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Newsletter - July 2009

Director's Comments

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Welcome to the New World Order

The days of overindulgence are gone – most likely for a very long time. While there may be periods of renewed consumerism, they will not be sustainable in the West given overextended personal balance sheets and the likelihood of a long-term decline in the value of the dollar and Euro vis-à-vis the Asian /emerging market currencies. Only in the East (and possibly South America) will the prospects for a burgeoning middle-class support global consumption.

Prior to this financial crisis, our generation has never had to face hardships like those faced by past generations. As a result, we have come to expect, even demand immediate gratification. So when faced with a difficult choice, we have repeatedly opted for the “easy out”; postponing the pain for another day in the unrealistic hope that it will not resurface, at least not in our lifetime or at our expense. Avoidance in other words - avoid the painful, put-off the tough choices and let someone else deal with the ensuing mess. To varying degrees, the global response to this crisis, both politically and economically, appears no different. Just as we did when the tech bubble burst, we are opting to reflate in the hope that we’ll be lucky enough to grow our way out of the excesses. But isn’t this precisely what compounded the mess in the first place? Is there no limit to how much we can artificially fuel economic growth before the supply of stimulus runs out and it all goes horribly wrong? Given the numbers, I think these efforts will ultimately prove futile, just as they have in Japan. In the case of the U.S., the administration is attempting to offset 14 trillion in destroyed credit with several trillion of stimuli. This approach seems a bit fallacious to me.

As a generation, we need to cease acting like a collective group of spoiled children. The time has come for us to take our medicine, as bitter as that may prove, suck it up as our parents and grandparents did when faced with unpleasant choices, and set a worthy example for the next generation of leaders. And perhaps we’ll discover as past generations have, the tremendous satisfaction that comes from hard work and sacrifice, and in the process rediscover the importance of character.

A good start would be to support the efforts of both AIMA and the MFA in assisting regulators with the development of sensible, effective and efficient regulations. Not surprisingly, I recently received an email from several European-based CAIA members looking to galvanize fellow members and the industry at large to collectively respond to Europe’s Proposed Directive on Alternative Investment Fund Managers. We plan to do just that in coordination and cooperation with AIMA, the MFA and other leading industry associations. I encourage all of you and your respective firms to do the same: we have a monumental task in front of us and we need everyone’s input. If we get this right, we will end up leaving the system in far better shape than we found it!

Craig Asche
Executive Director

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Exam Updates

September 2009 Exam Registration Update

  • Exam registration closes July 29, 2009 at 11:59 PM EDT
  • Late registrations are not considered under any circumstances
  • Register for an exam.
  • Exam dates: September 08 - 23, 2009.

Scheduling an examination appointment:

Pearson VUE testing centers are currently open to scheduling for the September 2009 CAIA exam period. We strongly recommend scheduling your exam appointment with them as soon as possible to ensure a seat at your preferred testing center. All exams are scheduled directly through Pearson VUE. If you have not yet received your scheduling instructions, please contact candidate@caia.org.

Registration vs. Scheduling:

While exam registration closes on July 29th, you may schedule your exam appointment with Pearson VUE at any time after completing the purchase process. The Association still recommends that you book your exam appointment with Pearson VUE at the earliest opportunity. 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.

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Latest News

Membership Surpasses 3,100 Designees - With the addition of these new members, more than 3,100 financial service industry professionals around the world... Click here to continue.

Grant Subsidies in Singapore for Program Fees - CAIA program fees will now enjoy financial training scheme (FTS) support with grant subsidies administered by the Monetary Authority of Singapore. The grant is provided to the following Singapore based... Click here to continue.

The Financial Services Board of South Africa Endorses the CAIA Designation - The endorsement of the CAIA designation by the Financial Services Board of South Africa is further evidence of the growing recognition throughout the global regulatory community for the important contribution the CAIA program is... Click here to continue.

"We are honored and delighted to have received these approvals from the MAS & FSB and welcome their commitment to education and professionalism within the Alternative Investment industry. Regulatory bodies play a critical role in promoting investor understanding and industry best-practices. We applaud their efforts and those of the many industry Associations who share this common goal with us." - Craig Asche, Executive Director

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Chapter Notes

Members, candidates, and friends gathered worldwide for a record number of 48 events in May and June compared to 50 events in all of 2008! We want to thank all the chapter leaders and active members in non-chapter locations who were involved in organizing these meetings - without your support these events would not have been possible. July and August will be quieter, with most chapters taking a break to plan more interesting events for the fall.

