All entries by this author

Foundations: They’ve Taken a Blow from “Subdued” Markets

Sep 2nd, 2015 | Filed under: Hedge Fund Industry Trends, Hedge Fund Strategies, Indexes, Institutional Investing, Liquid Alts, Performance, Analytics & Metrics, Risk management, Today's Post

Both private and community foundations depend heavily on U.S. equities. Indeed, domestic equities remained the bright spot while other strategies underperformed in 2014. A new report from a collaboration of the Council on Foundations and Commonfund provides food for thought about the reversal in foundation returns in that year. The Study of Foundations by this […]

The Enablers of the Fraudsters, Part I

Sep 1st, 2015 | Filed under: Best Practices, Insolvency, Regulatory, Today's Post

A new lawsuit against the corporate and individual enablers of a securities fraudster moves forward. The former are "alleged" enablers, but the latter is a convicted fraudster, already serving his time. Faille seeks to draw lessons. Part One of Two.

Administration, via Verrelli, Rolls the Dice on Insider Trading Issue

Aug 31st, 2015 | Filed under: Alpha Hunters, Hedge Fund Strategies, Legislation/Court rulings, Today's Post

Not all benefits are as tangible as a suitcase of cash, and the question of law for the Second Circuit, for the Ninth, and now perhaps for SCOTUS is: is friendship enough? how about regard for one's brother?

What Taper Tantrum?  And, Will Yellen Pull a Bernanke?

Aug 30th, 2015 | Filed under: Alpha Strategies, Hedge Fund Industry Trends, Indexes, Macroeconomics, Today's Post

The head of the New York Fed said on Wednesday, August 26th, that "the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago." We may be about to see another Fed retreat, analogous to that of a little more than two years ago.

Cause and Effect: Or, Shooting the Messenger

Aug 27th, 2015 | Filed under: Academic Research, Behavioral finance, Media Coverage of Hedge Funds, Today's Post

Not even Schrodinger blamed the reporters for market irrationality. Saying out loud, "Hey, this cat is dead," doesn't kill the cat.

CFTC Exempts ASX Clear from DCO Registration

Aug 25th, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Commodities, Hedge Fund Industry Trends, Today's Post

The CFTC has issued its first exemption from the CDO registration mandate under 5b (h). The successful petition for that exemption, from ASX Clear, has the additional merit of having inspired an idiosyncratic seeming, but concise, comment letter, quoted in full here.

When Underfunded Pension Funds Take Up Social Responsibility Investing

Aug 24th, 2015 | Filed under: Best Practices, Corporate governance, Institutional Investing, Legislation/Court rulings, Socially responsible investing, Today's Post

In November 2014, Scott Stringer, New York City's Comptroller, launched a campaign he called the Boardroom Accountability Project. Bernard Sharfman makes a case that this BAP is a good example of much that is wrong with institutional/activist investing today.

Study Says The Gold Bugs are Right

Aug 23rd, 2015 | Filed under: Currencies, Forex, Gold, Hard metals, Risk management, Today's Post

Gold seems, to a larger extent than silver, and even more so to an extent larger than is true for palladium or platinum, to work as a true financial asset: decoupled from price developments in the commodity markets. It succeeds as a hedge against currency and stock-market trouble.

Weintraub of GFT: Basel III Coming Into Force by Increments

Aug 20th, 2015 | Filed under: Asset allocation, Hedge Fund Industry Trends, Regulatory, Risk management, Today's Post

Faille spoke recently to Herman Weintraub, executive director and head of alternative investment practices at GFT, about the impact of the Basel III rule changes upon the HF industry. Weintraub says, one ought to look not at the parts, but at the whole.

Eurekahedge: The Markets are Reading the Headlines

Aug 18th, 2015 | Filed under: Alpha Seekers, Alpha Strategies, Commodities, CTA, Currencies, Hedge Fund Strategies, Today's Post

In the three month period that ends with July, Eurekahedge’s Greater China Index (which has 85 constituents) is down 9.39%. That has come about for precisely the reasons that a reader of the pertinent headlines would guess.

Another Southeast Asia Currency Crisis

Aug 17th, 2015 | Filed under: Currencies, Emerging markets, Forex, Today's Post

China's moves in recent days seem likely to set off a new Southeast Asia currency crisis, which will look a lot like the old Southeast Asia currency crisis. This was clear even on August 11th, when traders in the rest of the world were apparently working on the premise that China's move that day was a one-off.

Commodities & Currencies From May to August: How Much Has Changed

Aug 12th, 2015 | Filed under: Commodities, Currencies, Insolvency, Today's Post

What a difference a summer makes! In May of this year it was still taken for granted that the "normalization" of Federal Reserve policy and so of U.S. interest rates approached. Now, that cannot even remotely be taken for granted.

