Alternative UCITS Barometer

Quarter 1, 2014

Introduction

2

ML Capital Asset Management, the investment manager and promoter of the MontLake UCITS Platform, isdelighted to present the 13th edition of the quarterly ML Capital Alternative UCITS Barometer (Barometer).

The Barometer is designed to help identify and anticipate key trends in the demand for the major strategieswithin the Alternative UCITS sector.

The capital introductory team at ML Capital survey a diverse range of 60 investors who collectively managealmost $95 billion and today invest upwards of $20 billion into Alternative UCITS reflecting the widening ofthe investor base for regulated alternative products in Europe. Respondents range from insurance andpension funds to private banking organisations, with a significant constituent of financial advisers that dealwith the primary source of Alternative UCITS inflows, the mid-net-worth investor.

Commenting on the highlights of the latest Barometer, John Lowry, Co - Founder & CIO of ML Capital;

"This quarter, the strategies that our survey indicated would gain most assets were those focussed on Global,European and US stocks. This indicates that sophisticated investors are favouring risk assets, with thestrongest uptick in demand for Global long short funds where almost half of respondents plan to deploy moreassets. In addition, the Emerging markets sector as a whole , while still facing some stiff headwinds, appearsto be well positioned to stem the outflows of 2013 and indeed garner decent inflows over the coming months.Investors remain negative on the outlook for the convertible bond funds, and have quite divergent views onmost of the main sectors.

We are now entering into our fourth year of publishing the Barometer and would like to thank allrespondents for sharing with us their allocation plans for the coming quarter".

We hope that the Barometer will provide a useful insight into current appetite levels across some of themajor sectors of the regulated fund universe.

Should you have any questions then please do not hesitate to contact the team.

Cyril Delamare, CEO

Q1 Barometer Highlights

3

26%

2%

54%

14%4%

Participant Location

Continental Europe

Scandinavia

UK

Switzerland

Rest of World

Bullish Plans for Global and US L/S Equity Strategies

The top two most sought after strategies are Global long/short and US

long/short, with a healthy level of interest in the Emerging markets and

European sectors.

Huge Spike to Market Neutral Funds

Three times more interest this quarter for Market Neutral funds, which

contrasts the overall view of favouring risk assets. Some of the investors

surveyed indicated a barbell approach, strategically balancing an overweight

long/short equity exposure with a market neutral allocation. Others indicated

that they expect some potential headwinds for the markets with increased

levels of volatility this year. This should accelerate the move into market

neutral and lower risk absolute return products, and to the alternative funds

sector in general.

Swing away from Regional Emerging Market Funds

While 36% of respondents plan to allocate to diversified EM funds, demand

for dedicated Asian and Latam funds has fallen this quarter to the lowest

levels since the barometer commenced over three years ago.

14%2%

14%

10%60%

Participant Type

Bank/institution

Family Office

Fund of Funds

Private bank

Wealth manager / IFA

4

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Long/Short EquitiesTrending

5

Global Long/Short

US Long/Short

UK Long/Short

Japan Long/Short

• MORE • SAME • LESS

• MORE • LESS

48%38%

14%

44%46%

10%

18%

60%

22%

0%

10%

20%

30%

40%

50%

60%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

10%

20%

30%

40%

50%

60%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

10%

20%

30%

40%

50%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

18%

62%

20%

0%

10%

20%

30%

40%

50%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

Long/Short EquitiesTrending

European Long/Short

6

The most dramatic results within the long/short arena, is a strong trend towards Global l/s funds. Markedly, 48% of

investors said they plan to allocate more to the Global sector, up from 30% in the survey from the last quarter.

Following a year in which the S&P had its strongest year since 1997, many respondents are planning to increase

allocations to US l/s managers. Last quarter, some investors indicated a more cautious approach in anticipation of

increased volatility due to uncertainty surrounding quantitative easing in the US. Hence the last survey indicated a drop

back in appetite to a level of 35% planning to raise exposure to the area. After this pause, demand is once again on the

rise, with 44% of respondents planning to shift up their US exposure levels.

While Europe still has growth issues due to continued austerity measures coupled with anemic levels of bank lending ,

on a relative basis, the macroeconomic fundamentals are improving and the environment appears ripe for talented

regional stock pickers to buy cheaply into sound businesses that are unloved by the markets. European funds therefore

remain one of the most popular of all strategies, with 46% looking to allocate new assets to the sector.

Despite some stellar returns of late, the demand for dedicated UK and Japan funds remains relatively subdued, ironically

with the exact same result of 18% planning to increase allocations. Investors may well be underestimating the economic

strength of both countries, with Nouriel “Dr Doom” Roubini predicting a good year for Japan off the back of an

accommodative government policy and evidence of stronger growth.

