Performance, Analytics & Metrics
Save (Us All) for Retirement
Nov 15th, 2020 | Filed under: Performance, Analytics & Metrics, Newly Added, Asset allocation, What about beta?, Asset Allocation Models, Allocating to A.I.By Aaron Filbeck, CFA, CAIA, CIPM We have not been shy in our assessment of the current state of retirement. As we know, defined benefit plans face a tough road ahead as lofty actuarial assumptions have barely budged and regular distributions are hardly being backfilled with contributions. But what aboutRead More
Is the US Stock Market Overvalued? A Back-of-the-Envelope Calculation
Aug 16th, 2020 | Filed under: Performance, Analytics & Metrics, Financial Economics Theory, Newly Added, The Global Economy & Currencies, Economics, Macroeconomics, Finance & EconomicsBy Hossein Kazemi, The CAIA Association & The Isenberg School of Management In recent weeks, hundreds of research reports and many more blogs and commentaries have discussed the current valuation of the US stock market. With the economy in a recession and corporate profits and GDP down by double digits,Read More
An ‘Alternative’ Safe-Haven
Jul 26th, 2020 | Filed under: Performance, Analytics & Metrics, Newly Added, Risk management, Asset allocation, Asset Allocation Models, Risk Metrics and Measurement, Risk Management Strategies & Processes, Allocating to A.I.By Karl Rogers, ACE Capital Investments Abstract: The sovereign bond market has traditionally been a widely used tool for portfolio construction given its dual characteristics of returning a real yield with a negative correlation to equity markets – providing both a real return expectancy and portfolio protection. Given the zero-lower-boundRead More
Time-varying Equity Volatility Markedly Affects Hedge Fund Performance
May 19th, 2020 | Filed under: Performance, Analytics & Metrics, Hedge Fund Strategies, Newly Added, Risk management, Benchmarking & Performance Attribution, Risk Management Strategies & Processes, Hedge Funds, Structure of the Hedge Funds IndustryBy Masao Matsuda, CAIA, FRM, Founder, Crossgates Investment and Risk Management One would think hedge funds can weather market gyrations better than long-only equity investments as hedge funds have greater flexibility in determining the levels of market exposure. However, while some individual hedge funds may have been successful in adverse marketRead More
Making Your Portfolio About #Goals
Feb 13th, 2020 | Filed under: Performance, Analytics & Metrics, Retail Investing, Newly Added, Institutional Investing, Asset allocation, Benchmarking & Performance Attribution, CAIA Alternative Viewpoints, High-net-worth investors, Asset Allocation Models, Endowments & Foundations, The A.I. Industry, Institutional Asset Management, Real Estate Equity Investments, Family Offices, Hedge Funds, Commodities, Private InvestmentsBy Aaron Filbeck, CFA, CAIA, CIPM, Associate Director, Content Development at CAIA Association Central Issue of the Paper If you’re a social media junkie, you have probably seen “#goals” in your timeline. In most cases, the hashtag is referring to an attractive couple or an aesthetically pleasing plate of food.Read More
An Alternative View of Manager Selection Risk
Jan 16th, 2020 | Filed under: Performance, Analytics & Metrics, Newly Added, Institutional Investing, Risk management, Asset allocation, Benchmarking & Performance Attribution, Asset Allocation Models, Other Issues in Private Investments, Risk Metrics and Measurement, The A.I. Industry, Institutional Asset Management, Risk Management Strategies & Processes, Hedge Funds, Private Investments, Risk Management & Operations, Allocating to A.I.By Aaron Filbeck, CFA, CAIA, CIPM & Hossein Kazemi, PhD, CFA, CAIA Association & CISDM This is a summary of the editor’s letter originally published in the Volume 8, Issue 4 of the Alternative Investment Analyst Review, a journal published by CAIA Association. The Problem with Studies Many studies onRead More
Fixing the Sharpe Ratio: A Machine Learning Approach
Jun 16th, 2019 | Filed under: Performance, Analytics & Metrics, Newly Added, Risk management, Benchmarking & Performance Attribution, Risk Metrics and Measurement, The A.I. Industry, Risk Management Strategies & Processes, Hedge FundsThe Sharpe ratio has long served as a simple but important item in the due diligence tool kit. Formulated by William F. Sharpe in 1966 and first called the “reward to variability” ratio, the number arises from an investment’s rate of return minus the risk-free rate divided by the standardRead More
Accommodating Ambiguity Aversion in Portfolio Modeling
