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>Both ETFs and hedge fund are financial funds that a person considers putting their money in with the intention of maximizing their return. To say that they "pl

>Both ETFs and hedge fund are financial funds that a person considers putting their money in with the intention of maximizing their return. To say that they "play different sports" is at best stretching the truth, at worst a lie. They're playing different strategies. If you're a defense-driven team you play to win primarily be keeping the other team (call them the black swans) from scoring. To bring it out of metaphor, it's about risk-adjusted maximum return. If you're an offense-driven team you're trying to put more points on the board. The S&P 500 is a decidedly long bet on 100%, large cap, primarily western corporate equities. >So the "unexpected strength" came from performing "in-line with historical averages"? Hedge fund guys are usually bears and as such they've successfully predicted 9 of the last 5 recessions. They're perpetually prepared for or waiting for history to be proven wrong. It is within that context that they are seeking a maximum return (and justification for high fees).

taeric 9y ago
Just to be clear, you are agreeing with the post you responded to, right? That is, they are both playing the same game, but hedge funds use a different strategy. Which is the point here. Their strategy is evidently a losing strategy. (Or, rather, suboptimal.)
- dkarl 9y ago
  * Their strategy is evidently a losing strategy. (Or, rather, suboptimal.)* It was not their strategy that competed and lost. It was the strategy of paying them to play the game for you. Their strategy of running a hedge fund instead of an S&P 500 index fund could be working out very well for them.
  - taeric 9y ago
    Touché.
SilasX 9y ago
>They're playing different strategies. If you're a defense-driven team you play to win primarily be keeping the other team (call them the black swans) from scoring. To bring it out of metaphor, it's about risk-adjusted maximum return. Yes, but that still reduces to a metric applicable to both investments; it just means you can't compare on return alone. If hedge funds produce a slight higher return by but by taking significantly greater risk, that would be a legit strike against them.
valuearb 9y ago
Hedge funds run that gamut from "bears" to "bulls", from value to speculation, from public equities to private equity and bonds and commodities. Renaissance is a market maker. The only thing that "Hedge Funds" have in common is that they are private investment partnerships, and typically charge a percentage of assets plus a percentage of profits for their services. Based on their charters they can invest in many different ways. Historically the term "hedge fund" arose because there was a popular class of private investment partnerships that sought to provide good risk adjusted returns by remaining hedged against possible market collapses. But those types of hedge funds are a small minority, and the label has lost all value. Ted Siedes knows all of this, because he runs a fund of funds where he adds his own layer of fees to "hedge fund" fees in order to get his clients into the "best" funds. He's been selling the myth of "hedge fund" outperformance for a long time, which is why he made this bet. He's drinking his own koolaid, and it turned out to be made in Jonestown.
biot 9y ago
> they've successfully predicted 9 of the last 5 recessions Have you transposed the numbers or is this an amusing reference to something?
- mining 9y ago
  It's probably saying that they invest as though recessions that didn't happen were going to happen.
  - spinchange 9y ago
    That. It's an old joke about bear investors.
prewett 9y ago
But as an investor, I'm not playing different sports. I'm looking to maximize returns while minimizing losses. A defensive team and an offensive team may have different strategies but their goal is the same: win the game. Are you saying that "risk-adjusted maximum return" is essentially (rate of return, std. deviation), and that hedge funds are offering a lower rate of return in exchange for a lower std. deviation? Like how Treasury bonds offer (1%, 0)? I'm no hedge fund expert, but I've always assumed hedge fund claim to get higher rate of return than the S&P 500 through the brilliance of their active management (for which you pay them gobs of money). And in this experiment, over 10 years, the deviation of the S&P 500 compared to its expected average was about 0, and their returns (net fees) was about 25% the S&P 500. So even if the S&P 500 had less than average returns it would have still trounced the hedge funds.
- eximius 9y ago
  Maximizing returns while minimizing losses is, ultimately, a meaningess phrase. What you mean is maximizing returns under some specific risk acceptance. That risk acceptance is different between hedge funds and other funds. You choose the fund that matches the game YOU are playing.

taeric 9y ago

Just to be clear, you are agreeing with the post you responded to, right? That is, they are both playing the same game, but hedge funds use a different strategy. Which is the point here. Their strategy is evidently a losing strategy. (Or, rather, suboptimal.)

dkarl 9y ago
* Their strategy is evidently a losing strategy. (Or, rather, suboptimal.)* It was not their strategy that competed and lost. It was the strategy of paying them to play the game for you. Their strategy of running a hedge fund instead of an S&P 500 index fund could be working out very well for them.
- taeric 9y ago
  Touché.

SilasX 9y ago

>They're playing different strategies. If you're a defense-driven team you play to win primarily be keeping the other team (call them the black swans) from scoring. To bring it out of metaphor, it's about risk-adjusted maximum return. Yes, but that still reduces to a metric applicable to both investments; it just means you can't compare on return alone. If hedge funds produce a slight higher return by but by taking significantly greater risk, that would be a legit strike against them.

valuearb 9y ago

Hedge funds run that gamut from "bears" to "bulls", from value to speculation, from public equities to private equity and bonds and commodities. Renaissance is a market maker. The only thing that "Hedge Funds" have in common is that they are private investment partnerships, and typically charge a percentage of assets plus a percentage of profits for their services. Based on their charters they can invest in many different ways. Historically the term "hedge fund" arose because there was a popular class of private investment partnerships that sought to provide good risk adjusted returns by remaining hedged against possible market collapses. But those types of hedge funds are a small minority, and the label has lost all value. Ted Siedes knows all of this, because he runs a fund of funds where he adds his own layer of fees to "hedge fund" fees in order to get his clients into the "best" funds. He's been selling the myth of "hedge fund" outperformance for a long time, which is why he made this bet. He's drinking his own koolaid, and it turned out to be made in Jonestown.

biot 9y ago

> they've successfully predicted 9 of the last 5 recessions Have you transposed the numbers or is this an amusing reference to something?

mining 9y ago
It's probably saying that they invest as though recessions that didn't happen were going to happen.
- spinchange 9y ago
  That. It's an old joke about bear investors.

prewett 9y ago

But as an investor, I'm not playing different sports. I'm looking to maximize returns while minimizing losses. A defensive team and an offensive team may have different strategies but their goal is the same: win the game. Are you saying that "risk-adjusted maximum return" is essentially (rate of return, std. deviation), and that hedge funds are offering a lower rate of return in exchange for a lower std. deviation? Like how Treasury bonds offer (1%, 0)? I'm no hedge fund expert, but I've always assumed hedge fund claim to get higher rate of return than the S&P 500 through the brilliance of their active management (for which you pay them gobs of money). And in this experiment, over 10 years, the deviation of the S&P 500 compared to its expected average was about 0, and their returns (net fees) was about 25% the S&P 500. So even if the S&P 500 had less than average returns it would have still trounced the hedge funds.

eximius 9y ago
Maximizing returns while minimizing losses is, ultimately, a meaningess phrase. What you mean is maximizing returns under some specific risk acceptance. That risk acceptance is different between hedge funds and other funds. You choose the fund that matches the game YOU are playing.