Category: Alternatives

The Other Side of Uncorrelated

In a meeting last year, an experienced investment advisor explained to me what he looks for in an “alternative” strategy: “Low correlation, low volatility, no downside, and high returns. I want to have my cake and eat it too.” That is a verbatim quote. The advisor went on to tell me story after story on […]

Big Winners and Big Drawdowns

Apple, Amazon, Microsoft and Alphabet… -All among the largest and most revered companies in the world. -All have returned unfathomable amounts to their shareholders. -All have experienced periods of tremendous adversity with large drawdowns. When thinking about big winners in the stock market, adversity and large drawdowns probably aren’t the first words that come to mind. […]

The Market Neutral Fantasy

“I like nonsense, it wakes up the brain cells. Fantasy is a necessary ingredient in living.” –Dr. Seuss Fantasy may be a necessary ingredient in living, but in choosing investments it can be perilous. The biggest fantasy in the world of investing is the Market Neutral strategy. Market Neutral is the fanciful idea that there is […]

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The Hedge Fund Myth

Reading through some of the mandates for hedge funds via Bloomberg can provide instant comedic relief… “Its strict requirement is that funds must have at least three years of 15 percent returns. The ratio of annual returns to maximum drawdown must be at least 1.5.” “The expected return of the manager is typically between 12 percent […]

From Alpha to Beta: A Long/Short Story

In 1949, Alfred Winslow Jones created A.W. Jones & Co., a partnership which invested $100,000 in stocks using leverage and a mix of long and short positions. Instead of employing a standard management fee, Jones would only make money if his clients made money, charging 20 percent of all profits. This was first vehicle of […]