Financial crises always turn up new risks – and new opportunities. Famously, George Soros bet against the Bank of England during a fiscally challenged time in the early 1990s and pocketed a billion and change for his troubles. Was that a spectacular guess in a geopolitical game of chicken, or was it true alpha? We don't know, because we don't have the data. Currencies didn't much matter then; they do now.

Commodities have been the big story of the past decade – almost a repeat of the inflation-burdened 1970s. If hems reflect stock market sentiment, we should be seeing an outbreak of bell-bottom trousers and platform shoes. Certainly, a new cohort of investors, institutional and retail alike, see price rises in the elements core inflation strips out – namely food and energy – as a secular shift. Still, appearances can be deceiving. A recent study argues a long-only bet on commodities is likely to result in a return that is statistically 0: not the 1970s at all.

Diversification – particularly of risk – is the “a” in alpha. At first sight, commodities earn an “a.” Certainly they have attracted attention from institutional and retail investors alike. Most of those are long-only portfolios – as in “l.” They are a “p” for poor, “h” as in hedge in “a” for adverse markets.

Chris Brodie has been trading commodities for over 20 years, and set up Krom River in 2006. Scotsman Brodie relocated to Zug in Switzerland several years ago and has no regrets about the move. The fund’s best year so far was 2008 when it rose by 37% while the GSCI fell by two thirds, and it was also up in August of this year. Krom River are running both discretionary and systematic funds, and also have a dedicated agricultural vehicle. We touched on a range of topics that CAIA candidates and charterholders will be familiar with. Krom River is a signatory of the Hedge Fund Standards Board that has been discussed on AAA.

There are fears that the summer selloff could paralyze or weaken the secondary market for hedge funds. Yet deeper research reveals that some sought after funds may still command premiums – the story is very much fund-specific.

Dennis Lohfert, founder of Ion Asset Architecture, discusses quantitative trading strategies and how they are affected by current market conditions.

Institutional investors have great expectations for private equity, and the right fund managers, willing to meet their “increasingly exacting standards,” will be in a position to listen to “capture part of the growing flow of assets” in that direction.

AllAboutAlpha.com spoke to John Zito, portfolio manager for credit opportunities at Brencourt, about some of the strategies Brencourt has employed and continues to employ in its search for alpha. He observed that one of the main investment strategies pursued by the Credit Opportunities Fund in particular is capital structure arbitrage.

There are high hopes that the new UCITS framework that took effect in July could herald rationalisation amongst Europe’s regulated hedge funds. While tax factors could slow down the process, UCITS has plenty of other growth drivers besides cost savings.

You and your neighbour are good friends and, like Dagwood Bumstead and Herb Woodley, you share tools all the time. Then one day it occurs to you that Herb has lots of tools that he isn't using, or using well. Why not, you say, make an offer on his garage and its contents. Of course, Herb will have his own terms and conditions – and maybe extract a price if the deal falls through.

Will they or won't they? BNYMellon Asset Management looks at commercial real estate and speculates on the future of--dare we say it--CMBS....

Corporate CEOs aren't the only ones who dread the appearance of activist hedge fund managers on their radar screens. Activists are giving the accounting departments pause as well, according to a new paper by Hall and Trombley.

If everyone is the best, then no one is the best. A look at private equity performance.

By Christopher Faille On August 11, Credit Suisse’s Asset Management Division issued a new white paper, “Commodities Outlook: Increased Volatility, Increased Opportunity?”  This paper takes the long view of the issue of returns on commodities, taking us back to the 1970s – not to commune with our inner John Travolta or Donna Summer, but in order [...]

By Christopher Faille Hedge funds are accustomed to outsourcing a variety of daily activities, from front to back office. Many do get nervous, though, about how far their outsourcing should go. Their skittishness increases as such proposals encroach upon the way they generate alpha, the matters that must be kept secret: idea generation, supportive research, a [...]

By Christopher Faille A presentation by Samuel Kunz, chief investment officer of the Policeman’s Annuity and Benefit Fund, Chicago, to the CFA Institute 2011 Asset and Risk Allocation conference addressed the pros and cons of “risk parity.”  His presentation makes it seem that risk-parity portfolios (RPP) and the Capital Asset Pricing Model (CAPM) are sibling rivals. [...]

By Christopher Faille It might be the subject of a Sesame Street episode.  “R is an important letter.  It stands for Rate and Return and Risk-Free and lots of other words!”  Yet, like Oscar the Grouch if deprived of his garbage can, R has lost its fixed abode. Much of the mathematics of finance over the last [...]

By Christopher Faille It is possible to be nostalgic about the era before computerized trading, and thus before high frequency trading (HFT), when the transmission of orders took place by means of a human voice over a landline telephone.  But we must qualify any such nostalgia.  Consider that the market makers at Nasdaq as recently as [...]

By Christopher Faille One of the scariest things about hedge funds is the loss of liquidity that such an investment involves, with lock-up periods, redemption suspensions, wonder about what is in the “side pockets,” and worry about getting caught in the clanging gates.

When academics from other disciplines turn their attention to finance, they sometimes make some quite startling discoveries. These may at first sight seem to resonate with behavioural finance but they are in fact quite different – and this research has not gone unnoticed by some of the most senior central bankers, financial regulators, and legendary hedge fund managers.

