What is a good track record to you ... I'll start

[GlobalMacro90]

I am wondering what some of you guys view as a good track record?

Not like Jim Simons good or anything like that, but a track record you would be impressed with or one that you aspire to have.

Here are my thoughts:

Length: Under 3 years is nonsense. I would at least want to see 3 years, preferably 5 years in length. Anything over 10 years would certainly be large enough sample. Special points are scored for trading through a whole market cycle. That makes its tough at the current time, as US equities have been in a 10 year (hated) bull market.

Return: Anything in double digits to me is good. Mid teens (15%) is very good and over 20% is excellent. Obviously this needs to be viewed in the context of the vol you are taking on.

Vol: If your vol is below your annual return, that is very good IMO

Sharpe: 0.50-0.80 is decent, certainly better than most. Sharpe > 1.0 is very good. If you are approaching 1.5 that is elite.

MAR (annual return / Max DD): 0.50 is pretty good. 0.75 is very good and 1.0 is awesome.

Context here matters. For example, high-frequency guys seem to naturally have a higher Sharpe ratio. If would believe a high-frequency guy with a Sharpe of 3+. If you arent high frequency though, I call BS on that. Feel free to disagree.

I would love you know your thoughts here. What are you goals?

My Goals:

Return of ~15% / yr
Vol of 12-15% / yr
Max DD less that -20%
Sharpe in the 1.0-1.2 range
Track record of >10 years


I am 3 years into my goal... Would love to know your thoughts.

 

[nooby_mcnoob]

Length: Under 3 years is nonsense. I would at least want to see 3 years, preferably 5 years in length. Anything over 10 years would certainly be large enough sample. Special points are scored for trading through a whole market cycle. That makes its tough at the current time, as US equities have been in a 10 year (hated) bull market.

Length is irrelevant. # of trades is relevant.

Return: Anything in double digits to me is good. Mid teens (15%) is very good and over 20% is excellent. Obviously this needs to be viewed in the context of the vol you are taking on.

Vol: If your vol is below your annual return, that is very good IMO

Agreed.

Sharpe: 0.50-0.80 is decent, certainly better than most. Sharpe > 1.0 is very good. If you are approaching 1.5 that is elite.

High Sharpe is doable going long only in a bull market.

I think you're missing low beta. High Sharpe + low beta is more trustworthy than high sharpe and high beta.

But I'm not a quant nerd so I can't tell you if I'm right, these are just my opinions.

 

[gaussian]

Sharpe: 0.50-0.80 is decent, certainly better than most. Sharpe > 1.0 is very good. If you are approaching 1.5 that is elite.

A sharpe of 1.0 or better over 5-10 years?

Unheard of. The best money managers in the world only get somewhere between 0.5 and 0.7.

 

[raVar]

I am wondering what some of you guys view as a good track record?

Not like Jim Simons good or anything like that, but a track record you would be impressed with or one that you aspire to have.

Here are my thoughts:

Length: Under 3 years is nonsense. I would at least want to see 3 years, preferably 5 years in length. Anything over 10 years would certainly be large enough sample. Special points are scored for trading through a whole market cycle. That makes its tough at the current time, as US equities have been in a 10 year (hated) bull market.

Return: Anything in double digits to me is good. Mid teens (15%) is very good and over 20% is excellent. Obviously this needs to be viewed in the context of the vol you are taking on.

Vol: If your vol is below your annual return, that is very good IMO

Sharpe: 0.50-0.80 is decent, certainly better than most. Sharpe > 1.0 is very good. If you are approaching 1.5 that is elite.

MAR (annual return / Max DD): 0.50 is pretty good. 0.75 is very good and 1.0 is awesome.

Context here matters. For example, high-frequency guys seem to naturally have a higher Sharpe ratio. If would believe a high-frequency guy with a Sharpe of 3+. If you arent high frequency though, I call BS on that. Feel free to disagree.

I would love you know your thoughts here. What are you goals?

My Goals:

Return of ~15% / yr
Vol of 12-15% / yr
Max DD less that -20%
Sharpe in the 1.0-1.2 range
Track record of >10 years


I am 3 years into my goal... Would love to know your thoughts.

I'd agree with you almost every point.

I would add one caveat.

Objective.

For instance, you can design an entire Program / Strategy? That offsets something your client is doing.

So let's say, a potential client has HUGE exposure ... i don't know ... to being bullish on Equities. Let's just call it that, since it's what most gravitate towards. And I'll steer clear of specifics, just to illustrate to newcomers what I mean by "Objective".

