Alternative investments: a curmudgeons guide.

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Any opinions expressed in this presentation constitute our judgement at the time of issue and are subject to change. We believe that the information contained in this presentation is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made as at the time of compilation. However, no warranty is made as to their accuracy or reliability (which may change without notice) or other information contained in this presentation. To the maximum extent permitted b9444

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Alternative investments: a curmudgeons guide.

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1. Alternative investments: a curmudgeon's guide.* Brian Parker CFA MLC Investment Management *This presentation was part of a paper delivered by MLC's Investment Strategist Brian Parker at the Centre for Investor Education (CIE) conference in Paris, October 2007

2. Any opinions expressed in this presentation constitute our judgement at the time of issue and are subject to change. We believe that the information contained in this presentation is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made as at the time of compilation. However, no warranty is made as to their accuracy or reliability (which may change without notice) or other information contained in this presentation. To the maximum extent permitted by law, we disclaim all liability and responsibility for any direct or indirect loss or damage which may be suffered by any recipient through relying on anything contained in or omitted from this presentation. This presentation contains general information and may constitute general advice. It does not take into account any person’s particular investment objectives, financial situation or individual needs. It should not be relied upon as a substitute for financial or other specialist advice. It has been prepared solely as an information service for financial advisers and should not be distributed to clients. Before making any decisions on the basis of this presentation, you should consider the appropriateness of its content having regard to your particular investment objectives, financial situation or individual needs. Opinions expressed constitute our judgement at the time of issue and are subject to change. The presenter is a representative of MLC Investments Limited. MLC Investments Limited ABN 30 002 641 661 105-153 Miller Street, North Sydney NSW 2060 is a member of the National group of companies. MLC Investments Limited is the issuer of the MLC MasterKey Unit Trust. Information about the MLC MasterKey Unit Trust is contained in the current Product Disclosure Statement (‘PDS’), copies of which are available upon request by phoning MLC on 131 831 or on our website at mlc.com.au. General advice warning and disclaimer

3. Main messages Wealth creation made simple – provide capital to businesses The further we get from that premise, the uglier things potentially get Too many alternative investments may not be alternative enough Questions to ask product providers about alternative investment proposals

4. Building wealth made easy Supply capital (equity or debt) to businesses Be patient Understand (and be comfortable with) the risks you are taking In recent years, too many people have made building wealth too complicated too opaque and too risky This slide is kind of self-explanatory. Think of it as my little dig at some hedge fund structures, a range of structured products and assorted other clever dick offerings from the investment banking fraternity.This slide is kind of self-explanatory. Think of it as my little dig at some hedge fund structures, a range of structured products and assorted other clever dick offerings from the investment banking fraternity.

5. What should an alternative investment look like? Sound economic basis for investing Low correlation to traditional assets, over a range of different environments Hedge funds/absolute return strategies, private equity, direct investments

6. Absolute return strategies Designed to ensure positive absolute returns over some specified (short-term?) time period The alternative to benchmark relative investing?

7. Absolute return strategies The return of any investment portfolio has a beta component and an alpha component Is your return driven by alpha or beta? (neither is NOT an admissible response) If the answer is beta, then can you really charge 2 and 20? If the answer is alpha, then a) you are a relative return investor b) alpha can certainly be negative

8. Where’s all the volatility gone?

9. What to do when volatility disappears? Gear up!

10. So, you want to invest in a private equity program NOW? Sound economic case for excess returns, and a sound use of capital Returns exhibit persistence – good private equity managers tend to stay that way! BUT.. Good private equity managers are swimming in cash 20% is the new 30%? Economic downturn would provide a great opportunity for skilled managers

11. Evaluating alternative investments Economic case for investing Alpha or beta? (and what am I really paying for?) Truly understanding the risks Just how alternative is it? Genuine skill or dumb luck?

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