World Beta Blog

I love this picture. . .

From the article "Hedge Funds: Where Did That One-Star Fund Go?" (HT: EC)

Morningstar certainly selected a lively date to launch its initial batch of Morningstar Ratings for hedge funds*: January 2008. One year later, hedge funds had suffered their worst 12-month performance in forever, dropping more than 20% in aggregate and spurring a wave of investor redemptions.

In response, hedge funds did what hedge funds do best–they quit. Folded shop, returned what assets remained, expired. They became ex-hedge funds. Either that, or they crawled into a cave to lick their wounds, continuing to exist but ceasing to be seen in daylight by refusing to update their performances in public databases such as Morningstar’s. All in all, of the 1,732 single-strategy hedge funds that received a rating from Morningstar during the March 2008 launch, a whopping 615 funds–36%!–disappeared over the ensuing 12 months.

Dalio’s Pure Alpha did 14% last year (although All-Weather got clobbered). Nice interview in Fortune mag – "Inside the World’s Biggest Hedge Fund".  Pure Alpha has averaged 15% a year – although I am not sure why they reported the gross returns.  That amounts to about 10.4% net after 2&20. 

Does anyone have the Pure Alpha monthly returns?  I posted the All-Weather returns awhile back but BW made me take them down. . .

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Nice profile of Swensen in Portfolio magazine.

Now that the book is (almost) out, I have some time to devote to some more research.  I have a whole stack of ideas on my plate, but a few I have listed below. 

What interests you most?  And if there is something that I haven’t listed that you would like to see more info on, leave a comment.

[polldaddy poll="1469721"]

12-Month simple moving average on the Nasdaq Comp back to 1973.  Very similar results as most of the other assets classes we have tested.  Increase in return, vol drops about 30%, and drawdown gets cut in half.

Data from Yahoo. 

Log Chart:

Non-log Chart:

Interview with Swensen here, and 2008 update (finally) for the Yale Endowment 2008 fiscal year (ending June 30th, 2008). 

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Lenny Dykstra sounds like a complete disaster.

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Quant approaches to bracketology here and here. 

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A few interesting stats from Financial Planning magazine:

In 2008, there were 8,020 U.S.-based companies with 12-month returns as of Dec. 31, 2008. The average return of all 8,020 stocks in 2008 was -39.6%. The median return was -52.7%, whereas the market-cap weighted 12-month return was -26.6%.

Of all 8,020 stocks, 89% had a negative return. The median negative return was -58.4%. Only 11% of all U.S. stocks had a positive return in 2008, and the median positive return was 19.9%.

In 1999: The average one-year return of all 6,242 U.S. stocks was 42.7%, but the median return was -3.9%.

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The Banff Film Festival is a must!

Looks great, although I haven’t had the chance to flip through it yet.  Should be in stores by the end of the month (finally) !

If you are in the press and would like a copy, drop me a line. . .

Ha, you know I agree…

STEWART: That would be great, but it’s not just you. It’s larger forces at work. It is this idea that the financial news networks are not just guilty of a sin of omission but a sin of commission. That they are in bed with them.

CRAMER: No, we’re not in bed with them. Come on. I don’t think that’s fair. Honestly. I think that we try to report the news and I think that people-

STEWART: A couple of guys do. This guy Faber.

CRAMER: He’s fabulous, Faber.

STEWART: And maybe two other guys.

CRAMER: He’s fabulous and he’s done some things that have really blown the cover off a lot of stuff.