Index
Numerics
.44 Magnum Leveraged Financing Program, 101
2 and 20, 110
401(k), 15
2012 Global Survey on Alternative Investing, 62
A
accredited investors, 109
advisory fees, 110
alternative investments, 4, 60-66
2012 Global Survey on Alternative Investing, 62
adoption by institutional investors, 61-62
currency arbitrage trading, 84
corporate governance, 119
disruption, 5
due diligence, assessing, 103-104
endowments, 6
2 and 20, 110
multi-strategy, 155
investment reasoning, 119
private placements, 102
public securities, 65
trading strategies, 148
annuity contracts, 120
investment basis, 120
Andreessen, Marc, 158
Android operating system, 96
annuity contracts, 120
black boxes, 84
convertible bond arbitrage, 150
currency arbitrage trading, 84
fixed-income arbitrage, 150-151
ARPANET (Advanced Research Projects Agency Network), 158
Asian Flu, 32
assessing due diligence, 103-104
asset allocation, 51
tactical asset allocation, 118-119
asset classes
correlation, 160
growth of alternative asset classes, 112
for nine-box investment strategies, 93-95
asset management companies, 37
availability of communication technology, 34
B
Baby Boomer generation, 16
balanced portfolios, 80
behavioral finance, 44
Bernanke, Ben, 2
beta, 78, 81-83. See also risk
beta blockers, 78
black boxes, 84
bonds, 26
convertible bond arbitrage, 150
“tapering,” 61
two-asset investment model, 80
borrowed capital, leverage, 161
Botein, Matt, x
Bretton Woods monetary system, 33
Bull Durham, 68
Bush, George W., 2
buy-and-hold investing, 27, 118
C
calculating future cash flows, 95
CBOE (Chicago Board Options Exchange) Volatility Index, 22
Clark, James, 158
Cliffwater LLC, 142
Coca-Cola, 48
combining risk and return potential, 117-118
communication technology, availability of, 34
comparing hedge funds and mutual funds, 136
consulting investment professionals, 38-40
contribution plans, 15
convergence trading, 137
convertible bond arbitrage, 150
corporate governance, 119
corporate restructuring, 137
positive correlation, 46
two-asset investment model, 80
between U.S and international markets, 47
Costner, Kevin, 68
The Crimson Permanent Assurance, 139
currency arbitrage trading, 84
cyclical nature of markets, 20-25
volatility, 29
D
deleveraging, 39
derivatives, 130
developed nations, market performance compared to emerging markets, 38-39
disruption, 5
distressed securities, 152
7Twelve Portfolio, 79
asset allocation, 51
balanced portfolios, 80
positive correlation, 46
between U.S and international markets, 47
“home country bias,” 37
international allocation, 37
risks, 52
two-asset investment model, 80
Wellington Fund, 79
Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market (Glassman), 1
Dow Jones Industrial Average, 1
volatility, 7
Dresdner Financial, 101
methods of performing, 104-105
Dychtwald, Dr. Ken, 14
E
emerging markets
hedge funds, 154
mutual funds, 65
performance compared to developed nations, 38-39
The Endowment Model, 58
shift to equities, 113
Yale University, 57
equity long-short strategy, 152-153
equity-based asset classes, 93
evaluating investment managers, 118-119
event-driven investment strategies, 151-152
F
“fear index,” 22
Federal Reserve Bank of New York, 33
financial communication, 34
financial crises and leverage, 130
financial professionals, advisory fees, 110
five-star rating system (Morningstar), 102
fixed-income arbitrage, 150-151
“The Flu Game,” 90
Frank, Barney, 2
frontier markets, 64
fund of funds, 141
future cash flows, calculating, 95
futures contracts, 129
G
GDP, growth of developing countries, 64
Generation Buy and Hold, 4
Glassman, James, 1
global macro investment strategy, 153-154
Asian Flu, 32
availability of communication technology, 34
Bretton Woods monetary system, 33
emerging market performance versus developed nations, 38-39
interconnectedness, 35
international allocation, 37
Goodyear Tire and Rubber Company, partnership with NASA, 56
Google, 96
Gore, Al, 158
Great Crash of 1929, 130
growth of GDP in developing countries, 64
H
Hassett, Kevin, 1
hedge funds, 109-111, 134-139, 161
2 and 20, 110
convergence trading, 137
corporate restructuring, 137
emerging markets, 154
Long-Term Capital Management, 33
management’s investment objective, 139
market directional hedge funds, 137
multi-strategy, 155
versus mutual funds, 136
opportunistic hedge funds, 138
private placement, 109
Hedge Funds Consistency Index, 149
high-water marks, 110
I
importance of planning investments, 158
indices, 4
correlation, 49
Journal of Indexes, 74
Standard and Poor’s 100 Index, 22
VIX, 22
inflation risk, 68
inflation-based asset classes, 93
