The Advantages of Investing in Alternative Investment Strategies

Discussion in 'Trading' started by DT-waw, Nov 18, 2002.

  1. DT-waw


    I want to start a thread about the advantages of investing in AIS: Hedge Funds and Managed Futures. I propose, that we'll discuss and share information on the following topics:

    1] The benefits of investing in AIS

    Key benefits are, IMO:
    - higher returns and lower risk than traditional investment funds/programs,
    - ability to have positive returns in falling equity and bonds markets,
    - ability to add AIS into an existing portfolio in order to reduce overall portfolio risk and increase returns.

    2] Success stories about people who run/invest in hedge funds, managed futures

    To name just a few: Quantum Fund, Meyer Capital Management, Quadriga, Beach Capital, Michael N Trading, Dunn Capital, Crabel Capital Management.

    3] Resources, links to sites that provide quality information about AIS ; ; ; ; and many others

    4] How to choose a fund/program. How to create a portfolio of funds.

    What we should take into an account when we have to choose an AIS? How to build a good portfolio of funds?
  2. Aaron


    Nice list of the resource sites, DT-waw!

    The CBOT has an execellent publication called <a href=""> Portfolio Diversification Opportunities: Managed Futures</a> that explains managed futures, what CTAs and CPOs are, etc.

    You could also include <a href=""> Schindler Trading</a> in your list of hedge fund managers.
  3. man


    It is an interesting thing you are bringing up. let me share some ideas.

    currently the main thing about alternative investment is, that it is changing dramatically from my perspective. there has been so much public interest that it is hardly an alternative any more. i think that the sharpe ratios produced during the nineties within complex portfolios of different funds will not be seen again in this market segment. the reason is that too much money is betting for the same thing. in some areas like convertible arbitrage, funds have become major players in the segment and are thus reducing the arbitrage opporunities significantly.

    managed futures will always profit in times of turmoil, since they ride the bond trades until the very end.

    hedge funds lived for decades from the inefficiencies produced by the longOnly industry. now they are no longer in the shadow but on the stage - this will change the thing. what is very interesting: who is doing arbitrage on hedge funds? what is the true alternative investment now? meaning: alternative to mainstream.

  4. DT-waw


    Here you can find a chart "Potential Impact of Managed Futures on Traditional Portfolio Jan 1980 - Dec 2001". It shows that adding Managed Futures into a portfolio can result in a higher return with smaller risk.

    Is it harder for hedge funds to make money now than 10, 15 years ago b/c there are more funds, traders? It's hard to tell. Liquidity has increased, trading costs are much lower. Technology allows to use much advanced strategies. There are more liquid markets, trading vehicles, which leads to more effective diversification.
  5. DT-waw


  6. man


    I do not agree with your conclusion and I do not agree with your argument. 144% return is offset by substantial volatility resulting in a Sharpe of 1.86. This is a god Sharpe Ratio, but look at the money under management. At the time of the hugh returns they hardly managed any money - looks like below USDm 1, which sound ike being much, but it is not for a professional fund. From the time on when there was substantial money in returns came back to reasonable figures.
    1. this is a good but not extraordinary outstanding fund
    2. past return figure is definitely not a good estimator for future returns.

  7. >2] Success stories about people who run/invest in hedge funds, managed futures

    Do you also have unsuccess stories :) ?

  8. alain


  9. DT-waw


    man, that is correct. But I have nothing against 100%+ yearly returns on small capital... We'll see how this fund will be doing in next months, with over $88M under management.

    Of course, it's true.
  10. DT-waw


    #10     Dec 6, 2002