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  • Female hedge funds outperform those run by men

    Hedge funds run by women have generated returns two times higher than their male counterparts this year, piling further pressure on a sector that has been branded “male, pale and stale” to recruit more female portfolio managers. The HFRX Women index, which pulls together the performance of female hedge fund managers, has returned 9.95 per… Read more…

    Female hedge funds outperform those run by men
  • Hugh Hendry Is Closing His Fund

    The wonderfully irrepressible Hugh Hendry of Noddy car fame ( see this video for the reference) is closing his fund. His rationale is explained here.

    Hugh Hendry Is Closing His Fund
  • The Order Of Things Matters

    Every now and again I get sent a magic trading system complete with equity curve, generally these are some sort of magic system someone is flogging that promises massive returns and never has a drawdown. They are the sort of quit your job with $10,000 and intra-day trade FX and make $10,000 per week. If… Read more…

    The Order Of Things Matters
  • HAPPINESS IS NOT ENOUGH

    Years ago, I knew one of those guys who seemed to always be happy and excited. He was always just that bundle of warm fuzzies. First to give you a hug. Always happy to see you. Complimented you about things that had no business being complimented. We’ll call him ‘Jon.’ Jon was like a dog,… Read more…

    HAPPINESS IS NOT ENOUGH

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Female hedge funds outperform those run by men

Hedge funds run by women have generated returns two times higher than their male counterparts this year, piling further pressure on a sector that has been branded “male, pale and stale” to recruit more female portfolio managers. The HFRX Women index, which pulls together the performance of female hedge fund managers, has returned 9.95 per cent for the first seven months of the year. This compares with 4.81 per cent for the HFRI Fund Weighted Composite index, a broader gauge of hedge funds across all strategies and genders. The strong performance comes despite women being under-represented across the hedge fund and wider asset management industry. It also tallies with previous data that show that hedge funds run by women outperform those run by men over five years.

More here – Financial Times

Hugh Hendry Is Closing His Fund

The wonderfully irrepressible Hugh Hendry of Noddy car fame ( see this video for the reference) is closing his fund. His rationale is explained here.

The Order Of Things Matters

Every now and again I get sent a magic trading system complete with equity curve, generally these are some sort of magic system someone is flogging that promises massive returns and never has a drawdown. They are the sort of quit your job with $10,000 and intra-day trade FX and make $10,000 per week. If you have been around markets long enough you will have seen this sort of thing – I have to give them some credit because at least they include and equity curve as opposed to simply quoting some mythical average return like fund managers do. Equity curves do convey a lot of information – they tell you about the trajectory of funds that have been invested. You can get a sense of how bumpy the journey might be and whether you could stomach the trip. However, the thing they do not tell you is the role of luck in achieving those particular returns. The returns a trading system generates and in turn its equity curve are uniquely sensitive to luck – not so much in the sense that the trader may have gotten lucky and run into the largest bull market in history which is entirely possible. But rather they are completely dependent upon the order in which the returns where generated.

To give you a simple example of this consider the chart below. In this chart I map the value of $1 invested in the All Ordinaries and $1 invested in the All Ordinaries but with the returns reversed so the return for 2015 becomes the return for 1900 and so on.

True Vs Reversed

I have plotted these on a log scale so you can get a sense of the journey – you can instantly see how simply reversing the returns changes the track of the curve. The reversed values lag behind the true values for 2/3 of the time, it lags for the first 30 odd years, catches up and then begins to lag again from the mid 1970s’. The true returns have a terminal value of $437,097.87 whereas the reversed values top out at $420,087.87. Simply changing the order costs the system $16,941.77

The same is true small changes in return – in the true return the years 1985 and 1986 were power years. They were the high point of the 1980’s bull run in terms of absolute returns with a return of 44% and 52% respectively but in looking at returns the question needs to be asked as to what the curve would look like if these were just average years of 9% return. Traders tend to spend too much time thinking about all the ways it is going to go right but very little time is spent on what could go wrong.

Expanded

The true values have the same terminal value of $437,097.87 wheres the changing of 1985/86 to average years drops the return to  $264,251.37 – a difference of $172,846.50. Whilst this does make for an interesting through experiment it also has practical implications. Trend following systems are built upon the outlier years – this is what generates their returns. If you miss these outliers then your returns over time will be ordinary. Traders do have a habit of missing these years simply because they are either caught in someone else’s narrative and miss market moves, they dont believe the move when it happens because they have a preconceived view of how much an instrument/position is worth or they are caught by the limiting belief that you can never go broke taking a profit. I lost count of people in the mid 1990’s who thought that COH was overvalued at $3.00. Granted its path to $157 has not been linear but its move to $45 was as close as you can get. This move is gone forever for such traders and will never return.

The same situation applies to the random reordering of returns. The chart below is the true returns compare to a randomly reordered sample of the same returns.

