andrewsmith_CAIA

    Today's Post

    Business Development Companies: The Basics Guest columnist Andrew Smith, CAIA, traces the history of Business Development Companies.

    By Andrew Smith, CAIA The public consensus on Business Development Companies (BDCs) is that they are “the new business bank,” filling the middle-market financing gap left by the financial crisis of 2008 and subsequent banking regulations in the following years. While this is true, it is an oversimplification of the BDC business model. BDCs are a form of Private Equity Fund; however unlike traditional Private Equity Limited Partnerships (Private Structure Private Equity Funds), they are publicly traded providing investors the liquidity offered from being listed on the public stock exchanges. Further, BDCs have a very specific focus on middle market companies, or companies that are in the $100million to $1billion valuation range, with hyper-growth potential. BDCs, like private equity funds, only invest in privately offered businesses. Like Private Equity Funds, BDCs invest in a wide range of industries, and their deals carry a variety of structures. Unlike Private Equity funds, which raise capital in the form of Limited Partnership Units from institutional investors, BDCs invest capital that they raise from a wide range ...

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 ...


Alpha Strategies

Mergers in Theory and Practice: Synchronicity and Synergy
According to a new report from Intralinks and Cass Business School, M&A activity is a critical component in how successful companies innovate and enhance shareholder value. Actavis' latest coup, rescuing Allergan from the clutches of Valeant and Pershing Square, may make the report's authors' point more vividly than their dry numbers can.

Intralinks, in collaboration with the M&A Research Centre at Cass Business School, has produced the first part of a projected two-part report on the last twenty years in the history of the corporate M&A world. Part I focuses on “the drivers of shareholder value creation” from M&A activity. Part II, projected for early next year, will look at the M&A strategies “of an elite group of M&A active corporate performers” seeking common attributes and behavior patterns. Among the findings of the authors of Part I: “firms outperform the market the more frequently ...

Technology

Big Data and Other Trends to Influence Hedge Funds in 2015
Big Data makes possible new ranges of inferences, and gives value to new skill sets. There will continue to be plenty of roles for human beings in recognizing the shadows cast by the intense light emitted by new technologies.

At a gathering at the Andaz Hotel in New York, October 22, a number of the alternative investment industry’s best and brightest discussed the new drivers of growth. The event, sponsored by Gravitas, turned on four themes: Big Data; Branding; Cybersecurity; and Innovation. I’d like to focus on just one of those points, the first of them, for further discussion here. So: what is Big Data and why might it be one of the major Drivers of Growth for 2015? Learning to Tell Time When I was a child, one of the rites of ...

Virtual currencies

Bitcoin: Three Bits of News on a Microcosm
A bitcoin-mining fire, a survey of small and medium businesses and their levels of preparedness for bitcoin customers, and a new criminal accusation against an alleged ponzi scheme: all conribute to the sense that bitcoin is a microcosm of the whole financial world, good and bad.

For those who believe that bitcoin, or some virtual currency akin to bitcoin, represents the future of human money, the latest news is … well, ambivalent. Although bitcoins themselves are intangible – they are strings of 1s and 0s – the bitcoin market has and requires the support of a large and quite tangible infrastructure, that is, “mines.” Bitcoins are “mined” as computers solve complex mathematical problems, adding to the crypto money supply. Fire in Thailand Last month, the hardware at a large bitcoin-mining facility in Thailand caught fire. The fire spread at ...

Legislation/Court rulings

Judge David Carter’s Valeant Decision: A Close Reading
Carter's decision allows Pershing Square to vote its equity in Allergan in ways favorable to Valeant's planned purchase thereof. More is going on here than just another incident in the consolidation of the biopharm world.

February and April 2014, Pershing Square acquired 9.7% of the shares of Allergan, a pharm company based in Irvine, California and best known for Botox. The circumstances under which it obtained this large chunk of the company’s equity have straightened some wrinkles and raised some eyebrows, and more important have raised a close legal question as to whether Pershing Square and related legal entities would be permitted to vote those shares in an upcoming special meeting. The controversial opinion issued by Judge David Carter on this matter on November 4th is ...

Real Estate

Is Private Real Estate Actually Less Volatile than Public Real Estate?
Guest columnist Brad Case, Ph.D., CFA, CAIA, examines the differences between private and public real estate investments.

By Brad Case, Ph.D., CFA, CAIAThere are three reasons why people have made the mistake of thinking that private real estate is less volatile. (1)    Comparing unlevered private returns to levered public returns: The most commonly used measures of private real estate are the NCREIF Property Index (NPI) and the NCREIF ODCE; the NPI measures unlevered returns on institutional core property investments even if the investments were made with leverage, while the ODCE measures returns from ...

Forex

Extra! Extra! Central Banking the Disease It Affects to Cure
The release of Lord Grabiner's report provides evidence going well beyond the conclusions that Grabiner himself is willing to draw, and shows a central bank acting as a wink-and-nod clearing house.

At the behest of the Bank of England, Anthony [Lord] Grabiner has studied whether, between 2005 and 2013, any B of E official engaged in (or knew of and winked at) any improper behavior in the forex market between 2005 and 2013. Shares of a $5.3 Trillion Market The release of the resulting paper serves as counterpoint to the heavy fines issued by U.K.’s Financial Conduct Authority, Switzerland’s FINMA, and two U.S. agencies, against the private banks ...

Timely Research

Will HFTs force a market redesign?
One of the unintended consequences of high-frequency trading may be that it forces a market re-design. Guest columnist Ginger Szala looks at the issues.

By Ginger Szala Notwithstanding the evident benefits of HFT in electronic markets, many market participants have argued that some HFT practitioners utilize trading techniques that are detrimental to the well-functioning of financial markets. Some of the trading techniques are spoofing, layering, and quote stuffing. Chicago Federal Reserve paper: Recommendations for Equitable Allocation of Trades in High Frequency Trading Environments, July 10, 2014 In late August 2014, the CME Group issued a regulatory notice defining and providing examples of ...

Currencies

Stop Draghi[ng] My Heart Around
Draghi and Yellen seem to be headed in opposite directions. One is revving up the money-creation engine, the other is 'tapering.' So why is Yellen so publicly supportive of Draghi? And what happened to the rebellion within the ECB?

For seekers of alpha, recent headline news seems bearish for the euro and bullish on the U.S. dollar. The Federal Reserve is going to allow interest rates to rise, while the ECB is resolutely going to resist that fate. Yet it is all so obvious, and seems all so played-out-already (Aaron Smith of Pecora Capital was saying exactly this about each currency back in June) that on a second thought one has to worry. One of ...