Posts filed under “Hedge Funds”

Underinvested in US Equities, Overinvested in Hedge Funds

Last summer in Boston, the Trustee Leadership Forum for Retirement Security held its annual meeting at Harvard’s Kennedy School. Trustees and representatives of various state pension funds listened to explanations about the challenges facing endowments and pension funds.

The conference is an attempt to explain why so many state pensions are underfunded and underperforming. The event was run by Jay Youngdahl, a senior fellow at the Hauser Center for Nonprofit Organizations at Harvard University. Youngdahl is the author of “Investment Consultants and Institutional Corruption,” and as you might imagine, there was very little in the way of minced words at this event. I was invited to give a presentation to this group on how cognitive bias and performance-chasing leads to investing failures (you can see “The High Cost of Neuro-Financial Errors” here).

A large part of the impetus for this sort of conference is the solidifying consensus that what has become known as the Yale model — outsized investments in hedge funds, venture capital and private equity — no longer works. Indeed, the performance numbers for the past 10 years make it clear that this model has failed to live up to its promise for a while, perhaps because there just aren’t enough good alternative investments to go around. Note that none of this is cutting-edge theory or newly discovered knowledge. Rather, it is a result of institutional inertia, where even a failing approach to investing holds on to its adherents long past its sell-by date.

Continues here

Category: Hedge Funds, Investing, Venture Capital

How to Lose a Billion Dollars in Hedge Funds

Take Apart: Overall, it’s a swing in the financial fortune of one of the country’s top private universities and one of the world’s most esteemed Jewish institutions of more than $1.3 billion, well more than 10 times the losses from the portion of Yeshiva’s portfolio invested with Madoff. Students who applied to and enrolled at…Read More

Category: Corporate Management, Hedge Funds, Investing, Really, really bad calls

Be Wrong Like Ray Dalio

In yesterday’s column, I wrote: If you have an issue with Social Security, then fix it. The regressive taxes to fund retirement benefits top out at about $117,000 in 2014. Why not simply raise that to $250,000 next year and $500,000 during the next 20 years. Congratulations, you just made Social Security solvent for the…Read More

Category: Cognitive Foibles, Corporate Management, Hedge Funds, Psychology

Hedge Fund vs S&P500 Performance

click for larger graphic Source: Bianco Research   Yesterday’s discussion about the Sohn Conference led to a few interesting e-mails discussing fees and performance (this is a favorite subject of ours: see this and this) and several readers asked to see a chart of specific measures of performance. Continues here

Category: Hedge Funds

Beware of Hedge Fund Managers Bearing Stock Tips

This week was the 19th annual Ira Sohn conference. It is an opportunity to raise money for a good cause (pediatric cancer research and treatment), and hobnob with rock star hedge-fund managers. It has become a must-attend event. Just remember one important thing: Ignore the stock tips. It is true that the picks and pans…Read More

Category: Hedge Funds, Trading, UnGuru

The Biases of Your Favorite Market Pundits . . .

Ever wonder what motivates various pundits, strategists and fund managers to spout off about whatever it is they are yammering on about? Step back and examine all of the various words spilled on markets. Scratch a little beneath the surface, and you quickly realize that not all participants are in a relentless search for the…Read More

Category: Financial Press, Hedge Funds, Investing, UnGuru

It’s a Tech Bubble! Unless You Care About Earnings and Valuations

Earlier this week, Greenlight Capital hedge fund manager David Einhorn reignited the bubble debate that we have spilled so many pixels dissecting. The shorter of Lehman Brothers and the New York Mets fan said in a quarterly letter to clients “we are witnessing our second tech bubble in 15 years.” The Bubble Chatter is nothing…Read More

Category: Hedge Funds, Psychology, Short Selling, Valuation

The Cognitive Side of Hedge Fund Investing

Larry Swedroe, research director for BAM Advisor Services LLC, noted earlier this month that total hedge fund assets under management, or AUM, reached $2.63 trillion. This represents a sizable increase, despite fund performance generously described as lackluster. The increase in assets under management led to some interesting discussions. Lots of readers had e-mailed me with…Read More

Category: Hedge Funds, Investing, Psychology

How Important Are Hedge Funds in a Crisis?

How Important Are Hedge Funds in a Crisis? Reint Gropp Federal Reserve Bank of San Francisco April 14, 2014       Before the 2007–09 crisis, standard risk measurement methods substantially underestimated the threat to the financial system. One reason was that these methods didn’t account for how closely commercial banks, investment banks, hedge funds,…Read More

Category: Bailouts, Hedge Funds, Think Tank

Why Has Hedge Fund AUM Hit New Record Highs?

I have been fairly fascinated by hedge funds for quite some time. I began studying them earlier last decade. It has been an intriguing field for investigation for a number of reasons: 1) Alpha Generators: In the early days of hedge funds, they created a ton of Alpha. Like pre-expansion sports leagues, there was a…Read More

Category: Hedge Funds, Investing