Expanding Frontiers: An Alternative Investments & Machine Learning Podcast

This episode explores and academic paper on the replication of hedge fund strategies using publicly available data and machine learning techniques, specifically autoencoders for dimension reduction and Generative Adversarial Networks (GANs) for synthesizing additional data. The author aims to demonstrate that such replicated portfolios can outperform traditional hedge fund returns after accounting for fees and transaction costs, th...

This episode explores how deposit-taking institutions, exemplified by Silicon Valley Bank (SVB), are transforming into "synthetic hedge funds". It examines SVB's hybrid business model, which combined on-balance-sheet "private equity-style banking" with off-balance-sheet "hedge fund-like trading strategies". The analysis highlights how SVB's reliance on "factor-based models" and "premature hedging exits" exposed it to significant in...

In this episode, we review two academic papers investigating various aspects of hedge fund performance and investment strategies. One relatively new study primarily examines how macroeconomic factors and the inclusion of hedge fund strategies impact portfolio performance for risk-averse investors, particularly focusing on out-of-sample predictability and risk-adjusted returns. It highlights that integrating hedge funds and consider...

This episode examines different facets of the housing market and its interconnectedness with broader economic factors. It reviews three recent SSRN papers. One source explores how contractionary monetary policy can lead to higher homeowners’ insurance prices, particularly for financially constrained insurers with interest-rate-sensitive assets, subsequently impacting home prices and mortgage applications. The other source investiga...

This is the second Expanding Frontiers episode devoted to quantum computing for finance. It  explores the current (2024) state and future potential of Quantum Machine Learning (QML), specifically focusing on its applications within the financial services industry. We discuss various QML algorithms including Quantum Variational Classifiers, Quantum Kernel Estimation, and Quantum Neural Networks, and also touch upon quantum generativ...

This episode provides an overview of multimodal Financial Foundation Models (MFFMs), exploring their progress, potential applications, and associated challenges. It emphasizes the ubiquitous nature of multimodal financial data—including text, audio, images, and tabular information—in various financial applications like search, robo-advising, and trading. The paper review also addresses the development lifecycle of MFFMs, from pre-t...

In this episode, we explore how smart finance—like social impact bonds and pay-for-success models—can help end homelessness. I share insights from my work with the Coalition to End Homelessness in South Florida and recent policy shifts nationwide, including the controversial Grants Pass ruling. We’ll look at data, dignity, and the human stories behind the numbers. This is about funding outcomes, not overhead.

Reference

Wilkens, K. ...

This episode reviews the book, Quantum Computing for Finance by Oswaldo Zapata, outlining the foundational concepts of classical and quantum computing, including topics like Boolean logic, qubits, quantum gates, and error correction. It explores how quantum computing can potentially enhance classical financial methods such as portfolio optimization, Monte Carlo simulations, and machine learning algorithms used in areas like credit ...

In this episode we discuss the increasing integration of artificial intelligence (AI) and machine learning (ML) into asset management, focusing on their application in portfolio management, risk assessment, and trading strategies. AI, particularly ML, allows models to process vast, complex datasets and identify patterns beyond traditional methods, promising enhanced efficiency and predictive accuracy. However, these technologies in...

This podcast episode discusses state and local AI regulations impact investor risk, finding that such laws can decrease risk by incentivizing firms to adopt better AI governance and reduce misconduct. It also examines how financial analysts utilize AI and its impact on their behavior. Finally, we discuss a third academic research paper on AI in risk management and forecasting from a global perspective. It is based on these three re...

This episode explores the evolving landscape of digital assets and their implications for institutional investors, highlighting the necessary learning process, expert engagement, and meticulous due diligence required due to unique risks and opportunities. It examines various valuation techniques for these intangible assets, acknowledging their speculative nature and rapid changes. A significant portion discusses tokenization, detai...

This episode provides a comprehensive overview of private credit and distressed debt markets. It outlines different types of private credit, including leveraged loans, direct lending, mezzanine debt, and distressed debt, detailing their characteristics and the vehicles used for investment. The text explores fixed income analysis, emphasizing the distinctions between bonds and loans regarding liquidity, risk, and interest rates, and...

This episode introduces structured products, explaining their creation from existing assets to meet specific investor needs regarding risk, tax, and liquidity. It covers various types, including equity-linked products, and the wrappers used to legally present them, detailing their potential tax effects. We discuss mortgage-backed securities (MBS), including residential (RMBS) and commercial (CMBS), along with the critical aspect of...

This episode provides a comprehensive overview of digital assets, beginning with the foundational distributed ledger technology (DLT) and its financial applications like asset tokenization and decentralized finance (DeFi). It explores various consensus mechanisms, including Proof of Work and Proof of Stake, and categorizes DLTs by governance and decentralization. We outline different types of digital assets, such as cryptocurrencie...

This episode provides a comprehensive overview of hedge funds, beginning with their fundamental characteristics, industry structure, and fee comparisons to private equity. We outline various hedge fund strategies, including global macro, managed futures, event-driven, relative value, and equity hedge funds, explaining their investment approaches and potential risks. The discussion also addresses the complexities and biases inherent...

In this episode, we take a deep dive into real assets—including land, natural resources, infrastructure, and intellectual property—and explore their unique characteristics and investment potential.

We’ll discuss timberland and farmland investments, covering valuation methods, risks, and opportunities. Then, we’ll break down natural resource investments, with a focus on commodity producers and master limited partnerships (MLPs).

The...

This podcast episode introduces commercial real estate as an asset class, outlining its categories like office and retail. It discusses advantages and disadvantages of real estate, including inflation hedging and illiquidity, and categorizes real estate equity styles as core, value-added, and opportunistic. The text then covers real estate development, viewing it through a real options lens, and explains valuation approaches such a...

This discussion examines the world of private equity (PE), spanning venture capital, growth equity, and buyouts. It covers diverse aspects such as investment types, valuation methodologies, and the structure of PE funds including their fees and cash flow dynamics. It explores the intricacies of venture capital stages, valuation techniques using multiples and real options, and the importance of redemption rights in growth equity. Fu...

This discussion serves as an introduction to alternative investments, targeting both institutional and retail investors, particularly those pursuing the CFA (or CAIA) designation. It defines alternative investments by what they are not (traditional stocks and bonds) and by what they are (hedge funds, real assets, private equity, etc.). The material explores the debate around including alternative investments in portfolios, touching...