Download - Investment Asset Classes
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Investment Asset Classes
A Brief Introduction
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Traditional Asset Classes
US Stocks $11.9T EAFE Stocks $14.4T US Fixed Income $13.9T Intl Fixed Income $17.2T US High Yield $.8T
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Emerging Markets
EM Stocks $6.4T Bonds $.4T
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Alternatives
Real Estate $11.5T/$90T Commodities >$4T Timberland $.06T Hedge funds $1.6T* PE $2T VC .25T*Versus 22.4B worldwide in mutual funds
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Real Estate-How Much IS Publicly-Traded?
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Commodities as Asset Class
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Commodity Trading Vs Production
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Timber
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Timber
Traditionally institutional ETFs CUT and WOOD
Asset Class Correlation Bonds 0.03 International Equity 0.76 Domestic Equity 0.69 REITs 0.55 Commodities 0.20 3-Month T-Bill 0.08 Source ETFDB.com
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Hedge Funds
Not mutual funds• Not subject to SEC regulation (so far)
• Organized as limited partnership• Small number of sophisticated investors
• Common feature is use of leverage
High returns in 1990s• Lack of correlation has not held up recently
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Hedge Funds Different From Mutual Funds
Investment by manager Limited to high net worth investors Concentrated bets Fees – large Little regulatory oversight Lack of liquidity Lack of transparency Asset allocation is slippery High attrition Can hold riskier assets Significant leverage
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Estimated Growth of Assets / Net Asset Flow Hedge Fund Industry 1990 – Q1 2007
$38,910 $58,370$95,720
$185,750
$256,720
$456,430$490,580
$539,060
$57,407$91,431
$4,406$55,340
$23,336$46,545
$99,436$126,474
$60,222
$374,770$367,560
$625,554
$820,009
$1,105,385
$972,608
$167,360$167,790
$1,464,526
$1,568,400
$73,585
$8,463
$70,635
$14,698
($1,141)
$36,918$27,861 $46,907
($100,000)
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
$1,100,000
$1,200,000
$1,300,000
$1,400,000
$1,500,000
$1,600,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Q12007
Ass
ets
(In
$M
M)
Estimated Assets Net Asset Flow
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Some Hedge Fund Strategies
Mutual funds are long-only Long/short equity
• Statistical arbitrage
• Market neutral
Event Driven Global Macro Arbitrage
• Convertibles arbitrage
• Relative value
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Hedge Funds
Near collapse of Long-Term Capital Management• $3.6 billion bailout
• Precipitated SEC scrutiny of hedge funds
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Regulation of Hedge Funds
Generally unregulated• Exemption for less than 100 investors
• Exemption if accredited
Scandals such as Canary Capital Partners
• Illegal trading with mutual funds
• Amaranth Advisors, 2006
• SEC scrutiny
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Offshore Hedge Funds
Major centers include Cayman Islands, Bermuda, Dublin, Luxembourg.
Rules • Generally not burdensome
• Anonymity
• Tax advantages
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The following 5 slides* are from:
AIMA’s Roadmap To Hedge Fundspublished November, 2008
Alternative Investment Management Association
* Also slide # 29
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Hedge Fund Fee Justification
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Returns According to Industry Group (IAMA)
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Example of Quick Summary - Timber