Browsing: Featured Post

Featured Post

The Next Crisis: BIS Warns of ‘Financial Vulnerabilities’ in EME/NFCs

Aug 25th, 2016 | Filed under: Currencies, Emerging markets, Finance & Economics, Macroeconomics, Newly Added, The Global Economy & Currencies

In a recent paper submitted to the G20’s working group on international financial architecture, scholars with the Bank for International Settlements have warned that an accumulation of debt in the years since the global financial crisis has left the emerging market economics (EMEs) vulnerable to capital outflows. The authors ofRead More


The Shale/Fracking Revolution: 1998 to 2011

Aug 23rd, 2016 | Filed under: Commodities, Commodities, Commodities: Examples, Investing in Commodities, Newly Added, oil

A critical revolution in the crude oil and natural gas markets began 18 years ago. Gary Sernovitz, who has given the world his thoughts on this revolution in the new book The Green and the Black, has had some convenient seats whence to observe, most recently as a managing directorRead More


Risk-Adjusted Time Series Momentum Strategies

Aug 21st, 2016 | Filed under: Finance & Economics, Financial Economics Theory, Hedge Funds, Macro and Managed Futures Funds, Newly Added

The name is awkwardly long, and the standard abbreviation, “RAMOM,” sounds like what one says when cheering on one’s mother as she nears a finish line. Still, risk adjusted time series momentum strategies have something to be said for them, in comparison to cross-sectional momentum (MOM without preface), or evenRead More


New Support for a 40-Year-Old Theory about IPOs

Aug 18th, 2016 | Filed under: Finance & Economics, Financial Economics Theory, Newly Added

It is always aesthetically pleasing to see something elegant brought down from an attic, dusted off, and found to be of continuing value as part of the home’s furniture. Back in 1977, Edward Miller offered a hypothesis about the price move patterns distinctive to newly listed stocks.  In “Risk, Uncertainty,Read More


Sovereign Credit Swaps: Europe’s Sovereigns and Regime Changes

Aug 16th, 2016 | Filed under: Allocating to A.I., Asset allocation, Asset Allocation Models, Credit Derivatives, Newly Added, Regulatory Environment, Structured Credit Products, Structured Products, The A.I. Industry

Andrea Consiglio and two of his colleagues have developed models for the management of risk in the sovereign credit swaps market, and they have successfully back tested these models against recent European history. Consiglio is a professor at the University of Palermo, in Italy. Sovereign CDS’ are contracts that offerRead More


Why are Bank Stress Tests like Student/Instructor Evaluations?

Aug 15th, 2016 | Filed under: Newly Added, Risk management, Risk Management Strategies & Processes

Two scholars affiliated with Columbia University have contributed to the ongoing discussion of Federal Reserve stress tests and their consequences in an article in the Journal of Alternative Investments. Stress tests have become a big part of the U.S. regulatory scene since 2009, with the creation that year of theRead More


New Paper Tackles Basic Questions About Alternative Investments

Aug 11th, 2016 | Filed under: Allocating to A.I., Alternative Investments in Context, Asset allocation, Asset Allocation Models, Newly Added, The A.I. Industry

RCM Alternatives, a Chicago-based asset manager specializing in managed futures products, has published a new white paper asking the naive-seeming question, “Why Alternatives?” The paper begins with the observation that many alternative investors look to this field for an answer to a specific problem:  hedging the long position in equitiesRead More


NB: China Positions the Yuan for Global Reserve Currency Status

Aug 9th, 2016 | Filed under: Currencies, Forex, Newly Added, The Global Economy & Currencies

Neuberger Berman, the asset management business spun off from Lehman in late 2008, has produced a new report on foreign access to China’s bond market. China has until now kept its bond market tightly fenced off from the rest of the world, which offers a marked contrast with the behaviorRead More


Study Says Pensions May Be Looking for Returns in the Wrong Places

Aug 7th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Newly Added, Private Investments, Real Estate Equity Investments

