October 2013

October 22, 2013

Fund of Hedge Funds, Manager Selection, and Due Diligence

One of the main reasons that more and more institutional investors, particularly endowments and foundations, include hedge funds in their portfolios is the expected diversification benefit, given the existing array of investment opportunities. In the U.S., these institutions are still increasing their strategic allocation to hedge funds, despite the fact that hedge funds as a… Continue reading

Alternative Investments, Asset Allocation, Due Diligence, Hedge Funds, Portfolio Management, Risk Management

October 22, 2013

An Event-Driven Strategy: Merger Arbitrage

Event-driven strategy seeks to invest in opportunities associated with corporate transactions such as consolidations, acquisitions, recapitalizations, bankruptcies, and liquidations. Merger arbitrage event-driven managers employ strategies that can capitalize on valuation inconsistencies in the market before or after mergers and acquisitions deals, and take positions based on the predicted movement of the underlying securities. Mergers can… Continue reading

Alternative Investments, Due Diligence, Hedge Funds, Risk Management

October 22, 2013

A Relative Value Strategy: Convertible Arbitrage

Hedge funds deploying relative value strategies seek to take advantage of “discrepancies” in price between securities or the overall market. Within the relative value category, there are sub-strategies, and convertible arbitrage is an important form of relative value strategy where hedge fund managers exploit pricing inefficiencies between convertible securities and the underlying stocks. Under normal… Continue reading

Alternative Investments, Due Diligence, Hedge Funds, Risk Management

October 22, 2013

A Global Macro Strategy: Managed Futures

Hedge funds utilizing a global macro strategy take positions in equity, fixed income, or currency markets in anticipation of global macroeconomic events to generate risk-adjusted returns. Global macro fund managers rely on the “big picture” or trends to identify investment opportunities and profit from anticipated price movements. There are sub-strategies within global macro strategies,… Continue reading

Alternative Investments, Commodities, Due Diligence, Hedge Funds, Risk Management

October 22, 2013

Hedge Fund Landscape

The first hedge fund emerged in 1949 when sociologist Alfred Winslow Jones and his four friends formed an investment partnership. The first reference to a hedge fund appeared in a 1966 Fortune article by Carol Loomis. Ms. Loomis wrote the story of Alfred Jones in The Jones Nobody Keeps Up With, little did she know… Continue reading

Alternative Investments, Asset Allocation, Hedge Funds, Portfolio Management, Risk Management, The Endowment Model

October 20, 2013

Impact Investing – The Next Generation of Venture Capital

In the 1990s, Jed Emerson advocated the concept of Blended Value for funds, firms, social ventures, and foundations to invest with social and environmental impact, rather than to maximize financial performance. Simultaneously, approaches such as pollution prevention, corporate social responsibility (CSR), and triple bottom line or the “three pillars” (people, planet, and profit) began to… Continue reading

Alternative Investments, Private Equity, Socially Impact Investing, Venture Capital

October 20, 2013

Private Equity Portfolio Management

Portfolio Management is a process of making investment decisions about asset mix, policy, and buy/sell disciplines in order to meet individual and institutional investors’ specified financial objectives, risk tolerance, investment horizon, and the optimize the risk-return relationships. Since 1952, Markowitz’s basic principles of portfolio construction, which were published in the Journal of Finance, have been… Continue reading

Alternative Investments, Due Diligence, Portfolio Management, Private Equity, Risk Management

October 19, 2013

Private Equity Fund of Funds

PE fund of funds have been around for nearly as long as the buyout industry. This type of investing became mainstream during the mid to late 1990s, as institutional investors sought additional ways to achieve diversification and deploy capital. PE fund of funds are often referred as PE multi-manager investments. Ten years ending the calendar… Continue reading

Alternative Investments, Portfolio Management, Private Equity

Private Equity Fund of Funds

October 18, 2013

Venture Capital and Buyout

The Yale Endowment’s investment success has been largely driven by the categories that are designed for sophisticated investors, such as PE. Ten years ending June 30, 2013, the endowment fund’s U.S. equities returned 10.8%, while PE portfolio returned 14.4% per annum. Yale’s PE investments include venture capital (VC) and leveraged buyouts (LBOs) Venture Capital After… Continue reading

Alternative Investments, Buyout, Private Equity, Venture Capital

October 17, 2013

Private Equity Landscape – Updated through October 2013

The growing interest in private equity investments has arisen among the institutional investors in the U.S., particularly endowments and foundations. The most significant reason of which include: compared to public equities, private equity has the potential to earn superior long-term returns, partly because private equity investors can accept an additional element of risk due to… Continue reading

Alternative Investments, Private Equity

Private Equity

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