Newsletter - April 2009
- CAIA on the Road:
Director's Comments
Is Global Financial Regulation Coming?
As international financial markets become more complex, so must the regulatory systems that oversee them.
It is not without a great measure of irony that our industry recently received a call to action from U.S. Treasury Secretary Timothy Geithner to participate in his new public-private partnership proposal.
Having maligned the alternative investments sphere as a major force in the creation of the credit crisis, the same politicians are now turning to us for assistance in developing and executing the solution.
Many once-bitten alternatives practitioners may be tempted to turn away, but like our founding body, the Alternative Investment Management Association, I have long asserted that it is essential that our industry proactively participate in the regulatory process. We now have the opportunity to become major players in the solution-building; we must grab it.
In addition to offsetting the negative stereotypes associated with alternative investments, this is also our opportunity to help direct the inevitable reshaping of the regulatory landscape in an efficient, meaningful way.
This month global leaders took their biggest steps toward a new world economic order that’s less U.S.-centric and envisions a more closely regulated financial industry with a larger role for international institutions and emerging markets.
World leaders conceded that “major failures” in regulation had been “fundamental causes” of the market turmoil. To make penitence and to try to avoid a repeat of the calamity, the G20 leaders pledged to impose stronger restraints on hedge funds, credit rating companies, risk-taking and executive pay.
“This is a major step forward and a reversal of the ideology of the 1990s, and at a very official level, a rejection of the ideas pushed by the U.S. and others,” said Nobel Laureate Joseph Stiglitz. “It’s a historic moment when the world came together and said we were wrong to push deregulation.”
A draft of the European Union directive makes clear that the regulatory emphasis for “alternative” funds will be focused on the managers, rather than directly on the funds themselves. The regulatory focus will apply equally to hedge fund and private equity managers, as well as those overseeing other vehicles such as commodity and real estate funds.
The United States regulatory system will likely undergo the most significant revamp of any of the major industrialized countries. This change is long overdue, given the antiquated and fragmented nature of the current U.S. system, and the increasing complexity of today’s financial instruments. But while U.S. policy makers are prepared to revamp the regulatory framework according to a blueprint outlined by Secretary Geithner, they may be reluctant to subscribe to a tightly coordinated global framework. Time will tell whether the urgency to act will trump the concern to maintain strict sovereign control.
Regulation is always a thorny issue; any group of two practitioners will find differences of opinion on the matter. However, participating in solution development will always serve us better than sitting on the sidelines while others determine the future of our industry.
Through his request for our participation, Secretary Geithner has provided us with the perfect opportunity to insist our voices be heard. Now it is our responsibility to speak up.
Craig Asche
Executive Director
Exam Updates
September 2009 Exam Registration Now Open
- Register for an exam.
- Exam dates: September 08 - 23, 2009.
- Early registration for the September examinations ends May 13, 2009.
- Exam registration closes July 29, 2009.
March 2009 Exam Results Release Information
Level I: Candidates who completed the Level I examination can log in to the website and receive notification of their general exam results.
Level II: Candidates who completed the Level II examination can log in and receive their general exam results beginning April 20th.
For more information about the grading process, please review the Grading FAQs.
Curriculum Updates
We have made significant curriculum updates to our September 2009 and March 2010 Level II curriculum.
The September 2009 and March 2010 Level II exam will cover a new edition of the CAIA Level II Current and Integrated Topic Readings, a dynamic curriculum section that integrates recent alternative investment industry developments.
A total of 7 new and updated articles have been added to this latest edition of the curriculum text.
Below is a list of articles that are new to the program for 2009-2010:
- “Coping with Climate Change" by Christian Weistroffer.
- "Beyond Markowitz: A Comprehensive Wealth Allocation Framework for Individual Investors" by Ashvin B. Chhabra.
- "The Strategic and Tactical Value of Commodity Futures" by Claude B. Erb, CFA, and Campbell R. Harvey.
- "The Subprime Credit Crisis of 2007" by Michel G. Crouhy, Robert A. Jarrow and Stuart M. Turnbull.
- "Tail Risk Management" by Vineer Bhansali.
- "Taming Global Village Risk" by Rodney N. Sullivan.
- "How Good are Private Equity Returns?" by Robert M. Conroy and Robert S. Harris.
As the financial landscape adjusts to the realities of a new marketplace, so too must our curriculum. The modifications we have introduced to our Level II curriculum...
Latest News: CAIA Association Acquires AllAboutAlpha.com
We're pleased to announce the recent acquisition of AllAboutAlpha.com, one of the leading online voices of the alternative investment industry.
"The integration of AllAboutAlpha.com into the CAIA family is a reflection of our mandate to provide the industry with salient and topical alternative investment knowledge. As a daily publication, AllAboutAlpha.com offers a perfect complement to the CAIA program, which is focused on foundational and long-term alternative investment education," said Craig Asche, executive director of the CAIA Association.
The CAIA Association has been an AllAboutAlpha.com sponsor since November 2007. In acquiring AllAboutAlpha.com, Christopher Holt has been retained and will continue in his role as its managing editor and lead writer. Christopher Holt founded...
Chapter Notes
Please note: Some chapter events are open to members only.
Boston: Special Announcement! The CAIA Association launched its 9th official chapter in Boston on April 26th! The event featured an engaging and provocative educational presentation by Mark Yusko, President and CIO of Morgan Creek Capital Management, LLC, entitled "The Great Repression - Dealing with the Aftermath of the Credit Crisis." You can view materials from the event by clicking here.
