Today’s Post

Study: Corporate/Government Cronyism Does Create Alpha

May 3rd, 2015 | Filed under: Academic Research, CAPM / Alpha Theory, Indexes, Today's Post

A new report finds that firms where current public officials are destined to become employees outperform other private firms by 7.43% per year during the three years before the officials/employees pass from one post to the other. The outperformance is highest in the year immediately before the switch, Justas a cynic looking for corrupt quid pro quos would suspect.


The Skorina Report: The Best, The Rest & Our Pick for Public Endowment CIO of Decade

Apr 30th, 2015 | Filed under: Alpha Hunters, Alpha Strategies, Guest Posts, Institutional Investing, The Skorina Report, Today's Post

Charles Skorina looks at the top public endowments and discusses performance with Erik Lundberg.


Tavakoli on Death, an Industry’s Culture, and Decisions

Apr 29th, 2015 | Filed under: Best Practices, Book review, Derivatives, Risk management, Today's Post

Bill Broeksmit, with whom Tavakoli worked closely at the interest-rate swaps desk at Merrill Lynch in the late 1980s, killed himself in January 2014. The manner of this death, and the circumstances surrounding it, give this book even more gravitas than would a global financial crisis or two.


Eurekahedge on Asia in March, and on Asia Over the Years

Apr 28th, 2015 | Filed under: Currencies, Emerging markets, Hedge Fund Strategies, Indexes, Performance, Analytics & Metrics, Today's Post

According to Eurekahedge the hedge fund industry globally returned $54.1 billion in performance gains in the first quarter 2015. This is the greatest first-quarter gain since before the global financial crisis.


Griffin, Bernanke, and the Saud family

Apr 27th, 2015 | Filed under: Alpha Hunters, Alpha Strategies, Currencies, Indexes, Macroeconomics, Today's Post

Why has Ken Griffin, the founder of Citadel, hired former Fed Chair Ben Bernanke as a Senior Advisor? This decision represents a surprise given Griffin's views on "quantitative easing," views he forcefully expressed a couple of years ago.


GOOG to Test Buy-on-Antitrust-Charge Theory

Apr 26th, 2015 | Filed under: Alpha Seekers, Legislation/Court rulings, Technology, Today's Post

Look for the EC sometime in the near future to bring a complaint about the contracts into which Google has entered with manufacturers that require them to construct the handsets in a way that favors Google’s famous search engine [over, for example, Microsoft’s Bing.] But consider that even this preliminary skirmish over comparison shopping might be a bullish sign for GOOG.


Some Assets are Hard to Ignore

Apr 23rd, 2015 | Filed under: Alpha Hunters, Alpha Strategies, Currencies, Gold, Hard metals, Infrastructure, Today's Post

Guest columnist Diane Harrison looks at the world of alternatives to alternatives, including stamps, cars, farmland and more...


Authorities Offer Revisionism About Flash Crash

Apr 22nd, 2015 | Filed under: Algorithmic and high-frequency trading, Derivatives, Indexes, Today's Post

Authorities now claim that the shenanigans that set off the flash crash of May 2010 were the work of Navinder Singh Sarao. Does this mean Waddell & Reed were unjustly maligned? Almost certainly.


Aleynikov’s Trial and My Cousin Vinnie

Apr 21st, 2015 | Filed under: Algorithmic and high-frequency trading, Intellectual Property, Legislation/Court rulings, Today's Post

A party seeking to employ an expert witness is supposed to let the other side know who the expert is in advance of trial. Fans of a classic Joe Pesci movie will remember that it isn't necessary to join the prosecutor in a hunting lodge.


Tax & Election Seasons Create Alternative Altercations in the US

Apr 20th, 2015 | Filed under: Legislation/Court rulings, Partner accounting, Real Estate, Today's Post, Venture capital

As a general rule, politicians [mostly] on the Democratic side benefit by raising the issue of the taxation of carried interest during campaigns and then quietly letting it die, as their donors expect, when the legislature is actually working on tax bills. It's a way of signaling who is a "populist" and who isn't.


Larry Fink Thinks ‘The Market Is Wrong’ on Greece

Apr 19th, 2015 | Filed under: Alpha Strategies, Currencies, Today's Post

It is always dangerous to say (of any deep and liquid market) that the market is simply wrong in its valuations. Likewise, if you're sitting at a poker table and you don't know who the sucker is ....


Eurelectric Speaks Up For Grushenka

Apr 16th, 2015 | Filed under: Derivatives, Regulatory, Risk management, Today's Post

Is it possible or desirable to separate "speculation" from operational hedging, so as to clear the way for industries to do the latter without the regulatory burdens that planners want to impose upon the former? Once Europe has decided that speculation is a bad thing, won't it end up pursuing the demon ways that will collapse the proposed distinction?


