16 Apr 2018

$1 Billion Tax Bill

If you’re writing a check to the government tomorrow for tax day, you’re probably not too happy about it.  At least you’re not suffering like John Paulson, the hedge fund manager, who is writing checks to the Fed and state for over $1 billion – on top of the $500 million that he paid in estimates last year. I know, I know: it’s a high class problem that we would… Read More

2 Apr 2018

Big Data, Artificial Intelligence and Machine Learning

Like every industry, the investment community goes through ‘hot’ trends that grab everyone’s attention and a lot people’s dollars. One of the reason that I’ve attended Schwab’s annual conference for the past 16 years is that I like to see these trends in the form of sales pitches to advisors. I didn’t pick up on this in the very early days, but it became obvious after the 2008 financial crisis… Read More

11 Sep 2017

Cliff Asness Says, Fire Your Mechanic

This article was originally published on June 3, 2014.  In my humble opinion, it holds up well; although I am disappointed that value stocks still haven’t turned around more than three years later.  As much as I don’t like that fact, however, the central thesis of my article is that these strategies can underperform for long periods of time.  One of my favorite people in our industry is Cliff Asness,… Read More

24 Oct 2016

Prerequisites for Alternative Investments

One of the more popular categories of mutual funds over the past few years have been so-called ‘alternative’ funds.  Alternative investments, broadly defined, are strategies that seek returns that are uncorrelated from traditional investments like stocks and bonds. While alternative investments were once largely confined to private partnerships, they are now popular in mutual funds, or what the industry refers to as ’40 Act Funds.  Following the 2008 financial crisis, alternative… Read More

26 Sep 2016

Is the Grass Greener in Private Equity?

Private equity is in the news quite a bit, but finding the returns for this asset class is somewhat more challenging. There are a lot of stories about mega returns, but as they say at the University of Chicago, multiple anecdotes don’t make data. Until recently, I only had small windows into the world of private equity returns. First, when private equity management firms like Blackstone, KKR, and the Carlyle… Read More

29 Feb 2016

Applied Investment Rigor

Barron’s cover article this weekend featured AQR, one of the fund companies that we use.  You can find the article here, but a subscription is required. The article was great, really explaining the firm and many of their processes – so much so that one of the online commenters asked, ‘what is this, an ad?’ My only disappointment was that the article really highlighted their alternative mutual funds, strategies like managed futures… Read More

8 Dec 2015

When Trends Reverse

Last Thursday, Mario Draghi, the President of the European Central Bank (ECB) disappointed markets by not increasing their current bond buying program. It was a shock to markets, although you wouldn’t really know it from looking at the stock market.  The S&P 500 lost -1.44 percent, and while that’s a fair amount, it definitely falls in the normal category and not in the shocking category. The real action was in the… Read More

30 Nov 2015

Performance Fees Get Exposure

The California Public Employees’ Retirement System (Calpers) is back in the news again (I’ve written about them previously here and here). This time, they’ve decided to disclose how much they’ve paid in performance fees to private equity fund managers and the number is a whopper at $3.4 billion. Private equity, hedge funds and some other kinds of private funds are paid on what is known as a ‘2 and 20’ schedule which… Read More

8 Oct 2015

Who is to Blame for the August Market Selloff?

When markets fell sharply in late August, a number of traditional managers pointed their fingers at a relatively new breed of asset managers pursuing a relatively new strategy and blamed them for the spike in market volatility. There are a lot of articles covering the public blame game; here are a few from the Financial Times, the New York Times, the Wall Street Journal, and Barron’s. The new strategy in question… Read More

17 Sep 2015

Puzzling Hedge Fund Returns

We all know that stocks had a tough August with the S&P 500 down -6.03 percent.   Things weren’t better in other parts of the world either as the MSCI ACWI ex US index, which is basically the rest of the world outside of the US, fell by -7.59 percent. Even the bond market, as measured by the Barclays Agg lost money, fell -0.14 percent. If stocks and bonds lost money,… Read More