Browsing: Featured Post

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Marketplace Lending: Just Because I’m Disruptive Doesn’t Mean We Can’t Be Friends!

May 23rd, 2017 | Filed under: Emerging Alternative Investments, Microfinance, Newly Added, Other Issues in Private Investments, Other Topics in A.I., Private Investments

Mark Shore, chief research officer of Shore Capital Research, and an adjunct professor at DePaul University, has prepared an “overview” of marketplace lending for institutional investors and wealth managers. The practice under discussion is also known as peer-to-peer, or even in these character economizing days as P2P, lending. Shore explainsRead More


Evidence that Sovereign Wealth Funds Mitigate the Agency Problem

May 21st, 2017 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added

Ever since the 1930s, scholars have discussed the “agency problem” built into the structure of publicly owned corporations. This was a theme of Ronald Coase’s landmark article, “The nature of the firm” in 1937. Shareholders presumably want a company managed in a way that maximizes their – the shareholders’ –Read More


First Quarter: An Industry Recovers From a Dry Spell

May 18th, 2017 | Filed under: Hedge Funds, Industry Size & Managers, Newly Added, Structure of the Hedge Funds Industry, The A.I. Industry

Preqin’s review of the hedge fund space in the first quarter of 2017 describes the quarter as a time of “return to form” after a dry spell. Two thirds of the investors interviewed by Preqin at the end of 2016 had said that their hedge fund investments had failed toRead More


Making a Case: Divestiture is the Wrong Tool Re Climate Risk

May 17th, 2017 | Filed under: Newly Added, Other Topics in A.I., SRI and Clean Energy

Sarah Bernstein, of the Pension Consulting Alliance, has prepared a discussion paper for the benefit of the Vermont Pension Investment Committee, on climate risk divestment.  Specifically, Bernstein wrote in reply to a request from the VPIC to examine three divestment tracks of common intent but differing levels of generality:  thermalRead More


The Cryptocurrency Ecosystem: A New Benchmark Study

May 16th, 2017 | Filed under: Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Newly Added, Other Topics in A.I., The Global Economy & Currencies

It is clear by now to even the most hardened skeptic that cryptocurrency, the class of assets of which bitcoin is the paradigm, is much more than a passing fad. Yes, the field may once have been too closely associated with survivalists, cranks, and bit players in the story ofRead 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


Real Assets and Environmental/Social Impacts

May 11th, 2017 | Filed under: Alternative energy, Natural Resources and Land, Newly Added, Other Topics in A.I., Real Assets, SRI and Clean Energy

It’s an old debate: does socially responsible investing under its variations (including “impact investing”) come at a cost in terms of risk-adjusted performance? Or does it actually add a dividend, so that one does well by doing good? Or are impact and non-impact investing in otherwise comparable assets on aRead More


Highlights in the Growth of Farmland Funds

May 9th, 2017 | Filed under: Agriculture, Farmland, Natural Resources and Land, Newly Added, Real Assets

Highquest Partners and a product strategist for timber and agriculture at GMO LLC (Julie Koeninger) have collaborated on a white paper on the history of farmland investment, at its heart the story, first, of how farmland has grown (since the late 1980s and the rebound from the farm crisis earlierRead More


SWFs: Growth Slows but Continues

May 4th, 2017 | Filed under: Allocating to A.I., Institutional Asset Management, Institutional Investing, Newly Added

Preqin’s new Sovereign Wealth Fund Review makes the point that total assets under the management of SWFs continue to grow, but the rate of growth is notably slowing. This graph, measuring in US$ trillions, illustrates the growth trend since the financial crisis. Although the space grew by $.76 trillion betweenRead More


ESG Concerns Have Multi-Factored Impact on Performance

May 2nd, 2017 | Filed under: Newly Added, Other Topics in A.I., SRI and Clean Energy

