Comments on: Hedge Fund Performance by Strategy

By: GregP

GregP — Fri, 14 Nov 2008 06:49:00 +0000

Barry-
Stock indices are not an appropriate benchmark for most of those HF strategies.
Instead, most should be benchmarked to [riskfree rate + x%], i.e. absolute return.

Only two, the managed futures and index return groups, show decent returns vs. their appropriate benchmarks this year. Macro has done okay.
The remaining seven groups, individually, are abysmal.

By: mark mchugh

mark mchugh — Fri, 14 Nov 2008 03:52:25 +0000

For TheUnrepentantGunner:

First off, I don’t presume to be smarter than you, but here’s a strategy that I’ve been tinkering with lately:

I am expecting a continued downward drift to the equities market (like Japan for the last twenty years). Understand, I expect counter-trend rallies as well, with volatility continuing to surge.

Thanks to recent ETF developments, we’ve got these ultra-short funds, and these funds trade options. I buy the ultrashort ETF and write covered calls on it.

Example:

SRS (ultrashort Real Estate) closed today at $134.70
The November $135 call is $12.70 (9.4% for six trading days)
or maybe December $135 call for $23.50 (17.5% for 25 trading days)

These are handsome returns for covered calls, but it gets better. The price swings are so wild (almost $57 for SRS today alone), that if the price drops sharply you can buy back the call for cheap, wait a few days and sell it again. So far, I am comfortable with this approach. I am not living and dying with every tick. Of course, a huge positive market upswing and/or sharp decline in volatility would make this strategy a loser.

It’s an idea anyway, hope it helps.

By: roncfp

roncfp — Thu, 13 Nov 2008 21:03:59 +0000

@CamHui: Thanks! But not net of taxes. Nice recovery today.

By: CamHui

CamHui — Thu, 13 Nov 2008 17:54:09 +0000

roncfp: Hedge fund index returns are net of fees

As “Managed Futures” is the only category that managed to escape the carnage, no doubt there will be hot money going into that strategy to chase returns. However, trend following CTAs (which comprise most of this category) don’t seem to have any alpha after fees.

See the discussion on my blog at http://humblestudentofthemarkets.blogspot.com/2008/11/trend-following-ctas-no-panacea.html

By: DL

DL — Thu, 13 Nov 2008 17:19:32 +0000

BR has often called for more “regulation” of the financial services industry. The obvious question is, what about hedge funds?

Of course, excessively stringent regulation of the hedge funds would send them offshore (e.g., Cayman Islands). But so what? As long as banks aren’t lending to hedge funds that are domiciled outside the U.S., I don’t think it matters what they are doing (for the most part).

By: Mannwich

Mannwich — Thu, 13 Nov 2008 17:08:58 +0000

@karen: Oh, I agree, there are going to some major opportunities (the number of stocks that reach new 52-week lows daily lately has been astounding) and I’ve dipped a toe or two in a bit lately (ACI, MCD, PRGN, courtesy of your tip) but am being very careful. Think we have much further to fall (again, just don’t know when) and want to have some majory powder dry for that buying opportunity.

By: I-Man

I-Man — Thu, 13 Nov 2008 17:04:42 +0000

“Reflexivity”

By: karen

karen — Thu, 13 Nov 2008 16:58:15 +0000

Jeff, my point was just the opposite : ) “this could be the greatest buying opportunity of the next 10 years…”

earnings of the surviving companies may surprise on the upside in quarters to come. i’m not saying to jump into homebuilders or reits, of course, but the world isn’t going to stop consuming food, energy, resources…

just contrary thots fwiw

By: Mannwich

Mannwich — Thu, 13 Nov 2008 16:50:16 +0000

@karen: I’m with you. Being mighty careful here. Stocks are headed down big. Just don’t know when but once the lows are breached, it’s going to get really nasty.

By: karen

karen — Thu, 13 Nov 2008 16:48:44 +0000

I can’t believe what i’m hearing! giving the FED even more power?!