FIN3102 Investment Analysis and Portfolio Management

Case 1: The Dynamis Hedge Fund: An Energy Hedge Fund

Section C5 Group 1A

Group Members: Christian Aanstad Jean Chow Li Jun Stephenie Yeo Pei Jin Winnie Tiong Ji Xiang (A0089731W) (A0066986H) (A0073563A) (U093021U)

Table of Contents Introduction .................................................................................................................................................. 3 Expansion to asset management business ............................................................................................... 3 Inclusion of Dynamis Fund ........................................................................................................................ 3 Energy Sector ................................................................................................................................................ 4 The Energy Portfolio ..................................................................................................................................... 5 Benchmarking ........................................................................................................................................... 5 Performance Evaluation............................................................................................................................ 7 Performance Measure .............................................................................................................................. 8 The Dynamis Fund......................................................................................................................................... 9 Performance Measurement...................................................................................................................... 9 Performance Analysis ............................................................................................................................. 11 Debt level ................................................................................................................................................ 13 Evaluation of Fee Structure ........................................................................................................................ 13 Fees for Energy Portfolio ........................................................................................................................ 13 Fees for Dynamis Fund............................................................................................................................ 14 Analysis of fee structure of Dynamis fund .............................................................................................. 14 Comparison of fee structure ................................................................................................................... 15 Conclusion ................................................................................................................................................... 16 Bibliography ................................................................................................................................................ 16

Introduction Scott and Stringfellow (S&S) started off as a regional brokerage house in 1893 and have always focused on regional industries like southern railroads which they have a competitive advantage in. Expansion to asset management business In 1893, due to heavy infrastructure development, railroad overbuilding and unstable railroad financing occurred, which triggered bank failures in the region.1 Despite their expertise in that area, it was difficult for S&S to gain profits, as it only earned investors commission fees. Given the circumstances, it was more profitable to expand into other areas of the finance industry, namely investment banking and asset management. The fee structure and the buy-overs of their funds by other companies meant a substantial profit source. Also, the economy (and financial market) was slowly recovering and grew in double digits by early 1900s. The trading volume in New York Stock Exchange increased sixfold between 1894 and 1901. 2 This positive market conditions further encouraged S&S to branch out into other instruments. Therefore, in view of profitability, expansion purposes, and market attractiveness, S&S chose to offer other instruments like investment banking and asset management. Inclusion of Dynamis Fund Asset management was solely by an S&S subsidiary, Scott & Stringfellow Capital Management (SSCM). Within the assets managed, there were two funds that were invested exclusively in the volatile and cyclical energy industry: the Energy Portfolio (1993) and the Energy Hedge fund (1997), known as the Dynamis Fund. Fred Bocock (grandson to founder Fredric William Scott 3) had an competitive advantage with his experience in the upstream oil and gas sector, and manages the two funds with his two sons. The Energy Portfolio, a mutual fund, can generate decent profits through management fees. Comparatively, the Dynamis Fund, co-owned by S&S and Fred, had potential for greater profitability.
1 2

The Depression of 1893, http://eh.net/encyclopedia/article/whitten.panic.1893 The New York Stock Exchange Building, http://corporate.nyx.com/en/who-we-are/history/new-york 3 http://www2.timesdispatch.com/lifestyles/2008/nov/26/fbob26_20081125-213325-ar-108996/

The Dynamis Fund being a private partnership, is less regulated by authorities and can employ a wide latitude of investment tools and strategies. This enables the use of short and leverages to enhance returns. Also, Hedge funds take a long-short position, which protects them against market risk and is profitable in both bull and bear markets. The Dynamis Fund, which does not aim to be market neutral, can be more speculative in the market and this different risk-reward characteristic will attract investors who are more risk-tolerant. The Dynamis Funds target investors of high net worth individuals (HNWI) and the lock-up periods, in turn gives certainty towards the pool of funds for investment, especially in illiquid investments which have greater potential of higher returns. More importantly, hedge funds have an incentive-based fee structure where managers receive an incentive fee that is a proportion of the earnings of the fund (in this case 20%). This provides the managers with double compensation: management and incentive fees. Therefore, consideirng the above factors, starting a hedge fund in addition to its Energy Portfolio is an attractive and profitable prospect. However, managing two funds concentrated in the same industry does cause conflcits, which will be discussed in the later part of the report. Energy Sector Fred Bocock, due to his comparative advantage, focused on the energy sector, the upstream area in particular. He periodically switches investment focus within the subcatagories of the upstream companies and in the most recent 1998 information, both portfolios were heavily invested in the category oil services which is made up of drillers and other services shown in the chart below. The term upstream refers to companies who are involved in necessary in getting oil and gas out of the ground. all the processes

The Energy Portfolio Benchmarking Compared to S&P500 and the other energy indices given, the S&P Integrated Domestic Index (SPOILD) is a more suitable benchmark for evaluating the performance of the Energy Portfolio as it best reflects the the portfolios composition of stocks. Also, SPOILD is still broad enough to be an accurate benchmark when the fund manager shifts its focus from one area to another, (e.g. from exploration and production (E&P) in the past to the current oil services) or even across upstream and downstream companies.

