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These guys averaged a ~9% return over the last few years. The S&P 500 has exceeded that. So what’s so special? Seems that passive investing works just as wel

These guys averaged a ~9% return over the last few years. The S&P 500 has exceeded that. So what’s so special? Seems that passive investing works just as well.

dsacco 9y ago
> These guys averaged a ~9% return over the last few years. Who are "these guys"? The funds discussed in the article have average annual returns well above 9%.
- madengr 9y ago
  Overdeck and Seigel. “The firm’s biggest fund, Spectrum, has earned an annual average return of 9.4% net of fees since 2004.” The S&P 500 has averaged 9% for 80 years. Joe Blow can buy index fund and do just as well as the quant clients. Sure, these guys are averaging 14% before fees, and it’s a great way to get rich. But after fees the client might as well just passively invest.
  - desu_ 9y ago
    You need to consider the following elements: -You compare the S&P and two Six Sigma funds over different timelines. The index yielded much less than 9% on 2004-2015 (you can halve the performance). -What’s the common feature between: the S&P, the formal idea of passive indexing, and the emergence of passive investment funds? None of them are 80 years old. -Retail customers (Joe Blow) rarely have access to hedge fund products directly (they might still be exposed through pension funds, sovereign wealth funds, etc. but it makes the allocation change almost out of their hands). -Stating performance figures alone is mostly a Bloomberg-reader thing. In practice, there is usually at least an attempt to incorporate some kind of risk measure when selecting hedge funds. I am not even anti-passive funds but you are memeing a bit too hard.
- deleted 9y ago
  [deleted]
FundThrowaway 9y ago
At what risk though? Returns should always be considered by the risk taken to achieve them.
- madengr 9y ago
  I’ll assume they have a higher risk to generate those higher net returns. After recently reading A Random Walk Down a Wall Street, my conclusions are: you are not going to time the market, the managed funds don’t do any better than index funds. 90% percent of the effort goes into squeezing out an additional 10%. So may as well spend 10% of the effort and settle with 90%. Of course fortunes are made on that 10%. Joe Blow slinging garbage cans can retire a multimillionaire by steady, passive investing.
  - FundThrowaway 9y ago
    Perhaps read about market neutral strategies, most quant funds have much higher sharpe ratios than index funds.
    - madengr 9y ago
      Ha ha, I’m an EE just passively investing extra income. Nothing more than a side interest. I assume you are talking about using higher volatility stocks with negative correlations; he talks about that in the aforementioned book.

These guys averaged a ~9% return over the last few years. The S&P 500 has exceeded that. So what’s so special? Seems that passive investing works just as well.

dsacco 9y ago

> These guys averaged a ~9% return over the last few years. Who are "these guys"? The funds discussed in the article have average annual returns well above 9%.

madengr 9y ago
Overdeck and Seigel. “The firm’s biggest fund, Spectrum, has earned an annual average return of 9.4% net of fees since 2004.” The S&P 500 has averaged 9% for 80 years. Joe Blow can buy index fund and do just as well as the quant clients. Sure, these guys are averaging 14% before fees, and it’s a great way to get rich. But after fees the client might as well just passively invest.
- desu_ 9y ago
  You need to consider the following elements: -You compare the S&P and two Six Sigma funds over different timelines. The index yielded much less than 9% on 2004-2015 (you can halve the performance). -What’s the common feature between: the S&P, the formal idea of passive indexing, and the emergence of passive investment funds? None of them are 80 years old. -Retail customers (Joe Blow) rarely have access to hedge fund products directly (they might still be exposed through pension funds, sovereign wealth funds, etc. but it makes the allocation change almost out of their hands). -Stating performance figures alone is mostly a Bloomberg-reader thing. In practice, there is usually at least an attempt to incorporate some kind of risk measure when selecting hedge funds. I am not even anti-passive funds but you are memeing a bit too hard.
deleted 9y ago
[deleted]

FundThrowaway 9y ago

At what risk though? Returns should always be considered by the risk taken to achieve them.

madengr 9y ago
I’ll assume they have a higher risk to generate those higher net returns. After recently reading A Random Walk Down a Wall Street, my conclusions are: you are not going to time the market, the managed funds don’t do any better than index funds. 90% percent of the effort goes into squeezing out an additional 10%. So may as well spend 10% of the effort and settle with 90%. Of course fortunes are made on that 10%. Joe Blow slinging garbage cans can retire a multimillionaire by steady, passive investing.
- FundThrowaway 9y ago
  Perhaps read about market neutral strategies, most quant funds have much higher sharpe ratios than index funds.
  - madengr 9y ago
    Ha ha, I’m an EE just passively investing extra income. Nothing more than a side interest. I assume you are talking about using higher volatility stocks with negative correlations; he talks about that in the aforementioned book.