Discussion in 'Trading' started by KS2007, Feb 3, 2007.
Hello elitetraders! Question...
what is the maximum acceptable drawdown for a hedge fund?
ha thanks! Seriously though...
1% of capital.
well, it should depends where the hedge funds invest in, so it's pretty relative.
That doesn't mean that may be the potential drawdown for the hedge fund is bigger than the potential drawdown you're going to be willing to take.
most established hedge funds with proper risk management in place will have a 1 day VaR (99%) of about 7% deviating a few % depending on their market and regional concentrations.
Seriously, multiple hedgefunds have drawdowns 40-50% and recover. its the nature of the game, if you want stability use another vehicle.
Drawdowns are part of the game. Some Trend Following funds have drawdowns in excess of 70% and still do alright.
very true. others blow up totally--- just don't try this at home ( trend follow)
this institutionalization of hedge funds is truly against their very nature.
Can be more than 100% if the hedge fund becomes reckeless and abuses leverage.
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