what strategy is he employing? that "riskless" arb stuff? (which i don't really understand) or the stuff that's in his book? (which i assume is not that "riskless" arb stuff..) if he's employing a directional bias i'd still regard 10% as too low, regardless of how small he's thus far managed to keep his drawdowns..
according to his disclosure docs he uses 280 different uncorrelated strategies. So, in other words, he has no idea what strategies are currently at work at any given moment. As far as what you are I consider to be a relevant return or drawdown, I guess it doesn't matter. He's managing $1B with a 2% management fee and 20% incentive fee from the middle of Wisconsin. I wonder how long it would take him to buy the whole state? -James
Crabel has his offices in Milwaukee, WI...If you do a google search you can actually see pictures of the office on the architect's website... IMO, the larger fund managers who shoot for the low returns with low drawdowns are very savvy...Its not that I admire the returns, per se, but I do admire the business sense since they are acutely aware of the needs and desires of the big money clients who are extremely risk averse... From what I have seen, the bulk of returns and drawdowns are managed from the leverage side of the equation...If you look at the funds on IASG you will notice the MER or Margin to Equity ratio...From that you can get a very good idea of leverage and leverage relative to returns and drawdowns...
ohmigosh... this gets even better! a 20% incentive fee!!!! WTF!!! lemme get this straight.. this crabel guy makes say 10% on a billion, $100MM, and gets to keep 20million for himself?? and takes a 2% cut on the one billion under management? another cool 20million?? gee-zus! what the hell are these investors getting then??? a freakin tbond return??
check out Crabel's book on amazon (only $799 ):eek: http://www.amazon.com/exec/obidos/ASIN/0934380171/103-7455467-1010216 p.s. i wonder how much of this stuff is just plain common sense
the beauty of low risk, i think, is pure peace of mind. if you can make 20-25% on a chunk of client funds (and a couple million of your own cash as well) while never enduring more than a 5% drawdown, you are basically sleeping like a baby every night- and $10 to $20 million under management can do the job, let alone something wild like a billion.
The more money you have, the more important capital preservation becomes. The reason comparison to S&P is often reference is because of opportunity cost analysis. Also, the S&P serves as a benchmark for mutual funds.
CTAs use notional funding. So if they state they have $10m under management, the actual cash deposited in trading accounts may only be a fraction of that. This allows the CTA to tailor the program to a target market (institutions seeking returns in low teens), yet allow the individual investor to leverage themselves up if desired. Eg. a CTA makes a return of $1m on a $10m account. He reports a 10% return. However investor only deposited $3m funds in trading account. So investor's actual return is 33%. Another reason for notional funding is that only a small percentage of the total is required for margin. If you are a pension fund with $100m to invest, and the fund never runs a margin/equity ratio of above 30%, you would probably just deposit $30m in the futures account and keep the rest separate.
Vishnu - where do you found this information? Do we talk about Crabel? I was searching the whole website and found no indication for that. What I found was: The Advisor presently utilizes an even mix of short term momentum and short term counter-trend techniques. In the DDoc and the http://www.crabel.com/strategy.htm site. Thanks