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I'd be willing to bet that Bayshore, for all its clever investment strategems and financial experts and so forth, will underperform a simple stock market index

I'd be willing to bet that Bayshore, for all its clever investment strategems and financial experts and so forth, will underperform a simple stock market index fund in the long run.

_8j50 4y ago
I doubt all that much is even in stocks. And if it is, plenty of private stocks to buy up before IPO or fund new companies. Of course nothing beats real-estate. With that kind of money, futures are very appetizing too.
GalenErso 4y ago
The job of a family office is not to act as a private hedge fund. Well, not necessarily. View it more as a "family management" office.
bidirectional 4y ago
Why? Loads of private investment funds beat indices.
- cardosof 4y ago
  It's not enough to beat them if you have all those complex strategies, you have to do it with good risk control and in a cost effective way, and that's why low cost broad market ETFs have their place.
- bitL 4y ago
  Yes, but not on average. Very few funds beat index consistently; in a 10 year period most of them look like a random walk.
cobertos 4y ago
The article mentions that a problem of investing _that_ much money is the scale. Is assume you'd have non-negligeable effects on what you invested in/effects in the intermediate levels (like putting too much money through the order book)? S&P 500 market cap is 32 trillion. 100 billion is 0.3% of that.
- philipov 4y ago
  The fact that that much money would move a stock price a lot is an indication that it should not be used to try to chase alpha by trading securities. That amount of money should be used to create value by building new things that haven't gone public yet, where the impact on stock price would not be an issue.
- Eddy_Viscosity2 4y ago
  Market cap is the total volume of all outstanding shares, but the price at any moment is defined by the last price sold. Only the shares currently being traded affect the price. 100 billion is plenty enough to affect price of 'traded shares' even if its only a small percentage of 'all shares'.
anm89 4y ago
This is funny because it's one of these things that is : - empirically incorrect (the idea that very few people beat the index) - but repeatedly constantly with unbelievable confidence by people who don't know the subject well - while misunderstanding the reasons why someone with that level of wealth wouldn't want to buy the index even if it gave them statistically good returns
- reducesuffering 4y ago
  > - empirically incorrect (the idea that very few people beat the index) Yep, definitionally 50% of stock market capital outperforms the market index average. People recommend index because you don't know who / what will outperform (funds will charge you fees like 1% so random dart choosing a fund means on avg. you get market index - 1%).
  - danielmarkbruce 4y ago
    Fees make this wrong, and then no one is talking about "stock market capital". They are talking about funds or people. As such, it's correct that few people beat the market.
    - reducesuffering 4y ago
      50% of funds and people absolutely beat the avg. index. Again, assuming efficient market hypothesis, it's by definition. As I've said, after fees, which is returned to the investor in the fund ~ -1%, of course it's not worth it. But the funds are throwing darts, the people are throwing darts, and 50% are beating the index. Only if you disbelieve the efficient market hypothesis, and think a few funds are disproportionately profiting ~100%/yr (you could maybe make the case for Rentech $10m medallion), would that be untrue.
      - danielmarkbruce 4y ago
        Brokerage fees. Even without that, still no. There is an implicit assumption in your math that bad and good investors aggregate funds in the same amount. They don't. And, depending on exactly how strictly you are defining EMH - I mean, does anyone believe it in it's strictest form? It's a crazy idea.
Galanwe 4y ago
That's completely irrelevant. You don't invest your money in what has the highest return. You invest it on what has the risk profile of your liking.
- jojobas 4y ago
  You'd be very hard pressed to go lower risk than SP500. Basically treasuries.
  - Galanwe 4y ago
    Hu, that is just very wrong on every level. The (stock) market is considered risky, both in terms of volatility (~15-20% annual), and in terms of exposure. Most quant hedge funds target ~10% realized annual volatility as a sweet spot for most investors.
- danielmarkbruce 4y ago
  Many people do in fact look for the highest return. You might have read some nice sounding theory around risk profiles, but the real world has investors doing basically anything and everything one can imagine.
  - Galanwe 4y ago
    > You might have read some nice sounding theory around risk profiles I read no such thing, but I have practical real world experience speaking to and reviewing investment decks for institutional investors, ranging from pension funds to insurance companies, banks and funds of funds. And these are what we call "non sophisticated investors". Yet even at that level, none of them would just "do anything" or "just look at returns".
    - danielmarkbruce 4y ago
      There are a lot more investors than that. There are loads of of hedge funds and PE shops (ie the people actually making the investments) who are trying to generate the highest returns they can. The idea that "we are the smart money" at places like you mention isn't accurate. Almost every single person at an insurance company, bank, fund of funds, pension fund wishes they were at the VC, PE, Hedge fund etc who is actually doing the investing. But they can't get a job there.

