All About Alpha Exclusive: An interview with Alexander Ineichen, author of “Asymmetric Returns”
Mar 7th, 2007 | Filed under: Institutional Investing, Performance, Analytics & MetricsWith their perfectly-timed trains and neatly-arranged homes, the Swiss are big fans of symmetry. This makes UBS’s resident hedge fund guru Alexander Ineichen all the more of an anomaly. His book Asymmetric Returns has been garnering a lot of attention not because it espouses order and regularity, but because it so vocally challenges the status quo, refutes conventional wisdom and, well, questions symmetry itself.
Before addressing a record crowd at an AIMA Canada event in Toronto earlier today, Ineichen (rhymes with Heineken) sat down with AllAboutAlpha’s Alpha Male to discuss issues including: 130/30 strategies, alternative beta, ”peak alpha”, the CAIA designation and recent attacks on the CAPM.
AM: You are a founding board member of the Chartered Alternative Investment Analyst (CAIA) program. Has the dramatic growth of the CAIA designation surprised you?
The growth of the program has exceeded my expectations. The institutionalization of hedge funds has always been a major theme of my research and it has also helped power the growth of the designation. The CAIA is a unique program that includes material not covered by the CFA. I’m often asked if it’s a substitute for the CFA. My response is that if you’re unmarried, then go ahead and do a CFA, but if you’re married and have kids, then the CFA may be just too much work.
AM: What did you learn after writing your first book Absolute Returns that compelled you to write this latest book?
Absolute Returns was based almost entirely on my UBS research reports “In Search of Alpha” and “The Search for Alpha Continues”. But Asymmetric Returns is based largely on new research conducted between 2003 and 2005. The motivation was to explore whether alpha and beta alone captured what we do the in hedge fund industry. A piece I wrote in 2005 called “A Critique of Pure Alpha” argued that alpha and beta don’t fully capture the value proposition of alternative investments.
Alpha is a term from the 1960’s. It relies on a linear model that is now somewhat outdated. Now we think, model and manage in a non-linear environment. While alpha and beta are convenient, I think perhaps we need to move on. Asymmetric Returns attempts to define this space beyond the CAPM.
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[…] Alexander Ineichen echoes this assertion in his book Asymmetric Returns.  Ineichen recently told All About Alpha: “I believe you can view the tech bubble of the 1990’s as a massive market inefficiency. But (on the other hand) inefficiencies in smaller markets can be arbitraged away much easier and faster.” […]
[…] The only myth we’re not sure we fully agree with involves hedge fund replication. Easterling wades into this debate by pointing out that it’s no surprise hedge funds have been correlated with the market over the past 5 years, since the market has risen over this time (the suggestion being that hedge funds will continue to rise even if markets tank). This is a valid argument and one also made by Alexander Ineichen. But Easterling’s branding of hedge fund replication as a “freshman mistake in statistics” is a little far-fetched.  […]