The casual analysis of market moves in Q1 2016 does not fully explain the performance of hedge funds over the period. In addition to changes in global macroeconomic conditions and market dynamics over the course of the quarter, hedge fund performance was driven by the impact of momentum and concentration across portfolios and the structure and behavior of multi-strategy funds.
Global Equity Separately Managed AccountSandyWarrick
This document discusses managing a global equity portfolio in a tax-efficient manner. It argues that global, multi-cap portfolios better approximate the market and provide more diversification and opportunities for tax harvesting. The key tradeoffs are between tracking error and taxes, and tracking error and alpha. The document outlines using factor alphas and optimization to balance these goals while minimizing trading costs and short-term capital gains over time. Backtesting different settings can help determine an approach likely to add value going forward.
Revolution Asset Management offers a hedged equity strategy that seeks to mirror benchmarks like the CBOE Put Index. The strategy maintains a long position in equities and carefully selected hedges, adjusting the hedge monthly. It aims to outperform the market with significantly less risk through consistent hedging. The portfolio managers have extensive experience in equities, derivatives, and risk management. They employ strategies like put writing, buy writes, and volatility spreads to generate premiums and lower portfolio risk.
Mutual fund performance and manager style by james l. davis(11)bfmresearch
This document provides a 3-sentence summary of the given document:
The document analyzes whether certain investment styles reliably produce abnormal returns for mutual funds and whether fund performance is persistent based on style. It finds that none of the styles studied generated positive abnormal returns compared to benchmarks, with value funds showing negative abnormal returns. There is some evidence that top performing growth managers and worst performing small-cap managers show persistence for a year, but abnormal performance tends to disappear quickly. The results cast doubt on the economic value of active fund management.
This document discusses the risks involved in trading futures and options contracts. It states that trading futures and options involves substantial risk of loss and is not suitable for all investors. There are no guarantees of profit, and past performance is not necessarily indicative of future results. It notes several specific risks, including the risk of losing the entire premium paid for an option, the risk of losing initial margin funds and any additional funds deposited to maintain a losing position, and the risk of positions being liquidated at a loss if requested funds are not provided in time. It also warns of difficulties in liquidating positions under certain market conditions and limitations of contingent orders.
Parametric provides strategies for exploiting increased market volatility, including rebalancing portfolios and using options strategies. Rebalancing reduces concentration risks and volatility over time by selling assets that have increased in value and buying those that have decreased, capturing returns from volatility. Options strategies can also provide downside protection for portfolios while retaining upside potential. Parametric implemented an options overlay for a client in 2008 that protected against a 5-20% market decline while retaining upside to 30%, balancing protection and participation in gains.
The casual analysis of market moves in Q1 2016 does not fully explain the performance of hedge funds over the period. In addition to changes in global macroeconomic conditions and market dynamics over the course of the quarter, hedge fund performance was driven by the impact of momentum and concentration across portfolios and the structure and behavior of multi-strategy funds.
Global Equity Separately Managed AccountSandyWarrick
This document discusses managing a global equity portfolio in a tax-efficient manner. It argues that global, multi-cap portfolios better approximate the market and provide more diversification and opportunities for tax harvesting. The key tradeoffs are between tracking error and taxes, and tracking error and alpha. The document outlines using factor alphas and optimization to balance these goals while minimizing trading costs and short-term capital gains over time. Backtesting different settings can help determine an approach likely to add value going forward.
Revolution Asset Management offers a hedged equity strategy that seeks to mirror benchmarks like the CBOE Put Index. The strategy maintains a long position in equities and carefully selected hedges, adjusting the hedge monthly. It aims to outperform the market with significantly less risk through consistent hedging. The portfolio managers have extensive experience in equities, derivatives, and risk management. They employ strategies like put writing, buy writes, and volatility spreads to generate premiums and lower portfolio risk.
Mutual fund performance and manager style by james l. davis(11)bfmresearch
This document provides a 3-sentence summary of the given document:
The document analyzes whether certain investment styles reliably produce abnormal returns for mutual funds and whether fund performance is persistent based on style. It finds that none of the styles studied generated positive abnormal returns compared to benchmarks, with value funds showing negative abnormal returns. There is some evidence that top performing growth managers and worst performing small-cap managers show persistence for a year, but abnormal performance tends to disappear quickly. The results cast doubt on the economic value of active fund management.
This document discusses the risks involved in trading futures and options contracts. It states that trading futures and options involves substantial risk of loss and is not suitable for all investors. There are no guarantees of profit, and past performance is not necessarily indicative of future results. It notes several specific risks, including the risk of losing the entire premium paid for an option, the risk of losing initial margin funds and any additional funds deposited to maintain a losing position, and the risk of positions being liquidated at a loss if requested funds are not provided in time. It also warns of difficulties in liquidating positions under certain market conditions and limitations of contingent orders.
Parametric provides strategies for exploiting increased market volatility, including rebalancing portfolios and using options strategies. Rebalancing reduces concentration risks and volatility over time by selling assets that have increased in value and buying those that have decreased, capturing returns from volatility. Options strategies can also provide downside protection for portfolios while retaining upside potential. Parametric implemented an options overlay for a client in 2008 that protected against a 5-20% market decline while retaining upside to 30%, balancing protection and participation in gains.
This document provides an overview of stocks and the stock market. It discusses common stock types like common and preferred shares. It also covers company development cycles from private to mature. The mechanics of investing like buying, selling, and margin trading are explained. Key terms like bids, asks, and quotes are defined. Different order types are also outlined.
Enhanced Call Overwriting - Groundbreaking Study Published in 2005Ryan Renicker CFA
- Lehman Brothers provides research on companies it also does business with, so its research may not be entirely objective. Investors should consider this and other factors when making investment decisions.
- The document discusses strategies for overwriting index call options, such as the S&P 500, to potentially enhance returns. It finds that enhanced strategies that adjust the level of overwriting based on implied volatility can further improve risk-adjusted returns compared to static overwriting strategies.
- Specifically, an enhanced strategy that overwrites with fewer calls when implied volatility is high, and more calls when implied volatility is low, performed best in backtests, outperforming simple overwriting strategies and the underlying indices on an absolute and risk-adjusted basis.
