This thoughtful and accessible article by the Bank of Canada examines a number of factors which are influencing the investment management of DB pension plans in Canada, including expectations for the equity risk premium. liability-focused investment, limited A/L matching, the limited supply of long-term bonds and the elimination of the Foreign Property Rule. 

Among the conclusions is that more plan sponsors will invest in alternative assets and shift more of their resources to active management.

This paper, by Ferrell Capital management, is a well constructed and thoughtful discussion of many of the less obvious, but very important dimensions of portable alpha strategies. In the preamble, the authors note that " Conventional wisdom often differentiates Alpha from Beta by defining Alpha as "skill-based" as opposed to market-based return. While Alpha is typically generated by the skill of the manager, there are other fundamental differences between Alpha and Beta. The purpose of this paper is to describe the benefits of harnessing not only the manager skill, but importantly, the math of risk management to combine portable Alpha strategies with Beta driven appreciation."

This paper by Daniel Capocci was awarded Best Doctoral Paper at the Global Finance Conference in Dublin in June, 2005. Using a database of 634 market neutral funds, the study examines the extent to which market neutral funds are, in fact, market neutral. It examines first market neutral indices, then individual fund returns and finally conducts an analysis based on ex-post beta.

The core conclusion is that while most market neutral funds are not significantly exposed to the market, they tend to be more exposed during bear markets than bull markets without being negatively impacted.

The Yale Endowment has released its 2004 Report. For the period ending June 2004 the total fund return was 19.4 %, led by private equity. For the last 10 years, the total fund return, net of fees, was16.8 %, ranking it in the top 1 % of large institutional investors. The 20 year return was 16.1 %.  The private equity portfolio returned 37.6 % over the last 10 years and averaged 30.6 % from inception in 1973.  The fund's target asset allocation includes 25 % to absolute return strategies ( half event-driven and half value-driven ), 20 % to real assets ( real estate, oil & gas, and timber ) and 17.5 % to private equity.  The absolute return strategies have delivered a return of 12.2 % over the last 10 years, while real assets returned 16.8 % over the last 10 years. 

A copy of the 2004 report is attached.

This analysis by Leslie Rahl and Luis Rodriquez of Capital Market Risk Advisors compares open and closed funds in terms of performance, volatility and liquidity. The results are quite interesting. The conclusion, in part, is that "constructing a successful hedge fund portfolio involves a great deal more than chasing returns and/or lusting after what you can't have."

An excellent presentation by David Bernard of Thomson Financial. It examines the issues with respect to benchmarking private equity, explores all of the options, complete with specific examples and includes a wealth of comparative return data. Must reading for every private equity investor.

This is a very readable and approachable discussion of the challenges of measuring risk in hedge funds. Written by Neal Greenberg and Sara Silverstein of the Agile Group, they examine all of the conventional risk measures and the associated shortcomings. They propose a risk assessment tool comprised of 4 factors; Tme Weighted Cumulative Drawdown, Conditional VaR, Modified Standard Deviation and Rolling Return Scores.

In early December, 2004 extracts were released from this working paper by Burton Malkiel of Princeton University and Atanu Saha of Analysis Group. The conclusions attracted considerable attention. Please note: The paper is a preliminary draft, not to be used for quotation or citation. We suggest it be read in conjunction with the following response from the Van Companies.
The abstract states : We provide risk-adjusted measures of performance as well as tests of the degree to which hedge funds live up to their claim of market neutrality. We also examine the substantial attrition of hedge funds and analyze the determinants of hedge fund survival as well as perform tests of return persistence. Finally, we examine the claims of the managers of "funds of funds" that they can form portfolios of "the best" hedge funds and that such funds provide useful instruments for individual investors. We conclude that hedge funds are far riskier and provide much lower returns than is commonly supposed."

In this paper George Van, Chairman and Zhiyi Song, Vice President of The Van Companies rebut the conclusions of the Malkiel-Saha Hedge Fund Paper. They examine the paper in detail and conclude that " Aggregate Hedge Fund Indices fairly represent performance ".