Browsing: Alpha & Beta

Statistical Methods of Estimating Beta & Alpha of Alternative Investments
Alpha and Smart Beta
The Estimation of Alpha and Beta
The Separation of Alpha and Beta
Portable Alpha

Alpha & Beta

Aon: Alternative Risk Premia Viable for Many

Sep 17th, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Asset Allocation Models, Finance & Economics, Financial Economics Theory, Newly Added

A new report from Aon discusses the contemporary market for alternative risk premia: where it is, how it got here; where it may be headed. The authors, Matthew Towsey and Chris Walvoord, begin with some very basic considerations of what ‘risk premia’ are. They are, on the one hand, theRead More


Sovereign Wealth Funds: Partners and Capability

Sep 7th, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Institutional Asset Management, Institutional Investing, Newly Added

Sometimes it pays to read footnotes and end matter, because that turns out to be where the story is. Bocconi University’s Sovereign Investment Lab has published its latest annual report on sovereign wealth funds, and this gives us a case in point. The report says that 2016 was far fromRead More


Alternative Risk Premia Investing

Jul 9th, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Asset Allocation Models, Newly Added

Unigestion has posted a research paper by Olivier Blin, Joan Lee, and Jérôme Teiletche, on “some of the practical considerations that should help investors get the most out of their allocation to” alternative risk premia (ARP) strategies. Unigestion is a boutique asset manager, and Blin is its head of crossRead More


Growth and Challenges for Asset Management in Italy

Jun 15th, 2017 | Filed under: Allocating to A.I., Alternative Investments in Context, ETFs, Newly Added, The A.I. Industry

A recent (May 2017) Deloitte white paper discussed asset management in Italy. The paper begins with the observation that key institutions in Italian finance have a relatively short history: going no further back than the mists of the 1990s. The Società di Intermediazione Mobiliare (SIM) – literally, the phrase meansRead More


Broad Commodities: Value, Inflation, Implementation

May 29th, 2017 | Filed under: Commodities, ETFs, Investing in Commodities, Newly Added

ETF Securities (US) LLC, a New York-based asset manager and manufacturer of ETP’s (Exchange Traded Products),” has issued a white paper written by its Director, Investment Strategy, (Maxwell Gold), on “broad commodities,” that is, on the use of a broad basket of commodities, as a way of allowing an investor’sRead More


State Pensions and Complex Investments

May 14th, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Institutional Asset Management, Institutional Investing, Newly Added

A recent report from the PEW charitable trusts discusses the degree to which the pension funds of the states of the United States are increasing their use of “complex investments.” It also speaks to the consequences of this move. The term “complex investments” is used here to describe any departureRead More


Survey Respondents: Market Volatility is the Gravest Threat Just Now

Mar 26th, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Institutional Asset Management, Institutional Investing, Newly Added

Natixis Global Asset Management is out with its annual survey of institutional investors and their views about alternative investors. The survey included institutions around the world and of many distinct classes: corporate and public pension funds, insurance funds, sovereign wealth funds, endowments/foundations, managing amongst them $15.5 trillion. The break-down ofRead More


Factor Investing And The Importance Of Market Cycles

Mar 15th, 2017 | Filed under: Allocating to A.I., ETFs, Newly Added, Other Topics in A.I., Smart Beta

By Scott Opsal, CFA Director of Equities, The Leuthold Group The widespread popularity of smart beta ETFs demonstrates that factor-based investing has advanced from the province of academia to rank among the most popular investment strategies for institutional and retail investors. Originally of interest to researchers looking to test, andRead More


BlackRock: Smart Beta Strategies Have Room for Growth

Mar 5th, 2017 | Filed under: Allocating to A.I., Alpha & Beta, ETFs, Liquid Alternative Investiments, Liquid Alts, Newly Added, Other Topics in A.I., Smart Beta

A recent Columbia Business School research paper looks into the transaction costs associated with smart beta strategies in order to estimate the capacity of each strategy. The three authors of the report are all affiliated with asset manager BlackRock Inc. They are: Ronald Ratcliffe, Paolo Miranda, and Andrew Ang. RatcliffeRead More


The Principal-Agent Problem and Smart Beta

Mar 2nd, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Institutional Asset Management, Newly Added

Economists  devote a good deal of attention to what they call the “principal-agent problem,” defined to include the whole nest of conflicts of interest and moral hazards that arise when one party agrees to work for and make decisions on behalf of another, especially when the goal is to  optimizeRead More


Why Do Alpha Seekers Find It In the Small Caps?

