MANAGED FUTURES PERFORMANCE OVER THE LONG TERM

September 20, 2010

We mentioned Gold hitting an all time high in a post last week in our newly released Managed Futures & Trading System Blog. (If you like our newsletter, we think
you’ll love the blog – click here to check it out).

But it isn’t just Gold in rally mode lately. Other markets like Palladium +33%, Cotton +32%, Coffee +33%, and Wheat +20%, are all up significantly for the year (as
well as bonds which we covered in our newsletter last week). Stocks are also looking at gains for the year, with a strong September thus far pushing them out of
the red. And of course, there are Managed Futures; which benefitted from a strong August to move into positive territory for the year.

With all of these asset classes pushing into positive territory for the year, it seemed as good a time as any to check in on how various asset classes have been
performing relative to managed futures (and to each other) thus far in 2010.

Past Performance is Not Necessarily Indicative of Future Results

Key: estimates as of 9/20/10 (8/31/10 for Hedge Funds) Managed Futures = Newedge CTA Index, Cash = 3 mo T-Bill rate, Bonds = Vanguard Total Bond Market ETF, Hedge Funds =
Credit Suisse/Tremont Hedge Index, Commodities – ishares GSCI ETF, Real Estate = ishares Dow Jones US Real Estate ETF, World Stocks = MCSI World Index (ex USA), US Stocks
S&P 500 Index

A few quick notes on the numbers above before moving on. One, we have switched from previous versions of this table showing up to date performance across
various asset classes to using ETF values for the real estate and long commodity asset classes. This both better represents an investable asset class, and is easie
for us to grab data for on a daily basis so as to give you as fresh of data as possible. One downside of this, is that the ETF performance may be more volatile and
show different performance from the asset class it tracks (thus the +18% reading in real estate, which doesn’t match the Case Shiller or other real estate metrics).

Secondly, you may wonder why commodities are down for the year, with the moves in grains and metals listed above. The answer is the energy sector.
Commodities are mostly having a good year, but there is one big drag on long commodity performance so far in 2010, and that is the energy sector with Crude
down -15% for the year. With most of the commodity indices overweight the energy sector, this has left the long only commodity indices down for the year.

A longer view

While it is good to see managed futures up for the year after a difficult 2009, we don’t recommend putting too much stock in just 8.5 months performance (for
managed futures or any of the asset classes for that matter). Taking a longer view roughly in line with your investment horizon is usually a better method for
comparing asset classes, and we show the 3, 5, and 10 year periods for the various asset classes below.

Past performance is Not Necessarily Indicative of Future Results

Key: through 8/31/10. Managed Futures = Dow Jones Credit Suisse Managed Futures Index, Bonds = Citi World Government Bond Index, Hedge Funds = Dow Jones Credit Suisse
Hedge Index, Commodities = Goldman Sachs Commodity Index, Real Estate = Case- Shiller 10city Composite, World Stocks = MCSI World Index (ex USA), US Stocks = S&P 500 Inde

It is not a pretty picture for stock market investors, with both US and World Stocks down across the 3, 5, and 10 year periods. It simply hasn’t been a good decade
for traditional investments with it starting off and ending with a bubble bursting (first the dot.com bubble and then the credit crisis/bubble). Whether this dismal
performance of the stock asset class means this is a great time to buy, or the buy and hold stock model is irreparably broken remains to be seen – but we
recommend hedging your bets with some alternative investments just in case we turn into Japan where stock prices having failed to return to their former levels for
nearly 30 years now.

Another interesting item to note on these longer view performance tables is the performance of commodities, which are down over the past 3 and 5 year periods
while just barely positive over the past 10 years. This is sure in stark contrast to the talking heads on television who seem to always be telling us that China and
India will cause commodity prices to rise sharply, and those who feel peak oil is here and will cause energy commodities to appreciate at an accelerating pace.

