July 2008
- Alternative
Viewpoints -"Commodities
Not About 'Buy and Hold'"
- Up to the Challenge? The CAIA
Mini Quiz Teaser
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When
Does 'Alternative' Become 'Mainstream'?
I am often asked the following: "How does CAIA define Alternative Investments?" As a preface to my standard response of "anything outside of the traditional long-only equity and fixed-income space", I explain that I am not a big fan of the term 'alternative' in general as it implies something outside the mainstream. This is hardly the case for Real Estate and Commodity Investments which have been around for centuries, and is no longer valid for HF's, Private Equity or Managed Futures for that matter, all of which have matured dramatically as a result of significant and growing global institutional participation.
Take for example the storied history of hedge funds. Obscure several decades ago, exotic in the eyes of most investors as of the turn of the century; today they're taking on increasing prominence. According to a July 1 Financial Times story, the ten largest US endowments now have approximately 32% of their assets in hedge funds.
The rush of institutional investors into alternatives can be observed on a near-daily basis. Over the last few weeks alone, Opalesque has cited numerous institutional investors planning and/or making their move, including:
- Japan's public pension fund
- New Jersey State Investment Council
- VBV Pensionskasse (Austria's multi-employer pension fund)
- University of Kentucky
- Phoenix Employees' Retirement System
- Royal County of Berkshire Pension Fund
- New York Common Retirement Fund
- Indiana Public Employees' Retirement Fund
- ERAFP (French Civil Servants Pension Scheme)
Over the same time period, JP Morgan Asset Management released a survey that suggests those currently invested in alternatives are pushing further into the arena. According to their survey of 191 large US institutions currently active in alternatives, "Next Generation Alternative Investing", institutional investors expect to increase their total average allocations to alternatives from 18% to 22% by 2010. This includes not just what we at the CAIA Association consider "core" alternatives, but also those that are only now coming to the forefront of many investors' awareness, including weather derivatives, carbon trading, infrastructure and farmland.
While these are both US-based surveys, one only need look at the recent forays by sovereign wealth funds into the private equity and real estate space to know that a similar narrative is playing out around the globe.
Therefore, with so many players moving in so quickly and so
deeply, how much longer will "alternatives" be alternative?
The answer is simple: as quickly as yesterday's alternative becomes
today's mainstream, new alternatives will pop up tomorrow to fill the
void.
In the never-ending quest for 'alpha', fund managers (and their
investing clients) will continue to scour the globe in search of these
new opportunity sets. After all, investing in alternatives isn't about
defining a set of asset classes. It's about developing an investment
process that is free to explore all available options in order to
realize one's investment objectives. Education plays a critical role in
developing these processes, for without it one cannot possibly reach an
informed decision.
Earning the CAIA designation ensures that our members have the tools to
develop such a process across all asset classes.
Thus armed and with eyes on the horizon, our members eagerly anticipate
- and will be well-prepared for - tomorrow's developments.
Best regards,
E. Craig Asche
Executive Director
September
2008 Exam Notes
September 2008 Exams
- Exam registration closes July 29, 2008 at 11:59 PM EST.
- Late registrations are not considered under any circumstances.
- Exam dates: September 08 - 19, 2008.
- Register for an exam here
Scheduling an Examination Appointment:
Pearson VUE testing centers are currently open to scheduling for the
Sepember. 2008 CAIA exam period. We strongly recommend scheduling your
exam appointment with them as soon as possible to ensure a seat at your
preferred testing center. All exams are scheduled directly through Pearson
VUE. If you have not received your scheduling instructions,
please contact candidate@caia.org.
Registration vs. Scheduling
While exam registration closes on July 29th,
you may schedule your exam appointment with Pearson VUE at any time
after completing the purchase process.
2008 CAIA Survey
The 2008 CAIA survey is currently underway through July 31 and your input is needed!
If you have ever enrolled as a candidate in the CAIA Program or you have considered the program for you or your staff, we invite you to participate.
Your feedback will help us develop a clear understanding of what investment professionals are looking for in the CAIA program and why they're choosing to enroll (or choosing not to).
With a better understanding of these issues, we can ensure we're providing the top quality AI accreditation program this industry demands and will allow us to do a better job of reaching out to investment professionals working in the alternatives space.
Though the survey will take only a few minutes to complete, your answers will be of great value to us. We hope you will participate.
Alternative Viewpoints - powered by CAIA
"Commodities Not About 'Buy and Hold'", posted June 29 on AllAboutAlpha.com
Keith Black, CFA, CAIA
Associate, Ennis Knupp + Associates
From AllAboutAlpha.com: With so much interest in commodities, we thought this might be a good time to revisit the rationale for so-called "managed futures" funds. But as Keith Black, CAIA, of consultant Ennis Knupp + Associates says, commodity investing is about a lot more than buying and holding commodities in hopes that the Chinese continue to buy new cars.
