In March 2018, Daniel Masters gave a talk at the Royal Yacht Hotel and Spa in Jersey, a U.K. tax shelter off the coast of France, attended by some of the island’s oldest families and financial nobility. The event, closed-door and invitation-only, offered a chance for some of the island’s wealthiest investors to discuss bitcoin and opportunities in the crypto space. The well-coiffed audience, sitting in plush, high-backed chairs, sipped wine and ice water while proceeding to assault Masters with a list of increasingly aggressive questions.

The greatest pushback came from the loudest — and richest — in the room.

“I was literally on my feet for two hours getting grilled,” says Masters, chairman of CoinShares, a digital asset investment firm, and former global head of energy trading for JPMorgan. “It turned into a fairly hostile reception, because here are people who have spent their entire lives accumulating wealth in fiat currency, and now you...

Investors took different tacks during the Covid-19 crisis, with hedge funds “indiscriminately” selling stocks amid the market tumult, according to research from the University of Virginia and University of Zurich. 

“Hedge funds divested significantly more in absolute and relative numbers than pension funds, mutual funds, or investment advisors,” University of Virginia researchers Simon Glossner and Pedro Matos and the University of Zurich’s Stefano Ramelli and Alexander Wagner wrote in a paper this month. During the first quarter, hedge funds divested around $100 billion of their equity positions held at the end of last year, or 4.4 percent of their assets under management at that time, the researchers estimated. 

Institutional investors were largely caught off guard in the crisis, as few firms had identified pandemics as a material risk, according to the paper. After European and U.S. economies shuttered to slow the spread of...

For all of Boaz Weinstein’s genius, he did not foresee this particular type of mayhem.

Instead, late last year the youthful-looking credit whiz was methodically scanning databases of bonds, swaps, and indexes on the 58th floor of Manhattan’s Art Deco Chrysler Building, where Weinstein’s Saba Capital Management has its offices. 

Among the empty coffee cups and water bottles, the hedge fund manager was noticing anomalies that often spell opportunity in credit markets — the side of the investment universe where Weinstein plies his craft.

Neither he nor his partners had an inkling of the coronavirus pandemic that would eventually tear through the world’s economies, devastate its credit markets, and extinguish more than 400,000 lives.

But what Weinstein saw was, he says, “crazy.” 

Prices for high-yield credit-default swaps, or CDSs, on dicey companies like United Airlines Holdings were cheap — the same as those on...

A global pandemic. Massive job losses. Consumer product shortages. Police brutality. Unsettling images of violent riots juxtaposed against peaceful civil disobedience. 2020 has been one thing after and another, and to say it has created a lot of stress for many people would be an understatement. 

However, despite these stressors, life goes on. Decisions — big and small, significant or trivial — must still be made. Unfortunately, we are not the greatest at making complex decisions at the best of times. And stress only makes it worse.

Psychological research has pointed to a few potential causes. Some research has shown that heightened stress levels cause our attention to narrow. Humans already have a tendency to focus on often irrelevant, but readily accessible, characteristics when making decisions. Factors like the familiarity bias and recency effect lead institutional investors to overweight equities of local businesses or retail...

For all of Boaz Weinstein’s genius, he did not foresee this particular type of mayhem.

Instead, late last year the youthful-looking credit whiz was methodically scanning databases of bonds, swaps, and indexes on the 58th floor of Manhattan’s Art Deco Chrysler Building, where Weinstein’s Saba Capital Management has its offices. 

Among the empty coffee cups and water bottles, the hedge fund manager was noticing anomalies that often spell opportunity in credit markets — the side of the investment universe where Weinstein plies his craft.

Neither he nor his partners had an inkling of the coronavirus pandemic that would eventually tear through the world’s economies, devastate its credit markets, and extinguish more than 400,000 lives.

But what Weinstein saw was, he says, “crazy.” 

Prices for high-yield credit-default swaps, or CDSs, on dicey companies like United Airlines Holdings were cheap — the same as those on...

Investors took different tacks during the Covid-19 crisis, with hedge funds “indiscriminately” selling stocks amid the market tumult, according to research from the University of Virginia and University of Zurich. 

“Hedge funds divested significantly more in absolute and relative numbers than pension funds, mutual funds, or investment advisors,” University of Virginia researchers Simon Glossner and Pedro Matos and the University of Zurich’s Stefano Ramelli and Alexander Wagner wrote in a paper this month. During the first quarter, hedge funds divested around $100 billion of their equity positions held at the end of last year, or 4.4 percent of their assets under management at that time, the researchers estimated. 

