Hedge. Living on the. ASKING the RIGHT QUESTIONS. INTELLIGENCE is NOT about having all the ANSWERS, RYAN BAILEY

Similar documents
SYSTEMATIC GLOBAL MACRO ( CTAs ):

Building Hedge Fund Portfolios Capable of Generating Absolute Return within Stressful Market Environments

Ho Ho Quantitative Portfolio Manager, CalPERS

HEDGE FUNDS AND AUTOMOBILES AN OVERVIEW

Hedge Funds: Should You Bother?

Absolute Return Strategy Process & Recommendations September 22-23, 2016

Update on UC s s Absolute Return Program. 603 Committee on Investments / Investment Advisory Committee February 14, 2006

Maximizing Returns, Minimizing Max Draw Down

Building Efficient Hedge Fund Portfolios August 2017

I-4 UC Absolute Return (AR) Program

2016 by Andrew W. Lo All Rights Reserved

Investment Policy Statement and Spending Policy

Alternative Investments: Risks & Returns

Hedge Funds and Alternative Investments

Asset Allocation with Exchange-Traded Funds: From Passive to Active Management. Felix Goltz

Private Equity Overview

Investment Policy Statement for Short-Term Investments

All Alternative Funds are Not Equal

Hedge Fund Strategy Education

The Ultimate Alpha Fund, LP

Fortigent Alternative Investment Strategies Model Wealth Portfolios Fortigent, LLC.

INVESTMENT POLICY STATEMENT AND GUIDELINES

TOTAL RETURN MARCH Newfound Case ID:

Sources of Hedge Fund Returns: Alphas, Betas, Costs & Biases. Outline

What is Risk? Jessica N. Portis, CFA Senior Vice President. Summit Strategies Group 8182 Maryland Avenue, 6th Floor St. Louis, Missouri 63105

Risk and Return: Past and Prologue

THE LONG AND THE SHORT OF IT:

Risk and Return: Past and Prologue

STRATEGY OVERVIEW. Opportunistic Growth. Related Funds: 361 U.S. Small Cap Equity Fund (ASFZX)

Mid-Year Survey of Hedge Fund Investor Sentiment

First Half Liquid Alternative Investments MAPS. Market Analysis & Performance Summary

The Benefits of Recent Changes to Trustees Investment Powers. June 2006

Media Contact: Alexa Auerbach, or FOR IMMEDIATE RELEASE

Managed Futures managers look for intermediate involving the trading of futures contracts,

Hedge Funds performance during the recent financial crisis. Master Thesis

Hedge Funds Performance Measurement and Optimization Portfolios Construction

Summit Strategies Group

Indian Association of Alternative Investment Funds (IAAIF) Swapnil Pawar Scient Capital

CERTIFIED INVESTMENT MANAGEMENT ANALYST (CIMA ) CORE BODY OF KNOWLEDGE

MEMBER CONTRIBUTION. 20 years of VIX: Implications for Alternative Investment Strategies

Zero Beta (Managed Account Mutual Funds/ETFs)

Customized Hedge Fund Portfolio Solutions for Advisors. Global Macro

Equities: Enhancing Your Small Cap Allocation

ASSET ALLOCATION IN ALTERNATIVE INVESTMENTS REISA April 15, Sameer Jain Chief Economist and Managing Director American Realty Capital

Study of Fat-tail Risk

Independent Study Project

2013: Zombie Apocalypse or Groundhog Day? Jon Freeman, Coller Capital

University Funds Investment Policy

Portfolio Management Consultants Supporting Enterprises, Advisors, and their Clients

Evaluating Performance of Alternative Investments

Calamos Phineus Long/Short Fund

Alternatives 101. Tools for Enhancing Asset Allocation ALTERNATIVES 101: TOOLS FOR ENHANCING ASSET ALLOCATION 1

Absolute Return Strategy Process & Recommendations March 23-24, 2016

New Insights on the Role of Alternative Investments in High-Net-Worth Portfolios By Scott Welch, CIMA August 9, 2011

Manager Comparison Report June 28, Report Created on: July 25, 2013

Real Return and Hedge Funds Analysis. Water and Power Employees Retirement Plan

Purpose andobjectives. Asset Allocation. General Portfolio Objectives. OCERS Board Policy Absolute Return Program Investment Policy Statement

I. ARS Search Process & Allocation Objectives

Lecture I. Anthony Broccardo Chief Investment Officer (CIO) F&C Asset Management plc London

Certification Examination Detailed Content Outline

CTAS SHOW SIGNS OF RECOVERY

Downside Risk-Adjusted Performance Measurement

BENEFITS OF ALLOCATION OF TRADITIONAL PORTFOLIOS TO HEDGE FUNDS. Lodovico Gandini (*)

Hedge Fund Overview. Concordia University, Nebraska

Grant Park Multi Alternative Strategies Fund. Why Invest? Profile Since Inception. Consider your alternatives. Invest smarter.

