Browsing: Featured Post

Featured Post

On the Bitcoin Blockchain: Looking Under the Hood

Jan 19th, 2017 | Filed under: Algorithmic and high-frequency trading, Business News, Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Newly Added, The Global Economy & Currencies

More than a year ago, the Capco Institute Journal of Financial Transformation (Journal) ran a “critical assessment,” by Robert Sams, of bitcoin blockchains as a means of distributed clearing. With both bitcoins and blockchains newly in the news, Sams’ informed assessment is worth another look. Two years ago, Nasdaq announcedRead More


Active Share: Empirical and Conceptual Issues

Jan 17th, 2017 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added

In 2009, Martijn Cremers, of the University of Notre Dame, and Antti Petajisto of New York University, introduced a new portfolio measurement they called Active Share, measuring in percentage terms the deviation of a portfolio from its benchmark (deviation in holdings, not in performance). Thus, a portfolio with 100% activeRead More


A Brief History of Hedge Fund Regulations in India

Jan 15th, 2017 | Filed under: Hedge Fund Regulation, Industry Size & Managers, Newly Added, Regulatory Environment, The A.I. Industry

The investment world now understands that politics and related matters of business climate in the Republic of India since the dramatic victory of the Bharatiya Janata Party in 2014. What is less well known is that alternative investment funds have been among the beneficiaries of the broader change. This storyRead More


Funds of Funds and the Task of Financial Intermediation

Jan 12th, 2017 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added, Private Investments, Venture capital

Are funds of funds a valuable form of intermediation? Robert Harris, of the University of Virginia, Darden School of Business, and three other distinguished scholars looked at this question in a Darden Business School Working Paper, and they decided that, at least with regard specifically to the role of FOFsRead More


Cash Management Strategies for Private Equity

Jan 10th, 2017 | Filed under: Allocating to A.I., Asset allocation, Asset Allocation Models, Newly Added, Other Issues in Private Investments, Private Equity, Private Investments

Private equity investors have a distinctive cash management question: what do they do with the money that has yet to be drawn or called? Keeping cash in pillow cases is, here as always, less than the optimal solution. One of the defining features of a PE firm is that anRead More


OECD Report on Insurer Portfolio Investment Strategies

Jan 8th, 2017 | Filed under: Allocating to A.I., Asset allocation, Asset Allocation Models, Institutional Asset Management, Newly Added

A paper by Helmut Gründl and two associates, discussed at the June 2016 meeting of the Organization for Economic Cooperation and Development, and published “on the responsibility of the Secretary-General” thereof, proposes that the regulators of insurers active in the various member countries should see their role not as theRead More


The Federal Reserve on Distributed Ledger Technology (that is, on Blockchains)

Jan 5th, 2017 | Filed under: Finance & Economics, Newly Added, Operations, Risk Management & Operations, The Global Economy & Currencies

A large team of officers and staff affiliated with the Federal Reserve (eight with the Board in DC, five with the FR Bank of New York, one with the FRB of Chicago) have collaborated on a new paper on distributed ledger technology in payments, clearing, and settlement. Of necessity, givenRead More


The Return Characteristics of Gold Mining Stocks

Jan 3rd, 2017 | Filed under: Commodities, Commodities: Examples, Equity-linked Structured Products, Gold, Investing in Commodities, Newly Added, Structured Products

Two Maryland-based scholars have reviewed the evidence of the performance of gold mining stocks. The title of their article, which appears in the Alternative Investment Analyst Review, November 2016, puts the central question bluntly: are such stocks “more like gold or like stocks”? Let’s get the answer to that queryRead More


PGIM:  Not All Alternatives Are Alike

Jan 2nd, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Asset Allocation Models, Institutional Asset Management, Institutional Investing, Newly Added

A new report from PGIM Institutional Advisory looks at an old question: what role should alternative investments play within the portfolio allocation decisions of institutions? The question is especially pressing at the beginning of 2017 because US broad equity indexes have done quite well for years, ever since the marketsRead More


