Anniversary of the Short Alpha Composite - Tuckerbrook Proves Alpha Based Fees Work

Marblehead, MA - January 27, 2009

The Tuckerbrook Short Alpha Composite was launched on January 1st last year with the promise of delivering a single investment into five long-established short-only portfolios using a unique alpha based fee. One year hence, the composite delivered on its promise, providing clients with seamless access to all five short portfolios through a single on-shore or off-short investment partnership. Moreover, the alpha-only incentive fee provided investors with one of the most cost effective hedges, stripping beta entirely from the calculation of incentive fees.

The composite is distinctly not a fund-of funds as evidenced by the fact that there are no layered fees, the portfolio managers own the general partner to the partnership, and performance fees are based on the composite’s performance and not awarded based on how the individual portfolios performed. This is called “fee netting” and has historically been viewed as unlikely to be embraced by investment managers.

As a genuine composite, the five individual portfolios are effectively rolled into one, delivering on average over 200 individual short positions with no meaningful concentration by sector or market capitalization. The result is a strong hedge and beta management tool for virtually any long or beta-burdened portfolio. The portfolio managers, including John Levin, Don Besser, Parker Quillen, Guy Judkowski & David Schroll and Michael Katz, have an average of over 15 years each shorting U.S. securities and the portfolios in the composite have an average track record of over seven years.

According to John Hassett, Managing Principal of Tuckerbrook, “We set out to prove two things. First, that even experienced, successful investment managers could embrace an alpha-based fee structure, and secondly, that a partnership combining multiple portfolios into one, with fee netting between the managers could be done effectively to the benefit of the clients and the managers. Our experience last year proved both”.

As an investment tool, the Tuckerbrook Short Alpha Composite is highly differentiated from short indexes, short ETF, or short index baskets. Because it draws on the combined short expertise of its portfolio managers, it reflects the timing sentiments of each manager. The result is a variability in exposure that has historically produced asymmetric capture ratios, that is, when the market looses a dollar the composite typically makes more then a dollar, but when the market makes a dollar the composite typically losses less then a dollar. Put another way, the composite of these five portfolios have produced consistent alpha in up and down markets, something alpha-free index shorts can not do.

The alpha-only incentive fee goes a step further then earlier attempts at alpha fees in that it rewards the investment managers for the alpha they produce on a scale that reflects their efficiency in making more then the market in down months and loosing less then the market in up months.

According to Parker Quillen, one of the portfolio managers in the composite, “We all thought the Tuckerbrook approach was interesting and unique. But having lived within the composite for a year and having met many institutional investors over the last several months, I can’t image that the model won’t be adopted by others as a way to combine expertise in a highly cost effective manner for the investor. In the end the structure is great for the managers as well, that is, if you believe you can produce consistent alpha”.

The Tuckerbrook Short Alpha Composite is also available with 150% of the short exposure for the same investment dollars, and its liquidity feature is also client friendly at 30-days notice with no lock-ups and no early redemption penalty or gates. Also unique to the Tuckerbrook approach: daily account transparency statements, delivered directly from the administrator, Citi Hedge Fund Services.

About Tuckerbrook Alternative Investments, LP

Tuckerbrook Alternative Investment is a registered investment advisor focused exclusively on alternative investments, including direct hedge funds, specialty fund-of-funds, and emerging managers. The firm is headquartered in Marblehead, Massachusetts, with offices in Stamford, Connecticut and New York City. More information on Tuckerbrook is available online at: www.tuckerbrook.com

Contact:
Amanda Velluto, Client Services, avelluto@tuckerbrook.com

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