Alternative Investments in Russia and the CIS Valuable

Alternative Investments in Russia and the CIS Valuable addition or dangerous addiction? Hedge fund manager selection for private wealth portfolio Olga Kokareva Head of Marketing and Investor Relations Da Vinci CIS Opportunities Fund olga. kokareva@dvcap. com Private Banking in Russia & CIS, 10 -11 March 2011

HNWIs regain their risk appetite Breakdown of HNWI Financial Assets, 2006 -2011 F 100% 10% 9% 7% 14% 18% 90% 80% 6% 8% 14% 24% 13% 70% 17% Real estate 21% 60% 14% Cash/deposits 31% 50% 40% Alternative investments 27% 21% Fixed income 31% 29% Equities 30% 20% 31% 33% 2006 2007 25% 10% 0% 2008 29% 2009 35% 2011 F *Source: Capgemini/Merrill Lynch Financial Advisor Surveys 2007, 2008, 2009, 2010 2

Return enhancement + diversification Adding hedge funds to the portfolio of traditional investments improves efficient frontier Traditional and alternative investments • Reduction of portfolio volatility Expected return • Low correlation with traditional investment strategies Traditional investments only • Absolute return • Profitability in different economic climates • Diversification Expected volatility For illustrative purposes only, not drawn to scale. *Demystifying the Role of Alternative Investments in a Diversified Investment Portfolio By Baird’s Advisory Services Research 3

Skill-based strategies Traditional assets Hedge funds Median return of managers by asset class Median return of managers by strategy 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 7. 2% Annualized return 9% 4. 1% 8% 7% 6% 5% 4% 3% ds 1% on 0% b on ild . b event driven ye vt -te hi rm gh go rm te lo m ng id - te in ds ds on vt. b b rm te na l s at io rn ge la r on to ck s th ow lu e ca p gr va p e ca rg la ds 2% Inter-quartile range of managers within asset class 10% 9% 5% 4. 1% 4% 3% Annualized return 6% 8% 7% 6% 5% 2% on b on ild ye gh go rm -te ng lo hi vt . b vt. b go rm te id m ds ds on on b rm na in t er na tio te th ow ca p gr la r ge va p e ca ds 3% 0% ds 4% 1% l s to ck s 2% lu e Annualized return 7% rg global macro Inter-quartile range of managers within strategy 8% la equity convertible fixed managed equity long/short arbitrage income futures market arbitrage neutral 1% 0% event driven equity convertible fixed managed equity long/short arbitrage income futures market arbitrage neutral * “Are Funds of Funds simply multi-strategy managers with extra fees? ” by G. Reddy, P. Brady, K. Patel. Based on statistical data for 6 years ending in march 2007 global macro 4

Formal approach is not enough anymore urities c e S t n e vestm n I f f o d a M anager M M Huge AU Low vola tility unts ual acco ndivid sparent i Tran tegy tion stra rela Low cor 5

Client is concerned about Return OF ON investments Based on 100 hedge funds failures investigations*: 50% failures were caused by operational risks 38% investment risk 6% business risk 6% due to multiple problems * Study by Capco partners Chris Kundro and Stuart Feffer 6

from private banker’s perspective HNW investors are not loyal to firms or banks – they are loyal to advisors In-house products lack of diversification limited universe of instruments to chose from Third-party products lack of transparency In-house due diligence 7

The reverse of selection process cornerstones Fund size too-much-money problem capacity limits Fund track record vs fund manager track record Big name talent retention problem = less operational risk affiliated infrastructure risk 8

Highly underestimated source of potential risk: Manager’s ego How does the manager deal with success? How does the manager react when things are going wrong? Does the manager respect the market? 9

Hedge fund selection is about seeking stars not stamps Advisor’s choice decides if adding a hedge fund to the client’s portfolio turns it into a poisoned cocktail or optimal mix of diversified investments. 10

Da Vinci CIS Opportunities Fund A fundamental multi-strategy hedge-fund focused on Russia and the CIS 11

