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November 26, 2007
Recap: Frontiers in Hedge Funds and Proprietary Trading Forum
The Frontiers in Hedge Funds and Proprietary Trading Forum was held in New York on November 16, 2007. The following summary of the event is provided by Odette Gregory from Gregorian Consulting.
Highlights included:
•The Impact Hedge Funds and Alternative Industries Will Have on the Financial Markets
•Role of Risk Management within Hedge Funds
•Alpha and Beta of Emerging Hedge Fund Strategies
•John Dizard, Columnist, The Financial Times
•Hedge Fund Replication
•Hedge Fund Regulation: When, Not If
PRMIA New York
Frontiers in Hedge Funds and Proprietary Trading Forum
November 16, 2007
Overview
Risk management is being accepted as a strategic firm function, rather than simply as a necessary cost center at asset management firms, that include hedge funds, mutual fund, pension, and insurance firms. Risk management has also evolved into a collaborative approach between the risk management department and investment teams in the asset management industry, as compared to the previous policing function that began at commercial banks a number of years ago.
The Impact Hedge Funds and Alternative Industries Will Have on the Financial Markets (8:30am)
As hedge funds continue to consolidate and diversify strategies for driving alpha, more attention will need to be paid to the operational and managerial structure in order to simultaneously maintain a culture of entrepreneurship while also allocating resources for the due diligence necessary to keep the hedge fund structure abreast of regulatory requirements. At the root of the hedge fund management structure is the issue of “fairness” and competition – what is the best way to create a partnership structure that rewards expertise and loyalty while also taking into account the need to remain flexible, operationally, in a volatile marketplace and in light of management’s right to limit their own liability to any one firm? At the operational level, taxes are the heart of the hedge fund business model and, with increasing regulation pending on the federal level, and perhaps also internationally, it is necessary to stay vigilant in order to anticipate and respond to any outside claims.
The management of hedge fund strategy will take on new importance and significance as alpha becomes increasingly ambiguous in the drive toward expansion and the evolution of returns. Especially in emerging categories, alpha is beginning to originate in increasingly esoteric spaces, within previously unknown terrain and profit curves.
Role of Risk Management within Hedge Funds (9:30am)
The fundamentals of risk management include hard core communication amongst managers and the maintenance of a reservoir of cash. The key to successful implementation is the ability to get in or out of a position without moving the market against your firm. In light if this, risk managers are on the right track when they continuously evaluate their measurement and stress test strategies; ensuring they are using risk modeling and anomaly discovery as a tool for decision-making, but not as a vehicle for off-side forecasting.
Alpha and Beta of Emerging Hedge Fund Strategies (11:00am)
Value to hedge funds comes increasingly from beta and not alpha driven strategies. Therein lays the conundrum when evaluating correlation, exposure, premiums and returns according to the specificities of typically reliable measurement tools. The question of how to rethink valuation is the preeminent question when considering the future of hedge fund strategic management. Increasingly, it is not sufficient to retool some components of the strategic arsenal, while leaving others on hold, but it is necessary to rethink all of them in simultaneity. For managers, the implementation of this process of renewal is a challenge that has yet to be fully capitalized for an appropriate return.
John Dizard, Columnist, The Financial Times (12:15pm)
Of note on the international horizon, in special regard to the volatility in energy scarcity and currency crises, is the risk embodied by the European Union. It can be expected that this region will produce more downturns in the market than the usual suspects in the emerging market frontiers.
Hedge Fund Replication (2:00pm)
Traditional and alternative assets are increasingly reliant on exposure to beta factors as sources of risk return. Hedge funds are increasingly understood to use market-driven exposures to cull return, rather than seeking absolute value gains. Replication products seek to emulate this form of beta-exposure used by hedge funds by simulating the dynamics of the beta factors themselves. By employing liquid assets within a range of strategies meant to synchronize with and monitor hedge fund transactions and returns over time and in sight of specific targets, replication products can provide risk managers with some of the benefits of alternative asset volatility without the full exposure to down-side risk.
Hedge Fund Regulation: When, Not If (3:15pm)
The regulation of hedge funds within the US is an impending reality, but a reality that can be met on secure ground. While regulation of funds outside the US is more lenient in certain key aspects, comprehensively, the US remains a strong competitor and a key market. To augment the Congressional call for more stringent tax liability for hedge funds, the SEC has established an anti-fraud rule and increasingly stringent standards for investor accreditation. However, with due diligence on the risk management level, hedge funds with operations in the US should not expect any hiccups when the time comes to prove compliance. One area that requires attention is the field of reporting, as it will be the mastery of tax and other filings that will prove the rule for success. Included, since no intent to subvert law or defraud investors, or proof therein, is required for an SEC investigation of the same, it will be prudent for all hedge funds and associated partners to use their risk management strategies to fully embrace the upcoming comprehensive relationship by reviewing all internal documents and procedures and ensuring they will satisfy the inquiries of any new federal code or series of enforcements.
Posted by kgittins at 03:11 PM | Comments (0)
November 20, 2007
New York Annual Steering Committee Meeting
The New York Steering Committee held their annual meeting on November 8th, 2007. Attending was the Regional Director James Tunkey and Steering Committee members Mark Abbott, William Ding, Matthieu Royer, Navin Sharma and Abraham Thomas.
The Regional Director announced that Colin Telmer and Desiree ONiell have resigned as members of the New York Steering Committee but will be on hand as advisors on an as needed basis. The Regional Director thanked them for their time and contributions.
The NY chapter adopted their own By-laws and can be viewed by clicking here.
The Committee reviewed the events and activities that had been and were still to be carried out in 2007. They noted that the year has been very successful so far and their efforts enabled the hire of two positions within PRMIA Global, a Marketing and Event person. The Committee also started discussing their plans for 2008, including their calendar of chapter events, C-Suite events, all day events and the CRO Summit.
The Committee held an election of the Steering Committee as per the chapter By-Laws and the following people were elected as members of the New York Chapter Steering Committee: Mark Abbott, Viktoria Baklanova, William Ding, Philippa Girling, Matthieu Royer, Navin Sharma, Abraham Thomas, James Tunkey and Christopher Whalen.
James Tunkey was nominated as Regional Director and Navin Sharma was nominated as Deputy Regional Director.
The Committee also voted on the creation or maintenance of additional committees within the New York Chapter, which include a Market Risk, Operational Risk, Credit Risk, Social Programming and Scholarship Program and Advisory Committee.
To read the complete minutes of the meeting, please click here
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Posted by kgittins at 03:01 PM | Comments (0)