Morningstar Advisor - Spring 2007 - 33

Hands-On Going Deeper: Finding and Analyzing Funds of Hedge Funds by Nadia Van Dalen Welcome to Hands-On, a place for do-it-yourself professionals who want to get their hands dirty doing their own investing research. We use an investing example to show you some data screens and analytical ideas. We also highlight parts of Morningstar’s tools that can help you perform these research tasks. In this issue of Morningstar Advisor, we’ve been talking hedge funds. An easy way for investors to gain access to the hedge-fund space is through a fund of hedge funds. These funds have significantly lower investment minimums than individual hedge funds, making it easier for clients with small portfolios to invest. Funds of funds also advertise other benefits, such as diversification of single manager risk, access to high-quality hedge funds, and due-diligence capabilities. Morningstar’s database contains data on almost 2,000 funds of hedge funds. This data is now available to advisors through Advisor Workstation Office Edition. But some words to the wise: Hedge funds are not required to report their numbers, and no hedge fund database is perfect. Although Morningstar has one of the largest hedge fund databases, it’s not without gaps. Still, it’s a good place to start your search for a list of potential investments that deserve further research. But how does one sort through this mountain of information? Advisor Workstation Office Edition contains data on nearly 2,000 funds of hedge funds, with print-friendly reports for each. Release date 28 Feb 2007 | NASD Members: For internal use or client reporting purposes only Page 3 of 4 Star Navigator Fund LP Performance Morningstar RatingTM Morningstar CategoryTM Net Assets ($Mil) Fund of Funds 0.76 30 Growth of $10,000 20 Release date 28 Feb 2007 | NASD Members: For internal use or client reporting purposes only 15 10K 8 Fund S&P 500 TR Page 4 of 4 & 1997 1998 1725000. 00 10.50 -18.08 9.67 -13.36 * 1999 2631000. 00 34.99 13.95 7.42 15.20 & 2000 3617000. 00 24.94 34.04 15.06 31.96 Star Navigator Fund LP & & & Operations * 2001 2002 2003 4640000. 5830000. 3630000. 00 00 00 Fees & Expenses 9.07 8.91 11.22 Maximum31.01 Fees -17.46 Sales 20.96 2.95 6.45 -1.19 Initial 20.95 -19.51 Deferred 31.08 Redemption Other Fees/Expenses 2004 5780000. 00 10.79 % -0.09 3.50 None -1.56 None None 6 % Morningstar RatingTM Morningstar CategoryTM Net Assets ($Mil) Quartile Rank ( * * (within category) Fund of Funds 0.76 History 2005 2006 02-07 6398000. 6415000. 00 00 NAV Expense Relative to Category 6.17 10.67 2.45 Total Return % Expense Range % Expense Range Total Cost Projection 1.26 -5.12 $ per $10,000 1.81 +/- S&P 500 TR for Category -1.71 0.74 0.49 +/- Category 3-Year Fund -0.35 -5.03 +/- Morningstar US 5-Year Category Average Release date 28 Feb 2007 | NASD Members: For internal use or client reporting purposes only 10-Year 6 7 0.76 Net Assets $Mil Minimum Investments Page 2 of 4 1998 5.02 1.36 0.42 3.37 1999 6.99 11.98 4.61 7.71 2000 7.86 4.86 7.69 2.58 Expense Ratio: Prospectus Expense Ratio: Annual Report Management Actual Management Maximum 12b-1 Actual 12b-1 Maximum Administrative Maximum 2001 2002 2003 1.00 None None 2004 Initial Additional Initial IRA Additional IRA Performance Initial AIP Additional AIP 2005 1.81 -0.48 2.44 2.29 2006 4.37 0.12 1.87 3.97 2003 Star Navigator Fund LP $ Relative Fund Quarterly Snapshot 100,000 vs. Fund Category Quarterly Fund 0 9.0 6.0 3.0 0.0 -3.0 -6.0 Morningstar RatingTM Morningstar CategoryTM Net Assets ($Mil) Fund of Funds History Fund Expense Operations Average Category 0.76 Relative Return Category Baseline Best Qtr Performance Worst Qtr Performance Growth of $10,000 Fund Index* Category Advisor Information Qtrly Total Returns 1st Quarter 2nd Quarter Contact Information 3rd Quarter East 46th Street 02-07 2005 6 4th Quarter 2006 Suite 300 ( * * United States 6.17 10.67 2.45 14 12 10K 9 Fund Advisor(s) Fund Inception Management Bedrock Advisors LLC 01-02-98 Tenure 9.27 Years 9.27 Years 1.83 3.28 0.21 4.58 3.80Advisor Information 5.19 0.08 -0.72 -1.06 Inception 2.30 2.40 1.24 01-02-98 Fund Fund 4.30 Advisor(s) 3.00 3.03 5.40 Bedrock Advisors LLC Subadvisor(s) 2004 & 10.79 History Manager Steve Dabbah 1-212-983-5744 David Moche S. Contact Information Contact Fund Advisor(s) E-mail Address * 11.22 Quartile Rank (cat) Total Return % +/- Category +/- Index* +/- Morningstar US Net Assets ($Mil) +/- Cat % Rnk Cat -1.19 