Dr. Drago Indjic considers the maturation of hedge funds and funds of hedge funds (FoHF). FoHF now represent over one-third of total hedge fund assets and are the preferred vehicle for most institutional and retail investors to gain hedge fund exposure due to perceived safety. However, FoHF often fail to be designed and managed as proper investment portfolios, exhibiting biases in portfolio construction and strategy selection. Determining the best FoHF involves addressing numerous questions around strategy diversification, leverage, liquidity, and fees.
Closed-End Funds: Opportunities and Challenges in a Unique Market - Dec. 2011RobertWBaird
This document provides an overview of closed-end funds, comparing them to mutual funds and ETFs. Some key opportunities of closed-end funds include the potential to buy funds trading at a discount to their net asset value, access to higher investment income, and exposure to illiquid markets through professional management. Potential challenges include funds trading at a premium, volatility from leverage, distributions including return-of-capital rather than income, and lower market liquidity compared to other investment vehicles. The document discusses these opportunities and challenges in more detail.
This document discusses analyzing investor behavior through analyzing their portfolio's performance and cost basis. It provides examples of calculating average cost basis using volume weighted average price. Analyzing cost basis at the individual security, fund, and portfolio level can provide insights into an investor's sentiment toward a stock and tendencies to take profits or losses. The document shows examples of different investors' portfolios concentrated in various profit/loss bands and how this relates to factors like portfolio turnover. Analyzing cost basis over time can help understand an investor's momentum and pressures.
This document provides an overview of active and passive investing styles. It explains that passive investing aims to track market indexes in order to reduce risk, while active investing attempts to outperform the market by selecting securities believed to be mispriced. Research shows that most active managers underperform the market average, but some argue active investing may exploit occasional market inefficiencies. The document concludes that both styles have merits, and investors should consider their personal objectives in choosing an approach.
This document provides a review of literature on risk management in the Indian capital markets. It summarizes various studies and analyses conducted on identifying types of risks when investing in corporate securities, guidelines for selecting companies to invest in based on risk-return analysis, and ways to measure and manage different market risks. The literature highlights the importance of fundamental analysis and equity research for individual investors to identify undervalued stocks with an adequate margin of safety.
WE BELIEVE that our Eighth Core Portfolio investment strategy provides the answers to the previously mentioned issues and offers a truly balanced approach to investing.
Equities, bonds, real estate and commodities are four asset classes that cover the core of any asset allocation process. The Eighth Core Portfolio is based on the idea that, during any given stage of a global investment cycle, money will flow across these assets, thereby affecting their performance. Rather than time the entry into the outperformer and the exit from the underperformer the Eighth Core Portfolio invests globally across all four in equal measure thereby ensuring that it participates in the best asset class in any environment. Over the investment period a constant exposure is maintained in order to avoid any outperforming asset class becoming a drag when the market turns.
This balanced approach is designed to produce medium to long term returns which exceed those of nominal cash returns. Historical evidence shows that this strategy has had proven outperformance in various timeframes and in all environments (see Tables 1 to 3) More importantly it minimizes volatility by taking advantage of the low correlations between the individual asset classes (see Table 4).
Join CMT program become a professional Technical Analyst, CMT USA Best COACHING CLASSES. CMT Institute Live Classes by Expert Faculty. Exams are available in India. Best Career in Financial Market.
www.ptajaipur.com/chartered-market-technician-cmt-course-india.html
This document provides information from Atlantic Sun Financial Group's August 2016 newsletter. It includes three articles:
1) "Investors Are Human, Too" which discusses behavioral biases that can influence investor decisions and recommends having a long-term perspective and sticking to an investing strategy.
2) "Be Prepared to Retire in a Volatile Market" which explains sequencing risk in retirement and recommends allocating assets into short, mid, and long-term buckets and strategies for determining annual withdrawals.
3) "Understanding the Net Investment Income Tax" which provides an overview of the 3.8% Medicare surtax on net investment income that applies to certain investment income if modified adjusted gross income exceeds thresholds.
CHW Vol 15 Isu 7 July Quarterly EHP Funds v1J Scott Miller
This document provides a summary of topics covered in the July 2015 issue of a quarterly review publication on hedge funds and alternative investing. It discusses an AIMA Canada seminar series to help new hedge fund managers, performance numbers for the recent quarter, and an article on using a trend-based approach to manage risk. The article describes how following a simple strategy of holding stocks only when they are above their 10-month moving average achieved equity-like returns with lower drawdowns and volatility than a buy-and-hold approach. It also introduces the author's own "EHP Fear Index" for determining their funds' risk levels.
This document summarizes a study examining 125 equity mutual funds that closed to new investment between 1993 and 2004. The study tests three hypotheses about why funds close: 1) The "good steward" hypothesis argues funds close to restrict inflows and maintain performance, and will perform well after reopening. 2) The "cheap talk" hypothesis posits closing has no real cost if fees increase and existing investors contribute, compensating managers. 3) The "family spillover" hypothesis claims closing diverts attention to other funds in the same family. The study finds little support for good steward performance, but evidence managers raise fees consistent with cheap talk, and little family benefit except briefly around closure.
Why Emerging Managers Now? - Infusion Global Partners WhitepaperAndrei Filippov
Traditional asset classes appear to offer uninspiring beta returns at present, and recent years’ hedge fund returns have disappointed both in magnitude and diversification benefits, likely reflecting capacity pressures associated with the concentration of AUM and inflows with larger funds. We argue that, by contrast, Emerging hedge funds offer a rich opportunity set with far fewer capacity issues where skilled managers with concrete competitive advantages in less efficient, smaller capitalization market segments can generate better, more sustainable and less correlated excess returns. Emerging managers do involve more investment and operational risk than larger peers; to that challenge we offer some suggestions on a thoughtful and rigorous approach to constructing an Emerging Managers allocation and balancing effective due diligence with scalability.