Percentage Monthly Returns for S&P 500 and Energy Portfolio

20% Percentage Monthly Returns 15% 10% 5% 0% -5% -10% -15% -20% 2/1/93 5/1/93 8/1/93 2/1/94 5/1/94 8/1/94 2/1/95 5/1/95 8/1/95 2/1/96 5/1/96 8/1/96 2/1/97 5/1/97 8/1/97 11/1/93 11/1/94 11/1/95 11/1/96 11/1/97 2/1/98 S&S S&P 500

Date

Graph 1.1: Percentage returns for Energy Portfolio and S&P500. Parameters/Inde x Alpha S& S 0 S&P50 0 0.0130 Russel l 0.0126 SPOIL C 0.0096 SPOIL W 0.0090 SPOIL D 0.0094 SPOIL P 0.0230 WTI 0.022 9 0.48 0.17 0.07

Beta 1 0.78 1.08 1.34 0.95 0.60 0.90 R2 1 0.11 0.28 0.40 0.59 0.59 0.59 Stdev residual 0 0.07 0.06 0.06 0.05 0.05 0.05 Table 1.1: Regression parameters of the Energy Portfolio on different market indices.

Additionally, when a regression analysis was done on the returns of the Energy Portfolio against the different market indices, S&P500 had the lowest R2 value of 0.11 which means that the return variability of the Energy Portfolio return is not well explained by the variability of S&P500. SPOILW, SPOILD as well as SPOILP gave the highest R2 of 0.59 and lowest residual standard deviation of 0.05 as shown in

Table 1.1. The R2 values for SPOILC, WTI and Russell are not as high. Since SPOILW, SPOILD and SPOILP gave the highest R2 values, these indices would explain a greater proportion of the Energy Portfolio return variability, hence making them relatively suitable benchmarks.

25% 20% Percentage Monthly Returns 15% 10% 5% 0% -5% -10% -15% -20% 2/1/93 5/1/93

Percentage Monthly Returns for Energy Portfolio and SPOILD S&S

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Graph 1.2: Percentage returns for Energy Portfolio and S&P Integrated Domestic Index (SPOILD). Among the 3 suitable energy indices, SPOILD is the most appropriate benchmark because SPOILD is a better representation of the portfolio regardless of the subcategory concentration strategy that the Energy Portfolio might have in the future. As the Energy Portfolio has a high turnover rate, where the companies or sub-categories the portfolio invests in changes frequently, it is crucial that the selected benchmark is still able to capture accurately the majority of the risks faced by the energy sector even after the change in composition. This is especially since investors would prefer a consistent benchmark for evaluating returns over the years as opposed to switching benchmarks whenever the portfolio switches its area of concentration. As shown in Graph 1.2, in the percentage returns for the Energy Portfolio follows closely to that of SPOILD, showing that SPOILD is currently able to reflect accurately on the returns of the portfolio and capture firm/industry-specific risks. Even if the Energy Portfolio were to switch drastically and heavily invested in E&P companies such as Anadarko and Apache like in the past, SPOILD is still able to capture accurately the majority of the risks faced by

11/1/97

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the energy sector as the index includes the more general area of integrated oil companies. Hence SPOILD fulfills this particular requirement of a benchmark very well. Comparatively, SPOILW and SPOILP are not as appropriate as SPOILD because they are more specialised in the oil well equipment and services companies, and E&P companies respectively. Being too specialised would mean that should the Energy Portfolio change its area of focus, SPOILW and SPOILP will not accurately reflect the returns of the Energy Portfolio. Moreover, SPOILW and SPOILP consider the returns of 6 and 5 companies respectively. This means that SPOILW and SPOILP are unable to represent the entire energy sector very accurately. However, a shortcoming of SPOILD is its inclusion of only 10 companies, making it not representative of the entire energy sector. Also, SPOILD is capitalization-weighted, hence it is less reflective of the Energy Portfolio to a small extent, as the Energy Portfolio concentrates on smaller and medium-sized companies. Being capitalization-weighted actually places more weightage on the large companies when computing the Index , as opposed to being price-weighted. Performance Evaluation Period Annual 1993 Annual 1994 Annual 1995 Annual 1996 Annual 1997 Energy Portfolio 20.27% -10.87% 49.7% 75.89% 14.85% SPOILD 18.28% -23.9% 29.36% 94.49% 26.29% S&P500 2.44% -5.59% 27.24% 14.47% 24.47%