Event-Driven Hedge Funds Rescued by Obamacare

Aug 11th, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Alpha Strategies, Hedge Fund Industry Trends, Hedge Fund Strategies, Institutional Investing, Today's Post

Obamacare's impact on the investment world may have been mitigated until very recently by the protracted and complicated litigation that the law immediately generated starting with its enactment in 2010. But now....

SEC’s Daniel Gallagher: Friend of the Beleaguered CCO

Aug 10th, 2015 | Filed under: Best Practices, Hedge Fund Regulation, Regulatory, Risk management, Today's Post

Commissioner Gallagher contends that some recent enforcement actions "have unfairly contorted the rule to treat the compliance function as a new business line," thus giving compliance officers the unwelcome role of business heads. In this and other respects, Gallagher says the agency is setting up a perverse system of incentives for those who ought to be its allies, the CCOs of IAs.

The LIBOR Fixing Scandal Gets a Conviction and a Book

Aug 9th, 2015 | Filed under: Book review, Currencies, Derivatives, Forex, Today's Post

When it all hit the fan, U.S. investigators in particular (the Brits somewhat less so) came to see Hayes as a mastermind behind its digestive generation. But Arvedlund seeks in her new book on the Libor Rigging scandal to place the role Hayes played in context.

Fractal Ambiguity in the AIFMD Passport Status of the U.S.

Aug 6th, 2015 | Filed under: Regulatory, Today's Post, UCITS

What does the road to passport status look like for the US, regarding Europe's AIFMD? It looks rocky, and ESMA seems disinclined to draw a legible map. Instead it offers ambiguity and links to further ambiguity in the footnotes of its report.

The Varoufakis Tape: Part Two

Aug 4th, 2015 | Filed under: AAA Newsreels, Currencies, Today's Post

Faille returns to the matter of a recorded conversation in which a former Greek finance minister talked about German ideas that ought to have the French government worried. Specifically, it is allegedly Werner Schäuble’s intention to scare the French into abandoning sovereignty. Greece is just a pawn.

The Varoufakis Tape: Part One

Aug 3rd, 2015 | Filed under: AAA Newsreels, Currencies, Today's Post

In a newly released recording (of a conversation apparently intended to remain secret somewhat longer), the former finance minister discussed the cloak-and-dagger task force that had drawn up plans for a Grexit. And, looking forward, he talked about German ideas that ought to have the French government worried.

The Strength of Multi-Strat Is No Mystery

Aug 2nd, 2015 | Filed under: Alpha Hunters, Alpha Strategies, Hedge Fund Industry Trends, Hedge Fund Strategies, Institutional Investing, Investment Management Fees, Today's Post

Credit Suisse Capital Services says that appetite has increased of late, among institutional investors, for multistrategy funds. Faille offers some thoughts as to why.

Crisis? Tempted to Flee to Shelter of Big Funds? Bad Idea

Jul 29th, 2015 | Filed under: Academic Research, Alpha Hunters, Alpha Strategies, Behavioral finance, CAPM / Alpha Theory, Hedge Fund Industry Trends, Hedge Fund Strategies, Institutional Investing, Today's Post

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.

PwC on Mergers and Acquisitions Activity

Jul 28th, 2015 | Filed under: Agriculture, Alpha Strategies, Currencies, Today's Post

"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. "

A New Look at Last Year’s Conference Board White Paper on Governance

Jul 27th, 2015 | Filed under: Best Practices, CAPM / Alpha Theory, Conference report, Corporate governance, Today's Post

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.

Enterprise Software Marketers Confirm: Seven is a Sacred Number

Jul 21st, 2015 | Filed under: Best Practices, Regulatory, Technology, Today's Post

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.

Delivering Alpha Highlights: Part Two

Jul 20th, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Alpha Strategies, Conference report, Hedge Fund Strategies, Today's Post

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.

Delivering Alpha Highlights: Part One

Jul 19th, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Alpha Strategies, Conference report, Corporate governance, Currencies, ETFs, Media Coverage of Hedge Funds, Today's Post

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.

SBA of Florida Looks into Truth & Consequences of Activist Investing

Jul 16th, 2015 | Filed under: Best Practices, Corporate governance, Institutional Investing, Risk management, Today's Post

Florida's State Board of Administration deserves some credit for undertaking a recent corporate governance study. Even trying to look at the consequences of its proxy-contest votes over a period of up to five years after they are cast seems to have shattered a glass ceiling separating actual institutional behavior from common sense.

