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Jul 23
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  • Risk Management

    Risk Management

    Hedge Fund Risk Management I course has been designed to fill a gap between the mathematics employed by advanced academic researches and the level of general knowledge that might reasonably be digested by practitioners. Read more...
  • Due Diligence

    Due Diligence

    We deliver the complete due diligence training specially tailored to address irregularities and unique problems of hedge funds. Unlike the commonly used die diligence frameworks, our platforms incorporate the most advanced quantitative models available today. Read more...
  • Portfolio Composition

    Portfolio Composition

    Do you know that a properly constituted portfolio of hedge funds shows not only significantly lower risks than the underlying funds, but also superior returns close to the best performers in the basket? Read more...
  • Genetic Optimization

    Genetic Optimization

    For the first time in the industry, we have applied the genetic optimization algorithms for hedge fund portfolios. Now our advanced FoF composition course explains hedge fund multi-extreme optimization in action. Read more...
  • Trend Segmentation

    Trend Segmentation

    The proprietary Trend Segmentation technique is included in our Risk Management and Portfolio Composition training. In brief, it evaluates diverse managers’ skills during on different markets (uptrend, downtrend and trendless). Read more...

Polls

The main reason of the current meltdown
 

What People Say


A must read Funds of Funds is to my knowledge, the first hedge fund related book in the market describing the complete process of FoF portfolio construction in depth. It is written by one of the industry experts, who introduces the details of hedge fund investing from the practitioner’s perspective. The book provides an excellent balance between the complex analytic and intuitive thought process.

It is a must read for every investors wishing to make an unbiased decision and for every fund manager interested in becoming a constituent fund.

Neal Berger
Apogee Capital Partners L.P.


Simply the best I have been waiting for this book for over six months. Excellent work, simply the best "funds of funds" book available. It gives you everything you need to build a top-performing hedge fund of funds: risk management, portfolio optimization, stress testing and so on. It is written in easy language and does not require a deep knowledge of the underlying maths.

What surprises me is that Dr Grauberg has compressed so much information that would be enough to write not one but several books.

Simon Elimelakh
BT Financial Group

Our Views

flagWe will neither try to convince you to invest into hedge funds nor make brave statements about wonderful alternative investment industry. It is not our aim. Our mission is to provide professional investors with the sophisticated tools, methodologies and unbiased opinions how to invest into the most contradicting yet ambiguous investment sector safely.

It is common knowledge that the most gifted managers are drawn first to the hedge fund industry. However, their top performance fees and lavish lifestyle equally attract a lot of people that can be hardly called competent professionals. On the other hand, we are witnessing a massive crowd of institutional investors constructing portfolios of hedge funds without any clue how to incorporate appropriate due diligence and risk management frameworks.

Our expertise is based upon real hands-on investments in hedge funds, equity - derivatives trading experience and, most importantly, own money investing. Therefore, our views of alternative investments often differ from the common standpoints. In brief, our viewpoints could be summarized as follows.


 

Madoff's Case: Why It Matters

madoff2We are not going to delve into endless discussions of how Bernie Madoff has successfully managed to defraud hundreds of investors for years. We will not talk about the reasons of the SEC’s dereliction, when the latter was supposed to examine the Madoff’s books since 2006. All these aspects are largely irrelevant for us. What really matter is how highly respected financial institutions (ex. Credit Swiss) invested billions of dollars into the Madoff’s scheme without conducing any basic due diligence.

Oh, sorry, it is not correct. Of course, they had conducted full due diligence; everyone familiar with the institutional asset allocation system knows that it is impossible to make any new investments unless a huge paperwork burden is in place - including numerous investment committee approvals. A million dollar question: what is the typical institutional due diligence worth, if it cannot spot a simple Ponzi scheme?

Let’s stress it again: we are not talking about HNWI or any end investors that could be easily misled. We are talking about top-grade institutional investors with virtually unlimited resources and long established routines. Why did they fail? The answer, at our opinion, is obvious:

The common institutional due diligence practice is solely based on formal (and largely worthless) questionnaires that disregard a coherent trading strategy analysis. A fairly basic examination of employed strategies and/or risk management would spot the Ponzi scheme instantly.
By prioritizing the know-my-managers factor, the employed check-up practices (if any) mostly neglected any other elements of the Madoff’s investment process. His funds even never used an independent custodian, which itself was supposed to raise a red flag immediately. However, no one questioned this. How could one doubt anything? The only Madoff name itself was sufficient to build unlimited confidence.

The bottom line is simple: the Madoff’s case clearly illustrates inability of institutional investors of conducting any coherent due diligence, which, in turn, derives from inappropriate frameworks used. On the other hand, this case exposes a common practice of investing primarily based on personal industry contacts ("we know that guy"). While we cannot argue a great importance of such contacts, disregarding other factors always lead to Madoffs’ scams. Unless we see radical changes in the institutional due diligence and risk assessment practices, we will see more and more such cases, especially during uncertain times.

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