Today’s Post

Argentina v. NML Capital: The Discovery Question

Apr 24th, 2014 | Filed under: Alpha Strategies, Emerging markets, Legislation/Court rulings, Today's Post

The Deputy Solicitor General for the U.S. took Argentina's side in a discovery dispute arising from the debt collection efforts of NML Capital, arguing for international reciprocity: that is, from the notion that sovereign nations must help each other keep some things secret.

Einhorn Letter: Sunshine and the New Tech Bubble

Apr 23rd, 2014 | Filed under: Alpha Strategies, Alternative energy, Hedge Fund Strategies, Technology, Today's Post

Einhorn explained to his investors his view that the markets are engaged in a new tech bubble, an echo of the infamous dotcom bubble of the 1990s. Accordingly, he says, Greenlight has created a basket of bubble stocks worth shorting.

‘Prediction is Tricky, Especially about the Future’

Apr 22nd, 2014 | Filed under: Alpha Strategies, Emerging markets, Today's Post

Some respondents told Intralinks that Germany is a less attractive M&A target for international investors than it might be, due to the impact of rising energy costs there, especially on manufacturing.

Estimates Show 90% of Hedge Funds ‘Socialize’

Apr 21st, 2014 | Filed under: Hedge Fund Industry Trends, Today's Post

Guest columnist Don Steinbrugge looks at how hedge funds can and do use social media

Pragmatic Foundations for an Austrian Home

Apr 20th, 2014 | Filed under: Academic Research, Today's Post

Christopher Faille makes it clear that he has no Keynesian sympathies. In his humble opinion, the Austrians are in general right on the economics, though they could use some empirical/pragmatic assistance on the matter of epistemology.

A Finalized Basel Rule: News and Views

Apr 16th, 2014 | Filed under: Behavioral finance, Derivatives, Risk management, Today's Post

But Basel is still part of the multinational push to fit the peg of credit derivatives into the square hole of standardized contracts and central clearing. Is the peg going to fit?

The Illusion of Conscious Investing Decisions

Apr 15th, 2014 | Filed under: Algorithmic and high-frequency trading, Today's Post

Consciousness did evolve. Why? I submit that there is no good answer to this question unless consciousness makes a difference to behavior. Trading and investing must be included as "behaviors" in that generalization.

Beware the Hedge Fund Indices of March, Caesar

Apr 14th, 2014 | Filed under: Hedge Fund Industry Trends, Hedge Fund Strategies, Performance, Analytics & Metrics, Today's Post

Japan-focused funds had three consecutive months of negative returns this quarter. These numbers look particularly jarring in contrast to the 2013 returns, from back in the days when Abenomics was being hailed as a success.

What a Hedge Fund Failure Looks Like

Apr 13th, 2014 | Filed under: Alpha Strategies, Hedge Fund Industry Trends, Hedge Fund Strategies, Today's Post

By Jeff Malec, CAIA CEO, Founding Partner Attain Capital Management, LLC The Twittersphere couldn’t get enough of the news last week that hedge fund legend Paul Tudor Jones was shutting down one of his eponymous funds, the Tudor Tensor Fund (try saying Tudor Tensor 10 times fast). And critics of hedge funds will jump to the [...]

The Skorina Report: PIMCO’s Heir-apparent goes missing

Apr 10th, 2014 | Filed under: Asset allocation, Guest Posts, Institutional Investing, The Skorina Report, Today's Post

Charles Skorina looks at the implications of El-Erian "disappearing" from PIMCO.

Science, Scientism and Economics: Some Timely Thoughts

Apr 9th, 2014 | Filed under: Academic Research, Today's Post

If you wish, you can take the idea that humans are purposive as a very broad empirical generalization. Or you can take it in various other ways. What matters is that it certainly isn’t as specific or historical as the kind of fact-gathering that the historicists of yore had in mind. And that continues to serve as a sore point in discussions within and about Austrian economics.

Thoughts on Lewis and Flash Boys

Apr 8th, 2014 | Filed under: Algorithmic and high-frequency trading, Media Coverage of Hedge Funds, Today's Post

Michael Lewis portrays Aleynikov, the Russian born coder convicted of two counts of theft in 2010 and imprisoned, then released by decision of an appeals court two years later, as a central figure in this dramatic tale about high-frequency trading. Aleynikov is not one of the bad guys, as such: but he is a self-blinkered tool of the bad guys. Some sympathy is extended: not much.

