Links - Alternative Risk

QUOTE OF THE DAY

I believe that individuals spend far too much time studying billionaire fund managers and not enough time studying normal people who have successfully retired. -- Ben Carlson

CHART OF THE DAY

ALTERNATIVE RISK

‘Factor investing’ wages battle against history, FT.com.  “This is the new frontier,” says Andrew Ang, head of factor investing strategies at BlackRock and a prominent academic in the field. “We have come to the stage where we’ve transcended asset classes and moved on to factors.” 

Absolute Momentum Woes,  priceactionlab.com "Absolute price series momentum models are experiencing large losses after a period of relentless promotion… Momentum traders are an easy prey."  

HFRX Interim Update: Hedge Funds Mixed Through Mid-June, FinAlternatives. 

When False Factors Are Exposed. ETF.com  "in out-of-sample tests, about half the factors produced zero to negative premia, even prior to considering transaction costs. Thus, the findings involving these factors were likely the result of data mining, or they were just lucky outcomes. Either that or they were behavioral anomalies that, post-publication, would be easily arbitraged away." 

What Is The Profitability Premium? ETF.com  "the premium persists because of limits to arbitrage, which prevents mispricing from being corrected."  

SEC Readies Case Against Merrill Lynch Over Notes That Lost95%, WSJ.  

Managed Futures 101: the quest for crisis alpha, Abnormal Returns.  "One of the attractions of managed futures is that they historically had a tendency to provide strong returns during periods of stock market crisis. This ‘crisis alpha’ is somewhat unique among traditional asset classes. This may be due in part the fact that the majority of managed futures strategies in form or fashion practice trend following or time-series momentum."  

Simplexity, IrrelevantInvestor. "Active and passive strategies can be combined to improve an investor’s experience. And while it’s probably true that a tactical model will suppress returns, if it can suppress volatility and help someone stick with their plan, then its importance to long-term returns cannot be overstated." 

Confessions of a Recovering Alpha Junky, Cullen Roche. 

Unquantifiable Risk, Ben Carlson.  "I don’t think enough hedge fund investors appreciate the blow-up risk they take by investing in these types of fund structures." 

My Factor Philippic, Cliff Asness "And (3) I examine ABKW’s claim that factor richening drives much of non-value long-term factor performance and find that this very serious allegation about other researchers’ work is totally without merit. Overall, these results suggest that one should be wary of aggressive factor timing. Instead, investors are better off identifying factors they believe in, and staying diversified across them, unless we see far more extreme pricing than we do today." 

Link to the paper.  

Sports Betting as an Asset Class, CIO. "UK hedge fund researchers find systematic sports betting can diversify and outperform traditional assets."