2010
Long short hedge funds?
Filed Under (Hedge Funds) by Admin on 05-07-2010
Long or short? France are out of the soccer world cup and it’s Warren Buffett’s fault? Berkshire Hathaway short sold Les Bleus to profit from their demise. Negative bets “cause” failure according to those who blame short sellers for the credit crisis. Did the team fail from fundamental problems or shorts? Have sovereign debt spreads widened due to some belatedly realizing there are no risk free bonds or use of credit derivatives? The fact is that markets where short selling and derivatives are not allowed have worse volatility and drawdowns. Anyone not shorting is not hedging. A flight to “quality” so BUY bonds and the yen? Long/short is the way to go.
A portfolio without shorts or derivatives is like a soccer team with no defenders or goalkeeper. The unhedged, unskilled crowd has underperformed CASH since France won back in 1998; so far my best ever year but commonly regarded as “bad” for hedge funds due to the blow up of one. Hedge funds have demolished long only managers since England won back in 1966; the year long/short was first widely publicized and shown conclusively to be a vastly superior alternative strategy for portfolios. After 44 years how much longer must most investors wait to be allowed to properly diversify and allocate to the pure alpha of genuine skill?
Jul 05, 2010: Most of us want to be millionaires. And if we can be one while we are young, it’s a double whammy! After all, the best time to enjoy our wealth is while we are young and healthy. In the process of chasing wealth, if we run out of time, the “millionaire” tag is not that attractive, isn’t it? Well the last time we checked, we found that we still can’t take our money with us :).