What is Alpha? – MoneyWeek Investment Tutorials



[Applause] [Applause] what do the following things have in common unicorns UFOs kryptonite and alpha today's video topic and the answer is none of them probably exists or if they do they're not much used to investors all right alpha is today's video topic let's take a look at what it is why the fund management industry likes you to know about it and why I'm a little bit skeptical about how useful it is to the average investor now this is not a great course video go somewhere else for that this is simply a quick and dirty guide to what alpha is and should you trust it okay alpha is often used by the fund management industry for one reason to sell more funds okay the way it's often been used recently is you get a certain type of fund hedge funds for example absolute return funds who claim to be high alpha certain managers might claim to be high alpha all right what does that mean right well it means in essence that the fund claims to add value over and beyond the normal call of duty although as the fund claims to outperform a benchmark of some sort and that performance is down to the skill of the fund manager the implication is that without the fund manager but out performance wouldn't be possible on that benefits you the investor and of course a cynic would say it benefits the fund manager as well because alpha is used to justify quite high performance fees otherwise would be quite tricky to justify alright so there it is there are other letters of the Greek alphabet that permeate the financial markets beater and Delta for example this is all about the first one alpha now what specifically is alpha and what exactly is the claim here well there are essentially two types of alpha alpha just felt that two types of alpha there is what I call fun alpha and there is security-based alpha now what do I mean by that both similar idea right it's all about capturing the performance almost you weren't expecting to get heavy hint that's been added by the fund manager what do I mean by the performance you're expecting to get well um there is a thing out there called the capital asset pricing model which I cover in another video that talks about why the city's share pricing model is bust because I'm not going to a lot of detail on it here there is a model out there that basically calculates the return you should expect to get from a given portfolio or a given share or security alright and that model is built on something called beta and beta I cover in another video rather unimaginative entitled what is beta all right so what I'm about to say is built on two things cap em covered in one video and beta covered in another but essentially what that model uses beta tries to do is it says here's the return you can expect to get from a fund or a security anything else on top is alpha anything else that that model doesn't predict you should expect to receive is fund manager and is value not going to stall that down a bit turn it to plain English and say actually on the left here it pretty much works a little like this alright he imagined a fund to set itself up and called itself the UK equity alpha fund alright and I want you to put your money in and the fund manager has said I'm gonna take out two percent every year as a management charge that's 2 percent of the value of the fund whether it goes up or down every year that says mines being in my pocket and 20 percent of any extra performance I generate any alpha okay you probably see where this is going now if you're a farm manager so what would that extra return me what you get your 20% off well let's say the benchmark is the foot through 100 that's the leading index of UK shares if you're not sure that is check out my video which is all about indices okay in my series so let's say the footsie 100 Rises 10% over a year for example and this sexy fund the UK equity alpha fund I think I'll call it the fund okay manages to rise by 12 percent over the same period the file manager could claim that going into the depths of portfolio theory and fund manager could claim will look that extra bit Linux for 2% his alpha okay and if you turn that to a number the extra 2% they might say and I'm having 20% of my pocket because that's extra value I generated for my investors okay on this side you can also do this because sort of an individual shares here I'm assuming it's kind of a portfolio on this side you could say well the cap M model the capital asset pricing model you're not sure what that is check out the video I mentioned earlier on on the city's pricing model that model might suggest that a security with a particular risk factor called beta again see the video there might the capital model might predict a return over a given period of say 5% if the actual return is 7% then 2% is the Alpha now I've summarized a heck of a lot of theory to get to those two points that really as an investor is most of what you need to know alpha is the claimed extra return that the fund or a security within a fund has generated over and above that that the cap in model predicts now you might think so far so good well if you generate 12 percent when the benchmarks on you're doing 10 2% extra return for investors well why not have 20% allows a fund manager well here are some of the problems okay here are some of the problems first of all if you're defining alpha as the extra return over what the cap end model predict using beta all I need to tell you is you if you don't know what the cap end model is and I've got no intention of finding out it is a massive lump of assumptions okay it's a load of judgments cap em sounds scientific but it requires you to make a whole lotta judgments and you're saying that anything extra that's generated is return over and above that is fund manager added value well I'd say that's a little