Feb 21st, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Finance & Economics, Financial Economics Theory, Newly Added

The median performance of active fund managers with a small-cap mandate is uniformly better than the performance of their colleagues with a large cap mandate against their respective benchmarks. Fewer than 40% of large-cap managers outperform U.S. large-cap equity. More than 60% of their small-cap counterparts do so. The patternRead More


PGIM:  Not All Alternatives Are Alike

Jan 2nd, 2017 | Filed under: Allocating to A.I., Alpha & Beta, Asset Allocation Models, Institutional Asset Management, Institutional Investing, Newly Added

A new report from PGIM Institutional Advisory looks at an old question: what role should alternative investments play within the portfolio allocation decisions of institutions? The question is especially pressing at the beginning of 2017 because US broad equity indexes have done quite well for years, ever since the marketsRead More


Pension Funds, Hedge Funds, and Allocations

Nov 8th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Institutional Asset Management, Institutional Investing, Newly Added

A new scholarly paper addresses the puzzle: which institutional investors are best informed? Zhe Chen, of the University of New South Wales, David Forsberg, Macquarie Graduate School of Management, and David R. Gallagher, UNSW Australia Business School,  compare hedge funds, mutual funds, pension funds, and private banking firms to determineRead More


Northill: In Defense of Active Management

Aug 27th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Benchmarking & Performance Attribution, Newly Added, Performance, Analytics & Metrics

Northill Capital, a London-based asset manager, has released a report defending active asset management from the common charge that it cannot, after costs, beat the passive managers. That is an old and familiar subject for debate. What cannot be debated, because it is a simple matter of definition and arithmetic,Read More


Active vs. Passive: A 3-Club Headwind

Aug 10th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Benchmarking & Performance Attribution, Newly Added, The A.I. Industry

By Scott Opsal Relative Performance Actively managed funds have recently underperformed passive indexes. As a result, fund inflows and deposits have favored passive funds. Active Vs. Passive Return Patterns Are Cyclical Our research suggests relative returns between active and passive are cyclical, depending on the market environment. We examine severalRead More


Study Says Pensions May Be Looking for Returns in the Wrong Places

Aug 7th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Newly Added, Private Investments, Real Estate Equity Investments

Alex Beath, senior research analyst at CEM Benchmarking, the Toronto-based pension research firm, has produced a white paper on the pension fund performance in the U.S. since 1998, and the news he brings is not good (for pension funds themselves, or for the hedge funds to which they have allocatedRead More


Lyxor Quants Ask: What Exactly is a ‘Risk Factor’ Anyway?

Jul 6th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Finance & Economics, Financial Economics Theory, Newly Added, The A.I. Industry

Given the growing body of scholarly work over “risk factor” investing, especially the growing number of risks cited as factors, one has to wonder: what exactly is a “factor”?  In terms that admirers of Rodgers and Hammerstein will remember: is a feature of an investment a risk factor because it’sRead More


Factor-Based Asset Allocation

Jun 19th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Asset allocation, Asset Allocation Models, Commodities, Investing in Commodities, Newly Added, Other Topics in A.I., Smart Beta

A paper by Xiaowei Kang and Daniel Ung, published in June 2014, remains timely because risk parity and related approaches remain the center of controversy and some confusion. The Kang & Ung paper looked at three approaches to risk factor based portfolio construction, studying specifically the practical aspects of theRead More