This document analyzes different categories of active mutual fund management based on measures of Active Share and tracking error. It finds that the most active stock pickers have outperformed their benchmarks after fees, while closet indexers and funds focusing on factor bets have underperformed after fees. Performance patterns were similar during the 2008-2009 financial crisis. Closet indexing has become more popular recently. Fund performance can be predicted by cross-sectional stock return dispersion, favoring active stock pickers when dispersion is higher.
Standard & poor's 16768282 fund-factors-2009 jan1bfmresearch
This document summarizes a study by Standard & Poor's on factors that predict investment fund performance. The study analyzed both qualitative factors like fund size, expenses, and age as well as quantitative metrics like Jensen's alpha and information ratio. The key findings were:
- For developed markets, larger funds with lower expenses tended to outperform. But for emerging markets, smaller funds did better due to differences in liquidity.
- Jensen's alpha and information ratio best predicted future performance of developed market equity funds over shorter time periods.
- Past performance was informative over 2 years but less so over 1 year due to noise. Fund selection should focus on factors predicting shorter term outperformance.
The document summarizes the mid-year 2011 Standard & Poor's Indices Versus Active Funds (SPIVA) Scorecard, which compares the performance of actively managed mutual funds to relevant benchmarks. Some key findings over the past 3 and 5 years include:
- Over 63% of large-cap, 75% of mid-cap, and 63% of small-cap US stock funds underperformed their benchmarks.
- Over 57% of global stock funds, 65% of international stock funds, and 81% of emerging markets stock funds underperformed.
- Over 50% of active bond funds failed to outperform benchmarks, except for emerging market debt funds.
- Asset-weighted returns also showed
Allied Motion Changing Mix And Refinancing Opportunity Set Up 60% Return Pote...Lester Goh
- The market is overly concerned about Allied Motion's exposure to commodity-sensitive markets, which accounts for a small portion of its business.
- Allied is shifting its product mix toward more solutions-oriented, higher-margin sales.
- Refinancing $30M in subordinated notes could add $1.6M to net income annually by lowering interest rates.
- With a changing mix and refinancing, the company could see 60% upside to a fair value of $36 per share.
This report analyzes liquid alternative investments (Liquid Alts) to see if they improve risk-adjusted returns when added to a portfolio. The author examines the 25 largest multi-alternative Liquid Alt funds. Adding most funds to a generic portfolio lowered its Sharpe and RoMAD ratios, indicating they did not provide the expected diversification benefits. Few funds limited maximum drawdowns during the 2008 crisis as expected. The author concludes Liquid Alts have so far failed to deliver on their promises and investors should be wary of allocating capital to them.
This document provides an analysis of Artisan Partners Asset Management (APAM). It discusses APAM's products, performance, ownership structure, and competitive positioning in the asset management industry. Some key points:
- APAM has approximately $97 billion in assets under management across 15 investment strategies. However, 75% of its AUM is in funds closed to new investors, limiting its growth potential.
- APAM's fund performance has been declining relative to peers, which could lead to lower inflows and pressure to reduce fees.
- The industry is seeing a shift toward lower-fee passive investments, which may compress fees for active managers like APAM.
- APAM derives most of its revenue from
This document analyzes the business portfolio of Airbus Group. It discusses how Airbus Group segments its business into three reportable segments: Airbus, Airbus Helicopters, and Airbus Defence and Space. However, the document argues that alternative segmentation methods may provide a more accurate picture by considering factors like product similarities, competition, and synergies across business units. The analysis explores using portfolio tools like the BCG matrix to evaluate Airbus Group's portfolio balance but notes these need to account for operational and financial synergies between business units. It also discusses how the unique characteristics of the aerospace industry, including heavy R&D costs and government involvement, impact business strategies.
Examination of hedged mutual funds agarwalbfmresearch
Hedge funds have traditionally only been available to accredited investors while providing lighter regulation and stronger performance incentives compared to mutual funds. Recently, some mutual funds have adopted hedge fund-like strategies but remain subject to tighter regulation. This study examines the performance of these "hedged mutual funds" relative to both hedge funds and traditional mutual funds. It finds that despite using similar strategies as hedge funds, hedged mutual funds underperform due to their tighter regulation and weaker incentives. However, hedged mutual funds outperform traditional mutual funds, with the superior performance driven by those with managers having hedge fund experience.
This document provides an overview of stocks and the stock market. It discusses common stock types like common and preferred shares. It also covers company development cycles from private to mature. The mechanics of investing like buying, selling, and margin trading are explained. Key terms like bids, asks, and quotes are defined. Different order types are also outlined.
Enhanced Call Overwriting - Groundbreaking Study Published in 2005Ryan Renicker CFA
- Lehman Brothers provides research on companies it also does business with, so its research may not be entirely objective. Investors should consider this and other factors when making investment decisions.
- The document discusses strategies for overwriting index call options, such as the S&P 500, to potentially enhance returns. It finds that enhanced strategies that adjust the level of overwriting based on implied volatility can further improve risk-adjusted returns compared to static overwriting strategies.
- Specifically, an enhanced strategy that overwrites with fewer calls when implied volatility is high, and more calls when implied volatility is low, performed best in backtests, outperforming simple overwriting strategies and the underlying indices on an absolute and risk-adjusted basis.
Dr. Drago Indjic considers the maturation of hedge funds and funds of hedge funds (FoHF). FoHF now represent over one-third of total hedge fund assets and are the preferred vehicle for most institutional and retail investors to gain hedge fund exposure due to perceived safety. However, FoHF often fail to be designed and managed as proper investment portfolios, exhibiting biases in portfolio construction and strategy selection. Determining the best FoHF involves addressing numerous questions around strategy diversification, leverage, liquidity, and fees.
Closed-End Funds: Opportunities and Challenges in a Unique Market - Dec. 2011RobertWBaird
This document provides an overview of closed-end funds, comparing them to mutual funds and ETFs. Some key opportunities of closed-end funds include the potential to buy funds trading at a discount to their net asset value, access to higher investment income, and exposure to illiquid markets through professional management. Potential challenges include funds trading at a premium, volatility from leverage, distributions including return-of-capital rather than income, and lower market liquidity compared to other investment vehicles. The document discusses these opportunities and challenges in more detail.
