THE EUREKAHEDGE REPORT

February 2009

Eurekahedge
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JANUARY 2009 ASSET FLOWS UPDATE

January was a positive month for hedge funds, as managers outperformed the underlying equity markets and most
strategies finished the month in the black; the Eurekahedge Hedge Fund Index returned 0.2%1. This translated into US$2
billion net performance-based increase in assets during the month, which was, however, negated by net redemptions of
US$71 billion2 through January.

Figure 1: Summary Monthly Asset Flow Data for 2008-to-date

Below are the highlights on asset flows for the month of January:

• Total industry assets down an estimated 4.7% (US$69.3 billion) on the month, and down 28.1% from their June
2008 peak, to US$1.4 trillion

• Outflows of US$77 billion eclipsed fresh inflows of US$6 billion, while US$10 billion in performance-driven asset
gains were offset by losses to the tune of US$8 billion

• Largest performance-based gains in absolute terms across North America in terms of regional mandates and in
strategy allocations to macro and multi-strategy managers

• Fixed income was the only strategy that saw a net increase in assets (US$170 million) during the month

1
Based on 65% of the funds reporting their January 2009 returns as at 18 February 2009.
2
Estimate based on 65% of AuM reported, and subject to a final revision towards mid-March.

2 >>> January 2009 Asset Flows Update

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Table 1: Performance-based Changes in Assets and Asset Flows in Jan-2009

Performance- Percentage
Dec-2008 Net Asset Jan-2009
based Growth/ Change in
AuM Flows AuM
(Decline) Assets

Hedge Funds 1,472.55 2.04 (71.38) 1,403.21 (4.71)

Asia ex-Japan 111.19 0.03 (5.18) 106.04 (4.63)

Japan 15.19 (0.06) (0.49) 14.64 (3.64)
By Geographic
Europe 329.14 (0.38) (12.90) 315.87 (4.03)
Mandate
Latin America 41.94 0.23 (1.02) 41.15 (1.89)
North America 975.09 2.22 (51.79) 925.51 (5.08)

Arbitrage 129.54 (0.23) (9.15) 120.16 (7.24)

CTA/Managed Futures 177.85 (0.57) (8.39) 168.89 (5.04)
Distressed Debt 61.35 0.01 (0.74) 60.62 (1.19)
Event Driven 153.77 0.14 (1.58) 152.34 (0.93)
By Strategic Fixed Income 66.41 0.41 (0.24) 66.58 0.26
Mandate Long/Short Equities 475.39 (1.50) (30.86) 443.02 (6.81)
Macro 90.17 1.92 (5.81) 86.27 (4.32)
Multi-Strategy 243.13 1.94 (10.56) 234.51 (3.55)
Relative Value 32.62 0.08 (1.94) 30.76 (5.69)
Others 42.33 (0.15) (2.12) 40.06 (5.37)

Note: All figures in US$ billion, unless otherwise stated

Source: Eurekahedge

All regional and strategic mandates faced net redemptions in January owing to the economic uncertainty in the underlying
markets, the resultant risk aversion among investors and the continuing desire to horde cash. In terms of regional
mandates, North American managers faced the largest redemptions in both absolute (US$51.8 billion) and percentage
(5.3%) terms, as the postponement of the US economic stimulus plan, among other things, took a toll on investor
confidence in the region. Likewise, European managers saw large amounts being redeemed (US$12.9 billion), partly due
to further deterioration in the region’s economy and sharp declines across markets in the region. Asia ex-Japan investing
managers faced US$5.2 billion of net outflows in January amid persistent volatility in the underlying markets, coupled with
discouraging near-term outlooks for most regional economies, while Japanese and Latin American managers faced the
least redemptions in both absolute and percentage terms.

Figure 2: Jan-2009 Asset Flow Estimates by Geographic Mandate

3 >>> January 2009 Asset Flows Update

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In terms of strategic mandates, long/short equities lost in excess of US$30 billion in redemptions, although losses across
the strategy were limited to US$1.5 billion as shorts across equities helped offset a large portion of losses suffered
through long exposure. CTAs, despite a good run in recent months, saw a US$9 billion decline in assets (US$600 million
of which was due to losses) as a further decline in commodity prices, among other factors, triggered redemptions from the
strategy. Macro and multi-strategy managers, however, saw performance-based increases of nearly US$2 billion each,
which went some way in offsetting a portion of the decline in assets caused by redemptions (US$5.8 billion and US$10.7
billion respectively).

Figure 3: Jan-2009 Asset Flow Estimates by Strategy Employed

January marked the sixth consecutive month of redemptions from the hedge fund industry, with over US$360 billion of net
outflows seen since August 2008. We expect to see more redemptions over the coming months owing to the following
factors:

a) Economic uncertainty across underlying markets

b) Continued risk aversion among investors
c) A redemption notification period of (or exceeding) one month for a majority of the funds, hence a lag of a month or
more between redemptions being filed and them completely taking effect
d) Institutional investors tending to shore up their balance sheets for the quarter ending March 2009, hence withdrawing
their investments

However, we also expect some fresh allocations into hedge funds, and foresee gradual inflows to surpass redemptions
over the first half of 2009. This is primarily because the bulk of the panic-driven redemptions have subsided, and also
because we expect investors to turn to hedge funds for absolute risk-adjusted returns and for their ability to consistently
outperform their long-only counterparts (the Eurekahedge Long-only Absolute Return Fund Index shed 3.3% in January,
while hedge funds finished in the black).

