“The Uneven Hedge”

Presentation CIFPS Conference, June 20, 2005

Intelligent Investing

May 5, 2005 2

Miklos Nagy, CFA, CFP

CEO and co-founder of Quadrexx a leading hedge fund expert in Canada Founder and Chairman of Canadian Hedge Watch Inc. -

Canadian leader in hedge fund information / education (www.canadianhedgewatch.com)

Co-author of Canada’s first hedge fund book “Hedge Funds for Canadians”. This book was the number 5 best selling investment book in Canada. Updated second edition is published in June, 2005 by Wiley.

Co-author of CHAIP course (Chartered Alternative Investment Planner) for IFIC (www.ific.ca) and CIFPs (www.cifps.ca)

May 5, 2005 3

The Global Hedge Fund Market

Hedge Funds globally: between US$1 and US$1.5 trillion

Fund of hedge funds represent over 35% of hedge funds in terms of AUM

Growth in FOHF is fastest within the hedge fund industry (40% per year since 2000)

May 5, 2005 4

The US Hedge Fund Market

Still account to roughly 50% of global hedge fund market

SEC vs FED view of hedge funds Increased regulation on hedge funds in

the coming years

May 5, 2005 5

Why Hedge FundsHedge Funds versus Equities/Bonds – Long-Term

Global Hedge Fund Net Returns*

January 1, 1988 - December 31, 2004

Style/StrategyAnnualReturn

StandardDeviatio

n

SharpeRatio

Van Global HFI 16.0% 8.8% 1.5

MSCI World Equity 6.6% 16.1% 0.3

S&P 500 12.4% 15.2% 0.7

Morningstar Average Equity Mutual Fund 10.0% 15.7% 0.6

Lehman Brothers Aggregate Bond Index 8.1% 4.4% 1.3

* Source: VanHedge

May 5, 2005 6

Why Hedge Funds Hedge Funds versus Equities/Bonds – Snap ShotsJanuary, 1995 to March, 2000

BULL MARKETVAN Global Hedge Fund

Index

MSCI World Index

Annualized Return: 20.21% 19.86%

Annualized Standard Deviation:

8.51% 13.34%

Sharpe Ratio (4%):

1.90 1.19

April, 2000 to March, 2005DIFFICULT MARKET

VAN Global Hedge Fund

Index

MSCI World Index

Annualized Return: 6.29% -5.91%

Annualized Standard Deviation:

5.87% 13.68%

Sharpe Ratio (4%):

0.39 -0.72

May 5, 2005 7

Low correlation to Major Markets:

During distressed market conditions, some Hedge Funds lose their diversifying properties; i.e. Concentration Risk

May 5, 2005 8

Correlation switching

This is an example of how individual managers change correlations during distress.

May 5, 2005 9

The Canadian Hedge Fund Market

Hedge Funds in Canada: AUM estimated to be between $26 billion ($16 billion retail)

Fund of hedge funds represent between 35% and 40% of hedge funds in terms of AUM

Fastest growing hedge fund type used to be (until Portus) in the Canadian hedge fund industry: Guaranteed Notes backed by major banks

May 5, 2005 10

The Canadian Hedge Fund Market

Fagmented market depending on:1. Type of Product2. Province of Residence3. Investor Class:

Accredited Investor Eligible Investor Investor signing “Risk Acknowledgement

Form” Anybody else

May 5, 2005 11

The Canadian Hedge Fund Market

The Effect of PORTUS Canada needs more level playing field for hedge funds

The growth in Principal Protected Notes will slow considerably

More regulation is likely

May 5, 2005 12

The effect of Principal Protection(based on back-tested data bw. Jan, 1998 to Dec, 2004)

Type of Investm

ent

Percentage ofPrincipal in FOHF

Percentage of Principal in

Bonds

AnnualizedReturn

AnnualizedStandard Deviation

FOHF 100% 0% 8.82% 8.03%

PPN 25% (unleveraged) 75% 1.17% 1.74%

PPN 50% (100% leveraged) 75% 2.71% 3.84%

PPN 75% (200% leveraged) 75% 4.13% 5.80%

PPN 100% (300% leveraged) 75% 5.44% 7.64%

May 5, 2005 13

Who is Quadrexx Asset Management Inc.: Toronto based asset management firm:

Managing unique and high quality alternative investment products.

The company was established in March, 2003 by the leaders of Canadian Hedge Funds to build a platform for a fund of hedge funds building on their relationship with Professor Luis Seco (Sigma)

May 5, 2005 14

Quadrexx Market Neutral Performance Fund’s Back-Tested Return Statistics(as of February 28, 2005)

Performance QMNPF S&P 500 S&P/TSXSC

UniverseVan GlobalHF Index

1 year: 3.75% -1.09% 10.94% 5.26% 6.20%

3 year: 12.95% -4.17% 8.84% 7.53% 8.87%

5 year: 16.89% -4.17% 1.52% 7.90% 6.86%