lisbon, november 17th 2010. “the black swan markets conference” pestana palace

Lisbon, November 17th 2010.

“The Black Swan Markets Conference”

Pestana Palace

Company’s Key Facts.Asset Management Theory.Portuguese Asset Management: Theory in

Practice?

Presentation Overview

PA Gestão de Patrimónios SA (Asset Management)- Based in the city of Porto- Regulated by Banco de Portugal (Licence number 223)- Regulated by CMVM (Licence number 273)

Company Financials (as of September 30th 2010): - Shareholders’ Equity = 6.2 Million Euros- Debt-to-Equity Ratio = 2 %

Major shareholders: PA SGPS SA (owns 51%), which in turn is 76% owned by Mr. Pedro Arroja.

PA’s Corporate Structure

Pedro Arroja, Founder and Chief Research Officer; PhD in Economics, Carleton University (Canada).

Ricardo Arroja, Investment Officer; B.S. in Business Administration, Universidade do Porto.

Fátima Pereira, Compliance Officer; B.S. in Law, Universidade Lusíada.

PA’s Key People

Goal?Which Assets?Which Mix of Assets?

Asset Management: Theory

Goal?

Long term, inflation adjusted, preservation and accumulation of wealth.

Asset Management: Theory

Asset Management: Inflation

Which Assets?

Traditional Assets: Equities, Long and Short Term Sovereign Debt;

Alternative Assets: Real Assets (Real Estate and Commodities), Managed Accounts (or Hedge Funds) and Private Equity.

Asset Management: Theory

Asset Management: Equities

Asset Management: LT Sov Debt

Asset Management: ST Sov Debt

Long term Inflation rates are proxies for Real Estate’s and Commodity’s Compound Annual Growth Rates.

Asset Management: Real Assets

Source: Dimson, Elroy and Staunton, ABN Amro/LBS

Which Mix of Assets?

Asset Management: Theory

Typical Asset Mix in Portugal;Asset Management Companies: Typical Business Plan; Alternative Business Plan.

Asset Management: Portugal

Typical Asset Mix in Portugal

Banks’ Private banking divisions and “Gestoras de Patrimónios” (Asset Management companies);

Typical Business Plan: Overall, portfolios are highly geared towards low risk/low return traditional asset classes.

Typical Business Plan

PA Gestão de Patrimónios SA:

Alternative Business Plan: Overall, portfolios are geared towards the Yale’s asset class diversification model, with a special emphasis on Managed Accounts and actively managed Long and Short trading strategies.

Alternative Business Plan

Quantitatively Driven: Trading models are based on Statistics and Econometric algorithms (but NOT High Frequency Trading);

PA’s Core Trading Theme: Most short term market fluctuations are mean-reverting;

PA’s Main Trading Instruments: Equity Index Futures, Bond Futures, Commodity Futures and FX Futures.

PA: Managed Accounts and Trading Philosophy

Market: S&P500. Inputs: Daily Highs and Lows; Nature: Counter-trend; Buy/Sell Signals: Four day periods, including one

price expansion and three price contractions; Specific Features: “Slow and Steady”, High

Probability, Low Turnover model, currently still being back-tested.

Price expansion/contraction (Model 3AB)

“Back Testing”

“Back Testing”

Market: Dow Jones Industrials Average’s (individual stock components).

Inputs: Daily Highs and Lows; Nature: Counter-trend; Buy/Sell Signals: Two day periods, including two

price contractions; Specific Features: “Slow and Steady”, High

Probability, Low Turnover model.

Price expansion/contraction (Model AA)

“Back Testing”

“Back Testing”

Market: Nasdaq-100. Inputs: Daily % Change; Nature: Counter-trend; Buy/Sell Signals: Weekly deviations to the mean; Specific Features: “Fast and Furious”,

HighTurnover, Low Probability model

Price expansion/contraction (Model SJ)

“Back Testing”

“Back Testing”

Market: S&P500. Inputs: US Economic Data; Nature: Trend Following (*); Buy/Sell Signals: Economic Estimates versus

Actual Data; Specific Features: “Fast and Furious”, High

Turnover, Low Probability model.

Macro Model

“Back Testing”

“Back Testing”

Position Sizing and Recommended Leverage:

1) Model’s t-stat or;

2) Trading Instrument’s Confidence Intervals at the 99% confidence level.

Risk Management

We believe that in the long run investors benefit by adopting a more diversified (out-of-bonds) portfolio, subject to proper due diligence.

We know that statiscally driven trading models can be successfull if given the time to consistently implement a well tested method.

Conclusions

Thank you very much for your time!

Contacts

Avenida de Montevideu, 282, 4150-516 Porto.

Phone: (+351) 226165220

Fax: (+351) 226165229

Webpage: www.pedroarroja.com

Email: r.arroja@pedroarroja.pt