Hedge Funds Investing: Going OffPiste For Returns

1

• Hedge Funds Investing Going Off-Piste For
  Returns
• Paolo Barbieri Head of Investments, Funds of
  Hedge Funds
• May 2007

For Professional Investor Use Only And Not To Be
Distributed To The Public
2
The New Alpha Pools
Source Morgan Stanley
3
hedge funds moving towards an active role

• There are an estimated 125 dedicated activist
  hedge fund managers,
• with many more hedge funds thought to be applying
  an active
• approach in conjunction with their main strategy,
  be that event driven,
• distressed, long/short equity or merger
  arbitrage.
• Euromoney, Feb 2007

4
Hedge Funds and Private Equity Worlds whats in
between?
Key characteristic
Type of involvement
5
Active versus control

• Not all active investors are control investors
• Active investors may drive the restructuring and
  facilitate balance sheet reorganization without
  assuming control
• Hedge funds are content with being active
  investors, fully exercising their rights
• Private equity players tend to pursue more
  control oriented investing

6
Restructuring Investment Strategies
7
Restructuring Investment Opportunities Across
the Cycle
PRE EARLY MID LATE
EMERGENCE DEFAULT BANKUPTCY BANKRUPTCY
BANKRUPTCY
8
Restructuring Returns Drivers
Returns are based on
Thorough research superior security selection
Turnaround risk
Ability to effect a value shift
Successful exit strategy
9
Superior Risk Adjusted Returns
Source Bloomberg and CSFB Tremont Hedge Fund
Index. Data valid from end December 2000 to end
March 2007.
10
Activism is working with the management in
creating value

• There is a growing number of activist hedge
  funds managers, but often their roles in creating
  shareholder value and working with management go
  unmentioned because they are without conflict.
• Euromoney, Feb 2007

11
Important Legal Information

• Past performance does not guarantee future
  results. There can be no assurances that
  countries, markets or sectors will perform as
  expected. Investments involve certain risks,
  including political and currency risks.
  Investment return and principal value may go down
  as well as up and could result in the loss of all
  capital invested. Investments employing the
  strategies described in this document are by
  nature highly speculative and may be volatile,
  involve leverage, be affected by lack of
  liquidity and should only be considered by
  experienced and sophisticated investors. Please
  seek professional advice and read the prospectus
  carefully before you invest. This document is
  not a prospectus and does not constitute
  investment advice or an offering of any shares or
  units and does not take account of the investment
  objectives or needs of or suitability for a
  specific investor.
• Unless otherwise stated, all views expressed are
  those of Pioneer Alternative Investments as at 31
  March 2007. These views are subject to change at
  any time based on market and other conditions and
  there can be no assurances that countries,
  markets or sectors will perform as expected.
  Whilst due care and attention has been taken
  during the preparation of this document, Pioneer
  Global Asset Management S.p.A. group of companies
  cannot accept liability for any errors or
  omissions contained within and expressly disclaim
  any liability whether in contract or negligence
  to the addressee of this document or any third
  party who may review it or use any material from
  it in respect of any loss or damage occasioned
  whether direct or consequential.
• The content of this document is approved by
  Pioneer Global Investments Limited. No offer of
  any interest in any of the investment schemes or
  strategies described in this document (the
  Schemes) will be made in any jurisdiction in
  which the offer, solicitation or sale is not
  authorised or to any person to whom it is
  unlawful to make such offer, solicitation or
  sale. The Schemes is an unregulated collective
  investment schemes under the UK Financial
  Services and Markets Act 2000 and therefore does
  not carry the protection provided by the UK
  regulatory system.
• In the UK the content of this document is
  approved for distribution by Pioneer Global
  Investments Limited (London Branch), 123
  Buckingham Palace Road, London SW19SL, authorised
  by the Financial Regulator in Ireland and
  regulated by the Financial Services Authority for
  the conduct of UK business. The content of this
  document has been approved to constitute a
  promotion made in the limited circumstances
  provided for in accordance with relevant
  provisions of The Financial Services and Markets
  Act 2000 (Promotion of Collective Investment
  Schemes) (Exemptions) Order 2001, made under
  Section 238(6) of FISMA (the CIS Order) and of
  the rules of the Financial Services Authority.
  Accordingly, this presentation is approved for
  communications (1) made pursuant to Article 14
  of the CIS Order to investment professional
  (i.e. persons authorised pursuant to FSMA or
  exempt from the requirement to be so authorised
  governments, local and public authorities
  persons who invest, or can reasonably be deemed
  to invest on a professional basis any director,
  officer, executive or employee of any such person
  when acting in that capacity) (2) made pursuant
  to article 22 of the CIS Order to (a) any body
  corporate with, or grouped with another person
  that has, paid up capital or net assets exceeding
  5m (or currency equivalent) (b) any body
  corporate with, or grouped with another person
  that has, at least 20 members and paid up capital
  or net assets exceeding 500,000 (or currency
  equivalent) (c) any partnership or
  unincorporated body with net assets exceeding 5m
  (or currency equivalent) (d) the trustee of any
  trust which at any time in the 12 months
  preceding the date of the promotion constituted
  by this company profile had a gross value of 10m
  (or currency equivalent) in cash or
  FSMA-regulated investments or (e) any director,
  officer, executive or employee of any person (a)
  (d) above when acting in that capacity.
• Promotion to a person not falling into one or
  other of these categories has accordingly not
  been authorised and may contravene FISMA, and in
  such cases you should place no reliance on the
  content of this company profile for any purposes
  whatever.
• Netherlands
• Any Scheme described in this document is not and
  will not be offered directly or indirectly, as
  part of their initial distribution or at any time
  thereafter, in or from within the Netherlands
  unless one or several of the following apply and
  the offer is made only to persons
• (i) who trade or invest in investment products in
  the conduct of their profession or trade within
  the meaning of the Exemption Regulation under the
  Dutch Act on the Supervision of Collective
  Investment Schemes (Vrijstellingsregeling Wet
  toezicht beleggingsinstellingen) and (ii), with
  respect to securities offered in the Netherlands,
  who also qualify as qualified investors
  (professionele marktpartijen) within the meaning
  of the Exemption Regulation under the Dutch Act
  on the Supervision of the Securities Trade 1995
  (Wet toezicht effectenverkeer 1995)
• Pioneer Investments and Pioneer Alternative
  Investments are trading names of the Pioneer
  Global Asset Management S.p.A group of companies.