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Anecdotally, I have investments in both traditional managed funds and contrarian managed funds. It seems to take longer for the contrarian funds to "strike gold

by 22c 5y ago

Anecdotally, I have investments in both traditional managed funds and contrarian managed funds. It seems to take longer for the contrarian funds to "strike gold" and overall they have not done better than my traditionally managed funds, but have still done significantly better than leaving money in a "high-interest" savings account. Also, on average, my "punter" picks do about the same as the contrarian funds although with more wild swings up and down, so for less hair pulling I am tending to move more and more towards managed funds or industry-based ETFs with the occasional punter picks. I certainly think that having some investments in the contrarian space makes sense as a diversification strategy, but I tend to leave those stock picks up to someone who has made it their day job.

LewisVerstappen 5y ago
>Anecdotally, I have investments in both traditional managed funds and contrarian managed funds. It seems to take longer for the contrarian funds to "strike gold" and overall they have not done better than my traditionally managed funds, but have still done significantly better than leaving money in a "high-interest" savings account. How have they done against the S&P?
- 22c 5y ago
  I don't invest in US markets, but of the equivalent index here, the contrarian fund this past financial year has certainly outperformed the index. Though it almost seems like luck. If you had asked me 2 years ago, my contrarian funds were in the red. I think the pandemic has really created both good contrarian opportunities as well as good value investment opportunities; both strategies seem to be working well at the moment.
  - carnitine 5y ago
    Spitznagel’s entire strategy is designed to lose all of the money allocated to it unless there is an extreme market event, hence why it should be a small allocation in a larger portfolio. It’s pointless to compare it to SPY or whatever.
- smabie 5y ago
  Depending on the fund, returns of the S&P could be irrelevant and not a suitable benchmark. Evaluating a fund isn't as easy as "does it beat the S&P?". There's a lot of other factors to consider.
- sb057 5y ago
  Not sure about OP, but Spitznagel's fund returned 4,144% in Q1 2020. It averaged 105.2% annually from 2009 to 2019. https://news.yahoo.com/mark-spitznagel-univesa-cio-on-risk-mitigation-204157461.html https://news.yahoo.com/mark-spitznagel-univesa-cio-on-risk-m... https://www.institutionalinvestor.com/article/b1nhg4w9k5hjp0/Nassim-Taleb-and-Universa-Versus-the-World https://www.institutionalinvestor.com/article/b1nhg4w9k5hjp0...
  - short_sells_poo 5y ago
    This is incorrect and keeps being repeated. Universa's marketing clearly struck gold. They made 4000% on the premium paid in, not on capital. No practitioner uses such concept because it's not useful. Imagine you insure your car worth $20000 and pay $1000 a year in premium. Your car gets totaled and the insurance pays out $10000. You are not going to say "woah my insurance paid out 1000%", as it's a meaningless number. You are going to say: "my insurance paid out 50% of the original car value". This is the same case, but of course Mr Spitznagel doesn't mind that silly numbers are flying around his fund.
    - Majromax 5y ago
      > They made 4000% on the premium paid in, not on capital. No practitioner uses such concept because it's not useful. Since they were able to invest only the premium paid in, I don't see why this isn't a useful metric. If they return 4000% on every dollar I give them but I only choose to give them 1% of my wealth, then the lower aggregate returns are on me. Dividing by a higher notional amount would be justified if the Universea funds could cause investors to lose more than their initial investment, in the same way that futures contracts have a notional value far in excess of their face value. However, I do not think the Universea funds work in this way.
