https://www.zerohedge.com/news/2018-09-22/how-fund-betting-end-world-outperformed-sp500
"According to a letter sent to investors earlier this year and seen by the WSJ, a strategy consisting of just a 3.3% position in Universa with the rest invested passively in the S&P 500, had tripled the money, generating a compound annual return of 12.3% in the 10 years through February, better than investing in just the S&P 500 itself. It also was superior to portfolios three-quarters invested in stocks with a one-quarter weighting in more-traditional hedges such as Treasurys, gold or a basket of hedge funds."
I believe Spitz is full of shit, I posted this last year and would love to see where I'm wrong as I'm highly interested in his strategy
"I believe Spitznagel is being a little misleading here. He finds that lower volatility improves geometric returns but he is not measuring actual dollars earned (which is more of a function of arithmetic returns). Its possible to have improved CAGRs without a single extra dollar earned.
This paper explains it well in the context of risk reduction from diversification
http://www.hec.ca/finance/Fichier/Chambers2014.pdf
This portfolio has the same expected return (arithmetic mean) but varying geometric means (CAGRs) depending how much volatility it has:
SDs drop and Geometric returns improve as you add diversification, but yet, the investor won't make a single extra cent from this. This is not to say that he will be making a mistake by diversifying but to talk about improved CAGRs while you are making less money "What at first appears to gratuitously lower the arithmetic return of the portfolio (and drag on the portfolio as a line item in 9 out of 10 years) turns out to be a CAGR boon." seems ridiculous.
What I think he is trying to get at is that there is an improvement in risk adjusted returns, which is likely to be true. But that improvement should not be measured by the CAGR, this gives a FALSE impression that returns will improve, which they likely won't. It should be measured by metrics like the Sortino, MAR or Calmar ratios. But given the Spitz is in the hedge/fee business, its just more appealing to him to give that false impression of return boosting from options buying".
To be clear, I'm not hating on the guy. I just think he is selling a false image. He should say 'options buying will improve risk adjusted returns even though it will be a dollar drag (cost) in the portfolio'. But instead he boasts about CAGRs of some phatom portfolio that doesnt exist because it makes people feel like they will beat the market, in some sort of free lunch, which wont happen
"According to a letter sent to investors earlier this year and seen by the WSJ, a strategy consisting of just a 3.3% position in Universa with the rest invested passively in the S&P 500, had tripled the money, generating a compound annual return of 12.3% in the 10 years through February, better than investing in just the S&P 500 itself. It also was superior to portfolios three-quarters invested in stocks with a one-quarter weighting in more-traditional hedges such as Treasurys, gold or a basket of hedge funds."
I believe Spitz is full of shit, I posted this last year and would love to see where I'm wrong as I'm highly interested in his strategy
"I believe Spitznagel is being a little misleading here. He finds that lower volatility improves geometric returns but he is not measuring actual dollars earned (which is more of a function of arithmetic returns). Its possible to have improved CAGRs without a single extra dollar earned.
This paper explains it well in the context of risk reduction from diversification
http://www.hec.ca/finance/Fichier/Chambers2014.pdf
This portfolio has the same expected return (arithmetic mean) but varying geometric means (CAGRs) depending how much volatility it has:
SDs drop and Geometric returns improve as you add diversification, but yet, the investor won't make a single extra cent from this. This is not to say that he will be making a mistake by diversifying but to talk about improved CAGRs while you are making less money "What at first appears to gratuitously lower the arithmetic return of the portfolio (and drag on the portfolio as a line item in 9 out of 10 years) turns out to be a CAGR boon." seems ridiculous.
What I think he is trying to get at is that there is an improvement in risk adjusted returns, which is likely to be true. But that improvement should not be measured by the CAGR, this gives a FALSE impression that returns will improve, which they likely won't. It should be measured by metrics like the Sortino, MAR or Calmar ratios. But given the Spitz is in the hedge/fee business, its just more appealing to him to give that false impression of return boosting from options buying".
To be clear, I'm not hating on the guy. I just think he is selling a false image. He should say 'options buying will improve risk adjusted returns even though it will be a dollar drag (cost) in the portfolio'. But instead he boasts about CAGRs of some phatom portfolio that doesnt exist because it makes people feel like they will beat the market, in some sort of free lunch, which wont happen
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