If you are asking how commodities as an asset class can have such different performance over these longer views than managed futures as an asset class have
had, remember that the commodity asset class is not the same thing as managers who trade commodities (the latter defining managed futures). Commodities as a
asset class represent the performance of long only commodity exposure, going up when commodities appreciate in price and down when they don’t. This is the typ
of exposure the various ETFs get you and espoused as essential by the likes of Jim Rogers and others. Managed futures can make (and lose) money both when
commodity prices appreciate and when they fall, as the managers will go both long and short commodity markets. Managed futures also has a lot of exposure to
financials and currencies, which aren’t represented by the commodity indices.

What impressed us in these charts? Managed Futures, obviously; which despite a poor past 18 months remain a strong performer across all three look back
periods. But it is hard not to be impressed with Bonds in the charts above and their showing as the best performer over the past 3 and 5 years. Hedge Funds and
Real Estate also held their own over the long term, remaining well ahead over the past 10 years despite poor past 3 year track records.

One cautionary note to those seeing managed futures outperforming the various asset classes in the ‘longer view’ charts above. Most of those returns are produce
in short bursts when volatility spikes and/or there is a sharp move higher in a market like Wheat this summer with the drought in Russia. Unlike bonds and the stoc
market (when things are going well), both of which can have nice consistent monthly returns for a period of time, managed futures are more apt to drive you crazy
for months on end with consistent losses (or at least no sizable gains) before any gains are seen. But those sideways and down periods for managed futures are
generally less painful than similar periods in other asset classes, and are a necessary evil to get to the ‘spike’ periods where the investment catches a large trend o
other outlier move to more than make up for the losing period.

Rolling 3year returns

Some of you may be saying – of course managed futures looks better across the past 3, 5, and 10 year periods; we just came through one of the worst 3, 5, and 10
year periods for the other asset classes (stocks and real estate in particular). This is true, it is a somewhat unfair comparison given how bad stocks, commodities,
and real estate performed; but at the same time that is part of the point here – that managed futures (and bonds) were able to outperform during a period which
brought down nearly every other asset class. They were in the same environment after all.

But what if we follow this argument a bit further and instead of comparing how well one asset class does when another is doing poorly (using the ‘longer view’) –
look at how poor each asset class has performed in the past when it is in a slump of sorts. In short, if the past three years were the worst environment for stocks an
real estate; let’s compare that 3 year period with the worst 3 year period for managed futures. And let’s not confine the analysis to arbitrary calendar year endings o
through the current date, but make it dynamic by considering the rolling 3 year (36 month) returns of each asset class to truly measure the worst it has been for eac
asset class on any of the past 163 separate 36 months periods back to January of 1997 (using data back to Jan. 1994).

We ran the test outlined above across the seven different asset classes and calculated the worst 3 year rolling period for each, the average losing 3 year rolling
period, number of times the 3 year rolling period has been negative, and % of time the 3 year rolling period has been negative.
The results show that managed futures as an asset class, have only had been negative over the past 36 months TWICE since January 1997. Contrast that with
world stocks, which have seen a negative past 36 month return SIXTY times over the same time period (only 1/3 of which was from the recent financial crisis).
Looked at another way, when taking a ‘longer view’ as measured by 3yr returns, managed futures were down only 1% of the time, versus US and World stocks and
commodities each seeing losses on the ‘longer view’ over 26% of the time.

Past Performance is Not Neccessarily Indicative of Future Results

Key: through 8/31/10. Managed Futures = Dow Jones Credit Suisse Managed Futures Index, Bonds = Citi World Government Bond Index, Hedge Funds = Dow Jones Credit Suisse
Hedge Index, Commodities = Goldman Sachs Commodity Index, Real Estate = Case- Shiller 10city Composite, World Stocks = MCSI World Index (ex USA), US Stocks = S&P 500 Inde

More impressive perhaps is the worst and average loss for those periods when managed futures did see a losing return across a 3 year period as compared to the
other asset classes – at just -2.78% versus a worse three year period loss for World Stocks and commodities standing at -49%, or nearly half the value of the
investment lost in 3 years time.