bit of a stretch actually is so it assumes you have complete faith in the underlying model to generate the required expected return correctly in the first place and I have some doubt so you'll see in like the videos secondly this is all incredibly short term you'll get phones you'd say well look over a very short term period I have performed the benchmark I want my extra 20% but really how can you separate over a short term period or work and judgment frankly how do you know this 12% is extra 2% was down to file manager skill okay you really need quite a few time periods 5-10 years then come back to me and say I generate alpha not just one two three as is happen in the past so alphas been used as excuse for a file manager to make a very short-term return take money off the table pocket it and then subsequently many of those absolute return funds and hedge funds have kind of nosedived but well then it's too late you see because the performance fee isn't isn't refundable when the fund collapses right it's kind of a one-way ticket with the file manager so alpha is used in that way to justify some extraordinary short-term fee structures okay third you know reason why I have a problem with alpha is that the past is no guide to the future all right and in any case fourthly if you like what are you actually going to do with it I mean if I tell you for example that three funds out of 20 how about before massive alpha we're gonna do pile into them okay because how do you know those same three funds will keep on performing the top of sector for any length of time okay just based on the alpha generation of a very short term performance period very few of our managers in reality outperform long term even the stars in the market Anthony Bolton once the UK's arguably most successful file manager okay got himself into deep trouble when he got went into China with this you know the new special situations fund I suddenly found out that you know that was a very different environment to invest in than the one perhaps he'd been used to in the past okay so even the best farm ideas and fail and therefore my advice be this one you gotta fund there are two elements that matter cost is one performance is the other though the problem is this cost is known you are gonna pay those those two and twenty fees the performance who knows so I must admit I've been Klein not to buy the Alpha story hook line and sinker and pay for our expensive fund I'd be more tempted of us looking at UK equities for example to pay for a much cheaper passive fund alright risk losing a little bit of alpha if it exists maybe it doesn't because at least then I know I'm getting a cheaper product okay rather than one that's much more expensive weather returns frankly are just as on certain to download this free video to your favorite mobile device find us on iTunes by searching for money week and the entire video archive is also available free just visit money week com

A real estate fund driving value through community betterment



hi I'm Hanna Bernard you're watching market one-minute joining us today is Alexia Meany CEO and president of SAR Maya capital thank you so much for being with us thank you for having me so as a real estate investment fund investing in the u.s. what is your mandate for your investors our mandate is rooted in the belief that the u.s. residential real estate sector is strong and will continue to be so we look for undervalued assets that through our program of rehabilitation community betterment and refinance we can provide provable long term returns for our investors allowing them the ability to participate in the over a hundred billion dollar residential real estate market in the US with a professionally managed portfolio a tax efficient portfolio and to avoid all of the complications and additional cost of direct investing and what really differentiates you from other similar funds what differentiates our my capital is threefold community betterment perpetual ownership and specific asset class community betterment is simply based on the idea of creating thriving communities based on the notion of doing well while doing good perpetual ownership only means that we've set up our funds in a way that as our investors take their initial capital off the table they'll be able to maintain their equity position in perpetuity and finally specific asset class the asset class or subclass that we're targeting we feel as one neglected and number two positioned for greater than average long term returns for our investors and where are you looking right now in one word Atlanta we love it our focus is more demographic base than geographic base but all of our demographic indicators keep pointing to Atlanta we look for things like the density of post-secondary institutions hospitals medical centers airports and most importantly infrastructure that's what allows communities to grow and thrive and Atlanta has all of those it's got over 15 fortune 500 companies it's really an education hub in the southeast and it's just positioned to grow on all sectors that's why we love it and you talked about thriving communities so what is your idea of community betterment well really the cornerstone of Sarma is investment philosophy is based on the notion of community betterment as I said before the idea of doing well while doing good the idea that people have the right to better safer and nicer communities not only helps our tenants but it actually increases the bottom line when we create additional services and amenities for our tenants that actually increases the intrinsic value of our investments really we're creating a brand on two sides one a brand for our investors because they look to us for above average returns and knowing that they're helping thousands of people along the way and our tenants look to us because we provide