IP Rights in Software: From Settlement Risk to Data Compression

Apr 7th, 2014 | Filed under: Algorithmic and high-frequency trading, Alpha Hunters, Legislation/Court rulings, Risk management, Technology, Today's Post

The patent dispute at issue before the Supreme Court March 31st involved a computerized escrow system that serves as a third party to a deal, eliminating settlement risk. A business-method patent, in short: nothing at all to do with speed of execution, or data compression, or other such trading-infrastructure-related feats.

Unintended consequences: a not-so random walk down Wall Street

Apr 6th, 2014 | Filed under: Algorithmic and high-frequency trading, Book review, Today's Post

Guest columnist Ginger Szala on Michael Lewis' new book.

Bitcoin: Regulation, Taxation, and Optimism

Apr 3rd, 2014 | Filed under: Currencies, Technology, Today's Post

One informed observer suggests that bitcoin could become a permanent, mainstream, and regulated fixture in the world precisely by maturing past the dreams of its founders and enthusiasts.

The Mania of Boom & Bust

Apr 2nd, 2014 | Filed under: Alpha Hunters, Alpha Strategies, Book review, Today's Post

Vikas Shah interviews Dr. Bob Swarup, CAIA, founder of Camdor Global and author of Money Mania: Booms, Panics and Busts from Ancient Rome to the Great Meltdown.

The Yin and Yang of Executive Compensation

Apr 1st, 2014 | Filed under: Alpha Strategies, Best Practices, Regulatory, Today's Post

The lesson for investors in the new Wachtell Lipton document may simply be that a corporation that is careless about compensation at the highest level, that cannot carefully document the reasons for payouts, is asking for trouble and that one must consider whether the market has fully discounted the trouble.

Baseball and the Stock Market

Mar 31st, 2014 | Filed under: Alpha Hunters, Alpha Strategies, Today's Post

Spring and the opening of the baseball season bring fresh hope, so we thought it only appropriate to look at the U.S. stock market and its relationship to baseball with guest columnist Thomas Schneeweis.

Quantifying Alpha for Private Equity: Four Approaches

Mar 30th, 2014 | Filed under: Alpha Strategies, CAPM / Alpha Theory, Private Equity, Today's Post, Venture capital

I admire a new "direct alpha" approach to measuring the success of PE portfolios. So will anyone who has had to tell a friend or loved one, "just come out and ask me please!"

European ETFs: Innovations the Key to Growth

Mar 27th, 2014 | Filed under: Academic Research, Alpha Strategies, Alternative Beta & Hedge Fund Replication, ETFs, Infrastructure, Today's Post

The way to keep growing is to keep changing. For the European ETF market, that means product innovation, from infrastructure funds to smart beta.

The New Republic Attempts Revisionism: Misses the Point

Mar 26th, 2014 | Filed under: Currencies, Hard metals, Today's Post

Yes, an article in a recent issue of The New Republic, by Dean Starkman, is right to dismiss certain simplistic views of the crisis of 2007-08 as offensive. But what is Starkman's alternative? In providing that, he gets simplistic himself, even complacent.

Two Unanswered Questions About Alternative Beta

Mar 25th, 2014 | Filed under: Alternative Beta & Hedge Fund Replication, Hedge Fund Strategies, Portable Alpha & Alpha/Beta Separation, Today's Post

Andrew Beer, Beachhead Capital, and guest columnist, takes a different look at alternative beta.

Investment Views on Emerging Markets Exposure Brighten

Mar 24th, 2014 | Filed under: Emerging markets, Hedge Fund Industry Trends, Hedge Fund Strategies, Performance, Analytics & Metrics, Today's Post

Have the emerging market assets and the funds focused thereon warranted this return of confidence by their recent returns? The answer to this question can't be any more emphatic than, "yes, somewhat."

The Market’s Early Experience with SEFs

Mar 23rd, 2014 | Filed under: Derivatives, Regulatory, Today's Post

After a lengthy CFTC deliberation and some controversy, the SEF system, with a "made available to trade" component, has gotten itself up and running. Some early observations from Celent.

