Newsletter - June 2009
- Director's Comments:
- Exam Updates:
- Latest News:
- Chapter Notes:
- Alternative Viewpoints...powered by CAIA:
- Field Notes:
- CAIA on the Road:
- Journal of Alternative Investments
Director's Comments
Upward and onwards...Moving Forward 
In the timeless words of Charles Dickens, "It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair..." (1)
Hedge fund & managed fund returns have put in some of their strongest results on record during May and overall have outpaced the traditional markets year-to-date, furthering David F. Swensen the Chief Investment Officer at Yale University, et al views that, for long-term investors in particular, the Alternative Investment industry offers significant value.(2) May was the best month in almost a decade for hedge funds, with the composite Eurekahedge Hedge Fund Index up 5.2 per cent and the industry attracting estimated net inflows of $1.5bn for the first time in ten months. Early reporting funds estimated inflows of $3.2bn which more than offset redemptions of $1.7bn. Overall, hedge funds are up 9.2% year-to-date, while the S&P 500 was up 1.8% as of end-May 2009. (3)
May results notwithstanding, our industry is facing powerful regulatory and political headwinds with change the inescapable outcome. These will undoubtedly be implemented over the coming months and with them will come pain for some, increased costs for many, but ultimately a closure to the uncertainty that has been plaguing our industry for far too long. I anticipate an industry-wide sigh of relief when that day finally arrives.
At the individual level, there exists a different but no less stressful level of uncertainty. And as we all know, stress can be very debilitating for those who must work under its influence day in and day out. For many employees, this can prove both distracting and de-motivating. There is nothing worse than worrying about something over which one has little or no control! Will I still have a job next month? Will my firm be one of the survivors? What opportunities will the AI industry hold for me going forward? So what can management do to shake staff out of this unhealthy "funk" and get them refocused and re-energized?
A CAIA member recently alerted me to an industry blog that suggested training programs such as the CAIA Program can offer a creative and cost effective means for management to do just that. Demonstrate your firm's commitment to staff by supporting their professional development. Get them focused on a common goal, a group project that will build their sense of team. Get their minds off the distractions over which they have no control and back onto the things they can do to improve their performance. Give them back that sense of purpose, of goal, and perhaps most important of all, a reason to feel good about themselves, their colleagues, their firm and this wonderful industry. The harder the challenge, the more rewarding the sense of accomplishment. The costs of doing so are minimal to the firm but the benefits in terms of productivity and job satisfaction are significant and lasting.
One last note: for those of you who haven't yet had a chance to read David Einhorn's (Greenlight Capital) speech at this year's Ira W. Sohn's Investment Research Conference entitled "The Curse of the Triple A," I highly recommend it.
Although he deals predominantly with issues related to the financial debacle here in the United States, his ideas represent yet another example of the intellectual capital found within the AI community.
Our political leaders could benefit significantly from the wisdom David and others in the AI community have to offer.
Craig Asche
Executive Director
(1) A Tale of Two Cities et. al.- Charles Dickens (1812 - 1870)
(2) Pioneering Portfolio Management: An Unconventiional Approach to Institutional Investment - by David F. Swensen, Charles D. Ellis (Foreword by)
(3) http://www.hedgeweek.com/articles/detail.jsp?content_id=33621
Exam Updates
September 2009 Exam Registration Now Open
- Register for an exam.
- Exam dates: September 08 - 23, 2009.
- Exam registration closes July 29, 2009.
Scheduling an examination appointment:
Pearson VUE has opened its testing centers 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 received your scheduling instructions, please contact candidate@caia.org.
September 2009 Level II Readings Book is now available for all Level II candidates and members. With over 350 pages of insightful alternative investment articles. Click here for more information.
Latest News: AllAboutAlpha.com's Research Dossier Highlight
We recently announced a new member benefit* of providing you with free and unlimited access to AllAboutAlpha.com's full Knowledge Base of content and research. The Knowledge Base contains reports organized into topic-focused "research dossiers" to save you hours of time researching topics of interest.
This new section highlights the Research Dossiers of AllAboutAlpha.com's Knowledge Base. This month's entry is the world's first global Guide to Sound Practices for Funds of Hedge Funds Managers, recently published by the Alternative Investment Management Association (AIMA).
