Browsing: Risk Management & Operations

Risk Management & Operations

PwC Charge: Asset Managers are Digital Tech ‘Laggards’

Nov 30th, 2017 | Filed under: Hedge Fund Industry Trends, Industry Size & Managers, Newly Added, Technology, The A.I. Industry

A new paper from PricewaterhouseCoopers on the coming transformations in the asset and wealth management industries says that firms in this market must adapt or die. And the adaptation the authors have in mind isn’t just the usual Darwinian metaphor – managers must “become business revolutionaries, even disruptors” in orderRead More


Due Diligence Requires Deep Dives into Data

Nov 7th, 2017 | Filed under: Due Diligence Process, Newly Added, Private Investments, Risk Management & Operations, Risk Metrics and Measurement

The data and analysis provider eVestment has issued a new white paper on “enhancing private equity manager selection with deeper data.” PE funds below the top quartile have not materially outperformed the public markets as a matter of history. So for an institutional investor, earning alpha is in large measureRead More


Lazard Research on Smart Beta

Nov 5th, 2017 | Filed under: Behavioral finance, Due Diligence Process, Finance & Economics, Financial Economics Theory, Newly Added, Other Topics in A.I., Risk Management & Operations, Smart Beta

Jason Williams, senior vice president at Lazard Asset Management, has written a white paper on the “six sins of smart beta.” First: what is smart beta? Academic studies indicate anomalies in the markets that somehow don’t get arbitraged away.  These become identified as “factors” and indexes can be designed soRead More


Federal Reserve on Counterparties to the next Lehman Brothers

Nov 2nd, 2017 | Filed under: Business News, Insolvency, Newly Added, Operations, Risk Management & Operations, Service Providers

The Federal Reserve has issued a final rule relating to the qualified financial contracts (QFCs) of global systemically important U.S. banking institutions (GSIBs). Derivatives & Repo Report, a blog maintained by the international law firm Perkins Coie, has done a thorough write-up on the subject, to which the material belowRead More


DTCC: How to Think About Fintech

Oct 24th, 2017 | Filed under: Newly Added, Operations, Risk Management & Operations

The Depository Trust and Clearing Corporation (DTCC), a provider of clearance, settlement, and a wide range of other services to the financial markets, has issued a new white paper on technological innovations and the disruptions fintech may generate. The report begins with a quotation from a speech given by LaelRead More


AIMA’s New Due Diligence Template

Oct 22nd, 2017 | Filed under: Due Diligence Process, Newly Added, Operations, Partner accounting, Risk Management & Operations, Service Providers, Technology

It has been 20 years since the Alternative Investment Management Association published its first due diligence questionnaire, a template designed to standardize the diligence process by which investors decide if a particular management is right for them. Now it has published a new questionnaire/template, covering a broader range of entities/strategies.Read More


EIU on Institutions and Time Horizons

Oct 19th, 2017 | Filed under: Allocating to A.I., Institutional Asset Management, Institutional Investing, Newly Added, Risk management, Risk Management Strategies & Processes

With the  sponsorship of Franklin Templeton, The Economist Intelligence Unit (EIU)  has surveyed  143 investing institutions in North America (part of the global sample of 571) in order to study recent shifts in their portfolio allocation, especially with an eye to the risks that concern them and the length ofRead More


Barnes on Swaps Transparency under  MiFID II

Sep 19th, 2017 | Filed under: Commodities, Investing in Commodities, Newly Added, Operations, Risk Management & Operations, Structured Products

A recent blog in the TABB Forum, by Chris Barnes of Clarus Financial Technology, looks at recent developments in the realm of MiFID, and looks forward. The UK’s Financial Conduct Authority in August of this year authorized certain Approved Publication Arrangements (APAs) for reporting under MiFID II.  The authorization ofRead More


Below the Black: A Review of Risk Reduction Strategies

Sep 13th, 2017 | Filed under: Commodities, Commodities, Hedge Fund Strategies, Hedge Funds, Investing in Commodities, Macro and Managed Futures Funds, Newly Added, Risk management, Risk Management & Operations, Risk Management Strategies & Processes, Risk Metrics and Measurement

Excerpted from the Alternative Investment Analyst Review, Volume 1, Issue 4 The Alternative Investment Analyst Review is the official publication of the CAIA Association. Access to the most current issue is an exclusive benefit of CAIA Membership while archived issues are available to the public in the Perspectives section atRead More


