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 A L P H A F I N A N C I A L T E C H N O L O G I E S

F I N A N C I A L L Y E N G I N E E R E D P E R F O R M A N C E
 M A N A G E M E N T T E A M
Created by seasoned Wall Street professionals with diverse backgrounds that include
experience in derivatives, structured notes, and other complex financial instruments as
well as institutional portfolio management, AFT’s management team represents a
considerable wealth of financial experience.
D E N I S N A Y D E N
C H A I R M A N
Former Chairman and Chief Executive Officer of GE
Capital Corporation. His 23-year management career
has spanned GE Capital’s activities from real estate and
corporate finance to transportation and industrial
finance, aviation services, and portfolio and
risk management.
B R A D W H I T E
PRINCIPAL—INSTITUTIONAL SALES & MARKETING
Mr. White has an extensive background in the
marketing of financial products with over fourteen
years experience. He was a pioneer in the direct
marketing of mutual funds and served as Chief
Executive Officer for 1-800-NO-LOADS, a direct fund
marketing firm he founded. In addition, he is the
author of The Diversification Effect, Balancing Portfolio
Risk which details his investment philosophy. Since
opening the home office of AFT in 2000, he has been
part of establishing the strategic direction of the
company, as well as its affiliates.
K E L L E Y P R I C E &
RICHARDMEAD OW S
P R I N C I PA L—A D M I N I ST R AT I V E S E RV I C E S
Mr. Price helped develop the mathematical processes
underlying the S&P DTI and monitors the software systems
used in the firm’s products related to or utilizing the S&P
DTI. Mr. Meadows shares responsibility with Mr. Price for
the administration and management of the firm’s S&P DTI
and related products. Both men are principals and
co-founders of Price Meadows Incorporated, recognized as a
leading firm providing third-party administration and
organizational resources for hedge fund investment
companies. In the 1980s and early 1990s, both men served
as general partner at Rainier Partners as well as a number of
other hedge funds and fund-of-funds. Prior to forming Price
Meadows, the pair worked on the sell side at E.F. Hutton.
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VICTORS P E R A N D E O
C E O
Former institutional money manager with over 38 years
experience working on Wall Street, trading independently
for, among others, George Soros, Leon Cooperman, and BT
Alex Brown. Profiled in the best selling The New Market
Wizards and Super Traders, Mr. Sperandeo has appeared in
The Wall Street Journal, Barron’s, Stocks & Commodities
as well as on CNBC, FNN, Fox and other networks.
Additionally, he has authored two books detailing his
philosophy: Trader Vic — Methods of a Wall Street Master
and Trader Vic II — Principles of Professional Speculation.
A D A M W A T T S
P R I N C I PA L—P RO D U C T D E V E L O P M E N T
For the past eight years, he has worked directly with Mr.
Sperandeo on the financial and marketing development
of AFT’s products. Additionally, he served on the team
that created the S&P DTI. He is an expert in computer
modeling of financial products and has extensive
experience in product marketing. Prior to joining AFT,
he worked as a derivatives and equities trader with
Trends Capture Investments and, previously, managed
Silverstone Advertising for eight years.
STEVEN G.C H R U S T
M E M B E R—E X E C U T I V E CO M M I T T E E
Steven G. Chrust is a member of the Executive
Committee. He is the President of SGC Advisory
Services, Inc. Mr. Chrust began his career in 1970 at
Sanford Bernstein & Co., which is currently a part of
Alliance Capital, an AXA company. He became a partner
in 1976 and served as its Director of Technology
Research. While at Bernstein, he ranked in the top tier of
analysts each year for more than a decade (including a
first-place ranking in his sector for five consecutive years),
as ranked by Institutional Investor. He has been on the
Board of Directors of a number of private and public
companies. He is a registered investment advisor and a
member of the New York Society of Security Analysts.
 P R O D U C T O V E R V I E W

A few of AFT’s product designs

S & P D T I S W A P
The S&P DTI offers the potential to add consistent,
incremental return to portfolios during bull stock
markets and potentially offset losses during bear stock
markets. More importantly, if used as an overlay,
investors can receive the S&P DTI’s benefits without
having to alter their current portfolio.
E N H A N CE D TREASURYN OT E
The Enhanced Treasury Note uses the S&P DTI to add
to the yield of the 10-year U.S. Treasury Note while
having unparalleled liquidity for a structured product. If
held to maturity, it can do no worse than the T-Note.

