Alpha Mail - A monthly email update from AllAboutAlpha.com
Dear Alpha Mail Subscriber:
 
As one hedge fund industry watcher wrote this week on AllAboutAlpha.com, the beaten-down hedge fund sector may be about to experience a resurgence.  But he wasn't the only one suggesting that hedge funds' flexibility may be a great advantage in the future.  Barron's reported this week in a piece titled "Are things so bad, they're good?" that:  
"It's now a commonplace point, fast approaching cliché status, to say that this market has been hell on hedge funds... Identifying overvalued and underappreciated pockets of the capital markets again seems a fruitful pursuit... Don't be surprised, then, if some sharp, opportunistic investors come calling to raise capital for hedge funds with a stated mandate to go long babies and short bathwater." 
And the head of alternative investments at UBP told Reuters last week that:
"Only the best will survive and will be able to seize the space left vacant by others. There will be some unique opportunities."
Cynics might call these views naive.  But if hedge funds' mandate is to act as the street cleaner, clearing up the refuse of market mispricings left behind by the credit crunch, then they may be well positioned.  After all, the streets are a mess and need some serious cleaning. 
Last month's ten most popular posts at AllAboutAlpha.com reflect dichotomy between the industry's recent hardships and its expectations for the future. 
May December be a much less "interesting" month...
Last Month's Most Popular Posts 
 

Here are the most-read posts at AllAboutAlpha.com in November: 

  1. Stigma of redemption gates fading fast:  Remember when gates were for losers?  Well, now all the cool kids are doing it.
  2. Asness: Quant funds not actually HAL 9000 black boxes: AQR's Cliff Asness argues in Alpha magazine that quant funds are going to work as programmed, even if they refuse to open the pod-bay doors every once in a while.
  3. Hedge funds discovered not to be an asset class after all: Using author Alan Dorsey's definition of asset class, it would appear the hedge funds never deserved the moniker in the first place.
  4. Overlay hedging in funds of funds improves alpha: Edhec: A new report by French research centre Edhec suggests that replicating, then shorting, hedge fund betas can mitigate the volatility of a fund of funds.
  5. Catastrophe Bonds: When the "100 year flood" really is a 100 year flood:  As the saying goes... "Red sky at night - sailors' delight...Red sky in the morning - sailors go long 'Parametrically-Triggered North Atlantic Wind' exposure."
  6. Exactly how bad was September for hedge funds?: Okay, so this piece has lost of its relevance by now.  But it was huge back in the day.
  7. Life after death for hedge funds?:  When hedge funds stop reporting to industry databases, they are thought to be dead.  But a new study finds the rumours of their death have been greatly exaggerated.
  8. Best way to regulate hedge funds is to regulate prime brokers better, says new paper: What to do if the SEC doesn't have the fire power to regulate hedge funds?  Deputize prime brokers.
  9. An exclusive interview with one of the witnesses called to testify at the Congressional hedge fund hearings:  We were the first media outlet to be granted an interview with Houman Shadab, one of the academics who testified in the US Congress about the role of hedge funds in the credit crisis last month.  And what he had to say may surprise you.
  10. Signs of Hope:  As a (much needed) public service, we assembled feel-good hedge fund stories that may just stop one or two managers from jumping out their office windows.
 
If you are based in London, you may want to check out an interesting event scheduled for next week.  French alternative investment research centre, Edhec, is hosting its annual "Alternative Investment Days" on December 9th and 10th.  It promises to be a good mix of practice and theory that features some of the names appearing on these pages (Edhec's Lionel Martellini & Noel Amenc, Premia Capital's Hilary Till, AP3's Erik Valtonen, Riskdata's Olivier Le Marois, and Innocap's Pierre Laroche and Martin Gagnon).  We look forward to seeing you there.
 
Finally, a plug for two recent posts that we highly recommend.  The first, listed above, is our interview with Houman Shadab, an academic who testified at the US Congress hedge fund hearings.  Shadab's testimony is an easy-to-read, yet information-rich account that suggests hedge funds may have actually been relatively small players in the credit crunch.
 
The other is a post on a fascinating account of the hedge fund industry written in 1970 by Fortune magazine's Carol Loomis (whom some may also recognize as the editor of Warren Buffett's famous annual investor letters).  It truly amazed us to see the uncanny similarities between what the nascent hedge fund industry faced back then and what it faces today.  As her comment at the end of this post suggests, Loomis seems to agree.
   
Have a joyous Holiday season and here's to a less "interesting" 2009...
  
Happy Alpha Hunting,
 
Christopher Holt, Editor
AllAboutAlpha.com
editor@allaboutalpha.com
 
Thursday, December 4, 2008
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