Preqin Special Report: CTAs

Alternative Risk Premia: What Do We know? 1

INVESTMENT POLICY STATEMENT. Loyola University Maryland

Quarterly Investment Review

What Institutional Investors are Looking for from Hedge Funds. CTA-EXPO Chicago September 2015

Are Market Neutral Hedge Funds Really Market Neutral?

PREQIN SPECIAL REPORT: HEDGE FUND MANAGER OUTLOOK H alternative assets. intelligent data.

Transition Management

Quarterly Asset Class Report Global Equity

What is the appropriate level of currency hedging?

Liquid Alternatives Challenges and Opportunities

ENDOWMENT INVESTMENT POLICY STATEMENT

Economic and Capital Market Update November 2017

How to evaluate factor-based investment strategies

FINAL INVESTMENT POLICY STATEMENT (IPS) FOR FLORIDA MEMORIAL UNIVERSITY, INC.

Jacobson Fund Managers Ltd.

Multi-Strategy Linear Investments Limited

INVESTMENT PROGRAM SYSTEMATIC VOLATILITY STRATEGY

Global Journal of Finance and Banking Issues Vol. 5. No Manu Sharma & Rajnish Aggarwal PERFORMANCE ANALYSIS OF HEDGE FUND INDICES

a diffi cult one for many CTAs over much of the rest of the year, and by the end of 2015 the benchmark was underwater.

Measuring Risk in Canadian Portfolios: Is There a Better Way?

AlphaCentric Hedged Market Opportunity Fund

Fixed Income: The Game Has Changed. Marc-André Gaudreau & the Dynamic Fixed Income Credit Team

Alternatives Market Briefing

Argus Performance Review

HEDGE FUNDS: HIGH OR LOW RISK ASSETS? Istvan Miszori Szent Istvan University, Hungary

INSIGHTS. The Factor Landscape. August rocaton.com. 2017, Rocaton Investment Advisors, LLC

IQ GLOBAL RESOURCES ETF (GRES) AND IQ REAL RETURN ETF (CPI) BOTH OUTPERFORM BENCHMARKS AT 3-YEAR ANNIVERSARY

The Pros and Cons of Hedge Funds

CHAPTER 1 Introduction Outline of This Book Studying for the CAIA Level II Examination 3

Real Return and Hedge Funds Analysis. Water and Power Employees Retirement Plan

Equity Markets in a Late-Cycle Environment: Balancing Opportunity and Risk

THE FULL SPECTRUM. This model has indicated a bull market environment since early Spectrum Financial, Inc. Market Environment Model

Managed Futures THE TRUTH ABOUT MANAGED FUTURES A PRESENTATION BY THE CAPITAL TRADING GROUP

Efficient VA Hedging Instruments for Target Volatility Portfolios. Jon Spiegel

Transcription:

Living on the Hedge. RYAN BAILEY Board Member, Texas Hedge Fund Association INTELLIGENCE is NOT about having all the ANSWERS, but ASKING the RIGHT QUESTIONS - Some Brilliant Person 1