May 14th, 2019 | Filed under: Performance, Analytics & Metrics, Newly Added, Risk management, Risk Metrics and Measurement, The A.I. Industry, Risk Management Strategies & ProcessesBy standard definition, “ambiguity aversion” is the preference for known risks over unknown risks, the known unknowns over the unknown unknowns. A recent paper discusses the portfolio-level consequences of this aversion. The paper, written by Valery Polkovnichenko and Hui (Grace) Wang, explains that for an ambiguity-neutral investor, “adding active portfolio withRead More
Hedge Funds: Observing the Unobserved Performance
Mar 14th, 2019 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Hedge Fund Strategies, Alpha & Beta, Newly Added, Benchmarking & Performance Attribution, The A.I. Industry, Hedge Funds, Structure of the Hedge Funds IndustryTwo different strands of scholarly research into hedge fund performance produce markedly different conclusions. There is the returns-based approach, which finds that the average hedge fund manager does better than the market portfolio, net of fees. But there is also a holdings-based approach, which looks at the performance of theRead More
Hedge Funds Stronger in January, Thanks to The Fed
Mar 3rd, 2019 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Hedge Fund Strategies, CTA, Industry Size & Managers, Equity Hedge Funds, Newly Added, Benchmarking & Performance Attribution, Event-Driven Hedge Funds, Funds of Hedge Funds, The A.I. Industry, Macro and Managed Futures Funds, Hedge Funds, Relative Value Hedge FundsRisk-on sentiment returned in January, with good news on trade talks and with the Federal Reserve in the United States putting some distance between itself and its 2018 hard-money stance (the Fed started saying in January that it would be “patient” about selling off-balance sheet assets). Globally, hedge funds grewRead More
Quantifying High Performance Dispersion Risk in Alternatives
Oct 24th, 2018 | Filed under: Performance, Analytics & Metrics, Alpha & Beta, Newly Added, Institutional Investing, Risk management, Asset allocation, Asset Allocation Models, Risk Metrics and Measurement, The A.I. Industry, Institutional Asset Management, Risk Management Strategies & Processes, Risk Management & Operations, Allocating to A.I.By Amit Soni, Portfolio Manager, Strategic Asset Allocation, New York Life Investments Lofty valuations in traditional assets have encouraged investors to explore alternatives. Unfortunately, the lack of a holistic investment framework to incorporate alternatives poses a challenge. Traditional risk-return based approaches, alone, over-allocate to alternatives–a result of underestimation of risksRead More
Self-Organizing Maps for Selecting Hedge Funds
Oct 9th, 2018 | Filed under: Performance, Analytics & Metrics, Hedge Fund Strategies, Newly Added, Asset allocation, Benchmarking & Performance Attribution, Asset Allocation Models, The A.I. Industry, Risk Management Strategies & Processes, Hedge Funds, Allocating to A.I.A new paper by Claus Huber, of Rodex Risk Advisers, looks at machine learning for risk analysis, working especially from the “self-organizing maps” associated with Finnish Professor Teuvo Kohonen. A SOM is a low-dimensional representation of input space (thinking of it as two dimensional makes the “map” analogy intuitive, andRead More
Cracking the Illiquidity Code
Sep 26th, 2018 | Filed under: Performance, Analytics & Metrics, Private Equity, Newly Added, Benchmarking & Performance Attribution, Equity Types of Private Equity, Other Issues in Private Investments, Risk Metrics and Measurement, The A.I. Industry, Private InvestmentsBy Tom Keck, Partner & Head of Research; Lisa Larsson, Vice President, Research Researchers at StepStone Group, a global private markets firm, recently released a white paper that puts the illiquidity of private equity into perspective. A fund’s life they reckon is too coarse a measure; the picture comes into focusRead More
Pension Funds, ‘Tilt,’ and Underperformance
Jul 1st, 2018 | Filed under: Performance, Analytics & Metrics, Newly Added, Institutional Investing, Benchmarking & Performance Attribution, Institutional Asset Management, Allocating to A.I.Christina Atanasova and Gilles Chemla have posted a discussion of pension plans,where holdings show a tilt toward private equity and real estate investments. Atanasova is associate professor of finance, Beedie School of Business, Simon Fraser University in Burnaby, BC, Canada. Chemia is professor of financial at Imperial College Business School, London,Read More
DB: Investors Newly Optimistic About Hedge Funds