Chicago: CAIA members and candidates gathered for a Social Networking event at Elephant and Castle on April 2nd. CAIA staff was in attendance at this event.
Hong Kong: CAIA members and candidates gathered in Hong Kong for an “End of Exams Happy Hour” on April 2nd at Goccia. To view photographs from the event please click here.
London: CAIA London held a talk by George Martin on April 9th, part of the 2009 CAIA London Educational Series. The presentation was entitled "Where Has All the Alpha Gone? The Decline of Traditional Alpha and New Sources from Alternative Alternatives."
New York: Members and candidates in New York attended an Educational Event on April 16th, "Secular Markets, Cyclical Risk - Wealth Preservation in the 21st Century," hosted by Bloomberg L.P. Featuring Jeff Lay, CMT is President of Talon Eight Capital Management.
Switzerland: CAIA members and successful March 09 candidates are invited to a Post-Exam Educational Event on May 19th in Geneva. This event will feature Michael Strating, Quantitative Equity Expert, Head of Disciplined Equity of Robeco, with the following presentation: "Controlling a Single Strategy Hedge Fund: the Case of an Equity Market Neutral Portfolio." Please view event details and register by clicking here.
On June 4th, members and successful candidates will be invited for an evening Networking Event which will take place in Zurich. This event aims to provide an informal space for networking and socializing. This will also be an opportunity to welcome new members and successful candidates. Save the date! Registration will be announced by e-mail and will also be available via our website in May.
San Francisco: CAIA San Francisco will be holding a special Educational Event on April 29th, which will feature Richard Sandor, Chairman and CEO of the Chicago Climate Exchange with the following presentation: Environmental Commodities: Using Markets to Solve Environmental Problems and Create Wealth. To register, and for more event details, please click here.
A Post-exam Social for members and candidates will also be taking place in San Francisco on May 12th. CAIA Staff will be in attendance to give you the latest association updates. Save the date! E-mail invitation will follow and event details will soon be announced on our website.
Singapore: CAIA members in Singapore are invited to an Educational Panel entitled "Professional Liability for fund managers during a recession,” which will be jointly held by CAIA, IMAS, CFA, AIMA, and Marsh. It is scheduled to take place on May 27th. Invitations to members will follow.
Alternative Viewpoints... powered by CAIA
Niccolo Machiavelli's Hedge Fund Secrets, posted March 19 on AllAboutAlpha.com
Konstantin Danilov, CAIA
In this guest blog, Konstantin Danilov, CAIA, highlights some of Machiavelli's ideas from 1513 that are relevant to today's hedge fund industry. Looking at several excerpts from chapter 25 of Machiavelli's letter to Lorenzo de' Medici written in 1513, it is interesting to note that a large portion of this particular chapter is particularly relevant to the hedge fund industry. It seems that ideas that were once known and respected have since been forgotten or largely ignored; modern day investors would be wise to revisit Machiavelli's prescient observations on the topic of luck and randomness and the implications for hedge fund investing. (As you will see, you might even say that best-selling author Nassim Nicholas Taleb is somewhat of a latter-day Niccolo Machiavelli.)
Chapter 25 begins with the idea one must understand the overwhelming effect of luck on life events, and by extension, the financial markets:
"Nevertheless, since our free will must not be denied, I estimate that even if fortune is the arbiter of half our actions, she still allows us to control the other half, or thereabouts. I compare fortune to one of those torrential rivers which, when enraged, inundates the lowlands, tears down trees and buildings, and washes out the land on one bank to deposit it on the other. Everyone flees before it; everyone yields to its assaults without being able to offer any resistance."
Field Notes: Geneva and Zurich
Geneva/Zurich
During my travels to Geneva and Zurich, I found the environment, on the whole, becoming more positive. Still, there is plenty of concern about what is occurring now and how it could affect the future landscape of the alternative investment industry, particularly hedge funds.
A number of people I spoke with thought that most of the bad news is already out there, that the risk now is more about how the environment will change as a result of the crisis of the past two years as opposed to concern about more scandals and negative stories.
Many subjects were discussed, such as the use of side pockets and gates, crowding in the mid-level buyout Private Equity space, the social duties of banks, due diligence, investment opportunities and the regulatory regime. While the merits and drawbacks of each were questioned, there were no clear answers. However, most individuals agreed that simply restricting certain activities (the use of gates, side pockets or short selling) is ineffective and misses the point. If anything, it will likely ensure that other methods will be employed to achieve the same ends, regardless of the names or structures used.
Steve Wallace, CAIA
Associate Director of Industry Relations, EMEA
CAIA on the Road: Finland, Sweden, Norway, Denmark, Cayman Islands, Ireland, Italy, Spain, New Zealand, Australia & U.S.
We are currently developing our spring travel itinerary and are looking forward to meeting CAIA members and colleagues in the following cities:
April
- Baltimore/DC: 13 - 15
- Helsinki/Stockholm/Oslo/Copenhagen: 20 - 24
- Cayman Islands: 26 - 1 May
May
- Dublin/Milan/Madrid: 4 - 7
- San Francisco: 11 - 15
- New Zealand: 11 - 18
- Australia: 19 - 26
- New York: 25 - 27
The Association is available to give private, on-site presentations of the CAIA program in each of these cities. These presentations are an excellent way to increase your company's awareness of the value of the CAIA program, as well as to highlight your significant achievement in earning the designation.
Contact events@caia.org for more information on planning an exclusive informational meeting for your colleagues.
We look forward to seeing you while we are on the road!