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 The Eurekahedge Report – February 2009

JANUARY 2009 HEDGE FUND PERFORMANCE COMMENTARY

Introduction

Hedge funds started the year with notable outperformance and loss mitigation, as the Eurekahedge Hedge Fund Index
rose 0.2%1 despite the MSCI World and Dow Jones-AIG Commodity indices losing 8.9% and 5.4% respectively through
January. This performance was achieved against the backdrop of persistent concerns on the health of the financial sector
and discouraging earnings reports for 2008, which also went some way in triggering further redemptions of US$77 billion
from the industry during the month.

In terms of regional investment mandates, Latin America and North America finished the month with healthy returns
averaging 1.6% and 1.2% respectively, with managers in both markets making gains from equities, shorting energy-
related commodities and from pair trades in currencies. The MSCI EM Latin America Index finished the month flat (-
0.3%), while the North American index lost 8% for the month.

Other mandates – namely, Europe (including Eastern Europe & Russia), Japan and Asia ex-Japan – saw hedge funds
finishing the month in negative territory, partly owing to the sharp equity market declines in their respective regions, on the
back of unfavourable macroeconomic factors, among other factors.

The chart below shows the current month, previous month and 2008 returns across broad regional mandates.

Eurekahedge Performance Indices – Regions

Global Market Review

Global equity markets closed lower in January, with most major indices falling in excess of 5% during the month.
Continued evidence of a deepening recession, coupled with mixed reactions about the US economic stimulus plan were
among the factors responsible for the drawdowns. Furthermore, discouraging macroeconomic news including declining
growth, rising unemployment, shrinking consumer demand and falling exports, coupled with grim near-term economic
outlooks also took a toll on equities across the board. In the US, the S&P 500 lost 8.6%, while MSCI’s European and
Asian indices fell 11.3% and 6.3% respectively.

In the fixed income space, treasuries slid lower on the back of falling demand, with longer term bonds falling more than
their shorter termed counterparts; yields on the US 90-day T-bill rose 10 bps, while those on the US 10-year T-note
finished the month 60 bps higher. The credit space, however, saw some improvement in the high yield market, which
recorded an increase of 5.8%2 during the month.

1
Based on 61% of the funds reporting their January 2009 returns as at 17 February 2009.
2
As tracked by the JP Morgan Global High Yield Index.

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In the currency markets, lower yielding currencies like the US dollar and the Japanese yen saw strong appreciation amid
renewed risk aversion among investors. Furthermore, a rate cut by the ECB coupled with weakening of the region’s
economy saw the euro finish the month 9% and 9.2% lower against the US dollar and the yen respectively.

The commodity markets saw mixed movements in January, with energy prices falling on concerns on declining demand
and growing inventories; crude oil fell another 6.5% on a monthly basis. Precious metals, however, rose into the month
with gold up 5% owing to lower interest rates across the board, coupled with a flight to quality among investors.

The chart below shows the current month, previous month, and 2008 returns across the various strategic mandates.

Eurekahedge Performance Indices – Strategies

Strategic Performance

A) Arbitrage and Relative Value

The Eurekahedge Arbitrage Hedge Fund Index rose a healthy 1.5% in January, with North American allocations
contributing the most (2%). Managers of the strategy largely benefited from improvement in the convertible market, which
despite still being cheaply priced, saw a healthy rally during the first half of the month as investors either bought into the
market or held on to their holdings.

European managers were up 0.8%, with systematic trades in the equity markets faring positively, while Asian allocations
ended the month flat.

Relative value players ended the month with an average loss of 0.9%, with North American managers posting losses of
1.9%. Managers with an equity focus (with the exception of those with a short-bias) had a difficult month owing to a sharp
decline across equities in the region; the MSCI North America Index lost 8% for the month. European managers,
however, were up 0.8%, benefiting from some pair trades across regional equities during the month.

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Arbitrage and Relative Value (Jan-09 and 2008 Returns)

B) Long/Short Equities and Event Driven

Long/short managers registered varied returns across different regions, but fared impressively on a relative basis given
the sharp declines in most major equity markets during January. The Eurekahedge Long/Short Equities Hedge Fund
Index lost 0.3% (yet outperforming the MSCI World Index by 8.6%), with European and Asian managers dragging the
average down.

Japanese managers recorded the largest losses averaging 1.6%, against a decline of 7.6% in the Topix. Long exposure
to the financial and real estate sectors proved loss making, while investments in small caps helped offset some losses;
the TSE Mothers index which tracks small-caps, finished the month in positive territory.

