News Worth Reading: October 30, 2015

News is overrated. We recommend reducing your daily intake and concentrating instead on hard data and data-rich analysis. That said, there’s always great information out there if you know where to look. The following comprises our list of news worth reading from the past week.

Alternatives

  • Do better performing funds hold the power to charge higher fees? (preqin)
  • Citi was briefly on the hook for a $400 million hit (efinancialnews)
  • Hedge funds are bracing for losses in catastrophe bonds due to Hurricane Patricia (finalternatives)
  • A broad look at the liquid alternatives industry (barrons)
  • AIMA has issued a guide for liquid alternative fund management (allaboutalpha)
  • Are private equity returns overstated? (awealthofcommonsense)

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Hedge Funds Weekly: October 26, 2015

The following is an excerpt from our Hedge Funds Weekly report, which is available in the clients section. If you are not yet a client, please request access.

Highlights

  • Our factor-based estimates project that hedge funds gained 0.21% last week, primarily on gains from equity beta
  • Hedge funds are now up 1.40% for the month and 0.92% for the year
  • 18 of the 30 strategies we follow posted positive performance
  • Aside from emerging market, energy, and healthcare funds, strategies with long equity beta exposure tended to show gains
  • Among our Global Benchmarks, most equity sectors and regions performed well, but commodities and MLPs were hit hard
  • Bonds globally struggled as only high yield and emerging market bonds posted gains
  • Although index returns are still preliminary, our September end-of-month hedge fund projections appear to have underestimated performance in most strategies

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News Worth Reading: October 23, 2015

News is overrated. We recommend reducing your daily intake and concentrating instead on hard data and data-rich analysis. That said, there’s always great information out there if you know where to look. The following comprises our list of news worth reading from the past week.

Hedge Funds

  • Hedge fund performance fees are falling (ft)
  • Hedge fund assets fell the most since 2008 last quarter (finalternatives)
  • The SEC released statistics on more than 2,600 fund advisers (nytimes)
  • Digging through the SEC’s statistics on hedge fund ownership (alphaarchitect)
  • A handful of hedge funds are going after the student debt market (institutionalinvestor)
  • Institutional investors own half of the world’s private fund exposure (pionline)
  • The SEC is keying in on compliance failures at hedge funds (ft)

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Hedge Funds Weekly: October 19, 2015

The following is an excerpt from our Hedge Funds Weekly report, which is available in the clients section. If you are not yet a client, please request access.

Highlights

  • Our factor-based estimates project that hedge funds gained 0.13% last week on profits from US equities and momentum strategies
  • Hedge funds are now up 1.15% for the month and 0.71% for the year
  • 20 of the 30 strategies we follow posted positive performance
  • Performance was varied across strategies, with returns displaying considerably more idiosyncrasies than we’ve witnessed recently
  • Most non-commodity assets performed well, but energy commodities and Latin American equities struggled
  • Commodity momentum and term structure strategies worked very well, even as commodity beta declined
  • Although index returns are still preliminary, our September end-of-month hedge fund projections appear to have underestimated performance in most strategies

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News Worth Reading: October 16, 2015

News is overrated. We recommend reducing your daily intake and concentrating instead on hard data and data-rich analysis. That said, there’s always great information out there if you know where to look. The following comprises our list of news worth reading from the past week.

Hedge Funds

  • Hedge fund managers cite poor performance as their key challenge (preqin)
  • When it comes to Asia-focused hedge funds, a local presence is better (preqin)
  • Distressed debt funds are not having a good year (ft)
  • Why people invest in hedge funds (awealthofcommonsense)
  • Fortress is shutting down its $2 billion macro fund (ft)
  • Renaissance is closing a $1 billion hedge fund “due to a lack of investor interest” (wsj)
  • Hedge fund flows were down 1.13% this month (reuters)

Investing

  • 129 finance people to follow on Twitter (businessinsider)
  • The ups and downs of alternative investing (allaboutalpha)
  • More factors isn’t necessarily a good thing (etf)
  • Indexing has at least one major drawback (nytimes)
  • Andrew Lo wants to redefine indexing (ssrn)
  • Cliff Asness capitulates on smart beta (alphaarchitect)
  • Fees are still among the most critical aspects of fund investing (nytimes)
  • The lack of reproducibility in financial research is a problem (financial-math)
  • Emerging markets look a lot cheaper than US equities (researchaffiliates)
  • A closer look at last month’s MLP collapse (wsj)

Research

  • Commodity beta has not been a good investment over the past decade (morningstar)
  • Another variation on momentum: absolute strength (alphaarchitect, ssrn)
  • Combining value and momentum from the bottom up, and the top down (ssrn)
  • Combining momentum and asset allocation (ssrn)
  • Should trend followers weight their portfolios using equal risk allocations? (ssrn)
  • A comprehensive study of frontier and emerging government bond markets (ssrn)
  • Institutional trading in illiquid stocks introduces return predictability (ssrn)
  • There appears to be a skewness risk premium in commodities (ssrn)

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Hedge Funds Weekly: October 12, 2015

The following is an excerpt from our Hedge Funds Weekly report, which is available in the clients section. If you are not yet a client, please request access.