a best-in-class product that they know that the landlord has put their well-being into his bottom line and that's really what differentiates our notion of community betterment it's a refreshing take I think so so why multi-family well as I said before I think multifamily in the u.s. is still positioned to do very well but more specifically the asset class that we're targeting what some people call the renters by necessity asset class is something that we feel is both neglected and has huge potential to find undervalued assets okay going forward the class a let's call it structures yeah there's a huge amount of them on the market now and we feel that that also gives us an advantage in the Class B and C to provide above average returns for our investors finally the way that we're managing them and we hope to manage them we feel that make it makes them somewhat recession-proof and that's why we like that asset class and what do you base your due diligence and evaluation process on well this is something that I'm most proud of actually because our team with lead of our CFO Chris Ross have developed an in-house proprietary analysis software called Sam thus our my analysis model and so we take current and previous existing data information on any asset plug it in and we can forecast into the future on the necessary metrics that we need to invest so what it does it allows us to take a look at things like net operating income rent rolls taxes cAPX funding into the future and it doesn't select an investment for us what it does it actually disqualifies investments so of the universe of investments that come across our desk Sam allows us to kick out the ones that actually don't meet the metrics maybe three years down the road even though they may today Wow just another degree of intelligence that right exactly well thank you so much that's so interesting you have a very refreshing take thanks so much for sharing all that with us thank you very much

Cultural and Creative Industries Innovation Fund



my name is Lisa Harding I am the coordinator for micro small and medium enterprise development in the technical cooperation division of the Caribbean Development Bank the cultural and creative industries Innovation Fund is a new program which was established in 2017 by the carbon Development Bank it is a facility of Finance and mechanism which we felt was important to help drive the development of the creative industries sector in our region we recognize that access to finance is one of the major constraints to creative industries entrepreneurs and the sector in general in terms of its development and therefore this fund is seeking to fill that financing gap in the market hi my name is Mary Alvaro and I'm the coordinator of the cultural and creative industries Innovation Fund hair and the Caribbean Development Bank so the cultural and creative industries Innovation Fund provides grant funding in three categories for innovative projects throughout our 19 borrowing member countries we provide for the enabling environments to develop the infrastructure available to the creative industries for the growth of the sector we also provide a grants for data collection and market intelligence and that is essentially to provide the statistics surrounding the industry that will enable us to understand exactly what the industry is doing how we're growing what kind of movements we need to make in order to forge a better pathway forward the component which speaks to improving the competitiveness of creative industries entrepreneurs and business support organizations has been designed to again more focus on capacity building interventions to basically help the entrepreneurs access new markets develop new creative products and services and also to just enable their improved competitiveness on a global scale eligible persons or institutions who can apply for finance and under the SIP bun include business support organizations academia creative enterprises with a focus on clusters non governmental institutions as well as government simple target by priority sub sectors including fashion and contemporary design film animation on Gaiman visual arts music and festivals and carnival so we have built three pillars intercept innovation collaboration and sustainability innovation is about really thinking through where we want to go in building in technology and building in other sectors into how we operate within the creative industries sector we want innovation to be hardwired into the fund in terms of its culture and its governance collaboration we are thinking about how we build communities our practice so we are looking for projects that really seek to bring others up and so if you are an experienced practitioner then how are you working within the sector to grow some other Enterprise we're looking for those projects that really span different countries and are tackling is to use in three or more countries within the Caribbean sustainability is really key to what we're doing here if the fund is not sustainable then we are not able to continue supporting the sector so we need this community of practice to be built around the fund in order to ensure the fun in sustainability and also to ensure that the projects within the funds are sustainable Raymond Williams says that culture is the complete way of life of a people and even though we all practice culture we all enjoy culture it's often a lot deeper than we think it is it's about embedded meanings it's about speech acts it is both the mundane and the extraordinary and to ensure that we can all continue to enjoy it we have to all support it and we hope that through the creative industries Innovation Fund we can finance exciting innovative projects that would help to build the sector and to help diversify our economies even more and to take our creative industries to another level