Feb 22nd, 2018 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Industry Size & Managers, Newly Added, Institutional Investing, Asset allocation, Benchmarking & Performance Attribution, Asset Allocation Models, The A.I. Industry, Institutional Asset Management, Fees, Hedge Funds, Structure of the Hedge Funds Industry, Allocating to A.I.Deustche Bank recently released its Alternative Investment Survey, the 16th annual. This year the questionnaires received replies from 436 global hedge fund investors, with assets under management of $2.1 trillion, who shared their insights, sentiments, and allocation plans. Glenn Bunn, co-head of Prime Finance at DB, said in a statementRead More
The Function of the High-Watermark: Not What You Think
Oct 1st, 2017 | Filed under: Performance, Analytics & Metrics, Newly Added, The A.I. IndustryA new paper in the Journal of Accounting and Finance discusses hurdle rates and high watermarks, and how they affect, or at least correlate with, performance. A hurdle rate is a minimum contractually specified rate of return that a hedge fund must achieve in order to collect performance fees. ARead More
Northill: In Defense of Active Management
Aug 27th, 2016 | Filed under: Performance, Analytics & Metrics, Alpha & Beta, Newly Added, Benchmarking & Performance Attribution, Allocating to A.I.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
Best Practices for Private Equity Sponsors in an Age of Increasing Scrutiny
May 23rd, 2016 | Filed under: Performance, Analytics & Metrics, Private Equity, Newly Added, Risk management, Benchmarking & Performance Attribution, Other Issues in Private Investments, Risk Management Strategies & Processes, Private InvestmentsBy 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
Tricky Times for Hedge Funds and a Lot of Negative YTD Performances
May 22nd, 2016 | Filed under: Performance, Analytics & Metrics, Hedge Fund Strategies, Equity Hedge Funds, Newly Added, Indexes, Benchmarking & Performance Attribution, Fees, Hedge Funds, Structure of the Hedge Funds IndustryA slim majority of hedge fund managers are in the red year to date, through April, according to the latest report from Eurekahedge. Specifically, 51.4% of managers have negative YTD performance. Over the same period in 2015, the analogous number was only 21.2%. That is a good indication of whatRead More
Eurekahedge: From Latin America to Middle Earth
Mar 20th, 2016 | Filed under: Performance, Analytics & Metrics, CTA, Newly Added, Macro and Managed Futures Funds, Hedge Funds, Allocating to A.I.The latest report from Eurekahedge tells us that hedge funds worldwide are down year-to-date through February, -1.27 percent. Dividing the industry by geographic mandates, Latin America is the only region to post YTD gains, +1.9% due to a rally in oil and commodities. Table 1, adapted from the report below,Read More
Eurekahedge: Performance after the ECB Underwhelms
Jan 28th, 2016 | Filed under: Performance, Analytics & Metrics, Equity Hedge Funds, Newly Added, Benchmarking & Performance Attribution, Macro and Managed Futures Funds, Hedge FundsThe latest Eurekahedge report says that regional mandates for the month of December 2015 produced quite mixed results. Asia ex-Japan managers yielded the best results, gains of 1.45%. Their Japanese counterparts produced 0.27%. In annual terms, Asia ex-Japan funds delivered 8.23% in 2015. Such funds saw an annual AUM growthRead More
Eurekahedge: All Regional Mandates Up for November
Dec 23rd, 2015 | Filed under: Performance, Analytics & Metrics, Newly Added, Benchmarking & Performance Attribution, Event-Driven Hedge Funds, Hedge Funds, Allocating to A.I.Faille takes a quick trip around the world with the assistance of Eurekahedge's numbers and graphs showing performance in November 2015 and year to date.Read More
Institutions Thinking About Interest Rates and Volatility
Dec 15th, 2015 | Filed under: Performance, Analytics & Metrics, Newly Added, Institutional Investing, Benchmarking & Performance Attribution, Endowments & Foundations, Institutional Asset Management, Allocating to A.I.In recent months, even the anticipation of Fed Reserve tightening has been able to send markets into a tizzy. Now the actual tightening is at last upon us. Both Natixis and Reuters surveys speak to the way the buy-side and sell-side see this. Read More
DB Global Prime: Hedge Funds See Steady Combined Inflows, But Lots of Action
Nov 29th, 2015 | Filed under: Performance, Analytics & Metrics, Hedge Fund Strategies, Industry Size & Managers, Equity Hedge Funds, Newly Added, Asset Managers, Benchmarking & Performance Attribution, The A.I. Industry, Hedge FundsDB Prime's researchers have highlighted the multi-year outflows from EM to DM. EM equity inflows in particular reached a peak in early 2011. Since then EM equities have seen an outflow which has benefitted primarily Europe and Japan within the developed world. Read More
A Curtain Opener for the Australia Forum
Sep 13th, 2015 | Filed under: Performance, Analytics & Metrics, Hedge Fund Regulation, Alternative Beta & Hedge Fund ReplicationPaul 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
