This week’s collection of articles for weekend reading gets started with Brad Balter making the case for liquid alternatives, and providing some specifics on why the establishment is wrong when they say hedge fund strategies don’t belong in mutual funds. Brad is right on this one, as are the many hedge fund managers who have thoughtfully entered the liquid alts market products that are just as robust as those they manage in private funds. Everyone deserves the opportunity to have sophisticated, diversifying investment strategies in their portfolio.
Other articles this week discuss the liquid alts trend in Europe, risk parity, smart beta, active share and other important topics. In addition, I would encourage you to read the last article on the list and to check out Meredith A. Jones’ new book, Women of the Street: Why Female Money Managers Generate Higher Returns (And How You Can Too). She presents an interesting angle on how you can diversify your portfolio – not just by investing in different asset classes or investment strategies, but also by choosing a combination of both male and female portfolio managers.
Enjoy the weekend.
- Setting the Record Straight on Liquid Alternatives (LinkedIn)
Brad Balter of Balter Liquid Alternatives shares his opinion on some common complaints and misconceptions that the establishment has about the liquid alternatives industry. Mr. Balter specifically rebuts an article from Skybridge Capital entitled, “Why Alternative Investments and Daily Liquidity Shouldn’t Mix.”
- Investors Develop a Taste for Liquid Alternatives (Financial News)
European investors have been clamoring for the Continent to catch up with the liquid alts trend, and hedge funds are finally listening. Winton Capital Management, Odey Asset Management, Man Group, Systematica Investments, and Marshall Wace, some of the biggest funds in Europe, have all either recently launched liquid alts or have announced plans to do so.
- Why the Richest Schools Invest More in Alts (Chief Investment Officer)
Not surprisingly, a Princeton University study found that Universities with steady and consistent income streams were more likely to pursue “riskier” investment avenues, such as private equity, hedge funds and venture capital. Universities are still extremely risk-averse overall, though, due to regulations placed on institutions that receive public funding, and scrutiny from the public.
- The New Smart Beta Factor Exposure (WisdomTree)
Smart beta and currency hedging are two widely discussed topics in investing right now, and WisdomTree believes that they both contribute to a new factor, “currency sensitivity.” This factor is important for explaining portfolio returns, and the company has incorporated it into a new indexing approach.
- Interpreting Active Share (Advisor Perspectives)
Jon Eggins of Russell Investments examines the “fad” of active share, and debunks some of the most common myths. After the air has been cleared, Mr. Eggins explains the ways active share can be used as a valuable tool for analysis.
- Are We Nearing Peak Commodity Hatred? (Pragmatic Capitalism)
Commodities have taken a real beating in the last few years – The Bloomberg Commodity Index is down 60% since 2008 – but is there a light at the end of the tunnel? Vanguard has noted that commodities are usually late-cycle assets, and many experts believe we are entering that period now, meaning we could see some positive movement at last.
- Searching for Natural Hedges Against Interest-Rate Risk (Advisor Perspectives)
Franklin Templeton’s Eric Takaha discusses the impending end of the bond bull market and what it means for investors’ fixed-income portfolios. He also offers some potential solutions to adapting a fixed income strategy to combat rising interest rates.
- Risk Parity’s Annus Horribilis (Chief Investment Officer)
Risk parity was second only to commodities as the worst-performing strategy over the last 12 months, but experts caution not to dismiss the strategy over one bad year. Looking at the last ten years, risk parity was actually the top performing mainstream strategy, with a 6.7% return.
- Hedge Funds Gear Up for Another Big Short (The Wall Street Journal)
Some big firms on Wall Street are betting on a collapse in certain types of liquid alternatives. Strategies that hold illiquid assets, such as high-yield bonds, may face a liquidity crunch if investors request redemptions amid a selloff. High-yield bond ETFs are also being targeted by some institutional short-sellers.
Meili Zeng and Jason Seagraves contributed to this article.