This document discusses analyzing investor behavior through analyzing their portfolio's performance and cost basis. It provides examples of calculating average cost basis using volume weighted average price. Analyzing cost basis at the individual security, fund, and portfolio level can provide insights into an investor's sentiment toward a stock and tendencies to take profits or losses. The document shows examples of different investors' portfolios concentrated in various profit/loss bands and how this relates to factors like portfolio turnover. Analyzing cost basis over time can help understand an investor's momentum and pressures.
This document provides an overview of active and passive investing styles. It explains that passive investing aims to track market indexes in order to reduce risk, while active investing attempts to outperform the market by selecting securities believed to be mispriced. Research shows that most active managers underperform the market average, but some argue active investing may exploit occasional market inefficiencies. The document concludes that both styles have merits, and investors should consider their personal objectives in choosing an approach.
This document provides a review of literature on risk management in the Indian capital markets. It summarizes various studies and analyses conducted on identifying types of risks when investing in corporate securities, guidelines for selecting companies to invest in based on risk-return analysis, and ways to measure and manage different market risks. The literature highlights the importance of fundamental analysis and equity research for individual investors to identify undervalued stocks with an adequate margin of safety.
WE BELIEVE that our Eighth Core Portfolio investment strategy provides the answers to the previously mentioned issues and offers a truly balanced approach to investing.
Equities, bonds, real estate and commodities are four asset classes that cover the core of any asset allocation process. The Eighth Core Portfolio is based on the idea that, during any given stage of a global investment cycle, money will flow across these assets, thereby affecting their performance. Rather than time the entry into the outperformer and the exit from the underperformer the Eighth Core Portfolio invests globally across all four in equal measure thereby ensuring that it participates in the best asset class in any environment. Over the investment period a constant exposure is maintained in order to avoid any outperforming asset class becoming a drag when the market turns.
This balanced approach is designed to produce medium to long term returns which exceed those of nominal cash returns. Historical evidence shows that this strategy has had proven outperformance in various timeframes and in all environments (see Tables 1 to 3) More importantly it minimizes volatility by taking advantage of the low correlations between the individual asset classes (see Table 4).
Join CMT program become a professional Technical Analyst, CMT USA Best COACHING CLASSES. CMT Institute Live Classes by Expert Faculty. Exams are available in India. Best Career in Financial Market.
www.ptajaipur.com/chartered-market-technician-cmt-course-india.html
This document provides information from Atlantic Sun Financial Group's August 2016 newsletter. It includes three articles:
1) "Investors Are Human, Too" which discusses behavioral biases that can influence investor decisions and recommends having a long-term perspective and sticking to an investing strategy.
2) "Be Prepared to Retire in a Volatile Market" which explains sequencing risk in retirement and recommends allocating assets into short, mid, and long-term buckets and strategies for determining annual withdrawals.
3) "Understanding the Net Investment Income Tax" which provides an overview of the 3.8% Medicare surtax on net investment income that applies to certain investment income if modified adjusted gross income exceeds thresholds.
CHW Vol 15 Isu 7 July Quarterly EHP Funds v1J Scott Miller
This document provides a summary of topics covered in the July 2015 issue of a quarterly review publication on hedge funds and alternative investing. It discusses an AIMA Canada seminar series to help new hedge fund managers, performance numbers for the recent quarter, and an article on using a trend-based approach to manage risk. The article describes how following a simple strategy of holding stocks only when they are above their 10-month moving average achieved equity-like returns with lower drawdowns and volatility than a buy-and-hold approach. It also introduces the author's own "EHP Fear Index" for determining their funds' risk levels.
This document summarizes a study examining 125 equity mutual funds that closed to new investment between 1993 and 2004. The study tests three hypotheses about why funds close: 1) The "good steward" hypothesis argues funds close to restrict inflows and maintain performance, and will perform well after reopening. 2) The "cheap talk" hypothesis posits closing has no real cost if fees increase and existing investors contribute, compensating managers. 3) The "family spillover" hypothesis claims closing diverts attention to other funds in the same family. The study finds little support for good steward performance, but evidence managers raise fees consistent with cheap talk, and little family benefit except briefly around closure.
Why Emerging Managers Now? - Infusion Global Partners WhitepaperAndrei Filippov
Traditional asset classes appear to offer uninspiring beta returns at present, and recent years’ hedge fund returns have disappointed both in magnitude and diversification benefits, likely reflecting capacity pressures associated with the concentration of AUM and inflows with larger funds. We argue that, by contrast, Emerging hedge funds offer a rich opportunity set with far fewer capacity issues where skilled managers with concrete competitive advantages in less efficient, smaller capitalization market segments can generate better, more sustainable and less correlated excess returns. Emerging managers do involve more investment and operational risk than larger peers; to that challenge we offer some suggestions on a thoughtful and rigorous approach to constructing an Emerging Managers allocation and balancing effective due diligence with scalability.
This document analyzes different categories of active mutual fund management based on measures of Active Share and tracking error. It finds that the most active stock pickers have outperformed their benchmarks after fees, while closet indexers and funds focusing on factor bets have underperformed after fees. Performance patterns were similar during the 2008-2009 financial crisis. Closet indexing has become more popular recently. Fund performance can be predicted by cross-sectional stock return dispersion, favoring active stock pickers when dispersion is higher.
Standard & poor's 16768282 fund-factors-2009 jan1bfmresearch
This document summarizes a study by Standard & Poor's on factors that predict investment fund performance. The study analyzed both qualitative factors like fund size, expenses, and age as well as quantitative metrics like Jensen's alpha and information ratio. The key findings were:
- For developed markets, larger funds with lower expenses tended to outperform. But for emerging markets, smaller funds did better due to differences in liquidity.
- Jensen's alpha and information ratio best predicted future performance of developed market equity funds over shorter time periods.
- Past performance was informative over 2 years but less so over 1 year due to noise. Fund selection should focus on factors predicting shorter term outperformance.
The document summarizes the mid-year 2011 Standard & Poor's Indices Versus Active Funds (SPIVA) Scorecard, which compares the performance of actively managed mutual funds to relevant benchmarks. Some key findings over the past 3 and 5 years include:
- Over 63% of large-cap, 75% of mid-cap, and 63% of small-cap US stock funds underperformed their benchmarks.