Industry Headwinds: And How to Move Forward Regardless

Dec 29th, 2016 | Filed under: Asset Managers, Industry Size & Managers, Investor Relations, Newly Added, Other Topics in A.I., Sales & Marketing in the AI Industry, The A.I. Industry

In a new white paper, CaseyQuirk has identified four catalysts said to be driving secular change in the active asset management world: New buyer demands emphasizing different value propositions for asset managers. Related to this – institutions are losing relative importance to high-net-worth individuals, and these individuals “value different attributesRead More


Women in Alternatives: A Globalized Survey

Dec 27th, 2016 | Filed under: Industry Size & Managers, Newly Added, The A.I. Industry

KPMG has released its fifth Women in Alternative Investments Report. This WAI, like its four precursors, “showcases the investment insights of women in alternatives while fostering a conversation about the unique issues facing women in the industry.” Camille Asaro and Kelly Rau, Alternative Investments, KPMG, kick off the report withRead More


PE Study: Managerial Turnover is a Good Thing for Investors

Dec 26th, 2016 | Filed under: Industry Size & Managers, Newly Added, Other Issues in Private Investments, Private Equity, Private Investments, The A.I. Industry

A recent study by Franceso Cornelli and two associates indicates that there is a positive relationship, in the private equity industry, between managerial turnover and fund performance. Cornelli is Professor of Finance, London Business School, and a fellow at the Center for Economic Policy Research.  The other authors are: ElenaRead More


Ammar on the Implied Volatility Smile

Dec 22nd, 2016 | Filed under: Emerging Alternative Investments, Newly Added, Other Issues in Private Investments, Risk Management & Operations, Risk Management Strategies & Processes

In a new working paper, a scholar at the School of Finance, at the University of St Gallen, Switzerland,   Semir Ben Ammar, has analyzed the relationship between catastrophe risk and the “implied volatility smile” in stock options.  Along the way, he has proposed what may be a novel type ofRead More


Natixis asks 500 institutional investors to look into the future

Dec 20th, 2016 | Filed under: Allocating to A.I., Emerging markets, Finance & Economics, High-net-worth investors, Institutional Asset Management, Newly Added, The Global Economy & Currencies

Natixis Global Asset Management has released the results of a survey of 500 institutional investors, asking them their views on prospects for 2017. The surveyed institutions expect that political and economic developments could cause an increase in volatility in the year to come, and active managers have to reset theirRead More


For The Netherlands: Sustainable Development Proposal

Dec 18th, 2016 | Filed under: Emerging Alternative Investments, Microfinance, Newly Added, Other Topics in A.I., SRI and Clean Energy

Eighteen major financial institutions, including ABN AMRO and ING Groenbank, have signed onto an ambitious program for sustainable development goals’ investment (SDGI). The institutions involved proclaim that they believe it is in their best interest, “as well as that of our clients and investees, to consider the largest societal challengesRead More


AIMA and KPMG on Managed Accounts

Dec 15th, 2016 | Filed under: Allocating to A.I., Institutional Asset Management, Newly Added

AIMA’s new managed accounts guide tells us that an investment manager considering the use of managed accounts should consider certain disadvantages that come with this product, and may want to negotiate around these difficulties with investors. For smaller investment managers in particular, the increased regulatory and operational requirements can beRead More


REITs: The Market Bought on Rumor, Sold on News

Dec 13th, 2016 | Filed under: Liquid and Fixed Income Real Estate, Newly Added, Real Assets

Real estate stocks have distinguished themselves from financials to the extent that the former group now has its own Global Industry Classification Standard (GICS) sector. A fair amount of publicity accompanied this change in August, and it catalyzed a white paper from Principal Global Investors on the REIT Breakout. TheRead More