Alex Beath, senior research analyst at CEM Benchmarking, the Toronto-based pension research firm, has produced a white paper on the pension fund performance in the U.S. since 1998, and the news he brings is not good (for pension funds themselves, or for the hedge funds to which they have allocatedRead More


Headline vs. Core Inflation: We Shouldn’t Have Laughed

Aug 4th, 2016 | Filed under: Commodities, Hedge Funds, Investing in Commodities, Newly Added, Structure of the Hedge Funds Industry

I’m old enough to remember the 1970s, and to remember the economic debates in the United States at the time concerning the inflation of that era. The U.S. left the Bretton Woods system near the start of the decade, thus ushering the “free float” of currencies against one another inRead More


Waiting for Normalization: Issuing Convertibles

Aug 2nd, 2016 | Filed under: Hedge Funds, Newly Added, Relative Value Hedge Funds

A moderate increase in the issuance of convertible bonds globally over the last three years came about only after a long post-crisis decline. At the convert market’s peak, in 2007, issuers placed $160 billion of these instruments. The placement for 2008 was only half that. By 2012 the market wasRead More


Stocks after Shocks: Equity Returns in the Face of Monetary Policy

Jul 31st, 2016 | Filed under: Economics, Finance & Economics, Financial Economics Theory, Newly Added, The Global Economy & Currencies

A new paper by two economists affiliated with the Federal Reserve System presents a new measure of the monetary policy exposure of individual stocks. The simplest approach to this task would be to regress individual stock returns around major central bank moves (“shocks”). But that turns out not to beRead More


Eurekahedge: Performance Down, Inflows Up in 1st Half 2016

Jul 28th, 2016 | Filed under: Equity Hedge Funds, Event-Driven Hedge Funds, Finance & Economics, Hedge Funds, Macro and Managed Futures Funds, Newly Added, The Global Economy & Currencies

The latest report from Eurekahedge indicates that hedge funds’ assets under management are up by $19.9 billion in the first half of 2016 worldwide. Eurekahedge, which tracks the health of the hedge fund industry month by month, also says that total industry performance-based results were down, $5.2 billion, so moreRead More


Litigating in the Wake of Manning

Jul 26th, 2016 | Filed under: Equity Hedge Funds, Hedge Fund Strategies, Hedge Funds, Newly Added

The United States Supreme Court preserved a role for state courts in securities litigation in a case involving accusations of ‘naked shorting,’ Merrill Lynch v. Manning, a May 2016 decision. Although the case involved specific state law claims, it also prominently referenced the Securities and Exchange Commission’s Reg SHO inRead More


Herbalife and Ackman: A History 

Jul 24th, 2016 | Filed under: Equity Hedge Funds, Event-Driven Hedge Funds, Hedge Funds, Newly Added

On July 15, 2016, Herbalife Ltd and the Federal Trade Commission reached an agreement that settles the FTC’s complaint. The company has agreed to pay $200 million to compensate consumers who may have been deceived into a rose-colored view of their prospects selling the branded diet and personal care productsRead More


Volatility Spillover Effects: India, Korea, China

Jul 21st, 2016 | Filed under: Commodities, Currencies, Finance & Economics, Investing in Commodities, Newly Added, The Global Economy & Currencies

Last year, two scholars writing in the Journal of Alternative Investments looked at the volatility spillover effects in the Chinese stock index futures and spot markets.  The question for them was whether there is spillover from spot markets into futures markets and back. I propose to give you their answer,Read More


Taking the Alcohol Out of the Wine:  A Decarbonized Index

Jul 19th, 2016 | Filed under: Climate change, Newly Added, Other Topics in A.I., Socially responsible investing, SRI and Clean Energy

A recent publication in the Financial Analysts Journal presents a model by virtue of which long-term passive investors may hedge the risks associated with climate change and/or with climate change related public policies. One incidental feature of the article is the sense it provides of the difference between carbon-free indexesRead More


Crude Oil at Mid-Year: IEA Assessment

Jul 17th, 2016 | Filed under: Commodities, Commodities: Examples, Newly Added, oil

