1. A LT I S FINANCIAL
Alternative Investment Solutions
Investor Presentation
November 2011
2. 2
Disclaimer and Confidentiality Statement
THIS PRESENTATION WAS PREPARED BY ALTIS FINANCIAL (THE “COMPANY”) AND PRESENTS ONLY A PRELIMINARY SUMMARY OF CERTAIN
ASPECTS OF THE PROPOSED OPPORTUNITY (THE “OPPORTUNITY”). IT DOES NOT CONSTITUTE AN OFFERING OF SECURITIES. THIS
PRESENTATION IS PRELIMINARY AND SUMMARY IN NATURE. THIS PRESENTATION IS INTENDED FOR, AND DELIVERED TO, ONLY VERY
SOPHISTICATED ACCREDITED INVESTORS WHO HAVE SUCH FINANCIAL RESOURCES AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS
AS TO BE ABLE TO CONDUCT THEIR OWN EXAMINATION AND DETERMINATION OF THE MERITS AND RISKS OF THIS OPPORTUNITY.
THIS PRESENTATION HAS BEEN PREPARED TO ASSIST INTERESTED PARTIES IN MAKING THEIR OWN EVALUATION PERTAINING TO THE
OPPORTUNITY, AND DOES NOT PURPORT TO BE ALL-INCLUSIVE OR CONTAIN ALL OF THE INFORMATION THAT WOULD BE CONSIDERED
MATERIAL OR DESIRABLE IN MAKING AN EVALUATION. TO THE EXTENT THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS,
SUCH STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO SOME RISKS, UNCERTAINTIES, AND OTHER
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TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR FORECASTED IN THE FORWARD-LOOKING STATEMENTS.
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INFORMATION RELATING TO THE OPPORTUNITY AND DOES NOT CONTAIN ALL OF THE INFORMATION WHICH WOULD BE CONSIDERED
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PRESENTATION OR DISCUSS THE INFORMATION CONTAINED HEREIN, OR MAKE REPRODUCTIONS OF OR USE THIS PRESENTATION FOR ANY
PURPOSE OTHER THAN THE EVALUATION OF THE OPPORTUNITY.
3. 3
About ALTIS
We Deliver Alternative Investment Solutions to Help Investors Achieve
their Financial Goals
We define alternative investments as investment strategies that provide risk mitigation and
diversification across market environments, and are generally uncorrelated with traditional
asset class benchmarks
Our Investment Products:
Provide institutional and retail investors with the benefits of liquidity and transparency
Are designed to reduce portfolio volatility without sacrificing potential return
Are used to complement traditional asset class allocations and improve portfolio risk-
adjusted returns
Capitalize on inefficiencies in the marketplace to deliver absolute returns, as well as
provide enhanced/risk-mitigated market exposure (Beta)
Are innovative, straightforward, and easy to implement
4. 4
About ALTIS
Our Core Focus is on Scalable Product Development and Distribution
We Develop Investment strategies in Collaboration with First-Rate
Investment Managers/Advisors and Financial Institutions
Scalability and repeatability are key attributes when considering specific strategies
The strategies can be managed economically and efficiently
We partner with investment managers/advisors and large financial institutions who
deploy unique strategies and have successful track records
Pervasive Distribution is Paramount to our Success
Our cornerstone is marketing and distribution
Our target markets are registered investment advisors( RIAs), family offices, broker-
dealers/home offices, and investment consultants (for pensions/endowments)
Our team has strong relationships within these target markets
5. 5
Pillars of Success
Distribution
Equity
Partners ALTIS Strategic
Partners
Identified
Strategies
6. 6
The Opportunity
We Converge Alternative Strategies with Liquidity and Transparency
Liquidity became paramount for investors during the crisis, and has remained a key
factor in investment decisions among advisors and institutions
Transparency has become critical- if an advisor cannot explain what the strategy is and
how it is implemented, they are far less likely to include it in a client's portfolio
Registered investment vehicles encompassing alternative strategies reflect demand and
facilitate further adoption¹
Alternative mutual funds can provide similar exposures to what hedge funds provide
but in a lower cost, more liquid, and more transparent fashion
We assist advisors in addressing the liquidity and transparency shortfalls
of certain alternative investment strategies by developing alternative
solutions through traditional investment vehicles such as mutual funds
¹ Morningstar & Barron’s Alternative Investment Survey of US Institutions and Financial Advisors- January , 2011
7. 7
The Opportunity
We Believe Alternative Mutual Funds are in their Early Growth Phase
Many portfolios still lack exposure to alternative investment strategies, and there is
increased investor demand for access to such strategies
Commodities and Real Estate, the original “alternative investments” for many investors,
have seen increased correlation with equity markets the past few years
Investment advisors are becoming more familiar with the various investment
techniques employed by alternative managers
Diversification, absolute and risk-adjusted returns are the top alternative investment
drivers for institutions and advisors¹
Market Size
US registered mutual funds managed $11.8 Trillion at the end of 2010²
In 2010, an estimated 90 million individual investors owned mutual funds and held 87
percent of total mutual fund assets at year-end. Altogether, 51.6 million households,
or 44 percent of all U.S. households, owned mutual funds²
Total assets in open-end funds that use alternative strategies stood at only $87.9 billion
as of the end of May, 2011³; this represents only 0.75% of current mutual fund asset
allocation to alternatives
¹ Morningstar & Barron’s Alternative Investment Survey of US Institutions and Financial Advisors- January , 2011
² Investment Company Institute- 2011 Investment Company Fact Book- 51st Edition
³ Investment News- “Alternative Strategy Funds Thrive…” July 24, 2011- By Dan Jamieson
8. 8
Why Now?
