..........Ospraie's blow up...........

Quote from makloda:

I think you see 'reversion to mean' everywhere, not just hedge funds. You see it in sports, CEO/Fortune 500 company performance, national GDP growth % etc.
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True because there are now a days too many funds and you got law of large numbers in effect. Performance is just due to selection bias. (someone wins the lottery at the end of the day).

I stopped using leverage a few years ago. I trade face value, like one bond futures contract for every 100K I have in my bankroll. I do the same with forex. I trade only spot.

All I need is to get 3 times the risk free interest rate. I'm happy then.

Ron
 
Quote from Daal:

I think anderson made a position size mistake there. They clearly understand those markets what happened was that the CRB went down 20% VERY quickly and they we're probably overlevered. I would not be surprised to see that their positions made money a few years from now
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Anderson changed his risk manager 3x and never gave them full authority. Add up FoHF management and long-only new products for distraction...
 
The fact that they lost big in *August* shows they had poor risk management. Losing say 10% in July would not be too bad since there was an extreme reversal. But being down an extra 27% in August shows they had an inadequate plan for handling large losses.

It seems like their risk control plan if positions made a huge move against them was "hold on and pray".
 
For that matter. All you need to do is look at all the funds that were up 40 percent ytd. they were all doing the samethings and all got murdered.
 
One of the issues with pure fundamental analyses, is that you have to hold tight during the noise phase since your timing will always be a challenge as the market takes time to adjust its pricing. Dwight gave a good example with the platinum trade in the early nineties while still at tiger.

The issue with the money management is not really a leverage issue. Its actually more liquidity risk which opens you up to the risk of fat-tailed events. Some of the funds trades will take as long as 3yrs to unwind.Also its how much you actually loose per point and then when your free lunch(correlation coefficients) go to hell.
 
they should have listened to me and heeded my advice. if they did,they would be up over 25% this year. by the way,i don't brag.
 
Quote from Nashequilibrium:

One of the issues with pure fundamental analyses, is that you have to hold tight during the noise phase since your timing will always be a challenge as the market takes time to adjust its pricing. Dwight gave a good example with the platinum trade in the early nineties while still at tiger.

The issue with the money management is not really a leverage issue. Its actually more liquidity risk which opens you up to the risk of fat-tailed events. Some of the funds trades will take as long as 3yrs to unwind.Also its how much you actually loose per point and then when your free lunch(correlation coefficients) go to hell.
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Timing is a non-issue for fundamental analysis. You buy at a heavy discount, then hold on until fair value. Setting up a fund with a 30% drawdown redemption clause means you are no longer a fundamental trader (unless you are 70%+ in cash at all times) but now exposed to market fluctuations. Quotational risk now becomes real blowup risk instead of temporary noise - you are now not a fundamental investor but a speculator. You are not betting that asset X is undervalued. You are betting that X will converge to fair value before it becomes 30% more undervalued - that is pure price speculation and nothing more; the price path a cheap asset takes to fair value is not predictable by fundamental analysis.

Liquidity is only a risk if your positions are too big. With appropriate position sizes, a good trader will either be able to exit promptly in all conditions, or be able to stomach the loss.

A 25% decline in a mature bull market that is a speculative favourite is not a fat-tailed event. It is a totally normal event in the markets, especially for crowded trades. Correlations change - this is widely known and not a fat-tail event either.

This guy's problem was simple - too much size, not enough risk control, poor contingency planning. An age old story that repeats itself time after time in the markets.
 
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