Altegris macro Strategy Fund | Manager Conversations
Altegris Macro Strategy Fund Manager
Mr. Yang founded Willowbridge
Associates in 1988. Before that,
Mr. Yang worked at Caxton Corp.,
where he initially served as Director
of Research focusing on the development
and application of computerized trading
models for a broad range of financial
markets. Later, Mr. Yang served as
Senior Vice President and Director of
Commodity Trading at the firm. Mr.
Yang co-authored the book Managed
FuturesThe Convergence with
Hedge Funds and a chapter in the
book Evaluating and Implementing
Hedge Fund Strategies.
aBOUT The
Sub-Strategy
++ A discretionary global macro strategy
that combines a technical, aggressive
approach with a fundamental,
risk-focused perspective.
++ Low or negative correlation to broad
market indices as well as to other
alternative investment strategies.
++ Willowbridge Associates is an
alternative investment manager with
$1.9 billion in nominal assets under
management as of June 1, 2013.
Philip Yang
Founder, Director and President
Willowbridge Associates
Willowbridge macro strategy built around challenge
of satisfying both momentum and value traders
Willowbridge Associates is one of the managers accessed by the Altegris Macro Strategy
Fund. Following is a Q&A about Willowbridges philosophy and expertise managing a strategy
substantially similar to that which is accessed by the mutual fund.
ALTEGRIS: What is your background and the history of the strategy?
Willowbridge: I started my career while I was still in graduate school,
at Commodities Corp., working for Bruce Kovner. Bruce founded Caxton
Corp., and I was one of the original people at the firm. I wore two hats at
Caxton. I was involved in the global macro trading that the firm is known
for, with a focus on the areas of metals and currencies. At the same time,
because my undergraduate degree was in computer science, I also developed
computer-driven trading strategies for the firmbasically, systematic
trading. Then, at the end of 1987, Caxton decided to spin off the systematic
trading group, because it had a strategy that was distinct from the rest of
the firm. Thats when I formed Willowbridge Associates. Willowbridges
historical connection to Commodities Corp. and Caxton has lent a dual
quality to the business model: On the one hand, its a systematic commodity
trading advisor, and on the other, its a global macro trading firm.
Weve been in business since 1988. For many years, the companys philosophy
was to try to maximize absolute returns. That changed in 2005, when we
decided that the best way to address returns was to try to maximize risk-
adjusted rates of return. An outgrowth of this change was the launch of
the wPraxis Futures Trading approach strategy in 2008. wPraxis Futures
Trading approach is co-managed by me and Frank Marrapodi, who has
been with the firm since 1999 and runs the global macro desk. Frank
was previously at Moore Capital, and was also a proprietary and foreign
exchange trader at Salomon Brothers. We currently have 41 professionals
supporting the firm, and nominal assets under management of $1.9 billion.
888.524.9441 | altegris.com/mutualfunds
Altegris macro Strategy Fund | Manager Conversations
ALTEGRIS: What is your investment philosophy?
Willowbridge: It starts with the fact that Frank and I
are very different traders, and most of the time, we dont
agree on how to trade the markets. Im very much a risk-
taker. I tend to be quite aggressive in the way that I trade,
and I like to put on large positions and make money that
way. Im also very flow-orientedI spend a lot of time
studying who is buying and selling the market, and what
are the potential pressures that are driving movement in
the marketplace. At the same time, because Im a systems
builder, Im very comfortable trend following. If you want
to classify me, you could say that Im a momentum trader.
Frank, on the other hand, is extremely risk averse. Hed
like to protect every single penny that he hasthats just
his psychological makeup. He doesnt care about trends
getting the right price and the right level is much more
important to him. And while we both look at fundamentals
very closely, Frank is much more of a fundamentalist than
I am. If I see large flows going against my fundamental
view, I dont have any problem going against that view,
because for me, the flow is much more important. Frank,
though, rarely goes against his fundamental view, because
he thinks thats the right way to trade. If you want to
classify Frank, you could say that hes a value trader.
In the marketplace, a momentum trader and value trader
are at opposite extremes. The times when they agree arent
that oftenand thats the case with me and Frank. However,
what weve found over the years is that when we actually do
agree, the trade usually has the potential to work out well.
Having observed this phenomenon, we decided to start a
strategy in which the only trades we would make are those
we completely agree on, in every waythe duration, the
sizing of the positions, the way were going to implement
the positions, and, most importantly, the stop. If a stop
is reached, no matter what, we get out of a tradeand
our positions always have corresponding stops attached
to them. So the strategy only includes trades that would
satisfy a momentum trader like me and a value trader like
Frank. In practice, we dont maintain a large number of
positions, because we cant find that many things to agree
on, but we like the potential of the positions that qualify.
A momentum trader and value trader are at opposite extremes. The times when
they agree arent that oftenand thats the case with me and Frank Marrapodi.
But when we do actually agree, the trade usually has the potential to work out well.
[2] ALTEGRIS ADVISORS
ALTEGRIS: How would a typical trade idea be generated,
evaluated and implemented?
Willowbridge: Im basically an information gatherer.
I read more than 250 emails a day. I read everything from
one-line investment reports to 200-page documentsit
helps that Im a speed-reader. In addition, I usually talk to at
least 20 people a dayoften at the same regular timeand
our other fund managers have a number of people that
they talk to in the marketplace as well, to get the lay of the
land. And thanks to modern technology, I have 30 to 40
people with whom Im in constant contact throughout the
day. The whole purpose of this process is the gathering of
information, the gathering of ideas, the gathering of flows,
the gathering of trends that were seeing in the marketplace.
We also have several full-time researchers on hand to
provide us with ideas. One of them is John Zumbrunn,
who used to be head of research at Commodities Corp. He
does a lot of research into longer-term trends and ideas
that have ramifications in the marketplace. As a result of
this research, we were aware quite early about a number
of potential opportunities. We also have David Kim, whos
probably one of the best Fed watchers in the world. Hes
basically read every single thing that Bernanke, Volker and
Greenspan have written, and hes focused on reviewing
what different central banks around the world are doing
and how the nuances of what theyre saying may affect
the marketplace. He also analyzes specific company
reports. In addition, we do research work in economic
and historical analysis. For instance, one thing we think
is interesting is how so much of what Japanese Prime
Minister Shinzo Abe is doing with Abenomics actually
comes right out of the playbook that the Japanese used in
the 1930s to get themselves out of the Great Depression.
So, with access to all these different streams of information,
Frank and I chat all day and bounce ideas off each other.
The two of us also have a formal meeting every day
at 9:00 am with two other traders in the firmMichael
Gan, an Executive Vice President who has been with
the firm since inception, and Mike Franko, who runs the
commodities operationsto pull together all the things
that were seeing and hearing in the marketplace.