The Cornerstone Capital Group, in a new white paper, looks at some of the specific interactions between ESG and investment factors. The paper, by Michael Geraghty, a global equity strategist for Cornerstone,  begins with a review of five of the factors most thoroughly studied in academia: value, the capture ofRead More


Longevity Risk Transfer Markets: Limits to Growth

Apr 30th, 2017 | Filed under: Allocating to A.I., Finance & Economics, Financial Economics Theory, Institutional Asset Management, Institutional Investing, Newly Added

It was a fairly routine item about an accomplished executive changing jobs in the asset management industry, but it caught my eye. A March 2017 news item said that Andrew Reid, until recently the head of corporate pension origination at Deutsche Bank, had left that post to work with InsightRead 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


Generation Two Liquid Alternatives

Apr 25th, 2017 | Filed under: Liquid Alternative Investiments, Liquid Alts, Newly Added, Other Topics in A.I., Sales & Marketing in the AI Industry

Beachhead Capital Management has published a white paper on what it calls the “second generation of liquid alternatives.” To begin at the beginning, “liquid alternatives” are investment products, available to retail investors, for example through mutual funds or ETFs, which are designed to provide the diversification and absolute-return benefits typicallyRead More


Ernst & Young on ESG Reporting

Apr 23rd, 2017 | Filed under: Newly Added, Other Topics in A.I., Socially responsible investing, SRI and Clean Energy

Are companies leveling with their shareholders and stakeholders in reporting data pertinent to their environmental and social impacts and their governance issues? Whether they are or aren’t levelling: how important is that as part of their relationship with their investors? For Ernst & Young, these questions have become more pressingRead More


Mega-Trends and Possible Future Normals

Apr 16th, 2017 | Filed under: Alternative Investments in Context, Newly Added, The A.I. Industry

A new CFA Institute report, working from a survey of 1,145 leaders in the contemporary global investment industry, discusses the mega-trends at work, including: technological advance, shifting client preferences, new macroeconomic conditions, changing regulatory regimes amidst geopolitical novelties, and new demographics. The report, entitled “Future State of the Investment Profession:Read More


Metals and Mining: A Tale of Two Doughnuts

Apr 12th, 2017 | Filed under: Industry Size & Managers, Natural Resources and Land, Newly Added, Real Assets, The A.I. Industry

Preqin has turned its Spotlight on Real Assets in a new publication, drawing our attention in particular to metals and mining. Among the institutional investors that say they are targeting unlisted metals and mining focused funds over the coming twelve months, Preqin names three as “samples”:  the Compagnia di SanRead More


Credit Suisse Finds that Institutions Remain Committed to Hedge Funds

Apr 11th, 2017 | Filed under: Allocating to A.I., Hedge Funds, Newly Added, Structure of the Hedge Funds Industry

A new Credit Suisse report about hedge fund investors’ appetites, titled “shifting tides,” comes to the somewhat re-assuring conclusion that, in some respects at least, the shift isn’t what one might fear. The report begins with the simple observation that 2016, a year that began with unexpected swings in manyRead More


Why They Call it an Absolute Priority Rule

Apr 9th, 2017 | Filed under: Business News, Event-Driven Hedge Funds, Finance & Economics, Hedge Funds, Newly Added

The U.S. Supreme Court’s recent opinion in Czyzewski v. Jevic Holding Corp. matters to hedge funds pursuing a distressed assets strategy, because the Justices have now made it more clear than they had before that the absolute priority rule under the U.S. bankruptcy code’s chapter 11 is … absolute. ItRead More


A Look at Sustainable Investment around the World

Apr 6th, 2017 | Filed under: Allocating to A.I., Industry Size & Managers, Other Topics in A.I., SRI and Clean Energy

The Global Sustainable Investment Alliance, a collaboration of green investment-oriented entities, has released its latest Global Sustainable Investment Review, looking at the state of SRI investments. This is the third in a series of reports “presenting results from Europe, the United States, Canada, Asia, Japan, and Australia and New Zealand.”Read More


Some Granularity on the Mexican Pension Industry

Apr 4th, 2017 | Filed under: Allocating to A.I., Institutional Asset Management, Newly Added, Operationally Intensive Real Assets, Real Assets

BlackRock has published a research report about pension funds in Mexico, a report produced as part of its broader research project looking into the state of the pension fund industry around the globe.  It shows that the cause of alternatrive investments as a group is the cause of diversification forRead More


How Does the Private Debt Fund Industry Grow?

