Editor's Letter - Past Performance Can Help You Create a Winning Private Fund Portfolio
Hossein Kazemi
Investing Like the Harvard and Yale Endowment Funds
Michael W. Azlen, CAIA and Ilan Zermati, Frontier Investment Management

U.S. University Endowment Funds, such as Harvard and Yale, have been leaders in diversified multi-asset class investing for over two decades. Through this approach to investing and with a large exposure to alternative asset classes, they have consistently achieved attractive annual returns with moderate risk. This paper explores whether investors can benefit by applying these investment principles to their own portfolios.

Offshore Property Investing: Thoughts on the Investment Process
Tim Stringer, CAIA, Frontier Advisors

Offshore Investment is an established component of most Australian institutional investor portfolios, and has been for some time. However, investing in offshore direct property has not featured heavily due to the more challenging nature of this asset class. In this paper, they discuss some of the key aspects associated with investing in direct property overseas, along with a few of the more interesting and important structural differences between key offshore property markets and the Australian market.

Patience Premium
Igor Yelnik, ADG Capital Management

This paper introduces the notion of a patience premium, which is based on the concept of ambiguity aversion and is an ambiguity premium. They identify three reasons for the existence of the patience premium, and explain they are driven by the behavior of market participants and are interconnected. The phenomenon of the patience premium helps explain why the performance of investment strategies may benefit from having longer holding periods.

The Rise of Unicorn Funds: Examining the Supply of Private Growth Capital
Rohit R. Kulkarni, SharesPost

This paper attempts to analyze the market forces that could drive further proliferation of Unicorns coupled with greater investor allocations towards the new Private Technology Growth asset class which contains them.

Investing in an Overvalued Market and Tail-Risk Hedging
Michael Ning and Michael DePalma, PhaseCapital

With equity and bond market valuations near all-time highs, defaults on the rise and central banks around the world set to drain liquidity from the financial system, the risk of a major decline in asset prices over the next couple of years has increased significantly. At the same time, valuations have given investors few good choices to earn returns without taking much more risk and exposing themselves to large losses. A possible solution to this dilemma, and the subject of this article, is to incorporate a tail-risk hedging strategy into the portfolio. By incorporating a tail hedge strategy, investors can increase their allocation to risky assets to add returns while protecting against the “black swan” events that result in large losses. There are numerous other benefits to tail hedging which are also discussed in detail in the paper.

Should DC Plan Sponsors Add Private Equity to Target-Date-Funds?
Andres Reibel, Pantheon

In this paper, the inclusion of Private Equity in custom Target-date Funds (TDFs) is shown to affect the return profile of TDFs – more specifically, building an allocation that includes Private Equity in TDFs while keeping the risk profile unchanged. From a practical point of view, this analysis demonstrates whether adding Private Equity to TDFs has the potential to enhance investors’ retirement returns without assuming additional risk.

Pershing Square, Ackman and CP Rail: A Case of Successful “Activism"?
Yvan Allaire and François Dauphin, Institute for Governance of Private and Public Organizations (IGOPP)

Pershing Square, an activist hedge fund owned and managed by William Ackman, began hostile maneuvers against the board of CP Rail in September 2011 and ended its association with CP in August 2016, having netted a profit of $2.6 billion for his fund. This Canadian saga, in many ways, an archetype of what hedge fund activism is all about, illustrates the dynamics of these campaigns and the reasons why this particular intervention turned out to be a spectacular success… thus far.

The Merits and Methods of Multi-Factor Investing
Andrew Innes, S&P Dow Jones Indices

With a wealth of smart beta indices to choose from, market participants may find it difficult to decide when each factor-based strategy is best suited to deliver returns. Is it wise to rely solely on the performance of one factor? If not, this paper explores which multi-factor approaches could be considered and the effectiveness of each.

The CAIA Endowment Investable Index
Hossein Kazemi and Kathryn Wilkens, CAIA