1 reply to this topic

[Jnavin]

Let's do the math. Simmons has been averaging 36% per year for quite some time. So, that's 3% a month. So far, in August, he is down 9%. Is this significant, considering his steady success? I'd say yes, it is. The problem is "fund of hedge fund" investors, who control many billions of dollars, have rules about dumping funds which draw down more than 10% in any single month. They would want their money back and be able to move on under such a circumstance. Despite the guy's stellar long-term performance and terrific reputation, down 9% so far in one month is a tough spot.

[greenie]

People tend to forget that wins and losses are not symmetric. If you are up 50% a month and down 50% next month, you are down 25% over two months.

3% a month for 24 months is 72%, but take 20 of 2/20 out and investors got 2.4% a month.

Now if you are down 20% for two consecutive months, the net return of the entire period is only 13% and not 72-40=32%. So, investors are right to run away after they see first monthly loss. This is the same as putting trailing stops on a trade, even if the trade worked wonderfully for a while.

Let's do the math. Simmons has been averaging 36% per year for quite some time. So, that's 3% a month.
So far, in August, he is down 9%.

Is this significant, considering his steady success?

I'd say yes, it is. The problem is "fund of hedge fund" investors, who control many billions of dollars, have rules about dumping funds which draw down more than 10% in any single month. They would want their money back and be able to move on under such a circumstance.

Despite the guy's stellar long-term performance and terrific reputation, down 9% so far in one month is a tough spot.