EFTA01435741.pdf

Subject: RE: DB - Harvest Collateral Yield Enhancement Strategy [I] [C] From: Andrew King Date: Thu, 22 Feb 2018 17:12:32 -0500 To: Vahe Stepanian Stewart Oldfield Cc: Martin Zeman Yep — I'll send it over once available. From: Vahe Stepanian Sent: Thursday, February 22, 2018 4:41 PM To: Andrew Kin Stewart Oldfield Cc: Martin Zeman Subject: RE: DB - Harvest Collateral Yield Enhancement Strategy [I] [C] Classification: Confidential Ok, can you send that over to me once available? I have another client that is looking into it and it would be helpful to have handy. Thank you, Vahe From: Andrew King Sent: Thursday, February 22, 2018 4:15 PM To: Vahe Stepanian < Stewart Oldfield Cc: Martin Zeman MINNIMNNMPIIMNIIIM Subject: RE: DB - Harvest Collateral Yield Enhancement Strategy [I] Vahe — we're tracking down some commentary on how the strategy did the past few weeks with elevated vol. before following up with Paul. I'll keep you updated. EFTA01435741 From: Vahe Stepanian Sent: Thursday, February 22, 2018 4:09 PM To: Stewart Oldfield ffi ; Andrew King Cc: Martin Zeman Subject: RE: DB - Harvest Collateral Yield Enhancement Strategy [I] Classification: For internal use only Stew/Andrew — was there any follow up on this? Best, Vahe From: Stewart Oldfield Sent: Wednesday, February 07, 2018 11:22 AM To: Andrew King Cc: Martin Zeman ; Vahe Stepanian Subject: RE: DB - Harvest Collateral Yield Enhancement Strategy Andrew, Just spoke to Paul. He's ready to focus on this. Please send him the latest book and any updated performance. Once he reads it, he will want a call with Rick or Allan. Only complexity here is that KCP trades all of his brokerage. So, the SMA will need to be set up alongside that account. Hoping we can all work together to get this done. EFTA01435742 Thanks 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. EFTA01435743 From: Paul Barrett [mailto: Sent: Monday, October 16, 2017 9:55 PM 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 142 W 57th Street, 11th Floor, New York, NY 10019 646-876-5277 (o) fcid:[email protected] From: Andrew King [mailto: Sent: Friday, October 13, 2017 5:03 PM To: Paul Barrett Cc: Stewart Oldfield Subject: DB - Harvest Collateral Yield Enhancement Strategy EFTA01435744 Paul, I'm an Investment Specialist on Stew Oldfield's team at DB. During your last meeting with Stew, you had discussed a managed option strategy on our platform: the Harvest Collateral Yield Enhancement Strategy (CYES). As a follow-up, I thought I would send more information for your review. As background, CYES is an overlay that seeks to exploit the volatility risk premium and time decay properties of options by actively managing a portfolio of short-dated index option spreads on the S&P 500 index. The strategy sells options to generate premium while purchasing further out of the money options to contain risk. In a disciplined manner, the strategy seeks to mitigate exposure to market directional risk by defensively adjusting positions in response to a large move or reducing exposure ahead of specific market events. The strategy enables an investor to add an incremental return stream to their existing portfolio, and the potential diversification benefit provided by the strategy's historically low correlation to equities. It requires no capital outlay and instead uses an investor's existing portfolio as collateral. The strategy is implemented through a separately managed account (SMA) with complete transparency and daily liquidity. Harvest is an established leader in managed option strategies. It was founded in April 2008 and has over $10BN in AUM. The strategy is managed by an experienced team of 15 investment professionals that have deep trading and portfolio management backgrounds and have demonstrated success through the global financial crisis and other market events. If you have any questions or would like to discuss further, please just let me know. There are risks associated with investing in this strategy, please see slide 20 of the attached presentation for a summary of risks. EFTA01435745 Best regards, Andrew King fcid:[email protected] Andrew King, CFA Vice President I Investment Solutions Group Deutsche Bank Securities Inc. Deutsche Bank Wealth Management 345 Park Avenue, New York, NY 10154 Tel. +1(212)454-0043 Mobile Email fcid:[email protected] This communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Please refer to https://db.com/disclosures for additional EU corporate and regulatory disclosures. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. EFTA01435746