K2 ADVISORS Alternative Investment Case Studies - - PowerPoint PPT Presentation

▶
k2 advisors alternative investment case studies
SMART_READER_LITE
LIVE PREVIEW

K2 ADVISORS Alternative Investment Case Studies - - PowerPoint PPT Presentation

Jan 25, 2024 21 likes •122 views

K2 ADVISORS Alternative Investment Case Studies

slide-1
SLIDE 1

K2 ADVISORS Alternative Investment Case Studies

slide-2
SLIDE 2

The Emergence of the Strategic Partner

1

slide-3
SLIDE 3

A collaborative, interactive relationship in which responsibilities are shared with or delegated to the investment manager; with the goal of

The Emergence of the Strategic Partner

creating a more absolute return approach to investing and improving risk- adjusted returns

2

slide-4
SLIDE 4

The “Real Value” of a Strategic Partnership

U.S. Public Pension Fund

“We set up these partnerships with a real eye toward hiring managers with

broad investment capabilities and lots of quantitative and qualitative talent, and then let them manage so we get their best ideas. The pension and consulting communities still are intent on dividing investments into tiny

3

  • boxes. The ultimate iteration of this tendency is to hire talented managers

and then keep them in the tiny boxes.” “They are very flexible and allow the manager to be very responsive to market conditions. Managers can make swift decisions about investment

  • pportunities and take full advantage of opportunities when they come

up.”

  • !"#$%&'&'&'
slide-5
SLIDE 5

Strategic Partnership: A Growing Trend Among Pension Funds

CalPERS

“Investment committee adopted a formal investment policy for a new multi-class strategic partnership program that will invest up to a total of $8 billion with four investment managers.”

Texas Permanent School Fund, Austin

“The $24 billion Texas Permanent School Fund, Austin, in April selected… strategic relationship managers who, together with internal staff, will co-manage portfolios of direct investments in hedge funds.”

New Jersey Division of Investment, Trenton

“The $72.1 billion New Jersey Division of Investment, Trenton, in December (2011) began a $1.5 billion strategic relationship.”

4

!()*(+ , !"#$%& --,.././../.

slide-6
SLIDE 6

Risk Systems: Stress Tests, Correlation, and Risk Profile

Sensitivity Analysis

Data Source: MSCI; As Of: Sep, 2011 Portfolio

  • 8.27%

S&P 500 -12.91%

64%

Barclays Agg TR

  • 2.20%

376%

GSCI Comm TR -12.08%

68%

HFRI FOF

  • 2.31%

357% Sample Stage 1 Proxy Analysis

Portfolio Beta Profile Sample Stage 1 Proxy Analysis

Portfolio VaR as % of Index VaR

Portfolio vs Benchmark VaRs

Portfolio S&P 500 Barclays Agg TR GSCI Comm TR HFRI FOF

  • 14%
  • 12%
  • 10%
  • 8%
  • 6%
  • 4%
  • 2%

0%

95% 1-Month VaRs (Value-at-Risk)

4.33% 4.38% 7.32% 7.52% 8.62% 4.13% 7.86% 4.02% 4.11% 4.55% 3.97% 4.12% 0.67%

  • 7.28%
  • 3.67%
  • 2.80%
  • 14.43%
  • 2.73%
  • 2.90%

1.26%

  • 3.24%

4.85%

  • 6.60%
  • 20.0%
  • 15.0%
  • 10.0%
  • 5.0%

0.0% 5.0% 10.0% 15.0%

S&P 500 Russ 2000 MSCI World USD Euro Stoxx 50 Emerg Mark ETF SPDR Financial SPDR Technology SPDR Cons Disc SPDR Cons Stap SPDR Energy SPDR Health SPDR Industrial Russell Growth/Value VIX Index iShares Bar 7-10yr Treas Bar Gbl Treas TR ML Euro Bond (EUR) Barclays Agg TR 2yr BBB Spread HY Bond Aus Bond TR GSCI Comm TR Dollar Index

Portfolio Beta-Derived Performance [Beta x 2 x Index Standard Deviation] Stress Scenarios - Period Returns

Risk systems enable investors to measure risk: stress tests, correlation analysis