Highlights

  • Our factor-based estimates project that hedge funds gained 0.72% last week on profits from domestic and foreign equities
  • Hedge funds are now up 1.10% for the month and 0.48% for the year
  • 23 of the 30 strategies we follow posted positive performance
  • Most strategy groups rose; only macro strategies suffered
  • Risky assets performed exceptionally well, while safe-haven US Treasuries suffered
  • Emerging equities and oil were particularly strong
  • Value factors, emerging currencies, FX carry, and high yield spreads were among our top performing Market Factors
  • Although index returns are still preliminary, our September end-of-month hedge fund projections appear to have underestimated performance in most strategies

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News Worth Reading: October 9, 2015

News is overrated. We recommend reducing your daily intake and concentrating instead on hard data and data-rich analysis. That said, there’s always great information out there if you know where to look. The following comprises our list of news worth reading from the past week.

  • The most important aspects to consider when investing in illiquid assets (robeco)
  • You should be currency hedging your fixed income exposure (abglobal)
  • BlackRock predicts below average market returns for the next five years (finalternatives)
  • Energy and commodity ETFs are not interchangeable (alphaarchitect)
  • The Fed believes that there is “ample liquidity in corporate bond markets” despite plummeting dealer ownership (newyorkfed)
  • Harvard’s endowment is losing managers left and right (finalternatives)
  • Are activists helping or hurting American companies? (wsj)
  • Despite advances in factor modeling, investors are still relying on CAPM (ssrn)
  • A look at several different methods for optimizing your portfolio (investmentidiocy)
  • Corporate bonds from low profitability firms outperform those from high profitability firms (ssrn)
  • Can dividends explain the low volatility anomaly? (arxiv)
  • Fundamental analysis is still a useful investment tool (ssrn)
  • How to improve upon the performance of time series momentum strategies (allaboutalpha, ssrn)

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Hedge Funds Weekly: October 5, 2015

The following is an excerpt from our Hedge Funds Weekly report, which is available in the clients section. If you are not yet a client, please request access.

Highlights

  • Our factor-based estimates project that hedge funds declined 0.12% last week as losses from alpha, high yield spreads, and merger arbitrage strategies overwhelmed gains from equity
  • Hedge funds are now up 0.45% month-to-date and down 0.27% year-to-date
  • Only 13 of the 30 strategies we analyze posted positive performance, and most of the winners were net long equity
  • Relative value and event driven strategies underperformed
  • Equity, government bonds, and real estate performed well globally, while commodities and high yield declined
  • Sovereign fixed income spreads were our best performing factors, while credit spreads were our worst
  • Aside from commodities, which had universally poor results, most asset classes notched mixed factor performance

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Hedge Funds Monthly: September 2015

The following is an excerpt from our Hedge Funds Monthly report, which is available in the clients section. If you are not yet a client, please request access.

Highlights

  • We estimate that hedge funds lost 1.63% in September as declines in global equity markets once again hampered returns
  • Only three of 30 strategies posted gains, with net long equity strategies suffering the most
  • US REITs, agricultural commodities, utilities, and US Treasury bonds were able to notch positive returns, but most of our other benchmark indexes posted dismal performance
  • MLPs had a horrendous month, losing 16.15%
  • Real estate market factors performed well globally, as did trend following and medium-term momentum strategies both across and within asset classes
  • MLP, high yield bond, inflation-linked bond, and several equity sector spread factors realized large losses
  • Our initial forecast of -1.93% for August’s hedge fund return overestimated actual performance by 0.21%, a good result considering the magnitude of the return
  • Our August forecasts were quite good for the broad indexes, as well as the equity sector, macro, and relative value indexes; they were weak for several equity strategies, including Equity Short-Bias

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News Worth Reading: October 2, 2015

News is overrated. We recommend reducing your daily intake and concentrating instead on hard data and data-rich analysis. That said, there’s always great information out there if you know where to look. The following comprises our list of news worth reading from the past week.

  • A set of objective, well-thought out comments on hedge funds (awealthofcommonsense)
  • The line between hedge funds and private equity is becoming blurred (institutionalinvestor)
  • Hedge funds are front-running ETFs (wsj)
  • One of Canada’s largest pensions is suing Boaz Weinstein’s Saba Capital (businessinsider)
  • Cargill is shutting down Black River Asset Management, its $7 billion hedge fund (ft)
  • Spruce Alpha blew up in August (and not in the good way) (nytimes)
  • The current S&P 500 drawdown in a historical context (capitalspectator)
  • Investment strategies that have outperformed in the 10 worst quarters since 1972 (dailyalts)
  • Intermediate term bonds have been a sweet spot for the risk/return tradeoff (awealthofcommonsense)
  • Inflation expectations are falling (capitalspectator)
  • Combining volatility, momentum, and trend in asset allocation (alphaarchitect)
  • Many fund managers would be better off doing nothing (ft)
  • Forget “active vs. passive”: it’s all about factors (gestaltu)
  • Deconstructing the Harvard endowment’s multi-year stretch of subpar performance (statisticalideas)
  • Why the MLP business model may be a goner (barrons)
  • Crowds can behave unpredictably, sometimes with tragic consequences (rp-pieces)
  • Wall Street is lacking an effective way to hedge credit risk (bloomberg)
  • Do amateurs forecast better than professionals? (wsj)
  • Liquidity risk explains a great deal of the return to FX carry strategies (ssrn)
  • Unlike what you’ve been taught, it’s sometimes optimal to exercise a call option early (ssrn)
  • The financialization of commodities has produced negative externalities for the real economy (ssrn)
  • Changes in bond volatility can predict future S&P 500 returns (ssrn)
  • A foreign exchange trading strategy based on higher return moments (ssrn)

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