Newsletter - September 2009
- Director's Comments
- CAIA Curriculum News
- New Book Series Announced
- September Exam Updates
- Alternative Viewpoints...powered by CAIA:
- "Using the Modified Sharpe & Information Ratios"
- CAIA Chapter Notes: Upcoming Events
- CAIA Out Front
- Member Profiles
Director's Comments:
When Alternatives Are No Longer Alternative
For years, I’ve been fielding the question “what will you do when alternatives are no longer considered alternative?”
It’s a legitimate question: hedge funds, which were fairly exotic only 15 years ago, are now a part of the common financial lexicon. Commodities, another major component of the CAIA curriculum, are an investment technique as old as the pyramids, and possibly older.
But to say that the CAIA program is about hedge funds or commodities or private equity investing is missing the point. In truth, our mission is to provide finance professionals with the ability to understand all that falls outside of the long-only equity and fixed income realm. This means that a significant part of our job is to provide insight into new vehicles as they come down the pike – to ferret out the “new alternative” and help our constituency to understand it.
The seismic shifts to the macro economic environment have provided us with a significant challenge. With the rapid maturation of the “traditional alternatives” and the anticipated regulatory changes to the same; the introduction of new vehicles like monetized intellectual properties, insurance linked investments, and renewable energy linked investments; and a yet-undefined “new normal” for return expectations, we are faced with a moving target.
For this reason, we are very pleased to announce the release of the CAIA Alternative Investment Knowledge Series, a set of custom curriculum readings published specifically for the CAIA program. The new readings will allow us to more nimbly shift to match the pace of this rapidly evolving investment space.
For example, we are witnessing a growing interest in investment strategies with missions that extend beyond the return stream. Whether called “green investing” or “socially responsible investing”, the appetite for such products has grown rapidly. Often the growth is spurred on by legislative mandates that require public investments incorporate environmental or social justice considerations into their selection process.
The evolution of this new investment approach spurred us to incorporate readings on infrastructure investments and the investment implications of climate change in the Level II curriculum. As institutional investors are often the bellwether of the industry’s future, we believe that the number of offerings that meet these new parameters will only grow.
The upcoming Green Investing Symposium, organized by the CAIA New York chapter, in conjunction with the Connecticut Hedge Fund Association and the NYSSA, suggests that many professionals across the investment spectrum are looking to this area with interest.
However, no matter what “alternative” means in a year, two years or ten, we look forward to providing CAIA candidates and members with the education needed to give them the first mover advantage.
Best regards,
Craig Asche
Executive Director
CAIA Curriculum News
New Curriculum Readings Published
Since its inception in 2002, the CAIA Association has strived to incorporate state-of-the-art reading materials in its curriculum. We are pleased to announce that we have reached a new milestone in our work with the publication of the CAIA Alternative Investment Knowledge Series: a set of books specifically written for the CAIA program.
In publishing the books in this series, we are guided by the Association’s mission to provide its members with a comprehensive knowledge of alternative investments, advocate high standards of professional conduct, and establish the Chartered Alternative Investment Analyst designation as the educational gold standard for the alternative investment industry.
The first book in our series, CAIA Level I: Introduction to Core Topics in Alternative Investments is a revised edition of Mark Anson’s Handbook of Alternative Investments. This new CAIA edition includes completely updated sections on hedge funds, managed futures and commodities, private equity, and credit derivatives, as well as new chapters on active management and real estate. Thus, the CAIA Level I required readings are contained in this one text, supplemented only by the CFA Institute’s Standards of Practice Handbook.
The second book in our series, CAIA Level II: Advanced Core Topics in Alternative Investments, also represents a significant step forward in the evolution of our curriculum. Each section was developed to incorporate the expert practitioner input that comprises the CAIA Program Core Knowledge Outline, and we believe this new model of curriculum development accurately reflects the skill set required of industry practitioners.
The third book in the series, CAIA Level II: Integrated Topics and Applications, is the result of the work of our Curriculum Task Force members. They reviewed the newly developed drafts of the first two new books in the series in light of the CAIA Program Core Knowledge Outline, updated the Outline, prioritized and developed supplemental topics, and reviewed practice problems designed for the Level II examinations which are included in this publication.
The fourth volume in this series is titled CAIA Level II: Current and Integrated Topics. It is updated annually and designed to address topics that cut across all areas of alternative investments, such as asset allocation and risk management techniques, as well as new developments in the alternative investment research space and in the industry itself.
I believe you will find this series to be the most comprehensive, rigorous, and globally relevant source of educational material available within the field of alternative investments.
Kathryn Wilkens-Christopher, PhD, CAIA
Director of Curriculum
CAIA Association
September 2009 Exam Updates
September 2009 Exams In Session
The September exams are now underway. We wish the best of luck to the over 2900 individuals who have registered for this exam cycle.