2011—A Lost Year After a Lost Decade…
After a turbulent decade for investors, advisors are faced with extremely low yields, a
tremendous amount of macro-driven uncertainty, and continued volatility in equity
markets
Advisors are concerned about the ability of traditional investments to provide their
investors with stable returns and financial peace of mind
Portfolio diversification in 2008 was severely tested, as correlation across traditional
asset classes/strategies migrated towards one (perfect correlation)
70%+ of institutions expect alternatives to account for more than 10% of their
portfolios over the next five years; 37% expect their portfolio allocation to alternatives
to exceed 25% ¹
50%+ of advisors surveyed expect to see their clients’ allocations to alternatives grow
by more than 10% per-year over the next five-years¹
70%+ of institutions surveyed and 66% of advisors believe that alternatives will be as
important or more important than traditional investments over the next five-years¹
Our strategies are specifically chosen to address different asset class needs of
an investor’s portfolio; an early 2012 launch enables us to be in a great position
to capitalize on this migration to alternative investment strategies
¹ Morningstar & Barron’s Alternative Investment Survey of US Institutions and Financial Advisors- January , 2011
9. ALTIS
Mutual Funds
Two Distinct Investment Strategies to be Launched in 2012
10. 10
Risk Mitigation is the Foundation of our Investment
Solutions…
Levels of risk tolerance have diminished since the economic crisis—investors
would be willing to forego some upside participation in exchange for
downside protection
Investment strategies can take advantage of structural inefficiencies across a
number of different asset classes to deliver lower volatility and absolute
return solutions
Volatility can significantly impact compounding, so it is key to identify
strategies which can mitigate large draw-downs without foregoing the
potential for strong upside appreciation
Volatility is an asset class in and of itself and can be harnessed in a number
of different ways to dampen overall portfolio volatility and increase risk-
adjusted returns
11. 11
Strategic Partners
Trustworthy and credible partnerships are critical to our success
Ability to leverage existing track record, firm reputation and infrastructure
is key to establishing rapid penetration in the marketplace
Initial partnerships include:
Options manager with 30-years of institutional portfolio overlays
Large financial institution with proven strategies wrapped in index
form
Focus will be on initial strategies outlined; however, we will be
opportunistic in identifying key partnerships we think can bring value to
the marketplace
Management/advisory fees are in the process of being negotiated, but cost
should be far less than building-out capabilities in-house to start
12. 12
Distribution
Institutions
Wirehouses/Independent
Broker-Dealers
Registered Investment Advisors /
Family Offices
13. 13
Mutual Fund Operations
ALTIS Financial Outsources All Mutual Fund Operations
Such outsourcing enables ALTIS to achieve efficiency and scalability, and to focus specifically
on distribution and product development…
Outsourced Operations Include:
Fund Administration
Fund Accounting
Transfer Agency
Custody Administration
Compliance
Account Openings, Incoming Transfers, Customer Service
24- Hour Automated Voice Response
Edgar Filing and Printing Services
14. 14
ALTIS Financial- General Timeline
Series A Funding Marketing Materials Series A Funding Road Show
First Closing- Developed Final Closing- Commences to Present
$1.5 million Registration Statement Total Round- $3 Million Strategies to RIAs and
Commence Drafting of Filing Preparation (See Filing of Registration Family Offices for
Registration Statement Next Slide) Indications of Interest
Statement
December 1, 2011 November 1, 2011- January 2, 2012 January 2, 2012-
January 2, 2012 April 16, 2012
Effective Date for Estimated Estimated Estimated
Mutual Funds $50 million AUM $100 million AUM $250 million AUM
April 16, 2012 July , 2012 December, 2012 October, 2013
16. 16
2012 Mutual Fund Rollout
ALTIS Enhanced Equity Fund—designed to provide enhanced
equity exposure through a more risk-controlled framework than
traditional equity mutual funds, capturing 80-100% of equity