The Latest News from Italian Banking and the Dane-geld

Apr 15th, 2015 | Filed under: Alpha Strategies, Insolvency, Risk management, Today's Post

Banca Monte dei Paschi di Siena, BMPS, the oldest bank in the world, has now admitted that its exposure to Nomura Holdings has exceeded the 25% cap set by Italy’s regulators. Faille can't think of a good alpha-winning play on this fact, but it does inspire him to re-work a Kipling poem.


They Do It Right Down Under: Australian Institutional Funds

Apr 14th, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Alpha Strategies, CAPM / Alpha Theory, ETFs, Indexes, Institutional Investing, Today's Post

The hapless U.S. mutual funds Chen and Gallagher sample have a nominally positive pre fee alpha only when measured against CAPM. That disappears into the negatives when the baseline used is the Fama-French model, and deeper into the negatives when the momentum factor is added.


When I Learned Truth About RadioShack

Apr 13th, 2015 | Filed under: Hedge Fund Strategies, Insolvency, Technology, Today's Post

IT guys have been denigrating RadioShack, from their own perch of superiority, for a long time. The trouble is, while those IT guys were the future, RadioShack's customer base was fading into the past.


EDHEC: Geography is Not Just a Listing or Headquarters

Apr 12th, 2015 | Filed under: Academic Research, Alpha Strategies, Asset allocation, Asset pricing, Emerging markets, Risk management, Today's Post

Indexes labeled as representing developed market equity include companies with significant and increasing exposure to macro-economic trends in the emerging markets. A portfolio that tracks such an index may well have much more such exposure than its managers or investors had bargained for


Liquidity, Leverage and Those Nimble Hedge Funds

Apr 9th, 2015 | Filed under: Derivatives, Hedge Fund Strategies, Regulatory, Risk management, Today's Post

Basel III has given us three different statistics with a common goal, to keep banks to a stable funding profile, neither too illiquid nor too highly leveraged. As these requirements come on-line, what will be the consequences for the relationship between prime brokers and hedge fund managers?


John H. Makin, Hedge Fund Economist/Principal, Defender of U.S. Fed

Apr 8th, 2015 | Filed under: Academic Research, Alpha Hunters, Currencies, Forex, Today's Post

The impression one gets from some of the recent work of Dr. Makin is of a man who decided, late in life, that currency is a state invention, and that the states deputize their central banks to make sure the rest of us use it properly.


Zulauf Sees Unprecedented Risks: Zhou Fears Deflation

Apr 7th, 2015 | Filed under: Currencies, Emerging markets, Macroeconomics, Today's Post

Felix Zulauf is the principal of Zulauf Asset Management, and a former global strategist for the UBS Group. He said that central banks have intervened on such a large scale of late that they have left "global financial markets ... more distorted than ever before and accordingly the risks are very high."


EDHEC: Smart Beta Indexes May Be On a Launch Pad

Apr 6th, 2015 | Filed under: Academic Research, CAPM / Alpha Theory, ETFs, Risk management, Today's Post

There have been "a considerable number of product launches in the area of smart beta ETFs," but investors are eager for more, perhaps in the hope the developers will get beyond the "few popular strategies" in that area on which they have so far focused. With more variety may come a real take-off.


Reflections on the MS Internet Explorer, R.I.P.

Apr 5th, 2015 | Filed under: Algorithmic and high-frequency trading, Legislation/Court rulings, Technology, Today's Post

The U.S. Department of Justice typically brings high-profile antitrust actions against 'monopolists' by piling its legal theories on top of dubious micro-economics. A recent announcement by Microsoft sends Faille down memory lane, to two 1990s era actions by the D of J against MS in the days when Bill Gates was still a great media ogre.


M&A: a Continuing Trend According To Survey

Apr 1st, 2015 | Filed under: Alpha Hunters, Alpha Strategies, Currencies, Today's Post

Intralinks is confident that the ongoing growth in M&A activity will continue through the 2d quarter, fueled by strong performances in EMEA and North America. In North America in particular the drivers include low interest rates and pressure on corporate honchos to generate growth in that low-rate environment.


The Supreme Court and Securities Fraud: No Barking Tuesday Night

Mar 31st, 2015 | Filed under: Asset pricing, Legislation/Court rulings, Today's Post

The U.S. Supreme Court has just created a new, and confusing, standard for the trial of issuers who have made opinionated statements in offering documents. In certain contexts, to be determined ad hoc, the statement of an opinion, such as "we believe our practices are all lawful and value adding" can be a misleading omission of facts that might tend to the contrary conclusion.


Does the hedge fund industry benefit society?

Mar 30th, 2015 | Filed under: Alpha Hunters, Alpha Strategies, Hedge Fund Industry Trends, Hedge Fund Strategies, Media Coverage of Hedge Funds, Today's Post

Guest columnist Donald Steinbrugge, CFA, looks at the bad rap hedge funds have gotten and talks about why it's not deserved.


