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Alternative Investment Strategies Conference

Speaker: Christopher Guthrie, President and CEO Hillsdale Investment Management

Date: April 21, 2004

Venue: Sheraton Centre, Toronto ON

Synopsis: Increased Manager Responsibility In A Five-Dimensional World: Benchmarking & Controlling Risk

The current state of tracking error-constrained mandates assumes that control of systematic risk is primarily the responsibility of the plan sponsor in evaluating the risk and establishing the benchmarking process. This dynamic appears sub-optimal as many investment managers have superior information as to the total risk in their strategies as well as to the correlation of their strategies to the sponsor’s portfolio.

The alternative “Five-Dimensional Mandate” leads to improved mutual benefit for investors and managers. However, this process demands the construction and measurement of multi-dimensional mandates and, most importantly, increased responsibility for the investment manager. This discussion will focus on the building blocks, or five dimensions, to a better mandate, including:

- Return vs. benchmark: comparing portfolio returns against an established benchmark – Evaluating and controlling risk (i.e. volatility) – Correlating the manager’s strategies with the rest of the investor’s portfolio – Measuring drawdown (the percent of change from peak value to trough) – Determining time underwater (the time from previous peak value to new peak)

Sponsor: Federated Press