market appreciation and less than 50% of any equity market
decline
ALTIS Long/Short Commodity Fund—provides long/short
commodity exposure by going long the 10 most backwardated
commodities (monthly rebalance) while going short the DJUBS
Index, capitalizing on backwardated commodities generally
signaling strong fundamental demand
17. ALTIS Enhanced Equity Fund
Overview
Designed to provide equity exposure in a more risk-controlled framework
than traditional equity mutual funds, capturing 80-100% of equity market
appreciation and less than 50% of any equity market decline
Consists of actively managing an options portfolio as an overlay to the
underlying equity exposure—strategies include call writing and various
downside hedging strategies
Methodology can be employed in different funds across a number of
underlying equity indices (e.g. S&P 500, Russell 2000) to address specific
allocation needs
Sub-advised by investment manager with ~30 years of experience in
managing and trading option portfolios for institutional clients
Very few equity mutual funds implement either covered call or hedging
solutions, let alone combining both into one fund.
Gateway (GATEX) does both, has >$5B in AUM, and we feel isn’t as efficient in its
downside hedging strategies leading to material drags in performance during
stable market environments
18. ALTIS Enhanced Equity Fund
Fund Characteristics
An Equity Collar consists of selling a call option to finance the purchase
of a put option, and is generally done at zero upfront cost for a defined
maturity (generally 6 months – 1 year).
Investor establishes maximum upside and downside exposure over a
certain period of time, thereby lowering overall equity volatility
Implementation is inefficient, especially in low-rate, higher
volatility/volatility skew environments
Enhanced Equity fund seeks to improve upon this concept through
active management of various option strategies, specifically by:
Going long the underlying index
Selling call options (utilizing index options which will be 1256 contracts:
providing 60% long term capital gains/40% short term capital gains treatment)
Purchasing downside protection
Specific option strategies to be employed will vary with the market/volatility
environment
19. ALTIS Enhanced Equity Fund
Benchmark Option Indices—comparative analysis
The CBOE has created a variety of indices, each providing equity exposure with an option overlay
The ALTIS Enhanced Equity Fund combines elements of each Index while seeking to further exploit
inefficiencies to improve upon these benchmark strategies
BXM BXY Tail Hedge Collar
Methodology Buy SPX, sell 1 month, Buy SPX, Sell 1 month, 2% Buy SPX, buy 1 month OTM Buy SPX, sell 1 month, 10%
ATM call on SPX OTM call on SPX VIX call with 0-1% of total OTM call, purchase 3 month,
assets 5% OTM put
Key Strengths 1. Generates significant 1. Enables investor to 1. Greatly mitigates steep SPX 1. Provides the investor with a
monthly premium participate in SPX moves up declines when volatility performance zone, which
2. Produces favorable to 2% per month levels had been lower greatly reduces overall portfolio
risk-adjusted returns 2. Investors do receive some 2. Adjusts exposure based on volatility
compared to SPX level of call premium volatility levels in attempt to 2. Sells shorter-dated options and
minimize carry cost purchases longer-dated ones
Key Weaknesses 1. Minimal protection in 1. Minimal protection in tail 1. Purchases VIX option 1. 10% OTM calls generate
tail scenarios scenarios exposure (albeit less) at minimal premium in most
2. Strikes don’t adjust 2. Strikes don’t adjust based on higher VIX levels (30-50), market environments and if
based on market market conditions despite high cost (skew) and timing is wrong may sell call at
conditions generally lower VIX bottom
sensitivity to SPX declines 2. Put options costs can be a
(e.g. Jan/Feb 2009; Sept, heavy drag on returns in certain
2011) environments
2. 1 month maturity increases
potential premium outlay
20. ALTIS Enhanced Equity Fund
Comparison to other CBOE Benchmark Indices
180.00
160.00
140.00
Index Value (3/22/06 = 100)
120.00 BXM
S&P 500 Total Return
100.00
VXTH
80.00 BXY
Altis Proxy (BXM/BXY + VXTH)
60.00
40.00
20.00
-
12/1/2006
12/1/2007
12/1/2008
12/1/2009
12/1/2010
3/1/2006
6/1/2006
9/1/2006
3/1/2007
