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from Unstructured Finance:
The sultans of swing
Although most investors have been pleased with the steadily rising U.S stock market over the past six months, funds that profit when markets are convulsing are licking their wounds.
With market stress at multi-year lows, volatility hedge funds returned just 1.16 percent in the first quarter, compared with 3.7 percent for the broader hedge fund group.
Some of the volatility specialists are doing better than others by capitalizing on major market moves in Japan, for example. And some are doing better simply because they are ‘short’ volatility funds - they tend to perform better when markets are calmer. But those funds are now few and far between.
“If I were to turn the clock back there were a lot more short volatility funds than long in 2004,” said Joshua Thimons, a portfolio manager at PIMCO. “There are fewer now – 2008 wiped most of the face of the map.” Short volatility funds earn a risk premium by selling volatility in the markets, capitalizing on the fact “that some managers use it as tail hedging,” he explained. “These funds have done better this year, but there are fewer of them.”
from Unstructured Finance:
Cash is king in housing
By Matthew Goldstein
It's no secret that housing in the U.S. has become an investors market, especially if it's an investor with cash to burn.
For more than a year now, we and just about everyone else in the financial media have been writing about how Wall Street-backed firms are looking to buy-up the wreckage of the housing bust on the cheap and rent out those homes until the time is right to sell them for a sweet profit. And it should come as no surprise that much of that buying is being done with cash because it's the easiest way for an investor get a deal done quick.
from Unstructured Finance:
The amazing shrinking pile of non-agency mortgage debt
By Matthew Goldstein
Many cash-strapped, unemployed or underemployed people are still struggling with too much consumer and household debt. But there is one kind of debt that is getting smaller and smaller--mortgage bonds issued during the U.S. housing bubble by Wall Street banks and finance firms that isn't guaranteed by either Fannie Mae of Freddie Mac.
The outstanding dollar value of so-called private label residential mortgage bonds, or non-agency mortgage debt, is $909 million, according to stats compiled by CoreLogic and mutual fund firm Doubleline Capital. At its peak in July 2007, the total of private label mortgage debt was $2.2 trillion.
from Global Investing:
Making an Impact may be new good
If the pure pursuit of greed is no longer good in the post-crisis world, what defines the new "good"?
That's when you start to consider "Impact Investing", a type of investment that pursues measurable social and environmental impacts alongside a financial return. According to a report prepared for the Rockefeller Foundation, approximately 2,200 impact investments worth $4.4 billion were made in 2011.
from Bethany McLean:
The weird, unsatisfying case against S&P
The government’s 119-page civil lawsuit against credit rating agency Standard & Poor’s for allegedly inflating the ratings it gave to residential mortgage-related securities, or RMBS, in the run-up to the crash has removed whatever lingering doubts (there weren’t many!) might have remained about just how problematic the ratings game is. But it also raises a question: Why, in cases of white-collar wrongdoing, is it often the cogs in the wheel that seem to pay the highest price?
Let’s stipulate that there are weird things about this case. To lower its burden of proof, the government is using a 1989 law that is supposed to protect taxpayers from frauds against federally insured financial institutions. The result, as Bloomberg columnist Jonathan Weil has pointed out, is that the government is claiming that some of the very banks — mainly Citigroup — that packaged the securities were also defrauded by the rating agencies.
from The Great Debate:
Taking on the rating agencies
The credit rating agency, Standard & Poors, announced Monday that it was the target of a civil lawsuit by the Justice Department for its actions in rating the complex securities that played a major role in the 2008-2009 financial collapse. The company also said that it had not been apprised of the details. It is interesting that the other two major rating agencies, Moody's and Fitch made no announcements.
There is much that all the agencies should worry about. What is publicly known -- and it is a great deal -- was laid out in the two-year Senate investigation led by Senator Carl Levin (D-Mich.), which ended with the release of a final report in spring, 2011.
from MacroScope:
Big government kept a “contained depression” from being a Great one: Levy
David Levy says he is bullish on the U.S. economy long term. But for now, the country is effectively stuck in a “contained depression,” the chairman of the Jerome Levy Forecasting Center told Reuters during a recent visit to our Washington bureau.
Still, things could have been much worse, says the third generation economist. For Levy, the interventions of a large and proactive federal government prevented a repeat of the 1930s.
from Global Investing:
Frontier markets: safe haven for stability seekers
Frontier markets have an air of adventure and unpredictability about them. One is tempted to ask: Who knows what will happen next?
The figures tell a different story.
In fact, emerging markets overtook frontier markets in terms of volatility of returns as long ago as June 2006, as a recent HSBC report shows. And a more significant milestone was passed a year later, in June 2007, when even developed markets overtook frontier markets in terms of volatility of returns.
from Expert Zone:
If the U.S. and EU slide into recession
(The views expressed in this column are the author’s own and do not represent those of Reuters)
There are apprehensions that the U.S. and EU could drift into recession again. The economic crisis of 2008 unnerved every country, with growth either turning negative or falling drastically. The recovery from that recession was weak and any relapse could be prolonged.
from Unstructured Finance:
Hedge funds love affair with leverage still on hiatus, for now
By Katya Wachtel
Last year was a sorry one for the $2 trillion hedge fund industry, when funds lost 5 percent on average. This year managers are doing better, up more than 5 percent for the year, according to the latest tracking data.
But those returns are a far cry from the 16.4 percent rise achieved by the S&P 500 this year, so what will hedge fund managers - who are supposed to be the smartest, savviest market players on the Street - do to juice returns?