      - short_sells_poo 5y ago
        > Since they were able to invest only the premium paid in, I don't see why this isn't a useful metric. If they return 4000% on every dollar I give them but I only choose to give them 1% of my wealth, then the lower aggregate returns are on me. I feel there's a misunderstanding of what Universa is and this keeps confusing people. Universa is not an alpha fund. You don't give money to Universa with the aim that they'll generate steady income, or even any income. They are basically an insurance product. If nothing happens for 10 years, they'll just steadily lose money (this is expected) in the form of the premium. In fact, in absence of market crashes, the expected value of Universa is negative. >Dividing by a higher notional amount would be justified if the Universea funds could cause investors to lose more than their initial investment, in the same way that futures contracts have a notional value far in excess of their face value. However, I do not think the Universea funds work in this way. That's not at all how you think of a tail protection fund like Universa. The premium is just a constraint, not a risk metric. Say your portfolio makes 10% a year and you are willing to invest 1% of that in protection. That 1% premium spending is your constraint, nothing more. But your risk metric is the capital that you wish to insure, not the premium. It then follows that you should calculate the Universa return as a % of the capital you want to protect, not the premium you spend to protect it. Exmaple: you have assets worth $100 and you want to spend $1 on protection (Universa). You determine that in a 2020 style market stress event you'd be expected to suffer a 20% drawdown. Beyond protection efficiency analyses, you really don't care what your return on premium is, you care that for the 1% premium spent, your protection is expected to earn enough as a % of your assets that your total drawdowns become manageable. The premium just puts a ceiling on the overall insurance level you can afford for your portfolio, but again for this you need to think in terms of % return of your portfolio value.
olalonde 5y ago
It's a bit controversial but there's a lot of evidence that actively managed funds underperform passive ones. "A Random Walk Down Wall Street"[0] is a good read on the topic. [0] https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
- riffraff 5y ago
  An interesting read is also the well known SPIVA report. It's not flawless, but it's quite obvious many hedge funds are not working for you as much as they work for themselves. Which is also what the guy in the article says, incidentally. https://www.spglobal.com/spdji/en/research-insights/spiva/ https://www.spglobal.com/spdji/en/research-insights/spiva/
- 22c 5y ago
  Yes, I've read similar stories and of course Buffet is famous for saying things along similar lines. For me, I decided to follow Steve Clark's advice of "Do More of What Works and Less of What Doesn't". I invested in a bunch of different things including ETFs, managed funds, futures, individual stock picks, IPOs, etc. and I found managed funds that seemed to work better than ETFs (though 5 years is not really enough time to know for sure), so I pumped more into the managed funds that were working. Investing only in IPOs seems to work well as well but the hardest part for me was knowing when to sell (which in my case I almost never sell and I often miss the best opportunity to cash out my IPO investments). I am sure there are some bad managed funds, probably more bad ones than good ones. I'm certainly not saying managed funds are a better choice overall than just going "all-in" on Vanguard, but picking out a few managed funds to try out after doing a couple of hours research is also not a strategy that should be completely written off either, at least in my experience.
  - didibus 5y ago
    One issue with managed funds is that the people in charge of managing can rotate, so a managed fund doing well now in 10 years could be like a whole different fund, since the employees in charge of managing it could have all changed.

