HFRX Indices Mid-August 2013 performance notes

Global financial markets posted mixed performance through mid-August, as US equities posted the worst weekly decline for 2013 in 2nd week of month. US equity declines were broad based across value, growth and market capitalizations, with sector declines led by Technology, Semiconductors, Healthcare, Real Estate and Telecom, which were only partially offset by gains in Energy & Commodity sensitive sectors. In contrast to the US, European equities generally gained through mid-August, with gains led by Italy, Spain and France only partially offset by declines in the UK. Asian equities were also mixed with gains in China, Hong Kong and Australia offset by declines in India and Singapore. US yields rose with the US 10 year bond yields rising 30 basis points through mid-month; European yields also rose led by UK Gilts, German Bunds, France, Switzerland and the Netherlands, though yields declined in both Italy & Spain. The US dollar fell against the British Pound Sterling, Australian Dollar, Euro & Japanese Yen, although the US Dollar gained against EM currencies including the Brazilian Real, South African Rand and Indian Rupee. Metal & Energy commodities gains were led by Silver, Copper, Platinum and Oil, while Agricultural commodities were mixed with gains in Cotton and Cocoa offset by declines in Hogs, Soybeans and Wheat. Hedge funds posted mixed declines through mid-August with the HFRX Global Hedge Fund Index posting a decline of -0.40% as losses in Equity Hedge offset gains in Relative Value Arbitrage.

HFRX Relative Value Arbitrage Index gained +0.17% through mid-August, with contributions from Convertible, Corporate Fixed Income and Commodity Arbitrage strategies managers offset by weakness in Credit exposure. The HFRX RV: Convertible Arbitrage Index rose +0.44% as high yield credit widened, with gains in high delta US convertibles, volatility positions and effective rate hedging. The HFRX RV Multi-Strategy Index gained +0.09% as gains in Commodity Arbitrage strategies were offset by Credit exposures, while HFRX Fixed Income Credit Index posted a decline of -0.11%.

HFRX Event Driven Index posted a decline of -0.32%through mid-August, with contributions from Merger Arbitrage strategies offset by declines in Distressed and Credit strategies. The HFRX Merger Arbitrage Index gained +0.12%, with contributions from transactions in First M&F/Renasant, Hudson Bay/Saks, Spartan Stores/Nash Finch, MAA/Colonial Properties and Thermo Fisher/Life Technologies. The HFRX Special Situations Index declined -0.34% from exposure to transactions in Industrial and Non-Cyclical sectors and specific contributions from core positioning in Apple, J.C. Penney, American Airlines, US Airways, Dell, Elan, Yahoo and Penn West Petroleum.

HFRX Macro Index posted a decline of -0.70%, with declines from quantitative Systematic CTA and Fixed Income strategies as EM equities declined and EM currencies fell against the US dollar. The HFRX Emerging Markets Index posted a decline of -0.94% with weakness across Emerging Asia, Latin America & Russia. The HFRX Macro: Systematic Diversified Index declined -0.54% with weakness across Equity, Commodity & Fixed Income strategies.

HFRX Equity Hedge Index posted a decline of -0.81% through mid-August as US equities posted the worst week of performance for 2013 in 2nd week of August. The HFRX Fundamental Value Index declined -0.80% with contributions from global equities positioning offset by declines in large cap US and European exposure. The HFRX Fundamental Growth Index declined -0.77% with contributions from exposure to Brazilian equities and global healthcare sectors only partially offset by gains in Emerging Asia equity. The HFRX Market Neutral Index declined -1.01% from losses in small cap fundamental managers and factor-based strategies.

          Comments reference performance as published through August 16, 2013.

The detailed performance history of the HFRX Indices can be found at: www.hfrx.com