There is a lot of room to market a single program, to an objective of always being short Equities in some way. A client who is very bullish on Equities? It's going to offset what he / she / they are doing. So building a program that doesn't do that well, maybe only 3% a year, but has HUGE upside in a 2008? There's a place for that.

So it depends on ... the objective.

 

[raVar]

I am wondering what some of you guys view as a good track record?

Not like Jim Simons good or anything like that, but a track record you would be impressed with or one that you aspire to have.

Here are my thoughts:

Length: Under 3 years is nonsense. I would at least want to see 3 years, preferably 5 years in length. Anything over 10 years would certainly be large enough sample. Special points are scored for trading through a whole market cycle. That makes its tough at the current time, as US equities have been in a 10 year (hated) bull market.

Return: Anything in double digits to me is good. Mid teens (15%) is very good and over 20% is excellent. Obviously this needs to be viewed in the context of the vol you are taking on.

Vol: If your vol is below your annual return, that is very good IMO

Sharpe: 0.50-0.80 is decent, certainly better than most. Sharpe > 1.0 is very good. If you are approaching 1.5 that is elite.

MAR (annual return / Max DD): 0.50 is pretty good. 0.75 is very good and 1.0 is awesome.

Context here matters. For example, high-frequency guys seem to naturally have a higher Sharpe ratio. If would believe a high-frequency guy with a Sharpe of 3+. If you arent high frequency though, I call BS on that. Feel free to disagree.

I would love you know your thoughts here. What are you goals?

My Goals:

Return of ~15% / yr
Vol of 12-15% / yr
Max DD less that -20%
Sharpe in the 1.0-1.2 range
Track record of >10 years


I am 3 years into my goal... Would love to know your thoughts.

Oh one other thing.

We use Sharpe? And I agree with all of your comments on Sharpe. But we also use Sortino, and prefer Sortino.

Why?

Because Sortino does not punish your upside volatility, whereas a Sharpe Ratio will.

Don't get me wrong, I agree with you. Sharpe is easy to calculate, so it's good to have it in there. It's an industry standard. But we prefer Sortino, because a Sortino ratio will not get punished due to a HUGE up year. Sortino just focuses on the downside deviations, and punishes you for those. Whereas a Sharpe Ratio CAN be lowered during a time period of a big return.

And last I checked? No one complained too heavily about experiencing a big 'up' year.

 

[R1234]

Depends on your clientele. Billion dollar hedge funds can get away with 10% net CAROR over the long term with a sharpe of 0.6 to 1.0.

Small retail money managers have to perform at a higher standard for their business to stay solvent. They need to generate net returns in the mid to high teens with drawdowns not exceeding 15% (measured as peak to valley using daily returns).

 

[GlobalMacro90]

Oh one other thing.

We use Sharpe? And I agree with all of your comments on Sharpe. But we also use Sortino, and prefer Sortino.

Why?

Because Sortino does not punish your upside volatility, whereas a Sharpe Ratio will.

Don't get me wrong, I agree with you. Sharpe is easy to calculate, so it's good to have it in there. It's an industry standard. But we prefer Sortino, because a Sortino ratio will not get punished due to a HUGE up year. Sortino just focuses on the downside deviations, and punishes you for those. Whereas a Sharpe Ratio CAN be lowered during a time period of a big return.

And last I checked? No one complained too heavily about experiencing a big 'up' year.

Good points regarding Sharpe. Like you said it is the industry standard (despite its flaws) so like it or not people will ask about it

 

[GlobalMacro90]

A sharpe of 1.0 or better over 5-10 years?

Unheard of. The best money managers in the world only get somewhere between 0.5 and 0.7.

Unheard of? I dont know about that. Rare sure, but I think it is something to strive for.

I see some trading jobs on Linkedin that basically say - Dont apply if you dont have a Sharpe fo 2+. That is either BS or high frequency trading.

 

[raVar]

Good points regarding Sharpe. Like you said it is the industry standard (despite its flaws) so like it or not people will ask about it

Exactly

 

[gaussian]

Unheard of? I dont know about that. Rare sure, but I think it is something to strive for.

I see some trading jobs on Linkedin that basically say - Dont apply if you dont have a Sharpe fo 2+. That is either BS or high frequency trading.

Sharpe can be gamed.

Increase frequency to some infinitesimally small time interval and your performance doesnt even matter any more. This necessarily excludes people who buy and hold for weeks to months at a time, despite their overall performance being more consistent over 5-10 years.

I don't know why you'd want to trade for someone else anyway. Makes no sense.