Bruce Campbell on Top Stock to Play the Emerging U.S. Cannabis Industry: Halo Labs Inc (NEO:HALO)



all right Bruce Campbell joins me now portfolio manager of Stowe castle cannabis growth fund Bruce welcome yeah thanks for having me on the show you bet so Bruce let's start with over you you've obviously moved heavily into the cannabis sector you've got some favorite names out there but what is it in the cannabis space that you're most attracted to now in terms of company configuration I mean there's a few areas that we like obviously the extraction area we think continues to be fairly big with the fact that you know now we're gonna see these concentrate markets open up you know they're talking sort of December but more likely you know January of next year when those open up and there's gonna be so many different products that need extraction so we think that space is gonna be fairly big and then in the u.s. we continue to think that you know there's opportunities there both from a branding perspective from a multi-state operator perspective and then all the ancillary services and then looking at Europe and and South and Central America you know I really take a look at those and think that they're you know probably three years behind where we are in Canada and so we think there's opportunity there as you know we start to really get into medical and then probably down the road recreational markets there in in those are markets sure I'm looking at your you top two investments so it seems to me if I was to just look at this top 10 list is from a 50,000 foot view it's see I see like two patterns in here I see that you're very attracted to people who are focused on extraction rather than cultivation in some cases and then you're also focused on the u.s. multi-state operator model it would that be an accurate sort of takeaway yeah I mean those are the two areas that we think have the most immediate opportunity and then you know obviously Europe goes beyond that there's not a lot of investable opportunities for Europe yet but so you know most of it is what we're looking at in Canada because we're looking again for cash flow and you look at the Canadian the Canadian extractors in you know Neptune balance and Mehta farm you know they're the ones that are generating cash flow and then down in the US obviously the multi-state operators especially if they hit their in you know if they're in limited license states then they have an opportunity here to really build and and gain real estate before we see some type of legislation change that happens you know are anyone's guess but you know I would I would imagine the next five years you see some type of legislation changed and then it's legal right I read it about in The Globe and Mail you talked about a company called halo halo Labs down in California who's in Oregon California Nevada and as a result of that I went into some research and discovered that they have this quite a quite a diverse product line of extracts and then they've got this new thing called dab tabs with the shatter Iser which I've never seen anything like it before but halo is not on your top ten list is that just because it's kind of new for you it's new and it's it hasn't been as liquid until late so we have actually split up into a couple different holdings so we own some of the common stock but we also own the convertible debentures as well so it shows up as two different positions so if you combine those it would probably show up in the top ten but as as individuals that they don't I see and what was it particularly about halo that attracted you so they have again going back into extraction and kind of the expertise there they have some expertise in extraction and they have a number of different extraction solutions so they're not just you know co2 or ethane or or butane but they provide you know a number of different solutions plus they've been innovative in their product design so the dab tabs and now they're actually trying to introduce a product which will be adaptive ape type of product which could again sort of revolutionize the business to a certain degree sure the shadow riser dab tab combo you're referring to actually interviewed Kieran's to do the CEO in London last week and that combined with this move into lassoo too which is something that you know when I see these look a lot of the companies moving is a little suit to it I like what's what plus ooh – why is everybody going to let sue – and then I also interviewed the Deputy Prime Minister her blue suit – last week and now I understand that oh ok L the suit is basically this sort of elevated mountain top Kingdom that's got the ability to grow great cannabis and service the 60 million market strong market of South Africa which is significant but they're planning to service your Europe from extracts produced in Lesotho at super low cost because it's a you know a low cost nation yeah exactly so I mean that's you've seen a number of the different Canadian lp's all had head over there and you know eventually I think the African market is is going to be big you know there's going to be a competition there with the black market to begin with as much as there is in Canada but eventually that gets regulated but the European market you know if they can get GMP facilities set up so that then they can export into Germany I would be the first place and then you know sort of beyond that as we see country by country roll out medical or recreational programs then there's going to be a huge opportunity there and and as you mentioned the you know the cost of production is going to be very favorable especially compared to you know indoor Canadian facilities right halo labs has has a hundred and twenty million warrants overhanging the stock at 80 cents how much of that how do you perceive