HFA NET SHORT US SUB PRIME SECTOR

In light of recent events in global and domestic equity, bond and credit markets, and the global liquidity crunch, HFA Asset Management would like to clarify the position of its funds, with respect to these issues and in particular to clearly articulate HFA’s exposure to US Sub Prime and CDO’s (collateralised debt obligations) across its funds.

Firstly, it is important to note that the hedge funds and the traditional fund managers that have suffered significant losses or a significant lack of liquidity, have been those managers that have pursued a single investment strategy that had a specific net long exposure to CDO’s and RMBS (residential mortgage backed securities).

This particular segment of the hedge fund universe is a very low percentage of the total hedge fund industry. Therefore readers should be aware that the recent media speculation of hedge fund losses does not affect the entire hedge fund industry, but rather only a small portion of the over 7000 hedge fund managers who collectively manage in excess of an estimated US$2 trillion on behalf of Institutional, High Net Worth and Retail investors.

HFA Asset Management is an absolute return fund of fund provider with in excess of A$3.8 billion in assets under management. The HFA stable of funds are all absolute return fund of hedge funds, which are diversified across multiple managers and multiple strategies. This high level of manager and strategy diversification provides an inherent level of protection for investors against any adverse market gyrations within any specific market segment including equity bond and credit markets.

The US Sub Prime collapse comes as no surprise to HFA. Investors and advisers who have attended any of our investment briefings over the past 2 years will be well aware that Jonathan Pain (HFA Chief Investment Strategist) had been warning of the current situation for some time. To that end our portfolios have been positioned in anticipation for the current US Sub Prime situation. The recent market movements in this segment have only served to validate our existing views.

The HFA Diversified Investment Fund (HFA’s flagship fund) is a highly diversified portfolio of investments, with diversification across up to 50 managers, up to 15 investment strategies and spread across global geographies.

Of particular interest to HFA investors is that our exposure to US Sub Prime through both CDO’s and RMBS is net short. This was an intentional positioning by our investment manager Lighthouse Investment Partners LLC.

What does all this mean to the HFA Diversified Investment Fund unit holders? This net short
portfolio position means HFA’s Portfolios are profiting within this sector exposure from the recent collapse in the US Sub Prime market.

The HFA International Shares Fund, HFA Accelerator Plus Limited, HFA Partners Fund and the HFA Octane Fund series either have no exposure to US Sub Prime or are net short to the US sub prime market and have also benefited from the current difficulties within this sector.

Further to this with global and domestic equity markets falling between 6-12% over the past 30 days, we believe investors will be well rewarded over the next 12 months by their allocations to the HFA stable of funds, as the funds are designed to withstand these types of extreme market events.

It is worth remembering that such market events as these are rare, and are typically followed by a strong set of investment opportunities, for the strategies in which we invest. The resulting market volatility and inefficiencies deliver an environment which is conducive to our underlying managers producing strong risk adjusted returns over the next 12 months. HFA believes strongly that investments within the hedge fund segment of an investor’s portfolio should be
done through a dedicated, diversified, fund of fund approach. HFA remains committed to delivering to our clients true to label investments which deliver consistently strong risk adjusted returns.

Enquiries:

Darren Katz
Head of Investments
HFA Asset Management
Ph: (02) 8302 3333

Oscar Martinis
Head of Distribution
HFA Asset Management
(03) 9653 7418