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Just for context Melvin has returned better than 30% returns yearly since 2014. There is a very good chance if you are in their fund you’ll look at the total re
by kasey_junk 6y ago
Just for context Melvin has returned better than 30% returns yearly since 2014. There is a very good chance if you are in their fund you’ll look at the total return and be quite happy with the outcome, especially if their risk is decorelated with the other parts of your portfolio.
- gruez 6y ago>Just for context Melvin has returned better than 30% returns yearly since 2014 That's funny because in another thread someone mentioned that's usually how a lot of "good" investment strategies go. They return above-average returns when the times are good, but they get wiped out every few years/decades by the tail risk.
- kasey_junk 6y agoYep. Extremely common pattern. So long as the tail risk is diversified compared to other options that is a perfectly good outcome for many asset managers.
- wefarrell 6y agoIn one of Robert Shiller's intro to finance courses he discusses funds that have gamed their sharpe ratios by selling off the tails of their distribution returns. https://bookdown.org/Albert/finance-shiller/efficient-markets.html https://bookdown.org/Albert/finance-shiller/efficient-market...
- mmahemoff 6y agoA rough calculation assuming 35% for 5 years is they made 1.35^5, about ~4.5x. Now it's ~2.2x since they lost 53%. The good news is you didn't get wiped out, but it's about what a "boring" S&P 500 index would have earned since 2014, and would be worse than the index if you had invested after 2014.
- kasey_junk 6y agoPeople that invest in hedge funds are looking for risk differences as much as total returns. A fund that returns the same as the S&P but has a completely different risk profile is a very strong win.