- Over 57% of global stock funds, 65% of international stock funds, and 81% of emerging markets stock funds underperformed.
- Over 50% of active bond funds failed to outperform benchmarks, except for emerging market debt funds.
- Asset-weighted returns also showed
Allied Motion Changing Mix And Refinancing Opportunity Set Up 60% Return Pote...Lester Goh
- The market is overly concerned about Allied Motion's exposure to commodity-sensitive markets, which accounts for a small portion of its business.
- Allied is shifting its product mix toward more solutions-oriented, higher-margin sales.
- Refinancing $30M in subordinated notes could add $1.6M to net income annually by lowering interest rates.
- With a changing mix and refinancing, the company could see 60% upside to a fair value of $36 per share.
This report analyzes liquid alternative investments (Liquid Alts) to see if they improve risk-adjusted returns when added to a portfolio. The author examines the 25 largest multi-alternative Liquid Alt funds. Adding most funds to a generic portfolio lowered its Sharpe and RoMAD ratios, indicating they did not provide the expected diversification benefits. Few funds limited maximum drawdowns during the 2008 crisis as expected. The author concludes Liquid Alts have so far failed to deliver on their promises and investors should be wary of allocating capital to them.
This document provides an analysis of Artisan Partners Asset Management (APAM). It discusses APAM's products, performance, ownership structure, and competitive positioning in the asset management industry. Some key points:
- APAM has approximately $97 billion in assets under management across 15 investment strategies. However, 75% of its AUM is in funds closed to new investors, limiting its growth potential.
- APAM's fund performance has been declining relative to peers, which could lead to lower inflows and pressure to reduce fees.
- The industry is seeing a shift toward lower-fee passive investments, which may compress fees for active managers like APAM.
- APAM derives most of its revenue from
This document analyzes the business portfolio of Airbus Group. It discusses how Airbus Group segments its business into three reportable segments: Airbus, Airbus Helicopters, and Airbus Defence and Space. However, the document argues that alternative segmentation methods may provide a more accurate picture by considering factors like product similarities, competition, and synergies across business units. The analysis explores using portfolio tools like the BCG matrix to evaluate Airbus Group's portfolio balance but notes these need to account for operational and financial synergies between business units. It also discusses how the unique characteristics of the aerospace industry, including heavy R&D costs and government involvement, impact business strategies.
Examination of hedged mutual funds agarwalbfmresearch
Hedge funds have traditionally only been available to accredited investors while providing lighter regulation and stronger performance incentives compared to mutual funds. Recently, some mutual funds have adopted hedge fund-like strategies but remain subject to tighter regulation. This study examines the performance of these "hedged mutual funds" relative to both hedge funds and traditional mutual funds. It finds that despite using similar strategies as hedge funds, hedged mutual funds underperform due to their tighter regulation and weaker incentives. However, hedged mutual funds outperform traditional mutual funds, with the superior performance driven by those with managers having hedge fund experience.
The document discusses the DSP Mid Cap Fund, a mid-cap equity fund that primarily invests 2/3 of its assets in mid-cap stocks and 1/3 in large and small-cap stocks. It outlines the fund's investment philosophy of identifying durable businesses with strong management teams trading at reasonable valuations. The document also summarizes the fund's three pillar investment framework and long-term buy and hold approach, as well as its historically strong risk-adjusted returns compared to its benchmark.
Marathon Oil Corporation (MRO) is an independent oil and gas exploration and production company headquartered in Houston, Texas. MRO operates internationally with activities in North America, Europe, Africa, and the Middle East. The company has three operating segments: North American E&P, International E&P, and Oil Sands Mining. Comparable firms to MRO were identified based on factors such as market capitalization, oil production mix, reserve life, percentage of reserves developed, and debt-to-equity ratio. Hess Corporation, Apache Corporation, Pioneer Natural Resources, and Continental Resources were selected as comparable firms to MRO.
1. The document provides an analysis of Enterprise Products Partners LP (EPD), a midstream energy services company. It examines EPD's financial profile, comparable companies, and performs valuation analyses including comparable company analysis, discounted cash flow analysis, and precedent transaction analysis.
2. A key finding is that while EPD's revenues dropped 40% due to oil market volatility, it was able to cut costs by 43% and maintain stable profitability ratios. The analysis identifies several comparable midstream MLP companies to EPD and derives an implied share price of $18.81 for EPD based on comparable company multiples.
3. Valuation methods applied include comparable company analysis using EV/EBITDA multiples, discounted cash flow
- The fund employs a contrarian investment strategy, focusing on out-of-favor industries and stocks that have fallen from investor support, with the view that they have potential to regain popularity within three years.
- Their "middle-down" research process identifies attractive industries first before performing bottom-up analysis on individual companies, focusing on those trading at discounts to tangible book value and cash flow.
- They construct a concentrated portfolio of less than 60 stocks across multiple sectors, with a maximum position of 5% and target market caps between $500 million to $1 billion.
OPXS is a monopoly provider of laser-protected periscopes to the US military. It has no competitors after acquiring its previous major rival. OPXS revenues and profits have steadily increased in recent years due to increased military spending on vehicles like tanks that use its products. The company trades on the OTC market, which may suppress its valuation. However, its current valuation of EV/revenue of 0.76x and EV/EBITDA of 8.8x presents an attractive risk/reward given its dominant market position and growth prospects from military spending increases and commercial expansion plans.
MintKit Growth Index: A Benchmark of the Stock Market for Sprightly Growth at...MintKit Institute
The document describes the MintKit Growth Index, which aims to provide ample growth at modest risk by selecting large-cap stocks in growing markets and sectors. It overviews the index's methodology, which involves equal weighting, fundamental and technical analysis, and both quantitative and qualitative screening. The final roster includes 10 stocks across various industries. The index is intended to outperform broad benchmarks like the S&P 500 by favoring undervalued, high-growth companies.
