Discussion of hedge fund research at the 2007 ECB Conference, Dublin
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My brief discussion of two academic research presentation https://www.ecb.europa.eu/events/pdf/conferences/ecbcfs_conf9/Indjic_presentation.pdf
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Discussion of hedge fund research at the 2007 ECB Conference, Dublin
- 1. Comments on Brown et al (2007) Ding et al (2007) Drago Indjic Dublin, 9 October 2007
- 2. Page 2Indjic (2007) Dublin Overview Hedge Fund Data – Databases – Regulatory fillings (ADV, FSA Part IV) – “Due dilligence” (AIMA DDQ) – Counterparties – structuring desks, platforms “Fund”? – Share classes + Series – Only USD? (50% TASS with ADV!)
- 3. Page 3Indjic (2007) Dublin Databases Multi-source: multi-valued field values Algorithmic data “matching” and cleaning technology – Management company and fund names – “Updating” and using research Asset weighted subsamples – AUM of fund management company Different “laboratories”
- 4. Page 4Indjic (2007) Dublin Anatomy of HF Failure ($1,000) $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0
- 5. Page 5Indjic (2007) Dublin HF Operational risk Operational risk >> Market Risk – Is ADV a single tick in DDQ? Who reads and verifies ADV? Holy grail: quantifying operational risk HF selection: VC or SME lending business: – Staff <10; AUM $30m; liquidated in 7 years
- 6. Page 6Indjic (2007) Dublin “On-Going” Due Dilligence 0 10 20 30 40 50 60 70 80 90 100 Jan-01 A pr-01 Jul-01 O ct-01 Jan-02 A pr-02 Jul-02 O ct-02 PerMonth 0 200 400 600 800 1000 1200 Cumulative Are on-site hedge fund manager interviews worth everyone’s time? (Discuss)
- 7. Page 7Indjic (2007) Dublin Brown et al (2007) ADV vs “on going due dilligence” – Are “problem” funds constant? (re-offenders?) – Problematic: less leverage, concentrated ownership Table A-C – OpRisk, Conflicts, Ownership/Governance – ω - score OpRisk has no influence to investor flows (!)
- 8. Page 8Indjic (2007) Dublin Ding et al (2007) Flows/Restrictions – Convex, linear or concave? – Live vs dead funds – “shorting” funds – θ illiquidity proxy Are FoHF “smart” money - how are FoHF rebalancing!?
- 9. Page 9Indjic (2007) Dublin Precision of restrictions M/M+30/15/ 90%ME+10%YE Jan 03 March 03 May 03 Sept 03 Nov 03July 03 Jan 04 Jan 03 March 03 May 03 Sept 03 Nov 03July 03 Jan 04 Jan 03 March 03 May 03 Sept 03 Nov 03July 03 Jan 04 M/M+60/20 2/Q+60/ M@5% fee Subscription & Redemption Notices, Gates, Penalties, Lock-ups ... suspended and forced redemption rights ... but everything is negotiable!
- 10. Page 10Indjic (2007) Dublin Future research Funds of hedge funds – Multi-strategy funds – Synthetic funds Mutual hedge funds (“130/30”) Incentives and contracting (early investments)
- 11. Page 11Indjic (2007) Dublin Conclusion Best due dilligence question competition 1.7% 0.9% 5.3% 1.5% 3.3% 1.7% 0.2% 1.2% 2.5% 0.7% 1.2% 3.2% 1.7% 0.6% 0.2% 1.5% 2.6% 1% 1.0%0.1% 0.4% 0.5% 2.91% 5% 18% 19% 9% 8% CISDM EUR HFR MSCI TASS 3.5% 0.4% 1%