Investment Strategies
Arden Asset Management LLC (“Arden”) invests client assets primarily with Portfolio Managers that employ a variety of strategies.  The Portfolio Managers have broad discretion in the types of securities or instruments they may own, the type of trading strategies they may employ, and the amount of leverage they may use.  The specific type and number of strategies employed by the Portfolio Managers will change over time, and Arden anticipates that, depending on market conditions, some strategies may be more appropriate for inclusion in a particular account than other strategies.  Nevertheless, Arden anticipates that a number of strategies will be eligible for consideration for investment by its various accounts, including but not limited to the strategies described below.  The listed strategies have been grouped as Relative Value, Event Driven, Equity Long/Short, Global Macro and Tactical/Other, though such groupings are for convenience only and are not definitive categorizations. 

Relative Value
Relative value strategies typically seek to exploit valuation discrepancies through the simultaneous purchase and sale of related financial instruments.

Convertible Arbitrage: This strategy typically involves seeking to take advantage of the convex price relationship between a convertible bond and the underlying equity by buying the convertible security and simultaneously trading a short position in the underlying equity according to the changing price relationship.  Other elements of the strategy include carry trades, capital structure arbitrage, private transactions, short convertible positions, and special situations arising from unique convertible features such as call premium, change of control puts and mandatory convert structures.

Credit - Relative Value: This strategy involves seeking to exploit relative pricing discrepancies between securities within an issuer’s capital structure or between related instruments referencing an issuer or issuers where historical relationships are mis-priced and there is a catalyst for those to converge or diverge.  These strategies are generally implemented by taking off-setting long and short positions in similar or related securities when their values, which are historically or mathematically interrelated, are temporarily distorted.  Profit is realized when the skewed relationship between the securities returns to normal. This strategy also encompasses managers who trade credit on a fundamental basis using alpha generating long and short positions. Credit Relative Value strategies primarily trade corporate debt instruments and bank loans, however they may also invest in equities and credit derivatives (both single name and indices).

Equity (MN) - Fundamental/Trading: This strategy utilizes primarily discretionary, qualitative processes to select securities and construct equity portfolios that are managed with low net exposure within a narrow band (typically +/-20%). This strategy incorporates both high-turnover active trading styles, as well as longer-horizon fundamentally oriented investment approaches.  While primarily driven by fundamental bottom-up stock selection, tactical considerations are also given to current and projected market dynamics.  The strategy is typically employed with low beta exposure, but may not be explicitly neutral to factors such as market-capitalization, sector exposure, and growth/value biases.

Equity (MN) - Quantitative: This strategy utilizes quantitative processes to screen and select securities and to construct portfolios. The strategy incorporates longer term (encompassing weeks to several months) fundamentally-driven strategies and short term (intra-day to a few weeks) technically-driven statistical arbitrage strategies. Longer term strategies typically focus on fundamental signals such as earnings, accruals, valuation, analyst upgrades/downgrades, ROA/ROE/ROIC, etc. and technical signals including long term momentum, institutional fund flows, insider selling, and market sentiment. The short term technically driven strategies utilize statistical models to identify mean reversion and short term momentum opportunities based on technical data including price, volume, volatility, and news. In addition to possessing a high level of quantitative and technological sophistication, the most successful managers in this space dedicate significant resources to on-going research and development efforts in order to continually enhance and refine their ability to identify new alpha and risk factors, and the efficacy of their portfolio optimization and trade execution processes. 

Fixed Income Relative Value: This strategy focuses on  taking advantage of temporary pricing anomalies in, along, and between related instruments in government interest rate and currency markets (directly and via related derivative instruments).  Trades are often based on deviations from historical relationships, with the expectation of mean reversion over time or a catalyst generating the correction.  Trades can be directional or conditional in nature and are almost always expressed through derivative transactions, including futures, interest rate swaps, options, options on swaps and forwards.  Examples of such styles are discretionary trades focused on the shape and slope of yield curves and relative mis-pricings between rates within and between regions. 