Grade Release Information
Grading will commence AFTER the examination window closes on September 23rd. Please do not contact the Association for grades at this time. An announcement will appear on the homepage when grades are available. Examinees will also be notified via email.
Level I grades are expected to be released approximately two to three weeks from the last examination day. Level II, which includes essays, takes more time and these grades are generally available between five and six weeks after the last examination day.
For more information about the grading process, please visit the Grading FAQs.
March 2010 Exam Registration
Registration for the next exam period (March 04 - 19, 2010) opens October 5, 2009.
Level I candidates are encouraged to take the Prerequisite Diagnostic Review. The prerequisite program has been expanded and Level I candidates are assumed to have mastered all of its content in advance of taking the Level I exam.
Alternative Viewpoints... powered by CAIA
Alternative Viewpoints: Using the Modified Sharpe & Information Ratios posted September 2, 2009 on AllAboutAlpha.com
Special to AllAboutAlpha.com by: By Neil Kotecha, CAIA, Vice President, Senior Research Analyst, BNY Mellon Wealth Management.
Using risk-adjusted return ratios is a necessary yet difficult task to do when analyzing investment managers. Ranjan Bhaduri points out the weaknesses of the Sharpe ratio in analyzing managed futures products in his July post at AllAboutAlpha.com. However, there are times when market anomalies make using the Sharpe and information ratios difficult even on traditional products. During these times, investors should not use the standard version of these ratios, for they can be misleading and result in ill-informed investment decisions.
Between 1970 and the end of 2008 there have been few periods of extreme losses among US and international equities. The S&P 500 Index's rolling three-year returns have been positive in all but three periods (1972 - 1975, 1999 - 2003 & 2006 - 2008). Similarly, the MSCI EAFE Index has only had three-year declines in 1972 - 1975, 1989 - 1992, 1999 - 2003 & 2006 - 2008. During these periods, many formulas broke down.
Each of the aforementioned ratios is calculated by dividing a type of excess return by a measurement of risk. As a reminder, the Sharpe ratio uses investment returns in excess of the risk-free rate of return as its numerator, then divides that by the standard deviation of the product (its risk). Similarly, the information ratio uses investment returns in excess of the return of an assigned benchmark as its numerator and then divides that by the tracking error of the product to its benchmark (its risk).
Click here to continue.
CAIA Chapter Notes: Upcoming Events
**SPECIAL EVENT!**
CAIA San Francisco presents Mark Anson, CAIA, President & Executive Director of Nuveen Investments, with a talk on The Alpha/Beta Continuum, which will take place on Tuesday, September 22 at the Banker's Club.
This event is open to the public. CAIA members and candidates, as well as members of the CFA are invited to attend at discounted rates. You can read the speaker's bio, view event details and register here.
With this event, September marks the beginning of another season of exciting social and educational gatherings that will be taking place in chapter locations and in other financial centers around the world. Some of the events are still in their planning stages, and details are forthcoming.
BOSTON:
CAIA Boston will be holding a social event on Tuesday, October 20 at the Hyatt Regency Hotel at 5:30pm. This is a celebration for those who sat for the September exam, with all of CAIA Boston. All those attending the Global Absolute Return Congress are invited to this event. To view the event summary and register please click here.
HONG KONG:
CAIA Membership in Hong Kong hosted an educational event featuring Michael Gibson, Partner at LIM Advisors Ltd. His presentation was entitled "The Asian Hedge Fund Industry: Recent problems, current outlook and future opportunities." Event details can be viewed here.
LONDON:
CAIA London is holding a member-only social event on September 16 at the Mulligans of Mayfair. Members can view details and register here.
Preparations are in full swing for the Green Investing Symposium, scheduled for Wednesday, October 14 at the Bloomberg Building. The event will take place from 2pm to 6pm, with a reception following.
This event is being organized by CAIA New York, in conjunction with the New York Society of Analysts (NYSSA) and the Connecticut Hedge Fund Association. Details will be circulated by email and posted here.
SEOUL:
Members in Seoul will gather for their next social networking event at the Seoul Plaza Hotel on Thursday, September 17. CAIA representatives will be in attendance to give the latest updates about the CAIA Association. To view event details and register, please click here.
SINGAPORE:
CAIA Singapore held an educational lunch event on Friday, September 11. Christopher Holt, Senior Advisor to the CAIA Association and Managing Editor of AllAboutAlpha.com was the featured speaker, with his talk "Hedge Fund Industry Updates 2.0." Event details can be viewed here.