3.50 -1.71 0.74 0.49 -17.46 -0.09 1.26 -5.12 1.81 Steve Dabbah 01-01-98 -19.51 -1.56 -0.35 -5.03 Since 1989, Dabbah has been the Chairman and Chief Executive Officer of Dabbah Securities 6 6 7 0.76 Corp. He is also the principal of Bedrock Capital Management, LLC and Bedrock Advisors, LLC. Previously, he was a Sales and Trading Associate at Shearson Lehman Brothers from Trailing Ret % +/-Index* Trailing Total Returns 1983 through 1985. YTD 2.45 1.81 12 Mo 10.07 -1.76 S. David Moche 01-01-98 Management Moche began his career in 1975 as a Certified Public Accountant and tax supervisor with 3 Yr Annualized 8.48 Touche Ross & Co. Beginning in 1987, he traded bonds, money Yr Annualized 5 market instruments and 9.81 currencies for Republic National Bank of New York in London and New York. Subsequently, Inception 13.86 *S&P room he was a Senior Vice-President and senior manager in the trading 500 TR at Dai-Ichi Kangyo Bank before establishing a hedge fund consulting business with a partner. Mr. Moche has received Series 3, 7, and 63 licenses from the NASD. Benchmark:S&P 500 TR Alpha(month end) 12 Mo 3 Yr Annualized 5 Yr Annualized Steve Dabbah Bedrock Advisors LLC dabbah@bedrockadvisors.com 6 East 46th Street Suite 300 United States 1-212-983-5744 0.49 1.20 0.08 1.28 31 33 43 23 Telephone Web Address Administrator Auditor Custodian Legal Counsel Prime Broker Fees and Purchasing Informatioin Fees -1.58 3.54 2.43 10.07 8.48 9.81 Purchase Information Risk 1 Yr 3 Yr 5 Yr Performance Fee Index % Management Fee % High Water Mark Hurdle Rate % 5.00 1.00 Yes Min Initial Investment Subsequent Purch Min Lockup (Months) 100,000 0 12 Standard Deviation Skewness Kurtosis © 2007 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may not be copied or redistributed, (3) do not constitute Sharpe Ratio investment advice offered by Morningstar, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or theirSortino report is supplemental sales literature, use. This Ratio (10%) and therefore must be preceded or accompanied by a prospectus and disclosure statement. Please read the prospectus carefully. 2.31 -0.51 -0.84 2.74 0.15 0.02 Æ 3.12 0.15 -0.49 2.18 6.65 11.32 Strategy (Provided by Star Navigator Fund LP ) Star Navigator Fund, L.P., a Delaware limited partnership (the "Partnership"), was formed on December 15, 1997 and is governed pursuant to the First Amended and Restated Limited Partnership Agreement in the form of Exhibit A to this Memorandum (the "Partnership Agreement"). The Partnership's investment objective is to achieve superior capital appreciation while minimizing the risk of permanent capital loss through investment in a portfolio comprised of other investment partnerships, managed accounts or other entities (the "Investment Vehicles") that invest primarily in publicly traded securities and financial instruments and to a limited extent in commodities, commodity futures and currencies. fl Tracking Error 1.99 4.67 5.07 1.78 4.39 6.12 Positive Months# Negative Months# Worst Months Max Drawdown Leverage Ratio -0.51 -1.42 -1.42 © 2007 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may not be copied or redistributed, (3) do not constitute investment advice offered by Morningstar, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report is supplemental sales literature, and therefore must be preceded or accompanied by a prospectus and disclosure statement. Please read the prospectus carefully. fl Æ © 2007 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the confidential and proprietary information of Morningstar, (2) may not be copied or redistributed, (3) do not constitute investment advice offered by Morningstar, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be correct, complete or accurate. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. This report is supplemental sales literature, and therefore must be preceded or accompanied by a prospectus and disclosure statement. Please read the prospectus carefully. fl Æ MorningstarAdvisor.com
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Morningstar Advisor - Spring 2007

Table of Contents for the Digital Edition of Morningstar Advisor - Spring 2007

Morningstar Advisor Spring 2007
Features
Departments
Letter from Joe Mansueto
Get to Know Morningstar’s Fund Managers of the Year
Is Your Client a Stock or a Bond?
Less Alpha, More Beta Than Meets the Eye
Your Mileage May Vary
A Clear-Eyed Look at Hedge Funds
Lower Risk, Higher Returns, What’s Not to Like?