Systematic Relative Value:  This strategy employs a model driven approach to relative value trading within major global asset classes, including equities, interest rates, commodities and currencies.  Pricing anomalies are identified via fundamental, macro-economic, and technical analysis, while individual trades tend to focus on medium or long-term mean reversion, typically at the country or asset class level or between commodity classes.  Portfolio Managers employ a research intensive investment process in order to identify and analyze relevant drivers of markets and security prices which are then translated into signals/factors.  These signals are incorporated into the model through a dynamic integration process, and properly weighted to minimize factor correlation and limit concentration. Portfolio Managers dedicate significant resources to on-going research and development to enable continued identification of new alpha and risk factors, as well as to further enhance and refine to portfolio optimization and trade execution processes.

Volatility Arbitrage: This strategy involves seeking to exploit mis-pricings in volatility between options or between the relative volatility of options versus their underlying securities, primarily in equity and fixed income markets, but also credit and currency markets.  Specific approaches can include trading skew (trading out-of-the-money puts versus out-of-the-money calls on the same underlying assets), convexity, dispersion and the term structure (trading one maturity versus another) of an option.

Event Driven 
Event-driven strategies involve investing in securities of firms currently or prospectively involved in a wide variety of corporate transactions where the investment thesis is predicated on the anticipated effect of a specific event.  Corporate events may include mergers, acquisitions and other situations which alter a company's financial structure and operating strategy. Trading strategies include merger arbitrage, catalyst-driven equities, stressed/distressed credits and corporate restructurings.

Credit - Event:  This strategy involves investing in catalyst-driven opportunities created by significant transactional events, such as spin-offs, mergers and acquisitions, industry consolidations, liquidations, reorganizations, bankruptcies, recapitalizations and share buybacks and other extraordinary corporate restructurings.  Trades are primarily expressed in the debt securities of companies, but may include all parts of the capital structure including equity. This strategy also incorporates loan origination investments, which typically focus on providing asset-based loans, real estate-related investments, bridge financing, and mezzanine financing.  These transactions may include long dated warrants to increase the lender’s total return.

Equity - Event:  This strategy focuses on catalyst-driven investment opportunities which may arise from a wide range of company-specific or industry-related events, legislative/regulatory changes, industry consolidations or other events.  Company-specific restructuring activities typically include buying or selling assets, entering into a new business or strategic initiative, leaving or discontinuing an existing business (including spin-offs and split-offs), or undergoing a change or reorganization of the capital structure, balance sheet or finances of the company.  In certain cases, the catalyst or motivation for corporate change may be instigated by external forces, such as activist investors.  This strategy also incorporates special situation investments, which generally involve deep fundamental analysis to identify mis-priced securities and may also include “value with a catalyst” type trades, top-down or thematic-oriented trades, and investments that may be more opportunistic in nature or longer in duration.  As these investments are typically more idiosyncratic in nature, it may be more difficult to implement an effective position level hedge, in which case market hedges may be used.

Risk Arbitrage: This strategy involves investing in securities of companies that are subject to publicly announced corporate events such as an acquisition, merger, divestiture, tender offer or exchange offer. Typically, the share price of the target company will trade at a discount to the purchase price offered by the acquirer due to uncertainty regarding the successful completion of the transaction. Successful execution of the strategy requires the Portfolio Manager to assess the probability and likely timing of the proposed transaction being completed. The Portfolio Manager must then determine whether the spread between the offer price and the market price provides sufficient compensation for assuming the risk of the transaction failing to complete. In cash transactions, the Portfolio Manager purchases shares of the target and may hedge market and/or sector risks. In the case of a share-for-share transaction, the Portfolio Manager will typically purchase shares of the target and sell short shares of the acquirer.  Where the Portfolio Manager feels a transaction is likely to fail, the trade will consist of a short position in the target and long position in the acquirer. 

Stressed / Distressed Credit: This strategy involves investing in securities of companies under financial stress or involved in formal bankruptcy proceedings.  While the strategy is predominantly oriented towards debt instruments, investments may be made across a company’s capital structure (including bank loans, bonds, subordinated debt and equity).  Derivatives such as CDS and listed options may be used both for hedging purposes and to express risk.  With stressed situations, value is typically unlocked via an event such as the sale of assets or a refinancing.  Participation in restructuring and bankruptcy proceedings requires a more process-driven investment approach incorporating both financial and legal expertise.  Once the “fulcrum security” (the debt instrument most likely to convert to equity in a restructuring) is correctly identified Portfolio Managers can extract value from the legal process including participation on creditor committees and in court proceedings. 

