Valuable Investment Advice in Managing Hedge Fund Managers

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After more than 16 years of experience in the investment field, Ed Stavetski accepted a position as managing director of PCM Partners, LLC, in 2009. Throughout his career, he has provided advisory services for investments such as hedge funds. Ed Stavetski also authored the book Managing Hedge Fund Managers.

A guide for investors, Managing Hedge Fund Managers: Quantitative and Qualitative Performance Measures provides a detailed analysis of considerations in hedge fund investment. The book addresses the rising appeal of hedge funds with a practical approach for modern investors. It particularly emphasizes the importance of starting with an investment policy statement that includes objectives and constraints such as the level of acceptable risk, as well as analyzing performance of the hedge fund both on the long and the short side.

After establishing key principles, Managing Hedge Fund Managers focuses on a set of fundamentals and provides outlines of the best practices for judging performance and weighing empirical evidence. The book includes examples of failed investments, accompanied by analysis of these failures and how to avoid similar mistakes. Overall, this guide stresses the importance of caution, but it also offers comprehensive information on how to proceed as a cautious investor.

Ed Stavetski’s Strategies for Selecting Hedge Fund Winners

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Ed Stavetski is a respected financial services executive who leads PCM Partners, LLC, as managing director. Working with ultra-high net worth clients, he provides investment oversight and comprehensive risk management solutions. Ed Stavetski is also author of the well-received book Managing Hedge Fund Managers. His 2010 work takes a comprehensive look at the range of factors that go into decisions of whether to invest in hedge funds.

A particular focus is on the art of picking winning hedge funds that meet core investment objective and risk-tolerance thresholds. He takes a close look at the various types of risk that define decisions, including model, counterparty, high-watermark, and liquidity issues. The latter risk factor has particular importance, as lack of available capital can push funds into more severe losses than they would otherwise experience. Mr. Stavetski also looks at the qualities hedge fund managers must possess in driving sustained success. He emphasizes looking beyond surface-level accomplishments and pedigree, and examining whether past success has been in areas of money management. In addition to evaluating individual analysts and portfolio managers, potential investors should investigate the underlying organizational structure supporting the fund, including third-party service providers.

Reducing Market Risk and Expectation Via Post Modern Portfolio Theory

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Ed Stavetski is a longtime financial services professional who engages with family offices and high net worth clients as PCM Partners, LLC, managing director. Addressing shortfalls in the traditional Modern Portfolio Theory (MPT) as a way of assessing investment risk, Ed Stavetski has created a Post Modern Portfolio Theory (PMPT).

The PMPT approach begins with investors calculating minimum acceptable return (MAR), which is defined as a threshold of portfolio growth that will enable them to meet long-term needs and maintain current purchasing power. Not being tied to indexed benchmarks and strategic asset allocations gives the MAR flexibility. Allowing for significantly lower gains than historical averages enables money managers to chart sensible, risk adverse courses. Upon determining the MAR, investors divide allocations into tactical and strategic categories. Strategic allocations form core portfolio holdings and are focused on broad allocations that are truly diversified. The tactical allocation is that which seeks alpha and can fluidly move between cash, bonds, commodities, and equity positions. Through the tactical allocations, highest possible returns are achieved and downside risks contained. A key advantage of this two-pronged approach, which reduces both risk and expectations, is that investors do not experience paralysis during extended downturns and have flexibility to seek out safe havens for at-risk capital.

Positive Investment Trends in the U.S. Manufacturing Sector

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As founder and managing director of PCM Partners, LLC, Ed Stavetski offers experienced asset allocation services to clients of ultra-high net worth. Ed Stavetski’s research-driven approach emphasizes carefully calibrated investments based on current market trends. U.S. market trends are largely positive, with home construction, airlines, consumer electronics, and Internet among early winners in 2014. In addition, aluminum, platinum, and precious metals are among the best performing industries, which in turn points to a brighter outlook for manufacturing.

U.S. manufacturers are experiencing a unique confluence of positive market factors, including declining energy costs, rising wages in countries such as China, and overall flat wages domestically. In addition, companies in a number of industries are moving production back from overseas as a way of better controlling supply chain factors such as shipment reliability and product quality. Despite concerns about overregulation in Washington, D.C., and uncertain global demand, a number of companies are taking major steps in bolstering U.S. production. Early movers include foreign-owned multinationals, such as the Chinese textile enterprise Keer Group Co., which has committed to a yarn-spinning plant in North Carolina. In addition, Airbus is in the process of creating a major passenger jet manufacturing hub in Mobile, Alabama. There are also numerous projects in development in the petrochemical sector that are of active interest to investors.