Asia ex-Japan investing funds were down 1% on average; allocations to Greater China, Korea and Australia/New Zealand
finished the month flat to negative but in the range of -1% to 0.2%, but losses from exposure to India (-3.4%) brought
down the region’s average return. This was mainly because of an accounting scandal at one of India’s leading information
technology companies, which was brought to light in early January. This took a toll on investor confidence, bringing the
country’s equity index down by 16% intra-month (from its monthly peak to its trough).

In Europe, hedge fund allocations to Eastern Europe & Russia (-8.5%) suffered large losses as falling oil prices and
liquidity concerns, among other factors, put downward pressure on the region’s equity markets; the MSCI Eastern Europe
Index ended the month down 15.7%. Other Europe-investing managers recorded mixed returns, as long positions proved
loss making on the whole, while shorts fetched gains; the FTSE and the DAX shed 6.4% and 9.8% respectively, owing to
further deterioration of the European economy.

Latin American (1.1%) and North American (1%) managers turned in strong returns. The former made gains from long
exposure to select oil and mining companies (in Brazil) whose stocks rose partly due to an increase in lending capacity
announced by the Brazilian government; defensive sectors like telecom and utilities slid lower during the month, affording
managers with opportunities on the short side. Brazil’s IBOVESPA recorded a monthly gain of 4.7%. In North America,
too, many defensive names ended the month lower, resulting in handsome gains from managers’ short books; the S&P
500 lost 8.6%.

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Long/Short and Event Driven (Jan-09 and 2008 Returns)

Event-driven managers were up 1.8% on average; however, the average was positively skewed by a handful of North
American managers who recorded impressive returns in the range of 8-22% during the month. Among them were
managers allocating to the energy sector who were afforded with lucrative shorting opportunities during the month, and
some focusing solely on Canadian equities; the MSCI Canada Index ended the month with a loss of 3.8%.

The Japanese index for the strategy, on the other hand, were down in excess of 5% on average, due to an activist fund
having lost 13% on the month, and the small number of equally weighted funds in this index.

C) Fixed Income and Distressed Debt

Fixed income and distressed debt managers returned 0.8% and 0.3% respectively in January, with most of the gains for
both strategies coming from North American allocations (up 3.3% and 1.8% respectively).

Fixed income managers in North America made their gains from short positions across US treasuries which saw a notable
correction amid declining demand. The yield on the US 30-year T-note recorded its biggest 2-week increase in over two
decades, while those on the 10-year note and the 90-day T-bill rose 60bps and 10bps respectively.

European fixed income managers posted an average loss of 2.4%, with three of four managers (out of six index
constituent funds) that have reported till date, in negative territory. Allocations to Eastern European and Russian debt
proved particularly loss making, and the marked weakening of the euro against the US dollar, partly due to a 50bps rate
cut by the ECB, adversely impacted the performance of managers in the region. However, lower mortgage spreads
across countries like Sweden and Denmark among others, worked to the benefit of some managers.

For Latin American fixed income managers (0.5%), long positions across Argentine bonds, among other things, fetched
gains as the markets reassessed the probability of defaults over the next year.

Distressed debt managers allocating to North America had a good month, benefiting from improvement across the high
yield space; the JP Morgan Global High Yield Index, which tracks the performance of high yield corporate debt, rose in
excess of 5%.

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Fixed Income and Distressed Debt (Jan-09 and 2008 Returns)

D) CTA / Managed Futures and Macro

The Eurekahedge CTA/Managed Futures Hedge Fund Index rose 0.5% in January, as short exposure to energy-related
commodities and long bets in the precious metals space helped more than offset losses suffered by wrongly positioned
managers.

CTA/Managed Futures and Macro (Jan-09 and 2008 Returns)

Macro managers (0.7%) fared better, with short equity and currency plays (such as long US dollar/short euro, for instance)
contributing the most to their monthly gains. Not surprisingly, net-long positioned energy-dedicated funds, among others,
finished the month down.

E) Multi-Strategy
Multi-strategy managers had a good month; the Eurekahedge Multi-Strategy Hedge Fund Index rose 1% in January.
While long exposure to equities resulted in losses across most regions, short equity positions coupled with trades across
the directionally trending currency and commodity markets, afforded managers with lucrative opportunities during the
month. Sharp appreciation in the US dollar against the euro, the British pound and the Australian dollar (among other
currencies), were among the movements that worked in favour of North American managers, during the month. Most

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managers in the region had a good month, but the region’s index rose 4.1% owing to double-digit returns realised by
some constituent funds. Most other regional mandates returned between -0.5% and 2% through January.

Multi-Strategy (Jan-09 and 2008 Returns)

In Closing

January came across as a good month on the whole as far as hedge fund performance is concerned, as most strategies
ended the month in the black, despite harsh movements across the underlying markets. The month also witnessed US$6
billion of fresh inflows from investors – which come across as an encouraging sign – though the inflows were more than
offset by redemptions of US$77 billion.

