Aaron chat

Did I read the chat log correctly that Aaron is using the free Quote.com data feed? Isn't the free data feed delayed by at least 10 minutes?
 
Quote from OPTIONAL777:



Good luck. Like Aaron, I suspect you are still quite wet behind the ears.

Unfortunately, they don't track failure statistics of small hedge funds like prop, but I tend to think the failure rates are similar for one who approaches both with a long term game plan, proper funding, and the right mindset.

Aaron's statistical figures disturbed me during his on line chat. He was so specific about gains "Yes, after we topped the charts with +97% in '02 we got a lot of new investors" but talked about drawdowns of 20 to 30%.

Isn't it interesting how people know exactly the upside figures, and give a wide range of down side?

I tried to ask about the 97% number, whether that was total return, or from some valley to peak, but the question did not go through.

I had a position back in the late 80's where I was working for a firm hawking managed futures accounts. My job was to look at track records, and they are very misleading in small funds, as big gains can come easily. Big losses can come just as easily. Someone can come into the fund at the wrong time, and easily lose 50% while the fund draws down only 20% depending on how they measure the overall performance.

I wish you luck with your goal, but it is unrealistic in my opinion.

A good hedge fund over time will outperform the market, but these ideas of generating double digit returns on a regular basis for clients are just nonsense statistically speaking over a 10 year period.

The truly wealthy people I know, and I do know a few, would laugh at someone talking about the kind of returns that are thrown around.

They know the truth, and the truth is that if you beat the S&P by 10 to 15% annually on a very consistent basis, you are among the best in the business.

They also know the difference in trading a few million dollars and large funds. Not the same animal at all.
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Great points. If you go to aaron's website at http://www.schindlertrading.com you will see his monthly results. That may answer a lot of your questions about drawdowns (at least on a monthly basis).

I realize that I can do things now with a few hundred k's that can't be done with a few hundred mil, or even 10m. I have talked to a lot of bigger investors and many liked that. While they may invest a few m with a guy who beats the sp by 10% like you say, they want a bit more volatility and possible upside and are looking at my fund to put say 50-100k into.

I think that everyone presents their numbers in a format that makes them look best. I personally am very concerned about drawdowns like you mention. In the past, I often had 5-10% drawdowns on a regular basis. It is very hard to make 100%+ without drawdowns. We both know that.

I have since cut down on leverage and position concentration as I want less volatility since I am managing OPM. I am very willing to sacrifice some upside for some peace of mind in regards to drawdowns and upsetting friends/family. For better or worse, I have changed my own style quite a bit to better suit the needs of OPM. Thus far this year, I have not had a drawdown (peak to trough) of more than 3%. I am happy with that considering the current performance of the fund.
 
Quote from marketsurfer:



it's not ego concerning the fund size, it's ego when picking up chicks or just at a party--- "what do you do for a living?" well, i manage a hedge fund ! totally true but it does conjure up images of private G5's and mansions.

i think it is a great thing, and as you know, do it myself--BUT i believe that the focus should be on raising substantial capital or it's a waste of time.

best,

surfer
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I've done/said a lot worse than that to pick up chicks. :D
Happy Trading
 
Quote from praetorian2:



Great points. If you go to aaron's website at http://www.schindlertrading.com you will see his monthly results. That may answer a lot of your questions about drawdowns (at least on a monthly basis).

I realize that I can do things now with a few hundred k's that can't be done with a few hundred mil, or even 10m. I have talked to a lot of bigger investors and many liked that. While they may invest a few m with a guy who beats the sp by 10% like you say, they want a bit more volatility and possible upside and are looking at my fund to put say 50-100k into.

I think that everyone presents their numbers in a format that makes them look best. I personally am very concerned about drawdowns like you mention. In the past, I often had 5-10% drawdowns on a regular basis. It is very hard to make 100%+ without drawdowns. We both know that.

I have since cut down on leverage and position concentration as I want less volatility since I am managing OPM. I am very willing to sacrifice some upside for some peace of mind in regards to drawdowns and upsetting friends/family. For better or worse, I have changed my own style quite a bit to better suit the needs of OPM. Thus far this year, I have not had a drawdown (peak to trough) of more than 3%. I am happy with that considering the current performance of the fund.
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Seriously speaking, most people would be happy to have had their money with a hedge fund manager that did not lose money over the past 3 years.

Bear markets are not about getting great returns, they are about preservation of capital with a bit better returns than bonds.

It pisses me off that many people did better with bond funds than equity funds over the past 3 years. That aint right.

The sooner the damn bonds start losing favor, the better.
 