As this year began, crude oil prices were stuck at their lowest level in twelve years. The world seemed to be bulging with surplus of the stuff. In January, the International Energy Agency estimated that the excess of supply over demand through the first half of the year would beRead More


Private Capital Fundraising Slows: Green and Brown Valleys

Jul 14th, 2016 | Filed under: Farmland, Infrastructure, Natural Resources and Land, Newly Added, Operationally Intensive Real Assets, Other Topics in A.I., Real Assets, Real Estate, Real Estate Equity Investments

Preqin, the multinational data and consulting firm, has looked at the second quarter and found it was, for private capital fundraising  … slow. So was the quarter before it. Together they made up the first half of 2016, in which the funds closed in the world of private capital globallyRead More


ESG Issues: The Material and the Immaterial

Jul 12th, 2016 | Filed under: Allocating to A.I., Alternative energy, Benchmarking & Performance Attribution, Newly Added, Other Topics in A.I., Socially responsible investing, SRI and Clean Energy

Activists pressing for corporate change on environmental, social, and governance issues often focus on issues that are, from the point of view of firm valuation, immaterial. Three scholars associated with the Harvard Business School recently quantified the materiality versus immateriality of shareholder proposals on ESG topics and discussed some ofRead More


Managing Expectations: The Rise of the Separately Managed Account

Jul 11th, 2016 | Filed under: Family Offices, Hedge Fund Industry Trends, High-net-worth investors, Newly Added, Sales & Marketing in the AI Industry, Structure of the Hedge Funds Industry

By Diane Harrison The line between wealth management and fund management continues to blur for the alternative asset managers who serve the high-net-worth investor community. Driven by a growing desire on the part of these investors to maximize control over their investment portfolio, managers who are emerging or who operateRead More


Infrastructure: Look at the Contracts–Not the Industry or the Index

Jul 10th, 2016 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Infrastructure, Newly Added, Operationally Intensive Real Assets, Real Assets

A new paper from EDHEC Infrastructure Institute decides that there is no such thing as a listed infrastructure asset class. What is the practical significance of that inference?  It means that for investors (individual or institutional) looking to diversify their portfolio properly, a dedicated index focused on a listed infrastructureRead More


6 Questions about Dead Hand Proxy Puts

Jul 7th, 2016 | Filed under: Equity Hedge Funds, Hedge Fund Strategies, Hedge Funds, Newly Added

Dead Hand Proxy Puts are a relatively recent innovation in corporate finance, one intended to fend off shareholder activism, whether fueled by interested hedge funds or otherwise. Here is a primer on the subject. What Is It? A DHPP is a provision that creditors include in loan contracts with corporations,Read More


AIMA on the Consequences of Brexit: Three Scenarios

Jul 5th, 2016 | Filed under: Newly Added, Regulatory, Regulatory Environment, The A.I. Industry

Among the questions that have acquired a great deal of urgency in recent days is: what will Brexit mean for MiFiD? Or for MAD? Or for the CMU? Britain has always been a major voice in the creation of these systems and directives within the EU. Where will hedge fundRead More


Brexit and Hedge Fund Strategies

Jun 30th, 2016 | Filed under: Currencies, Equity Hedge Funds, Finance & Economics, Hedge Funds, Newly Added, Relative Value Hedge Funds, The Global Economy & Currencies

How well did hedge funds help their investors to hedge potential losses as a consequence of the markets’ immediate reaction to the Brexit vote in the United Kingdom? How well will they hedge the other uncertainties going forward? Thursday, June 23, the UK voted to leave the European Union. TheRead More


Lewis’ Heroes Get an Exchange for Their Speed Bump

Jun 26th, 2016 | Filed under: Algorithmic and high-frequency trading, Business News, Equity Hedge Funds, Hedge Fund Strategies, Hedge Funds, Newly Added