Commentary

• MORE • SAME • LESS

• MORE • LESS

46%52%

2%

0%

10%

20%

30%

40%

50%

60%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

Global Emerging

Pan-Asia

Commentary

Latin America

7

Emerging MarketsTrending

As a whole, EM equities underperformed the major developed markets in 2013, returning a - 4% vs. a 25% rise for

developed world equities. Investors made a big strategic move away from the emerging markets last year and allocated

the majority of their risk asset exposures to the developed markets, concerned about uncertainty surrounding QE.

While several headwinds still remain, it appears that a healthy number of allocators are taking a bolder approach with a

strong 36% of respondents planning to allocate to diversified EM l/s funds over the coming quarter. Evidently, with a

clearer picture in terms of US monetary plans, quite a number of investors believe that emerging markets do indeed

offer attractive opportunities.

Globally diversified EM funds remain by far the most popular way to allocate to the Emerging Markets over regional

funds. However in stark contrast, demand for dedicated Asian and Latam funds is very muted and continues to fall - to

the lowest levels since the barometer commenced over three years ago.

36%

32%

32%

12%

62%

26%

8%

50%42%

0%

10%

20%

30%

40%

50%

60%

70%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

10%

20%

30%

40%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge• MORE • SAME • LESS

• MORE • LESS

Fixed Income

Relative ValueTrending

Market Neutral

Convertible Arbitrage

Commentary

By far the most popular strategy in the Relative Value sector is Market Neutral funds this quarter, with 36% of allocators

wishing to raise current positions. This big spike of interest may indicate that some investors are expecting increased levels of

volatility this year, which is also likely to accelerate a meaningful move into market neutral products and to alternative funds

in general. The uptick in interest levels may also be due to the relatively strong returns delivered by the sub strategy in 2013,

which was one of the few hedge fund categories to deliver at or close to its targeted levels of return.

With the convertible bond market fair to richly priced, interest levels in Converts is at an all-time low of 0%, while the negative

view on the general Fixed Income funds sector continues this quarter with 54% of investors planning to decrease exposure, as

investors see returns falling as strategy risks increase.

8

36%

58%

6%

90%

10%

14%

32%54%

0%

10%

20%

30%

40%

50%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

10%

20%

30%

40%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

10%

20%

30%

40%

50%

60%

70%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge• MORE • SAME • LESS

• MORE • LESS

Commentary

Distressed

Event DrivenTrending

Multi-Strategy

Merger Arbitrage

9

Despite delivering solid returns, the healthy swing back towards the Event Driven sector, indicated in the survey of the

last quarter, has not followed through this time, with interest levels falling back across all three sub sectors. Multi

strategy funds show the healthiest levels of interest with 22% of those surveyed planning to raise their levels of

exposure. It will be interesting to review both the returns and the levels of interest over the coming quarters for this

sector.

Merger Arbitrage funds performed quite well in 2013. Managers are predicting a good year in 2014 with corporations

incentivised to use cash on their balance sheets due to the likely rise in interest rates. Despite this, investors appear to

have reservations and have drastically cut their plans for allocation to its lowest level, 10%, since the first issue of the

barometer, over three years ago

22%

70%

8%

2%

86%

12%

10%

80%

10%

0%

10%

20%

30%

40%

50%

60%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

10%

20%

30%

40%

50%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

10%

20%

30%

40%

50%

60%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge• MORE • SAME • LESS

• MORE • LESS

10

Managed Futures / CTAs

Commentary

Macro & CTATrending

Global Macro-Discretionary

Global Macro Systematic

Global Macro- Discretionary funds continue to be the most popular within the overall Macro/CTA sector, with almost 30% of

investors planning to look for new macro-managers to invest with. However, investors continue to indicate that the low level

of supply of proven managers is holding back their investment plans.

Following several years of relatively poor returns from CTAs, interest levels continue to slide, and from a highpoint of almost

60% in the fourth quarter of 2011, this quarter only 14% now plan to raise their allocations, reflecting a broader consensus for

the sector. The relatively limited number of CTA managers who have delivered solid returns are generating considerable levels

of demand.

Cleary the environment has been very difficult for most CTAs, with a lack of definitive trends, risk-on and risk-off market

environments, and low rates. However we remain convinced that the rationale for a healthy allocation to the sector will be

well rewarded over the coming months.