5

Benchmark Beta Std Dev

S&P 500

0.68 3.17%

Russ 2000

0.49 4.46%

MSCI World USD

0.64 5.71%

Euro Stoxx 50

0.35 10.83%

Emerg Mark ETF

0.45 9.47%

SPDR Financial

0.52 4.00%

SPDR Technology

0.59 6.69%

SPDR Cons Disc

0.56 3.56%

SPDR Cons Stap

0.91 2.26%

SPDR Energy

0.43 5.31%

SPDR Health

0.67 2.98%

SPDR Industrial

0.50 4.13%

Russell Grow th/Value

0.24 1.37%

VIX Index

(0.12) 29.34%

iShares Bar 7-10yr Treas

(0.98) 1.87%

Bar Gbl Treas TR

(2.36) 0.59%

ML Euro Bond (EUR)

(2.49) 2.90%

Barclays Agg TR

(1.50) 0.91%

2yr BBB Spread

(0.28) 5.11%

HY Bond

1.36 0.46%

Aus Bond TR

(1.33) 1.21%

GSCI Comm TR

0.50 4.89%

Dollar Index

(0.82) 4.01%

%0/1.*(*(2(((2/(/2((2/

Portfolio Beta Profile

  • 1.68%
  • 16.85%
  • 8.50%
  • 7.16%
  • 11.20%

10.02%

  • 7.49%
  • 8.38%
  • 7.77%
  • 16.10%

6.53%

  • 27.74%
  • 35%
  • 30%
  • 25%
  • 20%
  • 15%
  • 10%
  • 5%

0% 5% 10% 15% 1997 Asian Flu (FX) 1998 Credit Crunch 2006 Energy Sell-Off 2007 Sub Prime 2001 Correction 2001 Rally 2004 Spring Hike 2008 Uh Oh January 2000 DotBomb 2002 Summer 1998 Fall Steepener 2008 Lehman Fail Post-Bailout Stress Scenarios - Period Returns

These tools are needed for active portfolio management

34) *(*(*22(((2((( 2/(/2((2/2

slide-7
SLIDE 7

Dynamic Asset Allocation Framework – US$ 1 Billion Sample Portfolio

Asset Class Allocation Decision Domestic Equity 35% Treasury Bonds 10% Sovereign Debt 5% Corporate Credit 15% Passive Beta 20%

Beta = 1.00

Passive Beta 5%

Beta = 1.00

Passive Beta 8%

Beta = 1.00

Passive Beta 5%

Beta = 1.00

Passive Beta 0%

Beta = 1.00

International Equity 20% Passive Beta 5%

Beta = 1.00

Commodities 5% Passive Beta 2.5%

Beta = 1.00

Alternatives 10% T +1 Liquidity

6

Hedge Fund Active Long 15% Beta = 0.50

PE Venture Capital

Hedge Fund Active Long 10%

Beta = 0.50

Mezzanine Debt Direct Loans

Hedge Fund Active Long 2%

Beta = 0.05

Hedge Fund Active Long 0%

Beta = 0.10

Hedge Fund Active Long 10%

Beta = 0

Real Estate Reinsurance Other Beta Completion

  • r Hedge

Beta Completion

  • r Hedge

Beta Completion

  • r Hedge

Hedge Fund Active Long 15%

Beta = 0.45

PE Venture Capital Beta Completion

  • r Hedge

Hedge Fund Active Long 2.5%

Beta = 0.25

Timber Farmland Beta Completion

  • r Hedge

1 Day To 2 Years 5 – 10 Yrs. T +2

34)

slide-8
SLIDE 8

Potential Benefits From a Strategic Partnership

Establishes a layer of fiduciary responsibility Best thinking and ideas from managers Increased investment flexibility Ability of manager to reduce risk or seek best risk-adjusted investments Increased ability to be more opportunistic Improves staff productivity: Improves staff productivity:

5 !(2!36 5 %(1/(72/8 5 9(: 5 ;022()</(/

Knowledge transfer – education of staff Access to systems (risk, data, market information, etc.)

7

slide-9
SLIDE 9

Contact Information

K2 Advisors, L.L.C. &=5 ,3 2(# -, # &.&'. 3 &.&-. & - !&.'.,'> ;.)?:( David C. Saunders .3(/1//* ;.(?:(

8

slide-10
SLIDE 10

Important Disclosures and Disclaimers

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