31–40 of 123 posts
Lets see how it performs longer term (10 year period).
[1]: http://paulmerriman.com/10-reasons-brokers-dont-like-index-f...
In the chart, this is how the fund has compared to an S&P index over the past 5 years: * 2013 - 5% over * 2014 - 15% under (and negative overall) * 2015 - 30% over * 2016 - 10% over * 2017 - About even One exceptionally strong year, and pretty uneven otherwise. Hardly proof that these biology-derived algorithms are the secret to market-beating returns.
The other problem is scale - this is pretty evidently an advertising attempt in order to raise more cash. It's a lot easier to return 20% on, say, $100M AUM than it is on $1B AUM.
To be fair -- these caveats are true for almost every fund you hear about. I do think that's kind of my big issue with the article though, that this fund is just like every other fund; it's intrinsically an actively managed portfolio with the same shortcomings as any other. It's just got a good publicist!
In the chart, this is how the fund has compared to an S&P index over the past 5 years: * 2013 - 5% over * 2014 - 15% under (and negative overall) * 2015 - 30% over * 2016 - 10% over * 2017 - About even One exceptionally strong year, and pretty uneven otherwise. Hardly proof that these biology-derived algorithms are the secret to market-beating returns.
> As the genome project produced reams of data, Lun saw an opportunity to break ground in computational biology and in 2006 joined the Broad Institute of MIT and Harvard, a crossroads for scientists and hedge fund managers. There Lun met senior computational biologist Nick Patterson, a former cryptographer who had spent a decade at Renaissance Technologies making mathematical models. Another Lun colleague, genomic re…
> A 3 year track record is plenty long enough to prove out a system and provide a track record. It's a troubling sign that there is only $20 million in his fund if. I'm curious as to why you say a 3 year track record is long enough to prove a system. I don't necessarily disagree (though I think number of trades executed in that timespan and the type of trading strategy might be as important as the timespan itself), b…
It's important to note that 3 years doesn't mean 3 data points. It really depends on the funds average trade horizon. Which is, I think, exactly what you were referring to.
An HFT firm trades at such small scales that it can use its daily returns such that each year actually provides 252 data points.
On the other side of the coin, Berkshire Hathaway would need benchmark times longer than a single year.
I'm assuming the fund has holding times of around a week based on intuition and prior knowledge of alto of different fund investment structures.
The thing to understand about hedge funds is that most of them change investment strategies at some point in their lifetime such that historical records no longer really apply. This can happen for a number of reasons:
1) markets get crowded and force people to search for alpha somewhere else
2) funds get larger and existing strategies don't have the capacity to manage the new money.
3) traders leave and new traders have new ideas.
3 year is an industry goldilocks mark for comparing hedge funds. Not too long to take into account old strategies that are no longer employed and not too short that it doesn't allow the strategies to play out.
I cant' remember the exact number but Victor Haghani of LTCM fame talked about this and said it would be something like 143 years of data to know if a biased coin that comes up heads 60% of the time is biased to a 95% confidence level.
Obviously this isn't workable and as such we have to use smaller time frames.
See:
Wait a second. The average hedge funds is underperforming the SP500 index every year and by important returns? How are they still in business?
Slightly off topic: In the graph hedge funds have performed very badly against the S&P. Given the massive fees a lot of hedge funds charge: what is the incentive?
In the chart, this is how the fund has compared to an S&P index over the past 5 years: * 2013 - 5% over * 2014 - 15% under (and negative overall) * 2015 - 30% over * 2016 - 10% over * 2017 - About even One exceptionally strong year, and pretty uneven otherwise. Hardly proof that these biology-derived algorithms are the secret to market-beating returns.
I'm reminded of Linus Pauling: He made amazing, fundamental breakthroughs in chemistry and quantum physics, but when he applied his genius to medicine, we got orthomolecular medicine and mega-dose vitamin C as a cure-all, something which has been roundly disproven by actual evidence.
That said, investing in algae could be a good idea. It has potential as a cheap, high-volume input to synthetic food production.