211–220 of 323 posts
Earlier quoted context omitted.
Good question! Somebody took over running the technical side of that some years back, so I haven't followed it closely. I'll ask. But if anybody has a bet they'd like to get registered, just email me and/or them.
What email should they use?
Contacting me
The best way to contact me is via email; try my first name at this domain.
Earlier quoted context omitted.
I can only but point you back to read the article. You may have misunderstood some facts: - He made a bet with the manager of Hedge funds that picked 5 funds of funds. None of the picked fund of funds performed better than S&P. So it is 5 against 1. We can say that this manager picked the wrong one, but none other took the risk of the bet... - Look at the first chart just at the top of the article. Hedge funds perfor…
> You mention that plenty of individual funds did beat the S&P. This is straight an apocryphal anecdotal fallacy. No, no it isn't. Individual funds have beaten the market for 20 - 30 years at a time. You won't even hear about most of them unless you really go digging, for a combination of reasons: 1. Funds that actually, consistently beat the market quickly find themselves in possession of more money than they know w…
And I'm just going to self-promote a bit and say that the bet was registered via a project I worked on, the Long Now Foundation's project Long Bets: http://longbets.org/ We've been going since 2002: https://www.wired.com/2002/05/longbets/ We are happy to host bets of long-term significance, and the minimum bet is only $200/side. I am glad to personally help shepherd people who are serious about bets to make sure you…
Earlier quoted context omitted.
Nothing works forever but there are funds like Renaissance Technologies' Medallion which may just be getting heads for a long time but rather seem to have some secret sauce that works for a long time. Usually though they're not very large and don't seek out investments.
Renaissance is an exception at levels that makes me wonder if it isn't a cover for other methods or operations. Howw many sigmas divergent is it?
This does not surprise me. My personal experience with hedge fund managers is that they are good salesmen that peddle their financial expertise to clients, convincing them of their financial rock-star status (usually gained through a lucky investment or two). Paulson is a classic example. Wealthy individuals buy into it, especially those that are less educated (e.g. those that have inherited money), and happily alloc…
I expect that you are right about a significant number of funds (I would say most long-only funds). But a decent chunk of the industry exists because investors want higher-sharpe investments than the market even if they don't beat a bull market and/or investments that will remain uncorrelated with the market. This is a reason why a lot of money is flowing into quant funds despite the overall outflow, because most qua…
Earlier quoted context omitted.
I used to work on Wall St, and nearly every hedge fund was a client of our company. This is absolutely true.
There is no single Wall Street vendor who has nearly every hedge fund as a client, unless perhaps you are talking about a major exchange like NYSE. Even that is probably not a valid because of the huge number of firms doing smaller volumes via third parties (and having no direct relationship with the exchange). Or perhaps you worked at Reuters or similar, in which case you would not have much visibility into the fund…
I'm surprised that anyone is surprised by my statement because it seems like an open secret. I don't think most of it is illegal, but sharing of non-public info is very, very common.
Earlier quoted context omitted.
I understand a lot of the top performing hedge funds operate via insider information.
You cannot perform above average without an information asymmetry. This asymmetry may be either because you found "bug" in financial system or insider information or custom data collection. The test for "good" funds is essentially what information asymmetry they have. If their answer is "good fund managers", "years of experience", "past performance" etc then it's not concrete asymmetry and most likely won't work over…
1) they can't buy in to using valuation as their sole investment criteria. They want to be "smarter", thinking they can see things others can't using psychology or charts or other pseudo sciences. 2) They fall sway to Mr Market ( read the Ben graham parable). 3) They can't sell value to clients and only want a strategy clients will pay for. 4) Buffett spends a great deal of time trying to make decisions free of bias. A CFA program teaches you nothing about this, but it's critical to good valuation work. For example, WEB does not want to know the stock price of a company he's analyzing until he's made his valuation estimate. He doesn't want to be biased into giving a too high valuation to a company he loves just to ensure he can buy it.
Lastly, there is a meta level to value investing. A great valuation at a current price isn't enough if the company lacks a competitive moat, or management can't be trusted to treat shareholders well. First level cigar butt value investors never learn this.
Earlier quoted context omitted.
There is no single Wall Street vendor who has nearly every hedge fund as a client, unless perhaps you are talking about a major exchange like NYSE. Even that is probably not a valid because of the huge number of firms doing smaller volumes via third parties (and having no direct relationship with the exchange). Or perhaps you worked at Reuters or similar, in which case you would not have much visibility into the fund…
He worked at Starbucks and would overhear traders bragging about their crimes in queue.
Also, it's not like actual illegal behavior is uncommon when it's hard to prove, and it's not like a lot of people aren't proud of it. Watch Jim Cramer's interview with Jon Stewart as an example and the reaction to Wolf of Wall Street as another.
In business school, a friend asked me to recommend firms where he could do some quiet insider trading by tipping off relatives who would trade on his behalf. He ended up at MF Global.
There aren't statistics on this kind of thing, but my experiences have all told me succeeding as a hedge fund requires breaking the same rules as everyone else, not unlike doping in pro sports.
For anyone interested in this bet, Ted Seides (the losing party) did a good podcast on the topic: http://capitalallocatorspodcast.com/BetwithBuffett/ My layman's understanding of hedge funds is they are better at hedging losses than increasing gains. So in good years they might underperform the broader market (e.g. gain 9% instead of 12%), but in bad years they should lose much less (e.g. lose 5% instead of 15%). I t…
Ted got the biggest market crash in last hundred years and still got trounced.
He can't admit the truth because it's destructive to his very business model.
Hedge funds as a group over time always trail the market because of their high fees. Funds of Funds layer yet another layer of fees, making this bet suicidal.
Ted Seides is a Wall Street con man grafting fees off poorly informed investors. He was delusional to make this unwinnable bet.
Has anyone done the analysis to see if the stock-picking by those managers was worth anything at all? Obviously it wasn't worth the fees they charged. But if all those fees had been flattened down to the same expense as the Vanguard fund, would their advice have been worth anything over the index? To a first approximation, it looks like the answer is no.
Investments can have a dual mandate - high returns BUT also low volatility. Many hedge funds will admit their returns may not beat the S&P500, but will counter that their returns have lower volatility -- achieving more consistent gains over time. To answer your question, sounds like the answer is still no, but it is worth noting that this whole conversation is ignoring the volatility side of the conversation.