L/S Spread Percentiles
Curious what the ranges for average career L/S spread are for HF analysts.
I would guess it's something like:
- Negative spread = 40%
- 0-5% spread per year = 40%
- 5-10% spread per year = 10%
- 10-15% spread per year = 5%
- >15% spread per year = 5%
Assuming this is over a 10-15+ year career.
wtf
what? you think these are too low?
Those spreads don't factor in any leverage right?
Way too optimistic. Over 5 years maybe but for over 10 years?
Negative: 60%
0-5% 35%
5-10% 4.9%
10%+ 0.1%
I am speaking to L/S spread defined as:
Multi-strat funds generally look at ROIC on gross capital, which in the above case would be 5% (defined as 10% PnL/200% gross at zero net). I would agree with your numbers for ROIC on gross capital, but those seem low for L/S spread.
The numbers you listed would imply that the industry destroys a lot of value post-fees, which I don't think is true historically.
Let me know if we are having different definitions here or if you think my numbers are still too high using the same definition.
Thanks for the thoughts either way.
Why do you think the industry is losing AUM?
Why don't you think the industry destroys value on median?
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