Investing with Traders during a Drawdown?

C

CPTrader

ETs,

It seems that despite all the renewed emphasis on due-diligence vis-a-viz thoroughly understanding a manager's trading style/strategy and risk management, that investors ultimately base their investment decision solely on most recent historical performance.

By extension, it seems that investors are constantly chasing the new hot trader/fund and buying trader's equity peaks.

Is this necessarily wrong, bad or narrow-minded?

Can one make the objective argument that an investor should be willing to invest in a trader/fund even during a drawdown, even if it is a historical maximum drawdown?

Given the above, from a trader/fund manager's point of view does it make any sense to bother explaining your strategy to a potential investor when all they really care about is your most recent monthly/daily numbers? I mean why bother with the charade of discussing the strategy- they (investors) either can't understand it, don't want to understand it, or would rather not be bother with it?

How do you really make a wise investment decision, apart from just looking at historical data?

Finally, can/should one invest in a trader with a limited or non-existent track record?

I am curious as to people's personal experiences in this matter.

Thanks!
 
I would definitely invest with a manager who has a stable record and is in a middle of a slump - perhaps because i am a trader.
It is like buying at a discount.

I would also invest a smaller sum with a manager without a proven track record if their background warranted it.

At the same time I would not invest other people's money with the unproven manager because it may leave me open to potential problems.
 
Quote from vhehn:



because you will probably lose all your money. seems like good enough reason for me.
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Rethink your statement and tell me if it still sounds logical. By your reasoning all the great funds with 2, 3 5+ track records should NOT have ever had any investors becuse they too at one point had a limited or non-existent track record.
 
I think these days most people don't know what's in their fund, maybe even what vehicles are in the fund, or that behind it all there's a trader. Manager's track record?? Fogettaboutit.
 
Quote from peterfigliozzi:

I think these days most people don't know what's in their fund, maybe even what vehicles are in the fund, or that behind it all there's a trader. Manager's track record?? Fogettaboutit.
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Peter I think you were a little too witty for me.. I don't quite understand your point ... care to break it down a little bit more
 
Quote from CPTrader:



Rethink your statement and tell me if it still sounds logical. By your reasoning all the great funds with 2, 3 5+ track records should NOT have ever had any investors becuse they too at one point had a limited or non-existent track record.
More...

yes i would say that same rule applys to funds. i would let someone else do the testing. the recent market crash sure should have driven that point home. so many people lost 50-70% of their money to inexperienced fund managers. once your money is gone you dont get to go back for a replay. its up to you to stack the odds in your favor.
 
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