Alexander Ineichen: Why the investment case for hedge funds is still soundAug 27 2012 1 Comment
Alexander Ineichen is one of the most well-known researchers on hedge funds globally after his “In Search of Alpha―Investing in Hedge Funds” (October 2000) and “The Search for Alpha Continues―Do Fund of Hedge Funds Add Value?" (September 2001) became the most often printed research publications in the documented history of UBS. He is also author of "Absolute Returns―The Risk and Opportunities of Hedge Fund Investing" (Wiley Finance, October 2002) and “Asymmetric Returns―The Future of Active Asset Management” (Wiley Finance, November 2006). Alexander has also written several research pieces pertaining to equity derivatives and hedge funds and contributed to several chapters to financial books. He also wrote "AIMA’s Roadmap to Hedge Funds" (November 2008) which was at that time the most often downloaded document from the AIMA website.
In this interview with Opalesque.TV, Alexander shares his vital insights on the state of the global hedge fund industry, risk management and how to acquire the much necessary investment wisdom.
The video is divided into the following chapters:
1. 00:57 (min:sec) The state of hedge funds
While hedge funds have not shot the lights out,
* they have largely outperformed global equities and balanced portfolios (5yr rolling)
* from a qualitative perspective, the investment case for hedge funds is still sound
2. 05:11 (min:sec) Compounding Matters
Average hedge fund surviving 2008 reached high-water mark in Sept. 2010, while financials might need until 2024, assuming 6% annual growth
Hedge funds the only sector of asset management offering active risk management
At the end of the day, investors are absolute return investors
Long-only or buy-and-hold literally means absence of risk management
3. 09:43 (min:sec) Asset Protection - Truth or Fiction?
How different hedge fund strategies really performed during 20 crisis events in global equities since 1980
Managed Futures are the best diversifier with positive returns in 18 out of 20 crisis events
Hedge funds still mitigated losses in each crisis
4. 13:23 (min:sec) Judgement & Understanding: cannot be outsourced
* understanding return drivers
* qualitative aspects of risk management
The limited value of correlations or historical characteristics
5. 16:58 (min:sec) Will investors insource more risk management?
Real risks of investing go beyond volatility and model risks
Investors must deal with "the darkness of uncertainty", where a lot is black
6. 22:51 (min:sec) Ineichen's five-layered knowledge pyramid:
From data to wisdom
7. 25:51 (min:sec) The attributes of wisdom
How to get (investment-) wise
The search for wisdom is a path
Alexander M. Ineichen, CFA, CAIA, FRM is founder of Ineichen Research and Management AG, a research boutique founded in October 2009 focusing on absolute returns, risk management and thematic investing. He started his financial career in derivatives brokerage and origination of risk management products at Swiss Bank Corporation in 1988. From 1991 to 2005 he had various research functions within UBS Investment Bank in Zurich and London relating to equity derivatives, indices, capital flows and alternative investments, since 2002 in the role of a Managing Director. From 2005 to 2008 he was a Senior Investment Officer with Alternative Investment Solutions, a fund of hedge funds within UBS Global Asset Management. In 2009 he was Head of Industry Research for the hedge fund platform at UBS Global Asset Management.
Alexander holds a Bachelor of Science in Business Administration with Major in General Management from the Universities of Applied Sciences in Business Administration in Zurich (HWZ), Switzerland. Alexander also holds the Chartered Financial Analyst (CFA) and Chartered Alternative Investment Analyst (CAIA) designations and is a certified Financial Risk Manager (FRM). He is on the Board of Directors of the CAIA Association and is a member of the AIMA Research Committee.
Alexander Ineichen is one of the most well-known researchers on hedge funds globally after his “In Search of Alpha―Investing in Hedge Funds” (October 2000) and “The Search for Alpha Continues―Do Fund of Hedge Funds Add Value?" (September 2001) became the most often printed research publications in the documented history of UBS. He is also author of "Absolute Returns―The Risk and Opportunities of Hedge Fund Investing" (Wiley Finance, October 2002) and “Asymmetric Returns―The Future of Active Asset Management” (Wiley Finance, ...more
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