Who left the wrench in the markets engine? Maybe the SEC…

Mar 20th, 2014 | Filed under: Algorithmic and high-frequency trading, Regulatory, Technology, Today's Post

There is an arm's race aspect to the trend toward ever-higher speeds in trading, and this has created a "latency risk" in the markets that has an adverse impact on liquidity, a new study shows. This feeds into some ongoing arguments.

Improving the Odds with Managed Futures

Mar 19th, 2014 | Filed under: Alpha Hunters, Commodities, CTA, Today's Post

Guest columnist Diane Harrison looks at the basics of managed futures.

The Luxury Industry by Continent and Product

Mar 18th, 2014 | Filed under: High-net-worth investors, Indexes, Timely Research, Today's Post

Big Items" luxury is the subsector of the luxury industry that involves the marketing and sale of yachts and private jets. A full 87% of the respondents from that subsector expect growth in revenue this quarter.

Global Warming and Human Ingenuity

Mar 17th, 2014 | Filed under: Book review, Infrastructure, Risk management, Today's Post

Early on in this book the author mentions that Deutsche Bank has made a small play in Royal Boskalis, a Dutch dredging and infrastructure company, one which may be in a position to capitalize on rising sea levels by building the sea walls this will require.

Can We Agree to Stop Calling It the ‘Tobin tax’?

Mar 16th, 2014 | Filed under: Currencies, Forex, Today's Post

Arjuna Sittampalam, editor of Investment Management Review and a Research Associate with EDHEC-Risk Institute, cautions the asset management industry in Europe that even if the idea of a continent-wide FTT is defeated, it may encounter a "worse development."

Newsweek: Is This Nakamoto the Nakamoto?

Mar 13th, 2014 | Filed under: AAA Newsreels, Currencies, Technology, Today's Post

The dust-up over Newsweek's recent article on bitcoin's real or alleged founder is great fun, and will do bitcoin itself no harm.

The JOBS Act – has it made an impact?

Mar 12th, 2014 | Filed under: Hedge Fund Industry Trends, Today's Post

Few choose to act on the U.S. JOBS Act 'benefits.'

The Cheat Sheet from Years of Wizardly Advice

Mar 11th, 2014 | Filed under: Book review, Hedge Fund Industry Trends, Risk management, Today's Post

The story told here of Bruce Kovner and a botched soybeans trade conveys a lesson about the value of persistence, and a lesson about risk management.

Europe: Hadrian’s Wall and the Big Picture Today

Mar 10th, 2014 | Filed under: AAA Newsreels, Alpha Hunters, Currencies, Today's Post

My own quite speculative view is that Europe as a project is coming apart, and that some of the constituent nations may split into underlying parts in the process, but that this is happening slowly and messily so the world is as yet far from seeing any new equilibrium.

Mutual Fund Whistle Blower Case Will Proceed

Mar 9th, 2014 | Filed under: Best Practices, Regulatory, Today's Post

Lawson, the whistle blowing employee of an investment advisor, is protected by SOX. Six Justices agreed on that, although they disagreed on exactly why, or on how far the implications might take future courts.

Stock Crashes and the Damming of Bad News

Mar 6th, 2014 | Filed under: Academic Research, Risk management, Socially responsible investing, Today's Post

Hoarding bad news bears this meaning: at some point a lot of bad news is going to break through the informational dam all at once, producing a flood, that is, a firm-specific crash.

The ‘Knowledgeable Employee’ No-Action Letter

Mar 5th, 2014 | Filed under: Hedge Fund Regulation, Today's Post

The SEC says that it does not believe that “merely” providing analysis or information to the active members of a policy-making committee within a fund management firm is the same thing as making policy for the firm. That seems likely to provoke some wonderful hair-splitting disputes going forward.

Converting to the ’40 Act and a Checklist

Mar 4th, 2014 | Filed under: Alternative Mutual Funds, Hedge Fund Industry Trends, Investment Management Fees, Retail Investing, Today's Post

Why convert a hedge fund to a mutual fund instead of establishing a stand-alone vehicle available to retail investors that could invest alongside the existing hedge fund?

Depositary-lite and the challenge of implementation

Mar 3rd, 2014 | Filed under: Hedge Fund Industry Trends, Hedge Fund Regulation, Regulatory, Today's Post

AIFMD brings many changes to the table. Grant Thornton Ireland has issued a new paper looking at the ramifications.

