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Old 09-06-2014, 11:03 PM   #101
ToothSoother
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Re: Hedge Fund Manager welcomes your questions

Given that there are thousands of hedge funds, is there any evidence that the standout hedge funds outperform beyond statistical significance?
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Old 09-06-2014, 11:53 PM   #102
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Re: Hedge Fund Manager welcomes your questions

What does your average day at the office look like? Most people know what it looks like for a grunt analyst, but what does a guy with 90% of himself tied up in the firm do all day?

Favorite blogs?

How has your investing style evolved since you started? Can you take us through any of your big decisions that you got right or losers that you were able to cut quickly (of course be as vague as you're comfortable with).
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Old 09-07-2014, 12:22 AM   #103
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Re: Hedge Fund Manager welcomes your questions

1. What are your views of the market direction over the next 6-18 months?
2. Do you think there is enough freely available educational material for a non-institutional investor to consistently beat the market?
3. What do hedge funds think of Big 4 M&A people as potential employees? I have an opportunity to get on as an analyst, but my understanding is that these are not viewed the same as a BB M&A.
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Old 09-07-2014, 07:33 AM   #104
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by fluorescenthippo View Post
What percentage of hedge funds beat the market net fees?

Do you believe this is higher or lower than the percentage academia will tell you?

I completely respect hedge funds. I also think there is more dumb money investors in them compared to most of types of investing. Also curious as to your thoughts on that.
What percentage of poker players win net of the house rake? What percentage of poker pros make money each year?

HSBC has a list of hedge fund returns they publish every week (which sometimes shows up in zerohedge and other places). I would encourage all to take a look. Some years are better than others.

My point is there is actual evidence here...enough so that (again) I think reasonable people who examined the evidence would conclude that some hedge funds are not just lucky "coinflippers" and that a simple screen for those that have been around for awhile with success would likely result in a portfolio of hedge funds that would generate a high return per unit of risk (high information ratio)
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Old 09-07-2014, 07:47 AM   #105
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Re: Hedge Fund Manager welcomes your questions

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Why? This seems to be a pretty unique position, so I'd love to hear more here.

When I did the CAIA exams back in 2010-2011, they were aimed at helping money managers make good decisions picking alternative investments for that sector of their portfolio. The readings were entertaining, but the exams were pretty easy. I have found that passing them has not helped on my resume.

re: 25/50 NL
Did you ever beat any level over a large sum of hands? Also, did you ever get tutoring from an online pro? If not, why not?

re: managed accounts
Would love to hear more here. I've heard that some of the big pension funds essentially now have managed accounts. It seems like something I'd insist on if I were a large pension fund, particularly for newer funds. I understand if this isn't something you want to talk about or just haven't thought about much because it isn't applicable to your firm.

What questions are we not asking that you'd like us to ask? I'm not sure how much this thread has helped your book.
I must admit I have not reviewed the CAIA or CFA for a few years now, but at least then I thought the readings for the CAIA were better, more challenging and more valuable knowledge on average than those for the CFA. I am surprised the CAIA exam was easy (maybe I was wrong to assume it would be hard, or maybe you are a genius).

Poker has never been more than an avocation for me. I had a solid (winning) record at sit and gos in the early days of online poker (where my knowledge of game theory--and others lack of knowledge-- helped the most). I would be a losing player online or live play at most tables today--very rusty.

Managed accounts--as I said before it is a matter of maximum control and flexibility for a client versus the burden of extra admin costs (and other costs from being at a smaller scale than a co-mingled fund would be).
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Old 09-07-2014, 07:51 AM   #106
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by ToothSoother View Post
Given that there are thousands of hedge funds, is there any evidence that the standout hedge funds outperform beyond statistical significance?
yes!
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Old 09-07-2014, 09:21 AM   #107
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Re: Hedge Fund Manager welcomes your questions

what percentage of idea generation comes from the top/exec rank, and what percentage comes from the analysts?

how do you keep your best analysts from leaving and starting their own shop? (other than paying them **** tons)?
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Old 09-07-2014, 11:34 AM   #108
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by hedgefundguy View Post
HSBC has a list of hedge fund returns they publish every week (which sometimes shows up in zerohedge and other places). I would encourage all to take a look. Some years are better than others.
Here's the HSBC report with a brief summary from Zerohedge earlier this year:

http://www.zerohedge.com/news/2014-0...2014-full-list

They point out that this has been a good year for hedge funds because the S&P is only beating about half of them, unlike the past five years where the S&P has beaten about 90%. If the HSBC report also recorded all the funds that have gone bankrupt in the past 10 years or so, wouldn't it make the case for hedge funds look extremely poor?
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Old 09-07-2014, 01:46 PM   #109
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Re: Hedge Fund Manager welcomes your questions

Do you truly believe managers always act in the client's best interest? If not, what are some of the things you've seen? We don't put it past managers to reduce their risk to protect their MTD or YTD track record if they are outperforming peers.