Without Cash and Clout, Advisors and Clients Get Short End of Stick
Get the Strategy Minus the Headaches
Analyzing Funds of Hedge Funds
Not All Hedge Funds Are Created Equal
A Fund with a (Long) View
Laying Low and Prospering
A Menu of Ideas to Fill Five Market Baskets
Oil and Gas Gushing with Values
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
What’s New at Morningstar and on the Web
You Can’t Always Get What You Want
Morningstar Advisor - Spring 2007 - Cover 1
Morningstar Advisor - Spring 2007 - Cover2
Morningstar Advisor - Spring 2007 - Features
Morningstar Advisor - Spring 2007 - Departments
Morningstar Advisor - Spring 2007 - 3
Morningstar Advisor - Spring 2007 - 4
Morningstar Advisor - Spring 2007 - Letter from Joe Mansueto
Morningstar Advisor - Spring 2007 - 6
Morningstar Advisor - Spring 2007 - 7
Morningstar Advisor - Spring 2007 - Get to Know Morningstar’s Fund Managers of the Year
Morningstar Advisor - Spring 2007 - 9
Morningstar Advisor - Spring 2007 - 10
Morningstar Advisor - Spring 2007 - 11
Morningstar Advisor - Spring 2007 - Is Your Client a Stock or a Bond?
Morningstar Advisor - Spring 2007 - 13
Morningstar Advisor - Spring 2007 - 14
Morningstar Advisor - Spring 2007 - 15
Morningstar Advisor - Spring 2007 - Less Alpha, More Beta Than Meets the Eye
Morningstar Advisor - Spring 2007 - 17
Morningstar Advisor - Spring 2007 - Your Mileage May Vary
Morningstar Advisor - Spring 2007 - 19
Morningstar Advisor - Spring 2007 - A Clear-Eyed Look at Hedge Funds
Morningstar Advisor - Spring 2007 - 21
Morningstar Advisor - Spring 2007 - Lower Risk, Higher Returns, What’s Not to Like?
Morningstar Advisor - Spring 2007 - 23
Morningstar Advisor - Spring 2007 - Without Cash and Clout, Advisors and Clients Get Short End of Stick
Morningstar Advisor - Spring 2007 - 25
Morningstar Advisor - Spring 2007 - 26
Morningstar Advisor - Spring 2007 - 27
Morningstar Advisor - Spring 2007 - Get the Strategy Minus the Headaches
Morningstar Advisor - Spring 2007 - 29
Morningstar Advisor - Spring 2007 - 30
Morningstar Advisor - Spring 2007 - 31
Morningstar Advisor - Spring 2007 - 32
Morningstar Advisor - Spring 2007 - Analyzing Funds of Hedge Funds
Morningstar Advisor - Spring 2007 - 34
Morningstar Advisor - Spring 2007 - 35
Morningstar Advisor - Spring 2007 - 36
Morningstar Advisor - Spring 2007 - 37
Morningstar Advisor - Spring 2007 - Not All Hedge Funds Are Created Equal
Morningstar Advisor - Spring 2007 - 39
Morningstar Advisor - Spring 2007 - 40
Morningstar Advisor - Spring 2007 - A Fund with a (Long) View
Morningstar Advisor - Spring 2007 - 42
Morningstar Advisor - Spring 2007 - 43
Morningstar Advisor - Spring 2007 - 44
Morningstar Advisor - Spring 2007 - 45
Morningstar Advisor - Spring 2007 - Laying Low and Prospering
Morningstar Advisor - Spring 2007 - 47
Morningstar Advisor - Spring 2007 - 48
Morningstar Advisor - Spring 2007 - 49
Morningstar Advisor - Spring 2007 - A Menu of Ideas to Fill Five Market Baskets
Morningstar Advisor - Spring 2007 - 51
Morningstar Advisor - Spring 2007 - 52
Morningstar Advisor - Spring 2007 - 53
Morningstar Advisor - Spring 2007 - 54
Morningstar Advisor - Spring 2007 - 55
Morningstar Advisor - Spring 2007 - 56
Morningstar Advisor - Spring 2007 - Oil and Gas Gushing with Values
Morningstar Advisor - Spring 2007 - 58
Morningstar Advisor - Spring 2007 - 59
Morningstar Advisor - Spring 2007 - 60
Morningstar Advisor - Spring 2007 - 61
Morningstar Advisor - Spring 2007 - Mutual Fund Analyst Picks
Morningstar Advisor - Spring 2007 - 63
Morningstar Advisor - Spring 2007 - 64
Morningstar Advisor - Spring 2007 - 65
Morningstar Advisor - Spring 2007 - Undervalued Stocks
Morningstar Advisor - Spring 2007 - 67
Morningstar Advisor - Spring 2007 - Most Popular Variable Annuities
Morningstar Advisor - Spring 2007 - 69
Morningstar Advisor - Spring 2007 - What’s New at Morningstar and on the Web
Morningstar Advisor - Spring 2007 - 71
Morningstar Advisor - Spring 2007 - 72
Morningstar Advisor - Spring 2007 - 73
Morningstar Advisor - Spring 2007 - 74
Morningstar Advisor - Spring 2007 - 75
Morningstar Advisor - Spring 2007 - You Can’t Always Get What You Want
Morningstar Advisor - Spring 2007 - Cover3
Morningstar Advisor - Spring 2007 - Cover4
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