Mar 30th, 2017 | Filed under: Debt Types of Private Equity, Newly Added, Private Investments

Preqin has issued a new report on global private debt. It begins with the observation that assets under management in the private debt industry (defined as the uncalled capital commitments plus the unrealized value of portfolio assets) have quadrupled in the last ten years, reaching $595 billion as of theRead More


The Free Lunch of Diversification: Still on the Menu

Mar 28th, 2017 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added

Anthony Davidow, vice president, alternative beta and asset allocation strategist, Charles Schwab, offers a valuable re-examination of modern portfolio theory in an article for Investments & Wealth Monitor. Davidow begins at the beginning. Harry Markowitz called diversification “the only free lunch in finance.” The idea is that by diversifying, anRead 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


Investing in Renewable Energy’s Infrastructure

Mar 23rd, 2017 | Filed under: Newly Added, Other Topics in A.I., SRI and Clean Energy

As AllAboutAlpha’s readers likely know, in December 2015, in Paris, representatives of 195 countries adopted a framework for the mitigation of the effects of the emissions of greenhouse gases. The framework (known simply as the Paris Agreement) aims to confine the increase in global average temperature to just 2? CRead More


Nation-States and Block-Chains: Vying for the Cutting Edge

Mar 21st, 2017 | Filed under: Currencies, Forex, Newly Added, The Global Economy & Currencies

Deloitte proposes that the Swiss Confederation has a key role to play in the continued development of blockchain. In a new whitepaper, Deloitte makes this case based on Switzerland’s “special position as a global innovation centre.” There are six sides to Switzerland’s position: its FinTech infrastructure; its start-up attractiveness; itsRead More


Private Equity Alpha and a Disappearing Act

Mar 16th, 2017 | Filed under: Newly Added, Other Issues in Private Investments, Private Investments

Kyle Welch, an assistant professor of accountancy at George Washington University School of Business, has issued an unusual challenge to two of the standard claims made on behalf of the private equity industry in a recent paper. Welch’s paper claims that “the alpha associated with private equity firms disappears afterRead More


Looking at a Continent: Stress-Testing Banks and Insurers

Mar 14th, 2017 | Filed under: Economics, Finance & Economics, Newly Added, The Global Economy & Currencies

The European Central Bank’s financial stability review, published in November 2016, predicts “steady, but modest, euro area economic recovery, despite continued headwinds.” The review is designed to assist Europe’s policy making authorities by providing information about the bank’s microprudential and macroprudential roles, along with the risks and vulnerabilities of theRead More


Staying Private: A Contrary Push or a Weakening Pull?

Mar 12th, 2017 | Filed under: Newly Added, Private Equity, Private Investments, Venture capital

The number of public companies listed on U.S. exchanges peaked in 1996. Due to mergers on the one hand and de-listings on the other, factors far offsetting new initial public offerings, this number has fallen drastically since then, to less than half of peak. Part of the reason for thisRead More


6 Thoughts About the Alternative Credit Market

Mar 9th, 2017 | Filed under: Debt Types of Private Equity, Newly Added, Private Investments

BNY Mellon has put out a new white paper about the alternative credit market, that is, about debt funds and the space where they dwell. The paper looks at six points: macro background; investor demand; supply-side response; regulatory context; managerial difficulties; and the role of service providers. This precis willRead More