Over the last several years, institutional investors have more than doubled their allocation (to over $200 billion), to financial products whose returns are linked to those of commodity indices. Commodities may be attractive due to: the low correlation between their returns and those of other asset classes, the high correlation of commodities returns with unexpected inflation, and the rising demand for commodities from fast-growing emerging markets countries, such as China and India.
In fact, when you look at the performance of these commodity
indices during the best and worst quarters for the Wilshire 5000 (and
quintiles in between), you can see that they have produced modestly
positive returns in almost all quintiles. In fact, the correlation
between commodity indices and other major asset classes is generally
below 0.2.
Click here to continue
AllAboutAlpha.com's
column, Alternative Viewpoints, aims to provide the thoughtful and
reasoned opinions typical of CAIA members on the various topics covered
by AllAboutAlpha.com. AllAboutAlpha.com is read by over
10,000 unique readers each month in the hedge fund and greater asset
management industry.
Up to the Challenge?
The
CAIA Mini Quiz Teaser
Many of our readers were surprised at the level of difficulty of the CAIA mini quiz! You challenged us and we're countering with yet another opportunity for you to prove your mettle.
Derived from our sample Level I and Level II exam questions,
the CAIA mini quiz is timed, the results are tallied, and the correct
answers appear beside each question. Amaze your co-workers and confound
your colleagues! Here's
a sample question/answer for your consideration:
Q: According to the Code and Standards, which of the following actions is proper with regard to investing in oversubscribed issues?
A. Orders for the smallest subscribers get filled first
B. Orders for institutional subscribers get filled first
C. Orders should be prorated to all subscribers
D. Orders for subscribers not filled in the previous issue get filled
first
Got 15 minutes? Put your AI knowledge to the test; take the CAIA mini quiz today.
Click here to view
the answer to this month's teaser!
CAIA at a Glance
Have you ever wished for a one-stop shopping solution to explain the
CAIA program to your colleagues? Well, help has arrived! Visit our
newly created CAIA
at a Glance page, which contains quick snippets of facts and
figures, as well as downloadable PDFs that give a complete overview of
the CAIA program. It's the perfect solution for busy professionals who
prefer their information in a form that fits their active lifestyles.
CAIA
Chapters Around the World: Toronto, Montréal, London, and
Singapore
CAIA London would like to thank everyone who attended the
presentation by Jan Loeys of JP
Morgan on July 3rd, especially our guests from the Securities
and Investment Institute (SII). The evening was a
tremendous success and we look forward to many more such educational
and networking opportunities. CAIA London would especially like to
thank The
Bank of New York Mellon for sponsoring the
event.
CAIA Canada also hosted lively events in the month of June: a social in
Toronto and an educational event in Montréal, which featured
a presentation by David Kerr of Deutsche
Bank. We're greatly encouraged by the support and
increasing interest among our Canadian members and candidates.
This month, CAIA London will be hosting their chapter social
on Wednesday, July 16th. This event is open to both members and
candidates. CAIA Singapore will also host a chapter social for members
on Thursday, July 17th.
Summer is finally upon us! Many of our candidates will be taking
holidays; others will be diligently studying for the September exams.
One thing is for sure: everyone's anticipating the fall, the time when
schedules return to their normal, if hectic, pace.
Whatever your plans, we hope you'll include a CAIA candidate gathering in your area!
CAIA's Summer/Fall Travel
Schedule
The CAIA Association is planning for a very busy travel schedule in the next three months. We are looking forward to meeting our members and colleagues in the following cities:
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2008
Summer/Fall Travel Schedule
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July |
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18th - 21st
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August |
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13th - 15th
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26th - 27th
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28th - 29th
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30th
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September |
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1st |
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1st - 5th |
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2nd |
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22nd |
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23rd |
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24th |
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29th |
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30th - 1st Oct |
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October |
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2nd & 3rd
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20th - 21st |
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22nd - 23rd |
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*Please note that these dates are subject to change.
The Association is available to give private, on-site presentations of
the CAIA program in each of these cities. These presentations are an
excellent way to increase your company's awareness of the value of the
CAIA program, as well as to highlight your significant achievement in
earning the designation. Contact events@caia.org
for more information on planning an exclusive informational meeting for
your colleagues.
We look forward to seeing you while we are on the road!
Answer to the CAIA Mini Quiz:
C: When making investments in new offerings, the issue should
be distributed to all customers for whom the investments are
appropriate. If the issue is oversubscribed,
the issue should be prorated to all subscribers.