Hedge Fund Investors and Managers: Concord and Discord

Mar 29th, 2015 | Filed under: Alpha Hunters, Alpha Strategies, Hedge Fund Strategies, Institutional Investing, Today's Post

Investors in hedge funds want more transparency than they think they're getting, a fact that might not be clear to their managers.


A Taylor-Swift Lawsuit: ‘I’ve Got a Blank Space Baby.’

Mar 26th, 2015 | Filed under: Algorithmic and high-frequency trading, Derivatives, Hedge Fund Strategies, Technology, Today's Post

This is the story of one high-frequency trading firm suing one or more others and giving detailed credence to everything that has been said over the last year or so by those who bemoan the rise of HFT firms.


The Fossil Fuel Divestment Debate for Fiduciaries: It’s the Portfolio….

Mar 25th, 2015 | Filed under: Alpha Strategies, Alternative energy, Alternative energy investing, Today's Post

The typical investment manager is more likely to understand the divestment argument if he is shown that the dynamic effects of climate change on his fossil fuel portfolio holdings will be like a knife to the brain of one of TV's Walking Dead zombies, portfolio splatter included.


Intraday Momentum Confirmed: Day Traders Credited

Mar 24th, 2015 | Filed under: Academic Research, Behavioral finance, CAPM / Alpha Theory, Derivatives, ETFs, Today's Post

The first half-hour return of the S&P 500 ETF predicts the last half-hour return of the same trading day rather well. Why isn't this effect arbitraged away and a random walk restored?


More Global Mandates, Fewer EM Mandates, and Other Changes

Mar 23rd, 2015 | Filed under: CTA, Institutional Investing, Performance, Analytics & Metrics, Risk management, Today's Post

Eurekahedge's latest report gives a number of timelines for grappling with changes in the hedge fund world: since 2007; since January 2013; YTD January 2015. In any frame, you don't have to be a meteorologist....


Most Investors Sanguine About Central Clearing Mandates

Mar 22nd, 2015 | Filed under: Best Practices, Derivatives, Hedge Fund Industry Trends, Regulatory, Today's Post

The international push to mandate central clearing has expanded the clearinghouses "well beyond levels the market has ever seen," Greenwich Associates reminds us in a new report. This is an experiment, and there remains some grounds for uncertainty about the outcome.


KPMG, MFA & AIMA: Institutional Investors & Customization

Mar 19th, 2015 | Filed under: Alternative Mutual Funds, Asset allocation, Hedge Fund Industry Trends, Hedge Fund Strategies, Institutional Investing, Investment Management Fees, Liability Driven Investing, Regulatory, Today's Post

Surveys suggest that certain conspicuous ongoing trends will continue. For example, the classic 20 + 2 fee structure will continue to crumble, replaced by "customized" structures. A full 91% of the small hedge fund managers who filled out a survey agreed with this. A mere 76% of large hedge fund managers did likewise.


ESMA to Member States: You’re Not Doing Enough Re: MiFiD

Mar 18th, 2015 | Filed under: Institutional Investing, Regulatory, Retail Investing, Today's Post

A newly released report tells us that ESMA is unhappy with the national "competent authorities" as to how they've enforced MiFiD. the report implies that the adjective in the phrase "competent authorities" is to be understood as a courtesy rather than a description.


A Defeat, but Not a Rout, for Appraisal Arb

Mar 17th, 2015 | Filed under: Alpha Strategies, Asset pricing, Hedge Fund Strategies, Legislation/Court rulings, Today's Post

The Delaware Chancery Court would apparently have preferred to stay out of the issue of valuation as it played itself out in the 2012 acquisition of Ancestry.com by Permira. But it couldn't: the statute encouraging appraisal fights was too clearly worded for that.


Women in Senior Roles in Alternative Finance: The Marathon Continues

Mar 16th, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Alpha Strategies, Hedge Fund Industry Trends, Today's Post

Funds of funds are quite different entities from single-manager funds from the point of view of the number of women in senior C-suite roles. Different in what direction? That depends upon the country under consideration.


Does Private Real Estate Actually Have a Low Correlation with Public Real Estate?

Mar 15th, 2015 | Filed under: Alpha Hunters, Alpha Strategies, Asset pricing, Institutional Investing, Private Equity, Real Estate, Today's Post

Brad Case, Ph.D., CFA, CAIA, looks at the relationships between public and private real estate.


5 Insights on a Hedge Fund Outlook

Mar 12th, 2015 | Filed under: Hedge Fund Industry Trends, Hedge Fund Strategies, Institutional Investing, Today's Post

Guest columnist Diane Harrison finds five trends in hedge funds that are worth watching.


