Browsing: Alpha Strategies

By Nicolas Rabener, CAIA, Factor Research & Karl Rogers, ACE Capital Investments INTRODUCTION Anyone who has watched the hit TV show “Billions” will have noticed that the hedge fund billionaire Bobby Axelrod and his former lieutenant, and occasional nemesis, Taylor Mason have totally different trading styles. Bobby, although mathematically gifted,Read More

There’s an old joke. Even, if you like, a meta-joke. It probably dates back to vaudeville, and it takes the form of an exchange between the stage comic and a selected victim from the audience. It goes like this: Comic: Today’s your lucky day. I’m going to tell you theRead More

By Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION There are folks in finance who know and folks who don’t know. The latter group often drives the former crazy by abusing terminology. For example, moderators and guests on CNBC talking about momentum and growth stocks as if they were the same thing.Read More

By Alex Botte, CFA, CAIA, Vice President, Two Sigma At the end of 2019, Two Sigma’s Venn platform added three new macro style factors to its risk model, the Two Sigma Factor Lens: Fixed Income Carry, Foreign Exchange Carry, and Trend Following. The first two factors are meant to capture anRead More

By Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION Investing is akin to fighting in the forever war. There are long periods of peace and prosperity, but investors are frequently drawn into short-term combat, extended battles, and multi-year wars. And the cycle repeats over and over. For some of the foot soldiers,Read More

By Aaron Filbeck, CAIA, CFA, CIPM, Associate Director, Content Development at CAIA Association During CAIA Association’s most recent Virtual Chapter event, Keith and I (virtually) sat down with Chris Tidmore, CFA, CPA at The Vanguard Group to discuss Vanguard’s recent whitepaper, “The Wrapper Matters: Comparing Liquid Alternatives to Hedge Funds”Read More

By Aaron Filbeck, CAIA, CFA, CIPM Associate Director, Content Development at CAIA Association Excerpted from the Alternative Investment Analyst Review, Volume 8, Issue 2 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 MembershipRead More

By Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION Scratching the surface of most people’s knowledge often does not reveal depth, but a lack thereof. When the former US Democratic candidates Tom Steyer and Amy Klobuchar were asked to name Mexico’s president, who is one the key counterparties for any US president,Read More

Until the final days of 2019, it has been a quiet year for high-frequency trading-related news. The whole concept of a trade executed in nanoseconds, and the related concept of a trading program managed with only sporadic human intervention or oversight, have all faded into background assumptions. What remains isRead More

A new report from Schroders looks at global convertible bonds, instruments that straddle the boundaries of debt/equity/derivatives. It tells us—in a discussion that might be of interest to the portfolio managers of relative value hedge funds—that these bonds have come back into fashion due to the higher volatility of 2019Read More

In a new paper, three quants with Robeco suggest that the “short” side of the activity of many long/short equity trades is pointless. These quants are David Blitz, Guido Baltussen, who is also affiliated with Erasmus University, Rotterdam, and Pim Van Vliet. They have broken down the common equity factorRead More

Carlos Salas Najera, of the New York City Data Science Academy, has tested an old idea (pairs trading) for a strategy that could be tailored to energy stocks and related ETFs. The resulting paper is “Pairs Trading and VAR Analysis Applied to Energy Stocks.” His latest paper, though, has aRead More

Machine learning as a way of managing a portfolio is a “wave of the future” with a lot of sea to cover before it breaks on the shore. Meson Capital Partners has sent its investors an update and summary for 2019 Q3 regarding its managed market neutral fund, and thisRead More

The “volatility effect,” also known as the “low-risk effect,” is the subject of a new paper from Robeco. The gist of the “effect” is this: low-risk stocks “should” show a lesser return than high-risk stocks. The Capital Asset Pricing Model predicts a linear relationship between the risk of a securityRead More

A report from CREATE in collaboration with BNY Mellon looks at two related megatrends in investing—climate change and artificial intelligence. It asks in each case: how is this trend perceived in terms of opportunities and risks? What are the specific investment issues involved or solutions likely to be adopted? AndRead More

Negative interest rate policy—that is, central bank arrangements that seek to inspire spending by punishing savings, not merely in real but in nominal terms—have spread in recent years among the developed economies, and are now in use in Japan, Switzerland, Sweden, and the Eurozone. Denmark got the ball rolling inRead More

Someone told me that it’s all happening At the Zoo. In this case, it was Paul Simon in his 1967 title song where he anthropomorphizes the animals he sees in the Central Park Zoo. Some are deemed to be honest, some kindly but dumb, and some insincere or skeptical, and,Read More

Britain’s All-Party Parliamentary Group on Alternative Investment Management has published a paper on the country’s pensions. It’s focus is defined contribution schemes especially and the demographic strain they face, and the prospect of their moving more heavily into alternative assets and strategies in response. Defined benefit schemes “have some freedomRead More

Working from a database drawn from 13F filings, authors of a new report from Goldman Sachs Asset Management maintain: (1) hedge funds tend to overweight equities in three markets: information technology, consumer discretionary, healthcare; (2) quarter-on-quarter turnover for equity hedge funds’ portfolios is limited; and (3) a long-only sample portfolioRead More