Arden Theatre Company Provides Summer Camp Activities for Children

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As founder and managing director for Philadelphia area-based PCM Partners, LLC, Ed Stavetski provides asset-allocation and advisory services for his clients. When not in the office, Ed Stavetski spends some of his free time supporting local organizations. In the past one of which was the Arden Theatre Company.

Founded in 1988, the Arden Theatre Company is a professional regional theatre situated in the heart of Philadelphia. The company purchased a 50,000-square-foot building in 1995 in the Old City neighborhood and recently renovated the structure.

During the summer, the theatre hosts several camps for local students. Among the offerings for August 2014 are three separate camps: Reporter Roundup, Costume Design Boot Camp, and A Galaxy Far, Far Away. Aimed at children enrolled in first through fifth grade, these camps typically last one or two weeks and run on weekdays from 9 a.m. to 4 p.m. Attendees study music, design, storytelling, and improvisation under the guidance of theatre professionals. Some camps, such as the Reporter Roundup, include a field trip – in this case, to a local television station.

Post-Modern Portfolio Theory

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A financial professional for more than 20 years, Ed Stavetski serves as the managing director and founder of PCM Partners, LLC. In that capacity, Ed Stavetski calculates risk and determines portfolio strategy for a diverse, ultra-high-net-worth clientele.

As its name indicates, post-modern portfolio theory (PMPT) stems from the modern portfolio theory. Developed in the 1950s and now a widely accepted standard among financial professionals, the modern portfolio theory (MPT) urges diversification and the use of noncorrelated assets to achieve solid risk-adjusted returns. In recent years, however, critics have criticized MPT’s effectiveness and, in particular, its risk-calculation methodologies.

MPT calculates risk using deviation below and above anticipated returns. Known as mean variance, this results in a risk valuation that includes unexpected positive as well as negative outcomes. By contrast, PMPT calculates variance using an asymmetrical model that focuses on downside risk.

Supporters of this methodology hold that only negative returns worry investors, while positive returns are a desired outcome and should not be considered risk. Furthermore, PMPT allows for different client needs and priorities in that it strives to identify returns below a specified target rate, thus enabling managers to customize downside risk. Therefore, although MPT remains the most common methodology across the financial industry, PMPT is gaining a foothold among client-focused investment managers.

The Shortcomings of Modern Portfolio Theory in Predicting Markets

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As managing partner with PCM Partners, LLC, investment consultant Ed Stavetski offers ultra-high net worth clients a full range of asset allocation and due diligence services. Ed Stavetski has extensive experience in alternative asset classes, from art to farmland, and is a thought leader in his field. He has developed Post Modern Portfolio Theory as a way of addressing major shortcomings in Modern Portfolio Theory (MPT) that were exposed by the worldwide financial crisis.

One of the key deficiencies of MPT involves the complex number of variables taken into consideration, with a portfolio comprised, for example, of 10 holdings involving 65 distinct variables. Even minute discrepancies at the input level result in major output errors. Another drawback of MPT is its focus on relative returns. Portfolios may fall significantly less than the overall market, but this does not negate the fact that investors lose overall revenue. Mr. Stavetski points out that so-called “100-year events,” in which a monthly loss of 12.8 percent occurs, do not happen rarely, but have occurred approximately every four to five years for the past 90 years. The MPT model, which utilizes standard deviation tools in assigning risk, is not applicable to illiquid markets or to real estate and private equity investments. This reflects the fact that mathematical models do not fully take into consideration investor emotions and their reactions to revenue loss. As a result, the MPT approach can disguise overvaluation and speculative bubble risks.

Hedge Funds Offer Investors High Risks and High Rewards

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An experienced financial professional, Ed Stavetski currently serves as the managing director of PCM Partners, LLC, a firm he established in 2009. As a financial and investment expert, Ed Stavetski has been invited to speak at universities, conferences, and institutes on a variety of subjects, including hedge funds.

A hedge fund is a managed investment portfolio that is designed to maximize returns through the use of a variety of investment strategies. Most of the time, hedge funds are legally organized as limited liability companies or limited partnerships and are managed by an individual who is paid a percentage of the fund’s profits. Typically, hedge funds are open to a small number of investors who are required to make a large initial investment, which they are often required to keep in the fund for at least one year.

Unlike mutual funds, hedge funds are largely unregulated, which allows fund managers to make higher-risk investments that have the potential for much higher returns. Not everyone can invest in a hedge fund, however. Because hedge funds are considered unregistered companies, only accredited investors are allowed to invest in them. To be an accredited investor, one must have an income of $200,000 per year, a net worth over $1 million, or at least $5 million in current investments. Today, there are thousands of hedge funds in operation with trillions of dollars in combined assets.