Investment Philosophy and Fund Edge Investment Philosophy Da Vinci Hedge Fund Edge § Respect the Market § Information is asymmetric § With western and local presence, we know both outside perception and domestic reality. § Inefficiencies create opportunities § Excellent knowledge of Russian and CIS markets and practices as well as flexible mandate allows us to identify those inefficiencies quickly and exploit them. § Look for upside, protect downside § Using derivatives allows us to enhance return while limiting downside risk. 12

Track Record in the CIS Dmitry Malykhin’s Track Record as the Head of Moscow Representative Office and later as the Head of Research and Trading of Wermuth Asset Management Gmb. H (WAM) is the Investment Adviser of the Greater Europe Fund Limited. Dmitry Malykhin’s period (1999 – 2006). Net Return, MTD Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTD 1998 0, 00% 0, 10% -3, 87% -1, 26% 0, 63% -5, 32% 6, 08% 1, 44% 7, 34% 0, 95% 5, 56% 1999 0, 43% -4, 97% 6, 13% 5, 89% -4, 03% 6, 20% 2, 79% 1, 89% 17, 19% 15, 88% 2, 78% 12, 44% 79, 68% 2000 -4, 66% 10, 47% 5, 21% -6, 83% -4, 83% -1, 09% 2, 89% 6, 22% -9, 31% -1, 72% -10, 56% 2, 02% -13, 62% 2001 8, 69% 1, 28% -1, 44% 2, 51% 5, 79% 6, 24% -1, 47% -0, 74% -7, 04% 5, 10% 7, 14% 6, 25% 35, 97% 2002 5, 64% 7, 41% 4, 72% 11, 29% 1, 15% -9, 91% -6, 88% 1, 65% -2, 70% 6, 47% 4, 57% -0, 27% 23, 23% 2003 -0, 31% 9, 52% -3, 64% 9, 20% 7, 38% -0, 19% -0, 28% 7, 88% 12, 93% -1, 10% 0, 29% 4, 87% 55, 60% 2004 3, 85% 7, 49% 3, 30% -5, 41% -0, 84% 1, 16% 0, 95% 0, 76% 7, 52% 3, 77% 1, 71% 0, 69% 27, 17% 2005 2, 19% 14, 36% -6, 65% 0, 07% -2, 03% 0, 00% 7, 29% 12, 65% 3, 91% -6, 37% 4, 99% 9, 63% 44, 76% 2006 20, 57% 4, 33% -0, 11% 12, 63% -7, 88% -3, 75% 0, 07% 1, 81% -7, 78% 2, 81% 6, 65% 3, 53% 33, 83% Dmitry Malykhin’s Track Record (2008 performance is audited) as an Investment Adviser of Worldcrest Limited (2008 - 2009). No performance or management fees have been charged until Nov 2009. Worldcrest was merged with Da Vinci CIS Opportunities Fund in Nov 2009. Net Return, MTD Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTD 2008 0, 2% 3, 6% 3, 1% 2, 9% -1, 8% 0, 9% -3, 6% 18, 7% 0, 1% 8, 1% -2, 4% 31, 87% 2009 -2, 3% 0, 9% 17, 6% 26, 1% 25, 7% -6, 5% 5, 3% 10, 9% 23, 6% 7, 0% 165, 35% Dmitry Malykhin’s Track Record as the Chief Investment Adviser of Da Vinci CIS Opportunities Fund (from the Fund inception in March 2009). 2009 performance is audited Net Return, MTD Jan 2009 2010 7. 45% Feb -1, 97% Mar Apr May Jun Jul Aug Sept Oct Nov Dec YTD 6, 85% 15, 97% 15, 61% 0, 23% 3, 97% -5, 71% 8, 09% 6, 84% -0, 67% 3, 98% 88, 2% 11. 76% 0. 68% -6. 96% -1. 38% 7. 12% -3. 41% 3. 64% 4. 1% 1. 97% 6. 5% 31. 7% 13