Climate Finance: A Priority for the MDBs

Jul 15th, 2015 | Filed under: Climate change, Social investing, Socially responsible investing, Technology, Today's Post

A new report from the World Bank says that six multilateral development banks delivered more than $28 billion in financing in 2014 that "address climate change" in one of two ways, mitigation or adaptation.

SEC: KKR Misallocated ‘Broken Deal’ Costs

Jul 14th, 2015 | Filed under: Private Equity, Regulatory, Risk management, Today's Post

A recent SEC finding at the expense of KKR illustrates the risk inherent in non-allocation, or careless allocation, of broken-deal expenses, and illustrates that lawyers don't necessarily use the word "deceit" to mean what one might think it means.

Predicting the Re-Creating of the Drachma

Jul 13th, 2015 | Filed under: Currencies, Insolvency, Today's Post

The prime minister has pushed aside the Greek Finance Minister, Varoufakis, and has replaced him with Tsakalatos. Is this change a matter of conciliation? or further defiance?

The Old Puzzle of SRI: India and France

Jul 12th, 2015 | Filed under: Academic Research, Alpha Seekers, Alpha Strategies, Social investing, Socially responsible investing, Today's Post

The conclusion of two Indian scholars in a new study supports the view that socially responsible investing is good for investors in India. But Faille worries that the battle-of-the-studies has thus far been indecisive, and that aerodynamics suggests this insect shouldn't be able to fly.

Aleynikov Again: State Jury Conviction Set Aside

Jul 8th, 2015 | Filed under: Algorithmic and high-frequency trading, Legislation/Court rulings, Technology, Today's Post

The judge's ruling setting aside the jury's guilty verdict is, of course, grand news for Aleynikov. It is also the curtain on a sometimes farcical spectacle. But let us not forget that there are issues of principle involved.

Usury Law: Not Too far From the Madden Crowd

Jul 7th, 2015 | Filed under: Derivatives, Legislation/Court rulings, Regulatory, Today's Post

National and international markets have long been accustomed to the fact that various states in the United States have their own usury laws. Still, litigation in the 2d Circuit, arising out of New York, may have a substantial impact on credit markets and their derivatives.

SCOTUS on Copyright Means a Win for Fences: Loss for the Noosphere

Jul 6th, 2015 | Filed under: Institutional Investing, Intellectual Property, Today's Post

An idea for the hierarchical design of a platform's APIs, and a particular expression of that idea, walk into a bar. What's the punch line?

PwC Looks Ahead to 2020: Offers a Roadmap for Alternative Investment Managers

Jul 5th, 2015 | Filed under: Best Practices, Emerging markets, Hedge Fund Industry Trends, Hedge Fund Strategies, Infrastructure, Technology, Today's Post

PwC offers a glimpse of a 'day in the life' of a typical compliance analyst in 2015 and again in 2020. As these authors tell it, the day is filled with data, darkness, and drudgery at present, but it will be airy, alliterative, and analytical in another five years.

Bitcoin and Kin: The View from Europe

Jul 1st, 2015 | Filed under: Asset pricing, Currencies, Derivatives, Today's Post, Virtual currencies

Bitcoin's price charts nowadays seem to have settled into an equilibrium between $240 and $220 per. But ESMA, and the authorities in Sweden, are both paying attention.

Rogue Trader Adoboli’s Return to Freedom: Down Memory Lane

Jun 30th, 2015 | Filed under: Alpha Strategies, Risk management, Today's Post

Perhaps the fate of Kweku Adoboli, whose roguish trading at UBS' expense came to light in September 2011, can serve now in the summer of 2015 as a caution for some in the European elite contemplating the long stand-off between Syriza and the Troika.

Dead Hand Proxy Puts: A Case Study

Jun 29th, 2015 | Filed under: Best Practices, Insolvency, Legislation/Court rulings, Today's Post

The creation of a so-called Dead Hand Proxy Put in the Healthways matter was especially egregious because it took place immediately after the board had agreed, under considerable shareholder pressure, that it would de-stagger its elections. The appearance then was that after giving up one defensive moat, the incumbents with the help of lenders immediately created for themselves another.

European Investor Satisfaction with Smart Beta ETFs

Jun 28th, 2015 | Filed under: Academic Research, Alpha Strategies, CAPM / Alpha Theory, ETFs, Liquid Alts, Risk management, Smart Beta, Today's Post

Two authors at EDHEC remind us that 15% of the assets in any ETF or ETF-like products for European investors were in smart-beta indexed products as of August 2014, and that this amount is growing. They discuss the extent to which investors are pleased with their results.