Institutional investors were largely caught off guard in the crisis, as few firms had identified pandemics as a material risk, according to the paper. After European and U.S. economies shuttered to slow the spread of...

The recent resurgence of coronavirus cases in Hong Kong has Asia’s top executives worried.

“We had a good Father’s Day celebration,” Ellis Cheng, chief financial officer of Kerry Logistics, told Institutional Investor from his headquarters in Hong Kong. “But now the cases are coming again. We’re not talking about a handful of cases but 70, 100 cases. Probably the Hong Kong government will apply some sort of restrictions again soon.”

Cheng is among the members of the 2020 All-Asia Executive Team, II’s latest annual ranking of the region’s best CEOs, CFOs, and investor relations professionals. Other top-ranked executives like Jason Lau — No. 1 CFO is the basic materials division — shared his concerns.

“I hope that we can get it under control, otherwise we will have another lockdown in the city,” said Lau, whose firm Xinyi Glass Holdings Limited makes glass for cars and construction for Ford, General Motors, and Volkswagen, among others....

In the early days of the pandemic, SLC Management, the institutional investment manager of insurance company Sun Life, quickly raised money from institutional investors to launch a series of opportunistic funds to take advantage of the distress.

President Stephen Peacher put an investment team together and raised money from parent Sun Life and outside clients to invest in beaten-down REITs (real estate investment trusts). The firm also launched one of the first funds to invest in securities from the Federal Reserve’s and Treasury department’s TALF, or Term Asset-Backed Securities Loan Facility. TALF was designed to stabilize credit markets by encouraging investments in asset-backed securities with federal government loans. Peacher tapped an investment team that had managed a TALF fund during the global financial crisis. SLC won new mandates over the past few months for strategies in private credit, liability-driven investments, and commercial...

“Culture matters.” 

How many times have you uttered this phrase when talking about your own company or your manager due diligence process? 

Asset managers certainly recognize this and loudly tout their own cultures as being essential to their success. Asset allocators — and especially investment consultants — cling to this phrase as if it had totemic power, ascribing to a manager a mystical ability to generate alpha. 

Willis Towers Watson, for example, writes, “In the competitive world of generating alpha, we believe culture is a unique ingredient and the bedrock on which a competitive advantage is sustained over the long term.” But in spite of its importance, the firm admits, “evaluating [a manager’s] culture is not easy. It can require countless hours speaking to a firm’s leadership and staff, in addition to data gathering and analysis to create a robust view of the firm.” 

Which takes us, inevitably, to...

Are asset owners skilled at selecting fund managers? Research suggests not.

In a new study examining manager selection by pension funds, endowments, foundations, and sovereign wealth funds, finance professors Amit Goyal, Sunil Wahal, and M. Deniz Yavuz determined that the asset managers hired for mandates end up “significantly” underperforming those who were considered, but not chosen.

According to the researchers, these bad hiring decisions tended to be driven by two factors: past performance and personal relationships between the allocators and managers. The conclusions were based on analysis of some $1.6 trillion invested across nearly 7,000 mandates between 2002 and 2017.

First, Goyal, Wahal, and Yavuz concluded that prior returns had an “important influence” on the hiring process: A manager in the 75th percentile of past performance was 30 percent more likely to be chosen than one in the 25th percentile.

“Selection based...

The year of the coronavirus may turn out to be the best one yet for hedge fund mogul Bill Ackman, who spoke with Institutional Investor after he scored another coup Wednesday when his Pershing Square hedge funds sponsored an initial public offering of a $4 billion special purpose acquisition company. 

Pershing Square Tontine Holdings, as it is called, is the largest-ever SPAC — also known as a blank check company because it’s simply a publicly traded receptable for the cash that eventually will be used to buy a private company, allowing it go public without all the trouble and risk associated with such efforts. 

“We designed Tontine to be the most efficient way for a large, high-quality growth company to go public, and our shareholders have bought into that plan,” Ackman said in an interview after the IPO launched Wednesday.

While SPACs have become the rage among hedge funds, Tontine’s huge popularity is also a reflection on...

A global pandemic. Massive job losses. Consumer product shortages. Police brutality. Unsettling images of violent riots juxtaposed against peaceful civil disobedience. 2020 has been one thing after and another, and to say it has created a lot of stress for many people would be an understatement. 

However, despite these stressors, life goes on. Decisions — big and small, significant or trivial — must still be made. Unfortunately, we are not the greatest at making complex decisions at the best of times. And stress only makes it worse.

