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    Crisis? Tempted to Flee to Shelter of Big Funds? Bad Idea The authors of a new study of the relationship between fund size and performance employ a database consisting of 7,261 funds and their performance over a twenty year period (1994 to 2014). Spoiler alert: size is bad. Especially in a crisis.

    A new report out of the Cass Business School, City University, London, indicates that investors, especially in times of crisis (that is, when the use of the adjective “hedge” in front of “fund” is most apropos), are better off investing with a small fund rather than a large one. This is counter-intuitive, in that it is precisely in times of crisis that the temptation to flee to the larger institutions is most powerful for many investors. Yet the negative statistical correlation between size and performance was largest in three periods within the database of this study, times of crisis: 1999 to 2000, 2003 to 2004, and 2008 to 2010. Why? Largely because of the restrictions that the larger funds place on redemptions. More obviously, diseconomies of scale play a role, and can themselves vary with the business cycle. Size and Time The authors (Andrew Clare, Dirk Nitzsche, Nick Motson) describe their study as based on a more comprehensive database that that of earlier studies along the same lines. Specifically, their database consisted of 7,261 ...

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: 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 ...


Currencies

PwC on Mergers and Acquisitions Activity
"Not moving is more risky than moving," said one CEO asked about mergers and acquisitions. "We will make more acquisitions, but they’ll probably be larger in nature, more transformative. "

PricewaterhouseCoopers’ recent review indicates that the mergers and acquisitions market in the United States will continue to gain steam through the second half of this year. It offers the same lesson we took from John Paulson’s remarks at Delivering Alpha. But the subject is important enough to deserve some detailed reinforcement. Martyn Curragh, PwC’s U.S. deals leader, said in a statement, “Corporate boards are deploying record amounts of cash to increase returns, and high stock prices are emboldening buyers and sellers. The strong U.S. economy and rising confidence signals a strong ...

Institutional Investing

7 Messages Family Offices Give Emerging Managers
Guest columnist Diane Harrison examines the relationship between family offices and emerging managers and why some managers get money and why others don't.

By Diane Harrison After attending a recent conference where experts discussed prevalent issues family offices struggle with in terms of their investment management activities, it struck me that there is a certain disconnect in the communications aimed towards and emanating from these family offices. The number of family offices in the United States is roughly the same as the number of emerging managers looking to family offices for investments, and that current figure is in the thousands. Why then are these managers finding the prospects for placement of their funds so ...

Retail Investing

‘Women of the Street’—Not Just Another War Story
Meredith Jones' book on investing in women takes it to the Street and comes back with some solid conclusions.

Women of the Street: Why Female Money Managers Generate Higher Returns (And How You Can Too) By Meredith A. Jones Palgrave MacMillan, hard back US$30 I admit that I was skeptical when I received my copy of Meredith Jones, “Women of the Street: Why Female Money Managers Generate Higher Returns (And How You Can Too).” I’ll carbon date myself and admit that I’m old enough to remember when women’s business clothes were knock-offs of men’s suits and the blouses had big droopy bows that were supposed to be the feminine equivalent of the ...

Hedge Fund Strategies

Delivering Alpha Highlights: Part Two
Low interest rates and record equity valuations together mean that companies can use either stock swaps or borrowed cash or a combination of the two, to buy one another. Further, corporate executives infer that they have to keep buying in order not to become a target themselves.

Surely John Paulson’s discussion of merger arb with Melissa Lee counts as one of the highlights of this year’s Delivering Alpha conference. In part, it became a highlight through the luck of timing, that is, breaking news on the subject: 21st Century Fox had just offered to take over Time Warner, bidding $80 billion. Time Warner has also immediately rejected the offer, but in the view of the market, the fact of such an offer puts the company in play. A common pattern in such cases is that the offerer’s equity falls ...

Corporate governance

A New Look at Last Year’s Conference Board White Paper on Governance
Last year the Conference Board asked itself several questions germane to corporate governance. They were good questions. The odd thing about the report was the way the greybeards involved simply threw up their hands rather than trying to answer any of them.

You don’t need to be a weatherman (or a hedge fund’s star trader, a corporate board member, a securities lawyer…) to know at least a couple of things about the governance of public corporations in the 21st century. Specifically: activist shareholders have attained an unprecedented level of importance, often crashing the once-sedate garden parties of corporate board deliberations. Second, the institutional context in which they can do this has been molded and will be remolded ...

Private Equity

Alternative Investments By the Numbers: Top 5 2015 YTD Takeaways
Guest columnist Andre Boreas takes a look at the alternative investment universe year-to-date 2015 by the numbers.

By Andre Boreas, CEO, Quadsight Partners As the half-way point of the year passes, we thought it would be a good time to take a look and see where things stand with the hedge fund and private equity markets, including five important takeaways from the first half of 2015:   Capital raising continues to be strong across all asset classes. Total hedge fund assets topped $2.94 trillion in Q1 with $18.2 billion in new capital allocated according to ...

Technology

Enterprise Software Marketers Confirm: Seven is a Sacred Number
God rested on the seventh day of the week of creation. Ever since, the number seven has stood for the completion of an epoch, or of a perfect set. Thus, a German enterprise concern has now listed the "seven pillars" for improved market surveillance through software.

A German enterprise software concern recently published a white paper about financial market scandals, expressing its views as to how regulators can “get serious” about market surveillance. It’s worth looking seriously at these ideas (even if they were put forward, in essence, as advertising) for what they may say about how certain international winds are blowing. It’s also somewhat amusing to see the way in which authors settle upon the number “seven” in order to make ...

Media Coverage of Hedge Funds

Delivering Alpha Highlights: Part One
Larry Fink is "deeply worried" that the combination of share repo with high-yield debt is "one of the reasons why we have a below trend-line economy. We're not investing in the future as much as we should." Carl Icahn, predictably, has a very different view of what ails us.

On Wednesday, July 15th, at the Delivering Alpha conference, Carl Icahn debated Larry Fink, with the moderating/refereeing services of Scott Wapner of CNBC. The Icahn/Fink debate wasn’t labelled as a debate. It was a “panel.” But it was a panel of two (aside from Wapner, who was of there in an officiating capacity), and it was a panel of two who have quite predictably contrasting opinions about the subject proposed for their discussion: activist investing. Just ...