The best thing to take away from this exercise of looking at the various asset classes using a ‘longer view’ for those contemplating managed futures or already
involved with them, is that the managed futures asset class is a tortoise over the hare type investment. Expecting success right away is likely to lead to
disappointment. In fact, it is quite likely you will see no better performance in your portfolio over the first few months, and possibly even the first year or TWO or
THREE. But unlike stocks and real estate, which display a ‘when they are bad, they are really bad’ type of track record; the rolling 3 year performance comparison
show us that the flat or down performance period over months or years for managed futures should be tolerable, or at the least much more tolerable than a similar
down period in stocks, real estate, or long only commodities. [Disclaimer: Past Performance is Not Necessarily Indicative of Future Results]

In conclusion, be patient and give your managed futures investment time to survive through flat and down periods. The reward can be outsized gains(and smaller
down periods) when looking at the investment over a longer time frame measured in 3 to 10 year periods.

Jeff Malec

DISCLAIMER

Past performance is not necessarily indicative of future results. The data and graphs above are intended to be mere examples and exhibits of the educational topic
discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts

IMPORTANT RISK DISCLOSURE

Futures based investments are often complex and can carry the risk of substantial losses. They are intended for sophisticated investors and are not suitable for
everyone. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect
investor returns.

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Feature | Week in Review |

Week in Review : Gold hits all time highs as grains, softs, and stocks follow suit with
rallies
Most commodity and index futures featured rallies during the past week with higher volume indicating market participants started to come back into the arena post
Labor Day week. Economic data was again a hot topic with most reports showing better figures than most analyst expectations easing fears of market participants
of a possible double dip recession. The start of earnings season was in the spotlight as well with some early releases showing better growth, especially in the tech
sector aiding ideas that world IT spending is on the improve.

News from Asia also had market repercussions with China releasing strong factory data figures along with indicating a willingness to ease restrictions on foreign
investment for some trading instruments. The Japanese government also played a key role in the marketplace after the Bank of Japan intervened to try and stop th
strong recent appreciation of the Yen. European news was mixed as rumors of sovereign debt issues again cropped up, but the new Basel III agreement by global
regulators indicating all banks would be required to up capital reserves by more than triple the current standards in a tiered manner stretching out to January 2019
helped ease fears.

Weather was again the mainstay for the food and soft sector raising worries of possible price rationing Sugar +10.34%, Cotton +7.59%, Corn +7.32%, Cocoa
+3.74%, Soybeans +3.69%, OJ +3.27% and Wheat +0.35%. Livestock also received support from the rally in foods from ideas that any supply rationing would add
up to higher feeding costs as Live Cattle posted a +2.32% surge and Lean Hogs added +0.84%.

Metals finished the week in a fever pitch with Silver attaining and Gold besting its record high as investors took their cue from fading economic problems along with
ideas that uncertainty in currencies could drive price further on flight to quality purchasing. Platinum +5.15% led the way up followed by Palladium +4.97%, Silver
+4.89%, Copper +3.39% and Gold +2.49%.

Stock Index futures posted a sector wide rally on the strong tech earnings and news of the global agreement on banking regulations which seemed to bury fears of
a possible replay of another banking meltdown. The three tiered Basel III agreement also gave institutions and governments a fairly large time window to come into
compliance easing marketplace worries that the softer part of the industry would be able to handle raising equity in a longer period of time. The tech heavy
NASDAQ futures +3.65% led the rally followed by Russell 2000 futures +2.24%, Mid-Cap 400 futures +2.06%, Dow futures +1.405 and S&P 500 futures +1.34.

Activity in the currency futures was heavily swayed by the Bank of Japan intervention aimed at slowing Yen appreciation, but the Basel III agreement also was
evident in activity as the continentals firmed as European sovereign debt concerns seemed to wane after the announcement of the requirements. Market
participants drifted back into the Euro +2.90%, British Pound +1.77% and Swiss Franc +1.01% at the expense of Japanese Yen -1.93% and the U.S. Dollar index -
1.65%.

