http://www.ilukacg.com/insight.html Astute, if infrequent, commentary on the hedge fund industry http://www.ilukacg.com/traditional_alternatives.html Do alternative investments ultimately yield traditional returns? Historical data certainly suggests so... 09 Jan 2009 04:30:00 http://www.ilukacg.com/basis.html With so many funds now gated and inventing new share classes to effect "orderly" liquidation or to capture "unprecedented opportunities", investors must decide who gets a renewed mandate and who gets fired. Making the decision is a difficult but not intractable problem. It will hinge on two things: how the manager navigated the second half of 2008 and, more importantly, did risk management actually work. I want to single out a particular risk management mistake made by many investors this past year... 12 Dec 2008 04:30:00 http://www.ilukacg.com/megafunds.html Certain hedge fund strategies suffer as assets grow because their opportunity set is finite. Convertible bond arbitrage is a good example of a small opportunity set which can offer decent returns for 10 to 20 billion dollars of capital (across all hedge funds). Beyond that though, there simply isn't enough opportunity; CB arb offers one to two billion dollars of profit p.a. to be shared by all hedge funds. If the strategy attracts too much capital, as it has in the past, it just means smaller returns for all... 12 Jul 2008 04:30:00 http://www.ilukacg.com/artificial_liquidity.html There is a particular risk that is increasingly prevalent within hedge funds that is poorly understood by many investors and is destined, I think, to become quite relevant in the near future. The risk, which I have dubbed "The Artificial Liquidity Trap", is an artifact of the ever increasing prevalence of illiquid investments by hedge funds... 04 Mar 2008 04:30:00 http://www.ilukacg.com/muggles.html If hedge funds are market wizards, then hedge fund clones are muggles looking for Hogwarts. Thus far they don't seem to have found it or the chamber of alpha, but their efforts are nonetheless valuable to investors... 27 Jul 2007 04:30:00 http://www.ilukacg.com/amaranth1.html The dust having settled from the Amaranth fiasco allows for comparison with another hedge fund failure from a few years earlier. Comparing LTCM and Amaranth offers some interesting insights into the evolution of an industry... 15 Nov 2006 04:30:00 http://www.ilukacg.com/cdo1.html In commenting on the series of perpetually flawed translations of his first novel, Milan Kundera noted that the whole thing would surely make him laugh if it did not concern him. This sentiment is similar to my feelings on CDOs... 08 Sep 2006 04:30:00