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    Administration, via Verrelli, Rolls the Dice on Insider Trading Issue Not all benefits are as tangible as a suitcase of cash, and the question of law for the Second Circuit, for the Ninth, and now perhaps for SCOTUS is: is friendship enough? how about regard for one's brother?

    The Obama administration’s solicitor general, Donald Verrelli Jr., has asked the Supreme Court to review the Second Circuit’s decision in the Newman insider trading case. The appellate court decision, issued in December, instructed the district court to dismiss the government’s indictment against the two named defendants, Todd Newman (portfolio manager at Diamondback Capital Management) and Anthony Chiasson (portfolio manager at Level Global Investors). Both defendants were charged as having acted upon inside information they acquired as “tippees.” The rule of law is that there exists no generic duty amongst all participants in the markets to forego transactions based on material, nonpublic information and acquired through someone’s blabbing mouth. Tippee liability requires more, specifically, proof of a personal benefit to the tipper. If I gave Joe Insider a suitcase full of money to get him to blab, my trading on his insider knowledge makes me as liable as his would make him. Further, if I gave Joe the suitcase, and you, dear reader, traded on the information, you inherit that liability too, so ...

Featured Post


The Skorina Report: A Look at the New Investment Crew at NYU

Charles Skorina looks at the new crew at NYU.

New York University opened its doors in 1831 and it's now the biggest private college in the country by enrollment. But their $3.4 billion endowment is relatively small for a large private US university (it's only the 28th-largest) and its performance hasn't been very impressive. We've paid much more attention to their uptown rival, Columbia University, whose $9.2 billion endowment is bigger, higher-performing, and officially Ivy League.  We ranked Columbia and Yale tied for number one by 10-year performance in our annual ...


The Skorina Report: The Best, The Rest & Our Pick for Public Endowment CIO of Decade

Charles Skorina looks at the top public endowments and discusses performance with Erik Lundberg.

This month we are pleased to bring you our annual survey of endowment performance at the Public Ivys, including many of America’s biggest, most prestigious, and best-endowed public universities. We think the performance of these endowments ought to be of interest not only to the endowment and foundation community, but to the investment world at large.  They include some extremely talented people getting results which rival investment organizations anywhere. And, they are important clients for many for-profit money managers all over the ...

Guest Posts


The Skorina Report: Risky Business–Chief Investment Officers and Public Pension Plans
Guest columnist Charles Skorina with a cautionary tale of greed and deceit and less-than-best practices at a large public pension plan.

Happy August! This is supposed to be the slow season in the media biz as torpid reporters and readers doze through late summer, but a story in the Wall Street Journal last week caught our eye. The headline read: "Pennsylvania Attorney General Kathleen Kane Charged With Obstruction, Perjury." The story even got big play in London where the Daily Mail gave it a lot of ink with many pictures of Ms. Kane wearing a smart white-on-white outfit for her day in court. Just another ...


Macroeconomics

What Taper Tantrum?  And, Will Yellen Pull a Bernanke?
The head of the New York Fed said on Wednesday, August 26th, that "the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago." We may be about to see another Fed retreat, analogous to that of a little more than two years ago.

Convergence of developments in late August 2015 have forced me to think about the “Taper Tantrum” of 2013, whether we are seeing much the same thing again, and whether it will have much the same consequence – a pull-back in the declared intentions of the U.S. central bank. One of these developments, of course, has been the wild roller-coaster ride of equities in the U.S. and for that matter in the rest of the world, beginning with the massive loss of value as reflected in any index, from the close of ...

Risk management

An Overview of Real Asset Investing
Guest columnist Andrew Smith, CAIA, provides an overview of real assets and their commensurate risks and rewards.

By Andrew Smith, CAIA Institutional investors are significantly increasing their allocations to real assets.   What do they know that the broad investor pubic does not?    How are they utilizing real assets to protect the value of their portfolios in downturns and to increase growth in bull markets?   In this article, we answer these questions as well as discuss the numerous benefits, as well as the risks, of real asset investing. What are Real Assets? Real assets cover a broad range of tangible, and some intangible, hard assets. Basically, real assets ...