Investors ‘Misoverestimate’ ETFs and a Push Towards ESG

May 26th, 2016 | Filed under: Allocating to A.I., ETFs, Industry Size & Managers, Newly Added, Other Topics in A.I., Socially responsible investing, SRI and Clean Energy, The A.I. Industry

In a newly released report, Natixis Global Asset Management speaks to the quite positive views of passive investment vehicles and exchange traded funds that it finds in today’s marketplace.  Their report inspires the neologism “misoverestimate,” as a logical analog of a former U.S. president’s term, “misunder ….” A Natixis surveyRead More


March Improved, but 2016 Still Rains Red for Hedge Funds

Apr 24th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Benchmarking & Performance Attribution, Equity Hedge Funds, Hedge Fund Industry Trends, Hedge Fund Strategies, Hedge Funds, Newly Added

The latest report from Eurekahedge indicates that hedge funds worldwide gained in March, though by far less than the underlying markets gained during the same period. Specifically, the Eurekahedge Hedge Fund Index gained 1.33 percent over the month, while the MSCI World Index, representing those underlying markets, gained 5.47 percent.Read More


Smart Beta Strategy: Aces Australian Scrutiny

Jan 10th, 2016 | Filed under: Allocating to A.I., Alpha & Beta, Alternative Beta & Hedge Fund Replication, CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added, Other Topics in A.I., Smart Beta

Paul Docherty, a senior lecturer at Newcastle Business School. University of Newcastle, in Australia, has studied the performance of the factors that underlie smart beta portfolios within the equity markets of that country. On the basis of a long time-series of data, Docherty has concluded that four such factors “allRead More


Arbitrage Pricing Theory and Large Pricing Errors

Dec 13th, 2015 | Filed under: Allocating to A.I., Alpha & Beta, CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Hedge Fund Operations and Risk Management, Newly Added, Portable Alpha & Alpha/Beta Separation, Risk Management & Operations, Risk Management Strategies & Processes

Uppal and Zaffaroni use Arbitrage Pricing Theory as a meta-model: a model that can be employed to check the errors in the specification of first-order models that in turn are used to value assets.Read More


MFS: The Limits of Passive Investing

Nov 15th, 2015 | Filed under: Allocating to A.I., Alpha & Beta

One helpful characteristic of active managers is that, in the words of a newly issued white paper from MFS, they can “avoid taking full market risk, intentionally avoiding companies and segments of the markets where risk is overpriced.” Read More


A Curtain Opener for the Australia Forum

Sep 13th, 2015 | Filed under: Alternative Beta & Hedge Fund Replication, Hedge Fund Regulation, Performance, Analytics & Metrics

Paul Chadwick, chairman of AIMA Australia, says that the hedge fund industry in Australia is at an "inflection point." Faille reflects on that ubiquitous expression, and then turns to Australia's new Investment Manager Regime. Read More


Delivering Alpha Highlights: Part One

Jul 19th, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Alpha Strategies, Currencies, ETFs, Media Coverage of Hedge Funds

Larry Fink is "deeply worried" that the combination of share repo with high-yield debt is "one of the reasons why we have a below trend-line economy. We're not investing in the future as much as we should." Carl Icahn, predictably, has a very different view of what ails us. Read More


European Investor Satisfaction with Smart Beta ETFs

Jun 28th, 2015 | Filed under: Alpha Strategies, CAPM / Alpha Theory, ETFs, Liquid Alts, Risk management, Smart Beta

Two authors at EDHEC remind us that 15% of the assets in any ETF or ETF-like products for European investors were in smart-beta indexed products as of August 2014, and that this amount is growing. They discuss the extent to which investors are pleased with their results. Read More


A New Index: The Eurekahedge 50

Jun 1st, 2015 | Filed under: Alternative Beta & Hedge Fund Replication, Indexes, Liquid Alts, Portable Alpha & Alpha/Beta Separation

