02/01/2005
Silicon Valley received 35 percent less venture capital investment in the third quarter of last year than in the second, reflecting a nationwide trend, according to the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. If venture capitalists expect tech start-ups to underperform, should I reexamine my own exposure to this sector?
Hedge funds are far riskier and provide lower returns than many assume, according to a recent paper by financial visionary Burton Malkiel. The Princeton University professor and author of the seminal investment tome A Random Walk Down Wall Street, with his coauthor Atanu Saha, is criticizing hedge fund indices for showing inflated returns and having other technical problems. Am I making decisions to invest in this asset class based on faulty performance information, as Malkiel’s paper suggests?
Banks are loosening standards to attract hedge fund business, warned Tim Geithner, president of the New York Federal Reserve, in a recent speech. This could cause them to suffer large losses if there is a shakeout in the hedge fund industry, as there was in 1998 and 1999. Are any of the banks in which I invest making a play for this business? Are they acting prudently?
The risk of the S&P 500 is now an investable asset class. Options on the Chicago Board Options Exchange’s VIX index futures contracts, which track the S&P 500’s volatility (a measure of risk), have debuted, giving investors the ability to either bet that the market will become more, or less, choppy, or to hedge their portfolios against those possibilities. Volatility remains very low; is this a good time to buy hedges against future S&P 500 volatility, or to invest in volatility in anticipation of a rise in it?
Investors paid $17.3 billion in hidden trading costs in their equity mutual funds in 2002, according to a recent study of 5,000 funds by the Zero Alpha Group, comprised of eight independent investment advisory firms. The group claims that these hidden levies comprise 44 percent of the real cost of investing, and are not reported to clients. Are my fund investments allowing this type of abuse?
Bermuda plans to crack down on hedge funds in the wake of the U.S. Securities and Exchange Commission’s passage of a rule that requires them to register as investment advisors. Bermuda had been a favored offshore domicile for these funds. How will its new legislation affect my investments in funds or in funds of funds, if at all?
Greenspan finally acknowledged that Chinese and Japanese central banks will not bankroll the U.S. government deficit indefinitely. Both of these institutions, along with central banks elsewhere in Asia and the Middle East, are beginning to shift their reserves from dollars to euros. How will this affect interest rates and the dollar, and my portfolio?
Bush has promised to reform the alternative minimum tax (AMT), although many expect this to be difficult to achieve in light of his first-term tax cuts and his other domestic priorities. What would his proposals for AMT reform mean for my portfolio and income strategies?
A dangerous debt bubble threatens private equity investors due to the growing activity of hedge funds in the sector, according to bankers who provide debt for leveraged buyouts. Hedge funds are bidding up valuations and causing all participants in M&A auctions to increase their leverage. Is this a concern for the funds in which I invest?
Russia’s growing rift with the United States over the Ukraine and our policies in Iraq, combined with Vladimir Putin’s consolidation of power over the country’s oil interests, puts the outlook for the ruble in question. If the ruble drops in value, how will it affect my exposure to Russia? To energy investments in general?