Quadriga Superfund - Managed Futures

[steve46]

Okay,
Ordinarilly I couldn't care less, but some types of comments just make me laugh. First. "all funds" DO NOT have the same volatility. My god, if you ever did manage more than your checkbook you would know that! Second. The dispersion of profits and losses falls about a median depending on the types of strategies that a fund uses. If you are going to make comments to the effect that you "don't know where people went to business school" you had better do it at a site where you have less chance of running into someone with a real education. I run a small private fund (10 years now) and I send a monthly letter to clients that describes how volatility of profits and losses can vary over time. "all the same"doesn't even come close to being true. I have no axe to grind. My fund is closed to new money.
Steve46

 

[NickPapaGeorgio]

Quote from steve46:

Okay,
Ordinarilly I couldn't care less, but some types of comments just make me laugh. First. "all funds" DO NOT have the same volatility. My god, if you ever did manage more than your checkbook you would know that! Second. The dispersion of profits and losses falls about a median depending on the types of strategies that a fund uses. If you are going to make comments to the effect that you "don't know where people went to business school" you had better do it at a site where you have less chance of running into someone with a real education. I run a small private fund (10 years now) and I send a monthly letter to clients that describes how volatility of profits and losses can vary over time. "all the same"doesn't even come close to being true. I have no axe to grind. My fund is closed to new money.
Steve46

Steve,

I think you misunderstood what I said. The point I wass trying to make is that volatility produces returns. It's not a negative number. Therefore volatility by it's definition is directionless. Without volatility you can't make money. The question one has to ask themselves is are they being compensated well enough for the volatility that the fund is offering? If the answer is no, then you should move on to the next fund. If the answer is yes, you invest in it.

For a fund that makes 40% to 50% a year, 20% to 30% drawdowns are very reasonable. In theory, the drawdowns should equal the upside volatility right. So if a fund can make 50% in a year then theoretically it should be able to lose that much too. So any fund that can keep their drawdowns to half of their upside is shooting pretty well in my book.

I don't need you to lecture me on hedge funds. The fact that you run a fund means nothing, there are a lot of people on ET that run funds. A lot. It's not that hard. So stop acting like you have some credibility here.

And let me ask you something. Since one of our resident ET members happens to run a fund, Aaron Schindler, screen name Aaron, what do you think about his fund? His numbers are worse then Quadriga's this year. He had his worst ever monthly loss in June at 25% and he is down 20% YTD. What do you think about this fund. Take a look at his website and read about his background. Let me know what you think. I can't wait to hear this. And he may even respond to your post as he posts on this thread.

BTW his website is www.schindlertrading.com

 

[Alexandre]

Quote from NickPapaGeorgio:

Alexandre, I don't know where you went to business school but this is simply not true. As I use to have a fund and know this firsthand. Most hedge funds want 30 days notice when you are going to take money out. When they know the amount that is going to be taken out, they simply reduce the size of their position. They are not liquidating anything. It would be as if you were long 100 spoos in your fund and now you have to sell 5 of them to adjust the fund for the redemption. It doesn't change your net position. You are still in all your positions, just with different size now. Same is true when people add funds. This is exactly how index trackers work. Fund managers have to buy and sell a proportionate amount of stock to adjust their funds to the indexes. It doesn't have any effect on the index itself.

So when people add money to Quadriga, they don't leave that money in cash, they automatically add it to all their existing positions. This effect is what led to the huge bull market in the 90's with mutual funds. As more and more money made its way into mutual funds every month, fund managers were forced to continue to keep adding to their positions. This does affect the instruments they trade. But as far as Quadriga goes, you can't manipulate the value of the fund by buying or selling it otherwise it would be a vehicle that someone from the outside could arbitrage and manipulate for their own profit. It simply does not happen.

ok, maybe you misunderstood what I was trying to say.

I never implied that Quadriga is manipulating the value of the fund in any way.

What I'm saying is:
If you have 100m capital used by the fund to take X positions on the markets and you get 50m redemptions, well you need to cut your positions in half. That could affect the value of your holdings if they are substantial or if the underlying is illiquid (LTCM is a case in point).

Where I went to business school is irrelevant here as I've been working in the HF industry for the last 10 years.

 

[NickPapaGeorgio]

Quote from Alexandre:

ok, maybe you misunderstood what I was trying to say.

I never implied that Quadriga is manipulating the value of the fund in any way.

What I'm saying is:
If you have 100m capital used by the fund to take X positions on the markets and you get 50m redemptions, well you need to cut your positions in half. That could affect the value of your holdings if they are substantial or if the underlying is illiquid (LTCM is a case in point).

Where I went to business school is irrelevant here as I've been working in the HF industry for the last 10 years.

Well then you have nothing to worry about then because Quadriga spreads its assets out over 80 different products and most of them are very very liquid. This would have no negative impact, at least no meaningful negative impact on the performance of the fund. LTCM is a bad example. They actually dominated the markets they traded in and had substantial amounts of copy cat capital chasing their positions. So when LTCM became unraveled, everyone was on the wrong side of the trade. Bad example.

 

[risktaker]

Here’s a performance track record of a very hypothetical fund with a super performance and assets doubling every year. Returns of 30% a year for the fund's 8 years look great.
Then it has a first loss equal to its average yearly performance and look at the results!