Those Action Levers in the Back Office

Mar 2nd, 2014 | Filed under: Derivatives, Regulatory, Risk management, Today's Post

Financial firms still have people manually implementing Excel spreadsheets in connection with various mandated stress tests, a fact that suggests to a Celent research director that Fred Flintstone runs the back office.

The Struggle Against Latency: Four Layers

Feb 27th, 2014 | Filed under: Algorithmic and high-frequency trading, Hedge Fund Industry Trends, Technology, Today's Post

Cutting latency in any one layer is a task distinct from that of cutting it in any of the others. For the physical or interface layer (the ground floor of our ziggurat), optimization involves fiber optics and efficient queue management.

Power, Greed, Political Influence: Whose Energy Debate is This?

Feb 26th, 2014 | Filed under: Energy, Today's Post

Farallon founder and Koch Brothers at odds over energy. Daniel J. Graeber,, looks the issues.

Insolvent Cross-Border Debtors and the Choice of Forum

Feb 25th, 2014 | Filed under: Insolvency, Investment Management Fees, Today's Post

In June 2010, pursuant to an order of that BVI court, the court-appointed liquidators of a Madoff feeder fund in liquidation in BVI petitioned the bankruptcy court in the Southern District of New York to recognize those proceedings as the foreign main proceeding under Chapter 15.

Boundless Natural Gas, Boundless Opportunities: Interview with EIA Chief

Feb 24th, 2014 | Filed under: Alternative energy, Alternative energy investing, Energy, Today's Post

U.S. Energy Administrator Adam Sieminski speaks candidly about the U.S. energy opportunities with James Stafford,

Liquidity? Perhaps It Is What it Does

Feb 23rd, 2014 | Filed under: Academic Research, Asset pricing, Forex, Today's Post

Four researchers have developed an "event-based" understanding of Liquidity, measuring it as a characterization (from 0 to 1) of the predictability of asset price trajectories. Illiquidity is surprise.

Is Global Macro en Vogue for 2014?

Feb 20th, 2014 | Filed under: Alpha Strategies, Hedge Fund Industry Trends, Hedge Fund Strategies, Today's Post

Global macro was the strategy of choice for many of the big managers early in their careers. Big-name brands including Soros, Tudor and Moore saw the value of the strategy in the 1990s. This oft-misunderstood strategy is returning to the forefront. Diane Harrison looks at why.

Tell Me I’m Reading this Wrong: ‘Mobilize more personal pension savings for…’ Financing?

Feb 19th, 2014 | Filed under: Insolvency, Institutional Investing, Regulatory, Today's Post

Unless Reuters has been utterly misled, a recent report there suggests that Europe's greybeards are considering an astonishingly bad approach to the insolvency of their banking system: soak the pensioners.

Would-be Error Detectors: Suit Up

Feb 18th, 2014 | Filed under: Book review, CAPM / Alpha Theory, Risk management, Today's Post

That gadfly of financial modelers and quants is back. This time, Taleb writes in such a way as to establish that he isn't a mere popularize/diluter of familiar academic arguments -- which is how the critics of many of his earlier books have painted him. And them.

Increased Tax Rates and the Net Investment Income Tax – A Galactic Collision of Forces

Feb 17th, 2014 | Filed under: Best Practices, Partner accounting, Today's Post

Maury Cartine, CPA, JD, Partner in Charge of Alternative Investment Group Tax, Marcum, LLP, looks at the tax changes and what this means for managers and investors.

Prediction: The Word ‘Alternatives’ Will Go Out of Use

Feb 13th, 2014 | Filed under: Alpha Strategies, ETFs, Portable Alpha & Alpha/Beta Separation, Today's Post

The separation of alpha and beta is becoming a matter of routine, and the result will (PwC suggests) eliminate the division between "alternatives" investing on the one hand and "traditional" investing on the other.

Who’s Allowed to Chase Alpha: Detail Work Continues

Feb 12th, 2014 | Filed under: Derivatives, Regulatory, Risk management, Today's Post

The multi-state, multi-national law firm Pillsbury Winthrop Shaw Pittman has offered its clients, especially the banking entities among them, a guide to the principal elements of the newly finalized Volcker Rule, and it touches upon several significant concerns that industry participants have expressed.