You boys simply do not understand what it takes to run hedge fund business. Firstly it is excatly that ..... a business. You've got investors, staff, regulators, partners .... You have to manage business risk like you would in any other industry. You've are responsible for alot of other peoples interests, and you want to grow the business over time and ensure you're still going to be around next year. The second consideration is that a hedge fund has a stated strategy - convertible arb, long/short, managed futures etc. You chose your strategy and you have to stick with it through thick and thin. You change your strategy, even in a minor fashion, and most investor will bail immediately. Especially if you're in a drawdown. Institutional investors build their own portfolios and they invest in your fund becasue they want exposure to your style/strategy. Gloabl macro managers (Soros, Kovner etc) are the one exception to the above rule. The last point being that institutional investors are realistic about returns and are spooked by volatility. You disclose that you're seeking 100%+ per year and I swear you'll you won't raise a nickel of institutional money. They know it can't be done with any size over time. And 20% + annual vol will mean 95% of allocators will not return your calls. Here's a challenge for you ... if you think you can generate a consistent 2% per month, with say only 1 down month per year (of a similar magnitude) with a billion dollars, for the next 10 years, then call me. We'll make more money than you ever dreamed of. bolter
We? Why should someone who can do that need you? If you can make that return the only problem you will have is trying to get ride of everyone who will be begging to accept their money. And trying to get ride of everyone who will try to steal your money.
I'd have something more chanlleging for you guys. ... If you can generate a consistent 3% every month trading EUR/USD, without any losing month. And you also have capital of at least a billion dollars to trade for the next 10 years, then please call me anytime. We'll make more money than you would ever dream of. I'll guarantee not to steal any of your money. We'll only share what we gain after making profits from the markets.
Look...with interest rates so low.... If you can show a record of 15% net with no monthly drawdowns...and have some of your own money in the fund... You will gather all the money the strategy can stand...no matter what the asset is that is utilized..... Any professsional fund of funds will play this one... You will have the best Sharp's ratio..etc...which is what they are looking for...along with personal risk participation.... However the above does not currently exist in the marketplace...just to let ypu know how difficult this is... Furthermore.....many of the largest capitalzed and finest US firms shoot for 16%...but rarely get there...
Most mutual funds are a result of their tracking index. The managers are very restricted, typical they cannot hold a single position larer than 2 or 5% of the total value of the fund etc. And in red days/smaller or bigger corrections/long bear markets they cannot just drop all positions like a daytrader, they have to sit and watch their positions decrease in value. Therefore most of the funds do not perform better than their markets. When you buy mutual funds you buy the market they are exposed to. If you are lucky the manager get out north of that market, if you are unlucky they get out south. In most cases they are very close to the market.
I'm not even sure what your point is, or if you have one. As far as I can tell, all you are saying is that some market participants are smart, some are dumb, and the smart ones make money from the dumb ones. Who can disagree with that? The reason I originally picked on your post was merely because it seemed to exemplify the arrogance of small traders who think that institutional money would be doing a lot better for themselves if only they were as smart as we are. That attitude is rooted in the mathematical contradiction which I pointed out. Since nobody seems to be defending that attitude anymore, I can only assume that my point has been made. Martin
I am working as a fund manager in europe. The reason is easy : Most things are random driven... So it is hard to generate systematical alpha. For private gamblers it would be maybe even harder if it wouldn't be random, because they just would not have the resources to compete with professionals. I am working for a long only fund. And beating the benchmark by even 1 % a year is quite difficult. At least with a information ratio that would people make thinking that you beated it with your skills and not just by luck.
most things are random driven? that's pretty scary coming from a fund manager. (shiver). maybe i should just accept this reality.