Mathias Mamou-Mani

Beachhead Capital Makes the Case for “Generation Two” Liquid Alternatives

PRESS RELEASE (New York, 6 April 2017) – Beachhead Capital Management (“Beachhead”), an innovative alternative investment manager, announced the release of a new report:  Generation Two Liquid Alternatives:  Built to Meet the Needs of Asset Allocators. This timely report addresses two key questions for investors today:  why were many investors disappointed with the first generation of liquid alternative mutual funds, and what better solutions are available going forward? Liquid alternative products created in the wake of the financial crisis (“Generation One”) often had three issues:  poor performance, high fees and/or highly unpredictable performance.  With short track records, the funds too …

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Smart Money Insights: Weekly Brief May 31

Welcome back after the holiday weekend. Last week we revisited some recent dire predictions that have faded from the headlines. This week, we’ll focus on a single issue — value vs growth stocks – since this is having a big impact on active investors of all stripes. The catalyst is that value-focused ETFs have had inflows of $5.5 billion this year while growth ETFs have seen outflows – causing some to forecast a reversal of the growth-chasing trend over the past several years. Key points follow below. Value Has Performed Terribly vs. Growth There’s a good article today in Bloomberg …

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How Smart is Smart Beta?

If smart beta is smart, is my beta dumb? First, a definition:  smart beta strategies are (allegedly) better ways of getting exposure to equities, bonds and other asset classes than via traditional indices.  What precisely does this mean? Let’s assume my core equity allocation is an S&P 500 index fund.  Smart beta guys think I have a problem:  the index is weighted by market cap.  Whenever Standard & Poor’s rebalances it, the weights of winners go up and losers down.  In other words, after Google rose 45% in 2015, I buy more Google (ok, “Alphabet”); as Chesapeake Energy dropped 75% …

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The Commodity Head Fake

Prediction is very difficult, especially if it’s about the future. Niels Bohr In the annals of modern portfolio theory, commodities deserve an award for the biggest diversification head fake of all time. By 2006, commodities looked like the ideal diversifier.  Academic studies demonstrated that commodities had consistently generated equity-like returns over decades, but with basically no correlation to other asset classes.  Performance over the preceding decade supported this, and allocators extrapolated these return characteristics out into the future.  Mean variance optimizers loved it as the new efficient frontier jumped to the upper left. Now fast forward to early 2016.  Over …

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The Trouble with Oil (Part Three)

One thing that I’ve realized is that there’s a disconnect in how different investors think about oil. For asset allocators, oil and commodities are a financial asset. Volatility and drawdowns are viewed like those of a stock. Oil down 20% feels a lot like a stock down 20%. For investors in oil company stocks and bonds, however, a 20% decline in oil is much more serious. A stock price primarily reflects a company’s equity and earnings prospects; oil, on the other hand, reflects revenue. A 70% drop in crude prices is like GE selling every product at 70% off. Framed …

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Position Crowding and Valeant

Position crowding is when a bunch of similar investors own a stock.  When those investors rush for the exits at the same time, the price drops a lot more than expected – perhaps to well below intrinsic value.  Note that we have published several notes on this on the Beachhead site (see Hedge Fund & Position Crowding and Equity Long/Short Post-Crisis: A Structural Analysis of the Decline in Alpha). The poster child for position crowding in 2015 was Pershing Square Capital Management, a highly regarded hedge fund.  Pershing Square ended the year down around 20%, its worst year ever and stunning …

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The Trouble with Oil (Part Two)

Two weeks ago we wrote a post on oil (The Trouble with Oil Part 1)  – why it matters to equities these days, and how the initial market response (and pundit commentary) seemed to miss some key fundamental aspects of commodity supply and demand. What a difference two weeks makes.  A few updates: Oil is up more than 25% from the lows (below $27 per bbl ten days ago, close to $34 today). The focus has shifted from near term demand hysteria to medium and longer term supply issues. The first indication of a policy response – Russia essentially publicly …

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Japan & Abenomics redux

Overnight, Japan’s central bank pushed short term interest rates into negative territory and pledged more monetary stimulus.  For a brief overview of Abenomics, please see our video below. In contrast to the positioning we discuss in the video (short the yen, long Japan equities), many systematic hedge funds appear to have been long the yen recently.  The unwind of those positions likely contributed to the 2% decline in the yen today (that’s a very big one day move in fx land…).

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Why Don’t Value Investors Always Buy the Dips?

In the short run, the market is a voting machine; in the long run, it’s a weighing machine. For fun, let’s assume you’re a value investor looking at GM in late 2015.  Like all good value investors, you want to make decisions based on “intrinsic value” – that is, what a company is worth, not where the stock trades today.  Taped on your wall is Benjamin Graham’s quote, “In the short run, the market is a voting machine; in the long run, it’s a weighing machine.”  You think like a business owner, not a trader. You trawl through the financial …

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The Trouble with Oil

In an earlier post, we talked about market volatility when new risks move to center stage. Well, crude oil is center stage, to say the least.  Why?  Oil at $30 per barrel for a few years would lead to (literally) a world of hurt:  widespread bankruptcies in the oil patch, massive write-downs in bank loans and high yield debt, plummeting capital expenditures and further job losses.  Some emerging market nations would default.  This satisfies the “big downside” criterion. In late 2014, pundits generally thought the decline was a good thing:  every dollar lost by an oil company was a gift …

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