On Friday, June 17, the Securities and Exchange Commission approved the promotion of IEX from an ATS to a proper exchange. Thereby it gave a new ending of sorts to Michael Lewis’ book, Flash Boys. One of the big issues for both proponents and opponents of IEX’ application to becomeRead More


New AIMA Guide: 7 Themes for Investor Relations Professionals

Jun 23rd, 2016 | Filed under: Alternative Investments in Context, Industry Size & Managers, Investor Relations, Newly Added, Sales & Marketing in the AI Industry, The A.I. Industry

In October 2015, a scholar at the University of Toronto wrote a paper on what he called the “paranoid style of investment lawyers and arbitrators,” bemoaning an increasingly shrill and belligerent tone in the investment world of late. If there is such paranoia, one probable contributor, and one possible consequenceRead More


Puerto Rico: The New Argentina?

Jun 21st, 2016 | Filed under: Business News, Event-Driven Hedge Funds, Finance & Economics, Hedge Funds, Newly Added

Puerto Rico and various instrumentalities thereof may default on debt within days. If they do so, this will happen without the benefit of an applicable bankruptcy system or other legislated means of restructuring, without a referee if you will, unless Congress acts decisively within a matter of days, something thatRead More


Factor-Based Asset Allocation

Jun 19th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Asset allocation, Asset Allocation Models, Commodities, Investing in Commodities, Newly Added, Other Topics in A.I., Smart Beta

A paper by Xiaowei Kang and Daniel Ung, published in June 2014, remains timely because risk parity and related approaches remain the center of controversy and some confusion. The Kang & Ung paper looked at three approaches to risk factor based portfolio construction, studying specifically the practical aspects of theRead More


Canadian Universities and Interest Rate Swaps

Jun 16th, 2016 | Filed under: Allocating to A.I., Endowments & Foundations, Institutional Asset Management, Institutional Investing, Newly Added

Two scholars looked recently at the behavior of Canadian universities regarding the management of their interest rate risk. They found something peculiar. The universities are making an increased use of interest-rate swaps, apparently under the impression that they are hedging against risks. But they aren’t. Almost all the swaps enteredRead More


Centripetal versus Centrifugal Force: Fund Marketing in Europe

Jun 14th, 2016 | Filed under: Newly Added, Other Topics in A.I., Regulatory, Regulatory Environment, Sales & Marketing in the AI Industry, The A.I. Industry, UCITs

On June 2, 2016 the EC issued a consultation document of interest to the many alpha seekers who would like to market their funds in one or more of the countries of the Eurozone. In a sense, its interest is much broader than that, because it fits into a veryRead More


How Risk Management Resembles Meteorology: A White Paper

Jun 12th, 2016 | Filed under: Hedge Fund Operations and Risk Management, Newly Added, Risk management, Risk Management & Operations, Risk Management Strategies & Processes

A new white paper from Campbell & Co. discusses the negative skew that is often a characteristic of portfolio returns, and the ways in which trend following can achieve positive skew instead. The paper is effectively advertised by its title, “Taming of the Skew.” The authors begin with distinctions amongRead More


Long/Short Equity: NB Makes the Case

Jun 9th, 2016 | Filed under: Equity Hedge Funds, Hedge Fund Strategies, Hedge Funds, Liquid Alternative Investiments, Liquid Alts, Newly Added, Other Topics in A.I.

A new paper from Neuberger Berman, an employee owned private investment firm that’s been part of the New York scene since 1939, makes the case that long/short equity strategies are “worth consideration as part of an investor’s equity allocation and the overall investment mix.” The paper is written by JulianaRead More


Giving the Baron King of Lothbury his Due

Jun 7th, 2016 | Filed under: Business News, Finance & Economics, Insolvency, Newly Added, The Global Economy & Currencies

The Bank of England is not only the central bank of the United Kingdom, in continuous operation since 1694; it is the model upon which central banking worldwide has been created. The Mother Central Bank is what it is. Mervyn King, the chief economist of the Bank of England throughRead More


