As investors become more sophisticated, Hillsdale believes that more emphasis will be placed on risk exposure and on reporting returns through a risk-adjusted lens. This will require managers to fully understand and defend their exposures and their market bets. While most investors are aware of market volatility and basic measures of risk such as country, industry and style exposures; going forward, more emphasis will be placed on easily quantifiable and more sophisticated measures, such as beta, correlation, drawdown, etc.

As a matter of policy, Hillsdale establishes clearly articulated guidelines, restrictions and tolerances on various parameters in order to control the risk of its portfolios. Risk parameters include:

• Investment vehicles allowed in portfolio
• Number of stocks in portfolio
• Weighting of stocks in portfolio
• Rebalancing stock weights
• Liquidity of stocks in portfolio
• Minimum and maximum industry exposures
• Rebalancing industry exposures
• Minimum and maximum½ net market exposures
• Rebalancing net market exposures
• Using leverage
• Minimum and maximum use of leverage
• Factor matching criteria
• Factor exposure criteria

All factors are monitored daily and rebalanced as required. The risk control process is fully incorporated within Hillsdale's proprietary computer modeling and simulation software applications.