Energy sector price activity weakened during the last week on news that the major Canadian supply line to the U.S. was being reopened after a recent shutdown to
clean up an oil leak. Crude Oil -3.17% took the brunt of the news followed by RBOB Gasoline-2.36% and Heating Oil -0.23%. Natural Gas futures rallied +1.89% on
seasonal usage purchases.

Managed Futures

After falling behind early in the month multi-market managers continue to try to mount a comeback in September. Strong trends in grains and tropical markets like
sugar and coffee have allowed programs that were over exposed in bonds to recoup some of the losses suffered earlier in the month. For those that did not have
heavy exposure in treasuries, September has been a great month of trading.

The program at the top of our list is a great example. Robinson-Langley Capital Mgmt +7.16% (Sept) did not perform as well as other long term traders in August
simply because it did not have many long bond trades on. However, that strategy is paying off this month, as the program was able to avoid the pullback in bonds
and concentrating resources on the strong grain and commodity trends. Now with two weeks of trading to go the RL team is on the verge of an outstanding month o
trading. Another program that came to life his month is Covenant Capital Aggressive at +5.45%. Covenant also has caught many of the long commodity trends this
month.

Other programs in the black include APA Modified +5.98%, APA Strategic Diversification +1.76%, Auctos Capital Management Global Diversified +1.48%, and
Sequential Capital Management +0.09%. DMH, Dighton Capital CTA Limited Aggressive trading and GT Capital are at breakeven for the month.

Despite the good week of trading last week there are still quite a few multi-market programs in the red for September including Mesirow Financial Commodities Low
Volatility -0.15%, Mesirow Financial Commodities Absolute Return -0.23%, Futures Truth SAM 101 -0.48%, Hoffman Asset Management -0.82%, Futures Truth
MS4 -1.21%, Clarke Capital Worldwide -1.75%, Accela Capital Management Global Diversified -2.38%, Dominion Capital Management Sapphire -2.43%, Integrate
Managed Futures Global Concentrated -4.36%, Applied Capital Systems -4.45%, Quantum Leap Capital -4.46%, Applied Capital Systems 2X -4.61%, Clarke
Capital Global Magnum -5.83%, Clarke Capital Global Basic -7.86%, and Clarke Capital Global Basic -7.86%.

Short-term index traders remain mixed for the month with Roe Capital Management Monticello Spread +2.43% and Roe Capital Management Jefferson +1.82%.
Paskewitz Asset Management Contrarian 3X Stock Index remains in the red at -7.39% after selling into the current stock rally.

With many of the physical commodities (Sugar, Cotton, Soybean, and metals) all on the verge of “parabolic” moves, many of the diversified option trading manager
have continued to face an uphill battle. Heading into the last 2 weeks of trading there are only a few managers posting estimated gains while the others have been
on the defense. Option traders currently in the black include: AFB Forty Eighters +1.59% (new to our tracking list), Crescent Bay PSI +0.44%, Liberty Funds Group
+0.09%, and Clarity Capital +0.06%.

The balance of managers are down for the month and include: Cervino Diversified Options -0.27%, Cervino Diversified 2x -0.37%, Kingsview Management -1%,
ACE SIPC -1.35%, ACE DCP -1.72%, FCI OSS -2.29%, FCI CPP -3.52%, Crescent Bay BVP -4.66%, and HB Capital -5.54%.

Specialty market managers have been a bright spot in many investor portfolios in 2010. In particular, agriculture specialist, Rosetta Capital management is having
their best performing month since January 2008 where they earned +13.85%. So far Rosetta is ahead an estimated +13.46% for September and approximately
+20% YTD thanks to continued momentum across the agriculture sector. Other specialty managers ahead for the month include, long only gold trader Cervino Go
Covered Call +1.03%, spread trader Emil Van Essen +0.91%, and agriculture trader NDX Shadrach and NDX Abednego which are ahead +0.20% and +0.01%
respectively. Specialty managers currently down for the month include Oak Investment Group -1.56% and 2100 Xenon Fixed Income -1.75%.