It appears likely that the new index, the Eurekahedge 50, as well as the daily tracker index that has been built around it, will have aspirational significance. It is designed to set a bar that will be very difficult for other alpha seekers to clear, yet easy for replicators to follow. Read More


They Do It Right Down Under: Australian Institutional Funds

Apr 14th, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Alpha Strategies, CAPM / Alpha Theory, ETFs, Indexes, Institutional Investing

The hapless U.S. mutual funds Chen and Gallagher sample have a nominally positive pre fee alpha only when measured against CAPM. That disappears into the negatives when the baseline used is the Fama-French model, and deeper into the negatives when the momentum factor is added. Read More


EDHEC: Smart Beta Indexes May Be On a Launch Pad

Apr 6th, 2015 | Filed under: CAPM / Alpha Theory, ETFs, Risk management

There have been "a considerable number of product launches in the area of smart beta ETFs," but investors are eager for more, perhaps in the hope the developers will get beyond the "few popular strategies" in that area on which they have so far focused. With more variety may come a real take-off. Read More


Intraday Momentum Confirmed: Day Traders Credited

Mar 24th, 2015 | Filed under: Behavioral finance, CAPM / Alpha Theory, Derivatives, ETFs

The first half-hour return of the S&P 500 ETF predicts the last half-hour return of the same trading day rather well. Why isn't this effect arbitraged away and a random walk restored? Read More


A Metaphorical Map that Proposes an Unbound Barbell

Feb 12th, 2015 | Filed under: Alpha Hunters, Alpha Strategies, Alternative Beta & Hedge Fund Replication, Alternative Mutual Funds, Asset allocation, Hedge Fund Strategies, Liquid Alts, Risk management

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. Read More


The Delusions a Boom Can Bring and the Perils of Chasing Hedge Fund Winners

Aug 28th, 2014 | Filed under: Alpha Hunters, Alpha Strategies, Institutional Investing, Portable Alpha & Alpha/Beta Separation, Risk management

For an investor allocating slots in its portfolio to hedge funds, the draw of recent outsized performance can be powerful. Thus, the temptation to chase winners. But two members of the Hedge Fund Strategies Group at Commonfund caution against it. Read More


Traders Sometimes Want Macro-News to Be Free

Jul 9th, 2014 | Filed under: ETFs, Indexes

There exists “robust evidence of informed trading during lockup periods ahead of the Federal Open Market Committee … monetary policy announcements” say three authors. Some agencies can embargo news effectively. The FOMC doesn't seem to be among them. Read More


What Will Drive ETF Growth? Not Active Management

Feb 3rd, 2014 | Filed under: Alpha Strategies, ETFs

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. Read More


Indexical Question: How Much Transparency is Enough?

Jul 10th, 2013 | Filed under: ETFs, Regulatory

In an initial consultation report in January of this year, the IOSCO Board took an aggressive position on transparency, saying that transparency of indexes used for ETFs should be such that market participants have "the ability to replicate a published Benchmark level...." The new final statement, EDHEC complains, has lost that language.Read More


Hedge Fund Replication: A Re-examination of Two Key Studies

May 1st, 2013 | Filed under: Alternative Beta & Hedge Fund Replication, Hedge Fund Industry Trends

Guest columnist Andrew Beer re-visits two significant studies on hedge fund replication.Read More


The Present and Future of Actively Managed ETFs

Apr 28th, 2013 | Filed under: ETFs

A recent paper by the SEI in collaboration with ETF Trends explains that the share creation/redemption process sets up a feature of ETFs, and in particular of active ETFs, that constitutes a potential competitive disadvantage vis-à-vis mutual funds. The former, not the latter, are susceptible to front running. Read More


On Mutual Funds, Alternative Strategies, and Waterfalls

Feb 19th, 2013 | Filed under: 130/30, Alternative Mutual Funds

John Siciliano, managing director at PricewaterhouseCoopers, updated me on the state of retailization/convergence from the point of view of the mutual fund firm managements with whom he has conferred of late. Read More