Table 1.2 Geometric returns calculated from Energy Portfolio: Risk Free Adjusted Data From Table 1.2, the risk-free adjusted returns for the Energy Portfolio are higher than SPOILD from 1993 to 1995, showing significantly good performance. However, for 1996 and 1997, the risk-free adjusted returns for the Energy Portfolio is lower than SPOILD, and from graph 1.2, we can see that the performance of the Energy portfolio is less volatile as a whole compared to the SPOILD. This difference in volatility is most likely due to the switch in area of concentration from E&P companies to offshore drillers and oil services in the Energy Portfolio. From 1996 to 1997, the Energy Portfolio

concentrated on oil services which has a lower short-term commodity risk, hence it would be logical to expect the lower volatitly and hence lower return as dictated by the risk-return relationship. This can be view in relative to SPOILDs return values, which would most likely represent the energy sector of integrated oil companies. In contrast, from 1993 to 1995, as the Energy Portfolio invested in E&P which has high short-term commodity risk, the returns would therefore be higher and outperform SPOILD. Despite the portfolio not performing as well as the SPOILD (but still significantly well) in 1996 & 1997, this does not actually reflect extremely badly on the Funds performance if we take into acount the limitations of SPOILD as a benchmark as previously mentioned, and most importantly, the factor of Hubberts prediction of Oil Peak occurring 1995. According to his peak theory, geophysicist M. King Hubbert predicted in 1974 that the global oil production will peak in 1995 and fall sharply subsequently. 4 Given the significant impact this will have on investments in the oil sector, a relatively risk averse fund manager would most likely switch their asset composition to something less volatile to reduce the losses that could occur due to the fall after the oil peak. Hence the switch by the fund manager to the less risky and volatile sector of oil services would be a rational and justified decision, especially since Hubberts oil Peak theory was later proved to be true. Therefore, the performance of the energy Portfolio is in fact relatively good, given the circumstances. Performance Measure Period Annual 1993 Treynor measure 25.9% using S&P500 Table 1.3: Treynor Measure Treynor Measure will be the most appropriate measure as it is highly likely that the investors chose the Energy Portfolio for diversification purposes, since the energy sector is a good diversification tool. If we assume that the investor plans to add the Energy Portfolio to a already broader , diversified portfolio, systematic risk will therefore be more relevant. Though the Jensens measure mentioned in Annual 1994 Annual 1995 Annual 1996 Annual 1997 -13.9% 63.5% 97.0% 19.0%

"Oil, the Dwindling Treasure" by Noel Grove, Photographs by Emory Kristof National Geographic, June, 1974

the case study is adequate to evaluate the absolute excess returns of the Energy Portfolio, Treynor measure is still a better choice because it gives you the excess return per unit of systematic risk. Since S&P500 is normally considered the general market portfolio, S&P500 was used to calculate Treynor measure. In Table 1.3, the patterns of the market risk-adjusted returns (Treynor measure) from 1993 to 1997 are consistent with the risk-adjusted returns in Table 1.2, which fits our previous performance evaluation of the Energy Portfolio. Hence we can conclude once again that the Energy Portfolios performance was relatively well, all things considered. The Dynamis Fund The Dynamis Hedge Fund is a Long/Short equity hedge that has a concentrated focus on the energy sector and does not use a market neutral strategy. When needed, it uses derivatives like options, as well as shorting to maximize their profit gains and minimize their overall risk. Performance Measurement When evaluating the performance of the Hedge Fund, the best performance measure to use would most likely be the Information Ratio. A general S&P 500 Index, or an Energy Sector concentrated Index have their unsuitable areas, as they are not adjusted for the leverages, options, short sales used in the Hedge Fund. A Hedge Fund Index would be a comparatively inferior benchmark, as research suggests that data that is used in the Hedge Fund Index are largely skewed to the positive side and not completely reflective of the hedge fund performance in the market. Hedge Fund Indices are largely skewed towards to the positive side due to a large variety of reasons, including its illiquidity, the survivorship bias, and the backfill bias. In a Hedge Fund, the assets contained are largely illiquid (compared to mutual funds) and hence difficult to determine their actual market value. Asset managers therefore are able to price their assets at a less conservative amount in order to portray greater returns. This is reflected in the Santa effect 5 where hedge funds tend to report significantly larger than normal average returns in December, where the annual performance evaluation and performance fee is decided.
5

Bodie, Kane and Marcus (2011). Investments and Portfolio Management (9th Edition ed.). McGraw-Hill.