Our outlook on hedge fund performance remains positive for the months to come. We expect equities to still be volatile
and range-bound over the near term, and work in favour of managers employing short-term trading strategies. Directional
strategies like CTA and macro will continue to benefit from trends across the currency and commodity markets, as they
have over the past year. And lastly, we expect to see a gradual decline in redemptions over the coming months, thereby
permitting managers to reduce their cash levels and increase their exposure to the markets, potentially resulting in higher
returns.

We expect to continue seeing fund closures in the near term, as a number of managers whose funds are below their high
water marks are unable to charge performance fees, rendering the funds unprofitable. Additionally, dwindling assets
resulting in lower management fees, make it harder to meet operating costs. However, we should also see a number of
fund start-ups in the months to come, given the large number of finance professionals and investment bankers moving
out of their jobs (whether voluntarily or otherwise); a key decided factor on this front would be whether or not they are
able to raise capital in the near future.

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2008 KEY TRENDS IN GLOBAL HEDGE FUNDS

Introduction

After a very strong 2007, hedge funds faced a challenging year in 2008 (particularly the latter half) in the face of high
volatility, collapsing banks, drying up liquidity, heightened investor risk aversion and severe redemption pressures.
Against this backdrop, hedge funds had their worst year on record with the Eurekahedge Hedge Fund Index ending the
year down 12.5%1.

The tumultuous year witnessed the industry shrinking to 8,471 funds, managing US$1.49 trillion in assets as at end-2008,
down from 8,642 hedge funds with assets under management (AuM) of US$1.89 trillion as at end-2007. Interestingly, the
number of funds fell by a mere 2% in contrast to an over 20% fall in assets. This difference can be explained by both
losses suffered by managers, as well as significant redemptions across the board with strategies like long/short equities
seeing net outflows of 20%; net redemptions across the industry amounted to US$200 billion throughout the year. Despite
this notable decline, the industry still stands 50% stronger than it was five years ago, in terms of the number of funds, with
a two-fold increase in assets.

Figure 1: Industry Growth over the Years

In the write-up that follows, we attempt a closer look at some of the trends shaping the structure and size of the global
hedge fund space in recent months, relying on data culled from the Eurekahedge Global Hedge Fund Database with
extensive information on 7,500 2 single manager funds. The report is split into two broad sections – the first which
examines the current structure of the industry, highlighting any significant changes over recent years, while the second
section takes on an analysis of fund performance.

Industry Size and Structure

Fund Size
To start with, we look at how the structure of the industry has changed over recent years in terms of fund sizes. To this
end we analysed three breakdowns of funds by different size ranges as at end-2008, 2007 and 2003.

1
The previous worst year being 2002, up 7.27%.
2
Including 484 long-only absolute return funds and 1,905 obsolete funds.

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Figure 2: Hedge Fund Population by Fund Sizes as at Dec-03 (in US$m)

Figure 3: Hedge Fund Population by Fund Sizes as at Dec-07 (in US$m)

Figure 4: Hedge Fund Population by Fund Sizes as at Dec-08 (in US$m)

An examination of the above three charts throws up some interesting observations:

1) The percentage of funds with over US$200 million in assets rose from 14% to 23% between 2003 and 2007, but fell
sharply to 15% by the end of 2008. This decline between 2007 and 2008 can be explained by the losses suffered by
managers, which brought down the assets of funds, coupled with redemptions which led to a decrease in fund sizes
across the board.

2) Similarly, funds making up the smallest range (up to US$20 million in assets) considered in this evaluation fell from
39% in 2003 to 28% in 2007, and then rose again to 35% by the end of 2008, further reiterated the above point.

Investment Strategy
In terms of strategic mandates, 2008 saw the largest decline in the market share of long/short equity managers; the

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Eurekahedge Long/Short Equities Hedge Fund Index registered a record loss of 21% for the year. These losses, largely
owing to sharp declines across global equity markets (MSCI World Index shed 42% in 2008), led to large scale
redemptions (net outflows of US$141 billion through 2008) across funds of the strategy, which further contributed to the
decline in their market share in terms of assets through 2008.

CTA/managed futures managers, on the other hand, saw a remarkable increase in their share of the pie (with assets at
US$180 billion, up from US$160 billion as at the end of 2007) through 2008, being the only hedge fund strategy to post
double-digit gains during the year; the Eurekahedge CTA/Managed Futures Hedge Fund Index advanced a solid 17% in
2008. Managers of the strategy made healthy gains from exploiting directional trends in the currency and commodity
markets during the year. Furthermore, CTAs saw relatively lower redemptions through 2008, which further helped
increase their share of the pie.

Some other strategies like event-driven and multi-strategy also saw an increase in market share during the year.
However, their increase can be explained more by the fact that their assets fell at a lower rate than those of the industry,
than by them having seen an increase in assets or impressive returns during the year. Figures 5 and 6 below show the
changes in the strategic-mix of the industry over recent years.

Figure 5: Strategic-mix of the Hedge Fund Industry (by Assets) in 2007

Figure 6: Strategic-mix of the Hedge Fund Industry (by Assets) in 2008

Geographic Mandate
We have put together a similar breakdown for broad investment regions across the industry to understand how the
market share of each has changed, both during 2008 and over preceding years. Figure 7 indicates a marked decline (in
assets) in the share of North American managers over the years – an outcome of other regions having gained popularity
amongst hedge fund managers and investors.