By Christopher Faille The press still seems to be discovering “fat tails” and “black swans.”  In July, news outlets gave admiring coverage to the International Monetary Fund’s expression of interest in the ideas of Nassim Taleb, the perhaps-overexposed philosopher who made the phrase “black swan” a cliché upon the success of his 2007 book of that [...]

As if there wasn't enough confusion in the roiling U.S. capital markets and regulatory environment, the U.S. Second Circuit Court has issued a decision that will make alpha that more elusive for hedge funds involved in shareholder activism.

Dr. Bob Swarup, of CAIA, and a Partner of Pension Corporation LLP, in London, was the keynote speaker at the Emerging Managers Forum on July 7. He presented “The Outlook for Alternatives in Today’s Economic Environment.”

Hedge fund assets have bounced back from 2008 to make a new high above two trillion and many performance measures have also more than recovered their losses. Yet it seems most of the inflows are being hogged by the Billionaire's Club, despite studies shouting "Small is Beautiful."

Two economists cogently contend that looking at developments in hedge funds' monthly risk profile will be most revealing.

A recent comic strip featured a somewhat ambitionless twentysomething relating that she had seen her cat lick its own back and her dog catch its tail, fulfilling their lifelong goals all before she had even formulated ones of her own. Asset managers prefer not to see the market catch its tail – it means deep drawdowns for their portfolios. A recent research paper, however, suggests that it's better to try to catch the tail – and shorten it – than to hope it won't happen.

A CMRA/IAFE study of the AXA Rosenberg case shows that model risk may not be on the radar screens of many quant funds.

Clients, according to a surprising new report, aren't too keen on alpha at the moment.

Eep! A new paper suggests that the economic crisis is not behind us and that dark days lie ahead. Fortunately, there is some assurance that all will come out well - if only we can manage to survive...

One of the long-term trends that the hedge fund industry, and many others, face is the fact that the new media have unpredictable and sometimes unsettling consequences for many ways of doing business, including ways of finding alpha. The case of Barclays v. Fly on the Wall illustrates some of those consequences.

The European Central Bank’s latest regular financial stability review uses the word “normalisation” a lot. But what does that mean?

Risk Aggregation has been expensive, and prohibitively so for some, whether it’s in-house or out-sourced. That may be about to change, but just as Skype phone calls are not always the best quality, so too some investors will still want to go further than the free solution.

In the alpha world, skill often depends on the support of other factors. Some call them pedigree, process and performance, and rank them in that order. There's only one problem: despite the best pedigree, and the best process, performance can suffer tremendously when something unpredictable occurs – a black swan or tail risk.

Hamlin Lovell reports from The Battle of the Quants 2011.

Carrier pigeons and post roads gave way to telegraph lines, then telephones, then networks of computers. In our own century automation has gone so far that actual human beings on an exchange floor seem destined to share the obsolescence of those pigeons.

Nobody seriously thinks hedge fund returns have a normal distribution, so why does old fashioned optimization continue to dictate portfolio construction? Just as prisms in lenses are used to correct some eye defects, do allocators need to look through more statistical windows?

It's almost summer, yet neither the ice-cold hockey rinks nor the sweaty basketball courts have relented on their highly paid inmates. Maybe the owners of these highly salaried prize fighters know something... and share it with fellow owners.

To limit, or not to limit? That is the question FSA Chairman Lord Adair Turner attempts to answer in a new paper on commodity holdings limits.

Credit Suisse Asset Management's latest alternative investment report shows the road to hedge funds is paved with good intentions - so long as there aren't any bigger explosions.

Amazing things can happen when you have a robust seeding program.

Optimism about the hedge fund industry's prospects reigns, according to a recent survey. But is it a contrarian sign?

Your house is grounded, so it should be stable. But what if the water table is rising? There could be leaks in the basement. That analogy explains why real estate as an asset class can be highly volatile despite the seeming solidity of the ground and the buildings. Leaks and floods, hurricanes and tornadoes, all drowned real estate returns during the financial crisis.

While still struggling, Japan-focused hedge funds were finally beginning to show some promise, according to a recent report. The unfortunate events of March have created new challenges for the industry.

Funds of hedge funds aren't exactly being embraced with open arms again just yet, but they are no longer the pariahs they were, according to a recent recent report.

All is calm and good on the surface of the hedge fund industry, with AUM collectively continuing to rise. Underneath, however, are some gyrations that are changing the composition of alternatives fairly dramatically.

Hedge funds' ability to persevere and thrive following the past few years is a sign they'll be around for the long haul - a sentiment confirmed by Rothstein Kass's latest annual hedge fund survey.

Some types of alpha have a sting in the tail: they hibernate or head south when tail risks appear, while other types of alpha thrive on panics. Crisis alpha is about celebrating low Sharpe ratios, and looking beyond price volatility to gauge risk.

Private equity managers arguably bit off more than they could chew in the pre-crisis, credit-crunch world. Now, several years on, PE-funded companies have managed to survive, mutate and thrive, according to a new report.

Much to the chagrin of activist hedge fund managers, poison pills are making a comeback - in new and more lethal forms. For managers in particular, reading the label and following the directions is more important than ever.

Predictable patterns are easy game for hedge funds.