Jeff Malec, CAIA, looks at the role of alternative investments in the current market environment and why they are crucial to successful investing.,
Guest columnist Bob Swarup, CAIA, looks at good governance and best practices and what the alternative investment industry needs to do to "grow up."
GFIA says that most of the Asia Pacific managers it tracks generated substantial returns above the relevant index in May 2014. The long-biased firms did best there, their event-driven peers … not so much.
Guest columnist Andrew Beer looks at the consistency of hedge fund returns and finds them, well, lacking...
Starting with 350 available metrics of corporate governance and/or forensic accounting, GMI Ratings has boiled their model down to just 64, and from those they get three scores.
Justice Scalia's opinion has the support of Justices who aren’t, to say the least, reliable allies of Scalia’s in the kind of ideologically driven splits that draw so much MSM attention, Obama appointee Elena Kagan as well as Clinton appointee Stephen Breyer are on board. On Monday, June 16th, the U.S. Supreme Court delivered a stunningly complete victory for NML Capital, the holdout bondholder in the much-watched litigation arising out of Argentina’s 2001 bond defaults. On the one hand, SCOTUS refused to hear Argentina’s appeal from the Second Circuit’s decision on what the issuing documents meant by the pari passu language. A decision not to decide has no precedential significance itself, but this of course leaves the Second Circuit’s decision, issued in October 2012, intact. Both as a matter of the law as it applies to this case, and as a matter of precedential significance for many similarly worded documents, the Second Circuit is the circuit that counts. What is Left Standing? The Second Circuit left standing, and now the Supreme Court has also left standing, a district court injunction against any payments that in any way rank holders of the restructured debt over the hold-outs. What the Second Circuit said was that in the pari passu clause in the issuing documentation of these Fiscal Agency Agreement bonds (FAA), the sovereign “manifested an intention to protect bondholders from more than just formal subordination.” The language was there to protect them precisely from what Argentina has more recently tried to do, that is, to protect them from any arrangement by which “Argentina as payor [discriminates] against the FAA bonds in favor of other unsubordinated foreign bonds.” On the same day (a few minutes later) SCOTUS also delivered a full-dress opinion on a related issue. The New York district court has interpreted the Foreign Sovereign Immunities Act of 1976 narrowly, so as to allow for discovery orders that assist NML in its search for Argentina assets in third countries where they may not be immune. Since Argentina owes NML more than $1.5 billion, it has plenty of incentive to continue this search. The Supreme Court upheld that statutory construction. The opinion wasn’t closely split. There was one dissent (Justice Ginsburg) and one recusal (Sotomayor). Still, the opinion for the other seven Justices, written by Justice Scalia, had the support of Justices who aren’t, to say the least, reliable allies of Scalia’s in the kind of ideologically driven splits that draw so much MSM attention. The 7-justice majority included Obama appointee Elena Kagan as well as Clinton appointee Stephen Breyer. What Happens Next? Argentina’s immediate reaction was that it will fight on, apparently by continuing to pay the favored creditors [Exchange Bondholders] and by continuing to exclude from these payments the FAA hold-outs. “What I cannot do as President is submit the country to such extortion,” says President Cristina Fernandez. The legal fight is over, though. And I should add that part of what SCOTUS has let stand here is a district court order the copies of its pro-holdout injunction be provided to “all parties involved, directly or indirectly, in advising upon, preparing, processing, or facilitating any payment on the Exchange bond.” Argentina’s New York agents cannot now give out money to the Exchange bondholders without aiding and abetting the defiance of a court order. Argentina must now either pay $907 million to the plaintiffs by the end of this month, or lose the ability to use U.S. financial intermediaries of any kind to pay the holders it has favored. The only possible means by which Argentina can resist the “blackmail” now and continue to pursue the policy it has in recent years is if it can pay the favored creditors without the involvement of any financial intermediary subject to U.S. court orders. This would prove tricky, especially with a tight schedule. The Rest of the World And of course even success there leaves Argentine open to the second of SCOTUS’ two punches, discovery and perhaps successful seizure of assets in third countries. Leaving Argentine matters to the side: what will be the consequence of NML’s victory in this matter, and the now-regnant Second Circuit reading of the pari passu clause, on the market for EM nation bonds? If, as at least some authoritative sources have indicated through this long fight, the pari passu language used in Argentina in the FAA followed “standard language included in substantially the same form in numerous credit documents” and if this decision changes how that language has been understood, then the markets will have to develop work-arounds: because from time to time sovereigns will default, and some sort of restructuring will have to occur. How those work-arounds will work is beyond me. But then, given my poor record trying to predict the twists and turns of this saga that is perhaps for the best.
"Isn't there anything good to be said for the practice of historical cost accounting, especially when the cost figures are higher than the mark-to-market figures? Well ... no. It's reality avoidance."
Given recent political news, it is perhaps unsurprising that, in the words of Eurekahedge, hedge fund managers "investing with an India focus and employing systematic trading strategies [posted] strong gains" in May 2014.
