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

Duration:
2 days
Location:
Prague, NH Hotel Prague
  • Alternative Universe, Absolute Return & Alpha
  • Alpha-Rich Alternative Investment Strategies
  • Using Multi-Factor Models to Benchmark Performance
  • Performance Data Biases and Quantitative Measures
  • Fat Tail Risk Overlays and Dynamic Monitoring
  • Due Diligence: Strategy, The Manager, Investment Vehicle
  • Applying Behavioural Adaptive Risk Overlays
  • Structured Alternative Investments and Alpha Transport
Course Description
This 2 day training event provides a firm grasp of the various alternative investment strategies within the hedge fund industry and the world of managed futures. The course will provide understanding into applying hedge fund strategies and how, using a combination of qualitative processes, quantitative tools and methodologies, this can be used to create robust and efficient absolute investment portfolios by allocating capital to third party alternative investment managers. The course will also address monitoring and regulation, helping candidates prepare for the industry issues they are likely to encounter.

Learning Objective
The alternative investments course enables participants to gain a greater understanding and appreciation of strategies and products within the alternative investments universe and to better see how they fit in within their overall investment portfolio primarily from an allocator's perspective.

The course will aim to provide comprehensive coverage of hedge fund and managed futures strategies from the perspective of both professionals with a thorough grounding in the principles and practice of investment management seeking a fast track current understanding of alternative investments, and to those actively participating in this field seeking to update themselves of current industry thinking, trends and the potential application of new concepts, such as the deployment of behavioural risk overlays to mitigate fat tail risk for example.

Methodologies
Classroom style lectures featuring up-to-date and relevant case studies and examples.

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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