Billion Dollar Claim from Black Swan Fund: Not from Taleb
Sep 7th, 2015 | Filed under: CAPM / Alpha Theory, Performance, Analytics & MetricsAs regular readers of this blog may recall, I have found much to admire in the writings of Nassim Nicholas Taleb. So I am happy that he had decided to put some distance between himself and a recent claim that Universa made $1 billion when bad news from China shook the world's markets in late August. Read More
The Skorina Report: Fearless Forecast Says That Endowment Returns Will Disappoint in FY2015
Sep 3rd, 2015 | Filed under: Performance, Analytics & Metrics, Hedge Fund Strategies, Institutional Investing, Alpha Hunters, Alpha Strategies, Alpha Seekers, Endowments & FoundationsGuest columnist Charles Skorina looks at the potential for 2016 endowment returns and finds them to be somewhat lacking... Could alternatives ride to the rescue?Read More
Foundations: They’ve Taken a Blow from “Subdued” Markets
Sep 2nd, 2015 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Hedge Fund Strategies, Institutional Investing, Indexes, Risk management, Liquid AltsBoth 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
Alternative Investments By the Numbers: Top 5 2015 YTD Takeaways
Jul 23rd, 2015 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Private Equity, Hedge Fund Strategies, Alpha Strategies, Liquid AltsGuest columnist Andre Boreas takes a look at the alternative investment universe year-to-date 2015 by the numbers.Read More
The Core Satellite Model: How to Cut Hedge Fund Fees in Half Part II
Jun 25th, 2015 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Alpha Hunters, Alpha Strategies, Alpha Seekers, FeesAndrew Beer continues his discussion on slashing hedge fund fees without burning yourself or your clients.Read More
Headline Factors and Hedge Fund Success
Jun 23rd, 2015 | Filed under: Performance, Analytics & Metrics, Indexes, MacroeconomicsEuropean mandated hedge funds, benefitting from improved expectations regarding that region, are up 5.54% year to date, says Eurekahedge. Wait: improved expectations? Yes, notwithstanding continued Greek drama. Read More
Mladina on Peeling the Onion: Looking for Idiosyncratic Skill
Jun 21st, 2015 | Filed under: Performance, Analytics & Metrics, Currencies, Indexes, Emerging marketsFactor models will evolve as researchers untangle what value is to be attributed to what factor. Model selection, then, has to remain flexible to keep pace with such research, and must of course remain useful for the investment decision makers. Read More
How to Cut Hedge Fund Fees in Half-Part One
May 31st, 2015 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Institutional Investing, FeesGuest columnist Andrew Beer takes on hedge fund fees. In part one of the series he looks at the investor aggregation model.Read More
Eurekahedge on Asia in March, and on Asia Over the Years
Apr 28th, 2015 | Filed under: Performance, Analytics & Metrics, Hedge Fund Strategies, Currencies, Indexes, Emerging marketsAccording to Eurekahedge the hedge fund industry globally returned $54.1 billion in performance gains in the first quarter 2015. This is the greatest first-quarter gain since before the global financial crisis. Read More
More Global Mandates, Fewer EM Mandates, and Other Changes
Mar 23rd, 2015 | Filed under: Performance, Analytics & Metrics, CTA, Institutional Investing, Risk managementEurekahedge's latest report gives a number of timelines for grappling with changes in the hedge fund world: since 2007; since January 2013; YTD January 2015. In any frame, you don't have to be a meteorologist....Read More
Why Constraints on Hedge Funds Matter
Mar 8th, 2015 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Hedge Fund Strategies, Alternative Mutual Funds, Alpha Strategies, IndexesAndrew Beer looks at what happens when talented hedge fund managers try and perform within the constraints of the mutual fund structure. Read More
Arbitrage 101: When Voting Has Negative Value
Feb 11th, 2015 | Filed under: Performance, Analytics & Metrics, Hedge Fund StrategiesReuters is now reporting that major investors seek the opportunity to convert their voting shares of Twenty-First Century Fox into non-voting shares, because the voting shares are trading at a discount. Faille takes Reuters' anonymous sources at their words for the purposes of discussion. He doesn't think these investors will get their convertibility. Read More
The Danger of Indices
Feb 1st, 2015 | Filed under: Performance, Analytics & Metrics, IndexesA useful benchmark or a dangerous prop? Guest columnist Andrew Beer looks at the hidden dangers in indices.Read More
What Happens to Hedge Funds if 2008 Market Conditions Repeat?
