Today's Post

    The Skorina Report: Divestment vs. Fiduciary Duty Whose Money is it? Guest columnist Charles Skorina takes a look at investment divestment..

    What the divestment debate comes down to is how boards define their fiduciary duty. [Spoiler: We don't think divestment is a good idea] We're recruiters in the business of finding chief investment officers and senior asset managers, and our readers worry more about investing than divesting.  So you may be forgiven if you overlooked Global Divestment Day on Friday, February 13. It was spearheaded by Bill McKibben's Free group with support from many other Green enthusiasts.  Mr. McKibben is the Pied Piper of the anti-fossil-fuel movement.  He has been barnstorming the nation's campuses for years rallying local activists and pressuring boards to remove traditional energy investments from endowment portfolios. We had our say about the divesters a while back in Skorina Letter 50. Today, we think it's worth another look. For one thing, an important new paper was published just ahead of Divestment Day and anyone who has to grapple with this issue should take a look at it. The economic consultant firm Compass Lexecon issued Fossil Fuel Divestment: A Costly and Ineffective Investment Strategy ...

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

Swiss National Bank Abandons Its Commitment to Support the Euro
John Brynjolfsson on Switzerland's slightly less than neutral stand on the Euro.

By John Brynjolfsson 1)      This morning's surprise announcement the Swiss National Bank (SNB) is first and foremost a SNB declaration of independence. Renounces ties to Euro explicitly. Implicitly renounces ties to ECB, Eurozone, European Court of Justice (which Rule yesterday in support of the ECB’s OMT, that is buying, of periphery debt), and Greek elections. Obviously Switzerland has a long history of remaining fiercely independent, whereas the 2 year old announcement of a floor had unwittingly become an unwelcome alliance of the country’s central ...

Alpha Strategies

Twitter for Geriatric (over 35) Investment Managers
Doug Friedenberg takes a look at Twitter as a random news generator on subjects close to the hearts of portfolio managers, and finds it invaluable for the information just beginning to enter your known universe.

We first learned about sex from the Encyclopaedia Britannica.  It was really slow going and overly clinical, but it was the best source available at the time....apart from trial and error on human subjects. There was a variant of social media in those days (conversations held between classes) and we used it to learn proper usage of the necessary four letter words. Fast forward a few years to the social media whirl in which we all live. The delta of change in social media is itself increasing rapidly.  Do you, dear ...


The Next Big Thing: A Robotic ‘Nexus’ of Contracts
In some fairly routine middle-critter corporate roles, there may no longer be much need for human managerial involvement. Enter the self-running business entity: another big step toward the obsolescence of human beings some of whom, nonetheless, will get wealthy in the process.

The next big wave of innovation to hit the financial world is likely the automation of much of the decision-making one customarily associates with the (human) management of business concerns. A corporation (or other entity) may run itself with only minimal actual human involvement, with an algorithm effectively entering into contracts with its stakeholders. The DAC is the platonically pure form of one of the dominant theories of corporate law today, the one that treats a corporation as a “nexus of contracts” – contracts with those leasing assets, with those contributing ...


Long-Term Infrastructure Debt: The Valuation Issue
Three authors at EDHEC propose a two-step modeling process for the valuation of certain infrastructure debt. One of the key ideas they incorporate is the value of the step-in rights that come when the issuers violate a covenant or otherwise find themselves in technical default.

The EDHEC-Risk Institute has issued a new paper on an old problem, how one can go about valuing infrastructure debt. The opportunities offered by infrastructure debt, especially the credit risk diversification it allows, are tempting. Still, these opportunities require entering a scary space. In an earlier paper, Blanc-Brude, the lead author here, argued that the world’s investors need reliable benchmarks for performance, and that the development of such benchmarks should be “high on the international policy agenda.” It is in the interest of the whole world, after all, that this space ...


Tsipras Marched Bravely Forward And … Surrendered
The Greek prime minister's surrender to Germany and the troika has alienated much of his own base in Syriza. You can bet on it. Indeed, finding creative ways to bet on it looks like a sound alpha strategy now.

On Friday night, February 20th, the government of Greece under Prime Minister Alexis Tsipras agreed to the conditional financial rescue deal demanded by other Eurozone nations, especially Germany. As is customary in such circumstances, Tsipras declared victory. Even though I am familiar with that custom amongst politicians, I’m a little taken aback by the effrontery of this declaration. Victory? Yes, that’s what he called it, though in a bit of humblebrag he added that “we won a battle, not a war.” What he and his ministers “won” looks a lot like a humiliation ...


AIMA Reports: Activist Hedge Funds are the Good Guys
Activist investors usually aren't trying to take control of a company. And when they are, managers have strong existing tools to foil them. What activist investors can do is increase share value, over sustained periods.

The Alternative Investment Management Association in a new paper credits “activist engagement by hedge funds” with improvement in both the stock price and the operational performance of the companies they have targeted, both while they held the stock and thereafter. This runs contrary to the common view that activists have been a negative interest because they’ve shortened the attention span of the corporate managers affected. Long-Running Debate A corporate management that wishes to entrench itself and avoid interference ...

Liquid Alts

Do you like or dislike equity?
John Shearman, CAIA, guest columnist explores the basics of liquid alts.

Traditional stock pickers live in a world that is analogous to Facebook. The average mutual fund manager spends their days buying stocks they “like”. For most, however, there is no “dislike” function. Like Facebook users, mutual fund managers are stuck in a one-dimensional world of “likes.” Facebook doesn’t have a “dislike” button for good reason; they do not want to promote negativity. In the world of social media, we can understand why Mr. Zuckerberg has taken ...


Macroeconomics: The Mainstream and the … Banks
The trade cycle is not a central concern of the reigning general-equilibrium models in macroeconomics. To the extent such models do consider booms and busts, they largely reject money or credit based explanations.

The mainstream in contemporary “macroeconomic” theory is defined by a particular sort of model, “dynamic stochastic general equilibrium” (DSGE). Such a model aims at a general equilibrium to the extent that it acknowledges that everything in the system depends on everything else. It is dynamic to the extent that it sees equilibrium not as a static fact, but as an always-vanishing goal, rather like the pseudo-rabbit used to get hounds to race each other around a ...


On First Looking Into SEC’s Homer: A Final Rule on Swaps Reporting
Commenters successful pressed for certain changes in this massive new rule during its years of gestation. For example, the rule incorporates a T + 24 approach for the reporting of block trades. But warned, though, blizzards in NYC don't stop the ticking of that 24 hour clock.

The Securities and Exchange Commission recently issued its final rule on security based swap reporting, Regulation SBSR, meant to discharge a statutory mandate imposed by Congress in the Dodd-Frank Act of 2010. As the mere mention of the year 2010 may remind you, though, this regulation has been a long time a-coming. The SEC first proposed a Reg SBSR in November 2010. It re-posed it, thus re-opening the comment period, on May 1, 2013. The final rule ...