AIMCo's All Too Familiar Vol Blowup?
Brett Friedman, Managing Partner at Winhall Risk Analytics, sent me a guest comment titled, AIMCo, Allianz, and Malachite Capital: All Too Familiar:
As Warren Buffet once said, “Only when the tide goes out do you discover who’s been swimming naked.”
The Alberta Investment Management Company (C$119 billion AUM), Allianz Structured Alpha 1000 and 1000 Plus ($9.5 billion AUM, est.), and Malachite Capital ($600 mm AUM, est.) all come to mind. All three funds pursued short volatility or variance strategies. Despite their claims to the contrary, the losses were predictable and had precedent in other markets. AIMCo’s estimated C$2.1+ billion loss should be viewed in the context of their asset base of approximately C$119 billion; the loss is large, and certainly disturbing, but not unheard of in a fund that size and with similar return expectations. The broader issue with AIMCo is not the strategy employed, evidently flawed as it was. Rather, it was the decision to pursue such strategies…
As Warren Buffet once said, “Only when the tide goes out do you discover who’s been swimming naked.”
The Alberta Investment Management Company (C$119 billion AUM), Allianz Structured Alpha 1000 and 1000 Plus ($9.5 billion AUM, est.), and Malachite Capital ($600 mm AUM, est.) all come to mind. All three funds pursued short volatility or variance strategies. Despite their claims to the contrary, the losses were predictable and had precedent in other markets. AIMCo’s estimated C$2.1+ billion loss should be viewed in the context of their asset base of approximately C$119 billion; the loss is large, and certainly disturbing, but not unheard of in a fund that size and with similar return expectations. The broader issue with AIMCo is not the strategy employed, evidently flawed as it was. Rather, it was the decision to pursue such strategies…