M A P S ™ N O T E
The MAPS™ Note combines financial engineering with
the S&P/DTI relationship to create a “AA” rated
principal protected note with leveraged returns. Because
of this structure, the MAPS™ Note has no principal risk
yet still has the potential to outperform traditional
investments.
B E A T S ™
BEATS™ offers S&P 500 investors the ability to receive
105% of the S&P 500’s total return while having only
100% of its risk if held for 10 years. In addition, no fees
are charged. This means investors will have the same
risk as their current S&P 500 positions but receive an
extra 5% of its return, while actually being charged less
than they are currently paying. Full liquidity will be
available; however, the value of the 5% enhancement
could be either an appreciated or depreciated value if
liquidated before maturity.

C H I P P S ™
The U.S. government issues inflation indexed securities called TIPS, which allow bond investors to index their principal
to the CPI. This can be a significant advantage because it removes the risk of a bond losing value because of greater than
expected inflation. CHIPPS™ is an security which allows bond investors to index their principal to the S&P DTI. TIPS and
CHIPPS™ are nearly identical in that the first is indexed to the CPI and the latter is indexed to the S&P DTI (see figure
six comparing S&P DTI & CPI). For the issuer of these types of securities, substantial cost savings can be realized because
the coupon on the fixed income instrument is lower due to the investors ability to potentially capture excess return from
the indexed component. ie. CPI or S&P DTI.

Patents granted in the U.S., Australia and the Bahamas. Patents pending worldwide.

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 A
H E D G I N G I N F L A T I O N R I S K

S & P D T I I N F L AT I O N A RY
A N D D E F L AT I O N A RY T R E N D S

T
FIGURESIX

he S&P Diversified Trends Indicator is an effective proxy for inflationary

and deflationary trends. Many investors consider futures markets as the
ideal way to offset inflation risk in portfolios. The S&P Diversified Trends
Indicator is long those futures contracts in markets with continuous rising
prices and therefore tends to reflect the impact of those markets on the
CPI over long periods. On the other hand, as inflation increases and
causes yields to rise, prices of the financial contracts are more likely to fall and hence would be
positioned as short in the indicator. As commodities rise and financials fall, the indicator
reflects rising inflation.

S & P D T I A D VA N TA G E S
OVER OTHER LONG/ SHORT VERSUS LONG INDEXES
COMMODITIES INDEXES

• Branded by Standard and Poor’s • Profits in up and down markets

• Patent’s allow its use in all structures while other • Has a 50% - 75% lower volatility
long/short indicators or indexes cannot.
• 50% Commodities – 50% Financials are
• Weighted MA is 38% more sensitive to negatively correlated
current prices
• Has a higher correlation to CPI
• Higher returns (Because it is weighted to energy)
• Is far more robust
• Lower Volatility (Because it is balanced
• Can be used as an overlay due to its low
with financials)
volatility and not only an asset allocation.
• $20 billion execution capability (Because it
• Options can be purchased far more cheaply
is weighted)
because of the low volatility
• No risk of ruin – never short energy
• Can be leveraged to produce more return
• It is more robust
• Accomplishes the same goals as
• The use of sector’s reduces whipsaws i.e. losses. long-only indexes

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 U N I Q U E A T T R I B U T E S

A cornerstone of investment theory has always

been that a tradeoff exists between risk and
reward: higher return equals higher risk; lower
risk equals lower return. Two developments in
finance, however, are pushing the limits of the
risk/reward relationship to new levels.
First, in response to global economics, the field of
financial engineering has become highly sophisticated,
creating efficiently priced solutions to financial problems
asset classes has grown to the extent that investments
can be created that have significantly higher risk-adjusted
return than their component parts.
Alpha Financial Technologies, L.L.C. (AFT) is on the
forefront of these trends by enhancing the relationship
between different asset classes by using financially
engineered products that address different investment
needs. From structured notes to swaps to hedge funds,
AFT designs patented and patent pending products to meet
that, heretofore, seemed unsolvable. Second, an the rigorous standards of financial fiduciaries while
understanding of the economic relationships between satisfying a range of goals.

F O U N D A T I O N O F O U R P R O D U C T S

All of Alpha Financial Technologies’ products are designed to achieve efficient returns.
Essential to accomplishing this goal is the Standard & Poor’s Diversified Trends
Indicator (S&P DTI). Developed by AFT and subsequently branded by Standard and
Poor’s, the S&P DTI is a rules-based investable trading methodology constructed entirely
of futures. It is designed to capture the economic benefit derived from both rising and
declining trends in all types of economic environments. Composed of tangible
commodities, like oil and gold, as well as financials, like currencies and bonds, the S&P
DTI differs from other strategies in both structure and performance.

