dougfriedenberg

    Today's Post

    Missing the Market: An American Visits Nigeria Guest columnist Doug Friedenberg explores Nigeria as a frontier market.

    When we told friends and associates of our invitation to visit Nigeria,  they all said the same thing (excepting our esteemed editor, who worried about something else which was, at least, to be found in the subject country):  “Try not to catch ebola.”  Which, as you will see, summed up beautifully a misconception in the United States which requires only a few facts to set right.  Ebola’s epicenter is at least a thousand miles away from Nigeria.  Location-wise, worrying about catching ebola in Nigeria is more like worrying whether someone in Palm Beach might get hit by falling debris from the 9/11 tragedy in New York. Geography aside, we also knew that Nigeria had successfully quarantined and followed up on the first case that showed up there.  And we saw the country’s massive ongoing follow up.  Our temperature was tested both before AND after each flight. That's not to say that there aren't one or two points of concern about doing business in Nigeria.  A cadre of internet-literate Nigerians have done yeoman work ...

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 ...


Legislation/Court rulings

The Magnetism of Insider Trading: Part One
A three-judge panel of the appeals court instructed the district court to "dismiss the indictment with prejudice as it pertains to Newman and Chiasson." Here we discuss why. in the second part, we'll discuss the likely consequences.

Todd Newman and Anthony Chiasson have won an appeal from their convictions of insider trading. The big outstanding question for alpha seekers is whether this decision will have a tempering effect on ongoing prosecutorial efforts, and (if so) whether that will make life easier, the paths less booby-trapped, for aggressive equity-oriented traders. I hope to tackle that big question here in the near future. But as a preliminary, let’s talk today about the specifics of the issue before the three-judge panel of the Second Circuit that issued this decision on December ...

Real Estate

Does Leverage Have a Positive or Negative Effect on Private Equity Real Estate Investments?
Guest columnist Brad Case, Ph.D., CFA, CAIA, explores the effects of leverage on private equity real estate investments.

By Brad Case, Ph.D., CFA, CAIA On balance it’s probably positive, provided you’re in the market during enough good periods to offset the pernicious effects of leverage during bad periods. Unfortunately fund managers have managed leverage very badly. Here’s how to estimate the effect of leverage on the basis of typically available data: Since 2000Q1 the National Council of Real Estate Investment Fiduciaries (NCREIF, as part of its ODCE data base) has published quarterly data on three of the four items necessary to estimate the effect of leverage on gross total returns of ...

Technology

Qatar and the QIA: When the SWF Is Also a Family Office
The royal family in Qatar, the House of Thani, just took direct control of the emirate's sovereign wealth fund. Also, that fund just invested big in Uber, confirming its reputation as perhaps the worlds most aggressive deal-hunting institution.

In recent days, two important pieces of information about the Qatar Investment Authority, the emirate’s sovereign wealth fund, emerged into public consciousness. First, the emir has replaced the chief executive of the SWF, Ahmad Al-Sayed, with a royal family member, Sheikh Abdullah Bin Mohammed Bin Saud Al-Thani. The state-run news agency announced as much on December 3d. Second, the QIA has gotten behind the makers of the ride-sharing app, Uber. An Executive Sheikh-Up Taking the first, first: The emir, His Highness Sheikh Hamad bin Khalifa Al Thani, has gone beyond just appointing a new ...

Hard metals

Don’t Blame the Swiss: Results Discounted Days Before Vote
The price of gold took a swan dive as November ended, just as Swiss voters formally nixed an initiative that would have required the central bank to buy a lot of the stuff. Faille argues that this is not a matter of cause and effect. It is, on the other hand, a fascinating case study in the discounting machinery that is a market.

The voters of Switzerland have rejected the “Save Our Swiss Gold” initiative, a political effort to force that country’s central bank to buy thousands of tons of the stuff, in order to bring gold’s portion of that institution’s over-all assets up to 20%. At almost the same time as voters were heading to the polls, the price of gold headed sharply down. There exists a temptation in some quarters to connect those dots. It is best to resist that temptation. Markets look relentlessly ahead. They aren’t at all nostalgic. Nor do they ...

Technology

Plans for a Nickel-Tick Pilot: Trouble in the Details
Observers of the slow slog toward an empirical test of larger tick sizes have raised concerns about the details of the three-track plan under consideration. In particular, there's an order-protection feature for one of the three "tracks" that has raised the hackles of Larry Tabb and the STA

One of the provisions of the JOBS Act of 2012 strongly suggested that the Securities and Exchange Commission experiment with the tick sizes of securities. There is an impressive case to be made that wider tick sizes support an infrastructure that has various positive effects that have been squelched by the 1990s move to doing everything in pennies or smaller increments still. Accordingly, in February 2014 the House of Representatives passed a bill more specifically targeted ...

Asset allocation

Election direction, market correction, asset selection…it’s all an investment question
In the U.S., the midterm elections will largely dictate the course of the remaining years of the current presidential term. This course also plays a major role in the future direction and relative strength of the US markets, which subsequently impact advisors’ decision-making for client portfolios. The interplay between these three areas justifies a closer look at how their relationship correlates to the process of investment management.

By Diane Harrison In the world of investment management, 2015 will arrive with little fanfare but perhaps more trepidation than usual. Advisors will consider a myriad of factors, both economic and not, which weigh on their overall investment decisions. The variables are many, and the impact on individual portfolios more so. How to navigate through the financial jungle facing their clients? In the U.S., the midterm elections will largely dictate the course of the remaining years of ...

Investment Management Fees

Aligning Interests: Side Pockets, Side Letters, and Central Issues
A proposed new set of principles, designed to encourage investors in the alt-investment industry in their discussions with their managements, encourages skepticism both about side-pocketed assets and about other investors' sweetheart deals (i.e. "side letters.")

Three big issues concern the Alignment of Interests Association, a gathering of investors in alternative investment vehicles who want to ensure (as their name suggests) that their interests are properly aligned with the interest of the managers of those vehicles. The three major areas of concern or threats of misalignment are: economic and liquidity terms; documentation and governance; transparency, valuation & disclosure. Economic and Liquidity Terms Accordingly, the AOI has proposed a set of principles, or best practices, ...

Alpha Strategies

The need-to-knows of Master Limited Partnerships (MLPs)
Guest columnist Andrew Smith, CAIA, deep dives the Master Limited Partnership (MLP) structure.

By Andrew Smith, CAIA Master Limited Partnerships, commonly referred to as MLPs are often viewed as a tax advantaged structure for an energy infrastructure company. While this definition is not inaccurate, it is an oversimplification of the MLP industry.   Companies structured as partnerships, including MLPs, do not pay income tax at the company level, providing them a tax advantage by eliminating the double taxation of a corporate structure. Many MLPs, unlike most partnerships, are publicly listed ...