Thursday November 15th

Presenter: Andrew Lo, Massachusetts Institute of Technology

Although risk management has been a well-ploughed field in financial modeling for over two decades, traditional risk management tools such as mean-variance analysis, beta, and Value-at-Risk do not capture many of the risk exposures of hedge-fund investments. In this talk, I review several unique aspects of risk management for alternative investments---survivorship bias, dynamic risk analytics, liquidity, and nonlinearities---and provide examples that illustrate their potential importance to both managers and investors. I propose a research agenda for developing a new set of risk analytics specifically designed for alternative investments, with the ultimate goal of creating risk transparency without compromising the proprietary nature of alternative investment strategies.

Presentation Two: Private Investing - Professional Management or Cottage Industry?
Replicating a trend, which has been in evidence south of the border for several years, Canadian plan sponsors are making significant commitments to alternative assets. There is frequently a lack of congruence between the investment objectives of the sponsor and the investment processes of the manager. We explore whether proper criteria in manager selection are being applied and whether managers are actually creating alpha through the means that they promise. We will draw examples from the field of private equity, but will argue that the issues identified are of broad applicability in the area of alternative asset investing.
Presenter: Philip Olsson, Altamira Investment Services Inc.

Session One Respondents:
1. Harry Gibbs, Workplace Safety and Insurance Board
2. Robert Kamp, TELUS Corporation

Presentation One: Institutionalization of a New Asset Class? Absolute Return Strategies
Institutional investing has evolved over the years in many ways. We have seen the progression from balanced funds, to grid allocations to most recently core-satellite approaches. These trends have followed a common theme focusing on how to best capture and allocate alpha in your portfolio. Absolute return strategies introduce new highly focused sources of alpha to portfolios through financial engineering techniques and these unique sources of value can be included in institutional portfolios in ever more efficient and creative ways.
Presenter: Craig Russell, Deutsche Asset Management

Presentation Two: Diversification and Alpha: What to Expect
Sophisticated institutional investors want hedge fund returns to be uncorrelated with the standard market benchmarks, and they want these returns to have a source that is not totally dependent on manager skill. How do these expectations match up with the reality of the various hedge fund strategies?
Presenter: Robert A. Jaeger, Evaluation Associates Capital Markets, Inc.

Presentation Three: The Surprisingly Large Impact of the Long-only Constraint
Investors are looking for innovative ways to earn investment returns in these shaky economic times. The benefits available through a market neutral fund can be substantial and include the potential for higher returns. This presentation will discuss the increased efficiency of long-short strategies and, by implication, the subtle but pervasive effects of the long-only constraint.
Presenter: Ronald Kahn, Barclays Global Investors

Session Two Respondents:
1. Terri Troy, Royal Bank of Canada
2. David Finstad, Alberta Revenue

Presentation One: (Mis)using Indices in Absolute Return Strategies
Indices used in the absolute return world little resemble their scientifically constructed cousins available for traditional asset classes. However, there is a tendency to use them in a similar fashion--a very grave error. This paper will outline the construction rules from the major providers and suggest ways for their proper use.
Presenter: Tristram Lett, YMG

Presentation Two: A New Paradigm in Portfolio Building
This presentation will provide a taxonomy of absolute return strategies and will look at new approaches to strategic asset allocation.
Presenter: Eric Kirzner, University Toronto

Session Three Respondents:
1. Robert Adams, Bank of Montreal
2. Chris Caswell, Via Rail Canada

Presentation One: Risk Management for Hedge Funds
Risk is a key factor for institutional investors when establishing a hedge fund investment strategy. Prime brokerage services are critical for the survival and success of hedge funds. To manage their own risk exposure, prime brokers have developed simple processes to monitor risk and break through the myriad of hedge fund mystiques. This session explores these techniques and how they may apply to institutional investors.
Presenter: Fred Francis, Royal Trust

Presentation Two: Global Long-Short Strategies
Disappointing recent returns from many world equity markets coupled with high volatility and lacklustre future return forecasts by some institutional investors has increased interest in long-short strategies. These strategies, when properly implemented, can generate strong positive absolute returns with little or no market correlation. We will address both the theoretical and practical benefits and risks of long-short strategies. A good stock selection capability coupled with a disciplined portfolio construction process that properly allocates and monitors risk are critical success factors for any implementation. A global long-short mandate, whether market-neutral or not, allows for the widest possible array of securities on both the long and short sides thereby facilitating maximization of absolute return relative to risk.
Presenter: Raymond Mui, Integra Global Advisors/Acadian Asset Mgmt.

Session Four Respondents:
1. Bruce Grantier, Scotiabank
2. Michael Keenan, Bimcor

Presentation One: IPO Investing
Given low equity returns of the past two years, investors have been seeking out ‘alternative investments’ with hopefully the promises of superior returns. One such class of alternative investment is private equity. While holding out much promise, some recent academic research has shown that returns to private equity investing have not been exceptional, especially given the risks. In contrast, some recent research has uncovered some potentially profitable strategies (short-run and long-run) for investing in IPOs. This presentation will summarize this recent research on private equity and IPOs.
Presenter: Craig Dunbar, University of Western Ontario

Presentation Two: Public Venture Markets
This presentation describes public venture markets, why they exist, Canada's public venture market and the challenges and opportunities that this market presents as an alternative investment for pension funds.
Presenter: Kevan Cowan, CDNX

Session Five Respondents:
1. Bill Forbes, Queen's University
2. Douglas Greaves, Canada Post Corporation

Presentation One: Timber Case Study
This presentation examines a recent decision faced by the Ontario Teachers’ Pension Plan Board: whether to recommend to the board of directors an investment in an alternative asset class, timberland. Timberland investments were like investing in a “tree factory” and represented a unique opportunity to diversify the fund, but also presented numerous challenges.
Presenters: Stephen Foerster of Ivey Business School, The University of Western Ontario with Wayne Kozun and Barbara Zvan, Ontario Teachers’ Pension Plan Board

Presentation Two: The Nature and Use of Weather Derivatives
This talk will introduce a new class of investment instruments: weather derivatives. It will describe the structure and workings of the instruments. It will also provide analyses and discussions around the potential role of using weather derivatives to augment conventional investment portfolios. Special focus is placed on temperature derivatives.
Presenter: Jason Wei, University of Toronto and Melanie Cao, York University

Session Six Respondents:
1. Leona Fields, York University
2. Dale Lockie, University of Guelph