FIGUREONE
LEFT PIE CHART: The S&P DTI gives exposure to a different set of asset classes; therefore, its return is different from traditional asset classes.
RIGHT PIE CHART: The pie chart shows the weight of each of the S&P DTI’s 24 components.

The indicator follows a quantitative methodology of a diversified portfolio of 24 futures contracts (components)
formed into sectors that are designed to reflect and track (price) trends while maintaining low volatility. Exposure
is divided equally 50%/50% between tangible commodities and financials in order to increase the internal
non-correlation among the components and to add liquidity to the investment. Components of the sector are
chosen based on fundamental characteristics and liquidity. The methodology of the S&P DTI is designed with a
focus on capturing both up and down price trends. Systematic rules are employed to establish a “long” or “short”
component position. Sectors are rebalanced monthly; components are rebalanced annually.
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 H I G H R I S K A D J U S T E D R E T U R N

I nvestment models show that when the S&P

DTI is combined with the S&P 500, they
have a tendency to offset each other’s losses
and generate portfolios which tend to
demonstrate superior risk-adjusted returns.
(See figures two and three).
During each of the S&P 500 worst 12-month
losses over any rolling 12-month period between
1985-2004, the S&P DTI had positive returns.
S & P D T I D U R I N G W O R S T S & P 50 0
12 M O N T H L O S S E S 1985 -20 0 4

T
Conversely, as we observe that in the S&P 500
largest 12-month increases over any rolling
12-month period between 1985-2004, the S&P
DTI had positive returns.
Unlike long-only commodity indexes, the
S&P DTI demonstrates positive correlation to FIGURET WO
the S&P 500 during its best 12-month periods of
profitable performance. However, the S&P DTI
demonstrates high negative correlation to the S & P D T I P R D U R I N G 15 B E S T S & P 5 0 0
12 M O N T H P R O F I T S 1985 -20 0 4
S&P 500 during its worst 12-month periods
of decline.
These unique characteristics combine to allow
AFT to create structured products that have
consistently profitable returns.

FIGURETHREE

L I Q U I D I T Y

Ultimately, many aspects of risk are unknown. Liquidity is the

final safeguard against the unknown and demonstrates a
confidence in the product. AFT recognizes this fact and places
such an emphasis on liquidity that many of our products often
have significantly greater liquidity than their counterparts
within the same category.

C U S T O M I Z E D S O L U T I O N S
AFT recognizes that different financial institutions have
specific needs for their investments. Our team of financial
professionals takes pride in the fact that we are often able to
create new, innovative solutions to portfolio needs that may
have been previously unsolvable.

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 E N H A N C E D R E T U R N

T he S&P DTI’s Pro Forma returns have been

stable and consistent. Since 1985, the
indicator’s Total Return (TR) has not had a
calendar year loss. Moreover, the indicator
has a low standard deviation, which means
that its option prices are inexpensive.
These characteristics give AFT tremendous
flexibility to create structures that consistently
enhance the return of low risk instruments
D U R I N G WO RST L EH M AN AG G BO N D
12- M O N T H P E R I O D S 1985-20 04

like government and corporate bonds. This

consistent enhancement is due largely to
the non-correlation between the S&P DTI and
most asset classes.
To demonstrate, we show in the graphs at right
that the S&P DTI is negatively correlated to the FIGUREFOUR
Lehman Aggregate Bond Index during one year
periods of decline. Conversely, the S&P DTI
shows strong positive correlation to the Lehman D U R I N G B EST L EH M AN AG G BO N D
Aggregate Bond Index during 12 month periods 12- M O N T H P E R I O D S 1985-20 04
of substantial gains. This unique relationship
enables the S&P DTI to enhance returns
through virtually all types of markets.

FIGUREFIVE

E F F I C I E N T R E T U R N
Although AFT has products that fit on both ends of the
efficient frontier, our primary goal is to design products that
surpass the return efficiency of traditional investment
products for any particular risk tolerance or need.

T R A N S P A R E N C Y
AFT’s product design philosophy emphasizes the use of
systematic strategies. As a result, we are able to create highly
complex products that remain completely transparent
allowing for thorough oversight and risk assessment.