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In order for this service to make sense, they would need to deliver returns that are at least 1% in excess of say the S&P 500 index performance. One quick way t
by takinola 3y ago
In order for this service to make sense, they would need to deliver returns that are at least 1% in excess of say the S&P 500 index performance. One quick way to verify is to test it. Put some amount of money in their care and see if their performance (minus fees) exceeds what you can get in a passive index. Also keep in mind the compounding effect of the fees towards your returns over time so the excess return required will likely need to be much higher than 1%. I'm too lazy to calculate it right now but you should be able to easily model the impact over 5 to 10 years.
- quickthrower2 3y agoYou cant test it or back test it in any statistically significant way. If you have a way to tell if they have Alpha then you don’t need them.
- takinola 3y agoCouldn't you just look at their historical performance and compare against an S&P500 index? It would be trivial to see if their performance justified the fees. It may not be statistically valid but if they can't demonstrate a benefit over the last 5 years, I wouldn't put any stock in them.
- throwaway828 3y agoSee if they have Omega ;) But as you say, if you know what Omega is you're probably not their customer.