Option-Based Strategies: Opt In Or Opt Out?

Harvesting Fear and Greed This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q1 hedge fund letters, conference, scoops etc SUMMARY Option-based strategies generated better risk-adjusted returns than the S&P 500 over the last 30 years Investors should be wary of buying options and focus on [...]

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Replicating Famous Hedge Funds

Do Hedge Funds Generate Alpha or Simply Provide Factor Exposure? Q1 hedge fund letters, conference, scoops etc This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. SUMMARY Diverse hedge fund strategies can be replicated via factor-mimicking portfolios The analysis highlights that most returns are explained by factors, not alpha However, hedge [...]

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Warren Buffett: The Greatest Factor Investor Of All Time?

How Much Alpha Did Warren Buffett Generate? Q1 hedge fund letters, conference, scoops etc This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Summary A factor exposure of Berkshire Hathaway reveals structural factor tilts Long Value, Size, Quality, and Low Volatility factors and short Growth and [...]

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Multi-Factor Smart Beta ETFs

A Recipe Only As Good As Its Ingredients This research note was originally published by Investments & Pensions Europe (IPE). Here is the link. Q4 hedge fund letters, conference, scoops etc mohamed_hassan / Pixabay Summary Investors have leaned towards multi-factor over single-factor products in recent years The factor selection and portfolio construction of multi-factor ETFs [...]

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Factor Olympics Q1 2019

And the Winner is... Q4 hedge fund letters, conference, scoops etc Summary 2019 has started favorable for factor investors, compared to 2018 Low Volatility generated the best and Value the worst performance Factor performance is comparable in the US & Europe, but different in Japan Introduction We present the performance of five well-known factors on an annual basis [...]

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Black Swans, Major Events & Factor Returns

How to Prepare For the Unexpected? This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. Q4 hedge fund letters, conference, scoops etc Skitterphoto / Pixabay SUMMARY It is questionable if investors should prepare for catastrophic events Factor returns are almost random after black swan and major events Simple diversification is likely the [...]

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GARP Investing: Golden Or Garbage?

Cheap Growth Stocks – Too Good to Be True? This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q4 hedge fund letters, conference, scoops etc rawpixel / Pixabay SUMMARY GARP aims to combine Growth and Value investing GARP stocks have outperformed the market since 1989 It is somewhat [...]

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Factor Investing In Financials, REITs & MLPs

Do Unique Sectors Offer Attractive Alpha Opportunities? Q4 hedge fund letters, conference, scoops etc SUMMARY Beating benchmarks is challenging for fund managers, even in unique sectors Factor performance in financials, REITs, and MLPs is comparable to the cross-sector factor returns Classic factor investing strategies are likely more attractive than industry expertise INTRODUCTION Stating that active managers have [...]

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Can Value Investors Do Good?

Combining ESG and Value Investing Summary ESG factors underperformed the Value factor and market since 2009 Integrating ESG in Value investing decreased returns, but increased risk-return ratios Residual ESG factors are likely to generate negative returns given the focus on stakeholders, not shareholders Introduction Value investors frequently comment on how challenging the strategy has been [...]

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Smart Beta: Broken By Design?

Investors Can’t Have Their Cake and Eat It Too This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q4 hedge fund letters, conference, scoops etc SUMMARY Smart beta excess returns are different from factor returns The Low Volatility factor shows the highest discrepancy between theoretical and realized [...]

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ESG Investing: Too Good To Be True?

Good versus Bad Corporates This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARY ESG factors generated positive excess returns since 2009 Show positive exposure to Low Volatility & Quality and negative exposure to Value & Size Factor exposure is likely [...]

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An Anatomy Of Smart Beta Value ETFs

Can Value Investors Capture Factor Returns via Smart Beta? Q3 hedge fund letters, conference, scoops etc SUMMARY Smart beta Value ETFs are relatively homogenous Some show high exposures to other equity factors, which may represent risk Excess returns from smart beta are significantly lower than long-short factor returns INTRODUCTION The last ten years can be viewed [...]

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Factor Investing Made In China

Harvesting Factor Returns in the Middle Kingdom This research note was originally published by the CAIA Association’s AllAboutAlpha blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARY Common equity factors generated attractive risk-adjusted returns in the Chinese stock market Factor performance in China often mirrors global factor performance Indicates common factor [...]

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Factor Optimization

Pure versus Dirty Factors SUMMARY Equity factors exhibit sector biases and exposures to other common factors A factor optimisation process allows investors to create pure factors Risk-adjusted returns do not increase, but pure factors are attractive from analytical, risk and allocation perspectives Q3 hedge fund letters, conference, scoops etc INTRODUCTION When large quantities of organisms like zooplankton [...]

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Private Equity: The Emperor Has No Clothes

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARY Private equity returns can be replicated with small cap equities Small, cheap and levered stocks would have achieved higher returns since 1988 Valuation and debt multiples are at all-time-highs, lowering [...]

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Tactical Statistical Arbitrage

SUMMARY Statistical arbitrage behaves similarly across markets Volatility is the main performance driver Attractive strategy for diversifying an equity portfolio Q3 hedge fund letters, conference, scoops etc INTRODUCTION Strategies like Value or Momentum are like staples that deserve a permanent allocation in investors portfolios. In contrast, other strategies are more like sunscreen, which is mainly used [...]

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Equity Factors: Reducing Portfolio Turnover

SUMMARY Portfolio turnover of equity factors can be reduced significantly by trading more conservatively However, reducing turnover does not necessarily increase risk-return ratios It all depends on transaction costs Q3 hedge fund letters, conference, scoops etc INTRODUCTION Turnover in business tends to be positive or negative, depending on the context. Investors prefer businesses with high turnover [...]

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The Dark Side Of Low-Volatility Stocks

Long Bonds? This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Q3 hedge fund letters, conference, scoops etc SUMMARY Low-volatility stocks have outperformed the market over the last 25 years The strategy has reduced equity drawdowns in the US, Europe, and Japan significantly However, low-volatility stocks have partially [...]

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Statistical Arbitrage In The US

Arbitraged Away? Q3 hedge fund letters, conference, scoops etc SUMMARY Statistical arbitrage has attractive strategy characteristics However, the returns are highly dependent on transaction costs Best used as a tactical strategy when volatility is high INTRODUCTION Equity markets in 2018 can be characterized by divergence. There is the US, showing strong returns, versus most other developed and [...]

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Improving The Odds Of Value

Tactical versus Strategic Allocations to Value SUMMARY Value investors earn a premium for holding undesirable stocks Market skewness may identify periods where the premium is more attractive The returns from the Value factor since 1926 were zero when market skewness was negative Q3 hedge fund letters, conference, scoops etc INTRODUCTION Although buying cheap stocks is intuitively [...]

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Factor Investing In Micro & Small Caps

Treasure Hunting in the Wild West of Equity Markets This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Get The Full Warren Buffett Series in PDF Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your [...]

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Liquid Alternatives: Alternative Enough?

This research note was originally published by the CFA Institute’s Enterprising Investor blog. Here is the link. Get Our Activist Investing Case Study! Get the entire 10-part series on our in-depth study on activist investing in PDF. Save it to your desktop, read it on your tablet, or print it out to [...]

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