Uptik and surf- Good points on the chix. I personally just say import/export. Maybe they think I'm in the mob... lol.

I think that a sharpe ratio is misleading. It is great if you are doing arb or something, but for an very agressive fund, it just shows that you are very risky b/c of upside movement. Granted, that is the truth, but i think that it shows much more risk than what really may exist. I think that peak to trough drawdowns are a much more standard measure or risk. That takes into account the upside much more.
 
Quote from praetorian2:

Uptik and surf- Good points on the chix. I personally just say import/export. Maybe they think I'm in the mob... lol.

I think that a sharpe ratio is misleading. It is great if you are doing arb or something, but for an very agressive fund, it just shows that you are very risky b/c of upside movement. Granted, that is the truth, but i think that it shows much more risk than what really may exist. I think that peak to trough drawdowns are a much more standard measure or risk. That takes into account the upside much more.
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An investor needs some method of deciding when to enter a fund.

Just like you want to buy a stock that has sold off, and sell it when it does well, you want to go with a proven fund manager just after or during a bad drawdown. The mistake most people make, is that they throw their money at a hot trader, who is due to correct, than go with a proven trader in a bad patch.

Funds should be the same, and it is important to be able to see how the manager is actually doing.

I put my money on Barry Bonds after he has gone 0 for 15 before I would if bet on him if he has just hit 8 home runs in 6 games.

High risk traders aren't bad, but they have streaks that are necessary to pay attention to.

Some of the managers get pissed off when the clients want to pull out after a good run, but it just makes sense to treat a fund or a fund manger like you would any other investment.
 
Quote from trader99:



The answer lies in Jack Schwager's interview with Bruce Kovner. He asked why Bruce wanted to manage a $600M fund instead of his own substantial personal money. Bruce said managing OPM represents a CALL OPTION which has asymmetrical risk vs managing your personal money is a straight symmetrical risk. The most you can lose in a fund is either nothing or the little capital you put in. The most you can gain is almost unlimited. I think most people would take an asymmetrical risk profile anyday. Limited risk, unlimited gain.
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I know some hedge fund managers are good guys, and truly do want to the right thing by their clients. (I actually do know, personally, some managers. My family is quite involved in the financial world.)

Having said that, the temptation to shoot for big gains, and thus higher personal rewards, is just too big for most managers.

Hedge funds, from the manager's perspective, really are a game of "heads we both win, tails only you lose".
 
Quote from praetorian2:

Uptik and surf- Good points on the chix. I personally just say import/export. Maybe they think I'm in the mob... lol.

.
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import/export? hmm....I'm gonna try that one tonight. I'll let you know how it works out.:D


someone else said something about the steak dinner bet. it's good to have fun making bets. Will 860 hold today? will Butler beat Ok? Will I get laid tonight? (take the over on that)
we should have a bet on s&p final # end of year. Whoever bets..goes to Peter Luger's in Brooklyn. The winner gets a free dinner.:D
 
Quote from OPTIONAL777:



An investor needs some method of deciding when to enter a fund.

Just like you want to buy a stock that has sold off, and sell it when it does well, you want to go with a proven fund manager just after or during a bad drawdown. The mistake most people make, is that they throw their money at a hot trader, who is due to correct, than go with a proven trader in a bad patch.

Funds should be the same, and it is important to be able to see how the manager is actually doing.

I put my money on Barry Bonds after he has gone 0 for 15 before I would if bet on him if he has just hit 8 home runs in 6 games.

High risk traders aren't bad, but they have streaks that are necessary to pay attention to.

Some of the managers get pissed off when the clients want to pull out after a good run, but it just makes sense to treat a fund or a fund manger like you would any other investment.
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777- You really know your stuff. I could't agree more with you. If an investor wants to invest with a manager, he should probably put his total in over a few months rather than one lump sum. He will probably get a better NAV basis.

I personally am a very "streaky" trader. I have been en fuego of late. I am probably due for a few weak months. That is part of the reason I've really pulled my position sizing in besides the war. I know myself all too well... lol.

I think that a lot of hedgies are afraid of people jumping ships like you suggest. That is why they have lock up periods. My fund has one too. If someone wants to jump funds, they should go to fidelity (they have hundreds, and dont mind much if you jump around each day). I am looking for long term type investors who can live confortably through good and bad (especially bad periods). I have already turned a few investors away who I thought would either be big hassles to deal with, or would be wanting to jump around and chase who had the best month.

Optional777, I really appreciate your knowlege on these matters. It is good to have a decent conversation on a message board with you and a few of the others here. First good board that I have participated on in a few months. Someone has to get Aaron in here to mop up.
 
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