so far there is nothing here but nonsense. If there is anything beyond that, I will let you know
Feb
4th
Wed
4th
Comments on “alpha” Fun
Hey! That seemed to go well. Thanks for the hard work (and lunch - those of you bit by leverage). Here are a few unrelated comments and links:
Comments:
- I now have a much greater appreciation for the job of a “risk manager” at a fund. It is not easy gathering up everyones positions into a coherent summary — even with the very rigid task of portfolios over 100 stocks and a fixed time frame. Now imagine we were trading 1000’s of CDS in non-organized exchages with non-standard terms.
- I picked the compensation contract loosely based on industry standards for hedge funds. However, give some thought to the incentives it created for you. Risky! My choice of “bankruptcy” (or more correctly investor redemption) was left vague at the outset. Mostly that was because I was initially not sure exactly how to specify it. In hindsight, the vagueness has some realism to it (the connection between redemptions and performance is fuzzy) and also helps from overt “gaming” of the incentives (none of you did that, of course).
- The Leverage ratio of 3:1 never came close to binding? Why not? Equity returns are very volatile, so you cannot lever up too much without inducing nutty-large return volatility.
- I have not read all your strategy descriptions yet, but from my quick skim a little more focus on “VAR” or “tail-event” returns would be helpful — how can your strategy go wrong? why? Clients/investors are interested in the up-side but they are going to ask you a lot about the down-side and your risk management.
Analysis:
- Here are all your fund returns. Take a look. How similar? Differnt? etc.
- Here is a PDF of my Four-Picture Analysis for each of the funds.
- Excel File with regressions and Summary stats
{Add more comments on regressions later}
And the Winner!
Team “Hicks” (lunch on me!)
- Robert Hicks
- David Mehl
- Brad Burke
- Sebastian Rojas
- Andrew Schlussel
`cause these two teams went bust (owe me lunch)
- Team Ash
- Team H (aka Team Hasselhoff)
Other Materials