Agenda Is it worthwhile for $500M+ Pensions and Endowments to invest in Hedge Funds? Background + Why do we Invest? Are Hedge Funds an Asset Class? Manager Assessment Qualitative and Quantitative Overview Implementation Concerns What s important to consider? Just invest in public equity? 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD Macro Barclays Agg Small Cap Small Cap Barclays Agg Small Cap Small Cap S&P 500 Market Neutral Small Cap S&P 500 11.4% 5.2% 27.2% 26.9% 7.8% 16.3% 38.8% 13.7% 4.5% 21.3% 8.7% Equity L/S Global Bond S&P 500 S&P 500 Global Bond S&P 500 S&P 500 S&P 500 S&P 500 11.4% 4.8% 26.5% 15.1% 5.6% 16.0% 32.4% 11.4% 1.4% 12.0% 6.8% Comp Macro Relative Value Barclays Agg Equity L/S 11.0% 4.7% 23.0% 12.5% 3.8% 12.5% 22.1% 6.0% 1.1% 10.6% 5.0% Relative Value Market Neutral Equity L/S Relative Value S&P 500 Relative Value Equity L/S Macro Barclays Agg Small Cap 10.0% -3.0% 22.3% 12.5% 2.1% 9.7% 14.5% 5.8% 0.5% 9.2% 5.0% Global Bond Relative Value Relative Value Relative Value Macro Relative Value Global Bond 9.5% -17.3% 20.3% 11.5% 0.8% 6.5% 13.4% 5.3% 0.4% 7.7% 4.5% Equity L/S Equity L/S Small Cap Relative Value Equity L/S 8.7% -18.7% 20.3% 8.9% -0.5% 4.7% 9.6% 4.9% 0.2% 5.5% 3.5% Barclays Agg Macro Relative Value 7.0% -20.8% 18.6% 8.5% -0.7% 4.4% 7.5% 4.3% -0.2% 5.4% 3.3% Comp Global Bond Barclays Agg Market Neutral Global Bond Market Neutral Equity L/S Equity L/S Barclays Agg Relative Value 6.0% -24.3% 6.9% 6.5% -1.5% 4.3% 6.4% 3.6% -0.2% 2.6% 2.5% Market Neutral Equity L/S Macro Global Bond Barclays Agg Macro Market Neutral Market Neutral Barclays Agg 5.7% -26.4% 6.9% 5.5% -2.0% 4.2% 0.1% 3.2% -2.8% 2.2% 2.3% S&P 500 Small Cap Barclays Agg Macro Small Cap Market Neutral Barclays Agg Global Bond Global Bond Market Neutral 5.5% -33.8% 5.9% 3.2% -4.2% 3.1% -2.0% 2.6% -3.2% 2.1% 0.7% Small Cap S&P 500 Market Neutral Market Neutral Equity L/S Macro Global Bond Global Bond Small Cap Macro Macro -1.6% -37.0% -1.7% 2.5% -4.3% -1.3% -2.6% 0.6% -4.4% 1.0% 0.2% 2

By the numbers: what are other investors thinking? Source: Preqin Investor Outlook: Alternative Assets 1H 2017. How did we get here? 1990 $39M 1996 $257M 2003 $820M 2010 $1,917M 2017 $3,210M New to Institutional investors, lower risk vs. equities, toe hold allocations of 1-5%, max Hedge Funds viewed as an asset class ( marketable alternatives ) As comfort level increases, allocations move from 5% to up to 25% Large in flows, muted returns, some reducing exposure without thought to initial thesis Source: SEC.gov and Hedge Fund Research, Inc. *2017 through first quarter as of 3/31/2017. 3

Why do we invest? σ Equity-like returns, bondlike volatility σ Growth Engines σ Tail/Macroeconomic Risk Hedging σ Portfolio Diversification NOT an Asset Class asset class [as-et klahs] noun A group of securities that exhibits similar characteristics, behaves similarly in the market place, and is subject to the same laws/regulations Ask: How does this manager impact my portfolio? 4

Evaluating Managers Appraising Hedge Fund Managers goes beyond Return Volatility Evaluating Managers Appraising Hedge Fund Managers goes beyond Return Volatility But also considers other merits... Skew Kurtosis 5

That skew and Kurtosis Market Neutral L/S Equity Short-Biased Stocks Global Macro CTA Managed Futures Risk Arbitrage Credit Arbitrage Convertible Arbitrage Qualitative Evaluation People Process 4Ps + Philosophy Performance OPPORTUNITY SET EDGE ROLE IN PORTFOLIO 6

Quantitative Evaluation When measuring quantitatively consider how the manager changes your distribution. For example: Merger Arbitrage Negatively skewed σ Increased frequency of higher (i.e., above average) returns σ Higher mean return σ Tail risk increased Implementation Concerns 1 Fund Size: The Enemy of Returns 2 LP Allocation Constraints 7

#1: Fund size Historically, Fund size vs. returns trade off But there are notable exceptions Source: Economist, ETFGI, Hedge Fund Research. #2: LP constraints Limited Partners bound by IPS restrictions 20% Typical maximum % of a given fund stipulated in IPS $400 million bite size Smallest fund would be a $2bn fund Hedge Fund * Assuming 10-20 managers for diversification, 10% Hedge Fund allocation, questions should be ask for $40-$80bn Investor 8

Questions. 9