HL Opportunity Fund L.P.

A Systematic, Covered Call Strategy

April 2015

HL Opportunity Fund

Strategy definition:

The Covered Call strategy is a well-known conservative investment strategy

that holds underlying stocks and sells call options on those same stocks in

order to earn extra income.

HL Opportunity Fund (HLOF) has a next generation, systematic approach

to the covered call strategy and has developed an algorithm to deploy the

strategy. The Fund owns 40-120 underlying stocks and executes the covered

call strategy based on pre-set rules. A computer algorithm generates all trades.

HL Opportunity FundOur value-added over the typical covered call strategy:

1. SystematicHLOF has developed a computer program to generate all trades based on pre-set rules. There is an algorithm that buys, sells or rollsindividual calls when certain criteria are reached.

2. HedgingThe Portfolio hedges its long positions using sector ETF’s. The hedge isdynamic, ranging between 40-80% of the Portolio’s long value.

3. Risk ManagementOur proprietary risk and portfolio management software is tailoredspecifically for this strategy. The risk guidelines are set with the aim ofreducing drawdown by 70% or more.

HL Opportunity Fund

Description: Systematic covered call strategy

Target net return: 7-9% annually (after all fees)

Target drawdown: -6% (daily peak-to-valley)

Target SD: <50% of the S&P standard deviation

Portfolio characteristics:

1) 40-120 blue chip, large cap NYSE-traded stocks

2) Call options written on each stock, 1-3 months from expiration

3) Hedging using large ETF’s

4) 5-8 different sectors

5) No high-frequency trading. Individual options are typically rolled one-two times per month in order to obtain optimum returns.

HL Opportunity Fund

What we look for in individual positions:

Broad coverage of the S&P universe, with 5-8 of the top-10 S&P 500 sectors

Diversification in each sector, with 10-15 names in each sector

Exposure to the largest, most liquid stocks in each sector

Liquid, highly traded single company call options

Hedging using highly liquid, sector ETFs

Leverage: up to 1.6x, (longs = 100-160%, shorts = 40-80%, net = 40-80%)

HL Opportunity Fund - Theory

HLOF’s portfolio has three elements:

1) Underlying large-cap, blue chip stocks

2) Written call options on those stocks

3) Hedges (liquid ETF’s)

The premise of the HLOF strategy is that call options on blue-chip stocks can provide 8-12% annual income.

a) In sideways markets, the stocks and hedges will tend to cancel each other out, allowing the call option premium to be captured.

b) In down markets, the call options and hedges should provide protection, potentially reducing drawdown by 70% or more.

c) In up-markets, the stocks should provide gains. The gains may be mitigated by losses in both the call options and hedges, potentially reducing stock gains by up to 50%.

HL Opportunity Fund YTD Performance graph – Total Portfolio

HL Opportunity Fund Performance graph – Technology Sector

HL Opportunity Fund YTD Performance graph – Energy Sector

HL Opportunity Fund

Current Portfolio (30 April)Largest sectors:

1. Technology sector

2. Energy sector

3. Financial sector

4. Gold-Miners sector

Largest individual positions:

1. Apple

2. Exxon

3. IBM

4. Chevron

5. EOG Resources

HL Opportunity Fund

Statistics HLOF ^BXM S&P 500

2015 YTD Gross Return (as of 30 April) 3.97% 3.15% 1.29%

2014 Gross Return 7.58% 5.64% 11.39%Average monthly return since inception (July 2013 – Mar 2015) 1.0% 0.7% 1.1%

Cumulative return since July 2013 22.6% 16.2% 23.7%

Standard Dev of monthly returns 9.6% 6.1% 9.3%

Correlation to S&P 53.8% 77.6% 100.0%

% of S&P (upside capture) 95.4% 68.2%

% Positive months 57.1% 66.7% 66.7%

HL Opportunity Fund

The HLOF Fund methodology and software have been developed by the two joint principals, Hylton Peimer and David Linden. They have more than 20 years combined experience in capital markets.

 

David Linden is a CFA, with more than 20 years of experience in financial markets. He worked in both an investor relations and due diligence capacity for a large Fund of Funds from 2004 – 2014 (Tel Aviv, Israel). In this function, he inter-acted with a variety of international clients and performed due diligence on numerous, well-known hedge funds. He was the main analyst on the famous Paulson sub-prime trade, which was considered the best trade of the decade. Previous to this experience, Mr. Linden was Head of Equity Research for an investment bank in Tel Aviv. David has an MBA in Finance from Wharton School, where he graduated with Distinction. He also has an Undergraduate Degree from the University of Michigan. He lives with his family in Israel since 1996.

 

Hylton Peimer has an honors degree in Computer Science from RMIT, Australia. Hylton has worked in numerous Israeli high-tech startups building enterprise applications for Fortune 500 companies. His roles have included software development and managing development teams. During this time Hylton has developed a keen interest in investing, and a particular interest in equity options. He lives with his family in Israel since 1998.

HL Opportunity Fund

Structure: Delaware Limited Partnership (USA)

Bank: Wells Fargo

Broker: Etrade

Administrator: Orangefield Columbus (at launch)

Legal: Schwell Wimpfheimer & Associates LLP

Subscriptions: Monthly, +7 days

Redemptions: Monthly, +7 days

Principals: Hylton Peimer & David Linden

Contact: info@hl-funds.com 315-210-8362

Share Classes: A (1.2% management fee/20% performance fee)

B (0% management fee/30% performance fee)