Today's Post

    A Taylor-Swift Lawsuit: ‘I’ve Got a Blank Space Baby.’ This is the story of one high-frequency trading firm suing one or more others and giving detailed credence to everything that has been said over the last year or so by those who bemoan the rise of HFT firms.

    In a class action lawsuit filed in the Northern District of Illinois, HTG Capital Partners claims that the U.S. Treasury futures market is rigged by a user of the HFT tactic of “spoofing.” Specifically, the CBOT in Chicago is the scene of the crime, of a “clear, discernable, and consistent pattern of manipulative and disruptive trading” in five, ten, and thirty-year Treasury futures. The intriguing part: who is HTG Capital Partners? HTG boasts on its webpage of “latency-sensitive algorithms implemented on multiple co-located facilities.” In short, this is an HFT firm suing one or more other HFT firms and giving, by its allegations, detailed credence to everything that has been said in the last year by those who bemoan the rise of HFT firms. But who is on the other side of the lawsuit? The Defendant(s) is John Doe, or are John Does. Suing an Anonymous Somebody What’s the point of suing Anon? In this case, much of the point is that a lawsuit creates an opportunity to elicit information from a third party who ...

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

(March 24 update) We present here recent anecdotals on the subject of climate change.  It's a topic that affects many industries: insurance, real estate, energy (renewable and non-), food, water, national defense, to name a few.   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.  There's an argument to be made that investors who accept the settled science ...

Guest Posts

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 ...

Alternative energy investing

The Fossil Fuel Divestment Debate for Fiduciaries: It’s the Portfolio….
The typical investment manager is more likely to understand the divestment argument if he is shown that the dynamic effects of climate change on his fossil fuel portfolio holdings will be like a knife to the brain of one of TV's Walking Dead zombies, portfolio splatter included.

What's a Poor, Gainfully Employed Fiduciary to do? Charles Skorina discussed the fiduciary's obligation vis-a-vis the movement to divest fossil fuel investments from many endowment portfolios on these pages on March 5. He argues against divesting because of fiduciary responsibilities and says: "What the divestment debate comes down to is how boards define their fiduciary duty. Traditionally that duty included getting the best possible returns from donated funds consistent with an appropriate level of risk."  We'd agree that this is de rigeur if one is to be the very model of a modern major fiduciary. We suspect ...

Risk management

More Global Mandates, Fewer EM Mandates, and Other Changes
Eurekahedge's latest report gives a number of timelines for grappling with changes in the hedge fund world: since 2007; since January 2013; YTD January 2015. In any frame, you don't have to be a meteorologist....

The March 2015 report from Eurekahedge makes a point of how much the hedge fund world has changed since 2007. For example, the share of globally mandated funds has risen to 65.7%, up 8.1% from eight years ago, because geographic diversification has become an important part of diversification sans adjective. Eurekahedge makes the related but distinct point that investing in a globally mandated fund is a cautious way of getting some exposure to the emerging market word. It’s just a lot less scary that investing directly in an EM fund. The ...


KPMG, MFA & AIMA: Institutional Investors & Customization
Surveys suggest that certain conspicuous ongoing trends will continue. For example, the classic 20 + 2 fee structure will continue to crumble, replaced by "customized" structures. A full 91% of the small hedge fund managers who filled out a survey agreed with this. A mere 76% of large hedge fund managers did likewise.

KPMG, the Managed Funds Association, and the Alternative Investment Management Association have jointly issued a report on the future of the hedge fund industry. The gist of the report will likely surprise few within the industry. What it amounts to is: certain conspicuous ongoing trends will continue. For example: institutional investors now drive and will continue to drive the growth of the industry. Most of the managers surveyed for the report say that pension funds in particular will be their primary sources of capital by 2020. Why pension funds? In large part ...

Legislation/Court rulings

A Defeat, but Not a Rout, for Appraisal Arb
The Delaware Chancery Court would apparently have preferred to stay out of the issue of valuation as it played itself out in the 2012 acquisition of by Permira. But it couldn't: the statute encouraging appraisal fights was too clearly worded for that.

The law firm Wachtell Lipton, for decades now a powerful advocate for corporate managements against stockholder activists and other challengers, takes an almost triumphalist view of a recent Delaware court decision in the matter of I can’t agree that managerial triumphalism is warranted here. But let’s look at what happened, and then get back to the issue of what it means. The opinion was a defeat for the petitioners, who had sought to persuade the judge that the fair value of the stock of Ancestry was well above the $32 that ...


Intraday Momentum Confirmed: Day Traders Credited
The first half-hour return of the S&P 500 ETF predicts the last half-hour return of the same trading day rather well. Why isn't this effect arbitraged away and a random walk restored?

If a drunk is walking randomly around a lamppost, then the fact that his first step of the day was away from the lamp post is supposed to tell us nothing about the direction of his next step, or his last step of the day. Of course, in saying so I’m rather stretching that old thought experiment, because I have to assume that the experimenters have kept him drunk all day – perhaps with an ...


Most Investors Sanguine About Central Clearing Mandates
The international push to mandate central clearing has expanded the clearinghouses "well beyond levels the market has ever seen," Greenwich Associates reminds us in a new report. This is an experiment, and there remains some grounds for uncertainty about the outcome.

A new report by Greenwich Associates looks at the pros and cons of central clearing from the point of view of participants in the interest-rate derivatives markets. The report is the result of a two-round survey. First, in 2014, GA interviewed 4,036 global fixed-income investors about their dealer relationships and use of various fixed-income products including interest-rate derivatives. Separately, GA conducted another 72 more in-depth interviews about market participant “views on systemic risk, the impacts of central ...

Retail Investing

ESMA to Member States: You’re Not Doing Enough Re: MiFiD
A newly released report tells us that ESMA is unhappy with the national "competent authorities" as to how they've enforced MiFiD. the report implies that the adjective in the phrase "competent authorities" is to be understood as a courtesy rather than a description.

Authorities released last month a review of Europe’s 2010 Markets in Financial Instruments Directive, or MiFiD. Specifically, the European Securities and Market Authority published a peer review on the way in which the national regulators in Europe have supervised and enforced the MiFid provisions concerning firm’s obligations on best execution. Alpha seekers would be well advised to review this report an early warning of the sort of continued regulatory tightening that may be in store. Paris-based ESMA ...

Hedge Fund Industry Trends

Women in Senior Roles in Alternative Finance: The Marathon Continues
Funds of funds are quite different entities from single-manager funds from the point of view of the number of women in senior C-suite roles. Different in what direction? That depends upon the country under consideration.

First: I have to protest on a matter of vocabulary. No matter how completely lost a battle this is, it is still worth while getting off a shot. Human beings don’t have a “gender.” Human beings have a sex. Words have a gender! A new report from Preqin draws attention to hedge funds in the Asia-Pacific region and their employment of women. As is all-too-common in the 21st century, the report refers to “gender equality” although ...