While commodity futures protect against commodity inflation, their relationship with measures of trend inflation is weak. Commodity futures do not appear to hedge inflation impulses coming from sectors other than food and energy, nor are they responsive to long-term relative rises in energy prices. While such episodes have been rare, the author cautions against assuming they are unimportant. He concludes that inflation-hedging benefits of commodities may depend on the source and persistence of inflation and they should not be described as an inflation hedge without qualification.
{"title":"Commodity Futures and Trend Inflation","authors":"Marc Fandetti","doi":"10.3905/jai.2023.1.198","DOIUrl":"https://doi.org/10.3905/jai.2023.1.198","url":null,"abstract":"While commodity futures protect against commodity inflation, their relationship with measures of trend inflation is weak. Commodity futures do not appear to hedge inflation impulses coming from sectors other than food and energy, nor are they responsive to long-term relative rises in energy prices. While such episodes have been rare, the author cautions against assuming they are unimportant. He concludes that inflation-hedging benefits of commodities may depend on the source and persistence of inflation and they should not be described as an inflation hedge without qualification.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-08-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46655765","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article tests the inflation hedging ability of infrastructure investments in both the short and long run in four of the major emerging markets. Based on the Generalized Fisher Hypothesis (GFH), we use Fama and Schwert’s framework and Granger causality tests for short-term insights, and Engle and Granger co-integration for a long run analysis, to examine the inflation hedging effectiveness of various listed indexes (composite infrastructure, energy, communication, utilities, common stock, and property). The findings indicate that infrastructure and its sub-sectors constitute a more effective hedge against inflation in the long run than in the short run. The empirical results also stress the presence of an inherent heterogeneity within the infrastructure sector, and suggest that real estate and infrastructure should be considered separately in investors’ portfolios. Our results have implications for investors, including institutional and retail, provided they have longer investment horizons, and for other market players to see infrastructure in the light of a unique asset class.
{"title":"Inflation Hedging Potential of Infrastructure Sector and Sub-Sector Returns—Evidence from Emerging Markets","authors":"Surbhi Gupta, A. Sharma","doi":"10.3905/jai.2023.1.199","DOIUrl":"https://doi.org/10.3905/jai.2023.1.199","url":null,"abstract":"This article tests the inflation hedging ability of infrastructure investments in both the short and long run in four of the major emerging markets. Based on the Generalized Fisher Hypothesis (GFH), we use Fama and Schwert’s framework and Granger causality tests for short-term insights, and Engle and Granger co-integration for a long run analysis, to examine the inflation hedging effectiveness of various listed indexes (composite infrastructure, energy, communication, utilities, common stock, and property). The findings indicate that infrastructure and its sub-sectors constitute a more effective hedge against inflation in the long run than in the short run. The empirical results also stress the presence of an inherent heterogeneity within the infrastructure sector, and suggest that real estate and infrastructure should be considered separately in investors’ portfolios. Our results have implications for investors, including institutional and retail, provided they have longer investment horizons, and for other market players to see infrastructure in the light of a unique asset class.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-08-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42315063","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
While real estate has by now become a well-established asset class among institutional investors, the vast majority of real estate investment so far has been in private rather than public markets (real estate investment trusts, i.e., REITs, or shares in real-estate companies). Against this background and amid an ongoing debate about the relative rewards of public versus private investments, this article asks how much of the historical return on global listed real estate can be explained by well-established market and alternative risk premiums. The results indicate that model-implied “excess returns” are effectively zero, suggesting that there is limited scope for public real estate to add value to an optimally structured multi-asset portfolio. However, to the extent that the design or composition of investors’ portfolios is sub-optimal—due to such institutional or legal constraints as prohibition of leverage, shorting, or exclusions of some categories of stocks—allocating to REITs might improve Sharpe ratios, especially when investors can deploy skill and competitive edge in selecting REITs.
{"title":"Listed Real Estate in a Multi-Asset World: Does It Add Value?","authors":"J. Jabłecki","doi":"10.3905/jai.2023.1.197","DOIUrl":"https://doi.org/10.3905/jai.2023.1.197","url":null,"abstract":"While real estate has by now become a well-established asset class among institutional investors, the vast majority of real estate investment so far has been in private rather than public markets (real estate investment trusts, i.e., REITs, or shares in real-estate companies). Against this background and amid an ongoing debate about the relative rewards of public versus private investments, this article asks how much of the historical return on global listed real estate can be explained by well-established market and alternative risk premiums. The results indicate that model-implied “excess returns” are effectively zero, suggesting that there is limited scope for public real estate to add value to an optimally structured multi-asset portfolio. However, to the extent that the design or composition of investors’ portfolios is sub-optimal—due to such institutional or legal constraints as prohibition of leverage, shorting, or exclusions of some categories of stocks—allocating to REITs might improve Sharpe ratios, especially when investors can deploy skill and competitive edge in selecting REITs.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-08-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45717648","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The current emphasis on impact measurement raises several challenges, including ethical ones. Rather than taking for granted that more and better measurements are crucial to the development of impact investing, the authors of this article question what drives this measurement mania and expose some related pitfalls. We also develop some practical and original ways to help the impact investing movement avoid some measurement-related traps, such as making numbers less salient and combining them with more qualitative elements, reducing the likelihood of metric overload, inviting investors to adopt the perspective of a beneficiary, or introducing random procedures (sortition) to give a voice to neglected stakeholders.