Somebody Has to Crunch These Numbers: Infrastructure Cash Flow

Jun 5th, 2016 | Filed under: Infrastructure, Newly Added, Operationally Intensive Real Assets, Real Assets

EDHEC Infrastructure Institute-Singapore recently released a paper on the cash flow dynamics of private infrastructure project debt. The gist of the paper is that investors’ ability to understand credit risk in private infrastructure debt turns on advanced statistical techniques. Or, in the authors’ words, “the nature of the data requiresRead More


The Case Against a Bearish Argument on Crude Oil

Jun 2nd, 2016 | Filed under: Commodities, Commodities: Examples, Newly Added, oil

  A recent Bloomberg story indicates that in a world  awash in cheap crude oil, traders are now storing the stuff at a loss, at sea, on board vessels in the Straits of Malacca. Further, they are going into debt so they can bear this loss. Citing Morgan Stanley analysts,Read More


Consequences of the Paris Climate Agreement

Jun 1st, 2016 | Filed under: Business News, Equity Hedge Funds, Finance & Economics, Hedge Funds, Insolvency, Newly Added

In early December 2015, representatives of 196 parties met in Paris, France, to discuss climate change, and the necessary reduction of greenhouse gas emissions on a global basis.  The result, the “Paris Climate Agreement,” seeks to limit warming to just 2 degrees Celsius (3.6 Fahrenheit) above pre-industrial levels, through aRead More


Puerto Rico and Bankruptcy

May 30th, 2016 | Filed under: Business News, Event-Driven Hedge Funds, Finance & Economics, Hedge Funds, Insolvency, Newly Added

The bankruptcies of public bond-issuing entities, such as Orange County, Calif.; Jefferson County, Ala.; and the City of Detroit, Mich. are still rare events, but they exert a lot of influence, in part because they demonstrate the possibility of that which isn’t supposed to be possible. The sort of entityRead More


Investors ‘Misoverestimate’ ETFs and a Push Towards ESG

May 26th, 2016 | Filed under: Allocating to A.I., ETFs, Industry Size & Managers, Newly Added, Other Topics in A.I., Socially responsible investing, SRI and Clean Energy, The A.I. Industry

In a newly released report, Natixis Global Asset Management speaks to the quite positive views of passive investment vehicles and exchange traded funds that it finds in today’s marketplace.  Their report inspires the neologism “misoverestimate,” as a logical analog of a former U.S. president’s term, “misunder ….” A Natixis surveyRead More


Hedge Funds are Still Relevant in a Diversified Portfolio: 4 Fundamental Criteria for Superior Manager Selection

May 25th, 2016 | Filed under: Asset allocation, Asset Allocation Models, Hedge Fund Industry Trends, Hedge Fund Strategies, Hedge Funds, Newly Added

By Appomattox Advisory, Inc. The discussion has revived again:  are hedge funds still relevant in a diversified portfolio? We believe that a thoughtful allocation to hedge funds continues to be an impactful, prudent and profitable strategy for institutional portfolios. For allocators seeking to achieve stable returns in a difficult investing environment,Read More


A Review of the Commodity Index/Global Hunger Controversy

May 24th, 2016 | Filed under: CAPM / Alpha Theory, Commodities, Finance & Economics, Financial Economics Theory, Investing in Commodities, Newly Added

The consensus in market scholarship seems to be not only that “still waters run deep” but that deep waters run still. The greater the depth of volume in a commodity, the lesser the volatility of that commodity’s price. (This of course requires the usual “other things being equal” caveat.) ThisRead More


Tricky Times for Hedge Funds and a Lot of Negative YTD Performances

May 22nd, 2016 | Filed under: Benchmarking & Performance Attribution, Equity Hedge Funds, Fees, Hedge Fund Strategies, Hedge Funds, Indexes, Newly Added, Performance, Analytics & Metrics, Structure of the Hedge Funds Industry

A slim majority of hedge fund managers are in the red year to date, through April, according to the latest report from Eurekahedge. Specifically, 51.4% of managers have negative YTD performance. Over the same period in 2015, the analogous number was only 21.2%. That is a good indication of whatRead More


