Mutual funds & technical trading

Discussion in 'Strategy Development' started by 99atlantic, May 17, 2006.

  1. Do you guys think it would be possible for a mutual fund to successfully technically trade a market by using a trend-based reversing positions strategy (e.g., using a channel breakout)?

    I mean the obvious answer is 'yes <w/ proper construction and maintenance>', but let's say you could do a realistic 20% return compounded annually in the market/secotr they traded......at a minimum they have to report monthly, and no matter how good a strategy is it is going to go through signifigant drawdowns, and we all know it's about weathering the drawdown for the big moves.

    Under normal circumstances it's not a big deal, but as a mutual fund because of constant reporting you'd be slinging all over the map in terms of returns, like 2%, 2%, 12%, -9%, -3%, 5%, -1%, 1.5%, etc.... so your returns would be more volatile than other funds who used more traditional, fundamental methodologies in determing their investments, thus making it harder to garner capital (because most would rather choose a more stable fund that earns slightly less but has nowhere near the volatility)

    Thoughts?
     
  2. Mutual Funds do a lot more than just buy/hold. They do that other stuff under the name of risk hedging.
     
  3. I know; what i meant is if they *only* speculated w/ buy/holds to try to pull a storng return w/o regard to volatility of returns