Hedge funds

Going nowhere fast


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You know why hedge funds when bad once again ? bacause they only go well as an industru in bull markets (which by definition should not be true - Isn't "hedge" a word for protection ?).

So, when life is easy (2007 game - Buy stocks and bonds, 2006 game - Buy stocks and bonds, 2005 game - buy stocks and bonds) the chimpanzees who compose 70% of this industry go well. On a bear market, which human nature by definition doesn't like, they do like this, badly...

Also by definition, market moves due to stress are way faster than bullish ones (check history to confirm). Well, shouldn't these funds be "THE" stress scenario traders ?

So much people with huge positions in the market, living by its reputation, which was built on false impressions and human ignorance (or clients slack or inability to find out who is a really good hedge fund manager).

The good managers ? Its not hard to find them. They are the ones quiting the industry (Probably because clients are too dum to understand them).

I know this may sound "revoltuous", but its not, its real, and this "resoultuous" impression you may have is the sucess premiun of all the false ideas and brands, and false reputation people sell around the financial system world.


Market is always unpredictable! Higher returns also means higher risks,what happened to hege funds is fair enough,goverments always part of the market ,no one should be blamed for underperformance!


Perhaps institutional investors choose HFs because they are not betting their own (personal) money. Likely they get a chunk of the 2% in return for their wise choice of fund.


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Plaintiff attorneys are slated to receive up to $200 million in fees and $27 million in costs, according to court documents. I thank you Firozali A.Mulla DBA


We definitely have the Fiscal cliff on as President Barack Obama was not planning to make a new offer to avert the tax increases and spending cuts that loom on Jan. 1 at a White House meeting with congressional leaders on Friday, a source familiar with the meeting said. At the meeting, Obama was set to ask lawmakers to hold a vote on a "fiscal cliff" plan that would allow taxes to rise on those who earn $250,000 and up, and that would extend unemployment insurance benefits, according to the source. Obama believes his plan would pass with a majority in both the House of Representatives and the Senate, the source said. The president was meeting with Senate Majority Leader Harry Reid, Senate Minority Leader Mitch McConnell, House Speaker John Boehner and House Minority Leader Nancy Pelosi - the first time the group has met together since November. If congressional leaders object to his plan, Obama will ask them for a viable counterproposal, the source added. If lawmakers have no alternative approach, he will seek an up-or-down vote in Congress on his plan, the source said. Wall Street sustained heavy selling Friday, denting annual gains, as the growing spectre of the U.S. tumbling over the fiscal cliff sent traders rushing out of equities. Standard & Poor's said it does not expect fiscal cliff negotiations to have an impact on the sovereign credit ratings of the U.S. federal government. Rep. John Carney, (D-Del.), offers his views on whether lawmakers will cobble together a deal to avert the fiscal cliff before the January 1 deadline. From the hugely disappointing Facebook IPO to the alarming fiscal-cliff talks, there was no shortage of new shocks to the psyche of retail investors this year. I thank you Firozali A.Mulla DBA


Which HFRX index does this article use to arrive at its stated 17% return metric? It seems that HFR's aggregate index uses equal weightings for its reporting hedge funds. With minimal reporting criteria (>$50MM AUM and willingness to be transparent), I'm not so sure that HFR provides an accurate picture of the Hedge Fund space...


I don't agree with the notion that choosing a money manager "is a task that would tax even a Nobel prizewinner".

Rather, understanding the basics of sound money management, and knowing which investors apply it, is enough.

For anyone considering giving up control of ones money, I strongly recommend reading the short article "The Superinvestors of Graham-and-Doddsville" by Warren Buffett.



MarkB in reply to lowtrance


ZA Observor





There are a few flaws in this article. 1) not all hedge funds report their return and even less do so honestly, 2) components of the index are not weighted by the amount of funds they manage; as such in a two-sample scenario, a hedge fund managing 100 million dollars with a return of 10% and another managing 10 billion with a return of 20% would show an average of 15%.


Some of you just don't get it, do you?

I work in this industry and I get the racket perfectly.



One word, and one word only.



Think about it carefully.




Statistical/volatility arbitrage in general has been quite profitable the last several years, I know of one that returned in access of 70% and another that returned 28% just this year alone (year-to-date), both without using leverage. The equity curves are remarkably smooth, not much concavity or convexity to speak of, going in an upward sloping fashion. This should continue to hold true as long as physical laws stay intact ;)

Macro strategy is the one big fail, probably because governments and people in general have been so irrational -- John Paulson is in trouble because of Euro related bets but Jim Chanos claim to be making money betting against the China growth story.

Daveycool in reply to balasrini

"What exactly do you mean by 'no leverage'?
Trading volatility necessarily is 'margin trading'.
Which is leverage."

That is the vanilla volatility arbitrage -- where perhaps someone uses a variance swap to implement their volatility bets. One can even create his own vol trade by betting on the changes in vega in an option derivative, for instance. That's the common form of vol-arb.

There are other flavours of volatility arbitrage (probably very esoteric) that's simply (translated and then) traded in the the underlying (equities), which is not considered leveraged unless we are talking about margin accounts. It is a less "accurate" form of arbitrage (the equity curve on a single bet can be very jumpy) because one has to account for other effects but in other ways it can be very desirable. Liquidity is the most common reason why. In other words, if you can find a way to do vol-arb on a company using its common stock instead of engineering a way to trade its option's vega, you would be better off especially if the company's options aren't very liquid.






Clastics in reply to Clastics





J. Kemp


Hardly surprising.

Connect The Dots


When death is all around--best to sell coffins.



Bryan Goh



So it implies that the top brained person in the world will be awarded by using the money earned by the useless brain of the world. It looks like a snobbery but it's reality of the world.


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