Random

The randomly reordered returns show almost a century of relative under performance including a substantial initial drawdown. So when you look at an equity dont take it as gospel, think  of the ways in which the journey could have changed with a few simple alterations or slip ups along the way. The overall aim of any form of system design is to produce a system that is incredibly robust and which shows profitability over a wide range of conditions and events.  In trading you need a little luck but you do not want to be dependent upon it.

HAPPINESS IS NOT ENOUGH

Years ago, I knew one of those guys who seemed to always be happy and excited. He was always just that bundle of warm fuzzies. First to give you a hug. Always happy to see you. Complimented you about things that had no business being complimented. We’ll call him ‘Jon.’

Jon was like a dog, one of those rare people whose enthusiasm and unbridled joy is so unceasing that it actually becomes a little irritating at times. “Can you, just like… hate life a little?” I used to think to myself. And no, I wasn’t wearing eyeliner.

Alas, it never happened. And I felt like an asshole for having such thoughts. I was just jealous, I decided. Or maybe worse: a bad person.

But I never felt like a bad person for that long, because Jon was so damn fun and engaging, that you couldn’t help but be lifted up by his spirits. He always wanted to know what was going on in your life. He was always encouraging. He was always happy for you and proud of you, even when you weren’t happy or proud of yourself.

I eventually just decided that Jon was one of those people who had it figured out. One of those people that the shittier parts of life seemed to pass on by. A person who somehow managed to walk between the raindrops. A person who was blessed and knew it and spent his days trying to make others feel just as great as he did.

Then one day, I walked in on him doing lines of coke off the back of a toilet.

What the fuck?

More here – Mark Manson

A Life Lesson


 

Why you should embrace failure – by Michael Yardney

Everywhere you look these days, people’s achievements are being celebrated, whether it be in the papers, among our family and friends, or on social media.

And why not?

Success is a wonderful thing and worthy of celebration, but so too is failure.

OK, so hear me out on this one.

Failure gets a bad rap and most of us go to great lengths to avoid messing up.

But here is the thing: we are all going to fail at some point — whether it be a succession of small errors or one monumental disaster.

The sooner we embrace failure as inevitable and arm ourselves with a few tricks to handle it, the better off we will be.

Here are four good reasons to celebrate failure:

 

  1. It builds resilience

little-treeTalent is an important component of success but it is not the only one.

Not by a long shot.

Hard work is also extremely important — as is discipline and focus — but I would also put resilience up there among the most important predictors of success.

Many would-be investors dream of financial freedom and start the journey by reading all the right books, researching the market and lining up their financial ducks in a row.

Then they hit a hurdle. Cash flow tightens or they miss out on a property. It all gets too hard and they give up.

Resilient types know how to take these setbacks in their stride.

Most often, this resilience has been built from a young age, where their parents taught them how to fail and pick themselves up again.

If you were a child who dealt well with failure you will most likely be an adult with the internal reserves to handle setbacks.

 

  1. It makes us more human and likeable

It’s what psychologists call the pratfall effect: when someone we perceive as competent makes a mistake, we often like that person more because it shows they are human, too.

Being vulnerable at certain times — failing, asking for help — is a necessary part of life and it helps us to bond better with others.

When we fail and we need other people’s help, we are able to cement relationships with family, friends and the community that sometimes we didn’t realise were even there.

Failure can open the door to better relationships with those around us because nothing puts things in perspective, or keeps our egos in check, quite like a run of bad luck.

 

  1. It makes us better at what we do

In my time in the property industry, I have seen many people fail at investing only to return to the game successfully, many times over.

When we fail it gives us a chance to reflect on our business and what went wrong so we don’t make the same mistake again.

We learn and adapt, and hopefully we grow from the failure.

It is amazing so many of us are afraid of failing when it is really one of the best ways to learn.

 

  1. We ask more questions

questions-blogWhether you choose to own up to your failures or hide them from others, they are a part of life.

If you learn to accept the possibility of failure, and not be so terrified of saying the wrong thing or messing up at work, then you will be a lot bolder.

This will mean you will ask questions without being afraid of looking stupid.

You will take calculated risks without being overwhelmed by fear and you will not be concerned what other people think and will therefore listen more to your own gut instincts.

And that will make you truly successful.

 

Guest author:

Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog. 

 

Four Important Trading Insights

Interesting piece from Dr Brett Steenbarger

…..Here are a few valuable insights I’ve gathered from my recent work with skilled, successful traders:

1)  What you trade is as important as how you trade:  The successful traders are trading instruments that move in meaningful ways and that capture their best ideas.  That means trading instruments that show the right kind of movement, and it means expressing your ideas through positions that offer the best risk/reward.  The successful traders have many ways to capture ideas:  many time frames, many instruments (stocks, futures, options), many markets……

More here – TraderFeed

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