institutional investors, 56
adoption of alternative investment strategies, 61
interconnectedness, impact on volatility, 34-35
risk, 61
yield, 95
international allocation, 37
International Monetary Fund, 33
intervals, 111
investing as art, 60
investment basis, 120
investment reasoning, 119
J-K
Jackson, Phil, 100
Jordan, Michael, 90
Journal of Indexes, 74
Kirtsaeng, Supap, 83
Knight Capital, 36
L
legislation, Revenue Act of 1978, 15
.44 Magnum Leveraged Financing Program, 101
deleveraging, 39
derivatives, 130
and financial crises, 130
futures contracts, 129
impact on mortgage industry, 127
maintenance margin, 129
misuse of, 127
Licklider, J.C.R., 158
living benefit riders, 120
long security position, 128
longevity, impact on retirement, 14
Long-Term Capital Management, 33
sequence of return risk, 72-75
Lunn, Geoffrey, 101
M
maintenance margin, 129
Malone, Karl, 90
market directional hedge funds, 137
market neutral strategy, 153
markets
globalization, 32
Martin, Andy, 79
Massachusetts Investors Trust, 62
medicine, effect on life expectancy, 11
Merton, Robert, 33
misuse of leverage, 127
sequence of return risk, 72-75
money managers
due diligence, 104
Morgan, Walter, 79
Morningstar, 49
five-star rating system, 102
mortgage industry, leverage, 127
Mosaic, 158
MPT (Modern Portfolio Theory), 10
MSCI EAFE, 47
multi-manager investments, 141
multi-strategy hedge funds, 155
mutual funds
emerging markets, 65
five-star rating system (Morningstar), 102
versus hedge funds, 136
Massachusetts Investors Trust, 62
public securities, 65
selection process, Style Box strategy, 91-92
top performers, 103
Wellington Fund, 79
N
NASA, partnership with Goodyear, 56
NASDAQ, 36
Netscape, 158
Newman, Paul, 116
nine-box investment strategies, 93-95
O-P
opportunistic hedge funds, 138
optimizing portfolios, 117-118, 122
Patton, George S., 146
Paulson, John, 134
pension plans, 15
performing due diligence, 104-105
Pioneering Portfolio Management (Swenson), 57
portfolios
7Twelve Portfolio, 79
alternative investments, adding, 51-52
asset allocation, 51
diversification, 28
selection process, Style Box strategy, 91-92
positive correlation, 46
private equity, 139
private placements, 102
hedge funds, 109
prospectuses, 121
psychology, behavioral finance, 44
public securities, 65
Q-R
Quotron system, 34
Ramirez, Alberto, 127
Ramirez, Rosa, 127
Regulation D, 109
regulations for hedge funds, 109-110
REITs (real estate investment trusts), 103-104
relative return, 71
convertible bond arbitrage, 150
fixed-income arbitrage, 150-151
resale value, 95
retirement plans, 14
contribution plans, 15
Social Security, 16
return approaches, 71
Revenue Act of 1978, 15
arbitrage
currency arbitrage trading, 84
combining with return potential, 117-118
in diversification, 52
inflation risk, 68
interest rates, 61
prospect theory, 69
sequence of return risk, 72-75
Russell 3000, 47
S
Samsung, 48
SARS (Severe Acute Respiratory Syndrome) epidemic of 2003, 32
Scholes, Myron, 33
Scott, George C., 146
SEC, Regulation D, 109
secular patterns, 22
selecting investment strategies, 146-149
arbitrage
convertible bond arbitrage, 150
fixed-income arbitrage, 150-151
equity long-short strategy, 152-153
event-driven strategies, 151-152
global macro strategy, 153-154
sequence of return risk, 72-75
short security position, 128
short selling, 153
signs of underperforming investments, 118-119
Social Security, 16
Soros, George, 154
sovereign debt crisis, 27
Standard and Poor’s (S&P) 100 Index, 22
stocks
resale value, 95
Stockton, John, 90
strategies for investments, selecting, 146-149
arbitrage
convertible bond arbitrage, 150
fixed-income arbitrage, 150-151
equity long-short strategy, 152-153
event-driven strategies, 151-152
global macro strategy, 153-154
Swenson’s Asset Allocations, 59
T
tactical asset allocation, 118-119
Takahashi, Dean, 58
“tapering,” 61
technology, dependence of investments on, 36
ThinkAdvisor.com, 61
intervals, 111
trading strategies, 148
traditional investments, 36
transparency, 142
Tversky, Amos, 44
two-asset investment model, 80
U
underperforming investments, signs of, 118-119
university endowments, 6
unpredictability of the market, 22
V
annuity contracts, 120
investment basis, 120
VIX (CBOE Volatility Index), 22
Asian Flu, 32
emerging market performance versus developed nations, 38-39
“flash crash,” 35
interdependencies, 34
VIX, 22
W
websites
Hedge Funds Consistency Index, 149
ThinkAdvisor.com, 61
Wellington Fund, 79
Wilson, Quentin, 10
World Bank, 33
WRP Investments, 116
X-Y-Z
Yale Investments Office, 113
The Yale Model, 58
Yale University, 57
calculating future cash flows, 95
Zuckerman, Gregory, 134