Also, there exists Survivorship Bias 6, where only the successful funds information is present in the data as the unsuccessful losses-suffering hedge funds tend to eventually shut down or abandoned and hence not included/removed. Certain companies even merge the unsuccessful fund with a more successful fund and remove previous unsuccessful funds track records, thus leaving the illusion that all assets were from the fund that was doing well all time. This means that in the database of hedge fund returns, bad records get weeded out and removed over the years, leaving only the good ones. Analyzing the high attrition rate of hedge funds, researchers have estimates that the Survivorship Bias ranges from 2.9% to 4.4%6. An equally important factor would be the Self-selection Bias 7, where due to the voluntary nature of the database, the data in the index is often skewed. The fund managers who voluntarily provide their database information most likely performed well as they wish to attract more investors and gain more capital by getting publicity through the database. Alternatively, fund managers who are no longer doing well may stop reporting their returns as they wish to hide the less than satisfactory returns from their investors, or may not report their returns at all if they did not do well. Another related reason for this inaccuracy in hedge funds index would be the Backfill Bias, also known as the Instant History Bias 8. When new managers of hedge funds appear, they tend to put in not only their current reported returns, but also their reported returns over the past few years into the database. This makes the available hedge fund data even more skewed to the positive side as like previously mentioned, these new managers who willingly put their current and past reported returns into the database are normally the successful ones. In fact, the Long/short Equity Hedge has an average of 57% of its funds being backfilled funds from 1996 to 2002, and is the hedge fund type with the largest average backfill bias of 6.34%8 out of all the hedge fund styles.

Financial Markets, David Swensen http://oyc.yale.edu/economics/financialmarkets/content/transcripts/transcript09.html 7 Nolke Posthumay, Pieter Jelle van der Sluis A Reality Check on Hedge Fund Returns July 8, 2003. 8 Nolke Posthumay, Pieter Jelle van der Sluis (2003,July 8) A Reality Check on Hedge Fund Returns. , The backfill bias is expressed as the annual difference between the backfilled and non-backfilled index in percentages of returns.

Therefore, due to the relatively higher illiquidity of hedge funds, the Survivorship Bias, Self-selection Bias and Backfill Bias, Hedge Fund Indexes tend to be less reflective of the entire hedge fund markets performance and more reflective of the successful cases. Also, as many hedge funds indexes do not reveal much information about their assets composition or strategy, it is even harder to find an Hedge Fund Index that is well-matched to the Hedge Fund significantly enough to do a accurate comparison. The General market Indices or Industry specific Indices that are commonly used in benchmarking mutual funds also have their shortcomings, as they are not adjusted for the leverage, options and short sales used, as well as the difference in asset composition and liquidity. Hedge funds tend to hold more illiquid assets than other funds due to its lock-up period, hence the return premium of hedge funds would be higher to compensate for the illiquidity. The returns for hedge funds should be adjusted for liquidity when comparing with funds with a higher liquidity as the extra return could be just due to the compensation for lower liquidity. However, in the case of this Dynamis Hedge fund, the liquidity level of the assets are comparatively higher as it trades in publicly traded companies and has an asset composition that is quite similar to the portfolio. Lastly, we have the information ratio, which is the best measure for the performance of the hedge fund as it measures the alpha (the excess return above or below the SML line) given each extra unit of idiosyncratic risk that the manager takes. This is the best performance measure as it measures the extra return that the hedge fund manager is able to derive from how much it deviates from the market portfolio, which in turn accurately reflects the managers stock picking skill. Also, it evaluates the returns of the hedge fund as an absolute value, which is the ideal method of comparison hedge funds and not in percentage or relative values. Performance Analysis When evaluating the performance of the Dynamis Hedge Fund, the evaluation will be done on the basis of how well the hedge funds returns have done compared to the market portfolio returns.