TIAA Report On Responsibility and Farmland

Dec 11th, 2016 | Filed under: Farmland, Natural Resources and Land, Newly Added, Real Assets

Biff Ourso, TIAA’s portfolio manager for agriculture investments, says in a prefatory message to their new report that “concerns have been raised about whether investment in regions such as Brazil contribute to land conflicts, lead to the displacement of local people … or foster excessive pesticide usage.” TIAA, which hasRead More


Private Equity Placements in China

Dec 8th, 2016 | Filed under: Allocating to A.I., Benchmarking & Performance Attribution, Currencies, Emerging markets, Newly Added, Private Equity, Private Investments, The Global Economy & Currencies

A new paper by G. Nathan Dong and two other scholars investigates private equity placements in China and their consequences for the issuing firms. The study works from a natural experiment that resulted from regulations created by the PRC ten years ago. In 2006, the China Securities Regulatory Commission issuedRead More


Shedding Light on the ESG/SRI Scene      

Dec 6th, 2016 | Filed under: Climate change, Newly Added, Other Topics in A.I., SRI and Clean Energy

The US SIF Foundation has published its latest Trends Report on sustainable, responsible, and impact investing. On the one hand, this is a statistical snapshot of US-domiciled assets in the ESG/SRI field at years’ end 2015. On the other hand, it offers fascinating historical material making it clear how weRead More


Global Pension Funds: Process and Best Practices

Dec 4th, 2016 | Filed under: Allocating to A.I., Asset allocation, Asset Allocation Models, Newly Added

A new white paper from PwC, sponsored by AMAFORES, La Asociación Mexicana de Administradoras de Fondos para el Retiro (The Mexican Association of Retirement Fund Administrators) , looks at the best practices for the pension fund industry in the wake of the global financial crisis of less than a decadeRead More


Preqin on Ag Funds and Their Managers

Dec 1st, 2016 | Filed under: Farmland, Natural Resources and Land, Newly Added, Real Assets

Fundraising for agriculture/farmland-focused funds has been remarkably strong recently, according to research by Preqin, the multi-national data and consulting firm. Farmland has been aptly described as the “oldest alternative investment” and dates as far back as 9,000 years ago. The focus on Preqin’s special report on agriculture is somewhat more recentRead More


Selling Growth Stocks at the Right Time: Hedge Funds Are Good At It

Nov 29th, 2016 | Filed under: Equity Hedge Funds, Hedge Fund Strategies, Hedge Funds, Newly Added

Two scholars at Ozyegin University, in Istanbul, make the case that hedge funds have a uniquely good record in one specialized sort of alpha harvesting: they are good at finding overpriced growth stock securities and trading to their advantage on the basis of that finding, especially when other sorts ofRead More


Local and Global VC Need to Work Together for Best Results

Nov 27th, 2016 | Filed under: Newly Added, Other Issues in Private Investments, Private Investments, Venture capital

Thomas J. Chemmanur of Boston College, Carroll School of Management, and two other scholars looked into the issue whether local venture capitalists “play well together” with international VCs, and vice versa. The resulting paper, in the latest issue of the Journal of Business Venturing, suggest that entrepreneurs benefit by bringingRead More


Rudin and Marr: A Reformulation of RP Methods of Portfolio Construction

Nov 24th, 2016 | Filed under: CAPM / Alpha Theory, Finance & Economics, Newly Added

A recent article by Alexander Rudin and William M. Marr, in The Journal of Alternative Investments, seeks to change the terms of discussion of the risk parity method of portfolio construction in a way that might remove some of the counter-intuitive consequences that can dog the approach. The paper, “InvestorRead More


Infrastructure Project Finance: Benchmarking and Definitions

Nov 22nd, 2016 | Filed under: Infrastructure, Newly Added, Operationally Intensive Real Assets, Real Assets