that in terms of a barrier to the investment thesis for new investors coming in do you think that's a manageable sort of overhang that is ultimately going to get chewed through because of the milestones the company will achieve yeah that's what we think I mean obviously investors have to be cognizant of that and you know as the stock probably approaches that level you will see some pressure on it especially as it sort of pops over you know into the into the low 80s they'll probably be some pressure as people who have been sitting on the stock exercise their warrants and then you know sell the stock to probably exercise those warrants but at some point in time we'll chew through that and it will chew through it based on their business if they can you know do all the guidance that they've suggested that they can then at some point in time you know the markets gonna say okay well we're willing to put a higher valuation on this fully diluted than what it's worth now and it will you know chew through those warrants and go to a higher level which will of course also help the company because they'll have you know all this cash that comes in to accelerate their business without having to do you know a new equity financing but they're you know it's kind of built in from the previous financings sure let's talk a bit about sone Castle cannabis Growth Fund now what what kind of investor is it appropriate for and how do they how do they get involved yeah so I mean we we took a long time to get it set up when we set it up we wanted to have the flexibility to kind of go anywhere with it and so we worked quite quite and extensively with the Securities Commission to get it set up and so that's really what we've designed and what you know our our feel is is that cannabis is going to be the fastest growing sector are one of the fastest growing sectors over the next decade in the world and so we want to be able to take advantage of those anywhere so if you're a growth investor and you want a piece of the cannabis market it's very difficult to try to pick individual names for one the sector is extremely volatile we talked about this now being the eighth wave that we've seen since we've been in the sector and we started back in 2013 and those waves can be you know 50 percent down and over 100 percent up so you know you need professional management in our opinion and you need diversification and so we add both of those and what we do is we were able to act a little bit quicker so we think that you know we had a lot of value to you know to holding if you had something like the hmm Jay you know that can be a good base and then we can we can add sort of some diversification there being able to act a little quicker and get into opportunities that they can't necessarily immediately act and so we think that we're you know a nice complement to them and a portfolio should have a combination of you know sort of that passive approach and our active approach as well okay great Bruce that's a fantastic first conversation with you I'd like to do this again and again and again and again so we're gonna leave it there for now and I'll come back to you soon we'll do this again thanks for joining us perfect sounds good thank you

What is the LIBOR / OIS spread? – MoneyWeek investment tutorials



red flags how do you know when the financial sector is in trouble and the wider economy might be in trouble well there are a number of indicators that keen investors will watch and in this video I want to cover one it's called wait for it the LIBOR Oh is spread now if you're still watching after a wet lot well let's have a look at what it is how it reveals that part of the engine room of the economy the banking sector might be in big trouble I am where you can get information from one or two aspects of this video I cover another video so I'll reference those as we go along write that name again the LIBOR oh is spread let me write that down so LIBOR oh I s spread quite a mouthful yet another piece of financial market jargon now hmm as everyone knows a few years ago the banking sector kind of exploded we have banks disappearing name such as Bear Stearns Lehman Brothers and so on and one of the ways that you could have spotted all that trouble emerging was to watch all this thing a bit of a technical indicator and try and explain what it does it's closed in the press quite a bit at the moment so it's worth knowing roughly what it does and how to interpret it right for the techies out there this will be an unsatisfactory video all right I'm going to keep this nice and basic for anyone who's a plain vanilla investor who wants to know right there's a warning signal out there the banking sectors in trouble how do I interpret it okay that's the end of this video so what is the LIBOR OS spread price break it down spread means gap between two things so the two things are two interest rates okay now a libel I've done another video called Britain's most important interest rate so if you're not entirely sure about LIBOR take a look at that video maybe before you tackle this little section but basically a libel is an interest rate it's the rate that banks estimate they'll be able to borrow at four different periods of time in the interbank market all right on those periods of time could be the one month or three months and three months is a very typical period over which banks might want to borrow okay so basically a panel of banks is asked to estimate that rate those results of an amalgamated by the British Bankers Association and you have one rate the rate of which the market that is banks in the UK market it's called the London interbank operate think they could borrow out for say three months right on this side overnight index swamps overnight index swaps right now I'm not going to go into the full detail of the contract for