Alternative Beta: Redefining Alpha and Beta
Soheil Galal, Rafael Silveira and Alison Rapaport JP Morgan

Alternative beta strategies extend the concept of “beta investing” from long-only traditional strategies to strategies that include both long and short investing. Although alternative beta approaches have relevance for different categories of alternatives, this article focuses on hedge fund strategies and describes what portfolio managers and investors should know about “alt beta” in that context.

 

OPEC Spare Capacity, the Term Structure of Oil Futures Prices, and Oil Futures Returns
Hilary Till Premia Research LLC; and EDHEC-Risk Institute

In this article, the author asks if we can explain in simple terms whether holding long futures positions in crude oil is a wise decision or not. It turns out that knowing whether OPEC spare capacity is at comfortable levels or not would have been very helpful in making this decision, at least since the 1990s. But this factor alone is not sufficient. One has to also examine the shape of the crude oil futures curve. The article provides details on various scenarios and examines how the author came to these conclusions.

 

Mebane Faber on ETFs
Mebane Faber

AIAR interviews Mebane Faber, co-founder and Chief Investment Officer of Cambria Investment Management and author of numerous white papers and three books: Shareholder Yield, The Ivy Portfolio, and Global Asset Allocation. In this interview he descibes his work at Cambria on ETFs and his views on the CAIA designation.

 

The Time Has Come for Standardized Total Cost Disclosure for Private Equity
By Andrea Dang, David Dupont, and Mike Heale CEM Benchmarking, Inc

Given the level of detail and timing of private equity manager reports, can pension funds disclose investment costs in a consistent manner across the industry? What would full cost disclosure require of a pension fund? The authors found a good example of this in one of their benchmarking clients and describe their perspective in this article.

 

The Hierarchy of Alpha
By Christopher M. Schelling, CAIA Texas Municipal Retirement System

Hedge funds and private equity funds have had their share of detractors over the last few years, with many institutional investors questioning whether the returns they have generated justify the significantly higher fees paid. Certainly, on a relative performance basis, a large number of these funds have had a tough time keeping up with long-only equities. There is also no debate that alternatives have become a much more competitive sector. This article evaluates the evolution of the industry and provides insight on how institutional investors should approach the question of manager selection and performance .

 

Private Market Real Estate Investment Options for Defined Contribution Plans: New and Improved Solutions
By Jani Venter and Catherine Polleys Aon Hewitt Investment Consulting

Historically, investment vehicles using private real estate have been largely unavailable to defined contribution (“DC”) plan participants, but that is now changing. The maturation of daily-valued private real estate funds along with a shift in DC plans towards the use of multi-asset portfolios such as custom target date and objective-based funds have introduced a new investment environment. With these products, daily-priced real estate funds that address legacy vehicle concerns are now available, DC investors can incorporate the return profile and diversification benefits of private core real estate into their multi-asset class investment portfolios. This article assesses the utility of private real estate funds in the pension plan scheme.

 

M&A Activity: Where Are We In the Cycle?
By Fabienne Cretin, Stéphane Dieudonné, and Slimane Bouacha OFI Asset Management

A number of studies have shown that M&A activity is cyclical by nature. After several lean years following the 2008 financial crisis, M&A activity in capital markets is enjoying a marked resurgence. This is illustrated by the return of mega deals in both the U.S. and Europe and the resumption of bidding wars. A number of questions spring to mind in this newly buoyant context: Is it the beginning of another cycle? If so, where are we in this cycle? How long will it last? What are the drivers?.

 

Nowcasting: A Risk Management Tool
By Alexander Ineichen, CAIA Ineichen Research & Management AG

Nowcasting is a reasonably new word used in both economics and meteorology. A forecaster tries to predict the future. A ‘nowcaster’ does not try to predict the future, but focuses what is known today, in real time. This article addresses the strengths of the approach and explains why investors should consider the replacement of forecasting with nowcasting.

 

VC-PE Index
By Mike Nugent and Mike Roth

The final figures for 2014 are in and it was a good year for the venture capital industry. In addition to record fundraising and capital invested, returns in 2014 outpaced the rest of the industry. Time will tell if this trend will last.

 

The IPD Global Intel Report
By Max Arkey

As an asset class, real estate investing typically has a high degree of home bias, especially when compared to equities and fixed interest. However, this domestic bias is starting to erode, with asset owners in most countries either already investing internationally or actively exploring the options for building offshore exposures. In this Global Intel Report, MSCI explores the diversification benefit of international real estate for the US market.