Vorträge Flashcards
(42 cards)
What kind of Hedgefund is Bill Ackmans Pershing Square?
Event Driven: Activist Investor
What is Herbalife?
What was Bill Ackmans Position to Herbalife and what did Icahn?
Herbalife is a nutrition company, which products are only available through its distributors (Multilevel Marketing)
Ackman: Herbalife is a pyramid scheme –> Shorted: $45 -> $0
Icahn: –> Long position
(Daniel Loeb had a long position too)
What is one primary strategic move of an Activist investor?
Long:
Obtain representation on the board of directors to impact the firm’s policy and unlock shareholder values (such as share buybacks)
Short:
Publicly talks down the security
Risk rating of an Activist investor (especially Pershing square)
Leverage permission: leverage positions
Portfolio concentration: High portfolio concentration
Key man risk
Regulatory risk (changes in regulations) Reputational damage (negative publicity could impact manager on influencing companies) Exposure Risk (Limited visibility over portfolio exposures) Short risk (Short squeeze)
Short interest
Number of shares of a security, which are sold short and have not been settled yet (no repurchase)
Outstanding short positions on the market
Multilevel Marketing (Herbalife)
Individuals earn commission by selling products
and
for sales made by people THEY RECRUIT
Legitimate multilevel-marketing: Earnings are based on selling
Illegitimate pyramid scheme: Earnings are ALSO based on recruiting
Pershing Square Strengths, Weaknesses, Opportunities, Threads
Strengths: High concentration of investments + lower fee
Weaknesses: Key man risk, low diversification
Opportunities: Flexible mandate
Threats: Regulatory
Expose to Style Premia? (AQR)
If an investor is not already exposed to style premia, it is alpha to them:
Alpha (vor CAPM) + Equity Beta (mit CAPM) + Other Market Beta (Fama-French 3 factor model) + Hedgefund Beta
What are the 4 different style premia of AQR?
Carry (different yield between markets)
Momentum (Performance based on recent history)
Defensive (Assets with low beta have, relative to risk, higher yields compared to assets with high beta)
Value (Intrinsic value)
Carry trade
Invest in markets with high yield through borrowing on markets with low yield
Carry = Yield(long) - Yield(short)
Yield(long) > Yield(short)
Defensive
Anomaly of low beta: Betting against beta
Assets with low beta long – Assets with high beta short
Risk premia in reality lower than predicted by CAPM –> Lower sharpe ratios (especially for high volatility)
Momentum
Physics: Momentum = Weight * speed
Trend: Rising prices create more demand
Payoff like a long straddle (CTA)
Problem: Momentum has problems with correlations.
Value
Intrinsic Value ≠ Stock price –> market inefficiency
DCF & Multiples
Price < intrinsic value –> Long and vice versa
Schedule 13D
Regulatory disclosure of positions to SEC and showing the intention of activistic activity
–> Abnormal trading vol. before and after filing
Activist Strategy
Buy stocks –> SEC filing –> Contact Management –> Cooperation vs. Confrontation –> Formal shareholder applications –> Judicial –> Corporate transaction
Hedge funds often use help of other shareholders
Negative externalities of activist investors
Reduced influence of corporate boards on management
Higher discretion in firms
They only listen to the most important investors
Only symbolic reactions
Positive externalities of activist investors
Institutional investors (intermediaries) have no incentive to help out companies --> Hedgefunds do governance intervention --> Can reduce agency costs
Was ist Netto, was ist Brutto exposure?
Eine Bank, die in ihrem gesamten Devisenbestand 120 % „Long“ und 50 % „Short“-Positionen aufweist, besitzt eine Netto-Exposure von 70 %.
Als Brutto-Exposure (englisch gross-exposure) bezeichnet man die Addition von „Long“- und „Short“-Positionen, um die Summe aller offenen Positionen erkennen zu können.
Long Short Equity Strategy
Instruments: Long (Stocks, which are undervalued) & short (Stocks, which are overvalued) + Leverage
Risk: Strategy does not work;
Beta Mismatching: If market is declining strongly, the long positions lose more, than the short positions win
Idea: Use Spread between valuations and minimize market risk
Reasons for shortselling
Claims are way too aggressive Claims do not get corrected Inventory does not show all needed goods Securities not mark to marked Assets inflationary indexed Bad conditions for leverage Stupid assets in inventory
Value Investing versus Growth investing
Value investing:
Stocks are cheap/expensive compared to a benchmark
Watch stocks with high cash flows / trading below multiple
Growth Investing:
Analytical on capital, earnings and growth
Big numbers in past or future growth, sales, market share
Absolute return investing
Have big return independent of market situation
–> Watch only on absolute return at the end of the year
Pairs Risk
Widening spreads between long and short
Einhorn Effect
Sharp drop in prices, after einhorn announces a short position
