Newsletter - January 2010
- A Special New Year's Message from the Executive Director
- Exam Updates
- Alternative Viewpoints
- Chapter Events/Notes
- CAIA Out Front
- Winter JAI Article
- EU Directive on AIFM
- Job Openings at the CAIA Assocation
A Special New Year's Message from the Executive Director
You can stop holding your breath now!
2009 has come and gone without taking the global financial system with it. Not that we’re "out of the woods" just yet, but the apprehension with which we began the year slowly gave way to a guarded sense of optimism that the worst may indeed be behind us. And this optimism, whether justified or misplaced, is an important component of any global recovery. As we all know, market psychology can have a powerful influence on behavior, and behavior a powerful impact on economic activity.
Equally important, however, is that we do not forget the lessons learned from this crisis. We must not fall back into our old ways and, in the process, sow the seeds of the next crisis. Fortunately, Mother Nature has a way of bringing imbalances back into balance whether we like it or not. In fact, the more extreme the imbalance, the more extreme the correction. Thus, our worst excesses result in the sharpest corrections which become indelibly etched into our memories. I’d say the last decade ranks right up there with the Roaring '20s and Japan in the late '80s in terms of extreme excesses.
So, what lessons can be gleaned from the events of 2009?
- Invest only in what you understand – if the Madoff scandal taught us nothing else, it is that if something seems too good to be true, it likely is,
- all the regulation in the world cannot prevent fraud – if someone wants to commit fraud, no regulation will prevent them from trying,
- leverage comes with risk and thus should only be used thoughtfully and sparingly – no favoritism here; leverage magnifies gains and losses equally,
- holding a portfolio of diversified assets alone does not necessarily ensure that one is risk diversified,
- and risk management and risk measurement are two very different functions – the latter being purely quantitative, the former both quantitative and qualitative.
So, what can we expect in 2010?
It is encouraging that institutional investors have not been sucked in by the global equity market rebound of 2009. While the major equity market indices have enjoyed a significant rebound from the punishing lows of 2008, when viewed over the last 10 years, the resurgence does nothing to change the period’s moniker as the "lost decade of equities". This fact has not gone unnoticed by global investors. They are acutely aware of the importance of protecting one’s downside, perhaps now more than ever. So, it should come as no surprise that they continue to shift allocations away from long-only equities in favor of alternatives—specifically those that offer the greatest potential for uncorrelated returns, such as managed futures and infrastructure.
As we begin 2010, markets remain both dynamic and fragile, and the promise of impending regulatory change only adds to the uncertainty, all of which should keep volatility high. For the quick and nimble—and I count non-traditional managers among the most quick and nimble—there should be no lack of opportunity over the coming year.
The same goes for us here at the CAIA Association. Opportunity abounds! Never has it been so crystal clear that knowledge is king, ignorance unacceptable. We have worked hard over the course of 2009 to deliver real value to you, our members. We have tripled the number of CAIA-sponsored educational events held round the globe, successfully launched our much-improved website, and significantly enhanced our curriculum with the introduction of the CAIA Knowledge Series. We expect nothing less in 2010 as we look to add to our network of eleven international chapters, build out our repertoire of educational offerings, and expand our presence in Asia.
All the best for a successful 2010.
E. Craig Asche
Executive Director
Exam Updates
March 2010 Exam Registration Closes January 26.
To sit for the exam, you must complete two steps.
- Register for the CAIA exam here.
- Exam Dates: March 4 – 19, 2010
- Registration Deadline: Tuesday, January 26, 11:59 PM EST
- Deadline is firm. Late registrations are not accepted.
- Reserve a seat at your preferred Pearson VUE testing center here.
- Exams are administered at Pearson VUE testing centers worldwide.
- While you must register for the exam (step 1) by January 26, you can schedule your exam appointment through Pearson VUE at any time.
- However, to ensure a seat at your preferred testing center, schedule your exam appointment as soon as possible. Deferments are not allowed and will not be granted to candidates who are unable to sit for the exam due to failure to schedule an appointment.
- Scheduling instructions are on the CAIA website. You must be logged in as a registered candidate to view the instructions.
- If you encounter scheduling difficulties, contact Pearson VUE immediately. Contact numbers are provided in the scheduling instructions.