Listed Infrastructure as a Complement to the Private Funds

Mar 7th, 2017 | Filed under: Newly Added, Operationally Intensive Real Assets, Real Assets

Two portfolio managers (and senior VPs) at Cohen & Steers, in a new white paper, make the case that “listed infrastructure is an attractive complement to private investments, providing long-term portfolio solutions for real asset allocations.” Cohen & Steers, a New York headquartered global investment manager, recommends that institutions allocateRead 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


Notes on Impact Investing in Europe

Feb 28th, 2017 | Filed under: Newly Added, Other Topics in A.I., Social investing, Socially responsible investing, SRI and Clean Energy

The Science Communication Unit (SCU) of the University of the West of England has produced what it calls a “future brief,” a discussion of environmental impact investing focused especially on the European context. The term “impact investing” itself is only about a decade old. The idea, under various guises, isRead More


The Low Volatility Anomaly: Gunpowder Inc.

Feb 26th, 2017 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Hedge Funds, Newly Added, Structure of the Hedge Funds Industry

In a new paper David Blitz, the head of quantitative strategies for Robeco Asset Management, crunches numbers and reaches a surprising conclusion, precisely contrary to an intuitively appealing theory about the low volatility anomaly.  But … let’s begin from the beginning. Standard financial economic theory holds that investors are compensatedRead More


Liquid Alternatives: A Look Back at Mercer’s Look Around

Feb 23rd, 2017 | Filed under: Liquid Alternative Investiments, Liquid Alts, Newly Added, Other Topics in A.I.

The market for liquid alternatives continues to grow and adapt. On St. Valentine’s Day of this year, ABR Dynamic Funds announced that it was launching its first Irish-domiciled UCITS V fund. Maybe it should have waited until St. Patrick’s Day? At any rate, the fund “seeks U.S. participation in aRead 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


Hedge Fund Managerial Talent: From Quality to Quantity

Feb 20th, 2017 | Filed under: Hedge Fund Industry Trends, Hedge Funds, Newly Added, Structure of the Hedge Funds Industry

A new report that comes to us jointly from EY and the AIMA indicates that hedge fund industry leaders believe that one of the secrets to success in the field is investment in, and thus retention of, talent. When the report was released, Dan Thompson, partner in the EY financialRead More


Earnings Releases & Social Media: Listening to the Crowd

Feb 16th, 2017 | Filed under: CAPM / Alpha Theory, Finance & Economics, Financial Economics Theory, Newly Added

Earnings releases, and the “seasons” made up out of them, have become almost a comforting ritual in the investment world. The days leading up to a company’s release often incites a good deal of more or less well-informed guesswork. That guesswork may become significantly more informed through crowdsourcing. That isRead More


Formula: Information + Liquidity + Short Time Horizon = Short Sales Profits

Feb 14th, 2017 | Filed under: Equity Hedge Funds, Event-Driven Hedge Funds, Hedge Funds, Newly Added

Jaewon Choi and two other scholars recently presented a paper that offers “direct evidence about the profitability of hedge fund short trades in equities.”  What is intriguing about this paper is not only what it finds about the profitability of short trades, but its method, why its authors consider theirRead More


Moszoro and Bykhovsky on Political Cognitive Biases

Feb 12th, 2017 | Filed under: Business News, Finance & Economics, Newly Added

In the politically charged atmosphere of our day, especially in the United States since the most recent presidential inauguration, it would be unwise to presume that hedge fund managers are exempt from political cognitive biases, or that these biases leave their portfolio decisions unaffected. Marian Moszoro and Michael Bykhovsky co-wroteRead 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


DC Sponsors and PE General Partners: A Good Marriage?

