IMCA Announces First Academic Paper Competition Winner

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Winning paper offers new insight into hedge fund risk analysis

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The winning paper illustrates a useful process for accurately forecasting daily returns of hedge funds, which helps advisors and investors to better weigh the risk and value within their portfolios.

Investment Management Consultants Association® (IMCA®) today announced the winner of its 2012 Journal of Investment Consulting Academic Paper Competition. The winning paper, “Monitoring Daily Hedge Fund Performance When Only Monthly Data is Available,” addresses a common problem related to time lag that confronts investors who wish to monitor their hedge funds on a daily basis. The paper’s authors are Russ Wermers, associate professor of finance, Robert H. Smith School of Business, University of Maryland at College Park; Daniel Li, research analyst, Markov Processes International LLC; and Michael Markov, chairman, Markov Processes International LLC. The paper will be published in the next issue of the Journal of Investment Consulting, and winners receive a $5,000 cash award.

“The authors provide valuable insight into a new approach to monitoring the daily risk of investing in hedge funds,” said Margaret M. Towle, PhD, CPWA®, Journal of Investment Consulting editor-in-chief. “The winning paper illustrates a useful process for accurately forecasting daily returns of hedge funds, which helps advisors and investors to better weigh the risk and value within their portfolios.”

The competition called for papers on topics that examine recent research relevant to investment consulting and private wealth management, and provide a development of theory and applied research related to risk management. Paper submissions were invited from non-tenured faculty and doctoral students. The Journal of Investment Consulting editorial advisory board selected the winning paper based on quality and relevancy of the research to investment management consultants and investment advisors.

“In our collaborative work, we sought to find a quantitative framework using the latest in factor modeling techniques to give investors an estimation of intra-month behavior of their hedge fund investments,” said Wermers. “We were amazed at how simple it can be to extract useful factor information from infrequent returns, then to use this information at a finer time scale. We think this approach has the potential to be widely used in the industry.”

“Consultants and advisors to hedge fund investors have long been plagued by the lack of transparency associated with privately managed funds,” said Markov. “Even for portfolios that have the luxury of real-time data and transparency, risk has proven difficult to assess and manage in the post-Crisis world; for hedge fund investors, this has been magnified. We’re greatly honored by this award and proud to advance conventional thinking in this space.”

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Established in 1985, IMCA is a nonprofit professional association and credentialing organization with more than 8,700 individual members. IMCA members collectively manage more than $1.6 trillion on behalf of 1.3 million clients, providing investment consulting and wealth management services to individual and institutional clients. Since 1988, IMCA has offered the Certified Investment Management Analyst® (CIMA®) certification, which earned accreditation by the American National Standards Institute (ANSI) in April 2011, making it the first financial services credential in the United States to meet international standards (ISO 17024) for personnel certification. IMCA’s Certified Private Wealth Advisor® (CPWA®) certification is suited for wealth management professionals working with high-net-worth clients. In 2012, IMCA conferences and workshops hosted approximately 4,000 attendees.

IMCA® and Investment Management Consultants Association® are registered trademarks of Investment Management Consultants Association Inc. CIMA®, Certified Investment Management Analyst®, CIMC®, CPWA®, and Certified Private Wealth Advisor® are registered certification marks of Investment Management Consultants Association Inc. Investment Management Consultants Association Inc. does not discriminate in educational opportunities or practices on the basis of race, color, religion, gender, national origin, age, disability, or any other characteristic protected by law.


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