High-Frequency Trading and Spoofing   

Aug 31st, 2017 | Filed under: Algorithmic and high-frequency trading, Business News, Commodities, Investing in Commodities, Newly Added, Risk Management & Operations

Six years ago Michael Coscia placed orders through the CME Group’s Globex platform via a trading algorithm that amounted to “spoofing.” He placed both large and small orders in the copper market, for example, with the large orders (cancelled within milliseconds) designed to create the illusion of market movement inRead More


Transparency in Alternative Investing

Aug 24th, 2017 | Filed under: Newly Added, Risk management, Risk Management Strategies & Processes

In February of this year, the Economist Intelligence Unit surveyed 200 senior asset managers and institutional investor executives to learn what factors are most important in the way they make their decisions. Several different types of institution were involved, including hedge funds, private equity firms, insurance companies, and nonprofits. Also,Read More


Risk Parity: Is it a Strategy for a Sprint or a Marathon?

Aug 20th, 2017 | Filed under: Newly Added, Risk Management Strategies & Processes

Excerpted from the Alternative Investment Analyst Review, Volume 1, Issue 4 The Alternative Investment Analyst Review is the official publication of the CAIA Association. Access to the most current issue is an exclusive benefit of CAIA membership, while archived issues are available to the public in the Perspectives section atRead More


Til and Heckinger on Commodity Debacles, Part II

Aug 6th, 2017 | Filed under: Due Diligence Process, Newly Added, Personalities in AI, Risk Management & Operations

A new paper available at SSRN looks at two infamous commodity industry melt-downs: Amaranth and MF Global. It offers a diagnosis of each. The paper is co-authored by Hilary Till, of EDHEC – Risk, and Richard Heckinger, of the Working Group on Financial Markets, Federal Reserve Bank of Chicago. InRead More


New Numbers on Catastrophe Bond Insurance

Jun 27th, 2017 | Filed under: Newly Added, Risk management, Risk Management & Operations, Structured Products

A new report from an Alternative Risk Transfer research service, Artemis, looks at the catastrophe bond and insurance-linked securities market in the (recor- breaking) first quarter of 2017. Bond and ILS issuance reached the unprecedented level of $2.76 billion this Q1. That involved 25 tranches of notes from 14 deals,Read More


How Do They Get Those Non-Correlated Returns?

May 30th, 2017 | Filed under: Commodities, Due Diligence Process, Investing in Commodities, Newly Added, Risk Management & Operations

In a recent paper Mark Shore, of Shore Capital Management, has discussed overlaying of strategies in managed futures, saying that it is something he covers in his course on managed futures at DePaul, but that in general it “is not discussed as much as it should be.” Behind that question,Read More


Hedge Funds and Sell-Side Analysts: Who is Tipping Off Whom?

May 7th, 2017 | Filed under: Finance & Economics, Financial Economics Theory, Newly Added, Risk Management & Operations, Risk Management Strategies & Processes

Nathan Swem, an economist with the Board of Governors of the Federal Reserve System, has written a paper on an always fascinating subject: the flow of information in financial markets. The point, in successful equity trading for example, isn’t merely “who you know?” Nor is it “what you know.” It’sRead More


Risk Management Isn’t Just Fund Selection

Apr 27th, 2017 | Filed under: Due Diligence Process, Newly Added, Private Equity, Private Investments, Risk Management & Operations

New Strategies for Risk Management in Private Equity, a new book from Private Equity International, is an anthology of papers on the titular subject. It is edited by Dr. Ivan Herger to offer investors in PE new perspectives on the field. Herger, a managing director at Capital Dynamics, has aRead More


The State of the OTC Index Dividend Swap Market

Feb 9th, 2017 | Filed under: Derivatives, Equity-linked Structured Products, Newly Added, Risk Management & Operations, Structured Products

In a new article in the Journal of Alternative Investments, Scott Mixon and Esen Onur quantify the over the counter index dividend swap market. Along the way, they provide a good example of the scientific method: positing a relationship, testing it against the data, and then abandoning it when theRead More


The Federal Reserve on Distributed Ledger Technology (that is, on Blockchains)

Jan 5th, 2017 | Filed under: Finance & Economics, Newly Added, Operations, Risk Management & Operations, The Global Economy & Currencies