Through this process, ideas emerge that Frank and I might
agree on. And once we find something that we can agree
on, we start analyzing what would be the most efficient
way to implement the ideawhether its through options, a
spread trade or just an outright position. We come up with a
stop, and then we would implement our trade at that point.
We trade the futures markets: commodities, currencies
(mostly G7), fixed income and stock indices. We always
trade things that are very liquid. Because of Franks risk
aversion, being in liquid markets, being able to get out of
something virtually instantaneously, is very important to us.
ALTEGRIS: What is an example of a trade that youve
implemented?
Willowbridge: One of our best trades was going
short both the DAX and the S&P in 2008. Interestingly,
we made most of our money that year in the second and
third quarters, whereas most managers made their money
in the fourth quarter, when the market really tanked.
Why was that the case? In analyzing the situation back in
2008, it became clear to us that a lot of the problems with
collateralized debt obligations and real estate were coming
to fruition. Early onby about May 2008we started
going short. Our positions were actually much larger
than they would have been normally, because at that time
volatility was still quite low and the S&P was at a much
higher level, so Frank was quite comfortable putting on a
relatively large position. However, by the fourth quarter,
when volatility was significantly higher, Frank was no
longer comfortable having large positions, so we reduced
our exposure considerably. While we still made money
in the fourth quarter, it was nowhere near what we made
in the second and third quarters. Due to our research and
information flow, we feel that we are often well positioned
to get in quite early on trades, but we also reduce or exit
our positions quite early as well. That means that we can
leave a lot of money on the table, because the last leg of
a trade can be the most profitable. But it is also the most
dangerous and the most prone to large give-backs.
ALTEGRIS: What are your primary competitive edges?
Willowbridge: I think our information flow is very,
very good. Ive been in the business for more than 30 years,
Frank has been in the business for 20-something years,
and a lot of the people at the firm are very experienced.
Our extensive experience also means that weve seen so
many different kinds of conditions and marketswhereas
There is no guarantee that any investment will achieve its objectives, generate profits or avoid losses.
Willowbridge Associates | Philip Yang
with a lot of firms, because their experience is more
limited, they dont have the same perspective. In my case
as well, Im not only a macro trader, but Im also a systems
trader, so I know the effects that systems can have on
the marketplace, and understand their significance.
Another thing thats interesting is we have a complete
lack of bias about going short. If you talk to a lot of global
macro traders, even though they will say theyre not
biased, we think its rare that they significantly short
the stock market. There are also a lot of global macro
funds now that are much more comfortable expressing
bearish views through fixed income rather than through
shorting stocks. We have that evenness in the sense that
when the markets are good, were able to participate,
and when its a bearish or risk-off type of environment,
we can participate through shorting as well.
ALTEGRIS: What are the primary risks
involved in pursing your strategy?
Willowbridge: We can potentially leave money on
the table with this strategy. The criteria for us to put on a
trade are very high. It has to satisfy me, the momentum
trader, and it also has to satisfy a value trader like Frank.
So there are many potential trades out there that are
good ones, but they dont satisfy both of us. So we will
leave money on the table; we will miss opportunities. I
would say, with the way that my partner is so risk averse,
while possible, the chances of us losing a lot of money
are small. At the same time, the chances of us missing a
trade are probably higher than with other managers.
ALTEGRIS: What role can your strategy play
in a diversified portfolio for an investor?
Willowbridge: One of the most interesting things
about our returns is, historically, we have zero or
negative correlation to most markets. Generally, we are
negatively correlated to the US stock market, and we
are negatively correlated to most alternative investment
strategies. So, if somebody wants something thats
not correlated or has a high negative correlation to a
traditional stock portfolio, we might fit in very nicely.
That is due in large part to the fact that we are not
biased against shorting the stock, commodity, fixed
income and currency markets, so we have the potential
to provide the role of being a portfolio diversifier.
888.524.9441 | altegris.com/mutualfunds 3[3]
Risks and Important Considerations