{"title":"Too Much of A Good Thing? Drawbacks of Stressing Measurement of Impact Investing","authors":"J. Celse, G. Davies, G. Grolleau","doi":"10.3905/jai.2023.1.194","DOIUrl":"https://doi.org/10.3905/jai.2023.1.194","url":null,"abstract":"The current emphasis on impact measurement raises several challenges, including ethical ones. Rather than taking for granted that more and better measurements are crucial to the development of impact investing, the authors of this article question what drives this measurement mania and expose some related pitfalls. We also develop some practical and original ways to help the impact investing movement avoid some measurement-related traps, such as making numbers less salient and combining them with more qualitative elements, reducing the likelihood of metric overload, inviting investors to adopt the perspective of a beneficiary, or introducing random procedures (sortition) to give a voice to neglected stakeholders.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-07-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47791996","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-30DOI: 10.3905/jai.2023.26.1.001
Hossein Kazemi
{"title":"Editor’s Letter","authors":"Hossein Kazemi","doi":"10.3905/jai.2023.26.1.001","DOIUrl":"https://doi.org/10.3905/jai.2023.26.1.001","url":null,"abstract":"","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-06-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41845956","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article evaluates the performance of alternative mutual funds (AMFs) from January 2000 to June 2022. The author discovered that monthly returns of alternative mutual funds have a high correlation with global and US stocks, and may not provide investors with diversification options. Correlation among average monthly returns of AMFs and US and global equities increased after the 2008 economic crisis and peaked during the COVID-19 induced lockdowns until the first vaccinations. For the period beginning in January 2000 and ending in July 2007, before the onset of the economic crisis, absolute performance, as measured by average monthly returns, showed that alternative mutual funds outperformed both US and worldwide stocks. Before July 2007, AMFs also outperformed US and worldwide equities in terms of risk-adjusted performance. After July 2007, AMFs lagged US stocks. During the COVID-19 induced lockdowns until the start of the first vaccinations, AMFs did not outperform US equities but they did outperform global equities in terms of risk-adjusted performance.
{"title":"Is Alternative Investment a Successful Strategy?","authors":"D. Malhotra","doi":"10.3905/jai.2023.1.193","DOIUrl":"https://doi.org/10.3905/jai.2023.1.193","url":null,"abstract":"This article evaluates the performance of alternative mutual funds (AMFs) from January 2000 to June 2022. The author discovered that monthly returns of alternative mutual funds have a high correlation with global and US stocks, and may not provide investors with diversification options. Correlation among average monthly returns of AMFs and US and global equities increased after the 2008 economic crisis and peaked during the COVID-19 induced lockdowns until the first vaccinations. For the period beginning in January 2000 and ending in July 2007, before the onset of the economic crisis, absolute performance, as measured by average monthly returns, showed that alternative mutual funds outperformed both US and worldwide stocks. Before July 2007, AMFs also outperformed US and worldwide equities in terms of risk-adjusted performance. After July 2007, AMFs lagged US stocks. During the COVID-19 induced lockdowns until the start of the first vaccinations, AMFs did not outperform US equities but they did outperform global equities in terms of risk-adjusted performance.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43969891","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Private equity (PE) funds, or more broadly private capital funds, can be benchmarked against public or private alternatives. Academic literature usually focuses exclusively on the public side. In this article, the authors investigate more-rigorous private peer group benchmarking methods beyond traditional “quartile ranking.” They focus mainly on both statistical and deterministic models for (1) peer group data enhancement, (2) handling very small peer groups, (3) simulation-based portfolio aggregation, and (4) the notion of maximum diversified private benchmarks. Ultimately, they discuss obtaining more-meaningful private benchmarks for a private capital portfolio.
