On 11 November 2022, Professor of Finance, Roman Kräussl, wrapped up the three-year FNR CORE project ALPHA with a full day conference in Luxembourg. Split into an industry-focused morning and an academically orientated afternoon session, the “Alternative Investments” workshop explored the performance and fund structure of alternative investments such as venture capital, private equity, infrastructure and hedge funds.
Source : uni.lu
Publication date : 12/07/2022
The project, which began in January 2019, brought together an international project team from the University of Luxembourg, the Luxembourg Institute of Science and Technology (LIST), the University of Illinois at Urbana-Champaign and Stanford University with principal investigator Prof. Kräussl. Members included Ankit Arora (LIST), Denitsa Stefanova, Kalle Rinne, Joshua Rauh (Stanford), and Joshua Pollet (Illinois).
Making sense of risks and returns
The project sought to provide a unified framework to analyse the risk and return profile of alternative investment vehicles using market-based estimates. Researchers structured their work around three main themes. Firstly, investigating a potential channel for identifying skill in the hedge fund industry through a signalling mechanism. Secondly, exploring the role of venture capital in the reallocation of liquidity in the economy and the extent to which venture capital partnerships represent a counter-cyclical investor, providing capital in market downturns when liquidity is scarce. And thirdly, addressing the role of public-private partnerships in the efficient allocation of capital through alternative asset classes.
The workshop, attended by around 80 participants from both academic and industry backgrounds, began with three keynote presentations on topics especially relevant to finance professionals, including “Institutional Investments in Infrastructure” (Joshua Rauh, Stanford University), “Limited Partners vs. Unlimited Machines” (Ludovic Phalippou, Oxford University) and “Alternative Investments with Self-Organizing Maps” (Paul Wilmott, Wilmott Associates).
Highlighting how alternative investments can finance evolving energy demands
The morning finished with a panel discussion, “Financing Energy – The Role of Alternative Investments" moderated by Prof. Kräussl and featuring speakers Barbara Boos (EIF), Barbara Weber (B Capital Partners), Joshua Rauh (Stanford University) and Niccolo Polli (HSBC). After moderator Prof. Kräussl set the stage with a series of assertions (energy is expensive, energy supply is not sufficient to meet demand, high energy prices contribute to rising inflation, the geopolitical outlook is not pretty, climate change is real, we care about the climate, we also care about energy prices and inflation), the panelists addressed three core questions:
Project ALPHA’s contribution to academia and beyond
Wrapping up the conference, academic researchers in finance presented their papers, including four papers written within the ALPHA project by its team members: Joshua Rauh on “Institutional Investors and Infrastructure Investing”; Denitsa Stefanova - on “Signaling or Marketing? The Role of DCMs in Closed-End Funds”; Kalle Rinne on “Does Family Matter? Venture Capital Cross-fund Cash Flows”; and Ankit Arora on “Venture Capital and ESG - Integration and Challenges”. The other papers presented included Florian Weigert’s “Unobserved Performance of Hedge Funds" (University of Neuchâtel), Juha Joenväärä’s “Hedge Funds Performance Persistence in Real-Time” (Aalto University) and Remco Zwinkels’ “Risk, Return, and Sentiment in a Virtual Asset Market” (VU Amsterdam).
This successful final workshop served as a showcase for the ALPHA project’s excellent outcomes. Thanks to support from the Luxembourg National Research Fund, the project generated key academic findings, many of them published as papers in top journals such as The Review of Financial Studies, numerous presentations at conferences including with the National Bureau of Economic Research (NBER), strengthened academic exchanges between Luxembourg and Stanford, tightening of research collaborations, and strong dissemination of relevant research findings directly to the industry.