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

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

#171

Post by dullcrisp »

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.

That’s fair. I’d do it for just 1% of the upside.

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

#172

Post by yieldcrv »

In private equity you are employing the managers to create opportunities

And during bear markets I’ve seen some managers create the most onerous terms far beyond what I could think of, and that's paid excessive dividends for me

I think that’s the real hedge that’s overlooked here

The performance of private funds is also not a complete picture, individual limited partners have different profit and loss than whatever metric the whole fund is subject to, someone that joined as an LP after any trade doesn’t have their capital allocated to that prior or existing positions, only the subsequent ones. so its not really possible to judge performance of fund managers in comparison to indices the way that it is popularly compared. Unless LPs are showing their own performance in a scatterplot, nobody knows anything. and LPs are typically subject to NDAs.

I just think it’s too reductive to say nobody can beat the index, then move the goal post to longer and longer time frames. You only need to be successful once, in any time frame but specifically shorter ones

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

#173

Post by rblatz »

throwaway2037 wrote: post #86
rblatz wrote: post #36

Earlier quoted context omitted.

I have the same thoughts. Eventually there will be a lot of money to be made breaking the s&p 500.

Can you explain the "breaking" trade? And why haven't we seen more written about it?

Think of when George Soros broke The Bank of England for an example of the type of trade.

There is a lot of demand for S&P 500 index , but that demand isn’t exactly tied to the fundamentals of the index, and the price isn’t tied to value of the underlying companies, it’s tied to demand of people looking to save money for retirement or a place to store a nest egg. This is an opportunity for price discovery to get things wrong and eventually the market should correct that.

https://www.investopedia.com/ask/answers/08/george-soros-ban...

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

#174

Post by ghaff »

jacobsimon wrote: post #168
ghaff wrote: post #149

Earlier quoted context omitted.

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/eq…

Yeah, for what it's worth, my financial advisor is pushing me towards more value stocks and some more bonds. (I am somewhat older as well in addition to be in a position where being conservative makes sense.) Was just doing some research.

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

#175

Post by immibis »

wenc wrote: post #17
decasia wrote: post #4

I'm curious if this is demonstrably an optimal strategy for individual investment too... I haven't had much success getting any clear data about whether active management demonstrably produces better results.

The common refrain is that "time in the market always beats timing the market". The implicit assumption in that refrain is that, despite periodic dips, the U.S. stock market always goes up over time. This has been true since the Great Depression (see graph of S&P 500 since 1929) https://www.officialdata.org/us/stocks/s-p-500/1929 The implicit assumption behind that is that the American economy always invents a way to…

And the assumption that the stock market will go up from now is itself a form of timing the market. It assumes that now is the best buying opportunity in the whole future. I don't like that refrain.

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

#176

Post by qwytw »

ryandrake wrote: post #121
qwytw wrote: post #82

Earlier quoted context omitted.

> You don't expect to beat the casino in roulette, Do you believe that investment is entirely random and there is absolutely no skill involved? Because if not, that's a nonsensical analogy. You should use a a both both luck and skill based game like poker (probably not the casino variety, though) etc. Otherwise if you can reasonably expect to beat 50% of all "players" (of course it takes much more time to verify that…

> Do you believe that investment is entirely random and there is absolutely no skill involved? The skill involved is more just "best practices" that let you match the market: Buy-and-hold, diversify, basically, do what the index funds do and you will be roughly +0 to the market. Beyond that, it's a totally random distribution that adds between -X and +X which allows some participants to beat the market and causes som…

> You can't tell beforehand which participants will beat the market, even having full knowledge of their strategies and skill

I never implied that I can. That fact doesn't prove that it's somehow fundamentally impossible to do that. The problem is that it's impossible to tell if you "strategy" is working until a significant amount of time passes and by that point the markets conditions might have changed to such an extent that you don't longer have an edge (add to that the fact that it's hardly possible to determine what part of your success was luck/skill). So there is always a huge amount of uncertainty.

Albeit if we look back by ~10-15 years it's rather obvious that it was possible to beat the market by a very significant e.g. there were clear rational reasons to believe that Nvidia would do better than its competitors like AMD or Intel and that there would be significant growth in GPU compute/ML/AI (of course accurately estimating the extent and exact timing but that wasn't necessary at all to get above market return) same applies to many companies in adjacent and unrelated sectors. Was I or the overwhelming majority of investors capable of realizing that and more importantly acting on it? Certainly not. But looking back it obviously wasn't random.

The efficient-market hypothesis is clearly false, at least in the short to medium term. That in no way means that most investors are even remotely capable of utilizing this fact.

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

#177

Post by qwytw »

stouset wrote: post #147
qwytw wrote: post #85

Earlier quoted context omitted.

> But each individual trader should not expect to beat the market In aggregate sure. But unless we believe that it's entirely random some individual investors can still certainly expect to beat the market, they just can't verify that in advance.

You’re being pedantic in all the wrong ways. I offer you a bet. We flip a perfectly fair coin. On every heads you gain 10% on top of your bet. On every tails you lose 10%. It is fair to say that after 100 flips you may profit. If one million people play this game, someone almost certainly will. But you can expect to lose money on this game. By the end, the average person will have about 60% of their original holdings…

> You’re being pedantic in all the wrong ways.

No, I simply disagree with the whole premise, at least to a limited extent.

> All of the available evidence shows that publicly-available actively-managed funds are essentially playing this game

Yeah that's true, I was mostly talking about individual investors and/or non public funds.

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

#178

Post by redox99 »

mewpmewp2 wrote: post #105
anamax wrote: post #28

Earlier quoted context omitted.

Someone with Buffet's success should exist by random chance. (Flip a fair coin enough times and it will come up heads 20 times in a row.) Also, some fraction of Buffet's success comes from deals that the rest of us don't have access to.

Yeah, I have tried to simulate this several times under different conditions. Given zero sum game and random odds, there is always going to be small percentage who have a lot and most will have below what they started with. It is easy to explain as well, if you for example start with $1000 and you have 50% odds of winning 10% every time. If you win and lose 50% you are going to be below what you started. If you alway…

Stock market is not zero sum.

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

#179

Post by mort96 »

bandyaboot wrote: post #113
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’re probably aware that no fund manager would accept your offer. But it doesn’t prove that they don’t think they can beat the market (as misguided as that belief might be), it just means they’re not willing to take on an absurd amount of risk to prove it.

I mean it does mean that they don't have faith in their ability to beat the market on average across significant time spans.

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

#180

Post by qwytw »

gbear605 wrote: post #148
qwytw wrote: post #85

Earlier quoted context omitted.

> But each individual trader should not expect to beat the market In aggregate sure. But unless we believe that it's entirely random some individual investors can still certainly expect to beat the market, they just can't verify that in advance.

That’s not what “expect” means in statistics. If we’re rolling 100-sided dice (each person rolls once), no person should expect to roll a 1, even though 1% of people will in practice roll a 1. Likewise, no one should expect to beat the market, even though many will in practice.

> Likewise, no one should expect to beat the market, even though many will in practice.

My only point is only that not every investor is rolling the same dice. It's just that it is effectively impossible to every verify whether you were rolling a 90-sided dice or a 100-sided one. It's rather clear that at least in the short to medium term (e.g 2-3 years) the stock is not even remotely perfectly efficient (that doesn't mean that the overwhelming majority of investors are somehow capable of utilizing that fact or that a significant proportion of those that did seemingly manage to do that weren't just lucky)

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