AAA sat down with Alex Gurvich and Jim Mitchell, both of The Rockledge Group, an investment advisory firm headquartered in Brooklyn, New York. We began by discussing the mid-January launch of a new product that gives the long-short equity strategy an ETF format, and ended up talking about a good deal else, such as the inherent superiority of ETFs over mutual funds, and Pimco's recent recognition of that fact.

Since transaction costs and the illiquidity of certain portions of an index make ideal tracking impossible, there will be a difference between the return of a tracking ETF, such as those tracking ETFs that are structured as UCITS in Europe, and the return of the underlying index or benchmark. The European Securities and Markets Authority maintains that investors should be informed of the factors that are likely to affect the size and the volatility of this difference.

Alpha Hunter Khiem Do talks about Asia and where the alpha is from his perspective.

The Hartford (CT) CFA Society recently hosted a workshop on “Pension Risk Management and Governance.” The discussion proved to be mostly, though not exclusively, about ERISA and about how plan sponsors may arm themselves against the sorts of litigation it may inspire. Moderator Martin Rosenburgh, who is both an attorney and a financial analyst, and currently [...]

By John Brynjolfsson A CPI critic recently suggested that Ben Bernanke thought CPI homeowner equivalent rent is a “made up” figure. Nothing could be further from the truth. Over the years I’ve been impressed with the rigor of CPI, unimpressed with its critics, and unable to find a better measure of the cost of living. Outside the [...]

Peter Urbani looks at Cornish Fisher and modified VaR as a function of skewness.

"...If all the money that's ever been invested in hedge funds had been put in treasury bills instead, the results would have been twice as good..." This is the astonishing finding of Simon Lack in his book "The Hedge Fund Mirage".

Two scholars affiliated with the Center for European Economic Research, drawing upon European data between 2000 and 2008, maintain that PE backed companies do not suffer from higher bankruptcy rates than their control group of comparable companies. Their paper also addresses the relationship between bankruptcy risk on the one hand and the syndicated (or, conversely, the stand-alone) nature of a PE deal. It finds no significant relationship.

The SEI asked institutional investors in hedge funds what was the number one reason for their inclusion of such funds in their portfolio. The most popular single choice was "absolute return." On the other hand, if you combine the numbers of the distinct answers that involve limiting the downside, then the percentage of respondents who gave some risk-management focused answer is 56 percent. As SEI says, this is "a marked cultural shift from the early days of hedge funds, when many investors focused on their potential to produce outsided returns."

Infrastructure is a basic need for any country, no matter what size. However, investing in infrastructure funds has been scant since its peak in 2007. That may be about to change.

In Singapore, some of the synthetic ETFs involve considerably more exposure to uncollateralized counterparty risk than the 10 percent or less that UCITS would allow. Singapore has, for example, the iShares MSCI India tracker, which has a 20 to 25 percent exposure. But Celent sees a possibiliuty that laxity will prove a winning move vis-a-vis Hong Kong.

In spite of what the media might have us believe, it isn't quite the end of the world as we know it, particularly as it applies to European private equity.

AIMA, in a report sharply critical of the proposed European Union financial transaction tax, sets out the way in which the tax could burden businesses, and their consumers, to a degree far greater than the proponents contend. After all, any single product may pass through several stages between raw materials and final consumer, as there are several steps between farmer harvesting wheat and retail outlet, such as Tesco, selling pasta. Businesses at every stop along the way (farmers, wheat processers, pasta extruders) will naturally want to hedge their own operational risks in the financial markets, so the price of the finished product will reflect the repeated imposition of the FTT.

First, an investor (according to a new white paper on due diligence from Merlin Securities) must decide what kind of strategy it is to which he wants exposure, and generate a list of managers who practice that strategy. Thereafter he can focus on each firm on that list looking at each of the three (qualitative) components of management, and subjecting his impressions to a variety of (quantitative) tests. Tripartite divisions seem to come into play a lot.

It seems that Patrick Byrne is interested in using a lawsuit filed in Canada in October 2011 as an opportunity for contesting the substantive merits, that is, providing evidence that the conspiracy exists as described and that Nazerali’s part in it was accurately portrayed in the various webpages of Deep Capture (called “chapters” for some reason). That may well prove healthy.

The fortunes of the world’s ultra high net worth (UHNW) individuals have surpassed $25 trillion. This is an astonishing figure, made even more so when contextualized against the value of the entire world's economic output (GDP) which, in 2010, was 'just' $63 trillion.

Godfrey Cadogan's formula, linking high-frequency trading, bubbles and crashes all into one formula of extreme simplicity (or "parsimony" as Cadogan puts it) leaves our reporter wondering: does the rendering of facts as a formula make them clearer, or does it just create a misleading patina of precision? Emanuel Derman recently warned of the overly simple models of finance economists, and perhaps this is a new token of that type.

A recent study, in which Steve Kaplan of the University of Chicago collaborated with Bob Harris of the University of Virginia and Tim Jenkinson of Oxford, addressed fund-level performance using data from Burgiss Group. Kaplan said this study indicates that “private equity has performed remarkably well.” In the period 1990 to 2008, a dollar in PE returned to investors 300 to 400 basis points a year more than a dollar in the equities of the S&P 500, net of all fees. This, if accepted, still leaves the question of the relationship of PE funds/firms to one another. Are they all the same?

If every fund is number one, then no one is number one. Irina Zeltser examines performance rankings in private equity.

IMF economist Manmohan Singh, in a recent working paper for the IMF, makes a case that pledged collateral is a critical financial lubricant, and that since the collapse of Lehman in September 2008 there has been a significant and troubling decline in its supply. Certain measures intended by regulators to enhance financial stability may in fact undermine it, by worsening the supply/demand mismatch, in effect creating a grey market for this pledged collateral.