by 22c 5y ago

LewisVerstappen 5y ago

>Anecdotally, I have investments in both traditional managed funds and contrarian managed funds. It seems to take longer for the contrarian funds to "strike gold" and overall they have not done better than my traditionally managed funds, but have still done significantly better than leaving money in a "high-interest" savings account. How have they done against the S&P?

22c 5y ago
I don't invest in US markets, but of the equivalent index here, the contrarian fund this past financial year has certainly outperformed the index. Though it almost seems like luck. If you had asked me 2 years ago, my contrarian funds were in the red. I think the pandemic has really created both good contrarian opportunities as well as good value investment opportunities; both strategies seem to be working well at the moment.
- carnitine 5y ago
  Spitznagel’s entire strategy is designed to lose all of the money allocated to it unless there is an extreme market event, hence why it should be a small allocation in a larger portfolio. It’s pointless to compare it to SPY or whatever.
smabie 5y ago
Depending on the fund, returns of the S&P could be irrelevant and not a suitable benchmark. Evaluating a fund isn't as easy as "does it beat the S&P?". There's a lot of other factors to consider.
sb057 5y ago
Not sure about OP, but Spitznagel's fund returned 4,144% in Q1 2020. It averaged 105.2% annually from 2009 to 2019. https://news.yahoo.com/mark-spitznagel-univesa-cio-on-risk-mitigation-204157461.html https://news.yahoo.com/mark-spitznagel-univesa-cio-on-risk-m... https://www.institutionalinvestor.com/article/b1nhg4w9k5hjp0/Nassim-Taleb-and-Universa-Versus-the-World https://www.institutionalinvestor.com/article/b1nhg4w9k5hjp0...
- short_sells_poo 5y ago
  This is incorrect and keeps being repeated. Universa's marketing clearly struck gold. They made 4000% on the premium paid in, not on capital. No practitioner uses such concept because it's not useful. Imagine you insure your car worth $20000 and pay $1000 a year in premium. Your car gets totaled and the insurance pays out $10000. You are not going to say "woah my insurance paid out 1000%", as it's a meaningless number. You are going to say: "my insurance paid out 50% of the original car value". This is the same case, but of course Mr Spitznagel doesn't mind that silly numbers are flying around his fund.
  - Majromax 5y ago
    > They made 4000% on the premium paid in, not on capital. No practitioner uses such concept because it's not useful. Since they were able to invest only the premium paid in, I don't see why this isn't a useful metric. If they return 4000% on every dollar I give them but I only choose to give them 1% of my wealth, then the lower aggregate returns are on me. Dividing by a higher notional amount would be justified if the Universea funds could cause investors to lose more than their initial investment, in the same way that futures contracts have a notional value far in excess of their face value. However, I do not think the Universea funds work in this way.
    - short_sells_poo 5y ago
      > Since they were able to invest only the premium paid in, I don't see why this isn't a useful metric. If they return 4000% on every dollar I give them but I only choose to give them 1% of my wealth, then the lower aggregate returns are on me. I feel there's a misunderstanding of what Universa is and this keeps confusing people. Universa is not an alpha fund. You don't give money to Universa with the aim that they'll generate steady income, or even any income. They are basically an insurance product. If nothing happens for 10 years, they'll just steadily lose money (this is expected) in the form of the premium. In fact, in absence of market crashes, the expected value of Universa is negative. >Dividing by a higher notional amount would be justified if the Universea funds could cause investors to lose more than their initial investment, in the same way that futures contracts have a notional value far in excess of their face value. However, I do not think the Universea funds work in this way. That's not at all how you think of a tail protection fund like Universa. The premium is just a constraint, not a risk metric. Say your portfolio makes 10% a year and you are willing to invest 1% of that in protection. That 1% premium spending is your constraint, nothing more. But your risk metric is the capital that you wish to insure, not the premium. It then follows that you should calculate the Universa return as a % of the capital you want to protect, not the premium you spend to protect it. Exmaple: you have assets worth $100 and you want to spend $1 on protection (Universa). You determine that in a 2020 style market stress event you'd be expected to suffer a 20% drawdown. Beyond protection efficiency analyses, you really don't care what your return on premium is, you care that for the 1% premium spent, your protection is expected to earn enough as a % of your assets that your total drawdowns become manageable. The premium just puts a ceiling on the overall insurance level you can afford for your portfolio, but again for this you need to think in terms of % return of your portfolio value.

olalonde 5y ago

It's a bit controversial but there's a lot of evidence that actively managed funds underperform passive ones. "A Random Walk Down Wall Street"[0] is a good read on the topic. [0] https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

riffraff 5y ago
An interesting read is also the well known SPIVA report. It's not flawless, but it's quite obvious many hedge funds are not working for you as much as they work for themselves. Which is also what the guy in the article says, incidentally. https://www.spglobal.com/spdji/en/research-insights/spiva/ https://www.spglobal.com/spdji/en/research-insights/spiva/
22c 5y ago
Yes, I've read similar stories and of course Buffet is famous for saying things along similar lines. For me, I decided to follow Steve Clark's advice of "Do More of What Works and Less of What Doesn't". I invested in a bunch of different things including ETFs, managed funds, futures, individual stock picks, IPOs, etc. and I found managed funds that seemed to work better than ETFs (though 5 years is not really enough time to know for sure), so I pumped more into the managed funds that were working. Investing only in IPOs seems to work well as well but the hardest part for me was knowing when to sell (which in my case I almost never sell and I often miss the best opportunity to cash out my IPO investments). I am sure there are some bad managed funds, probably more bad ones than good ones. I'm certainly not saying managed funds are a better choice overall than just going "all-in" on Vanguard, but picking out a few managed funds to try out after doing a couple of hours research is also not a strategy that should be completely written off either, at least in my experience.
- didibus 5y ago
  One issue with managed funds is that the people in charge of managing can rotate, so a managed fund doing well now in 10 years could be like a whole different fund, since the employees in charge of managing it could have all changed.