Weekend Reading Feb 8 2013

It’s been a hectic week down on the Ave of Giants. Notwithstanding, here are some interesting articles and papers for your weekend reading. Enjoy!

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It’s been a hectic week down on the Ave of Giants. Notwithstanding, here are some interesting articles and papers for your weekend reading.

First, here’s the news:

- Absolute Returns: CalSTRS missed its benchmark by 2%... while still making 13.5 percent. Congratulations?

- Deal Flow I: TIAA-CREF bought a 5 percent stake in Billabong .

- Deal Flow II: Kazakhstan’s Samruk-Kazyna bought a 29% stake in Glencore-controlled zinc producer, Kazzinc.

- Frontier Finance I: New Mexico’s Permanent Fund’s assets have surpassed its all-time highs from 2007.

- Frontier Finance II: Come to Edmonton. Study trees and roads. And then buy some. The frontier is calling you ...

- Zing: Brown’s endowment seems to be struggling (...though it’s hard to tell how badly since the endowment takes all its courses pass-fail..).

- Slow Motion: The IFSWF is reportedly still considering London for its new secretariat... months after starting its consideration of London for its new secretariat.

Second, here’s two interesting research papers:

- Najah Attig, Sean Cleary, Sadok El Ghoul, Omrane Guedhami have a new paper entitled, “Institutional Investment Horizons and the Cost of Equity Capital. “ Here’s a blurb:

“We examine the influence of institutional investors’ investment horizons on a firm’s cost of equity. We argue that the cost of equity will decrease in the presence of institutional investors with longer-term investment horizons due to improved monitoring and information quality. Our empirical results demonstrate that the cost of equity declines in the presence of institutional investors with long-term investment horizons, all else remaining equal. Our results indicate also that the monitoring role of long-term institutional investors is more pronounced for firms with higher agency problems (poorly governed firms). Overall, our evidence suggests that when considering the influence of institutional investors, it is critical to account for institutional heterogeneity, which leads to new directions for future research.”

- I. J. Alexander Dyck and Lukasz Pomorski have a new paper entitled, “Investor Scale and Performance in Private Equity Investments.” Here’s a blurb:

“We examine private equity (PE) investments of defined benefit pension plans and find that PE returns are 7.4% per year greater if the plan has significant rather than small holdings in PE. Cost savings for larger PE investors account for one quarter of the superior performance. These savings arise in equal parts from superior negotiating power and from more extensive use of lower cost investment approaches, most notably direct investing. Three quarters of the performance gains come from superior gross returns for larger PE investors. Tests suggest this reflects a superior ability of larger plans to bridge the significant information asymmetries between investors and general partners. These benefits to investor scale have limits, with concavity in the scale-performance relationship implying eventual diseconomies at very high levels of PE investment. Consistent with these return patterns, we find substantially more investments in PE by plans with the ability to scale up their PE investments.”

Enjoy your weekend!

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