A large team of officers and staff affiliated with the Federal Reserve (eight with the Board in DC, five with the FR Bank of New York, one with the FRB of Chicago) have collaborated on a new paper on distributed ledger technology in payments, clearing, and settlement. Of necessity, givenRead More


Ammar on the Implied Volatility Smile

Dec 22nd, 2016 | Filed under: Emerging Alternative Investments, Newly Added, Other Issues in Private Investments, Risk Management & Operations, Risk Management Strategies & Processes

In a new working paper, a scholar at the School of Finance, at the University of St Gallen, Switzerland,   Semir Ben Ammar, has analyzed the relationship between catastrophe risk and the “implied volatility smile” in stock options.  Along the way, he has proposed what may be a novel type ofRead More


Commissioner Piwower and Alpha Seekers

Nov 15th, 2016 | Filed under: Commodities, Event-Driven Hedge Funds, Hedge Funds, Newly Added, Operations, Risk Management & Operations

With a new administration in the making, thoughts in the world of asset management naturally turn to the issue of appointments to the Securities Exchange Commission and the Commodity Futures Trading Commission. Who is likely to get what position and what difference might it make? Recent practice has been thatRead More


Academics:  No, Navinder Sarao Did Not Cause the Flash Crash 

Oct 25th, 2016 | Filed under: Algorithmic and high-frequency trading, Business News, Finance & Economics, Hedge Fund Operations and Risk Management, Newly Added, Operations, Personalities in AI, Risk management, Risk Management & Operations, Technology

Mid-October news reports tell us that Navinder Sarao has lost his effort to avoid extradition from Britain to the United States. So he will face charges in the U.S. in connection with the “flash crash” of May 2010, the incident in which the DJIA fell 998.5 points in less thanRead More


Why are Bank Stress Tests like Student/Instructor Evaluations?

Aug 15th, 2016 | Filed under: Newly Added, Risk management, Risk Management Strategies & Processes

Two scholars affiliated with Columbia University have contributed to the ongoing discussion of Federal Reserve stress tests and their consequences in an article in the Journal of Alternative Investments. Stress tests have become a big part of the U.S. regulatory scene since 2009, with the creation that year of theRead More


How Risk Management Resembles Meteorology: A White Paper

Jun 12th, 2016 | Filed under: Hedge Fund Operations and Risk Management, Newly Added, Risk management, Risk Management & Operations, Risk Management Strategies & Processes

A new white paper from Campbell & Co. discusses the negative skew that is often a characteristic of portfolio returns, and the ways in which trend following can achieve positive skew instead. The paper is effectively advertised by its title, “Taming of the Skew.” The authors begin with distinctions amongRead More


Best Practices for Private Equity Sponsors in an Age of Increasing Scrutiny

May 23rd, 2016 | Filed under: Benchmarking & Performance Attribution, Newly Added, Other Issues in Private Investments, Performance, Analytics & Metrics, Private Equity, Private Investments, Risk management, Risk Management Strategies & Processes

By John Czapla, Parag Patel and Shane Newell, Valuation Research Corporation As the demand for transparency rises for private equity and hedge funds, the spotlight is increasingly focusing on valuation practices. There are an important number of reasons why the valuation process has become important, and they are essential forRead More


Credit Derivatives in China: A 2014 Presentation Recalled

May 19th, 2016 | Filed under: Newly Added, Risk management, Risk Management Strategies & Processes

The People’s Bank of China launched two seemingly important products in 2010: the Credit Risk Mitigation Agreement and the Credit Risk Mitigation Warrant. I refer to them as “seemingly” important because they addressed a large issue in a vast economy, and did so in what seemed to many a commendablyRead More


Escape to the Internet? Or Build Better Communities?

May 8th, 2016 | Filed under: Currencies, Digital currencies, Newly Added, Operations, Other Topics in A.I., Risk Management & Operations, Technology, The Global Economy & Currencies

Dissatisfaction with the fiat money issued by or on signals from central bankers will not go away. Talk of “printing press” money seems quaint, as when people of my generation still refer to a keyboard as a “typewriter.” Central banks and their servants (and their servers) around the world engage,Read More


Brexit and Derivatives: Allen & Overy’s Views

May 1st, 2016 | Filed under: Due Diligence Process, Newly Added, Regulatory Environment, Risk Management & Operations, The A.I. Industry

