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This week marks the publishing of our 1,000th post at AllAboutAlpha.com. We've seen a lot over the past 3 years. And despite its recent travails, the hedge fund industry remains approximately the same size now as it was back when we thought WordPress was a new type of laser printer and that blogs - like Pet Rocks and Cabbage Patch Kids before them - were another sign of the End of Times. To celebrate this milestone, we thought we would highlight ...
It's our pleasure to bring you a guest contribution today from Dr. William Shadwick, a highly-regarded mathematician who "crossed the aisle" to the world of finance a decade ago and has since made his mark on the field of investment performance analysis. Regular readers may remember Bill from his previous guest contribution to AllAboutAlpha.com in 2008 - one of that year's most-read articles on AAA. Widely known as the developer of the Omega Function and Omega Metrics®, Shadwick won ...
BY TRISTRAM LETT, MANAGING DIRECTOR, ABSOLUTE RETURN STRATEGIES, INTEGRA CAPITAL CORPORATION - Benchmark hedging, a process designed to reduce the investment risk in a benchmark, is not new. However, doing it successfully and efficiently is. This article has two parts: in the first we explore the process of benchmark hedging and how it is possible to efficiently implement the process. As well, we look at the benefits it provides. We then move on to put this into an important context-the use of hedge funds in institutional portfolios. This has ...
We were in Chicago earlier today (Tuesday) at the Managed Funds Association's Forum 2009. "MFA" used to stand for "Managed Futures Association". So as you'd expect from a Chicago-based meeting of this group, there were plenty of CTAs and global macro managers discussing trend following and pork bellies.
But not far beneath the surface of nearly every session was the 800 pound gorilla in the room: the ongoing saga of hedge fund regulation around the ...
A couple of weeks ago, we examined the "rational irrationality" in the way that closed-end hedge funds are traded. While you'd expect a flood of new hedge funds listings during periods when secondary market discounts were low; that was not always the case. In fact, a lot of hedge funds IPO'd closed end funds during recent rough spots for the industry.
Our friends at Opalesque report last week from Monaco where Tarun Ramadorai of Oxford University ...
In the pantheon of inefficient markets, one might expect commercial real estate to shine above all others. After all, buying and selling real estate (actual real estate, not REITs), can incur significant transaction costs, the market for real estate is heterogeneous and there is no single real estate marketplace to provide efficient pricing.
So does it follow that the management of commercial real estate investments offer up some juicy alpha opportunities? That's the question posed in ...
With hedge fund performance starting to look up, a reader recently suggested we check up on the trials and tribulations of "hedge fund replicators" - those who aim to clone the returns of hedge funds via passive exposure to highly liquid and ubiquitous investments. The most well understood method of doing is to use a factor model based on a trailing regression of hedge fund industry returns. One of the most prominent players in this ...
With the notable shenanigans perpetrated by some hedge fund managers, managed accounts seem like a no-brainer. After all, who wouldn't want to be in full control of their own private hedge fund? You could redeem whenever you wanted, get real time position-level transparency and even do your own valuations. But as we have suggested in the past, the situation is not quite this simple. Unfortunately, no managed account is an island. The legal separation of assets ...
Linear regression models (a.k.a. factor models) have a number of emerging applications in the hedge fund industry. One of the most often-cited here and elsewhere is hedge fund replication (see related posts). But as we discovered recently, regression-based models can also be used to estimate the daily returns occurring between monthly hedge fund reporting cycles (see related post). In addition, MIT's Andrew Lo has proposed several other applications of linear factors models to address ...
A lot of funds of hedge funds focus almost exclusively on smaller, newer hedge funds. Whether its due to the backfill bias that gives young funds apparent superpowers or simply because their managers are hungrier, newer hedge funds seem to outperform their older compatriots. Similarly, smaller funds (regardless of age) have generally performed better than larger ones. Small Fry Until now. Data analytics firm Pertrac, recently found that 2008 was an anomalous year since smaller hedge funds ...
Much of the financial calamity of the past couple of years has been pinned squarely on one culprit (that can assume a myriad of forms): complexity. As far back as early 2008, people were starting to blame complex strategies and financial instruments for the debacle that was unfolding before their eyes. The Wall Street Journal wrote on February 23, 2008 that: "The past decade has been the era of the hedge fund, as investors snapped them up ...
