Markets

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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NYSSA Keynote Presentation: Emerging Hedge Funds: Today versus 2006

In his keynote address to the New York Society of Security Analysts (NYSSA), Andrew Beer shared his views on launching a hedge fund in today’s environment and discussed the many ways in which the process changed over the last decade. This presentation was very well received and we suspect that it will likely be of interest to anyone in the pre-launch or post-launch phase, or simply working to raise additional capital. For more information, please visit NYSSA’s website and feel free to view attached.

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The Trouble with Alpha: Part I

Investors equate “alpha” to outperformance.  A high alpha fund presumably delivers substantial excess returns relative to its benchmark. True alpha is short-hand for manager skill.  Statistically, alpha simply is the result of a linear regression between two return streams. The regression finds the straight line (ordinary least squares) that best fits the time series. Visually, beta is the slope of the line and alpha is where it crosses the vertical axis. The calculation was designed to uncover managers who outperform simply by taking on more risk. A manager who leverages to outperform the S&P in an up year will show …

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The Rise of Populism and the Fall of Economies

Recent election cycles in the U.S. and Europe have seen the ascendance of political parties whose platforms are significantly shaped by populist initiatives. Underlining many such initiatives is a preoccupation with immigration. Earlier today the Wall Street Journal reported that 40% of Brexit supporters indicated that immigration was their primary reason for backing the Leave campaign. Although the U.K. is not party to the Schengen agreement, which enables passport-free travel across member states, eurosceptics have found a strong source of support among those fearful of spillover from the ongoing migrant crisis. In the U.S., wage stagnation and a preoccupation with …

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Why a ‘Replication’ Strategy Trumps Liquid Alt Funds

Catch Andrew Beer interviewed on TheStreet. The liquid alternatives movement is trying to bring hedge fund strategies to ordinary investors. Unfortunately, performance has been subpar for the majority of liquid alternative funds and the fees are still relatively high compared to the average mutual fund. Andrew Beer, managing partner at Beachhead Capital Management, said a ‘replication strategy’ is the better option. ‘The idea is simple: figure out how hedge funds are invested, and copy it,’ said Beer, who also refers to his replication strategy as ‘Dynamic Beta’. Beer said even for sophisticated investors, it is difficult to figure out exactly …

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Brexit in 10 Days?

A new poll from the Bruges Group gives the Leave camp a 19 point lead over Remain. According to the poll, 52% of respondents supported a Brexit, while only 33% wished to remain in the EU and 15% were undecided. A decisive victory for Leave is within grasp; even if all of the undecided Britons voted to Remain (an unlikely outcome), Leave would still come out ahead. Adding to the confusion, UK bookmakers are pricing in a substantially lower risk of a Brexit; for instance, bookmakers Ladbrokes and Coral are pricing in a 36% chance of a Brexit. Given the …

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Valeant: Position Crowding, Intrinsic Value – an Update

In January, we wrote a post on Position Crowding and Valeant – the poster child in 2015 for a crowded hedge fund name.  One of the points we made was that “intrinsic value” can be highly uncertain when it’s based on forecasts of earnings and cash flow.  We expanded on this when we wrote about how value investing had changed – from asset based analysis that (still, generally) underpins the Value factor to the concept of “private market value” (see Is Warren Buffett a Value Investor? and Why Apple is Not a Top Ten Holding of 93% of Hedge Funds).  …

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Brexit in 22 Days?

A new Guardian poll reveals a 52 – 48 split among Britons in favor of leaving the EU. The alarming result represents a sharp decline in support for the Remain camp, which held a comfortable ten point lead as recently as mid-May. Commentators attribute Remain’s reversal of fortune to a combination of heated rhetoric surrounding the migrant crisis and a growing skepticism among Britons that a Brexit would negatively impact their personal finances. A recent survey by UK research group Ipsos Mori revealed that 58% percent of respondents believed their standard of living would be unaffected, while a further 9% …

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Chasing Fund Returns is a Very, Very Bad Idea

How does a fund earn over $500 million in management fees yet lose over $1 billion for investors since inception? No, sorry.  It’s not a hedge fund.  It’s a mutual fund:  the Marketfield Fund, arguably the poster child for returns chasing in the liquid alts space. Here’s the background. The Marketfield Fund was launched in July 2007 and outperformed the S&P 500 by a cumulative 34.5% during the crisis. As one of a handful of long/short mutual funds, it stood to benefit from the rise of liquid alts in the years following the crisis. From mid-2008 through the end of …

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Why Apple is NOT a Top Ten Holding of 93% of Hedge Funds

To infinity and beyond Buzz Lightyear   A recent report by Goldman Sachs describes Apple (AAPL) as a “Very Important Position” (top ten holding) for 47 hedge funds. Overlooked is that fact that it’s not a significant position for 93% of the hedge funds in the survey and represents only a 1-2% overall allocation, less than its weighting in the S&P 500. Further, three years ago it was in fact a top ten holding of 109 hedge funds, so more than half decided to cut back. What happened? Perhaps the real question is, “how cheap is AAPL today?” Carl Icahn, …

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