Black Monday 1987
Just over twenty-five years ago, stock markets crashed on what has since become known as Black Monday, October 19, 1987. At the time, I ran an investment boutique in London that offered a single type of product – small cap equity funds for institutional investors. Obviously, our clients were somewhat concerned by the losses that […]
Low beta anomaly – some early evidence
Some of my readers have expressed the view that I am occasionally unnecessarily harsh in my posts. However, it is very unlikely that this post will elicit such a response since it is taking a rather critical look at the entrails of my own dissertation. While that was obviously a very long time ago, what […]
Ethical…?
The two big public pension plans in Geneva are in dire straits. The local legislature is considering a bill this week that would merge them and would also provide a capital injection of almost a billion Swiss francs. The funds have pursued what is euphemistically called a mixed financing strategy. Their assets cover less than […]
Alpha in tactical asset allocation
It is easy to beat the benchmark of a balanced portfolio in the long run. All we have to do is systematically overweight the riskier asset classes to capture their higher risk premiums. This may add some volatility but will almost certainly lead to a better long-term performance. Many years ago, I suggested this approach […]
Alpha in single asset class portfolios
Active managers try to outperform their benchmark through various active bets. They obviously need to be skilled in order to be successful. But skill is not the only possible driver of active bets. Some will be the result of biases. As investors, we need to be able to untangle the impact of skill – alpha […]
Alpha – real and fake
A few weeks ago, a friend asked me what I thought about a recently published study, entitled “The value of the hedge fund industry to investors, markets and the broader economy”. Written by the Centre for Hedge Fund Research of the Imperial College in London, it is published by KPMG and the Alternative Investment Management […]
Why buy Carlyle?
The Carlyle Group is about to go public. The founders of the second-largest private equity group wish to create a vehicle that will allow them to cash out gradually. It is perfectly understandable that they would want to sell some of their holdings. What is much less obvious is why anybody would want to buy. […]
Lies, damn lies and FTfm statistics
This week’s FTfm (the FT’s financial market supplement) ran an article headlined Hedge fund gains are other funds’ losses (access reserved to subscribers). It finds that hedge fund managers outperformed over the past thirteen years and that this outperformance was “financed” by a corresponding underperformance of traditional asset managers. This would be very good news […]
Showing ever better performance
Even though we all know that past performance is a very imperfect guide to future performance, it is still a major factor for many investors – if not the major factor – in the manager selection process. It is therefore natural that managers seek to present their performance numbers in the most favorable light possible. […]
Manager selection and college football
By Rolf on 29 November 2012
Some years ago, Goyal and Wahal published a somewhat depressing article that suggested that pension funds and their consultants added no value, on average, in their manager hiring and firing decisions. In particular, replacing poorly performing managers with new ones actually led to worse performance than if the fund had stuck with the old managers […]
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