Alternative Investments: from Alpha-Rich Portfolios to Adaptive Risk Overlays

Day One

09.00 - 09.15 Welcome and Introduction

Session 1: Alternative Investments, Absolute Return & Alpha

  • Alternative Universe: Hedge funds, Managed Futures, Private Equity, Real Estate…
  • Is Alternative Non-traditional?
  • Absolute Return, Alpha & Beta
  • Asset Class or Manager Talent Pool?
  • Paying for Alpha but getting Alternative Beta

Session 2: Alpha-Rich Alternative Investment Strategies

  • Real Alternatives generate Real Alpha
  • Broad Instrument Universe: Equities, Sovereign & Corporate Credit, Credit Default Swaps, Commodities, Futures & Options, OTCs, CFDs
  • Long/Short: Equity Long/Short, Long/Short Credit, Distressed, Special Situations
  • Relative Value: Equity Market Neutral, Pairs Trading, Fixed Income Arbitrage, Capital Structure Arbitrage
  • Event Driven: Reorganisations, Restructurings, Risk Arbitrage
  • Managed Futures: Multi-Time Frame Trend Following, Contrarian, Pattern Recognition, Global Macro
  • Case Study: Winton

Session 3: Finding the next Winton

  • Emerging & Established Managers
  • Locating the “Sweet Spot”: The Life-Cycle / Alpha Trade-Off
  • Databases, Conferences, Capital Introduction Events, Execution/Clearing Brokers
  • Example: Using a Hedge Fund Database

Session 4: Quantitative Performance Measures

  • Sharp & Information Ratios
  • CAPM and Jensen Alpha
  • Drawdown, Sortino, Calmar, Sterling & Omega
  • Examples: Pitfalls of Screening Using Quantitative Performance Measures

12.00 - 13.00 Lunch

Session 5: Using Multi-Factor Models to Benchmark Performance & Identify Alpha

  • Single Factor Models
  • Extending to Multi-Factor Models
  • Utilising Systematic Risk Factors
  • Incorporating Peer Group Style Index Factors
  • Building Customised Strategy Factors
  • Case Study: Deploying a Multi-Factor Model to Hedge Funds

Session 6: Performance Data Biases

  • Survivorship Bias
  • Backfill History
  • Thematic Tendency
  • Examples: Estimating Survivorship Bias using Fund of Hedge Funds Indices

Session 7: Qualitative Analysis

  • Strategy Representation & Quantitative Confirmation
  • Edge & Sustainability of Alpha
  • Risk Management Process
  • Seasoned investment Team
  • Ownership & Incentive Structures
  • The Happy Family

Session 8: Building Robust Alpha-Rich Portfolios

  • Investment Objectives and Constraints
  • Prospective Returns, Volatility and Correlations
  • Applying Post Modern Portfolio Theory to Minimising Drawdowns
  • Case Study: Generating Efficient Frontiers

Session 9: Fat Tail Risk Overlays

  • Measuring Tail Risk: Skew, CVaR, Stress Test, Scenario Analysis
  • Mechanistic Solutions: CPPI
  • Case Study: Applying Behavioural Adaptive Risk Overlays

Day Two

Session 10: Dynamic Monitoring

  • The Managed Account Structure
  • Performance Benchmarks
  • Style Drift
  • Capacity & Marginal Alpha

Session 11: Track Record - Verification

  • Carve-Outs
  • Composites
  • Letterheads
  • Pricing & Independent Administrator / Conflicts
  • Verification
  • Independent Audit

Session 12: Due Diligence – Strategy

  • Source of Alpha
  • Portfolio Construction
  • Trade Examples
  • Repeatability of Alpha
  • Key Man Risk

Session 13: Due Diligence – The Manager

  • Background Checks
  • Operational Infrastructure/Process
  • Back/Middle Office
  • Systems Redundancy & DR
  • Corporate Governance
  • Checks & Balances
  • Conflicts of Interest
  • Case Study: AIMA-Compliant Due Diligence Questionnaire

12.00 - 13.00 Lunch

Session 14: Due Diligence – Investment Vehicle

  • TER
  • Amortised Costs
  • Segregation of Assets
  • Counterparty Risk
  • Most Favoured Nations
  • Gating
  • Case Study: Cayman Investment Company Offering Memorandum

Session 15: Industry Regulation

  • AIFMD
  • Dodd-Frank
  • Investor Trends & Impact on Managers

Session 16: Implementation

  • Offshore Vehicles: Cayman Investment Company, BVI LP
  • Onshore Vehicles: UCITS
  • Managed Accounts: Transparency, Safety of Asset Custody
  • Case Study: Managed Account vs Managed Account Platform

Session 17: Ongoing Monitoring

  • Performance Benchmarks
  • Style Drift
  • Capacity & Marginal Alpha
  • Organisation Dynamics

Session 18: Structured Alternative Investments

  • Alpha Transport
  • Principal Protection Strategies
  • Capital Guaranteed Products – CPPI, Contingent Immunisation
  • Leverage Structures – Options, Structured Finance Linked to Alternative Investment Portfolios
  • Capital Efficiency & Tax

Summary, Evaluation and Termination of the Seminar

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