Alternative Viewpoints... powered by CAIA
The Ineichen Dialogues Act II: LaRasmussteinmontians in Yellowstone Park
By: Alexander Ineichen, CFA, CAIA
posted on October 28, 2009
The Ineichen Dialogues Act II: LaRasmussteinmontians in Yellowstone Park
Once upon a time, not so long ago, there was a bear named Winnie-the-Bear who lived in the Trillion Acre Wood. On some level, he was a silly old bear. Nevertheless, he was wondering what the fuss about hedge funds was all about. He invited his two best friends, George Jones, the famous hedge fund manager, and Ben Put, the famous academic central banker, to the Trillion Acre Wood for a chat on hedge funds.
Winnie-the-Bear: Thank you for joining me again. With all the fuss about hedge funds they clearly are going to face tough regulatory headwinds going forward, no? I find the topic of hedge fund regulation difficult to grasp, actually quite weird, to be honest. I wonder; if 'pro' is the opposite of 'con' what is the opposite of 'progress'?
Click here to continue reading.
Chapter Notes
CANADA:
Wednesday, January 20
CAIA members are invited to an educational event in Toronto on "Liquidity Issues in Private Investments. Keith Black, CAIA, an associate at EnnisKnupp in Chicago, will provide insight into how liquidity in Private Equity, Real Estate and Hedge Fund Investments has changed over the last few years. Registration is open until the day of event. View details and register here.
CHICAGO:
Chris Holt, CAIA Director of Industry Relations - Americas, blogs about a social event in Chicago on Tuesday, December 8 and links to an article in the Financial Times about a paper written by CAIA Curriculum Advisory Committee member and uber-connected researcher Hilary Till on the role of speculation in oil futures. Till attended the social event. Read the CAIA Blog entry, CAIA Members Braved Elements in Windy City.
FRANCE:
Gilles Guérin, Deputy CEO of HDF Finance, and Dunny P. Moonesawmy, Head of Fund Research in Western Europe and the Middle East for Thomson Reuters, spoke on December 9, at an educational event organized by the CAIA Association in Paris. Craig Asche, CAIA Association's Executive Director, and Steve Wallace, CAIA Director of Industry Relations - EMEA, attended the event. See photos from the December educational event.
GERMANY:
CAIA Germany's chapter launch on Tuesday, December 8 included a panel discussion on "Alternative Investments after the Crisis," focusing on climate investing, hedge funds, and private equity. Read the CAIA Blog entry, CAIA members launch CAIA Germany - the Association's 11th global chapter and one of the fastest-growing CAIA communities in Europe.
HONG KONG:
Thursday, January 21
CAIA Hong Kong will hold a social event at the Isola Bar for CAIA members and candidates working in the area. Click here to view details and to register.
LONDON:
Wednesday, January 20
CAIA London is holding a social at Mulligan's. Registration is open until the day of the event. This is a member and candidate event only. Click here to register.
Tuesday, January 26
In collaboration with the organizers of the LSE Alternative Investments Conference, 60 CAIA members will receive FREE seats to a panel discussion led by Mark Anson, CAIA. The panel discussion, titled "Separating Alpha from Beta," will be held on the Private Equity Day of the conference. This is a member and candidate only event. Click here to view details and to register.
Wednesday, February 17
CAIA London will host this year's Recruiter Educational Panel "Prospects and Perils in 2010". Speakers include senior recruitment and placement specialists who will share their experiences of 2009 and their views and tips for the market in 2010. This is a member only event.
NEW YORK:
Chris Holt, CAIA director of Industry Relations - Americas, attended a social on Tuesday, December 15 at the historic "Inside the Park at St. Bart's." He blogs about the social and a question he is often asked - should I take the CFA or the CAIA? Read the CAIA Blog entry, Sold out New York Chapter Social Rings in the Holiday Season.
A Wednesday, December 16 social event organized by CAIA New York in Stamford, Connecticut is the subject of this blog entry. Read the CAIA Blog entry, Stamford Rising.
SAN FRANCISCO:
Erin Davis, Chapter Head of the San Francisco Chapter, shares her thoughts on the Tuesday, December 15, social event in San Francisco. Read the CAIA Forum post.
SINGAPORE:
CAIA Singapore held a New Year's Lunch for CAIA members at the Tower Club on Wednesday, January 6.