6/1/2007
9/1/2007
3/1/2008
6/1/2008
9/1/2008
3/1/2009
6/1/2009
9/1/2009
3/1/2010
6/1/2010
9/1/2010
3/1/2011
6/1/2011
9/1/2011
Monthly correlation of ALTIS Proxy with S&P 500 Total Return during this period was 0.48
21. ALTIS Long/Short Alpha Commodity Fund
Overview
Backwardation refers to the shape of a commodity curve where the front
month futures contracts are more expensive than the outer months
Backwardation may exist for several different reasons, but is most
commonly associated with strong fundamentals due to strong current
demand and/or limited supply/low inventory of the commodity
In certain commodities, supply can take awhile to come into production and
can therefore exhibit more persistent backwardation (e.g. Copper), whereas
others are more seasonal in nature (e.g. Heating Oil)
2 potential benefits to obtaining long exposure to commodities in
backwardation:
Futures contract prices at expiration converge to equal the then-current spot
price, so that a backwardated futures contract could increase over time
As commodity positions are rolled prior to expiration, a backwardated curve may
enable investors to sell a more expensive contract (expiring contract) and
purchase a less expensive contract (longer maturity contract). This may result in
a positive roll yield and serve as a buffer to any decline in the commodity’s price
(i.e. downward shift of the entire curve)
22. ALTIS Long/Short Alpha Commodity Fund
Overview
This strategy seeks to capitalize on commodities in backwardation by identifying and
going long the 10 most backwardated commodities, rebalancing on a monthly basis
The front-month futures contract price is compared with the 12 month forward price
to determine which are the most backwardated commodities, thereby mitigating any
seasonality impact
Each commodity is rolled according to a pre-defined schedule, tailored specifically
for each commodity
The long positions in the 10 backwardated commodites are paired with an equally-
weighted short exposure to the Dow Jones-UBS Commodity Index, a broad-based
index across all commodities (both in backwardation and contango)
There are very few commodity ETF’s or mutual funds exclusively focused on the
power of backwardation and its ability to outperform the traditional benchmark
indices
Cash collateral will be managed with exposure to short-duration, high quality fixed
income securities/funds
23. ALTIS Long/Short Alpha Commodity Fund
Implementation
Partnership with a major financial institution who launched an Index around
the backwardation methodology in November, 2010
Fund will obtain exposure to this Index via swap (i.e. on an unfunded basis)
Fund investor’s principal is placed in short-duration fixed income securities
and cash, and is therefore not subject to counterparty risk
Fund will receive (pay) the positive (negative) Index performance on a
periodic basis, thereby further mitigating counterparty risk (i.e. investor may
only be at risk of not receiving the last performance payment (targeting
weekly performance true-up with financial institution)
Cash collateral, over time, should offset the Fund’s management fee and
potentially the entire expense ratio; however, this will be a function of the
then current interest rates
24. ALTIS Long/Short Alpha Commodity Fund
Comparison to Dow Jones UBS Index
250
200
150 Altis Backwardation
Alpha Commo Fund
100 DJUBS Index
50
0
9/1/2006
3/1/2007
6/1/2007
9/1/2007
3/1/2008
6/1/2008
9/1/2008
3/1/2009
6/1/2009
9/1/2009
3/1/2010
6/1/2010
9/1/2010
3/1/2011
6/1/2011
9/1/2011
12/1/2006
12/1/2007
12/1/2008
12/1/2009
12/1/2010
Source: Bloomberg
Annualized
Return Standard Deviation
Altis Backwardation Alpha Commodity Fund* 18.31% 7.77%
DJUBS Index -2.60% 22.09%
*Gross of expenses and management of cash collateral; Long/Short Commodity Index went live on November 23, 2010
25. ALTIS Long/Short Alpha Commodity Fund
Correlation with Major Indices
Monthly Correlation
Correlation with: 10 years Since Index Launch
DJ-UBS Commodity Index -0.109 -0.06
S&P 500 Total Return Index 0.108 0.295
iShares MSCI Emerging Market Fund (EEM) 0.119 -0.033
iShares Barclays Aggregate Bond Fund (AGG) 0.099 -0.362
Dow Jones US Real Estate Index 0.118 0.266
HFR Global Hedge Fund Index 0.127 0.379
Source: Bloomberg
26. A LT I S FINANCIAL
Alternative Investment Solutions
Investor Presentation
November 2011