Research Articles

Below you will find various papers and articles from MPI's research team that may be of interest to our clients as well as other financial services professionals.

Title	Abstract
New "Quantitative Due Diligence of Fixed Income Portfolios: A case study of the Oppenheimer Core Bond Fund" June 2009	This research paper provides step-by-step recommendations to assist with implementing quantitative methodologies within a fixed income due diligence framework. Using Oppenheimer Core Bond Fund as a case study, we demonstrate how investment professionals equipped with the proper tools and methodologies could have been alerted to the fund’s risks long before its collapse. Specifically, we illustrate how using returns-based style analysis (RBSA) with high-frequency data can help investment professionals understand risks and improve the speed and accuracy in detecting structural shifts within a complex bond portfolio.
"Monitoring Daily Hedge Fund Performance When Only Monthly Data is Available" April 2009	This academic paper, co-authored by Michael Markov and Daniel Li of MPI and Russ Wermers, Associate Professor of Finance at University of Maryland, introduces a new method for investors to forecast daily returns in advance of month-end reporting. The approach enables investors to infer daily results from monthly returns data. Synthetic replication portfolios are created by employing our Dynamic Style Analysis (DSA) to accurately replicate a given fund. Once the replication is achieved, daily returns for the underlying indices are used to project the fund’s daily returns. This replication approach can be used to better hedge risks and estimate Value at Risk (VAR).
"Madoff: A Tale of Two Funds" December 2008	In 2006 MPI ran analysis on the Fairfield Sentry Fund, one of the primary feeder funds to Bernard Madoff's strategy, and came to the conclusion that, most likely, the returns were fabricated. After an exhaustive returns-based quantitative analysis failed to explain the fund's consistently positive returns, MPI then discovered that the highest correlating factor was the return stream of a proven fraud-the Bayou fund. CEO and Director of Research Michael Markov writes about this revelation, the impact of Madoff's fraudulent returns on hedge fund indices and the need for due diligence in the investment community.
"The Law of Large Numbers: An Analysis of the Renaissance Fund" September 2007	A case study in hedge fund replication and risk management: our analysis of the Renaissance Institutional Equities Fund shows that thousands of trades, based on fundamental signals generated by computer models, can average to a simple combination of factors that mimic the performance of this large and well-known hedge fund.
"It's in the Numbers - How Proper Analysis of Returns can be a Crystal Ball" July 2006	MPI performed an analysis of the hedge funds managed by Mangan & McColl Partners looking for tell-tale warning signs of the fund's closure that investors might have been able to see with proper analysis techniques.
"Bill Miller vs. Manu Daftary - 2005 Duel Results" July 2005	This Returns-Based Style Analysis perspective compares two market outperformers, Legg Mason Value Trust and Quaker Strategic Growth Fund, to gain further insight into each fund's performance over 2005.
"Recent Trends in Hedge Fund Market Exposure" 2005	In this report, MPI analyzes whether hedge funds are becoming more sensitive to market moves by taking significant net long positions.
"Why Would One Invest in an Outlier? - A Bayou Analysis" 2005	Hedge fund blow-ups have garnered significant attention in both the market and in the general media. This study uses recent MPI advances in RBSA to evaluate if data from the Bayou Fund showed clear indications of potential financial improprieties.
"Seeing Through Walls - Bringing Greater Transparency to Hedge and Mutual Fund Analysis" 2005	A review of traditional applications of Returns-Based Style Analysis (RBSA) and the details of a new proprietary Dynamic Style Analysis (DSA) methodology developed by MPI to provide hedge fund and hedge fund of fund managers with an unprecedented view into the workings of individual funds for due diligence, performance analysis and risk management.
"Style Primer" 2005	This article is a brief overview of the history and basics of Style Analysis.
"Style Trends in Institutional Investment" 2005	This paper appeared as a chapter in "Equity Style Management: Evaluating and Selecting Investment Styles", Robert A. Klein and Jess Lederman (editors), Irwin Asset Allocation Series for Institutional Investors, 1995. The paper describes methodology used to identify the institutional style trends. It also shows how the same methodology can be used to build a valid investable international index.