Federal Reserve Bank of Atlanta

2006 Financial Markets Conference Agenda - Hedge Funds: Creators of Risk?

Monday, May 15
6:30 p.m.	Opening reception

Tuesday, May 16
7:00 a.m.	Registration table opens
8:50	Welcome and overview Robert A. Eisenbeis, Executive Vice President and Director of Research, Federal Reserve Bank of Atlanta
9:00	Paper I: “Hedge Funds: Risk and Return” Chair Gerald P. Dwyer Jr., Vice President, Federal Reserve Bank of Atlanta Presenter Atanu Saha, Managing Principal, Analysis Group Inc., New York (Additional paper presented: “Why Do Hedge Funds Stop Reporting Their Performance?”) Presentation Discussant Hans R. Stoll, Anne Marie and Thomas B. Walker Jr. Professor of Finance and Director, Financial Markets Research Center, Owen Graduate School of Management, Vanderbilt University, Nashville, Tennessee Presentation
10:30	Break
10:45	Paper II: “A Screen for Fraudulent Return Smoothing in the Hedge Fund Industry” Chair Stephen D. Smith, Professor of Finance, Georgia State University, Atlanta Presenter Nicolas P.B. Bollen, Associate Professor of Finance, Owen Graduate School of Management, Vanderbilt University, Nashville, Tennessee Presentation Discussant Edward J. Kane, James F. Cleary Professor of Finance, Boston College Presentation
12:15 p.m.	Luncheon buffet
1:30	Paper III: “Do Funds-of-Funds Deserve Their Fees-on-Fees?” Chair Paula Tkac, Financial Economist and Associate Policy Adviser, Federal Reserve Bank of Atlanta Presenter Andrew Ang, Associate Professor of Finance, Columbia Business School, Columbia University, New York Presentation Discussant Stephen J. Brown, David S. Loeb Professor of Finance, Leonard N. Stern School of Business, New York University Presentation
3:00	Break
3:30	Paper IV: “A Portrait of Hedge Fund Investors: Flows, Performance, and Smart Money” Chair Randall S. Kroszner, Member, Board of Governors of the Federal Reserve System, Washington, D.C. Presenter Marno Verbeek, Professor of Finance, RSM Erasmus University, Rotterdam Presentation Discussant Chester Spatt, Chief Economist, U.S. Securities and Exchange Commission, and Mellon Bank Professor of Finance, Tepper School of Business, Carnegie Mellon University, Pittsburgh Presentation
5:00	Adjourn meeting
7:15	Introduction of keynote speaker Jack Guynn, President and Chief Executive Officer, Federal Reserve Bank of Atlanta Keynote speaker Hedge Funds and Systemic Risk Ben S. Bernanke, Chairman, Board of Governors of the Federal Reserve System, Washington, D.C.
8:00	Dinner

Wednesday, May 17
8:00 a.m.	Introduction of speaker Jack Guynn, President and Chief Executive Officer, Federal Reserve Bank of Atlanta Keynote speaker E. Gerald Corrigan, Managing Director, Goldman Sachs, New York Handout
9:00	Break
9:15	Policy Session I: “Hedge Funds: An Industry in Its Adolescence” The recent dramatic rise in the number of hedge funds and the “institutionalization”of the industry mark a dynamic transition to adolescence as business models and strategies evolve. To be able to justify their hefty fees, these opaque institutions must be able to generate persistent above-average returns. From a finance perspective, the critical questions center on how these returns are generated and what risks are inherent in hedge funds’ strategies. The threshold question centers on understanding the systematic risk factors inherent in their positions. Identifying how and where hedge funds trade and how their positions are now being financed is critical to dissecting the changes in the industry and addressing the policy issues that arise as the industry evolves and its clientele changes and expands. Moderator Cathy E. Minehan, President and Chief Executive Officer, Federal Reserve Bank of Boston Presenter David A. Hsieh, Professor of Finance, Fuqua School of Business, Duke University, Durham, North Carolina Presentation Discussants Paul B. Bennett, Senior Vice President and Chief Economist, New York Stock Exchange Presentation Sanford J. Grossman, Chairman, Quantitative Financial Strategies Inc., Greenwich, Connecticut
10:45	Break
11:00	Policy Session II: “Hedge Funds and Investor Protection Regulation” A recent ruling by the Securities and Exchange Commission requiring that most hedge fund advisers be registered with the SEC aims to foster conduct and compliance that will better protect hedge fund investors. Critics of the ruling contend that the costs associated with it are likely to be considerably greater than the protection benefits. As an alternative to increasing protective regulation, the SEC should perhaps consider authorizing “funds of hedge funds” that make hedge fund investments available to more retail investors and could provide greater diversification and risk-management benefits. Moderator Cynthia A. Glassman, Commissioner, U.S. Securities and Exchange Commission, Washington, D.C. Presentation Presenter Franklin R. Edwards, Arthur F. Burns Professor of Free and Competitive Enterprise and Director, Center for the Study of Futures Markets, Graduate School of Business, Columbia University, New York Discussants Dwight Anderson, Principal, Ospraie Management, LLC, New York Gay Huey Evans, President, Tribeca Global Management (Europe) Ltd., London
12:30 p.m.	Luncheon buffet
1:30	Adjourn for the afternoon
7:00	Reception and dinner

Thursday, May 18
8:30 a.m.	Policy Session III: “Systemic Risk and Hedge Funds” Much of the hedge fund industry has developed a symbiotic relationship with the banking sector, so changes in hedge funds’ risk exposures now raise the specter that these institutions may have become a new source of systemic risk to the banking sector. New risk measures for hedge funds—including illiquidity risk exposure, models for hedge-fund and banking-sector indexes, analysis of hedge-fund liquidation probabilities, and measures of volatility and distress—suggest that the hedge fund industry may be heading into a challenging period of lower expected returns and that systemic risk may currently be on the rise. Moderator Kevin M. Warsh, Member, Board of Governors of the Federal Reserve System, Washington, D.C. Presenter Andrew W. Lo, Harris & Harris Group Professor of Finance, Sloan School of Management, and Director, Laboratory for Financial Engineering, Massachusetts Institute of Technology, Cambridge Presentation Discussants Ilan Goldfajn, Partner, Gavea Investimentos, and Professor of Economics, Pontifical Catholic University of Rio de Janeiro Presentation Richard R. Lindsey, President, Bear, Sterns Securities Corporation, New York Presentation
10:00	Break
10:15	Policy Session IV: “Corporate Governance and Hedge Fund Management” The conventional way of thinking about governance issues associated with hedge funds is to view them as mutual funds or money managers. An alternative view holds that the governance issues associated with hedge funds are best understood by looking at limited partnerships or public firms that are similar in terms of either their assets or liabilities. If this view is correct, hedge funds would fall under the purview of the Securities and Exchange Commission’s regulations governing broker-dealers, public corporations, or limited partnerships. Moderator Reuben Jeffery III, Commissioner and Chairman, Commodity Futures Trading Commission, Washington, D.C. Presenter Bruce N. Lehmann, Professor of Finance and Economics, Graduate School of International Relations and Pacific Studies, University of California, San Diego Presentation Discussants Kenneth E. Scott, Senior Research Fellow and Ralph M. Parsons Professor of Law and Business Emeritus, Stanford University School of Law, Stanford, California Marc Zenner, Global Head, Financial Strategy Group, Citigroup, New York
11:45	Closing remarks Jack Guynn, President and Chief Executive Officer, Federal Reserve Bank of Atlanta
Noon	Luncheon buffet
1:30 p.m.	Adjourn conference