Guest columnist Andre Boreas takes a look at the alternative investment universe year-to-date 2015 by the numbers.
Hedge Fund Strategies
Low interest rates and record equity valuations together mean that companies can use either stock swaps or borrowed cash or a combination of the two, to buy one another. Further, corporate executives infer that they have to keep buying in order not to become a target themselves.
PwC offers a glimpse of a 'day in the life' of a typical compliance analyst in 2015 and again in 2020. As these authors tell it, the day is filled with data, darkness, and drudgery at present, but it will be airy, alliterative, and analytical in another five years.
Spoofing is probably about as ubiquitous as texting-while-driving. And it is possible to make an example of a spoofer caught red-handed. But it isn't clear what purpose that will serve. The real problem is that a broken market contains a broken set of incentives.
Much of the ubiquitous talk of the short-sightedness of nasty activist investors or traders is simply confused, analytically sloppy. It is a sort of confusion likely to have negative consequences to the extent that investors/traders themselves come to take it seriously.
Guest columnist Don Steinbrugge looks at the value of trend-following CTAs in a portfolio.
For Faille, the stand-out essay in this collection of case studies, from CNBC's Maneet Ahuja, concerns Marc Lasry and Sonia Gardner, of the Avenue Capital Group. As Myron Scholes says in his afterword to this volume, Lasry and Gardner take returns from those whose demand for liquidity makes them willing to give them up.
A new report by Eurekahedge says that the rise of new products such as hedge fund trackers and related developments since the global financial crisis have set the fund of funds world into a downward spiral whence it has yet to recover.
Intrepid contributor Doug Friedenberg addresses a burning nomenclatural issue for the investment style formerly known as hedge funds and proposes a solution to save the financial system.
What about the Congressionally employed leaker in a matter that looks like an insider tip to hedge fund traders? Is the SEC even allowed to ask? Shockingly, Congress wants special treatment for itself and its staff.
The tear-jerker ending to a famous Broadway musical comes to Faille's mind as he contemplates the latest twist in the struggle over DuPont's board.
A new survey from AIMA seems designed to dispel the idea that alternative finance is a game played somewhere far away from the 'real economy.' The gist of it is that as banks withdraw from lending to that real economy, alternative asset managers, including hedge funds, have stepped in to fill the void.
It is of course possible to “question the wisdom of the SEC’s stance on this issue and its fairness to ordinary investors,” said the Judge in the Lanier/HFT decision. But the court isn’t in the business of second guessing the wisdom of regulation. Lanier's claims are dismissed.
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.
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.
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?
Guest columnist Donald Steinbrugge, CFA, looks at the bad rap hedge funds have gotten and talks about why it's not deserved.
Investors in hedge funds want more transparency than they think they're getting, a fact that might not be clear to their managers.
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.
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.
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.
Guest columnist Diane Harrison finds five trends in hedge funds that are worth watching.
Andrew Beer looks at what happens when talented hedge fund managers try and perform within the constraints of the mutual fund structure.
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.
John Shearman, CAIA, guest columnist explores the basics of liquid alts.
The hedge fund universe has become a much more complicated place since 2008. The old-school hedge funds offering only quarterly redemptions with at least one month notice are no longer the only option for those seeking alternatives plays. And those who are seeking such plays may be somewhat confused by the proliferation of possibilities.
Reuters is now reporting that major investors seek the opportunity to convert their voting shares of Twenty-First Century Fox into non-voting shares, because the voting shares are trading at a discount. Faille takes Reuters' anonymous sources at their words for the purposes of discussion. He doesn't think these investors will get their convertibility.
William Browder's new book, Red Notice, is a fascinating window into the recent history of Russia, both when Yeltsin (and at first Putin) welcomed foreign investment and then when things turned very ugly for those investors.
A physicist recently suggested that exchanges might do well to change the nature of the trading they host, holding batch auctions every one-hundredth of a second to better serve their real economic functions. Then a commenter proposed that taxation could achieve the same effect. Our physicist went back to the drawing board to consider this.
Unfortunately, Gallagher and Grundfest aren't simply contributing to the on-going debate over shareholder activism, classified boards, etc. They're trying to stifle it by suggesting a litigation campaign against the side they oppose. Shame on them.
Eurekahedge tells us that hedge funds were in the black 4.57% in 2014. That's hardly cause for celebration, since the MSCI World Index returned 6.79% over the same year. But all eyes now turn to the still-sliding price of oil.
Guest columnist Diane Harrison looks at both sides of the quantitative investment debate.
Guest columnist Don Steinbrugge, CFA, surveys institutional investors and hedge funds to find out what the top trends may be for 2015.
The Permal Group takes a refreshingly modest view of the eventual impact of Big Data on the business model of hedge fund managers. The better the data about a corporation, the more accurate the stress testing. Yes, that seems reasonable.
In Part One Faille discussed the Newman/Chiasson decision of a three-judge panel of the appeals court. In this follow-up, he discussed consequences, starting (but not ending) with the good news this offers Michael Steinberg.
The success of Wynn's lawsuit would have chilled free speech by short sellers. So let us take a moment to celebrate its quick demise at the hands of Judge Orrick. As a general rule, though, when a plaintiff quotes an expression from a transcript that, in fact, is immediately preceded by the word "not," and the plaintiff leaves the "not" out of the quote ... things are knotty.
A three-judge panel of the appeals court instructed the district court to "dismiss the indictment with prejudice as it pertains to Newman and Chiasson." Here we discuss why. in the second part, we'll discuss the likely consequences.
Guest columnist Don Steinbrugge examines what might happen to hedge funds if there's a 2008 "Groundhog Day" in the markets.
Carter's decision allows Pershing Square to vote its equity in Allergan in ways favorable to Valeant's planned purchase thereof. More is going on here than just another incident in the consolidation of the biopharm world.
Move over! It's crowded in here. What happens when hedge funds crowd a trade? Guest columnist Andrew Beer looks at hedge fund performance and the crowded trade.
GFIA shares some ruminations about the relationship between the abundant academic work on alternative investment and the insights of practitioners. Meanwhile, the Bank of Japan seems to be engaged in some ruminations of its own, and practitioners have to await the results.
Guest columnist Peter Urbani looks at emerging managers and why they may be re-emerging and bringing alpha with them.
Guest columnist and intrepid reporter Doug Friedenberg talks to Brad Katsuyama about HFT, Michael Lewis and more.
For many fund managers working in Southeast Asia, and/or China, June 2014 was “listless,” with numbers that suggest a flat tire. The booms on the ASEAN bourses are concentrated where the fund managers aren’t, in “high beta cyclical sectors.”
Herbalife (NYSE: HLF) may survive the tricky game it is playing. One critical point: even on the worst plausible reading of its behavior, Herbalife as a corporation or a stock isn't a chain letter. The products it offers its distributors and the public -- they are the chain letters. That's an important practical (though not a legal) distinction.
Herbalife (NYSE: HLF) is playing a tricky sort of game right now: outlast the high-profile short. If its underlying business model is sustainable it can win that game. It may also be able to win, or Ackman may lose, even if the model isn't sustainable, although in that case Ackman's odds are obviously better.
Guest columnist Andrew Beer looks at the consistency of hedge fund returns and finds them, well, lacking...
One takeaway, from the point of view of the managers, is that a close engagement with institutional investors requires a lot of time and effort, and those commodities have to be budgeted. How to handle the circumstances of industry maturity is an individualized call.
Guest columnist Rick Ehrhart looks at hedge fund incentive compensation.