Arnish Point Lighthouse, Stornoway Harbour, Scotland
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Risk
Overview
The Stornoway Recovery Fund's investment portfolio is comprised of debt, equities and other instruments of financially troubled companies. While the portfolio is heavily weighted towards debt investments, often these debt investments will be converted into equity through a restructuring process. Furthermore, often an investment's potential will only be realized after a corporate restructuring is completed which may take several years. Lastly, the Fund currently does not distribute income.

Given the above, an investment in the Fund should represent only a portion of an otherwise diversified investment portfolio, should be considered part of the equity or alternative asset portion of their investment portfolio, and is appropriate only for long term investors who are not reliant on their investment for current income.

3 Year Historical Risk Metrics
As of November 30, 2018Annualized ReturnRisk(1)Sortino Ratio(2)
Stornoway Recovery Fund12.5%1.87%6.41
S&P/TSX Total Return Index7.2%4.78%1.41
DJ/CS Distressed HF Index4.3%4.91%0.78
ICE BofAML US High Yield Index6.9%3.76%1.71

(1) We believe the risk to an investor is the permanent loss of capital. "Standard Deviation" captures both upward and downward flucuations in value; "downside deviation" only captures declines. As such, we believe the appropriate metric to measure risk is "downside deviation".

(2) "Sortino Ratio" is the amount of historical return for each unit of "downside deviation". In comparison, "Sharpe Ratio" is the amount of return for each unit of "standard deviation".

The indices listed above have been selected for purposes of comparing the level of risk of the Fund with widely-known, broad-based benchmarks. The Fund's level of risk may or may not correlate to any of these indices and should not be considered as a proxy for any of these indices. The S&P/TSX Composite Total Return Index is the headline index and the principal broad market measure for the Canadian equity markets. The Scotiabank Canadian Hedge Fund Index tracks the performance of funds managed by Canadian-domiciled hedge fund managers. The Credit Suisse Distressed Hedge Fund Index tracks the performance of distressed event-driven funds. The ML High Yield Master II Index tracks the performance of U.S. dollar denominated, below investment grade rated corporate debt.

Past performance is no guarantee of future results.