SWITZERLAND:
CAIA Switzerland is pleased to inform you about the Charity Gala Cocktail Dînatoire organized by “100 Women in Hedge Funds.” It will take place at the Hôtel du Parc des Eaux-Vives in Geneva on September 29th. To view event details and to register please click here.
On September 4th CAIA Switzerland held a successful educational event entitled “Managing risk through Clustering and Volatility forecasts: application on Long/Short Commodity and Long/Short Equitiy portfolios.” To view event details, please click here.
Stay tuned for events scheduled to take place in early October in Los Angeles, Frankfurt, Munich and Milan.
CAIA Out Front
CAIA’s Executive Director, Craig Asche, will be co-chair at Terrapinn’s upcoming hedge fund conference in London on November 4-6: Hedge 2009. Look for him on day 2 of the event at the panel entitled: “It’s All About Alpha.”
CAIA members will receive at 10% discount on registration for this event.
Christopher Holt, Senior Advisor to the CAIA Association and Managing Editor of AllAboutAlpha.com, will be co-chairing the next Global Absolute Return Congress being held in Boston on October 19-21.
Attendees of the conference will be invited to a CAIA social taking place after the conference. Click here to register for the social.
Steve Wallace, Associate Director of Industry - EMEA, will be a panelist for a hedge fund workshop during ALFI’s European Alternative Investment Funds conference November 24-25, Luxembourg.
Member Profiles
Catherine Valega, CFP, CAIA
Green Bridge Wealth Mangement LLC
Catherine Valega, a Certified Financial Planner Professional with Green Bridge Wealth Management LLC, has spent her career incorporating her clients’ personal beliefs and lifestyle into the portfolio construction process. She had worked in traditional investments her entire career. However in 2004, she decided that alternatives should be included in her clients’ portfolios as a way to diversify and manage volatility.
The last year has not been kind to financial advisors and planners. Headlines concerning fraud and severe market volatility have made investors confused and frightened. “While we were all unclear about the near-term direction of the markets, we were all very clear about the necessity to continue supporting our main goal – helping our clients integrate their personal beliefs and lifestyles with their financial decisions, while helping them attain their long-term goals.”
Ms. Valega believes that all portfolios should be well-diversified and contain exposure to alternative investment assets aimed at reducing volatility and increasing returns. “I found that the CAIA program was the best way to improve my knowledge of alternative investments. The readings were relevant and well-rounded. The program put me ahead of the curve in understanding the fundamentals of Alternative Investments.
“I was one of the very first graduates of the CAIA program, which I heard about through my manager at the time. It was the perfect way for me to enhance my investment experience, and launch my career in alternatives. The CAIA program is great to either start, or augment, your current AI knowledge. The readings are interesting, and well-rounded, so you really get a ‘heads up’ on your colleagues.”
In the past, Ms. Valega has worked for Pioneer Investments, Credit Suisse, Smith Barney, Lehman Brothers, the Wharton School of Business and Marriott Corporation.
In addition to holding the CAIA designation, Ms. Valega is a member of 100 Women in Hedge Funds. She is a Registered Insurance Representative, and is Series 7, 24, and 66 registered with LPL Financial.
Scott E. Keller, CFA, CAIA
UBS Global Asset Management Singapore Ltd.
As a Managing Director with UBS Global Asset Management Singapore Ltd., Scott Keller leads a team focused on sales and marketing of asset management products in the markets of Southeast Asia, Hong Kong and Taiwan. These professionals provide support to both internal clients as well as third party distribution clients.
In 2005, Mr. Keller moved from Switzerland to Singapore and changed divisions from UBS Global Asset Management to UBS Wealth Management as Head of Investment Consulting for both Hong Kong and Singapore. “In my investment consulting role at UBS Wealth Management in Singapore and Hong Kong, I noted that many clients – especially at that time – were very interested in various types of alternative investments, perhaps more so than the European clients I was dealing with before. As a result, I decided that an understanding of alternatives beyond what the CFA program had previously given me was necessary.
“The most complex aspect of both my previous and current roles is the need to explain – in very simple language – how investments work to non-specialists. This can be in verbal discussions and sales presentations, as well as in written sales collateral. It is almost impossible to explain an investment in a compelling – but simple – manner if you don’t fundamentally understand the investment across multiple layers. The CAIA Program helped me form that basis of understanding – and even helped me to approach investments from a new angle – in both the traditional and alternatives space.”
Mr. Keller earned his CAIA designation in 2008. “When I was earning the CAIA designation, not too many people had heard of it, especially in Asia. I think the popularity of this program will only increase over time. Those holding the CAIA designation are increasingly more recognized as immediately possessing the strong level of expertise which financial services specialists are expected to have in certain functions.”
Mr. Keller received his undergraduate degree in International Studies from Drexel University, and then later obtained separate Masters degrees from Georgetown University and Central European University in 1995.