What we’re reading (3/25)
“Front-Running Target-Date Funds For Fun And Profit” (Barron’s). “No institutional trader would think of telegraphing to the rest of Wall Street that it was about to execute a sizable trade. Yet that, in effect, is what the multi-trillion-dollar target-date fund industry regularly does when executing rebalancing transactions, enabling shrewd traders to front-run those transactions and profit at the funds’ expense.”
“Does Balyasny Have Good — Or Bad — Timing With Its New Venture Fund?” (Institutional Investor). “Venture investing has hit hard times since the 2022 collapse of technology and growth companies in the stock market. As a result, more than 1,200 venture-backed unicorns — companies valued at more than $1 billion — have yet to go public or get acquired, according to CB Insights, which tracks the VC industry.”
“Want To Invest In A Private Company? All It Takes Is $5,000” (Wall Street Journal). “It is getting easier to invest in high-risk, high-reward private companies. Now, all it takes is $5,000 to buy a stake in a firm like artificial intelligence platform Glean or crypto exchange Kraken. EquityZen and Forge Global, which are marketplaces for trading shares of private companies, are lowering the minimum investment from tens of thousands of dollars, the companies said.”
“Let’s Stop The Trade Deficit Blame Game” (Maurice Obstfeld). “Many economists suggest that low US saving, partly due to a federal budget deficit that reached a whopping 6.4 percent of GDP in 2024, could plausibly play a role in causing America’s large and persistent trade deficit. Proponents of tariffs or other trade-limiting measures push back furiously. The United States is a blameless victim, they say. US trade deficits arise from other countries’ mercantilist policies, foisted on a US economy that previous leaders have fecklessly and recklessly left open to external actors. To restore balanced trade, they argue, it is time to take back control. Anyone who points out that the United States borrows abroad because its saving falls short of its investment faces the retort that foreign saving exceeds investment by the same amount (another consequence of arithmetic). But neither observation suffices to determine the origin of the pattern of global imbalances, because saving and investment rates have deeper fundamental drivers. It is only those that can justifiably be labeled as ‘causes’ of the US deficit.”
“The Economics Of Healthcare Fraud” (Jetson Leder-Luis & Anup Malani). “Healthcare fraud imposes a sizable cost on U.S. public healthcare budgets and distorts health care provision. We examine the economics of health care fraud and enforcement using theory and data and connect to a growing literature on the topic. We first offer a new economic definition of health care fraud that captures and connects the wide range of activities prosecuted as fraud. We define fraud as any divergence between the care an insurer says a patient qualifies for, the care a provider provides, and the care a provider bills for. Our definition clarifies the economic consequences of different categories of fraud and provides a framework for understanding the slate of existing studies. Next, we examine the incentives for committing and for prosecuting fraud. We show how fraud is driven by a combination of inadequate (expected) penalties for fraud and imperfect reimbursement rates. Public anti-fraud litigation is driven by the relative monetary, political or career returns to prosecuting fraud and by prosecutorial budgets. Finally, we examine the prevalence of health care fraud prosecutions across types of fraud and types of care, and across the US, by machine learning on text data from Department of Justice press releases.”