The Alberta Approach to Benchmarking & Performance Attribution

May 18th, 2016 | Filed under: Allocating to A.I., Benchmarking & Performance Attribution, Industry Size & Managers, Newly Added, The A.I. Industry

The Alberta Management Investment Corp. began life in 2008, as a successor to a division of Alberta Finance. It became a crown corporation in order to better manage the allocation of assets for twenty-six pension funds and investment plans. Its leaders initiated a review and soon discovered that they hadRead More


10 Phrases To Jettison From Every Marketing Pitch

May 17th, 2016 | Filed under: Investor Relations, Newly Added, Sales & Marketing in the AI Industry

By Diane Harrison Spring is typically filled with tailored events for investors and managers to engage, learn about industry happenings and market views, and find investment opportunities with each other. One of the newer trends at such events includes the speed-date, in which pre-arranged, one-on-one sit down meetings allow investorsRead More


Global Focus Capital: Market’s Inflationary Expectations Are Too Low

May 12th, 2016 | Filed under: Allocating to A.I., Benchmarking & Performance Attribution, Commodities, Currencies, Finance & Economics, Macroeconomics, Newly Added, The Global Economy & Currencies

Investors can get ahead of events by aligning their portfolios to “a world of lower expected capital market returns and higher forward volatility.” That, at any rate, is the upshot of a thoughtful analysis by Eric J. Wiegel of Global Focus Capital, a Boston based asset allocation advisor. Why doesRead More


Trust Isn’t Just a Nice Warm Feeling

May 10th, 2016 | Filed under: Behavioral finance, Finance & Economics, Financial Economics Theory, Newly Added

Ross Levine, professor of finance at the University of California, Berkeley, and two scholars from Hong Kong (Professors Chen Lin and Wensi Xie) have published a study of corporate resilience in the face of a banking crisis. Their paper addresses a problem inherent in the relationship between Wall Street andRead More


Escape to the Internet? Or Build Better Communities?

May 8th, 2016 | Filed under: Currencies, Digital currencies, Newly Added, Operations, Other Topics in A.I., Risk Management & Operations, Technology, The Global Economy & Currencies

Dissatisfaction with the fiat money issued by or on signals from central bankers will not go away. Talk of “printing press” money seems quaint, as when people of my generation still refer to a keyboard as a “typewriter.” Central banks and their servants (and their servers) around the world engage,Read More


Risk Management & the Trouble with Capacity-Driven Decisions

Apr 28th, 2016 | Filed under: Commodities, Investing in Commodities, Newly Added, Risk management, Risk Management & Operations, Risk Management Strategies & Processes

A recent CAIA member contribution by Kathryn Kaminski, director of investment strategies at Campbell & Co., discusses the quantification of CTA risk management.  It is worth a look, not least because it amounts to a warning about how underperformance can result for the re-jiggering of allocation for capacity constraints. KaminskiRead More


Thoughts on the Valuation of Secured Assets of a Bankrupt Debtor

Apr 26th, 2016 | Filed under: Business News, Event-Driven Hedge Funds, Finance & Economics, Hedge Funds, Insolvency, Newly Added

How should one value the assets of a bankrupt entity, especially those that secure its debt instruments? That is obviously a key question in the world of distressed-debt investing.  A 2014 report from a commission of the American Bankruptcy Institute, and the continued controversy over that commission’s proposals, offers usRead More


March Improved, but 2016 Still Rains Red for Hedge Funds

Apr 24th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Benchmarking & Performance Attribution, Equity Hedge Funds, Hedge Fund Industry Trends, Hedge Fund Strategies, Hedge Funds, Newly Added

The latest report from Eurekahedge indicates that hedge funds worldwide gained in March, though by far less than the underlying markets gained during the same period. Specifically, the Eurekahedge Hedge Fund Index gained 1.33 percent over the month, while the MSCI World Index, representing those underlying markets, gained 5.47 percent.Read More