EDHEC, EMA in Broad Concord on ETFs

Apr 23rd, 2012 | Filed under: ETFs

In January, the European Securities and Markets Authority set out in a consultation paper its guidelines on exchange traded funds and other issues relating to the Undertaking for Collective Investment in Transferable Securities, and it asked for comments by March 30. Much of the ESMA paper involves issues of tracking and disclosure. Read More


Alpha Hunters: Bringing Long-Short Equity to the Masses

Feb 2nd, 2012 | Filed under: Alpha Hunters, Alpha Strategies, ETFs, Hedge Fund Industry Trends, Hedge Fund Strategies, Retail Investing

AAA sat down with Alex Gurvich and Jim Mitchell, both of The Rockledge Group, an investment advisory firm headquartered in Brooklyn, New York. We began by discussing the mid-January launch of a new product that gives the long-short equity strategy an ETF format, and ended up talking about a good deal else, such as the inherent superiority of ETFs over mutual funds, and Pimco's recent recognition of that fact. Read More


ESMA and EDHEC on Indexes and Tracking Errors

Feb 1st, 2012 | Filed under: Alpha Strategies, ETFs, Indexes

Since transaction costs and the illiquidity of certain portions of an index make ideal tracking impossible, there will be a difference between the return of a tracking ETF, such as those tracking ETFs that are structured as UCITS in Europe, and the return of the underlying index or benchmark. The European Securities and Markets Authority maintains that investors should be informed of the factors that are likely to affect the size and the volatility of this difference. Read More


Hedge funds – not the newest new thing in terms of innovation

Jul 11th, 2011 | Filed under: Alternative Beta & Hedge Fund Replication, Hedge Fund Industry Trends, Institutional Investing

CREATE-Research's annual report takes a closer look at innovation, and how a lack of has prompted institutional investors to wise up when it comes to alternative investments. We beg to differ. Read More


Hedge Fund Replication: Indexation & duplication? Estimation & approximation? Or a declaration of innovation?

Jan 24th, 2011 | Filed under: Alternative Beta & Hedge Fund Replication

Maybe it's about time we dispense with the antiquated notion that "hedge fund replication" is all about actually "replicating" anything.Read More


Researchers try to fix “unreliable” hedge fund measures

Jan 23rd, 2011 | Filed under: Alternative Beta & Hedge Fund Replication, Performance, Analytics & Metrics

The ubiquitous Sharpe ratio ignores those pesky "higher moments." But evidently, that's not all it lacks.Read More


Some (not so) random thoughts on the future of the hedge fund industry

Nov 25th, 2010 | Filed under: Alternative Beta & Hedge Fund Replication, Hedge Fund Industry Trends

In a paper last spring, Wharton Professor Christopher Geczy reviewed the research and concluded the hedge fund industry does indeed have a future - a future that just may not look much like its past or present.Read More


Financial crisis put mutual funds, hedge funds and ETFs on a three way collision course

Sep 8th, 2010 | Filed under: Hedge Fund Industry Trends, Portable Alpha & Alpha/Beta Separation

A series of recent reports on the convergence in the asset management industry shows can alpha-seeking hedge funds and beta-seeking ETFs can make strange bedfellows - especially when they have a common enemy.Read More


You can lead an investor to liquid alternative beta, but will they drink?

Jul 1st, 2010 | Filed under: Alternative Beta & Hedge Fund Replication

A new white paper by Credit Suisse Asset Management suggests liquid alternative beta will soon be as common an investing concept as index-linked investments in the long-only space. Read More


Being short apparently has its benefits

May 10th, 2010 | Filed under: 130/30, Retail Investing

A new research paper suggests mutual funds that adopt hedge fund-like strategies were aided by their short positions - especially during the financial crisis.Read More


The A’s, B’s, C’s and D’s of hedge funds

May 4th, 2010 | Filed under: Alternative Beta & Hedge Fund Replication

A 2010 update of a 2006 study on hedge fund alpha shows some interesting changes resulting from the financial crisis. Read More