We look for the following attributes in a potential manager: Sustainable and repeatable investment strategy; A verifiable record as an independent investment manager over multiple years; In most cases, a minimum of $100 million under management; Liquidity; Capacity for growth; Superior risk management; A demonstrated ability to preserve capital in down markets; A strategy that is readily comprehensible and that is complementary but not duplicative of or contradictory to those already in our portfolio; A high degree of accessibility and transparency; Strong back office procedures & capability; Impeccable references.

While our goal is to establish long term relationships with our managers, no manager stays first rate indefinitely. Periodic change is therefore inevitable. The key to successful change lies in its timing. Causes for immediate change include: Clear evidence of selection error; Manager alters investment disciplines; Manager changes risk profile; Manager is not fully forthcoming & transparent; Manager’s investment strategy ceases to make sense.

Absent the above, CA Partners believes that managers need to be allowed about three years to fully prove themselves.

Careful timing of termination is important. Timing considerations include:

• Are the reasons for under performance ones which will self correct or are they more fundamental?

• Is the value of the portfolio likely to recover in the foreseeable future or is it likely to deteriorate further?

• Even if the portfolio may recover its value, are there other good reasons for exiting now?

• Timing of next redemption date?

• By seeking to change the manager, are we succumbing to rear-window investing?