Leo Kolivakis's blog

A lot of hedge funds are hurting but most are doing well because they're riding the Beta Express up while charging alpha fees to their investors. Take it from me, hedge funds are no no panacea. And in many cases, they are pure con artists peddling snake oil.

Should Britain get ready for a mass exodus of bankers who are pissed at these new measures to curb their bonuses? Oh please, where are they going to go? Wall Street? They're next in the line of fire.

As the nature of markets evolve, you need to understand how collective inflows are influencing the trends in each asset class and changing the relationship between them. Rebalancing is crucial, but so is understanding what is going on in each asset class and how developments in one asset class will impact other asset classes.

There is a clean energy revolution going on and it's just in its infancy. Those who can't see it are either blind or hopelessly ignorant. If pension funds are smart, they will start thinking about investing opportunistically in this sector now.

It's amazing how a year after the worst financial crisis in post-war history, when hedge funds were closing the gates of hedge hell, things have not changed on Wall Street.

In the environment we're heading into, I prefer liquid asset classes over illiquid ones and I certainly would pick and choose my private equity and real estate funds more carefully instead of writing big checks to every large buyout fund. I'd make sure that my private equity managers are not glorified financial engineers who came from an investment banking background, but guys and gals with solid hands on experience restructuring companies from the bottom-up.

It's not just rating agencies that are at the crossroads, but pension funds are at the crossroads too. We need a governance overhaul that introduces more transparency and a compensation system that rewards risk-adjusted returns. The status quo at rating agencies and pension funds is totally unacceptable.

A few brave economists believe fiscal and monetary stimulus, as well as improved productivity, will help the United States bounce back stronger than anticipated, helping it to leap hurdles such as high unemployment, a soaring budget deficit and a beleaguered consumer.

We are in uncharted territory, so now more than ever, pension fund managers, board of directors and plan sponsors need to review their asset allocation more frequently, making all necessary adjustments as the environment evolves. Complacency and following the herd is highly irresponsible, ensuring mediocre performance over the long-term.

Are Teachers and other pension funds flying off course? Only time will tell but they sure are putting lots of eggs in the infrastructure basket. As with any investment, the benchmark should reflect the beta, credit risk and liquidity risk of the underlying investments. Infrastructure is a long-term asset class but it isn't free of risks and the benchmark must reflect this.

The news in commercial real estate keeps getting grimmer by the day. This crisis will have severe implications for pension funds that are carrying these properties on their books and banks that are exposed to commercial real estate loans. In other words, the commercial real estate crisis isn't over - not by a long shot.

But the wizards of Wall Street remain undeterred. They will come up with new ways to model all risks, including systemic risk. Will the consuming public be fooled by their chicanery? I don't know about the consuming public, but I guarantee you that the pension parrots will be fooled by their chicanery.

A year after Lehman collapsed, what have they learned on Wall Street? Absolutely nothing. That's pretty much what I see on Wall Street and at the large "sophisticated" Canadian public pension funds. Behind the rhetoric, it's business as usual. Who needs risk management when the markets are on fire and you're looking to shoot the lights out?

The banking/ hedge fund/ private equity/ commercial real estate bubble is the Mother of All bubbles, but this is endemic to a culture that promotes excessive risk taking and rewards it with excessive compensation.

Does all this mean the W-recovery is off the table? Not necessarily. What it means is that there is a lot of liquidity in the system that will spur another asset bubble. And we all know that asset bubbles do not end well.