Good Returns
The thought of not even outperforming the s&p 500 crossed my mind the other day and then I realized that most of these hedge fund losers can’t even do that😂😂😂 Imagine working 50-70 hours every week and then not being able to produce 20% returns. Under that is it even trading or is it just putting money in a better bank account. There’s guys out there who are generating triple digit returns on a yearly basis while theres so called “professionals” who are having a hard time making 10%. I understand it gets harder when you are managing capital in the 9 figures but 10% is nothing and even with that much capital you should be able to do it with no problem.
If you can do it consistently over a full market cycle, I will see you on Barron's.
Hedge funds are hedged. Assume the S&P is typically up 10%. A 10% return, net of fees at a beta of 0 to 0.5, is great. Heck, it's amazing if your beta is closer to 0. It means you're generating massive alpha and a have a highly marketable low-correlation product. Generating 10%, net of fees, at a beta of 0.7 is still good. It implies your gross alpha is very solid and your investors are still getting market-like return with less downside risk. At a 10% return, net of fees, with a beta of 1, you're still crushing the market on a gross basis (at 1 and 15%, you're still delivering ~3ppts of gross alpha), but you're taking all the value for yourself. You'd have to cut your fees, most likely, but you've got a viable fund at some level of fee structure.
Why are people so surprised to hear that hedge funds are hedged? It's in the name...
Guarantee you the guys generating triple digit returns for years on end will not continue to do so. Bet on it.
Nobody can do it repeatedly on large AUM.
Maybe some higher frequency prop desks could put up those numbers consistently? On relatively tiny AUM of course, and with a hefty infrastructure bill.
Ehh.. not an expert on hft but I think margins in this space are significantly smaller today.
The guys he's referring to also sound less sophisticated given he compares them to "professionals who are having a hard time generating 10%". So highly doubt this crowd is who he is referring to.
I can give you the "retail" reason.
I am investing in an HF because this particular fund should perform when my main source of income is likely to underperform and that's all I really care about. It's a literal hedge that ensures I have cash when I might need it.
Fee structure is fair, all performance driven, and they make a lot of opportunistic plays. Returns are greater than the S&P by a good margin net of fees but again, not why I'm investing.
The other big advantage is that it's run by someone with an amazing background that I can learn from and apply that to my own firm. Even if performance was mediocre, I know the learning opportunity is significant.
whats the minimum they take?
$500k
Can't believe this pod monkey kid. Me and several other members on the thread https://www.wallstreetoasis.com/forums/what-is-the-secret-sauce-feel-li… hours trying to explain simple concepts like the sharpe ratio.
Anchor gave a great answer there so I'm just going to link that and not waste any more time interacting with this pod monkey.
"If I think airline A will outperform airline B by 20% this year and that is a strong, very high confidence view - how should one play that? Imagine, depending on fuel or covid or market level, that 20% could come from airline A +40% airline B 20% OR A -10% and B -30%. I don't have any view on fuel or or covid or macro.
By the logic above - the better investor would just buy A and and hope the market goes up - if so he will "beat the market" and the WSO members will cheer. He will charge 20% of the pnl to the client. Now there's three scenarios if he just chooses A long and no hedge - either he is brilliant and can find ideas that go up in any macro and market environment, repeatable before anyone else - or he gets lucky and accepts an embedded gamble - or he just has no risk mgmt. But his return would be higher until he's wrong.
LPs especially charities and foundations which have annual expenses don't want that. They don't want or pay you for luck. They don't want to pay you for leverage. They want to pay you for the alpha - in this case the 10% outperf to peers you identified.
just because your return is 10% does not mean it is worse. The COULD lever that 3x for 30% upside (same as just being long) and presumably less downside risk (assuming you have a positive hit rate on specifically the item you're calling. Leverage is the magnification of exposures, not the exposures itself. Millennium delivering 11% a year every year is an endowments wet dream. The stability of returns allows LPs to lever it up if they want the same total return as a traditional fund, while not paying for the beta OR paying fees on the leverage.
if you could deliver 0.5% per month every month for 10 years in a row unlevered, you're a better investor than someone who beats the market by 15% annualized over 20 years with 2 12 pt drawdowns.