In a new article in The Journal of Alternative Investments, three EDHEC-affiliated scholars, led by Frédéric Blanc-Brude, the director of the EDHEC Infrastructure, Singapore, look at recent improvements in the understanding of the financial performance of privately held infrastructure investments, debt or equity, with respect to benchmarking thereof.  They concludeRead More


Aftermath of 2008: Reactions to Decreased Liquidity

Nov 20th, 2016 | Filed under: Finance & Economics, Liquid Alternative Investiments, Liquid Alts, Macroeconomics, Newly Added, Other Topics in A.I., Regulatory Environment, The A.I. Industry, The Global Economy & Currencies

A new report from State Street Corporation and the Alternative Investment Management Association says that nearly half of the market participants surveyed believe that decreased market liquidity is a secular change, not a cyclical one: that is, that it is a climate that is here to stay, not a rainRead More


PE Buyout Funds: Finding or Building a Proxy

Nov 17th, 2016 | Filed under: Allocating to A.I., Asset allocation, Asset Allocation Models, Newly Added, Other Issues in Private Investments, Private Investments

Alexandre Coupe, associate director, Pacific  Alternative Asset Management Company, head of PAAMCO’s asset allocation research, and formerly of Green Street Advisors, has written a fascinating review of private equity funds. She looks at what proxies work (and which don’t work) in assisting portfolio managers who have to make asset allocationRead More


Commissioner Piwower and Alpha Seekers

Nov 15th, 2016 | Filed under: Commodities, Event-Driven Hedge Funds, Hedge Funds, Newly Added, Operations, Risk Management & Operations

With a new administration in the making, thoughts in the world of asset management naturally turn to the issue of appointments to the Securities Exchange Commission and the Commodity Futures Trading Commission. Who is likely to get what position and what difference might it make? Recent practice has been thatRead More


MIND THE GAP—LENDERS APPROACHING

Nov 14th, 2016 | Filed under: Debt Types of Private Equity, Newly Added, Private Investments, Real Assets, Real Estate

By Diane Harrison It’s been years since investors have been able to get excited about the term “yield” when referencing their investment portfolio. Too many individuals have been hanging onto cash while searching fruitlessly for somewhere other than equities to put their money to work. Advisors haven’t been much helpRead More


Dakota Access and the Army Corps of Engineers: An Odd Mistake?

Nov 13th, 2016 | Filed under: Commodities, Commodities, Commodities: Examples, Infrastructure, Newly Added, oil, Operationally Intensive Real Assets

On November 7, the U.S. Army Corps of Engineers put out a statement that said that the Dakota Access Pipeline (DAPL) had agreed to halt its controversial ongoing construction in North Dakota. The following day, which happens to have been Election Day, [so non-election news went largely uncovered], the ownersRead More


Energy Infrastructure: The Midstream Sector

Nov 10th, 2016 | Filed under: Allocating to A.I., Endowments & Foundations, Institutional Asset Management, Newly Added, Regulatory Environment, The A.I. Industry

Is it a stream or is it a sea? They seem to have gotten their hydrological imagery mixed up. But no, the “sea” in question is a literal sea, though the “stream” in question is a mere bit of imagery, so clichéd as such that no one sees it asRead More


Pension Funds, Hedge Funds, and Allocations

Nov 8th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Institutional Asset Management, Institutional Investing, Newly Added

A new scholarly paper addresses the puzzle: which institutional investors are best informed? Zhe Chen, of the University of New South Wales, David Forsberg, Macquarie Graduate School of Management, and David R. Gallagher, UNSW Australia Business School,  compare hedge funds, mutual funds, pension funds, and private banking firms to determineRead More


McKinsey: Historically Anomalous Period Nears an End

Nov 6th, 2016 | Filed under: Alternative Investments in Context, Infrastructure, Newly Added, Operationally Intensive Real Assets, Real Assets, The A.I. Industry

McKinsey & Co. has posted a new report assessing the state and the future of the North American asset management industry, encompassing both active and passive managers and looking at five mega-trends. Skipping to the chase, the trends are these: The end of an anomalous eta of “exceptional investment returns.”Read More