A decision by the United Kingdom to leave the European Union could be a bad thing for the derivatives markets. But from a legal standpoint there isn’t a lot that can be done about it in advance, and the existing Master Agreement for derivatives needs no change. Those are theRead More


Risk Management & the Trouble with Capacity-Driven Decisions

Apr 28th, 2016 | Filed under: Commodities, Investing in Commodities, Newly Added, Risk management, Risk Management & Operations, Risk Management Strategies & Processes

A recent CAIA member contribution by Kathryn Kaminski, director of investment strategies at Campbell & Co., discusses the quantification of CTA risk management.  It is worth a look, not least because it amounts to a warning about how underperformance can result for the re-jiggering of allocation for capacity constraints. KaminskiRead More


Data Exploitation for Asset Managers: A Survey and White Paper

Apr 12th, 2016 | Filed under: Hedge Funds, Newly Added, Risk Management Strategies & Processes, Structure of the Hedge Funds Industry

A new survey sponsored by Northern Trust suggests that asset managers need to capture more value from available data, and that in order to do so they need both a more flexible strategy and stronger leadership than many now have. The surveyors talked to more than 200 executives in insuranceRead More


Andrew Lo: Progress is the Platform for Ever-Changing Risk

Feb 28th, 2016 | Filed under: Newly Added, Partner accounting, Risk management, Risk Management & Operations, Risk Management Strategies & Processes

Andrew Lo, of the Massachusetts Institute of Technology, recently wrote a stimulating discussion of two seemingly contrary “laws”: Moore’s and Murphy’s. Read More


AIMA’s Guide to the Bamboo Bridge of Operations

Feb 15th, 2016 | Filed under: Due Diligence Process, Newly Added, Operations, Regulatory Environment, Risk Management & Operations, Risk Management Strategies & Processes, The A.I. Industry

How sturdy can a bamboo bridge be? The front page of a new Guide from The Alternative Investment Management Association consists of a photo of a bamboo bridge, apparently on a beach, as seen from below. That is, this is the view of someone on whom the bridge would fall,Read More


“We Aren’t Obsolete,” Says DTCC White Paper

Feb 4th, 2016 | Filed under: Newly Added, Risk Management & Operations, Service Providers, Technology

The Depository Trust and Clearing Corporation has issued a new white paper on block chains and their significance in the context of the post-trade landscape. Block chains, also known as distributed ledgers, are a hot new technology, made so in large part by the cryptocurrency Bitcoin and by the publicityRead More


After Seven Years: Philosophical Implications of the Madoff Fraud

Dec 30th, 2015 | Filed under: Derivatives, Due Diligence Process, Equity-linked Structured Products, Newly Added, Operations, Personalities in AI, Risk Management & Operations

It has been seven years and a few days more now since Bernard Madoff acknowledged to authorities that “there is no innocent explanation” for the story they had just heard from his sons. It has been 15 and a half years since Harry Markopoulos ran the numbers regarding Madoff’s performanceRead 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


Delaware’s Supreme Court Upholds Smack-down of RBC

Dec 8th, 2015 | Filed under: Due Diligence Process, Newly Added, Risk Management & Operations

Some of the reasoning of the courts seems a bit circular to a layperson. Still, the gist is clear enough. Shareholders were cheated when Rural Metro was sold at a price well below its fair market value, and RBC has both the liability and the deep pockets necessary to make that right. Read More


For Practitioners of Risk Parity: Don’t Panic

Dec 6th, 2015 | Filed under: Allocating to A.I., Hedge Fund Operations and Risk Management, Newly Added, Risk management, Risk Management Strategies & Processes

A new paper by Cliff Asness puts the recent relative weakness of Risk Parity Portfolio performance into a broader context. The cumulative excess return from what he calls "simple risk parity" continues to rise steadily though undramatically. Read More


India: The Way Up and the Way Down Are Not the Same

Nov 26th, 2015 | Filed under: Finance & Economics, Financial Economics Theory, Newly Added, Other Topics in A.I., Risk Management & Operations, Risk Management Strategies & Processes, SRI and Clean Energy, The Global Economy & Currencies

Faille doesn't mean to argue theology, but he has to observe that a Shariah-based understanding of what constitutes “ethical investing” entails a lot of premises, and if those premises are to be inserted into reasoning about financial economics, they have to bear up to empirical, secular scrutiny. Read More