However, 2008 witnessed a considerable increase in the share of North American managers, despite a decline of over
US$200 billion in the region’s hedge fund space during the year. This increase was mainly a result of a corresponding
(and relatively larger) decrease in the shares of all other regions; worse-than-anticipated equity market declines (among
other things), particularly across the emerging markets, took a heavy toll on the performance of managers, thereby also

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triggering large scale redemptions from hedge funds allocating to these regions. In terms of returns too, North American
managers (-11%3) were among the least negative performers in 2008, resulting in the least redemptions (in percentage
terms) in the region.

Japan, on the other hand, has seen its share decline since end-2005, when it made up 2.7% of the industry. This decline
mirrored the end of the bull-run in the country’s equity markets, partly owing to which, hedge funds in the region have
registered three consecutive years of negative returns. Poor performance, both on a relative and absolute basis, in the
country led investors to reallocate their assets across other more profitable regions like the rest of Asia, particularly in
developing markets like China and India for instance, with the expectation of superior risk-adjusted returns. Assets in
Japanese hedge funds, after increasing US$200 million in 2006, fell by US$18 billion to US$16 billion at the end of 2008.

Figure 7: Change in the Geographic Mix of the Hedge Fund Industry (by Assets)

Emerging markets like Latin America and Asia ex-Japan saw a steady increase in their market shares up to 2007; the
share of Asia ex-Japan nearly doubled while that of Latin America tripled over the past five years. This was because
investors and managers with broader geographical mandates increased their exposure to emerging market funds and
equities across such markets respectively to benefit from their growth; the MSCI Emerging Markets Index recorded a 34%
5-year annualised return up to end-2007. However, a dramatic sell-off across equities in these regions through 2008,
amid slowing exports, drastic swings in commodity prices, and a general increase in investor risk aversion led to the
outflow of money from emerging markets, and resulted in a decline in the regions’ shares during the year; the MSCI
Emerging Market Index shed 54% in 2008.

Manager Location and Fund Domicile

Figure 8 provides a snapshot4 of the hedge fund population broken down by the head office locations of managers. A
quick glance at the chart suggests the US to be home to nearly half of the hedge funds, with the UK being a distant
second, accounting for a fifth of the population. Interestingly, the two countries house close to 70% of the hedge fund
population, but account for over four-fifths of the assets invested into the industry globally. This suggests that funds based
in the US and the UK generally tend to be larger, on average, than funds based in other parts of the world like Asia or
Latin America, primarily because a) the majority of the investors are based in these countries, and b) hedge funds
became common in these countries long before they did in Asia and other parts of the world.

Figure 9 illustrates a breakdown of hedge fund assets by the head office locations of managers.

3
Based on the Eurekahedge North American Hedge Fund Index.
4
Based on data contained in the Eurekahedge Global Hedge Fund Database.

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Figure 8: By Fund Population

Figure 9: By Assets

In a similar fashion, we have also put together breakdowns of the fund population – separately for onshore and offshore
funds – by fund domicile. This is mainly to look into which jurisdictions are more popular than others in terms of
regulations and tax benefits to funds and investors, Figures 10 and 11 illustrate the breakdown of onshore and offshore
funds respectively by their domiciles.

Figure 10: Breakdown of Hedge Funds by Domicile – Onshore Funds

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Figure 11: Breakdown of Hedge Funds by Domicile – Offshore Funds

Industry Performance

Some of the structural trends reviewed above indicate the industry to have shrunk both in terms of the number of funds
and assets, owing to performance losses, redemptions and the resultant fund closures (Eurekahedge has data on over
500 funds that have confirmed their closure since the start of 2008). That said, we now look at the performance of
managers during 2008 and over previous years, to understand the regions and strategies that have performed better than
others and briefly analyse the reasons.

This analysis is based on the returns of 2,4465 funds, and only takes into account funds which have been in operation for
the entire 3-year period ending December-2008. Additionally, we have excluded onshore Latin American funds from this
analysis, since most of them are based in Brazil and are denominated in the Brazilian real – the marked appreciation of
which against the US dollar, tends to greatly positively skew their returns thereby leading to an unfair comparison.

Strategy-wise Returns

Figure 12 illustrates the average strategy-wise 36-month annualised returns and the risk-adjusted returns (Sharpe ratio6)
of different hedge fund strategies, as well those of other investment vehicles like long-only absolute return funds and
funds of hedge funds. This is mainly to understand how each of the strategies performed during recent years when the
markets saw both strong rallies as well as the worst corrections in recent history. Furthermore, this analysis is aimed at
understanding how each of the aforementioned types of investment vehicles fare in different market conditions, and which
of them proves to be the most favourable investments in terms of risk-adjusted returns.

