From To: Jeffrey Epstein <[email protected]> Subject: Fwd: ATorus Daily Portfolio Report 4/15 Date: Wed, 16 Apr 2014 18:29:36 +0000 Attachments: ATorus BacktestNAV_041514.pdf Daily Portfolio from Michael Fowler Forwarded messa e From: Michael Fowler Date: Wed, Apr 16, 201 at : To: Please find attached the Daily Portfolio Report for 4/15 along with the below commentary. Have a good day! - Daily Commentary - Risk of Ruin & Position Sizing/Portfolio Exposures 'Risk of Ruin' we think is one of the most interesting concepts in understanding how sequencing coupled with the sizing of specific risks can have a disproportionate effect on end-outcomes. One can have a mathematical edge and wager correctly, but a sequence, over enough period of time will occur where the randomness of the draw will significantly negatively impact one's portfolio. The way to mitigate this is three fold: (1) Compound capital, and thereby continually increase risk allocations but risk-adjusted (in dollar terms, not outsized risk given mathematical edge) so the base capital grows. This is likely obvious to most. (2) Second, is attempting to mitigate correlation so all risks are not moving the same way. (3) Less obvious and less frequent, even if implementing (1) & (2), but just as important in the the end-outcome is mitigating deviations in risk exposures because of a known but unlikely sequence. Imagine playing 100 blackjack tables and counting cards and making the appropriate wagers given the count. Ideally and likely, the games are uncorrelated. Yet, what happens if the games become correlated in the participant's favor and wherein the 'run' occurs all the same time but doesn't get monetized all at the same time? Would you resize new wagers to this new level at that specific table given the new significantly increased bankroll? The answer is no, which may appear counter intuitive, if the games are not correlated and one is showing the correct discipline in sizing