Two sets of contrasting investment styles are revisited here- value (contrarian) vs momentum and active vs passive to identify investment opportunity at minimum cost on The Nairobi Securities Exchange (NSE). The results are eye-popping.
The document discusses various methods for valuing firms during mergers and acquisitions. It defines different types of mergers and provides a brief history of mergers and acquisitions in the United States. Common valuation models include balance sheet approaches like book value and liquidation value, as well as dividend discount and cash flow models. The valuation process involves analyzing historical performance, forecasting financials, estimating the cost of capital, and calculating and interpreting the results. An example case of the HP-Compaq merger is also reviewed.
The three-factor model developed by Fama and French provides a framework for investment strategies that identifies sources of risk that compensate investors. It explains stock returns better than the single-factor CAPM model by including factors for firm size and book-to-market ratio in addition to market beta. While book-to-market ratio may not seem to directly describe risk, it serves as a proxy for a company's financial distress - high book-to-market stocks tend to be more risky with higher expected returns. The three-factor model allows advisors to construct portfolios targeting different risk exposures from size and value factors to outperform the market over the long run.
This document appears to be a project report on mutual fund investment submitted for an MBA program. It includes an acknowledgements section thanking various parties for their support and guidance. The executive summary provides an overview of mutual funds in India and how awareness and information is increasing investment. The report appears to analyze data on mutual fund investors in Ahmedabad through surveys to understand preferences and criteria for investment. It includes sections comparing performance of public and private mutual funds in oil and petroleum sectors between 2008-2009.
J. Alexander's Mispriced Spin-Off Exacerbated By Understated GuidanceLester Goh
- Shares of J. Alexander's restaurant company fell sharply after spinning off from its parent company Fidelity National, likely due to non-fundamental reasons rather than issues with the business itself. As a small part of Fidelity National, J. Alexander's was a stub position for many investors who sold it off after the spin-off. Additionally, the company has limited analyst coverage as a smaller entity. However, the document argues that J. Alexander's is well-positioned in the upscale dining industry, with strong sales momentum, prime locations comparable to industry leaders, and guidance that understates the business, suggesting its shares are undervalued.
The document is an equity research report on Tesla Motors Inc. for the fourth quarter of 2015 produced by Seven Star FX Ltd. It includes strategic highlights on Tesla's strengths and opportunities. The financial highlights section analyzes Tesla's financial performance through income statements, balance sheets, and cash flow statements compared to other automakers. The report also notes Tesla's increasing debt levels from the previous year and contingent liabilities.
Wayne lippman - investing in mutual fundsWayne Lippman
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5 Reasons To Consider Buying AMZA
1. 5 Reasons To Consider Buying AMZA
AMZA is the first actively-managed C-corporation MLP ETF and was issued in October 2014.
The fund made its first distribution in January 2015, and at $0.50 would project to amount to a
roughly 9% annual yield.
I provide five reasons to consider buying this fund, ultimately relying on the skill of the fund's
manager.
Last October, I wrote about C-corporation Master-Limited Partnership (MLP) ETFs, and
mentioned a couple of ETFs that, due to their recent inception, had insufficient background to
enable adequate discussion. I would like to backtrack a bit to discuss one of those "young" funds:
InfraCap MLP ETF (NYSEARCA:AMZA).
2. AMZA began trading on 2 October, 2014; its start could not have been less propitious. The
fund's holdings are all in the oil industry, and in October, the industry was in the midst of a major
decline in oil prices. The drop in oil prices has dampened investor expectations.
AMZA is a C-corporation ETF focusing on MLPs; it is also one of the approximately 125
actively-managed ETFs currently available. Both of these considerations mean that AMZA is
going to have a substantial expense burden: C-corporations must pay taxes on their income,2
and
actively-managed funds generally cost more to operate.3
The question that confronts the potential investor is whether an actively-managed fund - and a
tax-burdened one, at that - is worth the additional expenses. Given that the active ETF is going to
have to pay out more than the passive ETF, and given that those expenses are ultimately taken
out of the moneys that would normally go to shareholders in the form of distributions, is the
active fund going to pay out better than a passive fund?
While it is up to the individual investor to decide the issue of what counts as "better," and while
each active ETF is different, I have five considerations that apply to AMZA that may make it an
attractive holding. My research in, and understanding of, AMZA was aided (and abetted) by a
conversation with fund manager Jay D. Hatfield, president and co-founder of Infrastructure
Capital Advisors, LLC and co-founder and general partner of NGL Energy Partners LP
(NYSE:NGL).4
For purposes of exposition, I will be comparing AMZA to a passive C-corporation ETF: ALPS
Alerian MLP (NYSEARCA:AMLP).5
3. Responsibility for the Actively-Managed Portfolio
The fund manager is the primary focus for an actively-managed ETF. In passive ETFs, the
management team follows a "roadmap" laid out for it by the fund's index; it may have more or
less leeway in choosing how to follow that roadmap, but the basic contents of the portfolio are
set for it.
The active managers, on the other hand, have the freedom to structure their fund's portfolio
according to their best judgment - and this is perhaps the most crucial element for the fund. If the
manager is out of step with the target sector/market, or if their skills are not adequately
developed, the fund is likely to founder regardless of the manager's best intentions. Skilled
managers, on the other hand, are able to bring their knowledge experience to their fund; this
may not guarantee success, but it at least makes success more likely.
The first consideration, then, would reasonably be AMZA's manager: Jay D. Hatfield. A look
at Mr. Hatfield's experience should give us an indication of his abilities:6
4. As President of ICA, he manages four other funds besides AMZA: Infrastructure Macro Income
Fund, LP; Infrastructure MLP Income Fund, LP; Infrastructure Long/Short Opportunity Fund,
LP; and InfraCap Real Estate Income Fund, LP
Served as Portfolio Manager for S.A.C. Capital Advisors (now Point72 Asset Management)
Was Managing Director and Head of Fixed Income Research, Zimmer Lucas Partners
Headed Global Utility Investment Banking at CIBC/Oppenheimer
Was Principal in the Global Power & Utilities Investment Banking Unit at Morgan Stanley & Co.
