Dear Investor,

I take great pride in reporting that Senna Risk Partners, LLP. (“SRP”) has provided superior capital growth to its investors for just under 2 years. $1,000 invested in January 2007 is now worth $3,193. (est.) on October 31, 2008. The intent of this letter is to accurately position Senna as an alternative investment and to provide the SRP investor a perspective of the basic tenets practiced in quantitative portfolio management.

SRP should be considered an aggressive investment vehicle. SRP is suited for institutions and high net worth investors who understand and accept the risks and potential volatility associated with aggressive returns. SRP is intended to comprise a smaller and aggressive portion of a diversified investment portfolio.

Managing risk relative to potential returns over a multi-year period is paramount to SRP’s success. The returns sought by Senna are aggressive relative to historic returns for equity indexes, mutual funds, and traditional investment vehicles. While total risk of SRP may at times be greater than other investment vehicles, incremental risk of SRP relative to potential returns can be commensurately less. This tenet of SRP’s investment philosophy is exhibited through its performance record.

SRP’s strategies employ the buying & selling of commodity, currency and equity index futures, which is commonly viewed to be extremely risky. However, futures (and options) utilized in their truest intent and properly managed are instruments to decrement, not increment risk. The dangers associated with futures are equally present with any other investment vehicle one trades in a margin account: excess leverage increases risk. SRP’s risk management system, a proprietary software called LOSS LOGIC ™, maintains a minimal-to-flat leverage ratio, averaging just 1.5x leverage per position managed. For reference, the hedge fund universe currently averages 5x leverage per position. With the results of SRP’s outperforming model, I’d like to think of SRP as a substantial investment opportunity for both aggressive and risk-conscious investors. An investment with SRP can be effectively utilized to augment overall returns with relatively low incremental risk.

SRP utilizes a mechanical system which, through 9 years of careful evolution and development, implements precise control on both systematic5 and specific risk 6. The initial seed of our model brought explicit study and the quantification of human behavior. Trading psychology, most often consumed by instinct, fear and greed, leads a discretionary trader down the path of erratic and inconsistent results. Additionally, winning streaks find one’s subconscious dissected in self-sabotage. I firmly believe in checking my emotions at the door. There is no better or more certain path to consistent results than the absolute removal of circumspection.

The heart of our value lies within our incredibly unique positioning during normal business hours. We are ultimately liquid, flat to the contract. Our market opportunities are utilized within hours of inception and our trading day is complete. I had not originally designed our model with this explicit liquidity in mind, nor did I foresee it’s value until comparing trade scenarios between historic signals and current trades. examination of headlines during normal market hours concurrent with market exposures proved positions be stopped out or limited to lower profitability. many of our trades would have been marked not as gains, but as losses. This finding is enlightening not just for it’s inherent value to our investors, but due to it’s indirect occurrence: As a mathematician and technical analyst bent for robotic efficacy, I don’t welcome unanticipated events easily!

Lastly, a thought on the long-term profitability of SRP and surviving the changing of the guard: markets would have to fundamentally change, trade by appointment, have no volume and no range (highs or lows) before our model, not to mention a long list of historically successful trend followers and systematic quant funds, ceases to perform. I am ultimately committed to our evolution, not just our survival. This requires constant evaluation, analysis, and change. We adjust our parameters appropriately upon market-specific behavioral shifts so that our model remains profitable for the long term.

I encourage you to read completely all of the information contained in the SRP Performance Memorandum and have every question adequately addressed before making an investment decision. I look forward to serving you well.

Sincerely,




Robert J. Stalb
Founder & Chairman
Senna Capital Management