Click on the links to view event details and to register for the following upcoming events:

July 15, 2009 - CAIA Social Networking Event in Tokyo, Japan

July 16, 2009 – CAIA Social Networking Event in Houston, TX

CAIA London: Members and Candidates are cordially invited to attend the Chapter’s July Social Event which will take place on July 22nd at 6:30 PM at Mulligan’s of Mayfair. You can register and view event details by clicking here.

Many other events organized by active members in Seoul, Shanghai, Taipei, Tokyo, Dubai, Cape Town, Atlanta, Miami, Seattle, Luxembourg, Vienna, Helsinki and Copenhagen generated great turnouts and fostered an interest for further networking opportunities.

CAIA Boston held a social networking event on June 11th at the Vintage Lounge with over 50 attendees. To continue networking, you are invited to join the CAIA Boston LinkedIn group by clicking here.

CAIA Canada held a highly successful networking and careers event in Toronto on July 8th, which was attended by recruiters from Beqaj International Inc., and Robert Half Financial Services Group. Earlier, the chapter hosted an educational event entitled "Private Equity Opportunities and LP Performance Measurement" on June 12th in Toronto. The summary of the event and speakers' bios can be accessed by clicking here.

CAIA Germany membership organized a highly successful educational panel in Frankfurt on June 9th on "Commodities - Portfolio construction, outlook and market mechanics." Event details and speakers' bios can be viewed by clicking here. Additionally, a highly successful social event was held in Munich on June 18th.

CAIA New York With over 70 attendees, the networking event on June 24th was a great success. Stay tuned for more exciting events in New York in the fall!

CAIA San Francisco Members in the Bay area gathered for an educational event on June 18th on "The Finances of Social Security and Health Care Reform" featuring John Shoven, Charles Schwab Professor of Economics at Stanford University as the guest speaker. The chapter has organized a series of very successful events so far this year and is planning more for the fall.

CAIA Singapore hosted a first of its kind open social networking event on June 25th, which was attended by over 60 members, candidates, and other guests. To keep the momentum, CAIA Singapore organized an educational event on July 8th which was entitled "Climate Change and Renewable Energy: Why China is developing renewable energy?" Event details can be accessed by clicking here.

CAIA Switzerland The networking event in Zurich on June 17th was the largest gathering we've seen so far with over 100 attendees. Two more educational events are scheduled in Switzerland for the fall - one in Geneva and the other in Zurich - and a networking event in Geneva is also a possibility.

Many other events organized by active members in Seoul, Shanghai, Taipei, Dubai, Cape Town, Atlanta, Miami, Seattle, Luxembourg, Vienna, Helsinki and Copenhagen generated great turnouts and fostered an interest for further networking opportunities.

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CAIA Examinations Team

Inside Exam Development

The heart of the CAIA Association lies in its curriculum and examinations teams, who must establish a foundation of knowledge in alterative investments and design a test to distinguish those who have mastered it.

The Examinations team structures the test around the study guide developed by the curriculum team. A new exam question, or “item”, stems from one or more learning outcomes from the curriculum. The author develops the item based on a set of guidelines on difficulty, structure, and style. Once written, the item must survive several “subject matter expert” reviews and revisions. Next, a psychometrician, an expert in the field of testing, reviews the new item, determining whether it can accurately test the knowledge required in the associated learning outcome, and identifying potential improvements. Then, a professional editor reviews the question for grammar, conciseness, and global comprehensibility. Passing all of these stages, an item may land on one of several “forms” of exams during an exam period. After the exam, the exams team analyzes the item’s results data to determine its validity as a measure of knowledge. The entire process can take dozens of hours or more per item.

Historically, CAIA exams have been written almost exclusively by staff with decades of experience as professors and experts in the field of alternatives. Like other areas of CAIA, the exams team has grown significantly over the past two years, adding full-time staff and utilizing alternative investment and psychometrics experts to develop items. Recently, the Examinations team tapped a new resource to ramp up exam development: CAIA members. We developed an exam writing training program and recruited volunteer members to draft exam questions through two committee initiatives: the Exam Council and the Exam Development Working Group. Distributing writing responsibilities brings the potential of scaling up production as well as broadening perspective.

In the future, exam development process will likely become even more rigorous as we aim to increase the quality and quantity of items, refine exam difficulty, and ensure exam integrity.

For more information, email the exams team at exams@caia.org.

