The discussion centers on private equity and venture capital replication. In august 2017, the economist profiled the firm’s efforts to partner with thomson reuters to create indices using public stocks to track the private equity asset class.Summary of cognitive learning theory the goal is to enable investors to mimic the returns of the private equity and venture capital asset class.

Arthur is the founder and CEO of DSC quantitative group.Summary of cognitive learning theory he also developed the investable hedge fund index operation for hedge fund research including index methodology, manager selection and, structured product development and distribution.Summary of cognitive learning theory prior to joining HFR, art was the founder/CEO of a venture-backed internet exchange operation focused on creating unique derivative markets for online trading.Summary of cognitive learning theory he managed the financial trading and investments group for koch industries and spent seven years in the capital markets group at the first national bank of chicago (J.P.Summary of cognitive learning theory morgan).

Jeffrey knupp is the president of DSC quantitative group. Prior to joining, jeff was the COO of cloud gate capital, a long/short equity manager.Summary of cognitive learning theory previously he ran deutsche bank’s global prime finance efforts in the midwest and had a similar role with morgan stanley. Jeff’s background also includes several years with citadel investment group in corporate strategy and development and experience as a management consultant in A.T.Summary of cognitive learning theory kearney’s financial institutions group, primarily focused on securities-related businesses.

The motivation for creating the research index was to have a direct tie to the PE and VC asset classes from which the tracking index is designed to mirror.Summary of cognitive learning theory this is critical and something missing from other products that claim to track the asset classes. Currently, the PE research index is comprised of over 2,000 PE-backed companies with a total market cap of nearly $2T and the VC represents over 8,000 VC-backed companies with a total market cap of nearly $800B.Summary of cognitive learning theory

From there we use a set of proprietary models to measure the risk (“beta”) of the research indices and adjust the exposure to the liquid securities of the tracking index as appropriate to match the same expected market movement as the research indices.Summary of cognitive learning theory we then re-allocate risk across sectors to tighten the tracking (but do not add or subtract any leverage as part of this step).

DSC: there are a number of different private market benchmark providers.Summary of cognitive learning theory we generally look at cambridge associates’ indices as they seem to be utilized by the majority of institutional investors. One major difference between our return profile and that of cambridge associates is that we construct a replication portfolio based on the “gross performance” of the underlying PE and VC-back companies, whereas the cambridge data is based on manager provided “net performance,” i.E.Summary of cognitive learning theory after the fund managers have taken their fees. Given the average level of fees in the asset classes, that leads to a material difference.

There are a few investors looking at our indices as part of a core/satellite framework – just like in their liquid equities portfolio where they want core exposure to be complemented by niche or specific managers.Summary of cognitive learning theory for investors that may be subscale for a full-blown PE program, the indices may represent a compelling alternative to a fund of funds offering.Summary of cognitive learning theory