EFTA01388936

From: Stewart Oldfield Sent: 2/5/2018 3:16/1 To: Paul Barrett BCC: Subject: RE: DB - Harvest Collateral Yield Enhancement Strategy This is quite a few days we've been having. I would like to see the market find a floor here, but perhaps it makes sense to revisit the Harvest overlay strategy over the next couple of weeks. From: Andrew King Sent: Tuesday, October 17, 2017 12:25 PM To: Paul Barrett Cc: Stewart Oldfield Subject: RE: DB - Harvest Collateral Yield Enhancement Strategy Paul, You're right that the returns have been around 70bps since Dec 2013. However, it's important to note that this is an overlay strategy, and doesn't require additional capital outlay. Due to this, all returns are incremental to the return that you would also earn on your collateral. Additionally, the strategy has a 25% margin requirement. Depending on the margin release available on the underlying collateral, you're able to increase your exposure to the strategy up to -4x on a given amount of collateral. Of course, this would increase the potential return and risk, but would also maintain the favorable Sharpe ratio and low correlation to equities. As an example, on a given amount of collateral, 3x exposure would result in 210bps of incremental return over the past four years. I'd also highlight that this incremental return would not be earned by applying leverage to the risks already in most portfolios (equity beta, credit, and duration). Due to the low correlation of the strategy to equities, for most investors the addition of the overlay has a diversification benefit to the overall portfolio, improving the risk adjusted return. Please let me know if you'd like to discuss further. From: Paul Barrett [ Sent: Monday, Oc To: Andrew King Cc: Stewart Oldfield Subject: RE: DB - Harvest Collateral Yield Enhancement Strategy Hi Andrew I reviewed the returns over the past 4 years and they are not that exciting. It has averaged around 70bps return over that time period. I like the concept but not sure the strategy generates enough returns. Happy to discuss more if you think I missed something. Paul Paul Barrett Alpha Group Capital LLC CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0092914 CONFIDENTIAL SDNY_GM_00239098 EFTA01388936