Trading Systems

Day trading systems continued to struggle in the month of September and unlike last week when swing systems were able to grind through the market conditions,
this week the swing systems struggled just like their day trading counterparts.

The few swing systems that were profitable last week had positions on from the prior week which they exited last week. Jaws 400 US, came into the week short an
got out early on Monday for a profit of $1,251.25. Jaws 400 US did make another trade during the week and it was a small winner. Strategic ES entered the week
long and exited on Monday for a profit of $407.50, which was its best trade of the week. Waugh CTO’s best trade last week was from a long trade it initiated on 9/1
and exited on 9/13 for a $610.00 profit. The net positive results for the week were Strategic ES at $26.85, Waugh CTO ERL at $100.00, Polaris ES at $257.50, and
Jaws US 400 at $1,315.00.

On the downside for the week were BAM 90 M Squared ES at -$67.50, MoneyBeans S at -$202.50, Strategic SP at -$429.38, Bam 90 ES at -$517.50, AG
Mechwarrior ES at -$540.00, Bam 90 Single Contract ES at -$542.50, Jaws 60 U Sat -$655.00, and MoneyMaker at -$705.00.
Day trading systems continued their struggles in the month of September. Many of the systems were hurt by lack of continuation of a big move. For example,
UpperHand ES traded twice last week both times there were big moves down in the eMini S&P markets. On Tuesday, there was a 4.25 point drop in the eMini S&P
market when UpperHand ES got short. The market then reversed directions and headed upwards. On Friday, UpperHand ES got short after an 8.5 point drop in the
eMini S&P market, only to see the market range the rest of the day and not continue downwards. For the week UpperHand ES was down -$272.50. Other negative
results included Balance Point ES at -$180 and Waugh ERL at -$620. Last week NPI Traders were all by themselves on top, unfortunately this week they couldn’t
duplicate the same success. NPI Traders had results of NPI Traders EC at -$192.50, NPI Traders US at -$371.25, and NPI Traders S at -$1012.625.

The recipe for success for day trading systems this week seemed to be trade infrequently. Both systems that were profitable for the week traded only once. Clipper
eRL made a nice long trade during mid-day on Tuesday and held on till the close for a profit of $231.09. NPI Traders CL was the other system that was profitable
and it made a long trade on Tuesday in CL and benefited from the rally at the close to make a profit of $530.00.

IMPORTANT RISK DISCLOSURE

Futures based investments are often complex and can carry the risk of substantial losses. They are intended for sophisticated investors and are not suitable for
everyone. The ability to withstand losses and to adhere to a particular trading program in spite of trading losses are material points which can adversely affect
investor returns.

Past performance is not necessarily indicative of future results. The performance data for the various Commodity Trading Advisor ("CTA") and Managed Forex
programs listed above are compiled from various sources, including Barclay Hedge, Attain Capital Management, LLC's ("Attain") own estimates of performance
based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the
individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes
proprietary results, and other important footnotes on the advisor's track record.

The dollar based performance data for the various trading systems listed above represent the actual profits and losses achieved on a single contract basis in client
accounts, and are inclusive of a $50 per round turn commission ($30 per e-mini contracts). Except where noted, the gains/losses are for closed out trades. The
actual percentage gains/losses experienced by investors will vary depending on many factors, including, but not limited to: starting account balances, market
behavior, the duration and extent of investor's participation (whether or not all signals are taken) in the specified system and money management techniques.
Because of this, actual percentage gains/losses experienced by investors may be materially different than the percentage gains/losses as presented on this
website.

Please read carefully the CFTC required disclaimer regarding hypothetical results below.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION
IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN; IN FACT, THERE ARE
FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED
BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY
PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO
HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK OF ACTUAL TRADING. FOR EXAMPLE, THE
ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS
WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN
GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION
OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL WHICH CAN ADVERSELY AFFECT TRADING RESULTS.

Feature | Week in Review |

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