1997 Assets Under Management…$1 mil Net % Return…30% $ 300,000
1998 Assets Under Management…$2 mil Net % Return…30% $ 600,000
1999 Assets Under Management…$4 mil Net % Return…30% $1,200,000
2000 Assets Under Management…$8 mil Net % Return…30% $2,400,000
2001 Assets Under Management…$16 mil Net % Return…30% $4,800,000
2002 Assets Under Management…$32 mil Net % Return…30% $9,600,000
2003 Assets Under Management…$64 mil Net % Return…30% $19,200,000
2004 Assets Under Management…$128 mil Net % Return…30% $38,400,000
Net earned returns…(1997-2004) $76,500,000

2005 Assets Under Management…$256 mil Net % Return…-30% -$76,800,000

It only took 1 yearly loss to wipe out the earnings of the fund's TOTAL prior 8 years of earnings!!!!

What kind of performance is this?

Something many people do not consider and what many of these hedge funds do not want to bring to light!

 

[steve46]

Look:
All funds have drawdown periods, and the question to ask is whether the drawdown falls within an acceptable level based on the strategies that they employ. Most fund will not divulge all the strategies that they use, and therefore it is difficult to make an accurate decision. I can only guess that Quadriga is no exception. If they are responsible, they will let you know as the dispersion of losses reaches a specific point. Problem is that at that point, clients send notes to redeem funds. So you (almost all of you) can see the natural tension that exists in this business. Nick you are either young or naive (or both). I hope you are young. Your pronouncements lack maturity. As far as Aaron's fund, again one has to take a moment to evaluate the strategies and match them against an extended performance record. 10 years is a good benchmark. I do this for friends periodically. It is hard work, and I am not interested in doing it for you. While I don't know Aaron well, we have communicated by email. I found him to be a smart, well educated guy. Also I believe he has character and would not want to screw his clients. Unfortunately I do not know the people at Quadriga. So I tend to be dubious as to their intent. Finally, I think my background and my track record of comments here does in fact give me some small authority. You on the other hand have no real track record here and your comments indicate inexperience and lack of grasp of the basics. If you show us some skills and good judgement, I think (eventually) you will be taken seriously. Steve46

 

[ElectricSavant]

Volatility of a funds equity curve and the volatility of the instruments traded within the fund are 2 different issues.

A fund may have meager results during a low range market in the instruments it trades.

An instrument can have a wide range and a trend following system can produce better results.

Naturally, a seasoned fund manager works with/has developed, a balanced system working with many instruments weighted according to the methodology. Usually a well capitalized fund looking for a MODEST return can consistently do well, if the manager has half a brain.

Michael B.

 

[NickPapaGeorgio]

Quote from steve46:

Look:
All funds have drawdown periods, and the question to ask is whether the drawdown falls within an acceptable level based on the strategies that they employ. Most fund will not divulge all the strategies that they use, and therefore it is difficult to make an accurate decision. I can only guess that Quadriga is no exception. If they are responsible, they will let you know as the dispersion of losses reaches a specific point. Problem is that at that point, clients send notes to redeem funds. So you (almost all of you) can see the natural tension that exists in this business. Nick you are either young or naive (or both). I hope you are young. Your pronouncements lack maturity. As far as Aaron's fund, again one has to take a moment to evaluate the strategies and match them against an extended performance record. 10 years is a good benchmark. I do this for friends periodically. It is hard work, and I am not interested in doing it for you. While I don't know Aaron well, we have communicated by email. I found him to be a smart, well educated guy. Also I believe he has character and would not want to screw his clients. Unfortunately I do not know the people at Quadriga. So I tend to be dubious as to their intent. Finally, I think my background and my track record of comments here does in fact give me some small authority. You on the other hand have no real track record here and your comments indicate inexperience and lack of grasp of the basics. If you show us some skills and good judgement, I think (eventually) you will be taken seriously. Steve46

Steve I laughed all the way through this post. Dude, this is not my first ET handle, I've been around here for a while. I use to school you when you ventured your head over into the options threads. Anyway, this is not a pissing contest. Here is my problem with you. You run a fund, so you say. Fine. So you come on here and make negative remarks about Quadriga based only on the last few months of performance. A fund that has been trading since 1996 and you make snide remarks about the fund. I find that to be a joke. Seriously. Just as I would if you did the same with Schindler. You know nothing about this fund except what they make public on their website which is almost nothing. Yet you presume to understand their fund, their strategies, and now you subtly make references to wether or not you trust them? Are you serious man? Get a hold of yourself man. Don't come on here and pretend like you are doing this charity work warning everyone about Quadriga. Are you jealous of them? I mean seriously, are you? What because they have close to a billion dollars and you don't. Does that bother you?

Why don't you keep running your fund and let Quadriga runs theirs and Aaron run his. If you guys want to see who has the best performance at the end of the year we can compare numbers but this is asinine. So there you go Stevo.

Btw, I love how diplomatic you got when I ask you to comment on a fund where the person can actually defend themselves. LOL. Good weekend!

 

[Shreddog]

What happens to the fund's assets under management in your example is irrelevant to the investor (though not to the fund managers).

If I was an investor from the first year, I did not lose all of my gains in your example.

Let's say I put 100K in to the fund the first year and never invested again.

30% * 8 years gives me $815K. A 30% loss after that leaves me with $571K, or a 471% return.

 

[ElectricSavant]

compounding

Quote from Shreddog:

What happens to the fund's assets under management in your example is irrelevant to the investor (though not to the fund managers).

If I was an investor from the first year, I did not lose all of my gains in your example.

Let's say I put 100K in to the fund the first year and never invested again.

30% * 8 years gives me $815K. A 30% loss after that leaves me with $571K, or a 471% return.