Because you are a multistrat shop, someone at your firm is managing/selecting PMs, is the PM's recent performance the primary driver of whether you cut them from your stable or increase their risk allocation?

Do you believe funds of funds can be a good proposition in spite of the double dipping of fees?

Although hedge fund investors must by definition be "sophisticated," they are often anything but. Have you been successful in educating clients and prospects that hedge funds are not some magic bullet that will outperform the S&P 500 every year?

PMs and traders can have some weird quirks and crazy egos. Can you share any funny or interesting stories about things you've heard or seen?

Btw, I think having 90% of your net worth in your fund is a bit extreme. I've seen more than one PM trade overly cautious to protect their own wealth.

Thanks again.

Edit: Also, still hoping to get your thoughts on mutual funds that trade hedge fund strats. Obv there are leverage restrictions on securities, but I can pay a fixed 1.5% or so and have my pick of several L/S equity or L/S credit managers(presumably second-tier since they are making a lot less than 2/20).

Last edited by hapaboii; 09-07-2014 at 01:56 PM.
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Old 09-07-2014, 04:24 PM   #110
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by hedgefundguy View Post
One argument in favor of hedge funds vs poker staking is that our returns our audited each year to ensure we are 100% accurate--undoubtedly a concern in any stake arrangement.
I'm not as skeptical as my questions sound but is this justified?

How capable are the auditors of correctly assessing the value of the positions?
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Old 09-07-2014, 04:25 PM   #111
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Re: Hedge Fund Manager welcomes your questions

Liking this HedgeFundGuy
What do you think society does wrong with it's taxation policies ?
Not just with regards to hedge funds but to everything in broad strokes in the US.

I am of the personal opinion that real-estate and inheritance is way under taxed and income and gambling winnings over taxed in my country (Norway).
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Old 09-07-2014, 07:41 PM   #112
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Re: Hedge Fund Manager welcomes your questions

Are you accepting any interns/volunteers from a poker background? I think some of us wants to ask this question but are too shy.
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Old 09-07-2014, 09:39 PM   #113
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by hedgefundguy View Post
There are large institutional investors (Endowments, sovereign wealth funds, fund of hedge funds, etc.) whose job it is to seek and invest in the best hedge fund managers. They are the lion's share of where we get capital (and where we spend time pitching).

Out materials largely consist of our historical returns, bios of key team members and a description of our process and what we feel makes us unique/good at what we do.
Would you mind sharing this with us?

Apologies if it's already been asked. I'm still chewing my way through the thread. Thanks for posting.
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Old 09-08-2014, 12:44 AM   #114
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Re: Hedge Fund Manager welcomes your questions

Are you familiar at all with the studies that have been done on performance persistence in hedge funds? As an example, can we predict which hedge funds will outperform in a given year based on their results in a previous year or years.

I have only glanced at this literature but my understanding was that many (most?) of the studies that have been done have found very little evidence of performance persistence. This kind of suggests to me that there may be a lot of fooled by randomness going on.

In poker, by comparison, there is immense predictive value in knowing the results from a given year. Obviously the sharpe ratios in poker are much higher, but are you surprised by these findings?

Maybe someone with an academic finance background could chime in about this too?

If anyone is interested, you can search Google Scholar for "performance persistence hedge funds"
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Old 09-08-2014, 12:50 AM   #115
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Re: Hedge Fund Manager welcomes your questions

for those who don't think that anyone can hunt down alpha, I suggest you read about RenTech.
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Old 09-08-2014, 03:32 AM   #116
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by Frankie Fuzz View Post
I have only glanced at this literature but my understanding was that many (most?) of the studies that have been done have found very little evidence of performance persistence. This kind of suggests to me that there may be a lot of fooled by randomness going on.
Could you link one (or more) of these studies? Reading academic literature and pointing out why it's wrong is fun sometimes.
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Old 09-08-2014, 03:45 AM   #117
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Re: Hedge Fund Manager welcomes your questions

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Could you link one (or more) of these studies? Reading academic literature and pointing out why it's wrong is fun sometimes.
Stinky,

I just took a look through the abstracts in Google Scholar for a bunch of the papers on performance persistence and it actually seems that most are claiming to show some degree of performance persistence, so I think I was possibly misinformed.

Here is a link to a bunch of heavily cited papers on the topic:

http://scholar.google.com/scholar?st...=en&as_sdt=0,5
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Old 09-08-2014, 03:58 AM   #118
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by Frankie Fuzz View Post
most are claiming to show some degree of performance persistence
That's what I found when I browsed through them quickly. I didn't see any that claimed no performance persistence.
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Old 09-08-2014, 06:35 AM   #119
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by hedgefundguy View Post
I would be interested in hearing from David or others on if they have a history of staking poker players and what has been their p/l history on doing so.
I was one of the most active online cash game stakers pre-Black Friday (2009-2011). Staking deals at higher stakes (25/50+) are usually one-time deals where a percentage of action is sold at par since the games do not run reliably enough. However there are a good number players looking for a longer term deal (sample size is your friend), the ideal players being overly conservative and looking to mitigate bankroll risk when moving up in stakes rather than Kelly violators.