Although the information ratio is the best performance measure, there is insufficient information to calculate the information ratio values. Hence the performance of the Dynamis Hedge Fund will be evaluated using the S&P 500 Index, which best reflects the market portfolio returns. Risk Free Adjusted Monthly Returns Period Dynamis Fund S&P 500 SPOILD Jul 97 12.98% 6.65% 13.66% Aug 97 7.94% -6.15% -4.3% Sept 97 12.45% 4.89% 16.33% Oct 97 -3.62% -3.87% 5.41% Nov 97 -15.53% 4.08% -10.32% Dec 97 7.24% 1.13% -10.87% Jan 98 -14.17% 0.61% -18.22% Feb 98 7.46% 6.66% 8.75% Table 1.4 Risk Free Adjusted Monthly Returns As can be seen from the table above, the Dynamis Fund does relatively better than the market portfolio represented by the S&P 500. It was able to do better than S&P 500 in S&P 500s two instances of losses in August 1997 (7.94% VS -6.15%) and October 1997 (-3.62% VS -3.87%) and was able to achieve significantly higher returns than S&P 500 in most cases, like July 1997 (12.98% VS 6.65%), September 1997 (12.45% VS 4.89%) and December 1997 (7.24% VS 1.13%). However, there were two instances where the fund did significantly worse than the market portfolio as represented in S&P 500. These two instances were in November 1997 (-15.53% VS 4.08%) and January 1998 (-14.17% and 0.61%). When compared with the returns of the SPOILD Index at that time period, it shows that the losses suffered by the Dynamis Hedge Fund were reflected similarly in the SPOILD Index (-15.53 VS -10.32 and -14.17% VS -18.22%). This suggests that the losses were most likely due to the industry/firm specific risks and idiosyncratic risk that are unique to the energy industry, which the Hedge Fund manager was unable to hedge against. In fact, this seems to be largely due to the decline in oil prices starting in October 1997, which had affected the upstream industry as a whole. Also, the Hedge Fund was able to increase its returns to 7.24% in December 1997 again despite the further losses suffered by the oil industry as a whole as can be seen from SPOILDs 10.87%. Similarly, the fall in returns in January 1998 can be explained by the unprecedented drop in

Asian Pacific Oil Consumption due to the 1997 Asian Financial Crisis 9, which had a large impact on the oil industry as a whole. Therefore, given the impact of certain oil industry specific losses that were relatively hard to predict and hence hedge against, the Dynamis Hedge Fund has done relatively well compared to the Market Portfolio. Debt level The debt level taken by a fund should depend on the fund managers stock picking ability. If past data has shown that the fund managers stock picking ability is relatively good, the leverage can then be relatively safely increased to increase profits. Additionally, the interest rate and the level of risk taken on with the leverage should be considered. Also, the liquidity of the assets is important in determining the level of debt that should be taken. If the hedge funds assets are largely illiquid (as most hedge funds are), the manager faces high risk if he needs to repay the liquidate the assets urgently for his debt related payments. Evaluation of Fee Structure Fees for Energy Portfolio The Energy portfolio is subjected to many types of expenses which include front-end or back-end load, operating expenses and 12b-1 charges. The difference in the gross and net SSCM Energy Performance Results is due to taxes and fees. On average, taxes and fees reduce portfolios annual return by approximately 0.64% and under the fees component, operating expenses and 12b-1 charges are relevant fees which contributed to the decrease as they are payable annually. Front-end and backend load is an either-or fee payable at the beginning or at the end of the investors investment hence it is a one-time payment fee. Operating expenses include administrative expenses and advisory fees paid to the investment manager while 12b-1 charges are marketing and distribution costs incurred by the fund. Though these fees were usually expressed as a percentage of total assets under management, it is not required for the
9

Oil Price History and Analysis. (n.d.). From WTRG Economics: Oil Price History and Analysis

