I would assume he runs a typical allocation between the long equity and managed futures position of 75% vs 25%. If the EFA is tanking and his managed futures don't give too much of a positive contribution he will tank alongside the EFA. Nothing shocking here.
Over your career, the market is going to "take several shots at you"... that is, there will be episodes where if you screw up, you'll lose most of what you've made over the years and perhaps more. This is one such time. '01-'03, in Tech was another. The #1 determinant of your career success will be "the losses you don't take". Matters not... how smart you are, how successful you've been, how much money you've made in the markets before... if you lose stop discipline, the market will EAT YOUR LUNCH at some point. FWIW... If they market's going to get MY money, it's going to be like "being nibbled to death by ducks"...
Well, then his business model failed. I assume he thought that all markets can not fall together (thus picking the EAFE) and the black swan year of 2008 proved him wrong. Also according to the performance chart, he is not getting the target EAFE +5-10% either. I wish him good luck and hopefully for the rest of the year he might get a better return and outperforms the EAFE, but so far it is 2 for 2 down....
Good luck AS. Can't really fault the guy as everyone here says this is what these guys do. Which is one of the reasons you can never really trust the hedge fund indexes as the broke funds get taken out, replaced by the good ones, sorry slightly better than broke ones
If you look at the chart, he was outperforming the EAFE from its inception in March until just recently when he began to underperform it severly causing them to become about equal (all earlier outperforming "gains" were erased). For the record, I'm not an investor in the IEP fund, just an interested bystander.
I noticed but so what?ERASED is the operative word. At the end of the year, you look at the endresults, and not what it was like back in May or Sept. When the markets started to slide, he should have hedged it with his futures and he could have kept his 5% edge or even increase it....
I think it shows that as a quant using a system its very hard (although not impossible, I know a few people, one who posts on ET, who using quant systems who do very well). For the most part though I think the little guy is screwed having to compete against the brainpower and computer power that a company like Goldman and the like can throw up against you.
I am actually a supporter of Aaron and would like to follow in his footsteps in some ways.. But why should anyone invest in a fund that is competing with larger players who have a team of PHd's that would likely destroy any edge you have on the quant side? Seems like this is a recipe for disaster..
Give the guy a break. He is only human. Sometimes I find it amusing to see so much hatred among traders on this forum.