Among hedge funds, CTA/managed futures managers have undoubtedly fared the best (annualised 13%) over the period
in question, with macro managers (annualised 9.3%) being a distant second. Managers of both these strategies made
healthy gains in 2008, being the only strategies to finish the year positive; gains were realised from exploiting movements
across the directionally trending currency and commodity markets through most of the year.

Most other strategies had a rough year amid record volatility, sharp sell-offs across equities and other asset classes,
heightened investor risk aversion and the consequent redemptions (particularly after the collapse of Lehman brothers in
September). Furthermore, redemption pressures forced some funds to sell their illiquid portfolios of real estate and private
equity holdings at the prevalent low market prices, which further worsened their performance, and hence triggered further
redemptions. For instance, long/short managers’ record losses of 21% negated most of their preceding years’ gains.

5
Including hedge funds, funds of funds and long-only absolute return funds.
6
Calculated using the riskfree rate of return at 4%.

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Figure 12: 36-Month Annualised Returns and Risk-Adjusted Returns by Investment Strategy

Figure 13: Annual Returns by Investment Strategy

Figure 13, which shows the annual returns for the last three years, suggests that although long-only absolute return funds
recorded the largest losses over a 3-year period, they were among the best performers in 2006 and 2007; however,
needless to mention, they were also the worst performers in 2008 when the underlying equity markets tumbled. The
reason behind the behaviour of their returns is that long-only managers provide high beta, resulting in impressive gains
during rallying marketsbut worse-than-average losses during market downturns. This pattern of returns also exhibits high
volatility, especially over a period that sees a bull run followed by a bear market or vice versa, resulting in discouraging
risk-adjusted returns by managers of the strategy (as seen in Figure 12). It should be noted, however, that even during
market downturns, long-only absolute return managers tend to outperform traditional mutual funds, since the former are
incentivised the same as hedge funds, getting paid through performance as opposed to pure asset growth.

Funds of funds were also in negative territory over the past three years, after their double-digit gains in two consecutive
years were more than offset by losses averaging 19.4% in 2008. These losses can be attributed primarily to – a) The
lower net-of-fee returns, owing to the double-layer of fees funds of funds charge (fees they charge directly for their

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services and fees they pay hedge funds that they invest into, both of which are deducted from the returns to the
investors); and (b) Funds of funds were also victims of redemption pressure, forcing them to liquidate positions in both
poor performing as well as admirably performing hedge funds in order to raise cash for both the short and longer term.

In terms of hedge fund strategies, both CTA/managed futures and macro managers saw positive returns for each of the
last three years, benefiting from directional movements in the underlying markets. Arbitrage and relative value managers
saw healthy returns over the preceding two years and were among those that registered the least losses in 2008; high
volatility across the underlying market through 2008 and the resulting mispricing of securities afforded them with some
opportunities to offset a portion of their losses suffered from other allocations through the year.

Similarly, Figures 12 and 13 also show that most hedge fund strategies performed well in 2006 and 2007 amid rallying
markets, record inflows and strong risk appetites among investors, but saw most of their gains being eroded last year
when the markets went south, liquidity contracted and risk appetites declined drastically.

Region-wise Returns

It is important to note, at the outset, that we have clubbed single-country mandates into appropriate broader mandates –
for example, we have included Greater China, Taiwan, Korea and India-dedicated funds into ‘Asia ex-Japan’ – for the
sake of simplicity in analysing the data. Similarly, as per classifications in the Eurekahedge databases, Europe also
includes funds allocating to Eastern Europe and Russia, Middle East and Africa.

Figure 14: 36-month Annualised Returns and Sharpe Ratio

Figure 15: Annual Returns by Investment Regions

18 >>> 2008 Key Trends in Global Hedge Funds

 The Eurekahedge Report – February 2009

Looking at both the graphs above, one can easily infer that Japanese allocations fared the worst over the last three years.
Not only did they post the worst 3-year cumulative returns, they were also the only ones to post negative returns for three
consecutive years. However, interestingly, they were among the best performers (with the least losses) through 2008,
although the Nikkei lost 42% during the year; gains from shorting financial and export related stocks, among other things,
helped managers offset a portion of the losses suffered from other allocations.

Most other broad mandates exhibited similar trends in their returns – decent gains in 2007 and initially in 2008, followed
by double-digit losses in the latter part of 2008. But over the 36-month period ended December-2008, geographically
diversified ‘Global’ managers posted the best returns (annualised 6.6%), partly owing to their flexibility of being able to
adjust their allocations to different regions during times of economic uncertainty. Furthermore, global funds, which also
tend to be larger7 than those employing most other geographical mandates, were in a better position through 2008 to
meet redemptions requests, than most of their peers who had to sell holdings in order to raise cash.

In Closing

To sum up, 2008 was a historic year in the financial markets, as liquidity contracted, credit markets froze and investor risk
appetites shrank dramatically. In addition, the year also witnessed the largest bankruptcy, the largest financial rescue
plan and the largest ponzi scheme, which was brought to light as the year drew to a close.

