This is How We Determined Investors Lost $27.7 Billion Investing in Non-Traded REITs
(Apr 2014)
Earlier this week we posted the summary results of our investigation into the performance of 27 non-traded REITs which had had a liquidity event by December 31, 2013. We found that investors are $27.7 billion worse as a result of investing in these 27 REITs rather than investing in a diversified portfolio of traded REITs. The post titled "Retail Investors Have Lost at Least $27.7 billion as a Result of Non-Traded REITs" is available on our blog.
Figuring out this $27.7 billion shortfall...
Retail Investors Have Lost at Least $27.7 billion as a Result of Non-Traded REITs
(Apr 2014)
As part of our effort to help investors avoid non-traded REITs, we have written over 25 blog posts on this defective investment type. We have noted in our research that because of high costs, illiquidity, lack of transparency and conflicts of interest, non-traded REITs should underperform liquid, low-cost traded REITs. A number of our blog posts including our post on the early trading in NYRT last week, titled "NYRT's Listing is More Evidence That Even the Non-Traded REITs Winners Are...
Further Reckoning of UBS Willow Fund's CDS Losses
(Feb 2014)
In previous blog posts we explained how the UBS Willow Fund completed its spectacular multi-year collapse in 2012 largely as a result of its leveraged portfolio of credit default swap (CDS) contracts. See Credit Default Swaps on Steroids: UBS's Willow Fund and Willow Fund's Hedging, Investing and Speculating in Distressed Debt With Credit Default Swaps. Through these CDS contracts, the Willow Fund made a large, highly-leveraged short bet on credit risk contrary to its repeated SEC...
Willow Fund's Hedging, Investing and Speculating in Distressed Debt With Credit Default Swaps
(Jan 2014)
In a recent post we demonstrated how the Willow Fund's purchase of credit default swaps evolved from hedging a portion of its distressed debt to swamping the portfolio with enormous short positions in distressed debt. In this post, we explain why the Willow Fund's use of credit default swaps was inconsistent with its repeated disclosures that:
... The Fund may use a variety of special investment techniques to hedge a portion of its investment portfolio against various risks or other factors...
Credit Default Swaps on Steroids: UBS's Willow Fund
(Jan 2014)
We previously published a working paper on how investors in Oppenheimer's Champion Income Fund lost 80% in 2008 when peer group funds lost about 25%. Our Champion Income Fund paper is available on our website. Oppenheimer had increased Champion Income Fund's exposure to CMBS through credit default swaps and total return swaps in 2007 and 2008. Figure 1 reproduces a figure from our 2010 paper which demonstrates that the leverage Oppenheimer took on through the swaps fully explained the...
Behringer Harvard / TIER REIT Illustrates How Non-Traded REIT Sponsors and Brokers Have Siphoned $10 Billion to $20 Billion (and Counting) From Investors
(Jan 2014)
Sponsors have issued, and brokers had sold, over $85 billion of non-traded real estate investment trusts (REITs) by the end of 2012. These investments are illiquid, high-commissioned, poorly diversified real estate investments. Despite their glaring defects another $20 billion of non-traded REITs were sold to investors in 2013.
Sponsors and brokers have siphoned off at least $20 billion from investors through their sales of non-traded REITs up through 2012. We illustrate the calculation of...
Variable Annuity Fees Linked to the VIX -- Part I
(Nov 2013)
We've discussed the CBOE Volatility Index -- known as the VIX-- many times before. Essentially, the VIX is a very complex calculation of the expected future variance of the S&P 500 (see the full calculation methodology), and is popularly known as the 'investor fear gauge'. The VIX is not a tradeable asset, but there are VIX options and futures contracts, and those contracts serve as the basis for several VIX-related exchange-traded products (TVIX, XIV, VXXto name a few). The VIX is very...
Structured Product Fees and Credit Risk
(Nov 2013)
Kevin Dugan noted in the April edition of Bloomberg's Structured Notes Brief that "Citigroup collected the highest average fees in the first quarter [of 2013] among the 10 biggest underwriters of U.S. structured notes." This got us wondering, is there any relationship between the credit quality of the underwriter and the fees the underwriter collects? If investors truly understood credit risk, issuers with higher credit risk would presumably have to structure products with lower fees to...
