10-14-09 © kdgeisler

    Today's Post

    Hong Kong Shariah-Compliant Launch Sells If I should declare that I will never eat duck, and then I simply re-name certain ducks “chickens” and eat them, then people who genuinely as a matter of principle refuse to eat duck may consider me a false friend. And those who have no objection to the eating of duck may think me a silly goose.

    Hong Kong launched its first ever Islamic bond September 10. The issuance was a sukuk bond which, again, is just a way of saying that it is a Shariah-compliant instrument: that is, a bond that escapes the strictures of Islamic law as understood by the authorities in this matter. For some background on what is or isn’t Shariah compliant, you might start here. There exist a range of justifications, arguments for why a particular bond is compliant. Skeptics about the whole field, such as Muhammad Akram Khan, describe many of these justifications as “legal tricks.” In the case of the Hong Kong sukuk the relevant “trick” is what is known as the ijarah structure. This involves the creation of an operating lease that stand behind the sukuk documents. In this case, the issuer is a special purpose vehicle created by the government of Hong Kong for this purpose. The SPE will use money from sale of the bonds to buy certain properties currently owned by that government. So Hong Kong’s SPE deals with ...

Featured Post


The Skorina Report: Another try at herding Gotham’s five-headed fund

Guest columnist Charles Skorina looks at the five-headed NYC pension system with its new leader, Scott Evans.

By Charles Skorina In July, Scott Evans reported for duty as Chief Investment Officer in New York City's Bureau of Asset Management, where he'll manage $160 billion in employee pension funds. Traditionally the city's CIO is replaced when the political wheel turns, which it did last fall. Retiring Mayor Michael Bloomberg was succeeded by William De Blasio; and Comptroller John Liu, the independently-elected custodian of the city's pension funds, was replaced by Scott Stringer. Mr. Stringer beat back a last-minute primary challenge from disgraced ...


One Ordinary Week in the Life of Climate Change


We thought it would be instructive to share with you links and the odd quote from recent press reports on the subject of climate change.  As a professional investor,  you no doubt want to be ahead of trends in the investment world.   Investment opportunities arise when there is a divergence of opinion, as is uniquely the case in the United States (unlike the other nations on Earth) on the subject of climate change.  The headlines of a few days tell ...

Guest Posts


The Skorina Report: Another try at herding Gotham’s five-headed fund
Guest columnist Charles Skorina looks at the five-headed NYC pension system with its new leader, Scott Evans.

By Charles Skorina In July, Scott Evans reported for duty as Chief Investment Officer in New York City's Bureau of Asset Management, where he'll manage $160 billion in employee pension funds. Traditionally the city's CIO is replaced when the political wheel turns, which it did last fall. Retiring Mayor Michael Bloomberg was succeeded by William De Blasio; and Comptroller John Liu, the independently-elected custodian of the city's pension funds, was replaced by Scott Stringer. Mr. Stringer beat back a last-minute primary challenge from disgraced ...


Institutional Investing

The Skorina Report: Another try at herding Gotham’s five-headed fund
Guest columnist Charles Skorina looks at the five-headed NYC pension system with its new leader, Scott Evans.

By Charles Skorina In July, Scott Evans reported for duty as Chief Investment Officer in New York City's Bureau of Asset Management, where he'll manage $160 billion in employee pension funds. Traditionally the city's CIO is replaced when the political wheel turns, which it did last fall. Retiring Mayor Michael Bloomberg was succeeded by William De Blasio; and Comptroller John Liu, the independently-elected custodian of the city's pension funds, was replaced by Scott Stringer. Mr. Stringer beat back a last-minute primary challenge from disgraced former Governor Elliot Spitzer (known to New York Post readers ...

Hedge Fund Regulation

Exemptions and Pools: CFTC Harmonizes with the JOBS Act
Two rules within the CFTC rulebook that offer exemptions for certain CPOs from certain regulatory requirements mirrored the original pre-JOBS Act Reg D on the SEC side. But of course we are now in a post-JOBS Act world, and the CFTC staff has now acted, not through a rule change but by staff letter, to harmonize with its sister agency and with the JOBS Act mandate.

