Quadriga Superfund - Managed Futures

[risktaker]

Ahh,
But there's your mistake. Which fund are you in, where you were invested in the fund's first year of operation? Virtually no one is. Yet these funds use those numbers to advertise their superb performance (which I'm not denying).

The point here is that when the majority of "investors" catch on to a well-performing fund, is usually when that fund is due for a break.
And *that* loss wipes out virtually any gains of 80-90% of those investors for the past 3-4 years, at least.

Also, its possible for somebody with deep pockets to "sponsor" a hedge fund and pump performance for a few years, suck in all the little fish and sell the fund as an ongoing concern to some foolish bank/investment house.
Too many accounting gimmicks can be performed when nothing has to be publicly disclosed!

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.

 

[Shreddog]

I see the point you are trying to make. And yes, I agree, the typical performance chasing fund investor is screwed in your example.

 

[steve46]

Nick:
Sounds like I hit a nerve here. So far you haven't offered anything of substance to your comments about Quadriga. Everything you say tells us that you haven't got a clue about fund performance. Your first comments tell us you have no math skills. Now you collapse into attacking people. Kind of like a monkey in a cage. Confessing that you have to use various handles tells us that you aren't to be taken seriously. Why would I want to give you a free consult regarding fund performance? Everyone reading your posts can see that you have no clue as to how the business actually works. As for schooling me? I don't think so. I think you ought to try another approach. Wait a couple of semesters, graduate high school and come on back. I'm sure the rest of us would be better off if you would go back outside and play with sparklers.

 

[Mathemagician]

Quote from risktaker:

Ahh,
But there's your mistake. Which fund are you in, where you were invested in the fund's first year of operation? Virtually no one is. Yet these funds use those numbers to advertise their superb performance (which I'm not denying).

The point here is that when the majority of "investors" catch on to a well-performing fund, is usually when that fund is due for a break.
And *that* loss wipes out virtually any gains of 80-90% of those investors for the past 3-4 years, at least.

Also, its possible for somebody with deep pockets to "sponsor" a hedge fund and pump performance for a few years, suck in all the little fish and sell the fund as an ongoing concern to some foolish bank/investment house.
Too many accounting gimmicks can be performed when nothing has to be publicly disclosed!

This is not accurate. If I invested 100k in the second-last year, my EOY balance would be 130k. Then, after the 30% drawdown, my balance would be 91k. This is hardly "getting screwed".

In fact, if you got in at the exact worst possible time, your balance would end up going from 100k to 70k. That's the worst-case scenario.

jj

 

[Mathemagician]

Steve,

What, is there a full moon this weekend? When I first saw these posts I was going to respond. However, after seeing the reaction to your (entirely accurate) responses I'm sure glad I didn't!

jj

 

[Mathemagician]

http://www2.standardandpoors.com/NA...e/IndicesIndexPg&r=1&l=EN&b=4&s=132&xcd=HEDGE

If you follow that link, you'll see that Quadriga and Schindler are not the only ones in the managed futures industry who are having a rough go of it. John Henry was also down 17% in April/May. My trading program has experienced a drawdown in the neighborhood of 13% as well.

jj

 

[steve46]

John:
If you are in the business, you understand that to evaluate this issue is complex. Recently I spoke with a fund manager who brought up an important point (one that I agree with). Drawdowns have a different significance depending on the leverage. I agree that many funds are seeing drawdowns this quarter. Some of my associates run "F of F" style operations and they are seeing severe drawdowns as well. My own comments are not meant as criticism of Quadriga, but to suggest to readers that it is smart to be knowledeable as to when fund returns are straying from normal dispersion. In my experience, there are times when this happens and what is behind it is that the trades are no longer independent events. If this is so, then the trades are exhibiting a specific type of dependency (loss begets loss) and the original edge is (probably) gone. Even if I still liked the longer term performance, I might want to pull back my exposure at that point. Best Regards, Steve46

P.S.
By the way John, you may notice that I don't suggest that folks abandon a fund based on that fact that its strategies may lose their edge. That is because my own research suggests that a good strategy does not lose its edge permanently. Rather than go into the abstractions, I will just leave it at that.

 

[Mathemagician]

Quote from steve46:

Drawdowns have a different significance depending on the leverage.

I would go even farther and say that PERCENTAGE drawdowns (percentage anything, really) are basically arbitrary. You can make them whatever you want, high or low, by simply adjusting leverage. That's why I always use dimensionless quantities and ratios in evaluating trading models and trading programs. (The ratio of average annual return to maximum drawdown is a commonly used dimensionless quantity, though not one I emphasize heavily.) Dimensionless quantities have an intrinsic meaning that is not altered by arbitrary extrinsic "settings" like leverage.

That said, the question of whether a current drawdown is within expectations for a trading model is probably the single most complex question facing a trader/manager. I find it so complex, in fact, that I have resorted to trading multiple models in small sizes across multiple markets and timeframes in order to protect against the degradation of one or more of the models. It is really the only truly effective solution to this problem that I have been able to deploy with confidence.

jj

 

[Mathemagician]

By the way John, you may notice that I don't suggest that folks abandon a fund based on that fact that its strategies may lose their edge. That is because my own research suggests that a good strategy does not lose its edge permanently. Rather than go into the abstractions, I will just leave it at that.

My research supports this, especially for longer term models. I think it's wise not to try to get into the details, especially with that full moon out there...

jj

 

[steve46]

Okay, when you talk about using "dimensionless quantities and ratios" the signal I get is that you have a math background. Unfortunately when I go into the math that underlies this subject folk's eyes glaze over and I can't blame them. Not everybody has the same background. One interesting book that deals with this subject is John Wolbergs "Expert Trading Systems, Modeling Financial Markets with Kernel Regression" published by John Wiley. Unfortunately it is out of print. I found my copy overseas at Amazon UK. If you are decide to get it, read chapter 2, page 32, "the curse of dimensionality". On the other hand, his comments may be old news to you. If so, please know that I don't mean to patronize. Well, I am going to go out and have a life. If you are in the USA, have a pleasant and safe 4th of July holiday. Nice talking to you. Steve46