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Editor's Letter - How to Evaluate the Performance of Alternative Assets
Hossein Kazemi
Alternative Premia, Alternative Price
Matthew Towsey, CAIA and Chris Walvoord - Aon Hewitt

Alternative Risk Premia strategies have risen to prominence over the last few years, fueled by investors' desire for diversification and an advancing understanding over what should be categorized as alpha and beta. This paper makes the argument that these strategies can aid diversification within a portfolio and allow investors access to sources of return that are different from traditional equity and bonds, at a reasonable price point.

What Rising Rates Mean for Hedge Fund Returns After Fees
Dan Covich, CAIA - Pavilion Alternatives Group

Should interest rates begin to rise from historically low levels, its paramount that investors understand the interaction of higher risk-free rates and performance fees on absolute return strategies. This paper explores that very relationship as hedge funds and active managers have the potential to capitalize on an environment of increased dispersion in global asset price movements.

Private Equity: Manager Selection, Portfolio Construction, and Outperformance
Raymond Chan, Jeff Diehl, and Miguel Gonzalo, and Tobias True, CAIA - Adam Street Partners

As private equity has evolved as an asset class, investors have tried to determine the relationship between private equity, public equity, and leverage. A recent paper by L'Her et al. (2016) found that, in aggregate, private equity does not outperform its public market equivalent. In this paper, we examine several potential sources of private equity outperformance in order to determine private equity's potential to add value and produce risk adjusted returns.

Asset Allocation in a Low Yield Environment
John Huss, Thomas Maloney, Zachary Mees, and Michael Mendelson - AQR Capital Management

In 2016, bond yields fell to unprecedented low levels in major markets. This phenomenon challenged long-held assumptions about asset allocation. Many investors asked themselves whether holding very-low-yielding bonds was pointless, especially given expectations of future rises in yields. Does this exceptional environment demand exceptional action? We have long argued for strategic risk diversification across many return sources - including bonds - with, perhaps, modest tactical tilts. In this article we question the premises behind that preference in light of the current yield environment and conclude they are still sound.

Forecasting a Volatility Tsunami
Andrew Thrasher - Financial Enhancement Group

The empirical aim of this paper is motivated by the anecdotal belief among the professional and non-professional investment community, that a "low" reading in the CBOE Volatility Index (VIX) or large decline alone are ample reasons to believe that volatility will spike in the near future. While the Volatility Index can be a useful tool for investors and traders, it is often misinterpreted and poorly used. This paper will demonstrate that the dispersion of the Volatility Index acts as a better predictor of its future VIX spikes.

Alts Transparency: Finding the Right Balance
Paul Finlayson and Stuart Lawson - Northern Trust

Despite the dominance of transparency as a discussion topic over the last decade, market practices in alternative investing haven't changed as much as you might think. Even after the 2008 credit crisis illustrated the dangers of having large allocations to opaque, illiquid assets, the industry has struggled to reach accommodation on transparency. This paper focuses on why the lack of progress within this asset class and some approaches to potentially overcome this hurdle.

Private Debt in an Institutional Portfolio
Sanjay Mistry and Tobias Ripka - Mercer Private Markets

Over the last few years, institutional investors have been increasing allocations to return-seeking fixed income strategies and illiquid alternative assets. In doing so, the level of portfolio sophistication within both allocations has also been increasing and roles within the portfolio get more explicitly defined. This paper focuses on private debt; which as an asset class we believe is attractive on risk-adjusted grounds, which can play different roles in the portfolio context and directly plays into the financing void which has arisen post the global financial crisis.

De-Risking Concentrated Stock Positions
Tom Boczar and Nischal Pai - Intelligent Edge Advisors

Executives and employees of public companies often accumulate company stock over the course of their careers. As a result, they often find themselves owning or otherwise exposed to an amount of company stock that comprises the bulk of their net worth. Coupled with global stock markets hitting new peaks, interest rates ratcheting up, and risks seemingly lurking everywhere around the globe, prudence might suggest that investors should sell or otherwise divest of some or all of their highly appreciated shares. This paper explores a strategy that can add a desirable dimension to wealth planning and portfolio construction to investors with concentrated positions.

The CAIA Endowment Investable Index
Hossein Kazemi, The CAIA Association and Kathryn Wilkens, CAIA, Pearl Quest