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That's true up to a point - but there are also ways to mitigate against those losses without completely giving up all the alpha you can get from betting on extr

That's true up to a point - but there are also ways to mitigate against those losses without completely giving up all the alpha you can get from betting on extreme tail events. I'm sure there are some fund managers who do follow this strategy - but they also mitigate the risks associated with it, which means their extreme gains are not as extreme as Paulson's, but their losses are not as extreme either. We hear about Paulson because he's an edge case. We don't hear about the funds that won big, but not quite as big as Paulson but who have had much better risk management practices.

cheez 9y ago
This is the equivalent of saying you should never lose money. Not sure there is a fund that has a strategy that is a perfect oracle.
- module0000 9y ago
  The only funds that "never lose money" are the ones us mere peons can't invest in. Eg: quant-driven funds that try to buy/sell the edge then profit the minimum movement 24/7, if those are losing money then they cease to exist - and they haven't done that yet. The minimum investment in those funds is high 7 figures though, and that's out of at least my price range for risk capital(and non-risk capital for that matter).
  - cheez 9y ago
    There is only one such fund that has survived over a long period of time and that is RenTec. As far as I'm aware, there aren't many others. And my understanding is that no one can invest in RenTec anymore either because they can't scale the strategy.
fauigerzigerk 9y ago
>We hear about Paulson because he's an edge case. We don't hear about the funds that won big, but not quite as big as Paulson but who have had much better risk management practices. At least we know a bit about their average performance, which has been very poor over the past 5 years: https://www.hedgefundresearch.com/family-indices/hfri https://www.hedgefundresearch.com/family-indices/hfri

cheez 9y ago

This is the equivalent of saying you should never lose money. Not sure there is a fund that has a strategy that is a perfect oracle.

module0000 9y ago
The only funds that "never lose money" are the ones us mere peons can't invest in. Eg: quant-driven funds that try to buy/sell the edge then profit the minimum movement 24/7, if those are losing money then they cease to exist - and they haven't done that yet. The minimum investment in those funds is high 7 figures though, and that's out of at least my price range for risk capital(and non-risk capital for that matter).
- cheez 9y ago
  There is only one such fund that has survived over a long period of time and that is RenTec. As far as I'm aware, there aren't many others. And my understanding is that no one can invest in RenTec anymore either because they can't scale the strategy.

fauigerzigerk 9y ago

>We hear about Paulson because he's an edge case. We don't hear about the funds that won big, but not quite as big as Paulson but who have had much better risk management practices. At least we know a bit about their average performance, which has been very poor over the past 5 years: https://www.hedgefundresearch.com/family-indices/hfri https://www.hedgefundresearch.com/family-indices/hfri