What does Karen the Supertrader and her results say about volatility? Oversold?

[jamesbp]

, but didn't they say something like she hasn't had a losing year since she went pro?

When did she go pro?

 

[newwurldmn]

As far as I can tell, a trade like this is equivalent to BRK borrowing $5bn unsecured at 20y OIS rate (actually, this isn't entirely clear; could be they discounted the premia at the BRK's risky rate, although this isn't what the Lehman doc that people in FT talked about suggests). I don't see how this is a poor trade...

And maybe he doesn't have to pay it back!

 

[Pekelo]

When did she go pro?

If by pro we mean trading other people's money, even if they are friends and family, then in 2008 she was already doing that, in the 700-800K range if I recall correctly...

 

[Surprise]

If by pro we mean trading other people's money, even if they are friends and family, then in 2008 she was already doing that, in the 700-800K range if I recall correctly...

That's what I said to Colin Powell about the Iraqi WMDs.

I really don't want to listen to 3 hours of interview again, but didn't they say something like she hasn't had a losing year since she went pro? That would indicate that she did at least 0.1% in 2008. (what again, would have been excellent in that year).
But again, HF performance is measured against the general market, so most investors would have been very happy losing only 5-10% in 2008.

Also, what is more likely, knowing that people were throwing money at her in 2009?:

1. She had a spectacular 2007 (50%) and a very bad 2008. Or

2. She had 2 very good, consecutive years outperforming the market.

Again its all based on interviews and hearsay , that's not a proof , you need a verified audited track record by a third party period , other than that we don't have any proof if she even have made a dime in her whole life , that's how the industry works .

 

[peleus]

700-800K range if I recall correctly...

Is she still doing this kind of output for this year? Is there also a chance for use to have her as a signal provider?

 

[newwurldmn]

No, nobody so far has managed to create a model for liquidity or, for that matter, to incorporate liquidity into any asset pricing model. Not to my knowledge and not in a way that is more or less accepted. I imagine there's a Nobel Prize waiting for whoever comes up with a good theory.

As to the other question, it's 'cause risk-adjusted returns aren't the only thing that people care about. Specifically, and this is even more relevant for leveraged institutions, your portfolio's risk is constrained not just by the "central scenario" measures (most commonly some flavor of historical VAR), but also by the "stress" measures (i.e. drawdown in a particularly adverse, liquidity-impaired scenario). This means that you can't just overwrite/underwrite, as you will bust your stress limits. If you could avoid marking-to-mkt/stress limits (a la the Warrenator), you could harvest these tasty returns all day long.

Marty,

I've been thinking about this a bit recently.
If you ran a short downside put book (any any format you choose: hedged, outright, spreaded, skew, whatever) under the one constraint that you can't lose more than 10% on a 10% shock, how much pnl can you reasonably make?

I get 5-7%ish: Underperforming historical long-only performance.

 

[Martinghoul]

Marty,

I've been thinking about this a bit recently.
If you ran a short downside put book (any any format you choose: hedged, outright, spreaded, skew, whatever) under the one constraint that you can't lose more than 10% on a 10% shock, how much pnl can you reasonably make?

I get 5-7%ish: Underperforming historical long-only performance.

We should ask sle for a confirmation of your estimate...

Personally, my guide has always been LJM. If you look at the history of their returns (http://www.ljmpartners.com/performance-history), it's pretty useful. Specifically, if we use the constraint that you have specified, it rules out both their "Aggressive" and "Moderately Aggressive" strategies, which leaves you with the "Preservation & Growth" as the only option. That seems to have produced a historical return of 8.6% per annum, so your estimate isn't that far off. Obviously, 8.6% still beats Spooz and all the caveats apply.

 

[Pekelo]

Is she still doing this kind of output for this year? Is there also a chance for use to have her as a signal provider?

You misunderstood something. The 800K was her AUM around 2008. And no, HF managers can't provide signals, and most likely you don't have portfolio margin anyway.

 

[newwurldmn]

We should ask sle for a confirmation of your estimate...

Personally, my guide has always been LJM. If you look at the history of their returns (http://www.ljmpartners.com/performance-history), it's pretty useful. Specifically, if we use the constraint that you have specified, it rules out both their "Aggressive" and "Moderately Aggressive" strategies, which leaves you with the "Preservation & Growth" as the only option. That seems to have produced a historical return of 8.6% per annum, so your estimate isn't that far off. Obviously, 8.6% still beats Spooz and all the caveats apply.

Maybe I am wrong in having this view, but I consider the LJM guys to be pretty smart.

They outperformed the SPTR by about 1%/year. That's pretty good.

Too lazy to calculate if their sharpe is in line with the SPX over the same period, but their sharpe is inline with the long run average of the SPX.

 

[Martinghoul]

Maybe I am wrong in having this view, but I consider the LJM guys to be pretty smart.

They outperformed the SPTR by about 1%/year. That's pretty good.

Too lazy to calculate if their sharpe is in line with the SPX over the same period, but their sharpe is inline with the long run average of the SPX.

Yeah, I agree, they appear to be reasonably smart and, more importantly, straightforward... I don't imagine, though, that there's some sort of super special secret sauce that they offer that a clever long-only shop couldn't reproduce, if they wanted to.

The other question, of course, is the mandates.