Quadriga Blow Up

[Choad]

Another point is the severe survivorship bias infecting longterm hedgefund returns.

Sure, some of those funds that survived 40-50% or worse drawdowns give hope that the "average" fund with a sick drawdown will survive.

But the reality is that a far far greater number of funds with those kinds of drawdowns are long gone from the data.

 

[QuenkishZakos]

Quote from Choad:

This will be the fate of 90% of today's hedgefunds, IMHO.

These traders are no better than you or I at trading. They are just better at promotion.

Leverage and hubris will surely kill a huge percentage of these funds. ith
The market is unforgiving in that most must lose, for the few to win.

I agree with what you have to say, most hedge fund managers will prove to be very overrated.

 

[gm120]

Quote from jerryz:

I'm not a big fan of the Sharpe ratio, but I have to admit that it does have its merit when you look at the first chart. Sure, the CAGR is 20%+, but most of that is from the first two years. Any investor who got in after the first two years are making far less than 20%.

Not really. Here are annualized returns from the last 2, 3, 4, 5, and 7 years, which are all above +20%.

http://www.iasg.com/iasgquant.asp?ID=641

 

[Virtuoso]

Quote from misctrader:

Yep. Problem with overcapacity. Everyone jumping in front of each other. Too much money and not enough opportunities.

Did you read in the Bloomberg link above about how one of John Henry's futures fund is down 26% and the fund has $1.6B. That's like over $400M poof!

oh well.. just like anything else all bubbles end. The hf bubble will be ending soon... And only the really good will survive, which is how markets work.

Not everyone can win in the long run...

Henry's flagship fund is now in a 54% drawdown, not 26%, fwiw...

 

[Virtuoso]

Quote from Trend Fader:

All good things come to an end.


http://www.bloomberg.com/apps/news?pid=10000087&sid=apv2M2NKqxHE&refer=top_world_news

Ummm I don't think Quadriga is a true "hedge-fund". Shit they left Maverick in and you know his ass wasn't accredited. Also, I was under the impression that Quadriga was a trendfollowing fund in the futures market, so what is the author babbling about GM's debt for?

While 30% is a nasty drawdown I'd be hard pressed to call it a "blow-up", many a fund have come back from worse...

 

[FredBloggs]

it has been proved countless times that kids in junior school can pick stocks (aka random) and out perform most managed funds.

i do think though that most people forget the increased handicaps involved in professionally managing LARGE amounts of money.

its not like day trading 2000 stock lots is it!!!


besides, these guys are forced to diversify by the regulators. diversification is admitting that you are parking money in an asset that you dont believe will perform as well as another asset


i would agree though that there is nothing special about these traders. they just have different issues (other than e signal packing up or ib crashing!!! ) than most retail/arcade or small prop traders

 

[Htrader]

No matter what ends up happening with quadriga, don't forget that the fund principals are almost certainly disgusting rich. 5+ years of outperformance for a large hedge fund is all you need to get amazingly rich.

Of course, all the investors all the top get screwed, but you can't argue with results.

 

[Choad]

Quote from Virtuoso:

Henry's flagship fund is now in a 54% drawdown, not 26%, fwiw...

Ouch.

Yeah, he's a billionaire and a smart guy and his fund should pull out of the slump. Heck, I believe in and use "reversion" strategies, but nobody can say if that fund (i.e. his strategy) will dip to -60%, -70%, -80% before righting itself. IMHO no one that runs public money should ever structure risk to allow that kind of drawdown. Irresponsible. I don't care how much he made in the years before.

If it lowers returns to 10%-20%/year to run lower leverage, so be it. -54% is pushing risk of ruin...

 

[Lefty62151]

Hello:
One thing I noticed from the "original" Quadriga thread was where Steve46 commented that the fund seemed headed for bad times, and the strategies might be failing. As I recall, Maverick (and others) jumped in to say he was wrong and that the fund was experiencing a reasonable drawdown.

I guess people can debate what a "reasonable" drawdown is, but for my money, 30% is significant. Perhaps if I were a retail investor who knew nothing about the business, but as it stands, my opinion is the same as Steve46"s. If I were running the money I would be re-evaluating the mix.

Good luck to those who might still be in there (bleeding).

Lefty

 

[Ikspec]

Quote from Virtuoso:

Henry's flagship fund is now in a 54% drawdown, not 26%, fwiw...

It's a good thing he diversified into baseball.