Comments on: According to investment guru Burton Malkiel … http://kenhoma.wordpress.com/2012/03/29/according-to-investment-guru-burton-malkiel/ News & Views on Marketing, Economics & Politics Mon, 20 May 2013 21:04:55 +0000 hourly 1 http://wordpress.com/ By: Frank http://kenhoma.wordpress.com/2012/03/29/according-to-investment-guru-burton-malkiel/#comment-10061 Fri, 30 Mar 2012 14:03:11 +0000 https://kenhoma.wordpress.com/?p=17249#comment-10061 As an asset mgr, I’m very concerned about the fees I collect and pay away. And there is pressure on managers to reduce fees (but when are service providers in any industry not pressured on fees). One enduring lesson from your class I use every quarter is to force my “commodity” service providers to justify themselves constantly from a price standpoint.

Look, I believe in alpha- and I believe in diversification (the greatest free lunch going). But diversification is done through minimal correlation. If you can generate alpha, via an uncorrelated investment play, there is justification for fees (including, yes, 14% of your yield).

As I push my fund business forward, all the interest is in alternatives to alternatives. The world doesn’t need another long-short fund. But funds that feature atypicality- where alpha is generated through say, “new” execution advantages, etc.- have value that justifies a generous fee structure.

I don’t sit and discuss how to build an alpha generator around a new currency model. We discuss how to bring high frequency trading to, say, art or coins. We don’t theorize how to yield-enhance a corporate bond via repo strategies; we discuss how to find fundamentally AA-assets with an odd component- duration risk, illiquidity, etc.- that will provide a coupon kicker.

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