According to AIMA, the guide was developed by some of the world's leading funds of hedge funds practitioners, and focuses on areas including risk management, due diligence, disclosure to investors, valuation, management of conflicts of interest and other operational issues. "It will be a practical business tool for funds of hedge funds managers and will also seek to provide relevant and insightful information for investors, regulators and policy makers, and the hedge fund industry's service providers."
Chapter Notes
BOSTON: CAIA Boston's "Congratulations, Commiserations and Social Event" at the Vintage Lounge on June 11, which was attended by Chris Holt of AllAboutAlpha was a great success.
CANADA: CAIA Canada held an educational event in Toronto on June 12. This event featured James C. Bachman IV, CAIA, Head of Research at The Burgiss Group, and Claude Robillard, Managing Director & CMO of the Artemis Investment Management as guest speakers.
CHICAGO: Members and candidates in Chicago are cordially invited to attend a social networking event which will take place on June 25th at Poag Mahone's. To view event details and to register please click here.
GERMANY: On June 9th CAIA members and candidates attended a highly successful educational panel discussion in Frankfurt entitled Commodities - Portfolio Construction, Outlook and Market Mechanics. Please click here to view event summary.
A social networking event will be taking place in Munich at Café Saha on June 18. CAIA will be in attendance. To view event summary and to register please click here.
HONG KONG: CAIA members and candidates in the Hong Kong are cordially invite to the next educational event "Life after a crisis - how extraordinary events reshape our views and change our priorities" on June 25. To view event details and to register please click here.
IBERIA: CAIA Iberia held an educational event on June 15 in Madrid. This event featured a debate on The Evolving Investment Regulatory Landscape in the European Union. To view more details about speakers, discussion topics, and to view the presentations, please click here.
On May 7, 2009 CAIA Iberia held a Post-Exam Social Event in El Plató, Madrid. Click here to view the Article and photos - English version as well as an Interview with Steve Wallace - English version.
LONDON: CAIA London will be holding their next social event at the Counting House on June 17th. All members and candidates are encouraged to attend. To view event details and to register please click here.
NEW YORK: On June 24, members and candidates are invited to social networking event at Inside Park at St. Bart's. Providing an informal space for networking and socializing, this event also offers an opportunity to welcome new members and successful March 09 candidates, and to meet CAIA staff. Due to overwhelming popularity registration for this event is currently closed.
PARIS: CAIA members in Paris held a highly successful post-exam congratulations and commiserations event on Thursday, June 11th at Café Clovis.
SAN FRANCISCO: The next Educational Event in San Francisco on Thursday, June 18th will feature John Shoven, the Wallace R. Hawley Director of the Stanford Institute for Economic Policy Research and the Charles R. Schwab Professor of Economics at Stanford University. He will discuss the finances of Social Security and Health Care Reform with references to his recent book, "Putting Our House in Order." To view event summary please click here.
SINGAPORE: CAIA Singapore is opening its doors to members and candidates for a social networking event on June 25th, which will take place at Indochine. To view further details and to register please click here.
CAIA Singapore recently held two very successful educational events. On May 19 an event featured Simon Ruddick, Managing Director of Albourne Partners. On May 27 the chapter held an event entitled "Professional Liability for fund managers during a recession," and featured a panel of legal experts.
SOUTHERN CALIFORNIA: Members and candidates gathered at a well attended social networking event on June 11.
SWITZERLAND: On June 17, members and candidates will be attending a social networking event in Acqua Seerestaurant in Zurich. This event will provide an informal space for networking and socializing. This will also be an opportunity to welcome new members and successful candidates, and to meet CAIA staff. Due to overwhelming popularity registration for this event is currently closed.
May and June have been filled with an increasing number of networking events! In addition to our regional chapter events, we're pleased to invite CAIA members and candidates as well as those would like to learn more about the CAIA Association directly from members and candidates to attend networking events in other select locations around the globe.