Feb 7th, 2017 | Filed under: Allocating to A.I., Institutional Asset Management, Institutional Investing, Newly Added, Other Issues in Private Investments, Private Investments

The British Private Equity & Venture Capital Association, in a new paper, contends that private equity has a valuable part to play in the portfolios of defined contribution schemes, for the simple reason that the PE world offers high returns in an era of low interest rates. To make thatRead More


EY on Real Estate Private Equity Trends

Feb 5th, 2017 | Filed under: Equity Types of Private Equity, Newly Added, Other Issues in Private Investments, Private Investments, Real Assets, Real Estate, Real Estate Equity Investments

The global real estate division of financial consultancy Ernst & Young recently published a report on the private equity outlook in the real estate space. As the head of the division, Mark Grinis, says in an introduction, the premise of the report is that success in this space requires managerialRead More


SWFs Looking to PEs Both as Intermediaries and as Co-investors

Feb 2nd, 2017 | Filed under: Infrastructure, Natural Resources and Land, Newly Added, Operationally Intensive Real Assets, Real Assets

A recent working paper from the European Corporate Governance Institute discusses direct investment by sovereign wealth funds in private equity transactions – that is, it discusses an ongoing shift from investing in PE funds to co-investing with PE funds. The paper describes this as a trend especially viable in theRead More


Pitfalls and Publicly Owned Hedge Fund Managers

Jan 31st, 2017 | Filed under: Alternative Investments in Context, Hedge Funds, Newly Added, The A.I. Industry

Two scholars affiliated with Singapore Management University have published a study of “the pitfalls of going public,” that is, of what can happen when the management of a hedge fund becomes a publicly owned company. They conclude that the going-public process itself breaks the alignment of incentives between managers andRead More


Pension Institute on the Herding Tendency of Pensions as Investors

Jan 29th, 2017 | Filed under: Allocating to A.I., Asset allocation, Asset Allocation Models, Institutional Asset Management, Institutional Investing, Newly Added

A new paper by the Pension Institute looks at the investing behavior of UK defined-benefit plans over the past 25 years, and finds a degree of correlation that should be worrisome to plan sponsors. The sponsors might want to design an improved incentive structure “that can better motivate pension fundsRead More


Big Data is Old Hat: Machine Learning is Hot

Jan 26th, 2017 | Filed under: Algorithmic and high-frequency trading, Allocating to A.I., Benchmarking & Performance Attribution, Business News, Finance & Economics, Newly Added

A year ago, in a report on Big Data and investment management, Citi Business Advisory Services predicted that “with the improved volume, velocity and variety of data inherent in the big data approach, the innovation seen in systematic trading models over the past decade could accelerate.” One of the platformsRead More


A Vision of 2020 and 6 Imperatives

Jan 24th, 2017 | Filed under: Industry Size & Managers, Newly Added, Other Topics in A.I., SRI and Clean Energy, The A.I. Industry

PwC, the global network of business and tax consultancies, has put out a white paper on the near future of the alternative asset management industry, to and through the year 2020. The paper begins with some numbers: by 2020, PwC expects the industry’s assets under management to grow to atRead More


Hedge Fund Performance: A Multi-Factor Model

Jan 22nd, 2017 | Filed under: Allocating to A.I., Benchmarking & Performance Attribution, Hedge Funds, Newly Added

Dimitrios Stafylas, of Aston University, Aston Business School, in Birmingham, England, has proposed a “holistic” model of hedge fund performance attribution with three key features: Irrespective of underlying fundamentals, it is only during good times that hedge funds as a class deliver significant excess return to their investors; Also duringRead More


On the Bitcoin Blockchain: Looking Under the Hood

Jan 19th, 2017 | Filed under: Algorithmic and high-frequency trading, Business News, Currencies, Digital currencies, Emerging Alternative Investments, Finance & Economics, Newly Added, The Global Economy & Currencies

More than a year ago, the Capco Institute Journal of Financial Transformation (Journal) ran a “critical assessment,” by Robert Sams, of bitcoin blockchains as a means of distributed clearing. With both bitcoins and blockchains newly in the news, Sams’ informed assessment is worth another look. Two years ago, Nasdaq announcedRead More