Hedge fund blogs
Hedge fund blog, a long only manager and a passive professor are flying north to present to an institution in New Zealand. As the airplane lands they see a purple sheep alone in a field.
Index idol says "Every kiwi sheep is purple! I must buy them all now. At any price the farmer asks, no matter how expensive. The market is always right because it's efficient. It's not my money anyway. I have academic tenure and a Nobel prize. Risk free for me."
Long only dude says "Some kiwi sheep are purple but the professor says they all are and I am benchmarked so I must buy also. Can't risk tracking error on the random walk. It's not my money either. I get paid the same whether clients win or lose."
Hedge fund blog says "All my money and my family and friends' money is in the fund so I analyze potential investments more closely. The endowment that pays the professor is also a client as well as the long only luddites' pension plan. In the field there is a sheep, one side of which appears to be temporarily purple. This may be due to chemicals in the sheep-dip, an accident with dye or paint, an optical illusion, a practical joke or a smudge on the airplane window. I will study sheep fundamentals and talk to shepherds, shearers and wool merchants. My quants will gather ovine data and conduct extensive statistical analysis, mathematical modeling, stress tests and scenario simulations. Perhaps, after exhaustive research, I can decide whether to short sell or even buy that apparently purple sheep, depending on its value."
Which fund would YOU invest in? Who should get the mandate? Who is most likely to generate absolute returns to pay the pension's liabilities? Whose fees represent the best VALUE for the work? What manager is the "cheapest"? Would an investor truly following the prudent man rule really choose an index fund given the fiduciary duty for due diligence in selecting appropriate investments for retirement beneficiaries? Which fund offers alignment between client and manager interests?
"Cheap" index funds are the joke.
Index idol says "Every kiwi sheep is purple! I must buy them all now. At any price the farmer asks, no matter how expensive. The market is always right because it's efficient. It's not my money anyway. I have academic tenure and a Nobel prize. Risk free for me."
Long only dude says "Some kiwi sheep are purple but the professor says they all are and I am benchmarked so I must buy also. Can't risk tracking error on the random walk. It's not my money either. I get paid the same whether clients win or lose."
Hedge fund blog says "All my money and my family and friends' money is in the fund so I analyze potential investments more closely. The endowment that pays the professor is also a client as well as the long only luddites' pension plan. In the field there is a sheep, one side of which appears to be temporarily purple. This may be due to chemicals in the sheep-dip, an accident with dye or paint, an optical illusion, a practical joke or a smudge on the airplane window. I will study sheep fundamentals and talk to shepherds, shearers and wool merchants. My quants will gather ovine data and conduct extensive statistical analysis, mathematical modeling, stress tests and scenario simulations. Perhaps, after exhaustive research, I can decide whether to short sell or even buy that apparently purple sheep, depending on its value."
Which fund would YOU invest in? Who should get the mandate? Who is most likely to generate absolute returns to pay the pension's liabilities? Whose fees represent the best VALUE for the work? What manager is the "cheapest"? Would an investor truly following the prudent man rule really choose an index fund given the fiduciary duty for due diligence in selecting appropriate investments for retirement beneficiaries? Which fund offers alignment between client and manager interests?
"Cheap" index funds are the joke.
© posted by Veryan Allen on 21:07
<< Home