Equity / Long Short 
Equity Long/Short strategies seek to identify equities that are trading under or over their true economic/intrinsic value.  These strategies are generally implemented by employing rigorous bottom up fundamental research to properly incorporate all available company specific news and information to determine if the market has under or over-discounted the fair value of a stock presenting buying or selling opportunities.  These strategies include:

Equity (L/S) – Long-Biased, Low Net & Variable Exposure: – This strategy employs rigorous fundamental and qualitative analysis with a broad investment scope.   The investment process generally includes evaluating company management, determining each company's competitive position, and analyzing financial statements, valuation metrics, and earnings growth prospects.  Investment theses are sourced on a bottom-up company specific basis and expressed in long and/or short positions primarily in equities and equity derivatives.  This strategy is constrained with regards to net exposure, and may vary in terms of leverage usage, position concentration limits, and holding periods. 

• Long-Biased - In Long-Biased portfolios, Portfolio Managers maintain a consistently net long market exposure, typically greater than 40% of net asset value.
• Low Net - In Low Net portfolios, Portfolio Managers maintain relatively consistent net market exposures in the range of negative -10% to positive +20% of net asset value.
• Variable Exposure - In Variable Exposure portfolios, Portfolio Managers can increase their net and gross exposure in an opportunistic and variable manner.  These Portfolio Managers can have exposure levels range anywhere from a net short position to a net long position. These managers do not have a structural net exposure tendency.

Equity (L/S) - Sector/Region: – This strategy employs rigorous fundamental and qualitative research with a narrow investment scope, typically focused on specific sectors or regions.   The investment process generally includes evaluating company management, determining each company's competitive position, and analyzing financial statements, valuation metrics, and earnings growth prospects.  Investment theses are sourced on a bottom-up company specific basis and expressed in long and/or short positions primarily in equities and equity derivatives.  The strategies are unconstrained with regards to net exposure, and may vary in their leverage employed, position concentration limits, and holding periods.  Portfolio Managers in this category seek to focus on a niche area where they have deep levels of expertise and can leverage a strong network of contacts to provide them with an informational edge. 

Global Macro
Macro strategies seek to analyze macroeconomic variables to identify dislocations and forecast future moves in global asset prices on an outright directional or relative value basis.  A variety of different trading and investing styles can be utilized to identify opportunities across an unconstrained universe of markets and products.

Discretionary Global: This strategy involves using fundamental and macroeconomic inputs to identify investment opportunities across a broad array of asset classes and geographies.  Certain Portfolio Managers may exhibit greater specialization in a particular asset class or region where they are able to leverage a greater informational advantage, given prior experience or mandate focus.  This strategy is often not market neutral and typically involves directional trades as well as relative value spread trades between related instruments.  Substantial investment and trading experience is needed to synthesize and reconcile large amounts of information to make largely qualitative assessments weighing a continuous flow of data that may further support or conflict with market views.  Given the diverse and potentially complex nature of the asset classes and instruments traded within this strategy, risk management, including the sizing and timing of building and exiting individual positions is a critical component of this strategy.

CTA (Commodity Trading Advisors): This is primarily a systematic strategy in which inputs to the models are predominantly technical in nature (price, volume, open interest, etc).  Generally trade signals are based on indicators such as moving averages, crossovers (oscillators), breakouts, relative strength indices (RSIs), and other chart/pattern based indicators.  The investment universe is typically limited to highly liquid exchange listed futures.  CTA strategies tend to be counter-cyclical to traditional markets and rely on momentum and market trends.  High levels of technical sophistication should be clearly demonstrated as well as the ability to minimize losses in trendless markets and through market inflection points.

Tactical and Other Strategies
Tactical/Other strategies encompass a variety of strategic and opportunistic investments that do not fit the strategy definitions listed above. 
Portfolio Managers may also invest in a variety of other strategies including other arbitrage strategies, private placements, real estate-related investments and short-term trading opportunities.  Many of the Portfolio Managers have the discretion to invest in multiple strategies or to use combinations of the strategies summarized above.  Arden and the Portfolio Managers also have the discretion to invest in high quality fixed income securities, cash and cash equivalents.  The Portfolio Managers will likely trade in U.S. dollar-denominated securities.  However, Arden may, in its discretion, select Portfolio Managers who trade in non U.S. markets and/or securities that are not U.S. dollar-denominated.