28%

46%

26%

6%

72%

22%

14%

38%48%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

10%

20%

30%

40%

50%

60%

70%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge

0%

10%

20%

30%

40%

50%

60%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Pe

rce

nta

ge C

han

ge• MORE • SAME • LESS

• MORE • LESS

Global Macro Discretio'

Market Neutral 36.0% 58.0% 6.0%

Multi-Strategy 22.0% 70.0% 8.0%

Global Macro Systemat' 6.0% 72.0% 22.0%

More Same Less

Macro & CTA

Distressed 2.0% 86.0%

Managed Futures/CTA

Source Data

More Same Less

Global L/S Equity

UK L/S Equity

US L/S Equity

European L/S Equity

Japan L/S Equity

48.0%

18.0%

38.0% 14.0%

60.0% 22.0%

44.0% 46.0%

More Same

11

Convertible Arbitrage 0.0% 90.0% 10.0%

More Same Less

14.0% 38.0% 48.0%

28.0% 46.0% 26.0%

12.0%

Merger Arbitrage 10.0%

20.0%

Latin America

10.0%

46.0%

Long / Short EquityEmerging Markets

Relative Value

More Same

42.0%

Less

Global Emerging 36.0% 32.0% 32.0%

8.0% 50.0%

Pan-Asia 12.0% 62.0% 26.0%

2.0%

18.0% 62.0%

Lowest Surveyed Hedge Allocation USD $ 25 m

Highest Surveyed Alt UCITS Allocation USD $ 8 bn

Lowest Surveyed Alt UCITS Allocation USD $ 2 m

Highest Surveyed Avg Alt UCITS Ticket USD $ 165 m

Lowest Surveyed Avg Alt UCITS Ticket USD $ 100 k

Highest Surveyed Hedge Allocation USD $25 bn

Barometer Participants

Barometer Surveyed Alt UCITS Assets USD $ 20 bn

80.0% 10.0%

Less

Barometer Surveyed Hedge Fund Assets USD $ 95 bn

Further Statistics

Total Press Reported Hedge Fund Assets USD $3,000 bn

Press Reported

Total Press Reported Alt UCITS Assets USD $ 265 bn

Event Driven

Fixed Income 14.0% 32.0% 54.0%

52.0%

About ML Capital

About The MontLake UCITS Platform

12

ML Capital is an independent and privately owned financial services group at the forefront of bringing high qualityalternative investments to the mainstream. Utilising our collective industry experience and expansive network ofcontacts, we are dedicated to locating the very best boutique fund managers and working with them to introduce theirskills to the rapidly growing market for quality onshore regulated investment products.

ML Capital launched the MontLake UCITS Platform in 2010 and has become one of the fastest growing UCITS platformin the market which delivers a range of specialist boutique alternative managers to institutional and retail investors.

ML Capital also creates and sponsors a range of non-UCITS regulated European investment funds such as the QIF andPIF, for investment managers and advisors whose strategy does not fit the UCITS framework.

Our senior partners have many years of hedge fund experience in key areas incorporating manager due diligence,portfolio management, operations, risk management and distribution. Through our diverse backgrounds, extensiveexperience and industry knowledge, our professionals have a proven track record in delivering investment productsand solutions which perform to the highest standards.

ML Capital is headquartered within the European Union in Malta and has offices in London and Geneva.

The MontLake UCITS Platform, domiciled in Ireland and regulated by the Central Bank of Ireland provides investmentmanagers with a turnkey solution for launching a UCITS fund under its umbrella structure. Typical time to market is 10weeks, or less, with the platform offering immediate access to a wide range of investors through ML Capital’sdistribution network.

Funds placed on the platform by ML Capital will benefit from top-tier service providers including Citi for custody,administration and trustee services, KPMG for audit, and Bridge Consulting for oversight and directorships. ML Capitalhas also ensured that managers utilising the MontLake UCITS Platform will have unfettered access to a network of theleading prime brokerage firms.

For more information on ML Capital please visit our website www.mlcapital.com or our platform websitewww.montlakeucits.com.

MALTA

Suite 5Tigne PalaceBisazza StreetSliema

+356 2133 4801

IRELAND

26 Upper Fitzwilliam Street Dublin 2Ireland

+353 1535 0912

info@mlcapital.com

www.mlcapital.com

SWITZERLAND

Rue de la Cloche 81201Geneva

+41 (0) 22 318 56 70

UK

30 St James's SquareLondonSW1Y 4AL

+44 (0)207 9252 748

DISCLAIMER

14

FOR INVESTMENT PROFESSIONALS ONLY

This financial promotion is issued by ML Capital Limited. This document is not intended as an

offer to acquire or dispose of any security. Information given in it has been obtained from, or

based upon, sources believed by us to be reliable and accurate although ML does not accept

liability for the accuracy of the contents. This information is not intended to constitute a basis

for any specific investment decision.

For Addressee only. The distribution of this report does not constitute an offer or solicitation.

Past performance is not a guide to future performance. The value of investments can fall as

well as rise. You should ensure you understand the risk profile of the products or services you

plan to purchase. The services provided by ML Capital Limited are available only to investors

who come within the category of the Eligible Counterparty or Professional Client as defined in

the Financial Services Authority’s Handbook they are not available to individual investors,

who should not rely on this communication. Information given in this document has been

obtained from, or based upon, sources believed by us to be reliable and accurate although

ML Capital does not accept liability for the accuracy of the contents. ML Capital does not

offer investment advice or make recommendations regarding investments.