Against this backdrop, the hedge fund industry saw well over 5008 fund closures through 2008 amidst a vicious cycle of
risk aversion leading to redemptions, which in turn led to forced selling, causing further losses and hence further
redemptions. Additionally, other factors like increased margin calls by prime brokers and counterparty exposure to
distressed investment banks, also led to some forced selling and hence losses, particularly through the latter half of the
year. The resultant losses and redemptions eroded over US$450 billion from the industry during 2H2008, bringing the
industry down from US$1.95 trillion in June 2008, to US$1.47 billion as at year-end.

On a positive note, hedge funds largely outperformed the underlying markets. While the MSCI World Index lost over 40%
through the year and the Reuters CRB Index was off nearly 40% from its mid-year high, the average hedge fund shed a
mere 13% through 2008. The industry also witnessed over 380 9 new fund launches during the year, confirming the
demand for hedge funds and absolute returns.

7
Eurekahedge Research shows that an average global fund has over US$300 million in assets, while all other funds have close to US$150 million on
average.
8
Actual number of fund closures confirmed with Eurekahedge up to February 2009.
9
Actual number of newly launched funds listed in the Eurekahedge databases as at February 2009.

19 >>> 2008 Key Trends in Global Hedge Funds

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 The Eurekahedge Report – February 2009

GLOBAL HEDGE FUND TOP 10 TABLES

January 2009 Return (%)* 3-month Returns (%)

Forbes Futures 113.62 AIS Gold Fund LP 102.20
Kayne Anderson Midstream Energy Fund Ltd 27.79 Hamton I - Bond 004 Ltd 60.08
Financials Opportunity Fund 25.00 Knight Asia Property Fund 58.49
Pearlman CTA Silver Conservative Program 24.73 Stratton Street PPC Ltd Japan Synthetic Warrant Fun 50.57
Kayne Anderson MLP Fund LP 21.90 Wessex Gold Fund - Class A 48.61
Osiris Investment Partners LP 21.49 PBK Capital Partners LP 47.66
AIS Gold Fund LP 21.41 INSCH Insight Ltd 47.32
Passport I LP - Rig Strategy 19.40 Osiris Investment Partners LP 46.87
Vltava Fund Sicav 18.59 Financials Opportunity Fund 45.16
Quantitative Global Fund - 3x 18.02 SAC Global Energy and Mining Fund 39.66

2008 Returns (%) 2007 Return (%)

Borromeo Program 198.16 Elk River Master Fund Ltd 300.07
Global Wealth Class B 171.24 Edge Investment Management Ltd 257.12
Creststreet Alternative Energy Fund 143.09 Sparta Cíclico 244.94
CAIM Premium Alpha I 140.64 Passport I LP - Global Strategy 232.63
Zentrender 136.16 Balestra Capital Partners LP 199.15
The 3% Return Per Quarter Program 134.50 HFH ShortPLUS Fund LP 191.33
Bearing Fund LP 132.54 SYW LP 169.55
D'Best Futures Fund LP 126.76 Lionhart Aurora Fund SPC Ltd - Venture Segregated P 161.51
Parizek Futures Program 120.75 Paulson Advantage Plus Ltd 158.56
Sparta Cíclico 116.34 Everyoung Growth Fund 158.29

Annualised Return (%)** Annualised Standard Deviation (%)**

BlueGold Global Fund Inc 248.98 Salus Alpha Real Estate 0.28
Creststreet Alternative Energy Fund 158.68 Coast Enhanced Income Fund II Ltd 0.75
Zentrender 145.79 Dexia Money + Double Alpha 0.79
Sparta Cíclico 117.55 WG Trading Company LP 0.91
CAIM Premium Alpha I 106.04 Dexia Index Arbitrage 1.03
Financials Opportunity Fund 85.98 Genesis Merchant Partners LP 1.04
The Ebullio Commodity Fund 82.98 Advis Macro FIM 1.25
Sparta Anti-Cíclico 75.98 Centurion Credit Group International Ltd 1.28
Dynamo Cougar 70.70 Dexia Money + Emerging Arbitrage 1.38
Phalanx Japan-AustralAsia Multi-Strategy Fund 69.33 GAP Institucional 1.42

Sharpe Ratio** Sortino Ratio**

Genesis Merchant Partners LP 9.99 QM Multi-Strategy Fund - USD 69.24
Advis Macro FIM 9.14 GAP Hedge 35.13
HG DI 8.81 CMT Global Fund Limited 33.53
GAP Institucional 8.13 Tri Global FX Managed Account Program 30.88
NEO Multi Estrategia Fund 7.41 JGP Hedge FIF 28.23
Centurion Credit Group LLC 7.37 Fator Balanceado FIM 23.98
Centurion Credit Group International Ltd 6.63 Atico Hedge FIF 22.05
Creststreet Alternative Energy Fund 6.59 HG Allocation Managers 20.23
Quest Iporanga 15 FIM 6.57 KWK Partners LP 17.27
Fator Sigma Institucional FIM 5.79 Da Vinci Arbitrage Fund 16.50

* Based on 65% of the funds reporting their January 2009 returns as at 18 February 2009.
** Only for funds with a minimum track record of 12 months.

