Acceptable Max DD?

You know, there are 3 kinds of lies:, lies, damned lies and statistics.
vladiator will tell you something like: "there're no proofs that market is not efficient" :D
 
IMO it is a waste of time to look at equity curves in this way. without knowing the background of the strategy the curve tells nothing at all - literally. example: I saw a hedge fund in 1998 with a track record of five years, no single down month and a return after fees above 20%. five months later the fund was down by 25% and ten months later the fund was dead. why? the strategy was being long emerging market bonds and as long as the currencies where not devaluated the game was simply take credit in the US and invest in these bonds using some leverage. then the currencies were devaluated and the strategy collapsed. you could not tell from the curve. you had to know the strategy.

There are funds that are doing even better than those described here with strategies that do not suffer such a threat as my example. some (very few) merger arbs are like that. convertibles too. in trading futures and equities there are some people doing extremely well by using multi strategy approaches. usually you do find these people on public sites.

IMO you are wasting time admiring curves without knowing the strategy background.


peace
 
What do you guys think if one were to split say...200K among 5-10 of the top funds?
Is this a viable approach? Or are you just buying the top of some managers' equity curves?

Also, what about the old "survivorship bias" where the funds we see today are either new or survivors but we no longer see/evaluate the bankrupt/80% DD losers?

Somehow, I get the feeling its not as rosy as it appears just looking at these reports posted. Am I wrong or just pessimistic?

Another question-what's the possibility that the returns are either fake/inflated or the fund manager might one day run off with your money?

It seems I've heard too many sad stories and may now have a biased view but want to better understand this industry.

I appreciate you guys discussing this subject and look further to any new insights.

Thanks.
 
it depends what our target is. 200 k will not work on "top" funds. usually their minimum requirements will not permit such diversification. one way to avoid this is fund of funds - you might like the santa barbara fund of funds, which uses quant traders only i think.

I would be very careful bying funds only from their equity curve. there is much more to it. do not forget that you are transferring money to very small companies - that requires some due dilligence.

the real issue is the target of teh investment. steady 10-15% or aggressive growth of 25-30%. this is the main issue IMO.


peace
 
Quote from man:

IMO it is a waste of time to look at equity curves in this way. without knowing the background of the strategy the curve tells nothing at all - literally. example: I saw a hedge fund in 1998 with a track record of five years, no single down month and a return after fees above 20%. five months later the fund was down by 25% and ten months later the fund was dead. why? the strategy was being long emerging market bonds and as long as the currencies where not devaluated the game was simply take credit in the US and invest in these bonds using some leverage. then the currencies were devaluated and the strategy collapsed. you could not tell from the curve. you had to know the strategy.

There are funds that are doing even better than those described here with strategies that do not suffer such a threat as my example. some (very few) merger arbs are like that. convertibles too. in trading futures and equities there are some people doing extremely well by using multi strategy approaches. usually you do find these people on public sites.

IMO you are wasting time admiring curves without knowing the strategy background.
More...

i agree.

although i think that with the shorter term strategies, a 12 year performance record can be quite meaningful. especially if you know something about the strategy.
 
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