Aaron chat

[praetorian2]

Aaron- I submitted my data to cogenthedge. I may also submit information to another one or 2. I wish I did not have to pay to see the info on other funds at these sites.

I was curious, how much interest has the posting generated for your fund? Which site gave you the most leads? It is pretty annoying to input all the information to get it up and going. Updating it monthly is not difficult though. Thanx in advance.

Harris:.

 

[praetorian2]

Quote from OPTIONAL777:



Looking at your fund results, you are down 30.9% for the year!!!

Man, that's a bad drawdown, especially for those who went into the fund at the end of last year.

Three losing months in a row, that sucks even worse.

You realize that you have to make over 44% for investors who came in at the end of last year just to BREAK EVEN????

Now, if you have a 20% month next month, do you take your 20% profit from that 20% month? And are your also including fees and commissions in your performance table?

Dude, you had better turn this ship around quickly.

I am curious about Aaron's response as well. Are investors getting upset?

If you look back at year end in 2001 and going into early 2002, his fund had a much worse drawdown period. I would assume that investors would realize that that is part of the price that you have to pay for outsized returns like those for full year 2002. If you want large returns, you will almost always have large volatility (both upside and downside). As someone said earlier on in this thread, the best time to invest is in a manager that you believe in right after a rough streak.

 

[OPTIONAL777]

Quote from praetorian2:



I am curious about Aaron's response as well. Are investors getting upset?

If you look back at year end in 2001 and going into early 2002, his fund had a much worse drawdown period. I would assume that investors would realize that that is part of the price that you have to pay for outsized returns like those for full year 2002. If you want large returns, you will almost always have large volatility (both upside and downside). As someone said earlier on in this thread, the best time to invest is in a manager that you believe in right after a rough streak.

Yes, the best time to invest in a fund is when the manager you believe in has had a rough streak.

However, to believe in a manager, you would also have had to seen them deal with drawdowns and recover successfully in the past.

My criteria is a manager who has been managing money professionally for at least 5 years, with a documented track record with sufficient amount of money under management to really have earned the title of professional money manager.

In fact, in truth, Schindler has been managing money less than 2 full years, if you look at the first month in 2001, to now.

My guess is that he blows out.

 

[Aaron]

Quote from praetorian2:

I was curious, how much interest has the posting generated for your fund? Which site gave you the most leads?

Harris:.

Just about all of our investors found out about us through these database sites or through word of mouth. Due to the SEC rules against general solicitation it is difficult to advertise.

 

[praetorian2]

I guess that the question is at what point you define a drawdown as being impossible to come back from. 30% is surmountable, 50% is probably not. It also depends on the manager's willpower to overcome, and the faith of his investors.

I am sure that you have had some drawdowns. What was your worst? I have had a few peak to trough that were in the 10-15% area, and one where I got pretty thoroughly hosed last fall. I was too concentrated in 2 GNP trades that both broke and imploded at the same time. I could have been fine with 1 disaster, but not 2 in the same day along with another 5% in other collateral damage in other positions i was in at the same time. My prior calculations were for a stock to blow my stop and let me out. Not for 2 to blow the stop levels significantly. THC halted and gapped down a ton, OMG imploded 50%+ from where it opened on the gap down day. I lost way less in OMG than THC.

At the end of the week, I went from setting a new account high to being down 25% from peak to trough. Surprisingly, I was still up for the month b/c I had performed so well in the weeks prior. In any event, it took me less than a month to make back the 30-odd% I needed to get to flat and I made a new account high about a week after that. The point is that drawdowns are surmountable. Depending on perspective, they can even be educational. I learned a lot from that experience. It really taught me to fear the markets. Since then, I have taken down position concentrations and leverage by a very significant factor.

Since that october, I have not had a down month b/c I have aimed to reduce volatility, and I have also not had a drawdown of over 10% peak to trough. I realized that my system worked, but my drawdown calculations were off. I decided that I needed to change my leverage and concentration calculations and I was willing to loose some upside performance in exchange for less volatility.

I assume that Aaron's drawdown is within his system's expectations and he is not concerned. The question is if he will tinker with the system or not.

 

[Aaron]

Quote from praetorian2:



I am curious about Aaron's response as well. Are investors getting upset?

If you look back at year end in 2001 and going into early 2002, his fund had a much worse drawdown period. I would assume that investors would realize that that is part of the price that you have to pay for outsized returns like those for full year 2002. If you want large returns, you will almost always have large volatility (both upside and downside). As someone said earlier on in this thread, the best time to invest is in a manager that you believe in right after a rough streak.

For most funds a 30% drawdown would be huge, but with our volatility it's not that big an issue. Keep in mind that even with this drawdown we are up 60% over the past 12 months.

To risk adjust the Schindler Fund to compare with other funds, you'd have to approximately divide our returns by 4. So instead of a really good year being up 97% (as we were for 2002), we'd only be up 25%. And instead of being down 31% this year, we'd only be down 8%. Not a big deal. I haven't heard many comments from our investors and our assets under management continue to grow.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RETURNS.

 

[NYSEtradinglog]

So instead of a really good year being up 97% (as we were for 2002), we'd only be up 25%. And instead of being down 31% this year, we'd only be down 8%.

absolutely - if you don't like drawdowns put 3/4 of the money into fixed income.

But I see another problem - "What you see is what you get" - as a rule of thumb with hedge funds the average yearly outcome is the worst draw down that a fund has.

There are only a few exceptions such as multy strategy trader t. crabel.

I wish you the best Aaron and I think you can make it but you have to be dam good, way above the average, to not hit greater then 50% draw down over the years.

good trading and many institutional investors........

NYSE

 

[DisciplinedHedg]

Quote from OPTIONAL777:

Yes, the best time to invest in a fund is when the manager you believe in has had a rough streak.

I would disagree with you wholeheartedly on this one. There is no rule that performance regresses to the mean.

Simply investing in a manager because he is down, whether or not you believe in him, is akin to betting on heads simply because its landed tails the last couple times.

 

[DisciplinedHedg]

Quote from OPTIONAL777:



Looking at your fund results, you are down 30.9% for the year!!!

Man, that's a bad drawdown, especially for those who went into the fund at the end of last year.

Three losing months in a row, that sucks even worse.

You realize that you have to make over 44% for investors who came in at the end of last year just to BREAK EVEN????

Now, if you have a 20% month next month, do you take your 20% profit from that 20% month? And are your also including fees and commissions in your performance table?

Dude, you had better turn this ship around quickly.

What is your point in all of this? Sounds like you get your excitement from another person's angst especially when its someone of which you wish you could be in their position (ie. managing a sizeable and growing fund).

 

[OPTIONAL777]

Quote from DisciplinedHedg:



What is your point in all of this? Sounds like you get your excitement from another person's angst especially when its someone of which you wish you could be in their position (ie. managing a sizeable and growing fund).

If I wanted to manage other people's money I would. Raising a few million is a rather easy task to start from, especially if you are some young punk rich kid with friends and faimily to throw you some coin to get started.

My point, is that has a lot of balls calling a commodity pool a hedge fund and leading people to believe it is a cakewalk to do so successfully.