Dealmakers: Trump, Hillary, and Mergers

Nov 3rd, 2016 | Filed under: Business News, Event-Driven Hedge Funds, Hedge Funds, Newly Added

Intralinks, a firm created 20 years ago to enable “high-stakes transactions and business collaborations,” has surveyed global dealmakers on the upcoming U.S. presidential election and on how it may affect the economic and regulatory environment for mergers and acquisitions. The gist of it is: in a database of 1,600 M&ARead More


Judge Rose: Libya’s SWF Heads Knew What They Were Doing

Nov 1st, 2016 | Filed under: Allocating to A.I., Institutional Asset Management, Institutional Investing, Legislation/Court rulings, Newly Added, Regulatory Environment, The A.I. Industry

The economic historians of posterity have their work cut out for them here. There are doctoral dissertations in the works already, no doubt. And in time several scholarly careers will hang on this.   Those scholars will have to make sense of the political developments in late-Qaddafi Libya, of the roleRead More


Impact Investing: The Impacts, Measurement and Profit

Oct 30th, 2016 | Filed under: Alpha-centric Companies, Newly Added, Other Topics in A.I., Social investing, Socially responsible investing

One candidate for the title “next new thing” is “impact investing.” As the term suggests, this refers to investing with an eye to the ways in which the investor’s decisions make an impact upon society beyond his own portfolio. This sounds a lot like socially responsible investing, or like itsRead More


Massad: Where the U.S. and the World Stand on Margins & Cap Requirements

Oct 27th, 2016 | Filed under: Commodities, Finance & Economics, Forex, Investing in Commodities, Newly Added, The Global Economy & Currencies

The chair of the Commodity Futures Trading Commission, Timothy Massad, addressed the Outlook Conference of the Managed Funds Association on October 21, and spoke about the global implementation of uncleared margin rules, which he called a critical component of “the new regulatory framework for swaps trading that the leaders ofRead More


Academics:  No, Navinder Sarao Did Not Cause the Flash Crash 

Oct 25th, 2016 | Filed under: Algorithmic and high-frequency trading, Business News, Finance & Economics, Hedge Fund Operations and Risk Management, Newly Added, Operations, Personalities in AI, Risk management, Risk Management & Operations, Technology

Mid-October news reports tell us that Navinder Sarao has lost his effort to avoid extradition from Britain to the United States. So he will face charges in the U.S. in connection with the “flash crash” of May 2010, the incident in which the DJIA fell 998.5 points in less thanRead More


Eurekahedge: Exodus from the Event-Driven Funds YTD  

Oct 23rd, 2016 | Filed under: Allocating to A.I., Commodities, Equity Hedge Funds, Event-Driven Hedge Funds, Hedge Funds, Newly Added, Relative Value Hedge Funds

The event-driven hedge fund space is the most troubled in a generally troubled time for the industry. According to the new Eurekahedge report, the event-driven strategy “has seen US$14 billion investor redemptions over the past nine months,” and $10.7 billion over just the past six months. The first nine monthsRead More


Fraudulent Transfer: No ‘Safety’ for Lyondell Shareholders   

Oct 20th, 2016 | Filed under: Business News, Equity Hedge Funds, Finance & Economics, Hedge Funds, Insolvency, Newly Added

In two decisions this year, in July and against in a re-affirmance in October, the U.S. District Court for the Southern District of New York has reinstated a claim brought by Trustee of the creditors of the bankrupt  chemical company Lyondell, looking to recover distributions made to the company’s shareholdersRead More


Islam, Western Pensions, and Real Assets

Oct 18th, 2016 | Filed under: Allocating to A.I., Institutional Asset Management, Institutional Investing, Intellectual Property, Natural Resources and Land, Newly Added, Operationally Intensive Real Assets, Real Assets

