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Efficient Frontier Related News
in chronological order

See also: Efficient Frontier Related Books, Efficient Frontier Related Scholarly Papers, or Efficient Frontier Home Page.

Table of Contents:

February 2006
- February 20 - THE CONUNDRUM OF RISK
January 2006
- January 30 - Funds of Funds
- January 27 - How Worldly Is Your Portfolio?
- January 5 - Hedge Fund Transparency Increasing, According to Strategic Financial...

THE CONUNDRUM OF RISK

February 20, 2006

From FMNN:
One of the positive things about international travel is that it gives me a large amount of time to read and think. This week we are going to look at some of that reading on the current issues surrounding the apparent willingness of investors to court ever increasing amounts of risk in the face of not only US central bank tightening but tightening by central banks everywhere, which has historically not been a bullish environment. I trust it will stimulate your own thinking.

But first, I want to announce that I along with my partners Altegris Investments will be hosting our third annual Strategic Investment Conference in La Jolla, California next May 18-20. As usual, we have a powerhouse lineup of speakers. Martin Barnes of Bank Credit Analyst, Dennis Gartman, Richard Russell, Louis-Vincent Gave, Mark Finn and my personal (as well as someone called Oprah's) doctor Dr. Michael Roizen (who wrote the RealAge series of books and the recent blockbuster bestseller You - The Owner's Manual). With this lineup you can expect not only solid information and some fun, but some very serious debates. One of my rules in designing a conference is to get speakers who are going to help make me a better investor and analyst. I think we have done that and more this year.

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Funds of Funds

January 30, 2006

From On Wall Street:
For something that was once the Next Big Thing on Wall Street, hedge funds have not made much of a difference for the average wirehouse adviser. Only about 6% of brokers use them, according to Tiburon Strategic Advisors. But a series of developments--in the area of new products, investment approaches and regulation--is bringing hedge funds closer to the everyday investor. The real question is: Is that a good thing?

By far the biggest development is the proliferation of "funds of hedge funds." These products accounted for some 57% of all hedge-fund assets as of September 2005, up from 49% at the end of 2004, according to The Barclay Group, a Fairfield, Iowa, consulting firm. Funds of funds often have lower minimum thresholds than the underlying hedge funds--a key point since few clients have the multiple millions of dollars needed to invest directly in some hedge funds. The fact that funds of funds diversify their holdings across multiple hedge funds also reduces the possibility that money will be invested with a single dishonest manager--or one who's simply not that skilled. In that sense, funds of funds have the same risk-reducing characteristic as team-managed mutual funds.

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How Worldly Is Your Portfolio?

January 27, 2006

From BusinessWeek Online:
Psst. Want a hot stock tip? Your dream, of course, is to get in early on the next eBay (EBAY ) or Google (GOOG ). But if you want a tip that will withstand the test of time, ignore the buzz. For the most part, it doesn't matter much which stocks or mutual funds you buy. What really counts is asset allocation, or how you divide your money among a diverse menu of investments.

Sure, you may think you're diversified. You've got a big chunk of your money -- probably about 60% to 70% -- in U.S. stocks, perhaps a mutual fund tracking the Standard & Poor's 500-stock index. Another 25% to 30% is in bonds, most likely rock-solid U.S. government bonds.

That's so-o-o 20th century. With returns on U.S. stocks in low gear and yields on the 10-year Treasury note about 4%, the flaws of such a plan are obvious. What you need for the 21st century is a more diverse set of investments. Thanks to a proliferation of new products, you can build a sophisticated, well-diversified portfolio on a scale that wasn't possible even five years ago. In the new portfolios:

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Hedge Fund Transparency Increasing, According to Strategic Financial Solutions LLC 2005 Hedge Fund Database Study

January 5, 2006

From eMediaWire:
Strategic Financial Solutions, LLC, (SFS) creator of the world’s leading asset allocation and investment analysis software, the PerTrac Desktop Analytical Platform, is pleased to present the aggregate results of the 2005 SFS Hedge Fund Database Study, an annual report that aims to shed additional light on the hedge fund industry.

One of the most interesting findings of the 2005 Hedge Fund Database Study was that, after combining all 12 databases and integrating the funds identified in the 2004 study, there were nearly 41,000 records across all databases, a jump of more than 16,000 hedge fund entries from last year. While clearly there has been healthy growth in the hedge fund universe since our last report, these numbers indicate great effort and improvement in fund data collection on the part of hedge fund databases. In fact, looking only at funds with start dates between 1990 and 2003 and adjusting for duplicate records, we saw an increase of approximately 870 single manager hedge funds and 630 funds of hedge funds, for a net increase of 1,500 funds. Indeed, it is safe to say that the quantity of hedge fund data available to investors increased dramatically in 2005, although, as we found in prior years’ studies, in order to get more complete hedge fund coverage, it is imperative to subscribe to more than one database.

