why do funds perform so poorly?

Quote from Sparohok:

The reason I originally picked on your post was merely because it seemed to exemplify the arrogance of small traders who think that institutional money would be doing a lot better for themselves if only they were as smart as we are.
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Yes most small traders are over arrogant in regards to this topic but their general idea is on the money. Most mutual & pension fund managers can barely keep up with the market averages but still get paid their nice compensation. Hence it does not matter to them, in good years they claim greatness, in bad ones they blame the market. Dumb money keeps on believing and keeps investing with these shyesters, paying a fee in order to barely mirror the averages.

You bring up the Stanford study which makes total sense since the mutual & pension fund industry is saturated and pretty much composes the market. As a counter example, before the hedge fund hype, the hedge funds were more esoteric and hence on average provided amazing returns (since you really had to be smth special to warrant such a high percentage of profits on top of management fees). Now that it is becoming saturated, the same math can be applied to hedge fund returns, as I think it has been already.
 
Quote from Hydroblunt:

Dumb money keeps on believing and keeps investing with these shyesters, paying a fee in order to barely mirror the averages.
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I agree that active mutual fund managers don't generally earn their keep. The evidence is increasingly that hedge fund managers as a group don't either (as you point out). Of course that doesn't mean that there are no excellent mutual fund managers or excellent hedge fund managers, but they are the exception rather than the rule.

I guess the question that interests me is, if mutual fund managers weren't shysters, if mutual funds attracted the very best and brightest on and off Wall Street, and really had their shareholders interests at heart, how much more would they make?

The answer is, maybe a few percent more. As a group they might even beat the S&P 500 by a percent or two over the long term. But my point is: that's the limit. In the very best case, the very smartest people can only beat the market by a tiny amount if they are managing an aggregate asset base of trillions of dollars. That's not a guess, that's the way it has to be based on some very simple and irrefutable mathematics.

Martin
 
beating the s&P saystematically is almost impossible.

In may case it is the Eurostoxx50R.

Hedge funds were able to generate alpha in the past. But even this is coming to an end as more and more money is playing the same strategies.
The only reason why some small traders think they would be able to beat the market is that they do not have enough experience. If they increase the number of bets radom will catch them !

The reason is not that fund managers are working for the interest of their companies !
 
Quote from autocorr:

The only reason why some small traders think they would be able to beat the market is that they do not have enough experience.
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No. You're wrong. It is possible for small traders to systematically, consistently beat the market year in and year out. The key to results like this is the structural advantage of not having much money.

Obviously this is not a provable assertion. Any strategy that depends on low volume also depends on secrecy.

Martin
 
Martin wrote:

No. You're wrong. It is possible for small traders to systematically, consistently beat the market year in and year out. The key to results like this is the structural advantage of not having much money.

Obviously this is not a provable assertion. Any strategy that depends on low volume also depends on secrecy.

Martin

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100% correct

This is one of the few businesses where ¨small¨is good....
 
to be honest i did not loose hope yet that the market is not random driven. I am favoring quant styles in the field of statistical arbitrage. For my own fun I am trading futures and did not loose hope to beat the market.
 
Sounds to me like the arb edge is dead. Merger arb especially. Leverage 10x so you can turn your 1% edge into a strategy, and then get run over by a truck when a 1973, 1987, 2000 comes.
 
that is not stupid for a fund manager. Take some assymtric risk like writing options far ut of money and you will be most times a small winner versus your benchmark and receive honour and money. If you are unlucky the strategy will make you search a new job :-)
 
Quote from OddTrader:

Q
http://www.collective2.com/cgi-perl...x&tablename=newsearch&numrecs=897&showfilter=

SYSTEM => SHARPE => RETURN
Dr.Forex => 0.54 => 156.40%
Hawk-fx => 0.64 => 113.60%
Koan2EURUSD => 0.8 => 112.30%
VortexIIForex => 0.97 => 91.80%
SARF2! => 0.54 => 73.40%

UQ

Probably the Sharpe values in the top 5 systems above would be the main reason for them Not to launch their hedge funds, Yet.
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Forex Magic
http://www.collective2.com/cgi-perl...id=15029556&want=publicdetails&showcomments=1

This table was last updated on => Tue Nov 1 07:14:51 2005 => Mon Oct 31 12:34:53 2005
Realism Factor => 100 => 100
Trades => 9 => 7
Profitable => 6 => 6
Losses => 3 => 1
Win % => 66.70% => 85.70%
Cumu $ => $43,240.00 => $47,040.00
after typical commission => n/a => n/a
Avg Win => $8,773.00 => $8,773.00
Avg Loss => $3,133.00 => $5,600.00
W:L Ratio => 5.6:1 => 9.4:1
P/L per unit => n/a => n/a
after typical commission => n/a => n/a
Avg Trade Length => 8.6 hours => 10.4 hours
Annualized % => 131.52% over 120 days (Today) => 144.28% over 119 days (Yesterday)
Sharpe Ratio => 1.23 => 1.38

or Forex Doctor? :confused: :D

Quote from malaka56:

Then you see the claimed returns of some posters on here (granted there is no verification), BUT if anyone ever looks at trading competitions like FXCM, trade2win, and consistently (yet simulated) programs like on collective2, and the number of other trading competitions. You can argue that getting returns like on FXCM of 700%+ a month, is not consistent, and it would be hard to tell because they only have montly trades, but if you look at longer term simulated programs, they are consistent over 36 week terms.

So how come there arent any super high performing hedge funds, or decent performing mutal funds? thanks.
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