this video see or what is a swap if you've never come across a swap before doesn't matter don't panic the point is this okay the very shortest amount of time as a bank you could leave money on deposit for is overnight so there is an interest rate called the overnight interest rate okay in fact this one called the Sterling overnight index average rate Sonya as a euro or European overnight index a betray iyanya what's that that's banks estimating what it would cost them to borrow or lend overnight literally overnight okay now here's the point all right which one of those two things borrowing for three months or borrowing overnight is riskier borrowing for three months why because your counterparty could go bust all right three months is a long time overnight you can be fairly confident things are going to go to value wrong all right I mean it might just be your counterparty disappears overnight but probably not so on that basis if you were to take say the three-month LIBOR rate and compare it to the rate in a contract that takes the next three months estimated individual overnight rates and adds them together you'd expect a bit of a gap but not a huge gap normally that's the spread why because it is a huge gap between the two someone would say well I'll just borrow but the lower of those two rates the overnight rate and lend now the higher one LIBOR and I'd make easy money if no one goes bust alright so you would expect there to be a huge gap but there is a gap because of risk overnight borrowing is less and lending is less risky than say three-month periods all right which again less risky than six months or a year right so here's the point this beast of the thing LIBOR as the London interbank operate to overnight index swap spread measures essentially risk in the markets because it says the wider the gap between what people estimate they could keep putting money on deposit for for three months as opposed to one rate negotiated for a full three months as that those two rate starts to diverge what does it mean if the market is gifting what we call an arbitrage opportunity to people who borrow one a lender the other and clean up or more likely fear is stalking the banking sector people are getting more and more more worried about lending over any length of times they're they're basically preferring the overnight rate okay that overnight rates kept nice and low and the gap between it and the three-month LIBOR rate is gradually gradually drifting so to put that in context if you'd put that on a graph all right normally the gap between let's say the LIBOR rate and the overnight rate okay expressed in this case as a contract the compounds overnight rates into a three-month rate you'd expect it to be reasonably tight you'd expect LIBOR to be above the overnight rate and that's indeed the case by about typically before the credit crunch 10 basis points that's the spread that cap 10 basis points isn't very much by the way it's some basically one tenth of a percent there's a hundred basis points in 1 percent so the gap between two rates quite tight what happened around the Lehman Brothers disaster 2008 you have this kind of thing happening this line when we like that and the sort of ever since then vaguely crept back so you kind of had a huge gap open up all right and then we've maintained a bigger spread ever since and that'd be about 2008 I'm not being too precise here okay how big did the gap go how much Theo is in the market well the answer is it ballooned out to more like 350 basis points or in other words the gap between the safe overnight rate and the riskier period LIBOR rate ballooned out to three a half seven right we've done sound like a lot but it's a heck of a lot more than just 10 basis points one tenth of one percent right why people suddenly panic the interbank market people are saying we don't trust other banks were not lending for any sort of length of time without charging a huge premium mid-back market that week so close down okay as people said right well the long this were prepared to lend voice over night or as do facial term nears were worried people want to borrow a flogger than that hiked up the rate all right now the gap and I say now as in when the video is being shot okay midway through 2012 the gaps between 30 and 40 basis points all right so three or four times where it's at for quite some time for the great crunch right but still a way down from this is a panic fest that was the Lehman Brothers collapse again that's because steps have been taken since then to try and stabilize to some degree the interbank market but it's worth watching its kind of the engine-room a banking sector all right when that rate spikes trouble all right you can expect interbank market closing up like a banks not lending to each other you can expect a central bank start panicking about how they get a rescue and open up the end of a market now obvious question is if you got all about all these some of it where'd you get the information from the arts from I'm afraid if you hadn't got a Bloomberg terminal or something similar okay all right sister burritos data it is not easy to get it fresh you know off the plate as it were but we got to do frankly most days easy too easy tip is stick the phrase LIBOR oh is spread into Google News and hit return all right and you will get an article pop up reasonably high might be Bloomberg data will get a pic off from their website data about this spread which is where maybe not right up-to-the-minute accurate but at least we'll give you a flavor but where that spread is heading okay and there are one or two other possible website sources but I so they tend to be subscriber based so there we have it a red flag indicator of trouble in the middle of banking sector and in later videos I'll deal with one or two more useful red flags for investors