20 >>> Global Hedge Fund Top 10 Tables

 The Eurekahedge Report – February 2009

EUREKAHEDGE REGION/STRATEGY INDEX RETURN MATRIX

Arbitrage CTA/Managed Distressed Event Driven Fixed Income Long/Short Macro Multi-Strategy Relative Value All Strategies
Futures Debt Equities
Jan-09 2008 Jan-09 2008 Jan-09 2008 Jan-09 2008 Jan-09 2008 Jan-09 2008 Jan-09 2008 Jan-09 2008 Jan-09 2008 Jan-09 2008

Asia -0.13 -16.93 1.15 5.16 -0.81 -10.59 -1.32 -15.95 -5.58 -9.04 -1.55 -22.20 1.42 -6.40 -0.59 -17.42 0.94 0.06 -1.34 -20.79

Asia ex-Japan -0.13 -8.27 -0.81 -10.59 0.00 -31.43 -26.05 -1.04 -29.03 0.25 -17.80 -0.59 -26.43

Asia inc Japan -0.13 -15.92 -0.81 -10.59 0.38 -22.78 -5.58 -9.04 -1.46 -27.05 1.42 -6.40 -0.83 -17.79 1.25 1.76 -1.15 -23.73

Australia/New Zealand 0.48 -3.75 -1.17 -24.91 0.32 4.80 0.13 -18.03

Eastern Europe & Russia -8.56 -60.80 -8.00 -42.66 -8.11 -54.15

Emerging markets 0.05 4.88 0.56 -24.19 1.77 -19.17 -0.62 -16.63 -1.38 -33.09 1.97 1.10 0.99 -9.38 -3.87 -32.49 -0.40 -23.87

Europe 0.81 -47.57 -1.50 -2.21 -33.37 0.41 -10.54 -2.44 -20.94 -0.56 -22.89 -0.60 -29.51 0.59 -5.99 -0.62 -22.55

Global Mandate 1.31 -6.38 0.63 14.96 -0.60 -26.07 1.18 -23.48 1.49 -14.87 0.04 -22.50 0.79 3.60 0.78 -12.34 0.92 -3.05 0.58 -5.10

Greater China -0.65 -25.32 -4.64 -25.58 -0.63 -23.47

India -3.26 -50.80 0.40 -44.46 -3.04 -53.53

Japan -1.49 -0.45 -4.72 7.08 -1.76 -9.85 1.97 -13.01 -1.87 -11.44

Korea -1.09 -23.32 -1.02 -22.81

North America 1.96 -8.41 0.07 25.44 1.76 -25.77 3.50 -26.22 3.57 -12.48 0.91 -17.13 1.67 25.66 3.96 -10.82 -2.17 -17.98 1.22 -10.90

Latin America 1.23 13.41 3.42 -3.61 0.55 6.26 1.10 -13.65 1.66 0.15 1.87 1.04 1.58 -3.60

Latin America (Offshore) 3.42 -10.11 0.36 -3.32 2.05 -27.61 0.66 -12.95 1.44 -11.16 1.55 -16.68

Latin America (Onshore) 0.59 13.60 11.33 0.93 11.53 0.72 -5.57 2.11 8.74 2.08 6.62 1.60 3.41

Middle East & Africa 1.53 -16.25 -3.67 -8.48 -0.25 -9.19

All Regions 1.52 -8.86 0.51 16.55 0.42 -25.80 1.28 -19.76 0.81 -14.24 -0.26 -21.04 1.09 2.33 0.98 -11.93 -0.63 -10.34 0.24 -12.56

Disclaimer
The contents of this Report are for information purposes only. The information contained in the Report (the “Information”) is based entirely on information and data received from the relevant subjects and from other third party sources
unless otherwise specified. Eurekahedge Pte Ltd has not verified the factual accuracy, assumptions, calculations or completeness of the Information. Accordingly Eurekahedge makes no representation or warranty as to the accuracy or
completeness of the Information. This Report does not constitute investment advice or counsel or solicitation for investment in any fund or product mentioned or any associates thereof. This Report does not constitute or form part of, and
should not be construed as, any offer for sale or subscription of, or any invitation to offer to buy or subscribe for, any securities, nor should it or any part of it form the basis of, or be relied on in any connection with, any contract or
commitment whatsoever. Eurekahedge expressly disclaims any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from: (i) the use of this Report, (ii) reliance on any
Information contained herein, (iii) any error, omission or inaccuracy in any such Information or (iv) any action resulting therefrom.

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Copying all or any part of the Report is strictly prohibited under copyright law. All breaches of copyright law will be prosecuted. No part of this Report may be reproduced, or transmitted by any means, electronic, mechanical,
photocopying, recording, or otherwise, or passed on to any other person or published, in whole or in part, for any purpose, without the prior written approval from Eurekahedge.

21 >>> Eurekahedge Region/Strategy Index Return Matrix MICA (P) 150/08/2008

 JS2067_Eurekahedge Private Equity Funds 2008_output.pdf 28/02/2008 10:52:27

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