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At the GAIM conference in Cannes, it’s very different from the derivatives or risk management conferences I’ve been to before. There are 1200 people attending. But the big difference is the content; at derivatives conferences you actually learn significant amounts of hard stuff. Here, people are mostly trying to do business, and the talks are of a very general kind. That’s not to say they’re not interesting, but there’s a generic quality to them. Sometimes it reminds me a little of that recent incident on the BBC where some random man wandered into the TV studio, and they thought he was the guy they were supposed to interview about music on the internet, and woman interviewer asked him a bunch of questions which he had no idea about, but he answered her, and she kept commenting on his insights into the music industry. See…

But I like it here and there’s lots to learn that isn’t quantitative, but about business.

Though everyone talks about alpha and beta inside the auditorium, the real alpha is out on the promenade by the sea or in the streets one or two levels back. There’s an unstudied I’m-OK look to the way people of all ages walk and dress and carry themselves.

I gave a talk about the excess return you should expect for investing in funds with long lockups. I was also on a panel about alpha.

Everyone is very imprecise about alpha, to put it mildly. They’re looking for it but they don’t say what it is. It’s a capm term that has been stretched beyond clear recognition.

I like to think of hedge funds as manufacturers. Like options replicators, who make an option out of stock and bonds, hedge funds are manufacturing something — a volatility forward in the case of vol traders, for example. The question to ask them is what are they manufacturing, and what’s their edge. How much cheaper can they make it out of off-the-shelf material? There should be a simple answer to this, at least qualitatively. From that point of view, alpha is the extra efficiency in the cost of manufacture, the excess you hope to make over the cost of ingredients and the manufacturing process.

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