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HEDGE FUND RISK AND OTHER DISCLOSURES

Hedge funds, including fund of funds (“Hedge Funds”), are unregistered private investment partnerships, funds or pools that may invest and trade in many different markets, strategies and instruments (including securities, non-securities and derivatives) and are NOT subject to the same regulatory requirements as mutual funds, including mutual fund requirements to provide certain periodic and standardized pricing and valuation information to investors. There are substantial risks in investing in Hedge Funds. Persons interested in investing in Hedge Funds should carefully note the following:

Hedge Funds represent speculative investments and involve a high degree of risk. An investor could lose all or a substantial portion of his/her investment. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment in a Hedge Fund.
An investment in a Hedge Fund should be discretionary capital set aside strictly for speculative purposes.
An investment in a Hedge Fund is not suitable or desirable for all investors. Only qualified eligible investors may invest in Hedge Funds.
Hedge Fund offering documents are not reviewed or approved by federal or state regulators
Hedge Funds may be leveraged (including highly leveraged) and a Hedge Fund’s performance may be volatile
An investment in a Hedge Fund may be illiquid and there may be significant restrictions on transferring interests in a Hedge Fund. There is no secondary market for an investor’s investment in a Hedge Fund and none is expected to develop.
A Hedge Fund may have little or no operating history or performance and may use hypothetical or pro forma performance which may not reflect actual trading done by the manager or advisor and should be reviewed carefully. Investors should not place undue reliance on hypothetical or pro forma performance.
A Hedge Fund’s manager or advisor has total trading authority over the Hedge Fund.
A Hedge Fund may use a single advisor or employ a single strategy, which could mean a lack of diversification and higher risk.
A Hedge Fund (for example, a fund of funds) and its managers or advisors may rely on the trading expertise and experience of third-party managers or advisors, the identity of which may not be disclosed to investors
A Hedge Fund may involve a complex tax structure, which should be reviewed carefully.
A Hedge Fund may involve structures or strategies that may cause delays in important tax information being sent to investors.
A Hedge Fund may provide no transparency regarding its underlying investments (including sub-funds in a fund of funds structure) to investors. If this is the case, there will be no way for an investor to monitor the specific investments made by the Hedge Fund or, in a fund of funds structure, to know whether the sub-fund investments are consistent with the Hedge Fund’s investment strategy or risk levels.
A Hedge Fund may execute a substantial portion of trades on foreign exchanges or over-the-counter markets, which could mean higher risk.
A Hedge Fund’s fees and expenses-which may be substantial regardless of any positive return- will offset the Hedge Fund’s trading profits. In a fund of funds or similar structure, fees are generally charged at the fund as well as the sub-fund levels; therefore fees charged investors will be higher that those charged if the investor invested directly in the sub-fund(s).
Hedge Funds are not required to provide periodic pricing or valuation information to investors.
Hedge Funds and their managers/advisors may be subject to various conflicts of interest.

The above general summary is not a complete list of the risks and other important disclosures involved in investing in Hedge Funds and, with respect to any particular Hedge Fund, is subject to the more complete and specific disclosures contained in such Hedge Fund’s respective offering documents. Before making any investment, an investor should thoroughly review a Hedge Fund’s offering documents with the investor’s financial, legal and tax advisor to determine whether an investment in the Hedge Fund is suitable for the investor in light of the investor’s investment objectives, financial circumstances and tax situation.

All performance information is believed to be net of applicable fees unless otherwise specifically noted. No representation is made that any fund will or is likely to achieve its objectives or that any investor will or is likely to achieve results comparable to those shown or will make any profit at all or will be able to avoid incurring substantial losses. Past performance is not necessarily indicative, and is no guarantee, of future results.

The information on the Site is intended for informational, educational and research purposes only. Nothing on this Site is intended to be, nor should it be construed or used as, financial, legal, tax or investment advice, be an opinion of the appropriateness or suitability of an investment, or intended to be an offer, or the solicitation of any offer, to buy or sell any security or an endorsement or inducement to invest with any fund or fund manager. No such offer or solicitation may be made prior to the delivery of appropriate offering documents to qualified investors. Before making any investment, you should thoroughly review the particular fund’s confidential offering documents with your financial, legal and tax advisor and conduct such due diligence as you (and they) deem appropriate. We do not provide investment advice and no information or material on the Site is to be relied upon for the purpose of making investment or other decisions. Accordingly, we assume no responsibility or liability for a ny investment decisions or advice, treatment, or services rendered by any investor or any person or entity mentioned, featured on or linked to the Site.

The information on this Site is as of the date(s) indicated, is not a complete description of any fund, and is subject to the more complete disclosures and terms and conditions contained in a particular fund's offering documents, which may be obtained directly from the fund. Certain of the information, including investment returns, valuations, fund targets and strategies, has been supplied by the funds or their agents, and other third parties, and although believed to be reliable, has not been independently verified and its completeness and accuracy cannot be guaranteed. No warranty, express or implied, representation or guarantee is made as to the accuracy, validity, timeliness, completeness or suitability of this information.

Any indices and other financial benchmarks shown are provided for illustrative purposes only, are unmanaged, reflect reinvestment of income and dividends and do not reflect the impact of advisory fees. Investors cannot invest directly in an index. Comparisons to indexes have limitations because indexes have volatility and other material characteristics that may differ from a particular hedge fund. For example, a hedge fund may typically hold substantially fewer securities than are contained in an index. Indices also may contain securities or types of securities that are not comparable to those traded by a hedge fund. Therefore, a hedge fund’s performance may differ substantially from the performance of an index. Because of these differences, indexes should not be relied upon as an accurate measure of comparison.