Socially responsible investing

When Underfunded Pension Funds Take Up Social Responsibility Investing
In November 2014, Scott Stringer, New York City's Comptroller, launched a campaign he called the Boardroom Accountability Project. Bernard Sharfman makes a case that this BAP is a good example of much that is wrong with institutional/activist investing today.

A fascinating blog post by Bernard Sharfman takes a skeptical look at the activist investing of public pension funds, especially in the context of proxy access. Sharfman, a prominent corporate-governance theorist with the George Mason University School of Business, takes a laissez-faire view of the field of corporate governance considered as a whole. We’ll get back to that Big Picture point, but for now let us look at the detail work. Sharfman, in this posting for the R Street blog, is clearly unhappy that the Securities and Exchange Commission has taken to ...

Risk management

Weintraub of GFT: Basel III Coming Into Force by Increments
Faille spoke recently to Herman Weintraub, executive director and head of alternative investment practices at GFT, about the impact of the Basel III rule changes upon the HF industry. Weintraub says, one ought to look not at the parts, but at the whole.

    Source: JPMorgan investor Services white paper, Leveraging the Leverage Ratio, Appendix   Almost a year ago now, the U.S. banking agencies issued a final rule implementing one important chunk of Basel III, the Liquidity Coverage Ratio, though the agreement provides for “final adjustments” to be made in 2017, depending on experience between now and then. Another chunk, the conservation buffer, is scheduled for phase-in starting next year and continuing into 2019. The LCR is the first international attempt to micro-manage the liquidity buffers of lenders. It will have a great impact on banks, and ...

Media Coverage of Hedge Funds

Cause and Effect: Or, Shooting the Messenger
Not even Schrodinger blamed the reporters for market irrationality. Saying out loud, "Hey, this cat is dead," doesn't kill the cat.

One of the oldest sorts of “media criticism” is the argument that reporting on something bad causes that bad thing. If only there were fewer news reports about violence … or embezzlement …or Ponzi schemes… it wouldn’t occur to anyone to act violently, embezzle money, or pay out earlier investors from the cash received from later investors. Put that baldly, such assertions seem absurd. It isn’t difficult, though, to dress such a notion up in sensible ...

Hedge Fund Industry Trends

CFTC Exempts ASX Clear from DCO Registration
The CFTC has issued its first exemption from the CDO registration mandate under 5b (h). The successful petition for that exemption, from ASX Clear, has the additional merit of having inspired an idiosyncratic seeming, but concise, comment letter, quoted in full here.

The Commodity Futures Trading Commission, on Aug. 19, exempted ASX Clear (Futures) from the obligation to register as a derivatives clearing organization with regard to swaps, “including, but not limited to, interest rate swaps denominated in U.S. dollars, Euros, Japanese yen, British pounds, Australian dollars, and New Zealand dollars.”  This concludes a process that inspired one commenter to quote hedge fund manager Paul Singer. ASX (Clear) is part of Australia’s ASX Group, a sizeable market operator ...

Risk management

Study Says The Gold Bugs are Right
Gold seems, to a larger extent than silver, and even more so to an extent larger than is true for palladium or platinum, to work as a true financial asset: decoupled from price developments in the commodity markets. It succeeds as a hedge against currency and stock-market trouble.

Lognormal trickery tends to smooth out price charts. That’s one of the irreverent thoughts that came to mind as I read a recent study of one of the perennial arguments of gold bugs has stood up to empirical testing. Three German scholars, Christian Pierdzioch, Marian Rose, and Sebastian Rohloff, argue on the basis of “Bayesian additive regression trees,” a machine-learning algorithm, that “gold and silver investments are a strong hedge against exchange rate movements of the ...

Media Coverage of Hedge Funds

Hedge Fund Assets to Increase a Quarter Trillion Dollars by Summer of 2016
Guest columnist Don Steinbrugge on why hedge fund AUM is set for an increase over the course of the next 12 months.

By Don Steinbrugge, CFA This is an update to an article I wrote last summer explaining why the hedge fund industry assets were reaching all-time highs, despite underperforming the S&P 500 index. This is more relevant today as hedge fund industry assets continue to set new records.  There has been a constant flow of negative stories about the hedge fund industry over the past couple years including the insider trading scandals, hedge fund fees being  too ...