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Want Better Hedge Fund Returns? Try One Led by a Woman

DealBook, January 15th, 2014

By William Alden

In the world of hedge funds, a relative few have a woman at the helm. And yet, these funds may be the standouts from the bunch, a new report argues.

In the years since the financial crisis, hedge funds managed by women performed better than a broader index that reflects the performance of the industry, according to a report released on Wednesday by the professional services firm Rothstein Kass. The report seeks to show that this “alpha” – superior returns, in Wall Street speak – is no mere fluke.

“There is meaningful alpha to be gained from investing in women-owned and -managed funds,” Meredith Jones, a director at Rothstein Kass who wrote the report, said in an interview. “There appear to be both behavioral and biological factors that impact women’s ability to manage money and make them consistent.”

From the beginning of 2007 through June 2013 – a period that includes the dark days of the crisis – a Rothstein Kass index of women-run hedge funds returned 6 percent, the report says. By comparison, the HFRX Global Hedge Fund Index, released by Hedge Fund Research, fell 1.1 percent during that time, according to the report.

Last year through November, the index of women-run funds had a 9.8 percent return, compared with a 6.13 percent rise in the broader index, the research showed. (Still, both indexes fell short of the Standard & Poor’s 500-stock index, which rose about 27 percent during that time.)

The report, titled “Women in Alternative Investments: A Marathon, Not a Sprint,” used a group of 82 hedge funds managed or owned by women. Last year, the firm said that female hedge fund managers produced a return of 8.95 percent through the third quarter of 2012, compared with a 2.69 percent net return for the broader index.

While highlighting the accomplishments of women in hedge funds, private equity and venture capital, this year’s report also draws attention to persistent gender disparities on Wall Street.

The research, based on a survey in September and October of 440 senior women in the alternative investments business, suggests that the vast majority of the top jobs are held by men. Of the women surveyed, only 15.5 percent said their firm was owned or managed by a woman. Among hedge funds in particular, 21.4 percent were owned or managed by women.

About 42 percent of the respondents said their firm had no general partners who were women. And nearly 40 percent of the firms included in the survey had no women on their investment committees.

In that context, hedge funds run by women remain something of a niche. Some institutional investors, like public pension funds, have a specific mandate to invest a portion of their money in funds run by women or minorities.

Though these mandates can be motivated by political factors, Rothstein Kass is seeking to show that investing with women managers can be a wise choice for purely financial reasons. A handful of studies have suggested that women traders behave differently than their male counterparts, acting less impulsively.

John Coates, a former trader who is now a research fellow in neuroscience at the University of Cambridge, argued in a 2012 book, “The Hour Between Dog and Wolf,” that testosterone contributed to market swings. Hiring more women on trading floors, he wrote, might have a stabilizing effect.

But these ideas are far from mainstream, and the industry has been slow to change. A fourth of investors surveyed by Rothstein Kass said they expected their allocations to women-run funds to increase “somewhat” in 2014, while 2 percent expected to allocate “significantly” more money.

Though the study expected more women to start their own funds in the coming years, the scarcity of such funds is itself an obstacle, a “chicken or the egg” problem, said Kelly Easterling, an audit principal at Rothstein Kass who contributed to the report.

“Without a large supply of funds, it’s difficult to achieve appropriate portfolio diversification or, for that matter, put enough money to work to move the performance dial,” she said in a statement quoted in the report. “On the other hand, until there is more money flowing to women-owned and -managed funds, it’s unlikely that there will be a stampede of new fund launches.”

Apple reveals iPad Air, new Macs and new OS X

(Photo: Justin Sullivan / Getty Images)

Apple CEO Tim Cook took the stage here in San Francisco to talk about “a lot”: New iPads, new Macs and the latest version of OS X — plus a lot of premium apps that are now free.

