By: David Hoffman, Investment News Published: October 23, 2006 Smaller events on the PGA and ATP Tours always have a problem attracting the big names.  Take, for example, the Canadian stop on the ATP Tour.  It seems that every year the top players fall victim to some freak injury right before the Rogers Cup.  Thankfully, they always recover by the [...]

By: Sydney Leblanc, Financial Advisor Magazine Published: August 1, 2005 This article for advisors covers ETFs in general.  However, the author makes an interesting observation about the role of ETFs in an SMA for purposes of hedging market risk and essentially creating portable alpha. “ETFs can also be used as hedging instruments. They can be optioned, margined and [...]

By: Yang Rong Published: March 6, 2006 Yang Rong’s observations about ETFs support their use as an alpha-isolation tool by hedge fund managers.  Which begs the question, “why just hedge funds?”. Excerpts:  “ETFs are often used for shorting purposes due to their intra-day trading rules, which not only help hedge funds to remove regulatory issues, but also generate revenue from lending [...]

By: Yang Rong Published: February 20, 2006 The explosion of the ETF industry now provides many more tools for alpha extraction and porting…  Excerpts: “Commodity ETFs: Commodities in general are typically a good hedge against inflation and stocks over a sustained period. The value of commodity ETFs is tied directly to the value of the commodity in question. “Dividend ETFs: The intention [...]

By: Noel Amenc, Edhec Business School Published: April 14, 2006   Professor Noel Amenc of the Edhec Business School in France argues for a new way of measuring mutual funds based on alpha/beta seperation (a topic regularly promoted on this website). Excerpts: “With the development of independent distribution and so-called “open” architecture, the marketing success of mutual funds no longer [...]

By: Lewis Braham, Business Week Published: December 26, 2005 This ariticle in Business Week illustrates clearly how hedging techniques can and will be used by individual investors in their own portfolios and it builds on many of the ideas contained in a post on this blog called “Financial Genomics”.  Excepts: “Using mutual funds, you can put together a hedge fund yourself at [...]

By: Alpha Male  Shorting out the equity market can isolate what I call the embedded hedge fund from within a long-only mutual fund.  As many, including William Sharpe, have argued, you don’t need to know the actual holdings in a mutual fund to determine the amount of beta within it.  One can simply regress returns against [...]

By: Alpha Male  In the 1930’s, a commerce student at the London School of Economics named Ronald Coase traveled throughout the United States conducting research for a research paper he called The Nature of Firm.  In 1991, he won the Nobel Prize for Economics for this and similar studies.  In his seminal paper, he tackled the [...]

By: Alpha Male  A friend recently asked me to analyze his firm’s equity mutual fund on the basis of it’s alpha component.  What proportion of the fund could be represented by an ETF, by cash (or borrowed cash), and by a market neutral overlay (a.k.a. “the embedded hedge fund”)?  If we assume a smal fee for [...]

By: Jonathan Clements, Wall Street Journal Published: February 8, 2006 Excerpt: If you’re like many mutual-fund investors, you own a mix of actively managed stock funds that tap into a host of market sectors. And, of course, you hope to beat the market. “Problem is, a lot of what you’re paying for isn’t stock-picking skill but basic market exposure [...]

By: Richard Kang, Meridian Global Investors Published: January 2005 Excerpts: The combination of the long position in the small cap fund and the short position in the Russell 2000 (assuming roughly equal dollar amounts) looks a lot like a market neutral long-short position, one subset of hedge funds. Only recently, with the explosion of index funds, ETFs and [...]