Challenges arising from alternative investment management.

Alternative investment management differs from traditional asset management in a number of respects. First, it is distinct in terms of both its targets – aiming to achieve an absolute performance, regardless of trends in underlying markets – and its strategies, in particular exploiting inefficiencies in the valuation of financial assets via opportunistic and discretionary positions. It also differs in terms of the financial techniques implemented, e.g. the extensive use made of leverage, derivatives and short selling, and the specific investment vehicles used (ad hoc structures such as hedge funds that are not bound by ordinary law in the way traditional investment vehicles are). These particularities, alongside the fact that the alternative investment universe is somewhat opaque, make it difficult to measure a fund’s risks or a fund manager’s performance. Specific measurement tools are therefore required, which differ from those commonly used in traditional asset management. Over the past few years, the alternative investment management, a diverse and rapidly-evolving universe, has enjoyed a spectacular development, which is illustrated by the sharp rise in the amounts under management and the proliferation of investment vehicles offered to an increasingly broad investor base. In view of the specific nature of alternative fund managers’ modus operandi, the flourishing of the alternative investment industry raises questions as to its implications in terms of financial stability. It also raises new issues regarding the division of roles between market participants and supervisory authorities in the organisation and monitoring of this asset management sector.

Modification of a commercial dna extraction kit to simultaneously recover rna, safely and rapidly, and to assess molecular biomass of the total and the active part of microbial communities, from soils with diverse mineralogy and carbon content : S11.04-P -15

We have modified a commercial DNA extraction kit for soil to simultaneously co-extract RNA. In this new procedure RNA and DNA are separated by two selective purifications in cascade without the need of DNAase or RNAse digestion. Consequently DNA and RNA are respectively purified from the whole co-extraction solution. Nucleic acids extraction is based on the action of SDS coupled with an efficient bead-beating step, but it does not require any solvent. Avoiding the use of solvents, which are damaging for human health and environmental quality, was one of our most important motivations to develop this protocol. In a second time, we have optimized this protocol to improve the DNA and RNA yield, but kipping those yields below the saturation limit of the kit to assess and quantify the variations of molecular biomass of the total (DNA) and the active (RNA) part of microbial communities in natural samples. We have also introduced a first step of homogenization of soil sample in liquid nitrogen to improve the reliability of the fungal 18S gene sequence quantification. Finally, we have shown that this protocol can be applied to a wide diversity of soils whatever their mineralogy and metal content (2 Ferralsols, 1 Vertisol, 2 Andosols from Madagascar), texture or biomass content (1 poor sandy soil from Congo and one carbon rich temperate soil sample submitted or not to a 1 month cold stress). * E Tournier, L. Amenc and AL. Pablo contributed equally to this study. (Texte intégral

Fundamental indexation revisited: new evidence on alpha

This study proposes indexing strategies representative of the equity market and based on readily available accounting information. In contrast to the previous literature, we discard balance sheet variables and instead develop two indices that revolve solely around income statement and dividend measures. We find that these indices outperformed the FTSE 100 by 3% on an annual basis over the last 25 years, whilst delivering similar or lower volatility. The constructed indices overlap by 90% with the FTSE 100, in terms of their total market capitalisation and constituent members. They have positive and significant alphas in 3- and 4-factor performance attribution models, showing that the performance cannot be explained by value, size, market beta or momentum tilts alone

Estimated Correlation Matrices and Portfolio Optimization

Financial correlations play a central role in financial theory and also in many practical applications. From theoretical point of view, the key interest is in a proper description of the structure and dynamics of correlations. From practical point of view, the emphasis is on the ability of the developed models to provide the adequate input for the numerous portfolio and risk management procedures used in the financial industry. This is crucial, since it has been long argued that correlation matrices determined from financial series contain a relatively large amount of noise and, in addition, most of the portfolio and risk management techniques used in practice can be quite sensitive to the inputs. In this paper we introduce a model (simulation)-based approach which can be used for a systematic investigation of the effect of the different sources of noise in financial correlations in the portfolio and risk management context. To illustrate the usefulness of this framework, we develop several toy models for the structure of correlations and, by considering the finiteness of the time series as the only source of noise, we compare the performance of several correlation matrix estimators introduced in the academic literature and which have since gained also a wide practical use. Based on this experience, we believe that our simulation-based approach can also be useful for the systematic investigation of several other problems of much interest in finance

