To: Mike Fowle From: Sent Mon 5/12/2014 4:33:06 PM Subject: Re: ATorus Daily Portfolio Report - 5/9 thanks On May 12, 2014, at 12:32 PM, Mike Fowler wrote: Please find attached the Daily Portfolio Report for 5/9. Also, I didn't hear from Jeffrey on Friday, or I could have been out of cell service. I'm now back, so anytime he's available let me know to finalize basic commercial terms for IMA per Darren. Thanks! - Daily Commentary - There has been considerable discussion recently on how 'Risk-Parity' strategies have performed poorly over the past I8-months. While we feel most of the discussion is a classic example of most people being unable to "separate the signal from the noise," there is some truth to the issue vexing these funds. For full disclosure, we don't know the intricacies of the respective models, but can make some deductions. To be clear, we think risk-parity makes more sense than most, but with one underling assumption that could potentially create a structural issue with the methodology. Specifically, the reliance on long term stable correlations between indicators, which are generally econometric based. While we assume there are many more than any two variables driving their respective models, it is evident that the relationship between 10-year break even rates and equity market portfolio weighting has broken down, recently. Recently, being the operative word, as it's entirely possible these correlations revert back to historical values. But, what happens if they don't? Maybe it's demographic shifts that have occurred in the US? Maybe it's the lack of any differentiating technology that fundamentally alters, at the same rate previously, the speed at which we can complete tasks that encompass most of our day or in our own personal mobility? We don't know, but our point, is that relying on these types of correlations on the foundation has it's own risk. We think our approach of relying on price and volatility mitigates a