Mr. Hatfield seems to have experience in portfolio management, the energy sector, alternative
investment instruments, hedge funds; his involvement with NGL (which is included in
AMZA's portfolio) also gives him direct experience in the MLP area. To my mind, this makes
him singularly qualified to manage the AMZA portfolio in a hands-on fashion.
Flexibility Inherent in Active Management
In principle, perhaps the major advantage AMZA (and any actively-managed ETF) has is
flexibility - the ability to be able to develop and modify the fund's portfolio according to the
manager's perception of economic conditions at the time, rather than in accordance with the
structural dictates of an index.
Any market - and particularly the oil/natural gas market, of late - is dynamic. The active fund
makes it possible for the manager to adjust the fund's portfolio on the fly to accommodate
changes in market conditions. In AMZA's case, Mr. Hatfield has done several things with the
aim of outperforming the "standard" MLP ETF, Alerian's AMLP.
A comparison of the funds' performances since AMZA's inception is presented in the following
chart:7
5. The chart as shown points out two important things:
Both funds have significantly outperformed The United States Oil Fund ETF, LP
(NYSEARCA:USO), which has a focus on upstream oil companies; and
AMZA underperforms AMLP by 142bps.
As for the first point, while USO focuses on upstream oil, AMLP's index (AMZI) focuses on
midstream companies which tend to be less susceptible to the volatility of upstream companies
and whose profits are not strictly tied to the price of oil.8
Upstream concerns have been hit
hardest by last year's drop in oil prices; midstream companies have been less affected.
For its part, AMZA also focuses its holdings in the midstream oil companies; in fact, 24 of its 36
holdings are identical to those in AMLP/AMZI. However, the similarity ends there. AMLP's
portfolio is dictated by AMZI, and AMZI weighs its holdings (which are chosen based on
distribution) according to market capitalization.
AMZA, on the other hand, is weighted according to Mr. Hatfield's perception of each holding's
value to the portfolio as a whole; this points to the second consideration: In the actively managed
portfolio, assets can be assigned to a holding according to the manager's conception of the
portfolio and the expectations for each particular holding in it. Specifically, in AMZA's case,
holdings are weighted according to their growth prospects.9
6. Beyond the MLPs
AMZI tracks the performance of MLPs only, and - being tied to its index - AMLP counts among
its holdings, 24 MLPs. These may be among the largest midstream MLPs, but AMLP holds only
these, and only in proportions consistent with its index.
In structuring AMZA's portfolio, Mr. Hatfield added depth to the 24 basic MLPs by investing in
companies that were general partners in some of those MLPs (and, in a few cases, putting more
weight on the general partner than on its MLP). In all, AMZA's portfolio has general-partner
holdings in nine of the 24 MLPs in its portfolio.
Has this strategy worked? As I prepared this article, I constructed an informal back-test of the
AMZA portfolio (as weighted) to get an idea of how the portfolio's holdings would have
performed over the past 5 years. This chart gives the results:
(click to enlarge)
The portfolio, as a whole, would seem to have done quite well although there is no escaping the
2014 downturn.
I then thought to examine AMZA's hypothetical performance in a different way: Compare the
portfolio as a whole to those holdings identical to AMLP (call this AMZI*), alongside the
"extension" of AMZA's extra 12 holdings (call this Non-AMZI*). To cap the comparison off, I
would add AMLP by way of comparing the five-year performance of AMZI to AMZI*.10
7. The results:
Perhaps most notable is the difference in performance between AMLP's use of AMZI and the
differently weighted performance of AMZA's AMZI*. This could be taken to indicate that - over
time - AMZA has a strong likelihood of outperforming AMLP even if both funds were limited to
the same 24 holdings, just by virtue of different weightings.11
Equally important, however, is the effect of the added holdings (Non-AMZI*). Over the past five
years, these 12 funds have shown marked value improvement, and that improvement has had the
effect of raising the performance of AMZA, as a whole, over the performance of its AMZI*
based holdings. The improvement that only seems moderate compared to the dramatic
improvement in Non-AMZI* can be attributed to the fact that AMZI* makes up nearly 82% of
assets compared to Non-AMZI*'s just-over 18%.
Our third consideration, then, is that the added depth to AMZA's portfolio - a product of
manager Jay Hatfield's approach to the fund - results in an improvement in fund performance
that complements the improvements he introduced with his different weighting scheme.
The Impact on Distributions
While the extended depth of AMZA's holdings seems to bode well for its future performance,
one can argue that it represents a setback to the fund's distributable income. The "basic" 24
holdings account for an annual income for the fund of $396,289.69 (ttm), for an effective yield
of 4.58%.12
8. With the 12 added holdings, the income increases to $457,133.01 for an effective yield of
4.32%.13
This means that, after projected expenses, AMZA would be offering its shareholders a
dividend yield of approximately $1.02 per year for a yield of about 4.58%.14
AMLP currently offers a yield of 6.71%. While AMZA's performance might look to be a good
bet, dropping 213bps in yield would seem to constitute a serious blow to the fund's active
management.
However, in January 2015, AMZA distributed $0.50 in dividends to shareholders (dividends are
to be paid quarterly). Such a distribution, if annualized, would amount to almost double what I
was able to identify from dividends paid by holdings and would constitute a yield of
approximately 9%.
When I asked if he thought that kind of dividend was sustainable, Mr. Hatfield answered in the
affirmative and was quick to bring up an important aspect of his management: He has instituted
the use of covered call options to boost fund income. Because of this tactic, AMZA was able to
increase dramatically the dividend it was able to offer. Mr. Hatfield expressed confidence that
the use of covered calls would enable the yield to remain in the vicinity of $2.00 per share per
year.15
Our fourth consideration, then, is the freedom the active manager has of using various
investment instruments to amplify the gains - and/or offset losses - the fund's basic holdings may
bring about. Even if it were ultimately able to generate half as much as it did for the first-quarter
dividends, AMZA would still offer a yield larger than that of AMLP.16
Constructive Use of Leverage
Debt is a double-edged sword, as I see it. It enables one to access resources one might not be
able to afford on one's own; it also becomes a burden, with interest payments and repayment of
principle diminishing one's ultimate return. Debt is one of the things that can cool my enthusiasm
for any investment.
