SL Advisors

continue this investment approach as well as research other attractive and inefficient opportunities. Investing begins with a thorough assessment of the portfolio objectives. Before putting any money to work, it is necessary to evaluate investment return goals alongside one’s ability and tolerance to take risk. These objectives are then used to construct the right asset allocations for the appropriate long-term portfolio. Within assets classes, the available opportunities across sectors and markets combined with the risks involved guide implementation. I’ve always found that thinking through different plausible outcomes and how we might react to them can make all the difference when markets shift and opportunities and risks change. This means we’re looking for opportunities to buy securities we like when they’re inexpensive, and to lighten up or exit when prices are strong. Prices change more frequently than values, and patience is usually rewarded.Our focus on value and fundamentals provide us with a margin of safety since we understand why we own a security, and it also means we’re unlikely to be investing in popular, overpriced sectors. Understanding how much of what types of risk we are taking is as basic as knowing where you’re driving and how fast. We constantly evaluate risk levels across our portfolios, assessing likely losses in both normal times as well as extraordinary ones. Many years of investing taught me the importance of constantly looking out for potential sources of loss. Markets will always surprise you. However, this isn’t the same as avoiding risk; clearly without risk taking there is no return. Therefore, we make sure we know how much risk we have and that we’re taking enough risk where our research has uncovered a compelling opportunity while limiting our exposure in situations where we have limited insight. While we are involved in markets on a daily basis and are constantly evaluating opportunities, we are investing for the long run. Portfolio exposures are shifted gradually in response to changing conditions and opportunities. Most positions are held for many months or longer, and diversification ensures that no single idea can dominate our returns for better or for worse. Our strategy is to get the portfolio construction right, to constantly reassess the opportunities we see and to follow our investment process consistently. When we do all of these things well, the results follow. SL Advisors only invests in publicly listed securities through separately managed accounts. We don’t run a hedge fund, so clients benefit from complete transparency of their account which is readily accessible through their custodian. Independent valuation and custody of client assets, transparency and accessibility are the foundation of this business. Balanced accounts are invested in Fixed Income and Equities using U.S. Treasuries, ETFs, closed end funds and individual equities.

investors as a group have done quite poorly, particularly in recent years. Plagued by high fees, complex legal structures, poor disclosure, and return chasing, investors confront surprisingly meager results. Drawing on an insider's view of industry growth during the 1990s, a time when hedge fund investors did well in part because there were relatively few of them, The Hedge Fund Mirage chronicles the early days of hedge fund investing before institutions got into the game and goes on to describe the seeding business, a specialized area in which investors provide venture capital-type funding to promising but undiscovered hedge funds. Today’s investors need to do better, and this book highlights the many subtle and not-so-subtle ways that the returns and risks are biased in favor of the hedge fund manager, and how investors and allocators can redress the imbalance. • Multiple fees, complex structures, hidden costs and occasionally biased valuation have consumed most of the investors’ profits • • The surprising frequency of fraud, highlighted with several examples that the author was able to avoid through solid due diligence, industry contacts and some luck • Why new and emerging hedge fund managers are where generally better returns are to be found, because most capital invested is steered towards apparently safer but less profitable large, established funds rather than smaller managers that evoke the more profitable 1990s Hedge fund investors have had it hard in recent years, but The Hedge Fund Mirage is here to change that, by turning the tables on conventional wisdom and putting the hedge fund investor back on top. Publication: December 2011