Investment Soe acns Management e e 9 e e e e e e . . . Bitcoin’s Historical Risk Premium is Unexplainable Division 1. Bitcoin Factor Exposures and Unexplained Premium 2. Tactical Hedge Funds’ Factor Exposures and Unexplained Premium 70.0% 1.2% 15.0% 1.0% a0 ‘ £ ui ix = = es en é 0.0% | = Funding = 06% m Funding = 5.0% iui = Liquidity ; 10.0% " ov Rate E 0% lm Exchange Rate * -15.0% © Emerging Market 0.2% = Emerging Market 20.0% 0.0% 25.0% Tactical Trading Hedge Funds Bitcoin 7.0% 300.0% 6.0% & 250.0% € = 2 5.0% E 200.0% é 10% 2.8pp 2 150.0% ~341pp m Factor Risk Premium % — “Factor Risk Premium 3 oo - = 3.0% Historical Risk Premium E 100.0% @ Historical Risk Premium = : a E 2.0% 50.0% 4 0.0% p Soe eats ciel nO coin “eee 0.0% F pee Tactical ac od Funds + 3.6% = Bitcoin’s 300%+ historical annual risk premium is idiosyncratic and cannot be explained by ISG’s multi-factor model. = An inability to understand sources of risk and return makes one incapable of predicting when performance will reverse. = For tactical hedge funds, half of the historical risk premium is explained by the factor model. (1) Peter C.B. Phillips, Shu-Ping Shi and Jun Yu, “Testing for Multiple Bubbles: Historical Episodes of Exuberance and Collapse in the S&P 500,” International Economic Review, Oct 28, 2015. Source: Investment Strategy Group, Bloomberg. 18 HOUSE_OVERSIGHT_025681