Auspice Capital Advisors Alberta Finance Institute Conference

1. Auspice Capital Advisors Alberta Finance Institute Conference July 2012

2. Outline • About Auspice. • Our Motivation – we are biased. • Practical Observations. • Perspective 1: Facts and Fantasies. • Perspective 2: Value and Myths regarding funds. • Summary. • Opinion.

3. New and old player? Yes. • More than a traditional hedge fund firm. • Managed Futures focused, Top fund in 2008. • Innovation through Alpha, Enhanced Beta Indices and Beta Strategies, Hedging. • Diversified business. • Global partnerships with industry leaders with both retail and institutional mandates. • Products suite offered in Canada, US and Offshore. • Growing Concern. • Selected as one of Alberta's 50 Fastest Growing Companies by Alberta Venture and KPMG. • Morningstar 2011 Silver Medal : “Best Opportunistic Hedge Fund”.

4. Next Generation Commodity Fund Manager Auspice uses its success and risk management experience in Alpha generation to create innovative solutions:

5. We are biased! • Auspice participates in all aspects of the futures and commodity markets from speculation to hedging. • We are motivated to make you think good things about: • Alpha generating Hedge funds. • Beta and Enhanced Beta Index development. • ETFs, Index Mutual Funds. • Hedging. • Company Purpose: • " We are deeply passionate about changing the way people think about commodity investing and managed futures.” • Futures are a great tool.

6. Practical Observations • Definition of hedge fund is vague. • There are many types of hedge fund strategies. • CTA/Managed Futures are agnostic price takers. • Largest allocated to alternative strategy. • Index Funds (CITs) may actually dampen price movement and volatility. • Traditional risk measures may not be appropriate in commodities. • Notional net exposures, VAR. • There isn't a true winner/loser or buyer/seller relationship in the futures markets: • Motivations to use futures are unique and disparate. • Transfer of risk from those that want to those that don’t. • Ex. GAS ETF experience. • Commodities, particularly, energies go through paradigm shifts in volatility. • The character changes, strategies change.

7. Suggested Perspective 1 Facts and Fantasies about Commodity Futures: Gorton / Rouwenhorst • Evidence of beneficial long-term properties of an investment in collateralized commodity futures contracts. • Commodity futures risk premium has historically been similar to stocks and exceeded bonds. • Historicalrisk of an investment in commodity futures has been relatively low – especially if evaluated in terms of its contribution to a portfolio of stocks and bonds. • Distribution of commodity returns is positively skewed relative to equity returns, commodity futures have less downside risk. • Diversificationbenefits given the negative correlation because of better performance during unexpected periods of inflation, and diversify the cyclic variation in stock and bond returns. • Tail risk protection.

8. Suggested Perspective 2 The value of the hedge fund industry to investors, markets, and the broader economy: Centre for Hedge Fund Research (Imperial College London), KPMG, AIMA. Portfolio Benefits: • Economically important risk-adjusted performance. • Hedge funds outperformed traditional asset classes (stocks and bonds) with less volatility. • Strategies such as CTA, Global Macro, and Market Neutral have a low correlation to other asset classes even during crisis and recession. • CTA is only strategy to provide benefits in all environments. • Hedge fund activity has beneficial effects for : • market liquidity, price discovery, financial stability, efficient allocation of capital, shareholder value, diversification and the broader economy.

9. Suggested Perspective 2 The value of the hedge fund industry to investors, markets, and the broader economy: Centre for Hedge Fund Research (Imperial College London), KPMG, AIMA Debunked Myths: • There is no academic evidence that shows hedge funds cause economic instability. * • Adverse funding and liquidity shocks significantly affect HF performance but no evidence HF adversely affect funding or liquidity. • HF have exposure to systemic risk but they do not cause or contribute to it. • HF trading actually reduces instability and mitigates systemic risk. • Be practical • No evidence that HF reduce markets liquidity but rather add it. * Boyson, Stahel and Stulz 2010

10. Summary • Use a tool that best gives the liquidity and transparency required. • No credit risk. • Benefits of HF participation greatly outweigh any perceived negative consequence. • Portfolio benefits. • Debunked myths. • Let the professional do their jobs: managers that focus on the commodity sector. • Given the complexities of the sector, rely on experts. • Dominant strategies such as CTA are price takers. • Take your shot! • Hedge fund. • Index Fund / ETF. • Long only / Beta commodity ETF. • Hedger.

11. Opinion • Commodities as an increasingly important asset class for professional money managers. • Yes • New players (ex. hedge funds, index funds) have created massive volatility in funds flowing to commodities. • Hard to quantify. • Lack of evidence. • Bigger fish. • Presence of fund players in raising or lowering cost of capital for commodity firms • Net benefit. • Far greater macro issues determine cost of capital.

12. Additional Information

13. Disclaimer • Futures trading is speculative and is not suitable for all customers. • Past performance may not be indicative of future results and there is no assurance that any of the fund’s investment objectives will be met. • This document is for information purposes only and should not be construed as an offer, recommendation or solicitation to conclude a transaction and should not be treated as giving investment advice. • ACA makes no representation or warranty relating to any information herein. • No securities regulatory authority has expressed an opinion about the securities offered herein and it is an offense to claim otherwise.