Live coverage

Researchers Re-Engineer E-Coli DNA to Make it Programmable

A team of synthetic biologists led by Farren Isaacs at Yale University [has taken] Escherichia coli cells and replaced all of the UAG stop codons with UAAs. They also deleted the instructions for making the release factor that usually binds to UAG, effectively rendering UAG meaningless…

The next step was to assign a new meaning to UAG during protein production. The team did this by designing molecules called transfer RNAs and accompanying enzymes that would attach an unnatural amino acid – fed to the cell – wherever they spotted the UAG codon…

By reintroducing UAGs at specific locations, as the Yale team have done, unnatural amino acids can be added into proteins at will.

"We now have an organism that has a new code, and we can reliably and efficiently open up the chemical diversity of proteins," says Isaacs.

For example, artificial amino acids could be added that give proteins unusual properties, such as the ability to bind to metals – resulting in novel adhesives. Or enzymes could be developed that are activated only in the presence of other molecules – which could be useful for drugs. “The genetic code is conserved for all of life, so this is a fundamental step forward,” says Philipp Holliger of the MRC Laboratory of Molecular Biology in Cambridge, UK. He says that because so much of the genetic code is redundant, there might be other codons that could be reassigned to expand the chemistry of living organisms.

(via Reprogrammed bacterium speaks new language of life - life - 23 October 2013 - New Scientist)

Chipotle Mexican Grill, Inc. (NYSE:CMG) has recently run into an epic trend line that signals a longer term top in the stock. This trend line stretche…

Chipotle Mexican Grill, Inc. (NYSE:CMG) has recently run into an epic trend line that signals a longer term top in the stock. This trend line stretches back to 2007, 2012 and now 2013. Each time this level has been reached, the stock has pull back significantly. A pull back over the next 6 months could yield an easy target of $450.00. Gareth Soloway InTheMoneyStocks.com

IPO Payoff Time: Blackstone Taking Hilton Public After 7 Years

Seven years after paying $26 billion for Hilton private equity giant Blackstone is taking the hotel chain public.

BRUSSELS (Reuters) - Greece must step up efforts to reach an agreement with international lenders on how to close a 2 billion euro ($2.68 billion) financing gap in its 2014 budget, the head of euro zone finance ministers Jeroen Dijsselbloem said on Thursday.

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Lazard Earnings Rise 75% on Deals

BY MICHAEL J. DE LA MERCED

Lazard, via Associated PressKenneth M. Jacobs, Lazard’s chief executive.

An improving market for deals and cost-cutting bolstered Lazard’s third-quarter earnings, as the investment bank reported on Thursday a 75 percent increase in profit from the period a year earlier.

The firm said it earned $62 million in adjusted profit for the quarter, amounting to 46 cents a share. On average, analysts had been expecting a profit of 35 cents a share, according to estimates compiled by Standard & Poor’s Capital IQ.

Lazard also reported a 10 percent rise in operating revenue, to $489 million.

“It was a solid quarter on both sides of the business,” Kenneth M. Jacobs, Lazard’s chief executive, said by telephone.

The improvement in Lazard’s results reflect, in part, a rise in markets, which has helped both the firm’s core financial advisory arm and its asset management business.

Its best-known operation, its mergers arm, reported a 3 percent rise in revenue, to $192 million. Assignments that the firm completed in the quarter included the sale of the Dutch coffee and tea company D.E. Master Blenders 1753 to Joh. A. Benckiser and the $2.8 billion sale of Ameristar Casinos to Pinnacle Entertainment.

Mr. Jacobs said he expected mergers activity to continue rising, given continued improvement in global economies and increased confidence in corporate boardrooms.

“The change in the last six to 12 months has generally been confidence,” he said. “That augurs well for deals.”

And Lazard’s asset management arm reported a 13 percent rise in revenue, to $248 million, as the firm’s assets under management rose to a record $176 billion thanks to increasing values and new client money.

The investment bank also disclosed that it held its adjusted compensation ratio at 60 percent, compared with 62.7 percent in the period a year earlier. Its ratio of noncompensation expenses to operating revenue fell to 19.7 percent from 21.5 percent.