A recent academic discussion of the much-vexed question of Islamic finance (including the always at least implicit query, how does it fit into the broader usually non-Islamic global picture?) focuses on the role in Islam of real assets, understood as tangible objects such as land, buildings, machinery, and commodities. TheRead More


It’s On: Bondholder Groups Square Off over Puerto Rico Financing

Oct 16th, 2016 | Filed under: Business News, Event-Driven Hedge Funds, Hedge Funds, Insolvency, Newly Added

On Oct. 7, a group of hedge funds that hold the general obligation bonds of Puerto Rico amended an existing complaint (initially filed in July) in a significant respect: by adding a new defendant. The new defendant is the issuer of the “COFINA” bonds, the Puerto Rico Sales Tax FinancingRead More


Venezuela: Thinking of Cromwell and Crude

Oct 13th, 2016 | Filed under: Commodities, Commodities: Examples, Emerging markets, Finance & Economics, Newly Added, oil, The Global Economy & Currencies

Hedge funds, among them some of those the unsympathetic call “vultures,” bought into the bonds of the Petróleo de Venezuela SA (PDVSA) early this year. PDVSA is Venezuela’s state-owned oil company, the consequence of nationalization forty years ago. Its fate turns on (a) the vagaries of post-Chavez politics in thatRead More


Fine Art as Joy and Investment: A Reflection

Oct 12th, 2016 | Filed under: Business News, Newly Added, Real Assets

Why do people own great paintings? As something pleasing to hang on the wall? As a way to impress the neighbors? Presumably many buyers of privately circulating 17th century Dutch masterpieces are speculators, alpha seekers. But aren’t they speculating, in the end, upon what some end user will pay? WhatRead More


Saving the World: One EM City at a Time

Oct 10th, 2016 | Filed under: Infrastructure, Newly Added, Operationally Intensive Real Assets

The Global Commission on the Economy and Climate has issued a new report urging governments and major financial institutions to “scale up and shift investment to sustainable infrastructure as a fundamental strategy….” The report, The Sustainable Infrastructure Imperative, has no force as law or policy anywhere, but it may signalRead More


Looking to the Technological Imperative: Where Has It Been?

Oct 6th, 2016 | Filed under: Equity Hedge Funds, Hedge Funds, Newly Added, Regulatory Environment, The A.I. Industry

On September 28, the Securities and Exchange Commission held an open meeting about a proposed shortening of the settlement cycle. The SEC’s staff has recommended that the settlement cycle for most broker-dealer transactions be shortened from three business days after trade date to two or, in the usual typographical abbreviation,Read More


Tick Pilot Program: A Progress Report

Oct 4th, 2016 | Filed under: Algorithmic and high-frequency trading, Business News, Finance & Economics, Newly Added, Regulatory Environment, The A.I. Industry

The long-awaited nickel-tick pilot program, an effort to test an alternative to the penny-or-less tick sizes that now prevail, , officially gets underway on October 3, and is scheduled to continue for two years. Securities have been selected and the phase-in schedule is set. The pilot is of significance, becauseRead More


Papaconstantinou on ‘Selling the Family Silver’  

Oct 2nd, 2016 | Filed under: Business News, Currencies, Insolvency, Newly Added, The Global Economy & Currencies

A former finance minister of the Republic of Greece has published a book, Game Over, on what it is like to be in the midst of a continent-wide political and financial crisis. This is a volume that might be read with attention by those who seek alpha from distressed sovereignRead More


From UMIFA to UPMIFA: Taking Stock 10 Years Later

Sep 29th, 2016 | Filed under: Endowments & Foundations, Institutional Asset Management, Newly Added

Ten years ago, thus before the global financial crisis, the Uniform Law Commission promulgated the Uniform Prudent Management of Institutional Funds Act (UPMIFA), a successor to an earlier uniform act, the UMIFA. One of the big changes from UMIFA to UPMIFA was the elimination of the concept of “historic dollarRead More