Due Diligence Idea: Reverse Stultification and Bloat

Nov 5th, 2015 | Filed under: Due Diligence Process, Risk Management & Operations

No one likes those bloated questionnaires. Perhaps twenty-five out of 300 questions are both relevant and important. So, to get better results, customize and re-focus the questions. Read More


The Elusiveness of the Natural Block Trade

Nov 1st, 2015 | Filed under: Business News, Operations, Technology

Trading on natural blocks is a very desirable goal. So why aren't more traders doing it? How hard are they trying? Some questions from a TABB paper, and from an intriguing commenter at TabbForum. Read More


Study Shows Divergence in Fund Expense Disclosure

Oct 29th, 2015 | Filed under: Operations

The analytic company Convergence concludes from its research -- a study of 2,600 ADVs -- that there is a lot of variance in the “depth, breadth, and quality of expense disclosure practices” across fund types and strategies. Read More


For Practitioners of Risk Parity: Don’t Panic

Oct 6th, 2015 | Filed under: Allocating to A.I., Asset allocation, Asset Allocation Models, Benchmarking & Performance Attribution, Newly Added, Risk management, Risk Management Strategies & Processes

A new paper by Cliff Asness puts the recent relative weakness of Risk Parity Portfolio performance into a broader context. The cumulative excess return from what he calls "simple risk parity" continues to rise steadily though undramatically. Read More


Foundations: They’ve Taken a Blow from “Subdued” Markets

Sep 2nd, 2015 | Filed under: Hedge Fund Industry Trends, Hedge Fund Strategies, Indexes, Institutional Investing, Liquid Alts, Performance, Analytics & Metrics, Risk management

Both private and community foundations depend heavily on U.S. equities. Indeed, domestic equities remained the bright spot while other strategies underperformed in 2014. A new report from a collaboration of the Council on Foundations and Commonfund provides food for thought about the reversal in foundation returns in that year. TheRead More


An Overview of Real Asset Investing

Aug 26th, 2015 | Filed under: Infrastructure, Intellectual Property, Private Equity, Real Estate, Risk management

Guest columnist Andrew Smith, CAIA, provides an overview of real assets and their commensurate risks and rewards.Read More


Study Says The Gold Bugs are Right

Aug 23rd, 2015 | Filed under: Currencies, Forex, Gold, Hard metals, Risk management

Gold seems, to a larger extent than silver, and even more so to an extent larger than is true for palladium or platinum, to work as a true financial asset: decoupled from price developments in the commodity markets. It succeeds as a hedge against currency and stock-market trouble.Read More


Weintraub of GFT: Basel III Coming Into Force by Increments

Aug 20th, 2015 | Filed under: Asset allocation, Hedge Fund Industry Trends, Regulatory, Risk management

Faille spoke recently to Herman Weintraub, executive director and head of alternative investment practices at GFT, about the impact of the Basel III rule changes upon the HF industry. Weintraub says, one ought to look not at the parts, but at the whole. Read More


The Skorina Report: Risky Business–Chief Investment Officers and Public Pension Plans

Aug 16th, 2015 | Filed under: Alpha Hunters, Alpha Seekers, Alpha Strategies, Institutional Investing, Risk management

Guest columnist Charles Skorina with a cautionary tale of greed and deceit and less-than-best practices at a large public pension plan.Read More


SEC’s Daniel Gallagher: Friend of the Beleaguered CCO

Aug 10th, 2015 | Filed under: Hedge Fund Regulation, Regulatory, Risk management

Commissioner Gallagher contends that some recent enforcement actions "have unfairly contorted the rule to treat the compliance function as a new business line," thus giving compliance officers the unwelcome role of business heads. In this and other respects, Gallagher says the agency is setting up a perverse system of incentives for those who ought to be its allies, the CCOs of IAs. Read More


MMIF Reporting: An Ongoing Challenge for Fund Administrators

Aug 5th, 2015 | Filed under: Due Diligence Process, Hedge Fund Industry Trends, Hedge Fund Regulation, UCITs

Guest columnist Shane Brett discusses a new RR Donnelley survey on the MMIF challenges facing fund administrators.Read More


Enterprise Software Marketers Confirm: Seven is a Sacred Number

Jul 21st, 2015 | Filed under: Regulatory, Technology

God rested on the seventh day of the week of creation. Ever since, the number seven has stood for the completion of an epoch, or of a perfect set. Thus, a German enterprise concern has now listed the "seven pillars" for improved market surveillance through software.Read More