That said, when used properly, it can help boost a company's (or a fund's) flexibility, enabling it
to make quick decisions and moves that can enhance operations. If used judiciously, leverage can
be deployed without engendering the fear of reduced future income.
ETFs are restricted in the amount of leverage they can employ; the Investment Company Act
of 1940 sets a limit of one-third of its asset value as the most a fund can borrow. AMZA
currently has borrowed 20%, the funds being used to implement the strategy and tactics Mr.
Hatfield deems necessary. This use of leverage, he contends, will enable AMZA to outperform
AMLP in the long run,17
and is the fifth, and final consideration we will look at.
Assessment
At the beginning of this discussion, I claimed that there were five reasons to give an actively-
managed fund such as AMZA serious consideration as a holding. Those considerations are:
9. 1. The experience and skill of the fund manager, Mr. Jay D. Hatfield, at making decisions about the
fund's portfolio and operations;
2. the freedom such a fund has in terms of varying the weightings of the holdings in its portfolio;
3. the ability to approach the portfolio's allocation strategy in ways not always accessible to a
passive fund;
4. the use of varied instrumentalities to enhance the performance of the fund beyond its holdings
and their performance; and
5. the flexibility to employ leverage as deemed necessary to optimize operations.
I came away from our conversation with the sense that Mr. Hatfield has a firm vision of the long-
term strategies that will bring about the growth in share value and the growth in distributable
income that could make AMZA a valuable part of any portfolio. Points 2-5 above constitute Mr.
Hatfield's three reasons why he believes AMZA will outperform AMLP by at least 300bps, and
as high as 500bps (he lumps 2 and 3 together while I see them as two different strategies).
In terms of the added costs, both active management and operation as a C-corporation entail, this
is a judgment each individual investor will have to answer for themselves. If the use of covered
calls is able to consistently boost distributable income, and if the oil market meets Mr. Hatfield's
belief that oil will be going for more than $60.00 per barrel in the next year,18
both yield and
performance should give a substantial total return for the investor.
I am not sure that the share value of AMZA will appreciate quickly, as the general oil situation is
still somewhat unstable, and instability in price and supplies of oil will keep upstream and
midstream stocks down. Further, with the Fed getting closer to committing to a rate hike, the
impact of such a hike on MLPs, their general partners, and AMZA itself, will be indeterminate.
I do see an upside to AMZA, and perhaps one in keeping with the roughly 20% increase Mr.
Hatfield sees in the price of crude. That AMZA is a young fund may mitigate its performance
somewhat, but a consistently high distribution would offset any downside. Long term, I think
this fund has excellent potential, that potential contingent on maintaining Mr. Hatfield (or a
comparably skilled replacement) as its manager.
Disclaimers
This article is for informational use only. It is not intended as a recommendation or inducement
to purchase or sell any financial instrument issued by or pertaining to any company or fund
mentioned or described herein.
All data contained herein is accurate to the best of my ability to ascertain, and is drawn from the
Company's published documents to the extent possible. All tables, charts and graphs are
produced by me using data acquired from pertinent fund information; historical price data from
Yahoo! Finance. Data from any other sources (if used) is cited as such.
All opinions contained herein are mine unless otherwise indicated. The opinions of others that
may be included are identified as such and do not necessarily reflect my own views.
10. Before investing, readers are reminded that they are responsible for performing their own due
diligence; they are also reminded that it is possible to lose part or all of their invested money.
Please invest carefully.
1
"C-Corporation MLP ETFs: Why Wait?"
2
For a discussion of the tax burden assumed by the C-corporation ETF refer to the early portion
of the article noted in #1, above.
3
Keep in mind that the passive fund is "managed" on a quarterly basis, usually; an active fund,
on the other hand, can engage its management team as often as deemed necessary. Further,
rather than following an index, the active fund management develops its own, proprietary,
method of portfolio management. This "extra" engagement of management comes at a price.
4
Jay D. Hatfield and I engaged in a phone interview on February 18, 2015. All references to Mr.
Hatfield refer to that interview. I thank Jay for taking the time to talk with me.
5
AMLP was considered the superior fund of those considered in the earlier article (#1, above).
The data in this table is updated from that in the earlier article, using data from the Annual
Report of November 2014. In particular, AMLP's E.R. is cited as being 8.56% while I was able
to calculate an E.R. of 5.09% based on the data provided in the recent AR. Any error in
calculation is mine, and is regretted. For reasons that will be clear as the discussion progresses,
Mr. Hatfield encouraged the comparison of AMZA to AMLP's index, AMZI.
6
Information culled from Infrastructure Capital Advisors' biography, viewable here.
7
United States Oil Fund LP is included to provide comparison to near-month crude oil futures.
8
Upstream companies are involved in exploration, drilling and extraction. Midstream
companies are focused on the transportation, processing and storage of oil.
9
Per phone conversation, #4 above.
10
In principle, this pits two versions of AMZI against each other. The difference between the two
would (again, in principle) be the different weighting systems used: AMZI's cap-weighted
scheme to AMZI*'s "prospect-weighted" scheme.
11
Of course, the standard disclaimer applies: past performance does not imply future
performance.
12
That is, the yield it realizes from its holdings.
13
Again, the yield AMZA realizes from its holdings. By themselves, the 12 additional holdings
realize an income of $60,843.33, amounting to a yield of 3.16%
11. 14
These figures are based on the stated E.R. of 1.05% subtracted from projected income, then
divided among shares outstanding. AMZA currently has 350,000 shares outstanding.
The reader should realize that these figures represent estimates on my part based on available
data, and do not claim to be representative of the fund's actual income.
15
Per phone conversation, #4 above. It is worth noting that covered calls have the potential to
bring about costly losses, as well as substantial gains.
16
It should be pointed out that, as I researched dividend payouts for the MLPs held by AMZA,
nearly all of them showed gradual, consistent, increases in distributions as the past 12 months
played out.
17
Per phone conversation, #4 above. According to Mr. Hatfield, AMLP is leveraged to only
10%.
18
Per phone conversation, #4 above.