For those clients who qualify, and if it is deemed appropriate, United Bank may recommend allocating a portion of a portfolio into alternative investments. The goal of investing with alternative investments is to achieve consistent returns that are uncorrelated with the stock or bond market environments. That is, regardless of the returns within the stock and bond markets, these investments should provide consistent returns with low volatility. We believe that these alternative investments are an important way to diversify some of the specific risk associated with direct investment in the stock markets.

Many, but not all, alternative investments fall under the category of hedge funds. The Wealth Management Group primarily utilizes a hedge fund of funds, which consists of at least 15 to 20 individual hedge funds. This multi-manager approach further reduces risk and allows the investor to obtain exposure to multiple trading strategies within one investment vehicle.

United Bank will use alternative investments to enhance the return characteristics in either or both the fixed income and/or equity asset classes. Under some conditions, we will suggest the use of Absolute Return Strategies as a bond surrogate. In light of the current interest rate environment, this adds significant alpha (the premium an investment earns above a set standard) to the part of the portfolio designed to provide safety. This is accomplished by:

• Consistent annual returns in the low-to-mid teens
• Volatility equal to or lower than the current level of bond volatility
• Low correlation to the traditional fixed income markets

For those investors with significant exposure to traditional equity asset classes, and who are concerned about high equity valuations and rising correlations among global equity markets, we can employ alternative investment strategies to augment their equity portfolio. The types of investment strategies that can accomplish this task include:

• Market Neutral Equity
• Distressed Debt and Equity
• Merger Arbitrage
• Convertible Bond Arbitrage
• Opportunistic Equity Long/Short
• Event Driven Strategies

We believe that the prudent use of alternative investment vehicles can add significant value to investors' portfolios. Of course, prior to recommending any investment, we assist clients in assessing both the potential for reward and risks associated with these options. Additionally, some alternative investments have liquidity provisions that are limited to either quarterly or annual redemptions.