It is important to remember that there are risks inherent in any investment and there can be no assurance that any investment product or
strategy will achieve its objectives, generate profits or avoid losses. The statements contained herein reflect the opinions of Philip Yang and
Willowbridge Associates, and are not necessarily those of Altegris Advisors, LLC. Certain statements are forward-looking and/or based on
market conditions at the time of writing, manager expectations, projections, and information available only to Willowbridge Associates. Such
statements may or may not be accurate over the long-term and are subject to change without notice.

The strategy discussed is only one component of the overall strategy utilized in the Altegris Macro Strategy Fund, and should not be the only
consideration for investment. Any securities or sectors identified do not represent all of the past or current holdings in the fund or strategy of
the manager. Although a certain type of security or sector may have been featured as a top performer, there are other securities that were not
mentioned that may have been underperformers. The reader should not assume that any sectors or types of securities discussed were or will
be profitable and reference to such sectors should not be construed as a recommendation or investment advice of any kind.

Mutual fund investing involves risk including the possible loss of principal. The investment expertise of the portfolio manager may prove to
be inaccurate and may not produce the desired results. The managers judgments about the attractiveness, value and potential appreciation
or depreciation of a particular security in which the fund invests may prove to be inaccurate and may not produce the desired results. The
risks specific to the Altegris Macro Strategy Fund include commodity risk, credit risk, derivatives risk, fixed income risk, foreign currency risk,
foreign investment risk, issuer-specific risk, leverage risk, liquidity risk, management risk, market risk, non-diversification risk, short position
risk, structured notes risk, taxation risk, underlying pool risk, and wholly-owned subsidiary risk.

Altegris Advisors LLC is an SEC-registered investment adviser that advises alternative strategy mutual funds that may pursue
investment returns through a combination of global macro and/or other investment strategies.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund. This and other
important information about a Fund is contained in a Funds Prospectus, which can be obtained by calling (888) 524-9441.
The Prospectus should be read carefully before investing. Funds are distributed by Northern Lights Distributors, LLC member
FINRA. Altegris Advisors, Willowbridge Associates and Northern Lights Distributors are not affiliated.

Veteran experts in the art and science of alternatives.

Altegris guides investors through the complex and often opaque universe of alternative investing with one core missionto find the
best alternative investments for our clients. For more information about efficient solutions for financial professionals and individual
investors seeking to improve portfolio diversification with historically low correlated investments visit www.altegris.com.

515469_062813 | 1477-NLD-7/1/2013

[4] ALTEGRIS ADVISORS 888.524.9441 | altegris.com/mutualfunds