The CFTC’s Division of Swap Dealer and Intermediary Oversight has issued an exemptive letter with regard to certain provisions of Regulations 4.7(b) and 4.13(a)(3). This letter brings the agency’s position into line with that of the SEC on solicitation restrictions. Readers of AllAboutAlpha will likely recall (and those who do may feel free to skip the remainder of this paragraph) that private funds often rely on the SEC’s Reg D as a safe harbor for non-registration. For a long time, Reg D prohibited the ships that weighed anchor within its harbor ...

Risk management

Burr XII, Extreme Value, and a Fantasy
The eight authors of a new study seek to add to “the existing literature of Bayesian VaR methods by … considering the … general class of Burr XII extreme value distributions “ and by estimating error bounds. After having a little fun we try to puzzle out what that means.

“They used a Burr XII extreme value distribution?” “Yeah, that’s what I’ve heard.” “What the heck is that?” “My best guess: it implies that Aaron Burr has bene cloned at least 11 times in secret laboratories.” “Why would that have extreme value?” “Suppose you wanted to stop the nefarious creators of 11 Alexander Hamilton clones….” “I don’t think that theory deserves a very widespread distribution.” But Seriously Folks Several scholars, including one affiliated with the CME Group and one with Morgan Stanley, have together announced a new framework for quantifying the risk of an equity portfolio, a ...

Risk management

Custodians Helping Customers with Securities as Collateral
How address issues of supply/demand imbalance in the world of collateral requirements? Custodians can do a good deal on behalf of their customers here, and are exploring just how much.

Sometimes the early material in a report is so boring that even us dedicated expositors can do nothing better than to splash into the middle. This is one of those times. But there is important stuff in the middle and end of the recent report by the Committee on Payments and Market Infrastructures, a working group under the umbrella of the Bank for International Settlements. The CPMI has issued a report on collateral management services. Nothing much matters here until Section III, which details the range of approaches that have ...

Hedge Fund Strategies

Metamorphosis in HFT: Update with Brad Katsuyama of IEX, Central Figure in ‘Flash Boys’
Guest columnist and intrepid reporter Doug Friedenberg talks to Brad Katsuyama about HFT, Michael Lewis and more.

As Gregor Samsa awoke one morning from uneasy dreams he found himself transformed in his bed into a gigantic insect.  "The Metamorphosis”, by Franz Kafka. Brad Katsuyama awoke one morning in early spring, 2014, to find he had just become the object of greatly mixed opinions and emotions upon publication of Michael Lewis’s work Flash Boys.   Michael Lewis had reached out to Brad earlier in the preparation of the book, but as the book took shape, ...

Legislation/Court rulings

Is Liability Insurance an Estate Asset in Bankruptcy?
The Manhattan bankruptcy court has now granted individual defendants in the MF Global matter, including Jon Corzine, access to funds from their D&O insurance. But it wasn't easy for them to get here, and therein lies our moral.

A recurrent issue in corporate bankruptcies may have entered the alternative-investment world’s consciousness more keenly than ever before as a consequence of the fall-out from the much-watched bankruptcy of commodities broker MF Global. Former MF directors and officers, facing lawsuits by shareholders and customers alike, seek access to what is known as their “A insurance.” In the D&O world, A insurance is that which pays the individual defendants for costs and losses that, for legal reasons, the ...

Performance, Analytics & Metrics

Asset Allocation & the Practical Application of Time-Window Analysis
Guest columnist Andrew Smith, CAIA, on performance analysis and its effect on asset allocation.

By Andrew Smith, CAIA Time window analysis is a version of performance analysis that takes looks at the statistical distribution of returns over different time-windows or holding periods. For example, let us say we have a fund with a 10-year track record of returns. A time window analysis would look at the return distribution of 1 day returns, 1 month returns, 3 month returns, etc on a day to day basis. So 1 month returns, for ...

Technology

Vindicating Austrians: The New ESMA Warning on Risks
In a new report, ESMA discovers that some investors may be guilty of "over-reliance on continued policy support." I gather that means that investors believe that central bankers and governments will play the role of Santa Claus indefinitely.

The European Securities and Markets Authority recently warned that valuation risks are on the rise on key markets. Some of the reasoning of the report must be giving Austrian economists, those much-despised Cassandras of central-bank-inspired bubbles, a sense of vindication. The good news is that in the first half of 2014, EU securities markets have witnessed “significant gains amid low volatility and notwithstanding a challenging economic and political environment.” The corollary is: low interest rates force a ...