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As 2008 enters the history books, we look back at the top ten most popular posts at AllAboutAlpha.com over the last 12 months. As you can guess, most have a decidedly negative tone - redemption gates, shrinking AUM, warnings over quant models, securities lending problems, terrible monthly performances... Thankfully the year is just about over. If you are in the office today, here is a walk down memory lane that will make you especially happy to welcome in a new year. ...
Critics of hedge funds often argue that industry growth has had two negative side-effects: firstly, that less-skilled managers have been attracted to the sector and second, that the number of alpha-generating opportunities has not kept pace with asset inflows. Assuming these are true, then it could be argued that recent industry shrinkage may lead to new opportunities. In our monthly guest contribution from a member of the Chartered Alternative Investment Analyst (CAIA) Association, Tommaso Sanzin of Hermes BPK ...
BY TRISTRAM LETT, MANAGING DIRECTOR, ABSOLUTE RETURN STRATEGIES, INTEGRA CAPITAL CORPORATION - Benchmark hedging, a process designed to reduce the investment risk in a benchmark, is not new. However, doing it successfully and efficiently is. This article has two parts: in the first we explore the process of benchmark hedging and how it is possible to efficiently implement the process. As well, we look at the benefits it provides. We then move on to put this into an important context-the use of hedge funds in institutional portfolios. This has ...
Optimistic analysts and economic commentators are apt to interpret a downturn as a "cyclical bear in a secular bull market". It seems that this phrase can also describe the current state of the the hedge fund job market. Few question that last year was an annus horribilis for the hedge fund industry. But Euromoney reports on a survey conducted last summer by the website Hedge Fund Jobs Digest that reached a number of surprisingly rosy ...
In September, we suggested that the recently imposed bans on short-selling certain stocks would provide academics with a field day as they examined whether such restrictions actually had the intended effects. We compared it to the situation immediately after 9/11 when climate researchers were afforded an opportunity to measure the effect of airplane contrails on ground surface temperatures in the United States.
Well the data is starting to roll in now. And according to a study ...
On November 25, the Pennsylvania State Employees Retirement System (SERS) announced its Q3 results. Public pensions across the US issued similar press releases detailing the Q3 carnage. But what makes this pension plan different is its widely publicized use of portable alpha (see our April 2008 post.) As a result, the media has been quick to associate the fund's losses with the "aggressive", "exotic" and "unusual" investment strategy. To be sure, it appears that portable ...
Apparently retailers aren't the only ones discounting their merchandise to bring wary shoppers into their stores this Holiday season. Asset management firms are now priced to move. Since their top lines are levered to the absolute value of capital markets, asset managers have seen a precipitous drop in their valuations recently. In fact, the following chart from Pensions & Investments shows how valuations have fallen further than the overall stock market and even further than ...
Hedge fund incentive fees are often called a "free option" since the fund manager can win, but can't lose. Since managers can influence the volatility of their funds, many assume that this asymmetry will always give the manager an incentive to "swing for the fences". But with so many hedge funds starting off 2009 well below where they were a year ago, we thought it might be useful to examine whether this axiom holds true ...
It's fair to say that the Madoff situation has added insult to injury for the hedge fund industry and may have prompted some hedge fund investors to finally capitulate. The New York Post recently wrote: "Now the worry is that hedge-fund clients will use the scandal as a final reason to pull money from even solid-performing managers. Although Madoff technically did not run a hedge fund, the structure of his $17 billion asset-management operation was similar ...
Over time, the somewhat arbitrary selection of the calendar year as a performance fee window has raised the hackles of some hedge fund investors. Some argue that a year is too short a time and performance fees should be calculated - or at least paid out - only after several years. While a longer performance fee calculation period seems to make perfect sense (it would reduce the "asymmetry" where the manager who can win but can't ...
End of the Hedge Fund? Unlikely, according to Washington Post columnist Sebastian Mallaby who writes, "Even if you define Madoff's investment outfit as a hedge fund, which for various reasons is debatable, there's nothing in this saga that supports clamping down on the industry." Hedge funds return to roots as alpha claim refuted: This prediction of the hedge fund apocalypse tops all others. Robert McAdie, a credit strategist at Barclays Capital, was quoted by Reuters last ...