Risk adjusted returns are what denote skill or structural advantages. You can't take a fund that's doing something with a completely different risk and volatility profile than the S&P and compare the returns. You don't deploy AUM, you deploy risk. The amount of return you generate per unit of risk is the value add of hedge funds. Comparing two funds, the better funds, is one of them has modestly lower returns and much lower risk it is the better fund. Now it is hard to isolate the risk taken for concentrated single manager funds - some are really good and have much higher returns with slightly higher risk - this is also good, but it's hard to tell over the mid term and sometimes people sneak in who take excess risk and blow up or look smart.
But comparing returns of hedge funds to the S&P, frankly, betrays a severe lack of understanding of the industry and of some of the underlying principles of markets and capital allocation in general."
BTW^ I'm putting this here so everyone can see, not just PodMonkey. PodMonkey is a lost cause.
I dont care. My cagr since I started trading is over 200% which is higher than yours and the majority of people on this site. Have fun with your 8% “risk adjusted returns” while I get rich. Btw volatility does not equal risk thats just bullshit hedge funds made ho to make then seem like they produce superior “risk adjusted returns”. All I care about is the fact that I’m getting rich and have much more money at 18 than a lot of you guys.
I realize you are trolling, but some advice.
You are 18, you haven’t had to live through many (any?) downs in the market (if you are talking about equities, which is what I’m guessing you trade). Even if you started trading when you were 13, outside of the equity drop at the end of 2018, you are looking at a great period to own equities, apply some leverage or be overweight tech (recently) and you have great returns.
Other posters have hit on why HFs exist so I won’t repeat those comments. But I would recommend that you be a bit more curious in life rather than think you have the answer to everything, especially this early in life.
hahahahaha
You should care. If you are generating 50%+ returns per year on your portfolio, congrats, but this implies a shitload of risk. There are a few different types of risks hedge funds care about - the big ones being directional risk, correlation risk, and dispersion risk.
Like the guy was explaining above, hedge funds hedge - for multiple reasons. Hedging reduces portfolio risk, but it also incentivizes primes to offer them more leverage. Is a bank going to offer podmonkey's book more leverage, which consists of 5 long dogshit tech positions, or an actual structured portfolio with favorable l/s skew and low correlation? Its a pretty easy answer. Of course you can generate 50% a year if you are highly concentrated in volatile names, not to mention you've only ever traded in a bull market. Sorry bud, but all you've done is put on a bunch of beta, and hardly generated any alpha. Seriously consider the advice people are trying to give you, because you will get blown up eventually.
Made a post related to this topic. No doubt consistently returning 10% like MLP/Citadel with low beta to SP and good sharpe is amazing for investors but isn’t it becoming apparent that barely anybody can actually do this? Hence the general decline in fees taken over time...
The pod shops are some the only ones that consistently do it. They’ve been hoovering up AUM pretty consistently for the last several years without any real change in fee structure. In fact, they may be getting better terms these days
I find it extremely funny how podmonkey184 is gone from this site after 2022 while being consistently active in 2021
Someone got humbled a lot after making this post
Who are these "guys" you speak of generating triple digit returns on a yearly basis? Please give me their number, I need them to manage my retirement fund.
These are the guys who may generate triple digit returns one year and then lose the entirety of your retirement savings the next year
No. The guy I learned from has been trading for 19 years and has a cagr of over 60%, in his first 10 years it was in the triple digits.
Imagine getting paid millions to generate “shitty” 10% returns with other people’s money? Doesn’t sound like a bad gig to me
Yeah lmao I guess when you look at it from that angle it is pretty good. But the point I’m trying to make is that their bad for investors.
If asset managers can make 10% gains and teenage cokeheads like you and your buddies make 50 or 100% then slowly but surely all that capital will be heading your way! Good luck!
Is this a troll post?
No , there’s a reason most hedge funds have been seeing capital outflows... its because there shit
Let us know how you do with the 4% CPI coming up here. See if you can beat Dalio again.
Silver is a decently large part of my portfolio... Already up 6% on it (2x leveraged). I understand short-term, long-term debt-cycles and will be able to generate very high returns in any market condition until my account becomes too large. That's just how versatile and great my system is.
There you go, you are picking on L/S funds and say "silver is decent part of my portfolio". No one is putting you down hombre your the one writing daily how everyone sucks.
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