The Best Hedge Fund You've Never Heard Of
From Turnkey Analyst:
The graphic below highlights the performance of the biggest names in
the hedge fund business. Their historical survivor-bias-filled track
record is amazing.
Just how amazing is the performance?
Not really that amazing.
Below I highlight the performance of a portfolio that takes $1 and
invests it in 10-year bonds. The portfolio then borrows $1.50 and
allocates 25cents to the S&P 500 and $1.25 in the 10-year. I
assume the cost of borrow is the t-bill rate+30bps (funding spread).
Effectively, you have a 2.25x 10-year position and 25% S&P 500
allocation, or a gross 2.50x lever. The performance over the past
~16.03 years (4/1/1997 to 7/31/2013) is presented below (trying to
mirror the period for the stats above):
Passive HF
- 15%+ CAGR
- 16.84% MaxDD
- ~0 correlation with common equity benchmarks
- Fully transparent; no lockups; no fraud risk; no K1s; no due diligence; no skill
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