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| News & Scoreboards |
10 Questions for your Private Banker - 02/05
02/01/2005
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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?
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