Looks like the various Superfund products were down anywhere from 16.5% to 32.5% for the month of May. Ouch. Significantly worse that most other trendfollowers.
AQR Hedge Fund moving into Trend Following
- Thread starter JezLiberty
- Start date
Looks like the various Superfund products were down anywhere from 16.5% to 32.5% for the month of May. Ouch. Significantly worse that most other trendfollowers.
Ouch indeed...
Well, after all, this is not a bad thing since they seem to be fairly dishonest with their fees, etc.
Not sure if you caught that on my blog but I ranked Trend Following CTAs and funds including Superfund, it was ranked as the second worst of all the managers, providing negative value compared to a simple and cheaper benchmark...
http://www.automated-trading-system.com/cta-alpha-calculate/#perftable
This wont get better after May I suppose...
Well, after all, this is not a bad thing since they seem to be fairly dishonest with their fees, etc.
Not sure if you caught that on my blog but I ranked Trend Following CTAs and funds including Superfund, it was ranked as the second worst of all the managers, providing negative value compared to a simple and cheaper benchmark...
http://www.automated-trading-system.com/cta-alpha-calculate/#perftable
This wont get better after May I suppose...
That's a nice piece of work. You might add these big-name trend-followers to complete your list: BlueTrend, Campbell, Graham, Willowbridge -- assuming you can find data.
Thanks - I'll try to add those - but as you say, its not always easy to find CTA performance reported every month (ie some CTAs only make it availabelt ot clients, etc.)
Quote from JezLiberty:
Thanks makloda, exactly my point
The probem is that people have a short/selective memory...
And many still hold the old Vic as a master trader...
There are many other examples, look at LTCM.. And John Meriwhether is opening his new fund after blowing up the one he set up after LTCM!
@Daal
I dont really want to get into an endless debate on this TF v MR, but I believe the examples are here to illustrate the theories/concepts behind it (and not the other way around):
- risk of ruin is increased by leverage/optimization of results (which is what mean reversion typically is about)
- markets exhibit fat-tail events and if you trade against them, you increase your risk of ruin, hence it makes sense to use a strategy that benefits from them (read Trend Following)
- you cannot predict...
A book that is much better than Trend Following to illustrate some of these points, imho, is The (mis)behavior of the markets by Mandelbrot. It is also very entertaining to read (I think it is better than Taleb's Black Swan and definitely much less arrogant - if any!)
All that being said, I believe from a pure business point of view, it might make more sense to set up a fund similar to Niederhoffer, LTCM, etc:
- your strategy makes people think you are very clever and can identify inefficienc
- people forget quickly about blow-ups
- your performance until you blow up will be much more impressive than TF funds, bringing lots of forgetful clients, bringing more AUM, and bringing in even more fees (both based on performance incentives and more AUM).
Now, if we talk about business ethics, long-term client relationship, it might make more sense to use a strategy that will ensure decent return and survival over the long term (read Trend Following)...
What's the definition of blow-up here?
TF can also have very large drawdowns and it's embeded in its roots.
What strategy does Niederhoffer use?
I don't think people use only one strategy... they all run as many strategies as possible.
Blow-up: see Amaranth, LTCM, Niederhoffer, etc. basically holding positions that go the wrong way and keeping holding until the losses are too big that they "blow up" and force you to unwind the position and close the fund.
Typically happens with Option-writing strategies: look (very) good until they blow up by a Black Swan event.
This never happens with Trend Following thanks to the use of stop losses - of course there can also be large drawdowns resulting from many small losses, but the art of Money Management is to make sure that these strings of small losses keep you in the game until the next big moves..
Not sure that Dunn, JWH, Chesapeake, Abraham, Eckhardt, etc. use anything else than Trend Following at the root of their strategy...
Typically happens with Option-writing strategies: look (very) good until they blow up by a Black Swan event.
This never happens with Trend Following thanks to the use of stop losses - of course there can also be large drawdowns resulting from many small losses, but the art of Money Management is to make sure that these strings of small losses keep you in the game until the next big moves..
Not sure that Dunn, JWH, Chesapeake, Abraham, Eckhardt, etc. use anything else than Trend Following at the root of their strategy...