If you can return 23% for 15 years annually, you are amongst the best in the world. Top 10, hands down. Buffett, Soros, D.E. Shaw, Rennaissance Technologies, Millennium Partners, Citadel, Steve Cohen, Peter Lynch, Paul Tudor Jones, Stan Druckenmiller. My top 10.
C'mon you say you are a fund manager, you should know better than just looking at average returns. If you look at their Sharpe ratio (for example) they would probably be among the top 100 but far away from the top 10. iasg.com database alone has more than 70 funds with better Sharpe Ratio than D.E. Shaw's. They are too volatile. The true top ten are much more consistent.
You are correct, there is certainly more to life than average annual return. However, i do believe that they are amongst the most consistent as well. Can you point out a few funds from iasg that you think qualify for returns and consistency? There are many that can do it for a short period of time, however, 15 years is pretty impressive. D.E. Shaw is a lot less volatile than many (if not all) major CTAs. I mean John Henry is a great money manager but highly volatile relative to DE Shaw and similar ilk. DE Shaw had a problem in the 3Q of 1998, that is the only major problem that I really know about.
You also have to consider that DE Shaw is running $6 Billion. Most of the Funds on IASG are pikers in comparison. In fact, the only ones in the CTA universe that compare in size are John Henry and Campbell that I can think of. It's alot different to average 23% returns on multiple billions than it is on a few million or a few hundred million. Also, in looking briefly at the IASG website, I noticed that the max peak to trough DD is much higher than DE Shaw. They are still in my top 10 overall, hands down.
Rotella manages 1.4 billion, has much better sharpe ratio and has been around for 14 years. Rotella is objectively better than DE Shaws but you don't hear the media or hot shot academics trumpeting Rotella's performance. Rotella who? Check out also IIG, IIU convertible fund, Basis pac, ADA investments, they all manage more than 100 million and have been at it 5 to 8 years. They all have way better Sharpe Ratio than DE Shaw. John Henry is about 97th in the Sharpe Ratio ranking. DE Shaw would be about 75th. The "6 billion" number does not necessarily reflect better performance but certainly better marketing. About the difficulty of managing 6 billion, I would say it's not much more difficult than 500 million. 20 billion or more that's hard. Maybe I should look at TASS and other hedge fund databases for more examples...
I respectfully disagree. Rotella had only a few hundred million up until a few years ago. None of those funds are in the same league as DE Shaw. I have no vested interest in DE Shaw but am just stating my opinion. Have you tried making returns on $6 Billion? You are talking about taking more than $1 Billion out of the market annually just to keep up with your average annual returns. There is no hedge fund in the world running over $20 Billion. I should probably drop Stan Druckenmiller from my list and replace with Bruce Kovner.
Have to side with trade-ya1 in this debate. (I've been in both buy and sell side of the hedge fund industry since '98). $100m is off the radar screen for most institutional investors. Performance attributes at that level are rarely replicated even at, say, a 5x level of FUM. Typically, if you ask a manager who's been working with $100m for some time what his estimated capacity is, his reply will include a caveat something like, "well, I'd have to adapt the strategies ..." I'm surprised, Buzzy, that you consider running $6bn isn't much more onerous than $500m. Not only are market-related factors an issue, the organisation management burdens tend to increase exponentially. If you can return 20% p.a. consistently, you will have people queuing up to place money with you. Marketing will hardly be necessary - your returns will get people knocking. One might argue that slick marketing has been a huge factor in Man's success, but then they've also had attractive numbers to include in the collateral. When I was a broker/portfolio manager, it was admittedly easy to garner private investors on the back of some tortured simulated track record. As a marketer to institutions, you begin with having to counter a very visible cynicism the moment you open your Powerpoint.... I love healthy Sharpe ratios as a marketer, but they carry little weight with my due diligence officer. They are not difficult to massage. I believe that most people involved in researching and selecting hedge fund managers will tell you that the quant part of the d/d process doesn't weight more than 20% in their report.
Traders and the institutional world (portfolio managers marketers etc etc) have very different mindsets. Read "market wizards", who's the best trader according to Monroe Trout? The one with the best Sharpe Ratio. Now let's go to a pension fund, what is the best fund for a portfolio manager? The one that won't get him fired even if it loses money. Another difference: traders strive to compound their money to infinity. 20% a year just doesn't cut it. It is quite feasible to make 20% a month if you have the skills. A trader says: I don't want to manage 1 billion and live off my 1% fee, I want 1 billion to be all mine. Institutional managers are happy with their 1% management fee so their game is pumping assets under management to infinity. That's why 20% a year looks like a lot to them and to you. But not to hardcore traders like myself.
Yes, I've read Market Wizards many times, and had an absorbing hour or so chatting to Jack Schwager a couple of years ago. I placed clients' money with Trout for several years in the late 90s. His approach, though, is rather the opposite of the generic 'hardcore' trader you describe, wouldn't you say? Ironically most of my clients at that time opted instead for the more exciting past results of Julian Robertson's global macro Tiger Fund (which had an SR of about 1.8 in mid-98, I recall, compared to c.2.8 for Trout) - unfortunately only to lose 50% of their wedge when he came to grief in the yen carry trade. Well, if you are one of the generic group making 20%+ per month, don't completely write off the idea of managing money for others if your Sharpe ratio's healthy. It'll get you to that goal of $1billion a lot sooner on the performance fees!