Fractional Reserve Banking: From First Premises

Jun 24th, 2015 | Filed under: Currencies, Regulatory, Today's Post

Banks are in the liquidity transformation business, and that is a critical role. But the ossification of the institutions that perform that role, by tradition, assumption, and concomitant regulation, is a threat to its success.

Headline Factors and Hedge Fund Success

Jun 23rd, 2015 | Filed under: Indexes, Macroeconomics, Performance, Analytics & Metrics, Today's Post

European mandated hedge funds, benefitting from improved expectations regarding that region, are up 5.54% year to date, says Eurekahedge. Wait: improved expectations? Yes, notwithstanding continued Greek drama.

Vindication for Pirrong and Irwin: Why Are Trafigura’s Profits Up?

Jun 22nd, 2015 | Filed under: Commodities, Derivatives, Indexes, Media Coverage of Hedge Funds, Today's Post

Trafigura has done quite well from the decline in crude oil prices in recent months. So well, in fact, as to throw a harsh light on a story that appeared in The New York Times in December 2013.

Mladina on Peeling the Onion: Looking for Idiosyncratic Skill

Jun 21st, 2015 | Filed under: Currencies, Emerging markets, Indexes, Performance, Analytics & Metrics, Today's Post

Factor models will evolve as researchers untangle what value is to be attributed to what factor. Model selection, then, has to remain flexible to keep pace with such research, and must of course remain useful for the investment decision makers.

Basel: What Does IRRBB Demand from Supervisors or Bank Boards?

Jun 18th, 2015 | Filed under: Regulatory, Today's Post

Central bankers now believe that they have to fix as supervisors what central bankers have wrought as money creators. The gnomes of Basel say that the interest rate risk management regime needs work because central bankers have given the world a prolonged period of exceptionally low interest rates, which has inevitably raised the stakes in this area.

Spoofing: The ‘It’ Enforcement Action

Jun 17th, 2015 | Filed under: Algorithmic and high-frequency trading, Derivatives, Hedge Fund Strategies, Regulatory, Technology, Today's Post

Spoofing is probably about as ubiquitous as texting-while-driving. And it is possible to make an example of a spoofer caught red-handed. But it isn't clear what purpose that will serve. The real problem is that a broken market contains a broken set of incentives.

Who Will Meet Yahoo at the Altar?

Jun 16th, 2015 | Filed under: Alpha Strategies, Intellectual Property, Real Estate, Technology, Today's Post

There was some excitement as recently as January 2015 over renewed talk of a Yahoo/AOL deal, but after the bloom finally came off that rose, YHOO settled into a trading range has been roughly from $42 to $46. Faille guesses that there is an opportunity here on the upside of that range, because another suitor is bound to appear.

Activism: Why the Short-termers Can Be Right

Jun 15th, 2015 | Filed under: Academic Research, Asset pricing, Hedge Fund Strategies, Media Coverage of Hedge Funds, Today's Post

Much of the ubiquitous talk of the short-sightedness of nasty activist investors or traders is simply confused, analytically sloppy. It is a sort of confusion likely to have negative consequences to the extent that investors/traders themselves come to take it seriously.

House of Saud Retains Plenty of Clout

Jun 11th, 2015 | Filed under: Commodities, Macroeconomics, Today's Post

A measured view of the underlying reality of the world market in crude oil suggests that the price may have gone as low as the Saudis want it to go. For traders there may be little if any further gain on the downside.

A Close Look at the Deutsche Bank Findings

Jun 10th, 2015 | Filed under: Asset pricing, Best Practices, Derivatives, Risk management, Today's Post

Judy Collins might suggest looking at risk from ‘both sides now.’ But it appears that according to DB at a critical moment in global financial history, risk existed only to the extent that it worked to enhance the value of DB positions: it didn’t exist in any sense that might have required a haircut.

Java IP War: The Obama Administration Picks the Wrong Side

Jun 8th, 2015 | Filed under: Intellectual Property, Technology, Today's Post

The Solicitor General, speaking for the United States, has filed the expected amicus brief in the Google/Oracle showdown. The SG's position is that the Supreme Court should refuse to hear the case so that the lower courts can get back to using what the brief calls the "flexible fair use doctrine" to do justice.

One Decision, Two Courts, Three Nations, Four Angles

Jun 3rd, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Insolvency, Media Coverage of Hedge Funds, Today's Post

Faille is struck by a brief passage in the recent Nortel decision (the Delaware side of the Delaware/Ontario concord over allocation) that suggests the degree to which the United States dominates the patent-granting as well as the patent-litigating world. Like what the U.K. is for defamation....