A new paper, by Adriano Tosi, of the University of Zurich, Switzerland, looks at the mispricing of a cross-section of international option returns, which suggests that there is money to be made (in more decorous language a “positive risk premium” may be “commanded,”) by selling exchange-traded products and buying theRead More

Two scholars associated with the University of California, Berkeley, have argued in a recent paper that there is less to latency arbitrage, or at least to a certain paradigmatic sort of latency arb, than meets the eye. Robert P. Bartlett III and Justin McCrary used data from the Securities InformationRead More

By Scott Henderson, CFA, CIMA®, CMFC, Calamos Investments Convertible securities have not been immune from the volatility that has roiled risk assets in 2016. However, we believe the volatile start to the year has set the stage for longer-term opportunities. A convertible bond can be thought of as a corporateRead More

A recent paper correlating days-to-cover with stock returns finds a DTC premium effect and suggests that hedge funds might want to arbitrage it. This study begins with the crowded trade problem. With so many sophisticated investors in the markets, looking for or at the same arb opportunities, a number ofRead More

By Konstantin Danilov, CFA Even though the rate of public company bankruptcies is at an all-time low, there has recently been lots of discussion regarding proposed chapter 11 reform.  If enacted, some of these proposals may have interesting implications for distressed debt investors in the future. Proposed Reforms and ResponseRead More

Sovereigns and their politicians are looking over the shoulders of the managers of their sovereign wealth funds. This is a pain in the neck for the latter, but it may mean opportunity for their counterparties. Read More

Presumably the U.S. Supreme Court's decision, in December 2008, that states can in fact make and enforce tougher labeling standards for cigarettes than does the federal government was a negative for tobacco stocks. But did that mean that stock prices had already anticipated the decision before it happened? or that they immediately adjusted downward on the morning the decision was announced? Or ... neither of those? Read More

Guest 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

The head of the New York Fed said on Wednesday, August 26th, that "the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago." We may be about to see another Fed retreat, analogous to that of a little more than two years ago. Read More

In the three month period that ends with July, Eurekahedge’s Greater China Index (which has 85 constituents) is down 9.39%. That has come about for precisely the reasons that a reader of the pertinent headlines would guess. Read More

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

Obamacare's impact on the investment world may have been mitigated until very recently by the protracted and complicated litigation that the law immediately generated starting with its enactment in 2010. But now.... Read More

Credit Suisse Capital Services says that appetite has increased of late, among institutional investors, for multistrategy funds. Faille offers some thoughts as to why. Read More

The authors of a new study of the relationship between fund size and performance employ a database consisting of 7,261 funds and their performance over a twenty year period (1994 to 2014). Spoiler alert: size is bad. Especially in a crisis.Read More

"Not moving is more risky than moving," said one CEO asked about mergers and acquisitions. "We will make more acquisitions, but they’ll probably be larger in nature, more transformative. " Read More

Guest columnist Diane Harrison examines the relationship between family offices and emerging managers and why some managers get money and why others don't. Read More

Guest columnist Andre Boreas takes a look at the alternative investment universe year-to-date 2015 by the numbers.Read More

Meredith Jones' book on investing in women takes it to the Street and comes back with some solid conclusions.Read More

Low interest rates and record equity valuations together mean that companies can use either stock swaps or borrowed cash or a combination of the two, to buy one another. Further, corporate executives infer that they have to keep buying in order not to become a target themselves. Read More

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

The conclusion of two Indian scholars in a new study supports the view that socially responsible investing is good for investors in India. But Faille worries that the battle-of-the-studies has thus far been indecisive, and that aerodynamics suggests this insect shouldn't be able to fly. Read More

Perhaps the fate of Kweku Adoboli, whose roguish trading at UBS' expense came to light in September 2011, can serve now in the summer of 2015 as a caution for some in the European elite contemplating the long stand-off between Syriza and the Troika. Read More

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

Andrew Beer continues his discussion on slashing hedge fund fees without burning yourself or your clients.Read More

There was some excitement as recently as January 2015 over renewed talk of a Yahoo/AOL deal, but after the bloom finally came off that rose, YHOO settled into a trading range has been roughly from $42 to $46. Faille guesses that there is an opportunity here on the upside of that range, because another suitor is bound to appear.Read More

Managers who offer funds that provide shorter time frames to investment exits, greater liquidity through a hedge fund structure, and employ the event-driven skill set that identifies and manages an investment portfolio yielding private equity-like returns are finding increased interest from an investment community seeking returns married with reasonable liquidity. Read More

This Lancelot's adventures came to a bad end: defeated by the dragon of insolvency. But its official liquidator did win a victory over an investor seeking special treatment via a side letter.Read More

For Faille, the stand-out essay in this collection of case studies, from CNBC's Maneet Ahuja, concerns Marc Lasry and Sonia Gardner, of the Avenue Capital Group. As Myron Scholes says in his afterword to this volume, Lasry and Gardner take returns from those whose demand for liquidity makes them willing to give them up. Read More

A new report by Eurekahedge says that the rise of new products such as hedge fund trackers and related developments since the global financial crisis have set the fund of funds world into a downward spiral whence it has yet to recover. Read More

Guest columnist Andrew Beer looks at alpha.Read More

Guest columnist Diane Harrison on investment lessons learned on the golf course.Read More