{"title":"Private Benchmarking for Private Equity Funds","authors":"Christian Tausch, Markus J. Rieder, Philipp Abel","doi":"10.3905/jai.2023.1.192","DOIUrl":"https://doi.org/10.3905/jai.2023.1.192","url":null,"abstract":"Private equity (PE) funds, or more broadly private capital funds, can be benchmarked against public or private alternatives. Academic literature usually focuses exclusively on the public side. In this article, the authors investigate more-rigorous private peer group benchmarking methods beyond traditional “quartile ranking.” They focus mainly on both statistical and deterministic models for (1) peer group data enhancement, (2) handling very small peer groups, (3) simulation-based portfolio aggregation, and (4) the notion of maximum diversified private benchmarks. Ultimately, they discuss obtaining more-meaningful private benchmarks for a private capital portfolio.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-06-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49663835","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Private equity (PE) risk and performance is a black box for investors, as information is quasi-private during a fund’s life. To overcome this issue, the authors use the universe of listed PEs (LPEs) in US exchanges, which permits the measurement of financial fundamentals based on audited quarterly reports and the observation of share price performance and volatility on a real-time basis. They first show that LPE performance and valuations are highly correlated with those of unlisted PEs and hence are a good proxy. LPEs constantly exhibit leverage double that of the broader market while showing no distinctive share price performance. Controlling for standard determinants of returns, LPE firms do not outperform market benchmarks. Using COVID-19 as an exogenous increase in tail risk, PE firms grossly underperformed, as markets penalized the riskiness and lack of transparency inherent in PE investments. The problems are likely greater in privately held PEs, where performance is self-reported, not audited, and illiquidity periods last up to 10 or 12 years.
{"title":"The Risk and Performance of Listed Private Equity","authors":"Hrvoje Kurtović, G. Markarian, P. Breuer","doi":"10.3905/jai.2023.1.191","DOIUrl":"https://doi.org/10.3905/jai.2023.1.191","url":null,"abstract":"Private equity (PE) risk and performance is a black box for investors, as information is quasi-private during a fund’s life. To overcome this issue, the authors use the universe of listed PEs (LPEs) in US exchanges, which permits the measurement of financial fundamentals based on audited quarterly reports and the observation of share price performance and volatility on a real-time basis. They first show that LPE performance and valuations are highly correlated with those of unlisted PEs and hence are a good proxy. LPEs constantly exhibit leverage double that of the broader market while showing no distinctive share price performance. Controlling for standard determinants of returns, LPE firms do not outperform market benchmarks. Using COVID-19 as an exogenous increase in tail risk, PE firms grossly underperformed, as markets penalized the riskiness and lack of transparency inherent in PE investments. The problems are likely greater in privately held PEs, where performance is self-reported, not audited, and illiquidity periods last up to 10 or 12 years.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-05-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42457986","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article investigates digital objects in video games as an alternative investment from 2015 to 2020. The authors use the Steam Community Market of the Counter-Strike Global Offensive game publisher, a database that contains 19,717 observations divided into knives, machine guns, machine pistols, pistols, rifles, sniper rifles, and stickers. They use a hedonic approach to construct indexes for each category and an overall index. The sharp increase in the overall index is due to the transition from pay-to-play to free-to-play in December 2018. The stickers index is very high due to the scarcity of some stickers and the use of specific periods. In addition, the returns are correlated with risks differently depending on the skins category. Given the low correlation between the returns of skins and those of financial and nonfinancial markets, the risk-adjusted returns of skins reveal a potential value for portfolio diversification. However, testing this potential through a CAPM approach for different portfolio risk profiles confirms only some interest in stickers and possibly Sniper rifles and pistols. Implications of these findings are discussed for individual and professional investors, gamers, and game publishers.
{"title":"Non-Separable Digital Objects as an Alternative Investment","authors":"Benoît Faye, É. Le Fur","doi":"10.3905/jai.2023.1.190","DOIUrl":"https://doi.org/10.3905/jai.2023.1.190","url":null,"abstract":"This article investigates digital objects in video games as an alternative investment from 2015 to 2020. The authors use the Steam Community Market of the Counter-Strike Global Offensive game publisher, a database that contains 19,717 observations divided into knives, machine guns, machine pistols, pistols, rifles, sniper rifles, and stickers. They use a hedonic approach to construct indexes for each category and an overall index. The sharp increase in the overall index is due to the transition from pay-to-play to free-to-play in December 2018. The stickers index is very high due to the scarcity of some stickers and the use of specific periods. In addition, the returns are correlated with risks differently depending on the skins category. Given the low correlation between the returns of skins and those of financial and nonfinancial markets, the risk-adjusted returns of skins reveal a potential value for portfolio diversification. However, testing this potential through a CAPM approach for different portfolio risk profiles confirms only some interest in stickers and possibly Sniper rifles and pistols. Implications of these findings are discussed for individual and professional investors, gamers, and game publishers.","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-05-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44623924","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-03-31DOI: 10.3905/jai.2023.25.4.001
Hossein Kazemi
{"title":"Editor’s Letter","authors":"Hossein Kazemi","doi":"10.3905/jai.2023.25.4.001","DOIUrl":"https://doi.org/10.3905/jai.2023.25.4.001","url":null,"abstract":"","PeriodicalId":45142,"journal":{"name":"Journal of Alternative Investments","volume":null,"pages":null},"PeriodicalIF":0.7,"publicationDate":"2023-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43960340","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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