SWITZERLAND:
"The Changing Role of Hedge Funds in Portfolio Context - The Alpha Uncertainty Principle." CAIA Switzerland closed the year with yet another highly popular and successful educational event. The speaker on Thursday, Dec 10, was Dr. Sassan Zaker, CFA, Julius Baer Portfolio Management/Alternative Investments.
EVENTS AT NON-CHAPTER LOCATIONS:
A few events are scheduled to take place in the near future in non-chapter locations. Click on the links below to view details and to register.
Cape Town - Thursday, January 21
Sydney - Thursday, February 25, details TBD
Melbourne - Tuesday, March 2, details TBD
CAIA Out Front
GAIM USA:
Tuesday January 19 - Thursday January 21, 2010
Boca Raton, FL
Christopher Holt, Director of Industry Outreach - Americas, is moderating a panel discussion on day two of the conferences on "Reshaping the Institutional Fund of Funds discussion on day two of the conference on "Reshaping the Institutional Fund of Funds Business - Where do they continue to add value to an end-investor's portfolio?"
Asset Allocation Summit
Wednesday February 24, 2010
Sydney, Australia
Steve Wallace, Director of Industry Outreach - EMEA, will participate in a panel discussion on "The return to Alternatives and the criteria for institutional investor mandates."
GAIM Ops Cayman
Sunday February 28 - Wednesday March 3, 2010
Grand Cayman
Chris Holt is moderating a panel titled "Industry Feedback Session." Participants are AIMA, Hedge Fund Working Group and President's Working Group. Leading Fund of Funds discuss a cost-benefit framework for implementing processes outlined by best practice reports.
Winter JAI Article
Non-Normality of Market Returns: A Framework for Asset Allocation Decision MakingAbdullah Z. Sheikh, Hongtao Qiao
When market stress and disruptions hit portfolios especially hard, it is natural for investors to ask if anything could have been done differently. The turmoil of 2007–2009 is just one among many such financial crises over the past 30 years— rare and unpredictable events that can, and should, challenge conventional ideas about portfolio construction. And often, it is in such times of reflection that one arrives at important insights and begins to craft effective solutions.
This article presents a statistical methodology that can incorporate three categories of non-normality; serial correlation, “fat” left tails (negative skew and leptokurtosis), and correlation breakdown (converging correlations). The results show that extreme negative events due to “non-normality” of asset returns are observed with much higher frequency than current risk frameworks allow for. Consequently, traditional asset allocation frameworks that are based on assumptions of normality in asset returns can significantly understate portfolio downside risk. The authors conclude that incorporating nonnormality can lead to more efficient portfolios.
Click here to read the full article.
EU Directive on AI Fund Managers
One of the CAIA Association’s founding organizations, the Alternative Investment Management Association (AIMA), is calling for a redraft of the European Commission’s directive on Alternative Investment Fund Managers (AIFM). Click here for a summary of AIMA’s opinions, and visit the Directive Centre for details on AIMA’s views and progress updates.
The CAIA Association shares AIMA’s opinion and encourages all CAIA members to support AIMA’s efforts by having their respective firms voice any concerns they may have to their relevant EU representatives.
Job Opportunities at the CAIA Association
The Association is experiencing unprecedented growth and has the following openings. Contact Ruth Carolan at hr@caia.org for more information.
Research Associate
Chartered Alternative Investment Analyst Association
Amherst, MA, USA
The Research Associate is responsible for the development and the production of curriculum materials that will serve as the basis for the CAIA examinations. The Research Associate will report to the Director of Curriculum and with work with CAIA staff and outside experts to ensure that all materials developed are technically sound and reflect academic research and industry practices. Click here to continue.
Managing Director - Asia Pacific
Chartered Alternative Investment Analyst Association
Signapore
The Managing Director – Asia Pacific is responsible for developing and executing strategy to establish and expand CAIA’s industry recognition, candidate participation and membership activity throughout the Asian region. The individual must work in close coordination with all of the department heads including the Chief Operating Officer, the Director of Marketing, the Director of Industry Relations and Outreach, the Director of Member Services, the Director of Candidate Services and the Program Director to ensure a sound operational structure, consistent message, and vibrant and growing regional CAIA community. Click here to continue.