Dec 4th, 2014 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Hedge Fund StrategiesGuest columnist Don Steinbrugge examines what might happen to hedge funds if there's a 2008 "Groundhog Day" in the markets.Read More
The Best Offense is a Good Defense: Profiting from Hedging
Dec 3rd, 2014 | Filed under: CAPM / Alpha Theory, Performance, Analytics & Metrics, Risk management, Asset allocationA regime switching model may treat a high-volatility environment as one “regime,” and a low-vol environment as its successor regime. The idea, as it applies to risk management, then, is simply to be ready in either setting for the switch to the other. This is both playing defense and playing offense. It is both managing risk and pursuing alpha. Read More
The Growing Problem of Calculating Performance Fees
Dec 2nd, 2014 | Filed under: Performance, Analytics & Metrics, Alpha StrategiesA new white paper produced jointly by FundCalcs and Global Perspectives looks at the growing complexity of calculating performance fees.Read More
Wars and Failed Mergers Make for a Tricky October
Dec 1st, 2014 | Filed under: Performance, Analytics & Metrics, Risk management, Emerging marketsOnly two hedge fund strategies performed in the positive numbers in October, the rest were all in the red. Managed futures did best, according to the Eurekahedge numbers, benefitting from their short positions on oil prices. Read More
GFIA Hedge Fund Manager Review: The End of an Era
Nov 3rd, 2014 | Filed under: Performance, Analytics & Metrics, Alpha Strategies, Emerging marketsIn what will be its last regular monthly report on such matters, GFIA tells us that a sharp correction hit markets in Asia ex Japan in September, and tells us of some of the funds that defied the outgoing tide. Read More
Hedge Funds and Position Crowding
Oct 23rd, 2014 | Filed under: Performance, Analytics & Metrics, Hedge Fund StrategiesMove over! It's crowded in here. What happens when hedge funds crowd a trade? Guest columnist Andrew Beer looks at hedge fund performance and the crowded trade.Read More
Hedge Funds: Good Run for India, but Troubles in Brazil
Oct 21st, 2014 | Filed under: Performance, Analytics & Metrics, Indexes, Emerging marketsIndia accounts for much of the positive showing of Asia ex-Japan in the hedge fund world YTD. That positive showing, in turn, may be attracting asset flow. Read More
Signs of a Renaissance in Emerging Manager ‘Alpha’
Oct 2nd, 2014 | Filed under: Performance, Analytics & Metrics, Hedge Fund Strategies, Institutional Investing, Alpha Strategies, Alpha SeekersGuest columnist Peter Urbani looks at emerging managers and why they may be re-emerging and bringing alpha with them.Read More
Merger Arb: Getting Your Stick to Where the Puck Will Be
Sep 8th, 2014 | Filed under: Performance, Analytics & Metrics, Alpha Strategies, Legislation/Court rulingsChristopher Faille speaks to Matt Porzio, the VP of Strategy and Product Marketing at Intralinks, about the data behind Intralinks' DFI. Read More
Eurekahedge: Europe-Focused Managers Took Hits in July
Aug 20th, 2014 | Filed under: Performance, Analytics & Metrics, Emerging marketsBanco Espirito Santo, and its CEO Salgado, had emerged from an earlier round of crisis (way back in 2012) with a roseate smell. Their latest smell ... not so good. Read More
All Regional Mandates in Positive Territory YTD
Jul 28th, 2014 | Filed under: Performance, Analytics & Metrics, Alpha Strategies, Emerging marketsThe latest report from Eurekahedge mentions that though instability is "brewing again in the Middle East," things have settled down a bit in Eastern Europe. This report was written prior to the shoot down of a Malaysian jet over the Ukraine. Read More
A Challenge to Bayesian Probability
Jul 23rd, 2014 | Filed under: CAPM / Alpha Theory, Performance, Analytics & MetricsThe stakes, for mathematics, finance, and the overlap of the two, are pretty high. So my ears pricked up when I heard of a sweeping challenge to Bayesianism. Read More