| April 28, 2016
There are a lot of things to look out for when doing manager check-ins, but here are the 15 most critical points to keep track of.
| December 28, 2015
Lets start with the basics then we’ll get into the specific strategies:
Quantitative investing is an approach for implementing investment strategies in an automated (or semi-automated) way. This approach lends itself well to (1) using large or unique data sets, (2) refining them into explanatory information, and (3) deploying that information via as trades using technology. Every quant investor is looking for an edge, so we’ll explain how these elements are used to capture edge.
| September 4, 2015
Shkreli trying on his new matching Tiffany’s bracelets
If infamous ‘pharma bro’ Martin Shkreli’s public statements since his arrest are any indication, he is likely to wage a trial by public opinion over the next several months.
Shkreli has already called his indictment a witch-hunt based on his much-hated move of jacking up drug prices rather than based on any legal wrongdoing. There seems to be some sympathy for this angle, and I wouldn’t be surprised to see upcoming pieces profiling his ‘introverted and misunderstood’ personality over the coming weeks. The talking heads have already begun to debate whether his unethical behavior with regarding to drug pricing merits the “response” by authorities.
| September 3, 2015
Hedge fund marketing is a tricky sport, and there are some pitfalls to be aware of when meeting with investors. Here are 5 of the worst types of meetings that hedge fund managers experience and how to interpret or avoid them.
| September 3, 2015
How often do you encounter a perfectly good product that is advertised as something it’s not? RedBull doesn’t actually give you wings and Axe Body Spray doesn’t make women break into your house. What these advertisement methods share is appeal to their target audience.
The academic definition of ‘arbitrage’ is a method of making money on price differentials where a risk-free profit can be earned.
| September 3, 2015
Everyone knows that a “fund of fees” has to overcome a high bar to justify it’s expenses (typically a 1% management & 10% incentive fee) but here are several other key problems that affect most fund of funds (FoF) investors and every individual investor in hedge funds alike:
| September 1, 2015
A key question that comes up in most due-diligence meetings is the oft dreaded “what is your edge?” The answer is often the difference between an allocation and going home with nothing. From my meetings with many managers I’ve found that most answers boil down to several cliches. Be sure to avoid these common answers that will turn off an experienced hedge fund investor:
| August 24, 2015
From an investor’s perspective some of the best responses we’ve heard include:
“We’re the largest private recipient of IPO syndicate in our region.” This was from a manager who has great relationships with major banks in his region and pretty much just flips IPOs for fairly absurd returns. This is entirely a relationship edge.
| August 23, 2015
There’s a big world outside of long/short equity and plain vanilla strategies.Here are some examples:
15. Life Settlements — Several hedge funds literally invest in the life insurance claims of others, hoping they’ll die early so they can collect. The Private Placement Memorandum’s for these funds often cite ‘risks’ such as cures for cancer or heart disease, and other medical breakthroughs that could unexpectedly prolong life.
| August 17, 2015
There are several objectives to hedge fund DD (and it’s not all about making sure the manager isn’t a Madoff.) It helps to recognize from the outset that each hedge fund is first and foremost a business, and for businesses to be successful, they need to have a differentiated product, and a repeatable process for creating that product. In other words, what is the manager’s differentiating ‘edge’, what is their process for exploiting that edge, (and how does it fit into your portfolio)?
| June 24, 2015
A rogue trader is a trader who risks extreme amounts of firm capital without authorization and then loses it. (Conversely, a rogue trader who MAKES billions is called a “managing director.”) Rogue trading happens when poorly designed incentives are coupled with weak operational controls. Before getting into the risk this presents to your hedge fund investments, let’s review history.
| June 22, 2015
The cornerstone of hedge fund investing is due-diligence. Over the years investors have missed blatant red flags that are obvious to experienced hedge fund investors. Apply these 8 tips to your due-diligence process to help sort through the weeds and avoid potentially fatal losses:
| May 19, 2015
#9. Neglecting PR Opportunities — Despite the JOBs Act and the loosening of ‘mass solicitation’ rules, most hedge funds are still so terrified of the SEC that they will do anything in their power to ignore perfectly legal PR opps. Ray Dalio, founder of Bridgewater Associates, was recently featured on the cover of Absolute-Return Magazine, giving an exclusive interview. If done correctly (ie: legally), TV appearances, magazine articles, and speeches can be a great boost to credibility.
| July 15, 2014
Investors likely get 75+ hedge fund investor letters per month. How do you get your letter to the top of the stack?
Fortunately, it’s not as hard as you might think. Your competition is severely deficient in 2 key areas:
Years ago I had the pleasure of sitting in the shortest meeting of my life between a hedge fund manager and an investor. The manager represented a well-known algorithmic trading firm. After the standard awkward quant-manager introduction and shmoozing effort, the investor began asking questions about the investment process. The manager gave several vague answers, much to the frustration of the investor.