Psychological research has pointed to a few potential causes. Some research has shown that heightened stress levels cause our attention to narrow. Humans already have a tendency to focus on often irrelevant, but readily accessible, characteristics when making decisions. Factors like the familiarity bias and recency effect lead institutional investors to overweight equities of local businesses or retail...

Transactions between asset managers reached $19.7 billion in the first half of 2020, up almost 50 percent from the same period last year, according to PwC’s mid-year report published on Thursday.

Investments in asset and wealth managers exploded, even though activity slowed substantially during March and April — the height of the economic shutdown. The PwC report looked at U.S. managers acquired by other American firms and foreign companies. 

Gregory McGahan, PwC financial services deals leader and a report author, expects that M&A will continue to flourish in the second half of the year. With the economic slowdown and uncertainty over the future, investors have kept up pressure on managers over fees. Managers are also racing to buy firms with some of the asset classes that have done well recently, including private credit. 

PwC argued that investors had the temerity to circumvent travel restrictions and other logistical...

State of Securities & Antitrust Class Action Litigation and Impact of Covid-19Securities class action settlements help investors recoup losses and deter fraud on a market level. There are currently more than $19 Billion in available settlement funds awaiting distribution and a large pipeline of current litigations expected to settle. Investors have to navigate the increased complexities surrounding not only participation, but also identifying the amounts and payouts they are entitled to recover from different sectors, both domestic and international.

You can’t accuse Ideanomics of failing to think big. 

The electric-vehicle and fintech company boasts on its website of “empowering a new economy” and “forging the new paradigm on how emerging technology companies grow and how industries embrace innovation.” Its slogan: “Digitizing tomorrow.”

It’d be a heck of a thing if got tripped up by Photoshop.

Ideanomics, which is headquartered in New York but has much of its operations in China, has touted a big, recently opened sales center for electric vehicles in Qingdao, in China’s Shandong province. But in June, short sellers betting against the company alleged the sales center didn’t actually belong to Ideanomics.

The company had issued a photo of the center, but shortly thereafter short-seller Hindenburg Research unearthed a 2018 Chinese news photo that looked strikingly similar to Ideanomics’ photo. The only difference was that the “MEG” logo of the company’s Mobile Energy...

You can’t accuse Ideanomics of failing to think big. 

The electric-vehicle and fintech company boasts on its website of “empowering a new economy” and “forging the new paradigm on how emerging technology companies grow and how industries embrace innovation.” Its slogan: “Digitizing tomorrow.”

It’d be a heck of a thing if they got tripped up by Photoshop.

Ideanomics, which is headquartered in New York but has much of its operations in China, has touted a big, recently opened sales center for electric vehicles in Qingdao, in China’s Shandong province. But in June, short sellers betting against the company alleged the sales center didn’t actually belong to Ideanomics.

The company had issued a photo of the center, but shortly thereafter short-seller Hindenburg Research unearthed a 2018 Chinese news photo that looked strikingly similar to Ideanomics’ photo. The only difference was that the “MEG” logo of the company’s Mobile...

Are hedge fund activists like Bill Ackman and Carl Icahn good at turning around companies — or just good at picking stocks?

A new academic study sought to answer that question, examining whether the investment gains generated by activist hedge funds are due to value creation or simply good stock selection. The paper was authored by Martijn Cremers, dean of the University of Notre Dame’s business school; finance professor Erasmo Giambona of Syracuse University; University of Arizona law professor Simone Sepe; and Ye Wang, assistant professor at China’s University of International Business and Economics.

“Some scholars argue that activist hedge funds improve the performance of undervalued firms and promote managerial and directorial accountability, benefitting all shareholders,” they wrote. “Others argue that activist hedge funds are professional arbitrageurs whose activities benefit themselves but not other shareholders, since any initial...

The Arkansas Teacher Retirement System is suing investment and insurance giant Allianz for allegedly losing $774 million of the pension’s money in its volatility-trading funds.  

This is the first major lawsuit to result from a salvo of blowups early this year. Industry insiders expect more to come over the summer. 

Among the defunct and grievously injured vol vehicles, Allianz Global Investors’ stand out because they were owned by a deep-pocketed corporation. Standalone hedge funds that blew up, such as Malachite Capital, left little behind for burned investors to potentially recoup, although whispers of litigation continue to swirl. 

The Arkansas Teacher Retirement System was among the largest investors in AllianzGI’s Structured Alpha products, a knowledgeable source told Institutional Investor. “The losses range from about $10 million into the nine figures,” or upwards of $1 billion, “but not many others are at...

You can’t accuse Ideanomics of failing to think big. 