To me, the main commonality between picking players and HFs to invest in is that it is not a level playing field in terms of access. The best players and funds have their pick of investors and can set the terms.

Back then anyone could recognize a profitable poker player (although this is changing, online results are not as transparent now) so your key to returns as a staker was a differentiated offer, ideally without sacrificing on the profit split. In my case, an offer of coaching was included.

Without transparency or access to historical data, things get a bit more complicated and you need to depend on personal experience (playing in same games) or third party referrals which obviously decrease your degrees of certainty in your projections.

No questions at the moment, but enjoying the thread and the discussion.
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Old 09-08-2014, 07:52 AM   #120
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Re: Hedge Fund Manager welcomes your questions

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I'm not as skeptical as my questions sound but is this justified?

How capable are the auditors of correctly assessing the value of the positions?
The auditors have become much better and put in thoughtful processes to lead to decent price discovery in the vast majority of asset classes.

For certain asset classes (stocks, government bonds, etc.) this is trivial of course. But now, on even the more esoteric stuff, they do a credible job.
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Old 09-08-2014, 07:54 AM   #121
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by LozColbert View Post
for those who don't think that anyone can hunt down alpha, I suggest you read about RenTech.
I agree...they are all time best.
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Old 09-08-2014, 08:15 AM   #122
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Re: Hedge Fund Manager welcomes your questions

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Are you accepting any interns/volunteers from a poker background? I think some of us wants to ask this question but are too shy.
I am looking for a way to screen potential candidates of various "non-traditional" (ie, not top school) backgrounds. Demonstrated poker skills would certainly be a plus for me, but that alone likely would not be enough.

Upgrade Capital has a contest which I am intrigued by:

http://upgradecapital.com/getinvolved/trading.html

Might be worth exploring.
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Old 09-08-2014, 08:19 AM   #123
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Re: Hedge Fund Manager welcomes your questions

Quote:
Originally Posted by GoMukYaSelf View Post
I was one of the most active online cash game stakers pre-Black Friday (2009-2011). Staking deals at higher stakes (25/50+) are usually one-time deals where a percentage of action is sold at par since the games do not run reliably enough. However there are a good number players looking for a longer term deal (sample size is your friend), the ideal players being overly conservative and looking to mitigate bankroll risk when moving up in stakes rather than Kelly violators.

To me, the main commonality between picking players and HFs to invest in is that it is not a level playing field in terms of access. The best players and funds have their pick of investors and can set the terms.

Back then anyone could recognize a profitable poker player (although this is changing, online results are not as transparent now) so your key to returns as a staker was a differentiated offer, ideally without sacrificing on the profit split. In my case, an offer of coaching was included.

Without transparency or access to historical data, things get a bit more complicated and you need to depend on personal experience (playing in same games) or third party referrals which obviously decrease your degrees of certainty in your projections.

No questions at the moment, but enjoying the thread and the discussion.
Thank you for the informative comments. I like your approach of differentiating yourself.
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Old 09-08-2014, 11:12 AM   #124
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by hedgefundguy View Post
More on evidence on hedge fund performance later.
Do you feel hedge funds should be registered with the SEC and required to report results on a regular basis, like mutual funds? If not, why not?

I feel the biggest myth about hedge funds is the myth that they provide above average returns for anyone other than the people running the hedge fund. There may be a few exceptions, but with a 75% mortality rate it is hard to believe investors fared well.

Quote:
The upward bias on reported returns looks even worse when we recognize how many hedge funds go out of business. When Princeton Universityís Burton Malkiel and Yale School of Managementís Robert Ibbotson studied Hedge Funds from 1996 to 2004, they discovered a 75 percent mortality rate. Only the funds that donít go out of business--and voluntarily report their results--are available for data compilation. As a result, Malkiel and Ibbotson calculated that the average returns reported in data bases were overstated by 7.3 percent annually during the eight year study.
http://assetbuilder.com/andrew_halla...sh_hedge_funds
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Old 09-08-2014, 12:06 PM   #125
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Re: Hedge Fund Manager welcomes your questions

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Originally Posted by hedgefundguy View Post
The auditors have become much better and put in thoughtful processes to lead to decent price discovery in the vast majority of asset classes.

For certain asset classes (stocks, government bonds, etc.) this is trivial of course. But now, on even the more esoteric stuff, they do a credible job.
For distressed/defaulted/modeled stuff, they will tell you a 20 bond isn't worth 80, but they won't push too hard if you have it at H20s.

They will have narrower ranges for IG, par type paper.
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