Atlanta, GA - June 17 - Fadó Atlanta
Shanghai, China - June 17 - Mr. and Mrs. Bund
Cape Town, South Africa - June 17 - Cape Grace
Charlotte, NC - June 18 - BlackFinn
Miami, FL - June 18 - GenSpring Family Offices
Helsinki, Finland - June 22 - Hotel Kamp - CAIA Attending
Dubai, UAE - June 23 - The Edge
Seattle, WA - June 24 - The Triple Door
Copenhagen, Denmark - June 24 - Custom House - CAIA Attending
Vienna, Austria - June 25 - Stadtwirt
Recent events:
Luxembourg - June 10 - Chiggieri
McLean, VA - June 10 - Maggiano's Little Italy
Taipei, Taiwan - June 10 - Shangri-La Hotel
Seoul, Korea - June 11 - Fontana Bar
Alternative Viewpoints... powered by CAIA
"Illiquidity Premium" that fueled endowment returns falls back to 2005 levels", posted May 7 on AllAboutAlpha.com
Michael W. Crook, CAIA
Back in early 2008, the Economist marveled over the gravity-defying returns of US university endowments. In early 2009, AllAboutAlpha.com contributor professor Christian Tiu wrote on these pages that "all endowments are relatively unconstrained, tax exempt and large enough to hold different asset classes". But what happens when a major driver of returns for these "different asset classes" runs out of gas? Michael W. Crook, CAIA, of Barclays Wealth.
The revelation last month of serious problems in the Harvard Management Company's portfolio brings into question the viability of the so-called "endowment model" of asset allocation. Harvard has essentially been forced into a liquidity-driven unwinding of its portfolio, due in part to some specific recent mistakes, but also due to its adherence to the prescriptions of the endowment model.
Click here to continue.
Field Notes: Milan, Madrid, New Zealand, & Australia
Milan, Italy
May started off with a return visit to Milan. The Italian hedge fund industry has been hit hard by redemptions and performance. During the course of my visit, I was told a number of times that assets under management had fallen by around 45%. This loss in combination with the annual tax on accrued gains has made it difficult to compete with offshore funds. However, there were certainly some positive stories of firms that have managed to gain inflows and were able to ride out this period.
Madrid, Spain
Next was Madrid, another city with a great base of CAIA members and candidates. Sergio Miguez and Laura Merlini, Iberia chapter co-Chairs, organized a fantastic networking event attended by approximately 60 people. The event offered an opportunity for people to discuss and better understand the current market situation. It's no secret that Spain in general has had a very tough time of it, especially over the last 9 months. However, I found people very optimistic and some of them, who had found themselves no longer employed, have established their own niche businesses - this is one of the great things about our industry, that true entrepreneurial spirit!
New Zealand & Australia
New Zealand is a relatively sparsely populated country with approx: 4 million people, and they don't have some of the services and businesses that thrive elsewhere. As a result, people are quite innovative in terms of the number of businesses that they run; one member I met has 3 businesses!
One of the main things that struck me about New Zealand was the expertise in the alternative investment industry. Most have spent a number of years "OE" in the US and/or London and return to New Zealand to run very successful firms. The New Zealand Absolute Return Association (NZARA) was also set up last year to cater to the local absolute return managers.
From New Zealand I took a short flight to Australia to visit the AI community in Melbourne and Sydney. The Australian AI industry has not been immune to the negative impact felt around the world. However, again there is a great pool of local expertise and a number of firms that are still doing well and planning to launch new funds. In Melbourne at a member dinner, and in Sydney at a networking event kindly arranged by AIMA Australia, I spoke to our members and a number of people who are just starting the path to the CAIA designation. It was great to meet with everyone and I think that those who are beginning their AI education are testament to the fact that people, especially in the current environment, place a great deal of importance on further education to ensure that they are at the top of their game. I believe that this pursuit of professional education will continue and that the CAIA Designation is at the forefront of this alternative investment education.
Steve Wallace, CAIA
Associate Director of Industry Relations, EMEA
CAIA on the Road: Zurich, Munich, Helsinki, Copenhagen, & Boston
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 June and July.
June
Zurich/ Munich: 16 - 19
Helsinki/Copenhagen: 22 - 25
July
Boston: 9 - 10
We look forward to seeing you while we are on the road!
Journal of Alternative Investments
Volatility Exposure of CTA Programs and Other Hedge Fund Strategies - Marc H. Malek, Sergei Dobrovolsky
This article examines the dependence of trend-following CTA performance on underlying market volatility, both quantitatively and conceptually. While it is generally believed that CTAs have a long volatility exposure, tests conducted by the authors indicate that it is not quite true. The perception that CTA strategies are long volatility came from academic research and became widespread among...