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Nevada’s public employee pension fund invests passively and beats peers (2016)

wsj.com

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Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#161

Post by dv_dt »

ProjectArcturis wrote: post #158
emacdona wrote: post #104

To any fund manager out there that truly believes you can beat the market, here is how you can sell me your fund: We agree on an index and a time frame. You guarantee me the same return as the index within that time frame. If you beat the index, you keep 90% of returns ABOVE the index (and I get 10%). We both win, and you win big. If you don't beat the index (within the time frame), you make up the difference (so I g…

The point of actively managed funds is not so much to "beat the market", it's to provide diversified returns via strategies that are uncorrelated with the market. On average, the S&P500 has returned about 7% annually. If I had a strategy that returned 5% on average but was totally uncorrelated with the S&P, then you'd get the best overall long-term returns (maximize the geometric average of annual returns) by investi…

Well then you could establish a simiar pay critera that beats the s&p 500 during recessionary moves of the index. Im guessing you wouldn't get many takers

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#162

Post by rty32 »

sameerds wrote: post #49

Completely off-topic. The article is paywalled, and for once I decided to go down the subscription rabbit hole. I am viewing this in Firefox on Windows. But every "subscribe" button on the WSJ page points to an Apple store page for the "app". WTF?!

Unfortunately Firefox is often treated as a forgotten child.

I say this as a mostly Firefox user on every platform. When the Firefox experience sucks too much, I switch to Chrome or Samsung Internet.

(Well, Firefox itself has a number of open bugs that haven't been fixed for a long time)

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#163

Post by jancsika »

bandyaboot wrote: post #123
cjblomqvist wrote: post #119

Earlier quoted context omitted.

Exactly. No point being the one taking the risk - if the professionals don't dare take the risk then any non-professional (fund buyer) shouldn't either (under normal circumstances). PS. Furthermore, an accurate comparison is not beating the index, it's beating it enough to cover the salary/compensation of the fund manager + some (with less risk! Risk = cost!)

Well I think many fund managers regularly take on risk to achieve higher returns. They just won’t take on 100% downside risk while being taxed 10% on the upside.

You've just found a way to restate "they don't truly believe they can (consistently) beat the market."

On the flip side-- a passive fund manager would take 100% downside risk of the fund failing to properly track the index, and only in return for a modest fee. Stated differently-- passive funds can and do consistently track the market.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#164

Post by weard_beard »

TheRoque wrote: post #157

So in the end, what's the key takeaway regarding global economics ? If (some of) the most well-paid people cannot guess the market, then doesn't it mean that they are useless ? Then why are we paying their services ?

Same reason we pay the TSA.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#165

Post by jacobsimon »

Mistletoe wrote: post #153
jacobsimon wrote: post #143

Earlier quoted context omitted.

One of my big brain investing ideas is to pick the stocks at the top of the index instead of buying the whole index. If index funds continue to rise in popularity, the stocks that are at the top will benefit most from passive investment volume. Plus, index funds follow a kind of Pareto principle where the top stocks contribute disproportionately to the total return anyway. As I’ve gotten older though, one of my reali…

https://www.aqr.com/Insights/Perspectives/Value-Spreads-Back... I’d be cautious that you are about to get a wicked mean reversion.

Yeah to clarify, I don’t necessarily recommend (or even follow) this strategy, I still mostly invest in passive index funds.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#166

Post by Mistletoe »

pants2 wrote: post #22
djkivi wrote: post #9

Fidelity: Successful investors forget they have an account: https://www.bogleheads.org/forum/viewtopic.php?t=146347

In crypto, successful investors get their funds stolen and then later recovered (MtGox, Gemini Earn)

Those are the lucky ones that get paid back in kind in the crypto currency they had. Some like the FTX folks are unfortunately paid in the dollar value of their account at the time.

Bitcoin was like 15-20k at the time of the FTX collapse and is now 60k again like the highs in 2021.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#167

Post by financltravsty »

emacdona wrote: post #104

To any fund manager out there that truly believes you can beat the market, here is how you can sell me your fund: We agree on an index and a time frame. You guarantee me the same return as the index within that time frame. If you beat the index, you keep 90% of returns ABOVE the index (and I get 10%). We both win, and you win big. If you don't beat the index (within the time frame), you make up the difference (so I g…

You are not an UHNW individual/institutional investor, so no "fund managers" of any note are going to waste their time on this wager.

"Beating an index" is really easy. Up to $10MM you can choose most any financial instrument class in the U.S markets and have a good probability of finding alpha for a long time (that would beat the S&P500 18.40% YTD). Many proprietary trading firms, or market makers, or quantitative trading shops do this regularly. Discretionary and systematic funds? Usually not. If their processes worked consistently, they would have no need to take outside capital and deal with relationship management. They could simply use more leverage (not exactly, but simplified for the general reader).

This is also ignoring the fact there are no details in TFA about actual portfolio compositions or returns -- i.e. this is a PR piece.

If your NW is under <$100MM, you should be focusing on hyper-growth strategies -- and not mentally limiting yourself on what is basically financial propaganda.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#168

Post by jacobsimon »

ghaff wrote: post #149
jackcosgrove wrote: post #145

Earlier quoted context omitted.

I had an active manager reach out to me with exactly this strategy. I didn't look at the fees or rebalancing schedule super closely, because I didn't want to invest with the guy, but IMO his market-beating claims were due to increased concentration during a bull market (risk) which could go sideways fast if he didn't rebalance at opportune times.

Which, without looking, probably means NASDAQ today--and certainly the top 50 or whatever tech stocks by whatever metric. That didn't look so great in late 2001. Certainly my T Rowe Price tech fund cratered. Tech has been very good, even relatively speaking through the great recession, since then.

The best approximation I’ve found is S&P has this Top 10 index[1]. Over the last 10 years it has performed 18% annually vs 11% for the overall S&P 500, but that’s obviously been a historic bull run in large cap growth stocks. I can’t find data going back to 2000 to see how that strategy would have played out, but curious if someone else finds it or crunches the numbers.

1. https://www.spglobal.com/spdji/en/indices/equity/sp-500-top-...

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#169

Post by DistractionRect »

emacdona wrote: post #126
bandyaboot wrote: post #123

Earlier quoted context omitted.

Well I think many fund managers regularly take on risk to achieve higher returns. They just won’t take on 100% downside risk while being taxed 10% on the upside.

I think this gets at a deeper point I'm trying to make. If you truly can consistently beat the market, you are already making a killing with your _own_ money. If you want to use _my_ money to place your bets (presumably b/c you want to leverage your market beating ability), I want a guarantee (because I'm more than happy to take the return of the index).

I follow, essentially you're viewing it like a loan + interest + a minor stake in the venture. If the venture fails, you still expect to repaid loan + interest and your stake in the venture is worth $0.

Unfortunately no one will agree to this as long as everyone else is willing to invest _and_ shoulder the risk

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#170

Post by immibis »

rr808 wrote: post #88

In general avoiding fees is definitely a good thing. Its one of those things that hindsight finds the best strategy and they were kinda lucky about the crazy bull market in the USA in this time. If you were a Pension fund in France, Australia, UK, Japan, China etc and put all your money in the local passive index tracker you'd maybe double your money in the last 20 years but way under perform S&P which is like 6x in…

This is true. Of course, when you have many indices, with random returns, some of them will perform well, but past performance doesn't guarantee future results.
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