The Sharpe ratio of estimated efficient portfolios

Investors often adopt mean-variance efficient portfolios for achieving superior risk-adjusted returns. However, such portfolios are sensitive to estimation errors, which affect portfolio performance. To understand the impact of estimation errors, I develop simple and intuitive formulas of the squared Sharpe ratio that investors should expect from estimated efficient portfolios. The new formulas show that the expected squared Sharpe ratio is a function of the length of the available data, the number of assets and the maximum attainable Sharpe ratio. My results enable the portfolio manager to assess the value of efficient portfolios as investment vehicles, given the investment environment

The salt-responsive transcriptome of chickpea roots and nodules via deepSuperSAGE

Background: The combination of high-throughput transcript profiling and next-generation sequencing technologies is a prerequisite for genome-wide comprehensive transcriptome analysis. Our recent innovation of deepSuperSAGE is based on an advanced SuperSAGE protocol and its combination with massively parallel pyrosequencing on Roche's 454 sequencing platform. As a demonstration of the power of this combination, we have chosen the salt stress transcriptomes of roots and nodules of the third most important legume crop chickpea (Cicer arietinum L.). While our report is more technology-oriented, it nevertheless addresses a major world-wide problem for crops generally: high salinity. Together with low temperatures and water stress, high salinity is responsible for crop losses of millions of tons of various legume (and other) crops. Continuously deteriorating environmental conditions will combine with salinity stress to further compromise crop yields. As a good example for such stress-exposed crop plants, we started to characterize salt stress responses of chickpeas on the transcriptome level. Results: We used deepSuperSAGE to detect early global transcriptome changes in salt-stressed chickpea. The salt stress responses of 86,919 transcripts representing 17,918 unique 26 bp deepSuperSAGE tags (UniTags) from roots of the salt-tolerant variety INRAT-93 two hours after treatment with 25 mM NaCl were characterized. Additionally, the expression of 57,281 transcripts representing 13,115 UniTags was monitored in nodules of the same plants. From a total of 144,200 analyzed 26 bp tags in roots and nodules together, 21,401 unique transcripts were identified. Of these, only 363 and 106 specific transcripts, respectively, were commonly up-or down-regulated (> 3.0-fold) under salt stress in both organs, witnessing a differential organ-specific response to stress. Profiting from recent pioneer works on massive cDNA sequencing in chickpea, more than 9,400 UniTags were able to be linked to UniProt entries. Additionally, gene ontology (GO) categories over-representation analysis enabled to filter out enriched biological processes among the differentially expressed UniTags. Subsequently, the gathered information was further cross-checked with stress-related pathways. From several filtered pathways, here we focus exemplarily on transcripts associated with the generation and scavenging of reactive oxygen species (ROS), as well as on transcripts involved in Na(+) homeostasis. Although both processes are already very well characterized in other plants, the information generated in the present work is of high value. Information on expression profiles and sequence similarity for several hundreds of transcripts of potential interest is now available. Conclusions: This report demonstrates, that the combination of the high-throughput transcriptome profiling technology SuperSAGE with one of the next-generation sequencing platforms allows deep insights into the first molecular reactions of a plant exposed to salinity. Cross validation with recent reports enriched the information about the salt stress dynamics of more than 9,000 chickpea ESTs, and enlarged their pool of alternative transcripts isoforms

Recent advances in hedge funds' performance attribution:performance persistence and fundamental factors

We survey articles on hedge funds' performance persistence and fundamental factors from the mid-1990s to the present. For performance persistence, we present some pioneering studies that contradict previous findings that hedge funds' performance is a short term matter. We discuss recent innovative studies that examine the size, age, performance fees and other factors to give a 360° view of hedge funds' performance attribution. Small funds, younger funds and funds with high performance fees all outperform the opposite. Long lockup period funds tend to outperform short lockups and domiciled funds tend to outperform offshore funds. This is the first survey of recent innovative and challenging studies into hedge funds' performance attribution, and it should be particularly useful to investors trying to choose between hedge funds