Prisma conducts ongoing research and analysis of key trends and issues shaping today’s landscape for alternative investments. Our research aims to explore topics of interest in the hedge fund community and provide investors with clarity around commonly faced challenges and issues.
Timing Market Beta and Hedge Funds
Paul Roberts, Patrick O’Sullivan FIA
In this paper we consider the historical performance of the hedge fund industry relative to mainstream asset classes following periods of asset price dislocation. The aim is to assess whether a hedge fund allocation remains compelling when markets appear “cheap”.
Models
Emanuel Derman, Financial Analysts Journal
The greatest danger in financial modeling is the age-old sin of idolatry. Financial markets are alive, but a model is a limited, human work of art. Although a model may be entrancing, we will not be able to breathe life into it, no matter how hard we try. To confuse the model with the world is to embrace a future disaster driven by the belief that humans obey mathematical rules.
Reflections on Q4 2008
Gavyn Davies
The final quarter of 2008 will long be remembered as one of the most disastrous periods for asset price performance for many decades. The credit crunch…took a new leg downwards after the failure of Lehman Brothers in mid September, and for a while during the fourth quarter liquidity disappeared from many financial markets.
Obama’s Economic Inheritance
Gavyn Davies
Barack Obama won the US Presidency because of the financial and economic collapse of 2008. The world now looks to him to restore confidence in an economic system that is under unprecedented strain. His election represents a good moment to survey the state of the world economy, and the risks it faces in the period ahead.
A Closer Look at Hedge Fund Beta
Prisma Capital Partners
Unlike the long-only world, where managers typically maintain a consistent beta, hedge fund betas are notoriously erratic. The added flexibility that hedge fund managers have to apply leverage, take both long and short positions and invest across multiple asset classes, leads to ever-changing beta measurements.
How Many Fund Managers Does a Fund of Funds Need?
Kartik Patel
Investing via fund-of-funds gives investors exposure to a diversified set of hedge fund managers following different strategies (like long/short equity, convertible arbitrage etc.). Here we investigate the appropriate number of hedge funds in a portfolio from the perspective of an institutional diversified fund-of-funds investment management mandate.