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.

"...If all the money that's ever been invested in hedge funds had been put in treasury bills instead, the results would have been twice as good..." This is the astonishing finding of Simon Lack in his book "The Hedge Fund Mirage".

The SEI asked institutional investors in hedge funds what was the number one reason for their inclusion of such funds in their portfolio. The most popular single choice was "absolute return." On the other hand, if you combine the numbers of the distinct answers that involve limiting the downside, then the percentage of respondents who gave some risk-management focused answer is 56 percent. As SEI says, this is "a marked cultural shift from the early days of hedge funds, when many investors focused on their potential to produce outsided returns."

AIMA, in a report sharply critical of the proposed European Union financial transaction tax, sets out the way in which the tax could burden businesses, and their consumers, to a degree far greater than the proponents contend. After all, any single product may pass through several stages between raw materials and final consumer, as there are several steps between farmer harvesting wheat and retail outlet, such as Tesco, selling pasta. Businesses at every stop along the way (farmers, wheat processers, pasta extruders) will naturally want to hedge their own operational risks in the financial markets, so the price of the finished product will reflect the repeated imposition of the FTT.

First, an investor (according to a new white paper on due diligence from Merlin Securities) must decide what kind of strategy it is to which he wants exposure, and generate a list of managers who practice that strategy. Thereafter he can focus on each firm on that list looking at each of the three (qualitative) components of management, and subjecting his impressions to a variety of (quantitative) tests. Tripartite divisions seem to come into play a lot.

The Mathema report is full of cautions, and indeed adopts a quite generally gloomy tone. The markets, it tells us, don’t lend any credence to the political fixes that have been offered for the eurozone and especially for its peripheral players. If the fixes did have credibility, then the PIIGS’ 10-year government benchmark yields would have been falling significantly of late vis-à-vis the 10 year German Bund yield. But there has been no such fall.

Guest columnist Charles Hage looks at hedge fund risk and discusses the long and the short of it.

Bandon Capital's managing directors believe it is possible to generate alpha from unique non-market sources, and that they do so through their forecasts of domestic and overseas sovereign interest rates.

Fear has gripped investors since the crises of 2008 and 2009 and the pain keeps coming back with a resounding smack every time a news story breaks. However, investors are starting to move back into the markets and if emerging managers aren't in the game now, they aren't going to get to play.

A new study from SEI shows If an alternative strategy can be offered in a mutual fund structure it has a much broader market opportunity than if not. Hedge fund managers want the mutual fund market just as mutual fund managers want to use the broader hedge fund range of strategies.

Amongst equity long-short funds, which constitute about half of the Asian hedge fund universe, the returns of hedge funds “were sometimes mean reverting but at other times displayed persistence in positive/negative momentum.” That is to say that sometimes a coin that has come up heads three times will come up tails the fourth time, but at other times it will persist in coming up heads the fourth time.

The true opportunities now lie in taking illiquidity. The panic – for there is no other word to describe this behaviour – today presents those who can afford to have a longer-term investment horizon with a unique time arbitrage.

Equity hedge fund performance has resembled the results of the S&P Index lately. We speculate that regression to the mean is because humans are involved, and find reasons to be cheerful for the group's future.

The hedge fund industry that invests in Asia is increasingly run from within the region, especially from the two hub cities of Hong Kong and Singapore, according to an August 2011 report by Singapore based consult In the early days of the Asian hedge fund industry, Asian strategies were quite generally run from outside of Asia [...]

The world is a fairly small pond in which ripples anywhere soon shake the surface everywhere. Such an observation, like the word “globalization,” has become a cliché, but the truth behind them both becomes quite obvious in the course of a new “Viewpoint” paper by Ernst & Young that examines fund distribution strategies in the [...]

In spite of sketchy performance from some top managers, institutional investors remain committed to hedge funds and a large number are shopping for new relationships in 2012.

The latest version of a yearly analysis tells the same old story about performance, now backed up by fifteen years of data. And the potential rewards of investing with smaller funds go beyond what you see in the database statistics.

By Christopher Faille One of the great clichés used by reporters, commenters, bloggers and twitterers in recent months has been that the central bankers of the developed world, and/or their Treasuries, have “run out of bullets.” They have “spent all their ammunition” seeking stimulus already and will have nothing in reserve should there be another serious [...]

Alpha Hunters Andrew Timpson and Joseph Schlater of Busara Advisors talk about what it takes to get an emerging manager allocation.

By Christopher Faille A new report on hedge fund inflows indicates that the rate at which money is coming into the hedge fund industry reflects that industry’s improved performance, but that if these figures are segmented by strategy or geography, the different rates at which they are attracting money do not very accurately reflect their different [...]

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.

Clearing within ten days after the transaction (T+10) was once the norm, though it now seems archaic. Clearing overnight or in a once-a-day cycle will in the years ahead become equally unsatisfactory. It may soon “become standard practice for risk managers and eventually traders to demand proof that their trades have been cleared mere seconds after execution.”

In Part II of this Alpha Hunter series, we examine the role intellectual property plays in the U.S. economy.

There will likely always be at least a simmering tension in the hedge fund industry between the managerial desire for discretion in the use of assets and every investor’s desire to have the option of withdrawing funds as needed. When a manager seeks to offer its investors more liquidity than its own portfolio can provide, [...]

New research from the Managed Funds Association looks at the state of the pension fund industry and examines the role that hedge funds can play in order to improve institutional investors' positions.

In the search for the optimal level of automation, there is a vice of defect, a vice of excess, and a virtuous golden mean.

The nature of funds of hedge funds, their scale and, more specifically, the added value they offer to their investors have all evolved over time, and will continue to evolve. In an interview, Brian W. Chung, senior vice president,senior portfolio manager for SSARIS Advisors, a Hedge Funds of Funds affiliate of State Street Global Advisors, spoke [...]

Patent trolls aren't the only ones hiding under the bridge and collecting tolls on intellectual property. Alpha Hunter Michael Friedman discusses the hidden alpha potential in IP.

What happens when a hedge fund gets a windfall of new investment dollars?

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.

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.

What's it all about, this alpha? And for that matter, where is it? Dr. Bob Swarup tackles the real meanings of alpha and beta.

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. [...]

Hedge funds are already being laid to blame for the latest market rout, whether true or rhetoric. And the worst is likely yet to come.

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.

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 [...]

Professor Neil Johnson talks about the DNA of financial markets with AllAboutAlpha's Vikas Shah

Alternatives are increasingly being viewed as a key component of portfolio construction for wealth management firms - good news for hedge funds. But there's competition from private equity.

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.