I'd be willing to bet that Bayshore, for all its clever investment strategems and financial experts and so forth, will underperform a simple stock market index fund in the long run.

_8j50 4y ago

I doubt all that much is even in stocks. And if it is, plenty of private stocks to buy up before IPO or fund new companies. Of course nothing beats real-estate. With that kind of money, futures are very appetizing too.

GalenErso 4y ago

The job of a family office is not to act as a private hedge fund. Well, not necessarily. View it more as a "family management" office.

bidirectional 4y ago

Why? Loads of private investment funds beat indices.

cardosof 4y ago
It's not enough to beat them if you have all those complex strategies, you have to do it with good risk control and in a cost effective way, and that's why low cost broad market ETFs have their place.
bitL 4y ago
Yes, but not on average. Very few funds beat index consistently; in a 10 year period most of them look like a random walk.

cobertos 4y ago

The article mentions that a problem of investing _that_ much money is the scale. Is assume you'd have non-negligeable effects on what you invested in/effects in the intermediate levels (like putting too much money through the order book)? S&P 500 market cap is 32 trillion. 100 billion is 0.3% of that.

philipov 4y ago
The fact that that much money would move a stock price a lot is an indication that it should not be used to try to chase alpha by trading securities. That amount of money should be used to create value by building new things that haven't gone public yet, where the impact on stock price would not be an issue.
Eddy_Viscosity2 4y ago
Market cap is the total volume of all outstanding shares, but the price at any moment is defined by the last price sold. Only the shares currently being traded affect the price. 100 billion is plenty enough to affect price of 'traded shares' even if its only a small percentage of 'all shares'.

anm89 4y ago

This is funny because it's one of these things that is : - empirically incorrect (the idea that very few people beat the index) - but repeatedly constantly with unbelievable confidence by people who don't know the subject well - while misunderstanding the reasons why someone with that level of wealth wouldn't want to buy the index even if it gave them statistically good returns

reducesuffering 4y ago
> - empirically incorrect (the idea that very few people beat the index) Yep, definitionally 50% of stock market capital outperforms the market index average. People recommend index because you don't know who / what will outperform (funds will charge you fees like 1% so random dart choosing a fund means on avg. you get market index - 1%).
- danielmarkbruce 4y ago
  Fees make this wrong, and then no one is talking about "stock market capital". They are talking about funds or people. As such, it's correct that few people beat the market.
  - reducesuffering 4y ago
    50% of funds and people absolutely beat the avg. index. Again, assuming efficient market hypothesis, it's by definition. As I've said, after fees, which is returned to the investor in the fund ~ -1%, of course it's not worth it. But the funds are throwing darts, the people are throwing darts, and 50% are beating the index. Only if you disbelieve the efficient market hypothesis, and think a few funds are disproportionately profiting ~100%/yr (you could maybe make the case for Rentech $10m medallion), would that be untrue.
    - danielmarkbruce 4y ago
      Brokerage fees. Even without that, still no. There is an implicit assumption in your math that bad and good investors aggregate funds in the same amount. They don't. And, depending on exactly how strictly you are defining EMH - I mean, does anyone believe it in it's strictest form? It's a crazy idea.

Galanwe 4y ago

That's completely irrelevant. You don't invest your money in what has the highest return. You invest it on what has the risk profile of your liking.

jojobas 4y ago
You'd be very hard pressed to go lower risk than SP500. Basically treasuries.
- Galanwe 4y ago
  Hu, that is just very wrong on every level. The (stock) market is considered risky, both in terms of volatility (~15-20% annual), and in terms of exposure. Most quant hedge funds target ~10% realized annual volatility as a sweet spot for most investors.
danielmarkbruce 4y ago
Many people do in fact look for the highest return. You might have read some nice sounding theory around risk profiles, but the real world has investors doing basically anything and everything one can imagine.
- Galanwe 4y ago
  > You might have read some nice sounding theory around risk profiles I read no such thing, but I have practical real world experience speaking to and reviewing investment decks for institutional investors, ranging from pension funds to insurance companies, banks and funds of funds. And these are what we call "non sophisticated investors". Yet even at that level, none of them would just "do anything" or "just look at returns".
  - danielmarkbruce 4y ago
    There are a lot more investors than that. There are loads of of hedge funds and PE shops (ie the people actually making the investments) who are trying to generate the highest returns they can. The idea that "we are the smart money" at places like you mention isn't accurate. Almost every single person at an insurance company, bank, fund of funds, pension fund wishes they were at the VC, PE, Hedge fund etc who is actually doing the investing. But they can't get a job there.