Monday, October 26, 2015

Hedge Funds’ Results: Far From August - Barron's

Hedge Funds’ Results: Far From August - Barron's:

"Through mid-October, the HFR hedge fund index was about flat for the year, compared with a 1.7% price drop for the S&P 500. Once again, the same argument emerges for hedge funds, which usually charge a 2% management fee, plus 20% of any profits, as it did in August: We might not be doing great, but we’re doing better than long-only stockpickers. There are fair arguments to be made on both sides when it comes to how hedge funds fared during these recent tests, whether it’s for August, 2015’s first 9½ months, or longer stretches. It’s important, however, for hedge funds not to move the goal posts in mid-game. If they’re billed as a good vehicle for relative returns—beating the S&P 500 in down markets and lagging behind it in upswings, or some variation of that—that’s fair enough, if expensive compared with mutual funds. Hedge funds look less credible when they purport to offer absolute performance—that is, positive returns in any market—and then fall back on the relative outperformance argument when the going gets tougher. You can’t have it both ways, especially when you’re charging 2 and 20.  "

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Warren Buffett: Why hedge funds fail - MarketWatch

Warren Buffett: Why hedge funds fail - MarketWatch:

 "The fixed annual fees hedge funds charge are the real money-makers, not the contractual "bonuses" for performance. By extension, Buffett is making a statement about active managers of all kinds. They're not in the business of beating the market. They're in the business of attracting assets and that's all.

For example, a hedge fund managing $1 billion charges a fee of 2% of those assets per year plus 20% of trading profits."

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Tuesday, October 06, 2015

A Tax to Curb Excessive Trading Could Be a Boon to Returns - The New York Times

A Tax to Curb Excessive Trading Could Be a Boon to Returns - The New York Times:

Interesting piece--not sure a tax would solve the problems, but ???

"Why do people hurt themselves by trading in this manner? Is it like gambling, with its danger of addiction akin to cigarettes? Maybe a little. A different study Mr. Odean worked on showed that when Taiwan introduced a national lottery, trading on the stock exchange fell 25 percent. So at least people there were able to substitute something else for their wagering activity. Mr. Odean chalks up much of the trading to overconfidence. Most of us think we’re better than the average investor, and men trade more than women. The Internet gives us the illusion of feeling well informed, so we conveniently forget that somebody else read everything we found before we did. Then, we compound the sins by failing to diversify"

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Monday, October 05, 2015

Europe's airlines spruce up their jet fuel hedges | Reuters

Europe's airlines spruce up their jet fuel hedges | Reuters:

"With fuel accounting for 46 percent of Ryanair's (RYA.I) 2014 operating costs, 33 percent of British Airways' (ICAG.L) and 21.5 percent of Lufthansa's (LHAG.DE), price fluctuations can seriously impact company profits. To reduce price-fluctuation risk on projected operating costs, many airlines hedge a proportion of their future fuel needs six to 24 months in advance by buying jet fuel or crude oil contracts from banks or on an oil futures market. But hedging strategies differ and not all airlines – and therefore consumers - will profit from today's low prices. [O/R] "

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Unfriendly Tax-Friendly Funds - WSJ

Unfriendly Tax-Friendly Funds - WSJ:

"The major finding: In every year [that was studied], tax-managed funds on average failed to save their investors more money on taxes than their incremental expenses, or the difference between their operating costs and the lower fees of the other types of passively managed funds.

In other words, any tax savings were eaten up by fees.


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