the firm’s core trading logic may systematically be accepted or rejected based upon their ability to add incremental return without exacerbating portfolio risk. Execution Risk: NuWave has developed a proprietary trading infrastructure that seamlessly integrates trade execution and risk management real-time, while also controlling order flow, optimizing trade execution and minimizing both execution slippage and operational error. Trades are primarily executed via electronic trading algorithms intended to mask the firm’s “footprint” in the marketplace, and executed trades are allocated, stored and independently reconciled via a proprietary trade management system (with the resulting impact on portfolio risk being measured accordingly).