Chasing Winners: The Appeal and the Risk
By Kristofer Kwait and John Delano, Commonfund, Hedge Fund Strategies Group

Within the universe of several-thousand active hedge funds, many managers have received outsized benefits from the extended broad market updraft and the draw of managers that have produced outsized recent winners can be powerful. Yet, such a strategy can work against investors in the long run. This article examines the risks of chasing managerial performance and offers insights on generating alpha in various market environments.

 

The Practicalities of Allocating to Smart Beta
By Toby Goodworth and Julien Barral, bfinance

Given the wide variety of available smart beta approaches and the associated styles and exposures they produce, it is essential for investors to have a clear understanding of what they require before looking towards manager selection and implementation. This article looks at some of the practical challenges and considerations facing investors along the route from initial consideration of a smart beta allocation through to manager selection and implementation.

 

The Blended Approach to Real Estate Allocations: Performance Implications of Combining an Exposure to German Spezialfonds with Global Listed Real Estate Securities
By Alex Moss, Andrew Clare, Steve Thomas, James Seaton, City University London – Cass Business School

This article seeks to increase the understanding of the performance implications for investors who choose to combine an unlisted real estate portfolio (in this case German Spezialfonds) with a global listed real estate element. The authors cover this “blended” approach to real estate allocations in the context of both listed and unlisted real estate equity allocations, and discuss the implications for risk management, Sharpe Ratios, drawdowns, and investment returns of the real estate portfolio.

 

Quantifying CTA Risk Management
By Kathryn Kaminski, CAIA, Campbell & Company

Risk management is often cited as a key to success for CTA strategies. Despite this claim, the process and tools for validating this statement have remained somewhat elusive for CTA investors. This article uses a simple factor-based framework to quantify CTA risk management. The factors measure the impact of shifting risk allocation among markets in response to a particular aspect of risk management (liquidity, correlation, volatility, and capacity) and the author provides historical commentary on the period from 2001 to 2015.

 

Cash Management Strategies for Private Equity Investors
By Chris Meads, Nik Morandi, and Andrea Carnelli, Pantheon

Risk management is often cited as a key to success for CTA strategies. Despite this claim, the process and tools for validating this statement have remained somewhat elusive for CTA investors. This article uses a simple factor-based framework to quantify CTA risk management. The factors measure the impact of shifting risk allocation among markets in response to a particular aspect of risk management (liquidity, correlation, volatility, and capacity) and the author provides historical commentary on the period from 2001 to 2015..

 

A Note on Direct Investing in Private Equity
By Ludovic Phalippou, Said Business School, University of Oxford

Asset owners (e.g. pension funds, sovereign wealth funds) often want to invest in assets other than the traditional ones (e.g. bonds, public equity) in order to obtain diversification benefits. In practice, however, it is difficult to measure the benefits and it is common to misjudge the expenses associated with diversification efforts. This article examines some of the costs of private equity investment and offers practical advice on venturing into this asset class.

 

Aligning Alternatives with Portfolio Objectives: A Framework for Integrated Portfolio Management
By Stephan Meschenmoser, Julia Wittlin, and Jonathan Callan, BlackRock

In the current low yield environment, investors are looking to improve returns while ensuring ample diversification across their portfolios. This dual focus, the quest for higher returns and true diversification makes alternative investments an attractive option for many. However, they do not always fit well within a traditional portfolio construction process. In this article, the authors propose an asset allocation framework with a mix of quantitative and qualitative techniques to address the challenges of alternative investments.

 

Interest-rate Swaps: Hedge or Bet? A Case of Canadian Universities
By Glenn Leonard and Gopalan Srinivasan, University of New Brunswick

The use of interest rate among non-financial public institutions, including universities, has increased in the past decade. Although interest rate swaps have long been common in the corporate environment, given the nature of cash flows and short-term assets that are typically carried by universities it is not clear whether they are true hedges or un-hedge an existing natural hedge and create risk in the university context. This article assesses the use of interest-rate swaps in a sample of Canadian universities and investigates whether they offer hedging benefits or if they actually increase a university’s financial risk profile..

 

VC-PE Index
By Mike Nugent and Mike Roth, Bison

Venture Capital returns continued their hot streak through June 30, 2015. North American venture capital’s horizon IRRs have overtaken the buyout industry’s horizon IRRs over the short and medium-term though buyout funds are still outperforming over the 10-year horizon. This edition of the VC-PE Index shows how things went in Q2 2015.

 

The IPD Global Intel Report
By Max Arkey, MSCI Real Estate

As commercial real estate becomes an increasingly prominent part of institutional portfolios, attitudes towards risk management are evolving. From the market context to portfolio, asset and tenant level - investors are changing the way they look at real estate risk. Using MSCI’s unparalleled global dataset and risk models, this analysis focuses on several key areas important to the discussion around real estate risk. We look at some of the underlying levels of real estate risk to demonstrate the importance of building greater risk awareness throughout the investment process..