MSR Investments, LLC

(Quantitative Directional)

Fund Investment Objectives

MSR INVESTMENTS takes a unique approach to short term directional trading. MSR's trading model evaluates multiple return distributions over a variety of time frames. This evaluation results in an optimal daily trading position, given forecasts of probability based forward return distributions. The time horizon for this assessment can range from one week to one month, although actual trading positions may be much shorter in duration. Additionally, the Program incorporates an intraday break-out trading model that attempts to mitigate losses when there are large intraday price changes. The strategy trades a wide variety of futures markets including global equity indices, currencies, fixed income, energy and gold. The portfolio is constructed from a collection of hundreds of individual strategies. We define a strategy as a combination of one model, one market and one set of variables. Strategies are reweighted in the portfolio daily based on a probability algorithm designed to predict relative future performance. Retaining hundreds of strategies in the portfolio is intended to mitigate the negative effects of data mining that can result from choosing only the strategy with the best return. The individual strategies are divided into two categories: reversal and momentum. We employ a probability based analysis focused on the return distribution of the various markets we trade across certain time frames that our research indicates are critical to determining the current state of the market. This analysis determines whether a certain market is most likely to be in reversal or momentum mode, and we then trade it accordingly.