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Alternative Viewpoints... powered by CAIA

"Investing in hedge funds in emerging markets: the "prudent approach", posted June 24 on AllAboutAlpha.com

mcrookPeter Douglas, CAIA, Principal, GFIA pte ltd.

After being beaten up along with most hedge fund strategies in 2008, emerging markets hedge funds are roaring back this year along with the fortunes of their target regions. Hedge Funds Review reports that, "While prone to volatility, emerging markets hedge funds have historically posted strong gains following market bottoms. In the 12 months following the trough of each of the five largest performance declines, funds have produced an average gain of 23.3%."

And Citigroup recently told Bloomberg News, "There is going to be an outsized investment back into Asia. Some of the big pensions are going to be looking at Asia; it's coming onto the radar screens."

We wondered if this was just a matter of emerging markets beta, or whether emerging markets hedge funds provide added value? For a perspective on this, we turned to our resident emerging markets expert, Peter Douglas, CAIA, Principal, GFIA pte ltd.

For long-term investors, hedge funds are the most prudent approach to access the opportunities inherent in emerging markets.

Emerging market equity investing has typically been characterized by dramatic price movements through market cycles in both directions. In addition, the inefficient, diverse and often rapidly developing nature of emerging capital markets creates challenges which can create unexpected risks for non-specialist investors.

In a recent report, GFIA analyzed how hedge funds specializing in emerging market investing can both exploit these market inefficiencies, and protect themselves from extremes of price movements, thereby generating stronger risk adjusted returns over time.

Click here to continue.

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Field Notes: Zurich, Munich, Helsinki, & Copenhagen

Zurich

As I arrived in Zurich (16th June) there was beautiful weather just in time for our networking event. During the event I learned that there have been a number of people that have lost jobs over the past 3 - 4 months, it seemed that there was a bit of a lag before employment in Switzerland in general was impacted by the global financial crisis. Nevertheless, I also heard a number of stories of people setting up their own funds or servicing businesses. One of our members who is a partner in a new fund is building on their track record before opening the fund to investment.

The event was an absolutely fantastic evening and big thanks must go to Patrick Oberhansli and Laura Merlini for finding a great venue and hosting the evening. We had around 100 people attend which I think is one of the biggest networking events that CAIA Association has hosted in Europe - the Swiss chapter has certainly set the bar high!

Munich

Back to Munich for another networking event arranged and hosted by Christian Voit CAIA from HVB. There was a lively discussion among the 25 people attending; with topics ranging from what was going on in the industry, changes to the CAIA curriculum and reading materials for next year. There were a number of CAIA candidates for the September exam as well as some individuals who were very interested in where the investment industry is moving towards. They understood that the knowledge and network gained through the CAIA Association and the CAIA designation is only going to be more important.

Helsinki & Copenhagen

The following week (22nd June) I returned to Helsinki and Copenhagen where we again had a networking event in each city, both of which were the first networking events we have organized. Another big thanks to Adam Klus CAIA in Helsinki for his assistance in arranging the venue and to Thomas Christensen CAIA from Bank Invest for assisting us with arrangements in Copenhagen. There wasn't that much that had changed in the 2 months since I was last there from an industry perspective but what I did notice is that awareness of the CAIA designation is growing. Certainly in Helsinki there are pension funds actively allocating to hedge funds and private equity funds now and have been over the past 6 months so there certainly remains an appetite for alternative investments in institutional portfolios.

As is occurring elsewhere in the world, there is also a great deal of negotiation around manager fees, in particular performance fees when institutional investors in the region are allocating to hedge funds. I found that fees were being negotiated more aggressively by institutional investors who are negotiating appropriate hurdle rates in relation to the performance fees.

While it's true that people are being displaced from their positions globally, one thing that remains unique to our industry and our members is the entrepreneurial drive that keeps them optimistic and constantly looking at new opportunities and niches to establish businesses. I remember one of my previous employers saying that Sir John Templeton (1) had on his desk a sign with the quote "from crisis comes opportunity" and that is certainly a good way of describing how the majority of people I talk to in the industry are responding to this crisis.

Steve Wallace, CAIA
Associate Director of Industry Relations, EMEA

(1) Sir John Templeton - November 29, 1912 - July 8, 2008, was an American-born British stock investor, businessman and philanthropist.

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CAIA on the Road: London & Frankfurt

The CAIA Association is available to give private, on-site presentations of the CAIA program in each of the cities we visit. 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.

Here are some of the places the CAIA Association will visit in July.

July

London: 3, 9 - 10

Frankfurt: 13

August

No travel plans

We look forward to seeing you while we are on the road!

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