The electric-vehicle and fintech company boasts on its website of “empowering a new economy” and “forging the new paradigm on how emerging technology companies grow and how industries embrace innovation.” Its slogan: “Digitizing tomorrow.”

It’d be a heck of a thing if they got tripped up by Photoshop.

Ideanomics, which is headquartered in New York but has much of its operations in China, has touted a big, recently opened sales center for electric vehicles in Qingdao, in China’s Shandong province. But in June, short sellers betting against the company alleged the sales center didn’t actually belong to Ideanomics.

The company had issued a photo of the center, but shortly thereafter short-seller Hindenburg Research unearthed a 2018 Chinese news photo that looked strikingly similar to Ideanomics’ photo. The only difference was that the “MEG” logo of the company’s Mobile...

Investors including California’s $246 billion teachers’ pension fund sent letters Tuesday to the heads of the U.S. Federal Reserve, Securities and Exchange Commission, and other major financial agencies calling for regulatory action on climate change.

The letters — signed by 40 investors representing nearly $1 trillion in assets under management — ask the regulators to “address climate change as a systemic financial risk” and “explicitly integrate climate change across [their] mandates.”

The group called on the Federal Reserve to consider steps outlined by climate advocacy group Ceres, which coordinated the campaign. For the Fed, these steps included exploring how climate risk can be addressed through monetary policy and requiring financial institutions to conduct climate stress tests.

Meanwhile, recommendations for the SEC included mandating corporate climate risk disclosure and ruling that investor consideration of environmental,...

In the years leading up to the 2008 financial crisis, a large asset manager kept a database on current, past, and prospective hedge fund managers — grading them on, among other characteristics, their transparency (or lack thereof).

Over a decade later, the hedge fund industry may be about to get a whole lot less transparent — and researchers argue that this data should raise alarms about secretive managers.

These researchers are Sergiy Gorovyy, Patrick Kelly, and Olga Kuzmina, the authors of a new paper, “Does Secrecy Signal Skill? Characteristics and Performance of Secretive Hedge Funds.” Using a proprietary database originating from what the authors describe as “one of the largest” fund of funds in the U.S., they analyze 192 hedge funds during the period between April 2006 and March 2009, looking at how the most secretive managers compared to those that were more transparent.

“What the paper can shed a light on is, is there reason to...

The end of the coronavirus pandemic could bring a large number of new asset managers.  

Data from eVestment show that the number of new firm launches tends to spike following economic crises.  

Here’s why, according to data firm: As markets contract, asset management employees may be laid off. Instead of seeking out a new job, they start their own firms. Additionally, some of these employees leave their jobs voluntarily, with the goal of taking a new investment approach presented by market turmoil.  

“You do a lot better when you’re a new young eager face when the times are tough,” John Alexander, director of consultants and investors at eVestment, said by phone.  

In addition to the post-crisis attitudes of potential investors, Alexander said that there is a generational opportunity for younger investors to step in.   

“Generationally, we’re kind of facing a weird brain...

The Arkansas Teacher Retirement System is suing investment and insurance giant Allianz for allegedly losing $774 million of the pension’s money in its volatility-trading funds.  

ATRS had a significant stake in three Allianz Structured Alpha products. The public pension fund went into 2020 and the coronavirus pandemic with about $1.62 billion of its $18.3 billion portfolio invested with Allianz Global Investors (AllianzGI), according to plan documents. 

The losses, as alleged, wiped out close to 5 percent of Arkansas teachers’ total pension savings. 

“Active management missteps” and a “profound breakdown in risk management” caused the Allianz funds’ “extremely disappointing” results, ATRS’s consultant Aon told the pension fund in an analysis, according to the lawsuit. Aon “chastised AllianzGI for a ‘lack of transparency into the events that unfolded,’ which 'perpetuated... lost confidence in the risk management...

Investors including California’s $246 billion teachers’ pension fund sent letters Tuesday to the heads of the U.S. Federal Reserve, Securities and Exchange Commission, and other major financial agencies calling for regulatory action on climate change.

The letters — signed by 40 investors representing nearly $1 trillion in assets under management — ask the regulators to “address climate change as a systemic financial risk” and “explicitly integrate climate change across [their] mandates.”

The group called on the Federal Reserve to consider steps outlined by climate advocacy group Ceres, which coordinated the campaign. For the Fed, these steps included exploring how climate risk can be addressed through monetary policy and requiring financial institutions to conduct climate stress tests.

Meanwhile, recommendations for the SEC included mandating corporate climate risk disclosure and ruling that investor consideration of environmental,...