An aphorism of Warren Buffett's once again making the rounds can be understood in at least three distinct ways. Faille looks at the possible constructions and decides that, whatever exactly Buffett meant to say or do, his reasoning here does little harm to his target, modern finance theory.
Many of recent history¹s most significant market events have manifest in what was (previously) the extreme of the market. These"bubbles" and "crashes" follow power laws, meaning that (in theory) they could reach any size and fundamentally threaten the functionality of the entire financial system. Could random trading be the solution?
Some Japan-focused long/short equity funds did produce positive returns in April, swimming against the stream in a month when Topix, Nikkei, and TSE Mothers all fell.
Pershing Square owns 9.7% of Allergan's equity. Further, Valeant's proposal is structured so that Pershing Square is more of a co-bidder than a seller.
Investors continue to "crave for exposure" to Asia, and even to Japan. India is especially exciting to some, perhaps because of hopes for the near-term political success of the BJP.
The latest news from Eurekahedge shows a spotty performance for the global hedge fund industry in April, and generally in the year to date. The report also makes a casual remark about low inflation numbers that gives our Christopher Faille an opportunity to grouse about its Keynesian premises.
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 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.
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.
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 […]
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 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.
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.
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!"
The way to keep growing is to keep changing. For the European ETF market, that means product innovation, from infrastructure funds to smart beta.
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.
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.
Deloitte's pie graphs emphasize the degree to which both hedge funds and PE vehicles have become dependent upon institutions in general, and detached from the retail market. But Deloitte says that 2014 "will likely see additional efforts by alternative fund managers to engage the retail investor base by taking their alternative investment strategies mainstream."
Managed futures are performing quite poorly. They also have a higher standard deviation than the HF industry aggregate, so it seems that if you're invested there your losses are at least buying you greater risk. [Wait. That can't be right.]
A new white paper from Debtwire and Bingham McCutchen finds some reason to be bullish about the distressed debt market in 2014. The long-awaited tapering of the Federal Reserve's easy-money policy may set off a wave of defaults, creating opportunities for the wary.
Corporations have cash in the till; and it is sitting up, begging to be put to work. Thus, M&A deals are on the way.
Pimco is expanding its active ETF offerings significantly. By serendipity, The Cerulli Edge contains some fascinating data on the growth of the ETF industry. both active and passive.
A new report from GFIA highlights some asset manager successes: in the Japanese markets riding the wave of Abenomics; in India benefitting from the weakness of the rupee; and in the Arab world thriving against the backdrop of political turmoil.
Andrew Beer looks at hedge fund replication to see if it works.
Higher-education endowments are sticking with the “endowment model,” that is, their asset allocations remain stable. For example, in 2012, the surveyed institutions had 15% of their total AUM in domestic equities, 16% in international equities. In 2013, those figures were only slightly higher, 16% and 18% respectively.
A forthcoming paper by Goldstein et al opens a window onto the convergence of two market-structure issues that, until quite recently, had not even been thought very similar.
The latest in a series of annual reports from Rothstein Kass on women in the alternatives world adopts a somewhat less cheery tone than did that of last year. No longer is the dominant metaphor a "tipping point." Now it's a marathon.
Diane Harrison looks at what 2014 may hold for the markets. What pain in exchange for the gain may lie ahead?
The crucial generalization to be drawn from the last three decades of alternatives investing by institutions is that generalization is tricky. Even within one type of structure, such as VCs, broad statements have to take account of the wide dispersion in returns, "making manager access and selection key determinants of success."
Guest columnist Diane Harrison considers performance. What's the alternative?
Guest columnist Don Steinbrugge provides his thoughts on what the coming year will bring for hedge funds.
In the interests of full disclosure I acknowledge here that I recently entered the realm of bitcoin owners myself. That said, bitcoin is a fascinating story, one of our top five of the past year.
Guest columnist Diane Harrison on taming the taper tiger.
Ogier Partner Peter Cockhill recently examined the direction in which the Cayman Islands regulator CIMA is headed on fund governance. He thinks the costs of the new framework, though real, will prove reasonable given the benefits.
Guest columnists from Tesseract Asset Management look at investor behavior and risk management.
The good news is that there is a general consensus that QE-infinity is not sustainable. "The notion that QE has distortionary effects is widely accepted," says the CSAM white paper.
Guest columnist Andrew Beer looks at fee reduction as an "alpha generator."
Guest columnist Doug Friedenberg turns over a few rocks in Cyprus and finds that there might still be something left.
The hedge portion of a liability-driven portfolio can be dominated by long-duration fixed income instruments. One of the points of a new Cerulli report is that by offering those, asset managers can get a valuable 'in' with the sponsors of DB plans, to whom LDI appeals.
Guest columnist Don Dale looks at
Guest columnist Tesseract looks at the second half of 2013 and asks the question "Where are we headed?"
Comparing the 2011 and 2012 data, some correlations that seemed clear in the former year either disappeared entirely, or become a good deal blurrier, in the 2012 data.