manager to have a fixed percentage. Advisory fees could vary across funds depending on the skilfulness of the manager, but as a gauge, operating expenses range from 0.2% to 2% while 12b-1 charges are limited to 1% of average net assets per year. Fees for Dynamis Fund In the Dynamis fund, the management fee is quoted to be 1% of the assets under management while incentive fee is quoted at 20% of funds profit. Nonetheless, the incentive fee may not always be applicable as a high-water mark (HWM) is included in calculation of fees. HWM means that the previous highest level of profit must be met before managers can get their incentive fees and even after the HWM is met, managers are only allowed to take the fee if the investors have a minimum 10% profit. The fund also imposes a hurdle rate, which does not allow the manager to get a fee on the first 12.5% of profits. Analysis of fee structure of Dynamis fund In general, the incentive fee motivates the fund mangers to work harder and achieve higher returns for the fund as their fees are dependent on the returns made. However, this inventive fee system does not hold the hedge fund managers liable for losses suffered, which combined with the incentive fee system, cause the managers to make extremely risky decisions without consideration of the negative consequences. Also, restrictions like the HWM and hurdle rates may dampen this motivating factor. If the hedge fund is currently suffering from serious losses, it would make it extremely hard for the manager to earn the incentive fee as the high watermark means they still have to achieve their previous highest profit level, but with the lower amount of capital they have now after the losses. This in turn may make them more prone to shutting down their hedge funds if they do badly, which is reflected in the high attrition rate of hedge funds mentioned previously. Although it seems to be advantageous to the investor, this fee structure would only make sense if the hedge fund manager is actually skilled and has the ability to earn significant returns, since this means that the manager would not be likely to fall too far under the HWM to have to resort to close the hedge fund and make the investor suffer losses. Therefore in order to benefit the most from this fee structure, the investor still needs to pick a portfolio manager with good stock picking skills.

Comparison of fee structure

If the return rate of the Dynamis Fund falls below the high water mark, the manager will only earn the 1% management fee. In contrast, the Energy Portfolio manager will earn a predetermined fee for operating expenses which is estimated to be about 1.3% to 1.5% in U.S.A. However, once the HWM is reached, and the 10% return balance criteria met and the 12.5% hurdle rate taken into account, the possible fee that the fund manager can derive would increase drastically to 21%, which is significantly larger than the energy portfolio. Hence the amount of fee that the manager can get for the hedge fund is extremely dependent on the portfolio performance and their stock picking skills, and not so for the energy portfolio. An interesting point to discuss would be the fact that currently, both the Energy portfolio and the Dynamis Fund are under the management of the same group of people, namely Fred Bocock and his two sons. The official stance of this group of managers is that the Energy Portfolio will be given priority over the Dynamis Fund which places the Dynamis Fund in a less advantages position as

this arrangement meant that the Energy Portfolio will be given priority if there were to be any profitable investments. In relation to the different compensation methods in place for the Portfolio
and the Fund here, it is very likely that the fund managers will choose to place the investment in the portfolio or hedge fund that allows that them to get a higher fee rather than follow the official priority stance strictly, since these fund managers ultimate motive is to earn their fees and given the large difference (~19%) in fees earned once the HWM is passed. Adding to this is the fact that there is no way to prove that the managers did not actually place the portfolio in greater priority, as there is no way to show that the investment was meant for the portfolio and not the hedge fund. This is especially

because the Energy Portfolio and the Hedge Fund invest in the same sector, and also that the hedge fund does not need to follow any legal regulations, meaning they are not under obligation to reveal exactly what investments they picked. Conclusion Based on the above analysis, the performances of the Energy Portfolio and the Hedge Fund appear relatively satisfactory when compared with the appropriate performance measures, (SPOILD and information ratio/S&P 500 due to unavailability respectively) and placed in context. It should be acknowledged however, that there is no index or measure that would be the perfect benchmark for any of the funds performances as none of the indexes are able to perfectly match the funds asset composition. Also, there exists the issue of whose perspective considered when deciding the best benchmark, for the investor would prefer a stricter benchmark that allows an accurate analysis, while the fund manager would prefer to pick a benchmark that can present their returns as the higher the better. Bibliography The Depression of 1893. (2010, February). From Economic History Services: http://eh.net/encyclopedia/article/whitten.panic.1893 New York Stock Exchange. (n.d.). From New York Stock Exchange: http://corporate.nyx.com/en/who-we-are/history/new-york F. Scott Bocock served his city. (2011, September). From Richmond Times-Dispatch: http://www2.timesdispatch.com/lifestyles/2008/nov/26/fbob26_20081125-213325-ar-108996/ "Oil, the Dwindling Treasure" by Noel Grove, Photographs by Emory Kristof, National Geographic, June, 1974 http://www.hubbertpeak.com/hubbert/natgeog.htm Bodie, Kane and Marcus (2011). Investments and Portfolio Management (9th Edition ed.). McGrawHill. Financial Markets, David Swensen http://oyc.yale.edu/economics/financial-markets/content/transcripts/transcript09.html Nolke Posthumay, Pieter Jelle van der Sluis (2003,July 8) A Reality Check on Hedge Fund Returns Oil Price History and Analysis. (n.d.). From WTRG Economics: Oil Price History and Analysishttp://www.wtrg.com/prices.htm