Stranger things have happened in this industry...
LJM Preservation and Growth Fund, collapsed by 82 percent! (WTF?)
- Thread starter prc117f
- Start date
I've been told that the retail funds run by prominent hedge funds are like the restaurant week menu at fancy restaurants. You feel like you are getting the real experience at a discount but aren't really.
They are ventures to use their name brand to get management fees but you don't get the same quality portfolio. The renaissance mutual fund didn't do well if I recall.
I think it very much depends, but yeah, it's not likely to be the special "secret sauce" stuff. I mean it's only logical, right?
Not sure what the "special sauce" of premiumselling is, but anyway, often the mutual-fund versions have extra layers of fees, and thus underperform.
Not a good example. The renaissance stock fund is a long only equity strategy that is highly correlated to the S&P 500. Their internal hedge fund trades everything in the world, long and short, options, futures, some of that very HFT. Completely different strategies.
Actually, in most cases they ARE the same. I see this trend more and more now where big hedge funds are trying to access the non accredited investor market through a mutual fund version of one of their lesser leveraged strategies. Their performance is almost EXACTLY identical. The only difference is, there are actually more fees on the mutual fund, usually a high front end load that drags performance in the first year.
I'll cite a real example. DUNN Capital Management. One of the best performing CTAs in the last 25 years offers their flagship trend following fund as a mutual fund for non accredited investors with a 5k minimum investment vs the 100k and 1 million minimums in their CTA structure. The performance numbers are identical.
The "special sauce" is all marketing BS. A large majority of the fund space is simply harvesting risk premia and adding beta to it. Throw some fancy marketing on top of that and your kids get to go to really nice private schools and mom and dad get invited to nice cocktail parties.
I think you were spot on earlier saying their performance just doesn't up and should be investigated. My guess is as a mutual fund they were in direct competition with XIV and perhaps in early January this guy https://www.ljmpartners.com/about/bio/yang-xu-cfa-cipm-frm comes up with the genius idea to increase leverage and get more aggressive since they were under performing. What really irks me is why fuck around with SP ops and implied vol and not just sell forward vols like everyone else. That's where the juice was. If you are gonna expose yourself to a blowup to the tune of 80% you should be earning north of 100% like XIV was.
This is one of their "marketing" pieces.
I dunno about this one, but I know that a few larger names in macro space have attempted to launch lower-cost "retail"(ish) vehicles (e.g. Brevan Howard). The liquidity profile of the retail offering is explicitly different, so the strategy is as well. My point was only to suggest that, if I were a traditional investor and I found that the manager is offering the same strategy at a lower cost, I might feel a bit miffed.
I wasn't referring to LJM's specific vol strategy here...