Gazelles, Exports, and Infrastructure: A View from the UK

Mar 11th, 2015 | Filed under: Conference report, Infrastructure, Today's Post

The Confederation of British Industry has taken a look at some of the issues that do and should concern investors in the industries of those islands. Among much else, the CBI wants the government to kick-start the private placement market. And to worry more about infrastructure.


Alpha, Love, and Marriage

Mar 10th, 2015 | Filed under: Academic Research, Alpha Hunters, Behavioral finance, Risk management, Today's Post

The most important turning points of our lives tend to have consequences for our alpha seeking. A new paper gives us some insight into what those consequences are, and how they vary as to strategies.


After the Balkan Adventure: A Bad Bank Gets Worse

Mar 9th, 2015 | Filed under: Frontier markets, Private Equity, Today's Post

Over the weekend that began March, auditors in Austria found that the billions already invested in the wind-down of Heta, part of the nationalized Hypo Group, would not suffice for the orderly wind down of this "bad bank." A worse-and-worse bank, it appears.


Why Constraints on Hedge Funds Matter

Mar 8th, 2015 | Filed under: Alpha Strategies, Alternative Mutual Funds, Hedge Fund Industry Trends, Hedge Fund Strategies, Indexes, Performance, Analytics & Metrics, Today's Post

Andrew Beer looks at what happens when talented hedge fund managers try and perform within the constraints of the mutual fund structure.


The Skorina Report: Divestment vs. Fiduciary Duty Whose Money is it?

Mar 5th, 2015 | Filed under: Guest Posts, Institutional Investing, Risk management, The Skorina Report, Today's Post

Guest columnist Charles Skorina takes a look at investment divestment..


Twitter for Geriatric (over 35) Investment Managers

Mar 4th, 2015 | Filed under: Alpha Strategies, Today's Post

Doug Friedenberg takes a look at Twitter as a random news generator on subjects close to the hearts of portfolio managers, and finds it invaluable for the information just beginning to enter your known universe.


AIMA Reports: Activist Hedge Funds are the Good Guys

Mar 3rd, 2015 | Filed under: Best Practices, Hedge Fund Strategies, Private Equity, Regulatory, Today's Post

Activist investors usually aren't trying to take control of a company. And when they are, managers have strong existing tools to foil them. What activist investors can do is increase share value, over sustained periods.


The Next Big Thing: A Robotic ‘Nexus’ of Contracts

Mar 2nd, 2015 | Filed under: Currencies, Digital currencies, Regulatory, Technology, Today's Post

In some fairly routine middle-critter corporate roles, there may no longer be much need for human managerial involvement. Enter the self-running business entity: another big step toward the obsolescence of human beings some of whom, nonetheless, will get wealthy in the process.


Do you like or dislike equity?

Mar 1st, 2015 | Filed under: Hedge Fund Strategies, Liquid Alts, Today's Post

John Shearman, CAIA, guest columnist explores the basics of liquid alts.


Long-Term Infrastructure Debt: The Valuation Issue

Feb 26th, 2015 | Filed under: Alpha Strategies, Asset pricing, Infrastructure, Insolvency, Today's Post

Three authors at EDHEC propose a two-step modeling process for the valuation of certain infrastructure debt. One of the key ideas they incorporate is the value of the step-in rights that come when the issuers violate a covenant or otherwise find themselves in technical default.


Macroeconomics: The Mainstream and the … Banks

Feb 25th, 2015 | Filed under: Currencies, Macroeconomics, Today's Post

The trade cycle is not a central concern of the reigning general-equilibrium models in macroeconomics. To the extent such models do consider booms and busts, they largely reject money or credit based explanations.


Tsipras Marched Bravely Forward And … Surrendered

Feb 24th, 2015 | Filed under: Alpha Strategies, Currencies, Today's Post

The Greek prime minister's surrender to Germany and the troika has alienated much of his own base in Syriza. You can bet on it. Indeed, finding creative ways to bet on it looks like a sound alpha strategy now.


On First Looking Into SEC’s Homer: A Final Rule on Swaps Reporting

Feb 23rd, 2015 | Filed under: Derivatives, Regulatory, Today's Post

Commenters successful pressed for certain changes in this massive new rule during its years of gestation. For example, the rule incorporates a T + 24 approach for the reporting of block trades. But warned, though, blizzards in NYC don't stop the ticking of that 24 hour clock.


Capital Call – Mastering 7 Essential Investor Questions

Feb 22nd, 2015 | Filed under: Institutional Investing, Today's Post

...One of the key hurdles all managers face is the investor interview, when the focus is not on the fund or strategy, but on the manager’s ability to sell him or herself. While managers are typically comfortable discussing their investment thesis and related activities, they are markedly less able to articulate the personal and intangible details about which investors want to learn more.