Salient to Investors:
Martin Rothe at Altradis Capital writes:
- Most hedge fund strategies still largely depend on stock market performance and those not incorporating equities haven’t lived up to their promises.
- A strategy’s historical return may not necessarily predict future returns, but selecting strategies with distinct return distributions makes it possible to produce positive absolute future returns.
- Investors seek high returns, low volatility, occasionally large gains and possibly no return outliers – but no asset class in the long term meets all of these requirements.
- Actively managed stock portfolios have highly unpredictable return streams because of beta-dependence and dependence on stock market behavior and the manager’s skills.
- Over time a managed option writing strategy exhibits similar characteristics to selling insurance. Key s understanding market technicals, including seasonal effects, as well as fundamentals – returns are highest in the aftermath of market volatility.
- Managed Futures programs can exploit opportunities not available to traditional portfolios, and can quickly reverse direction when and if appropriate, a flexibility-not shared by traditional stock and bond fund investments
- Trend-following programs that systematically cut losses early and let profits run tend to have unusually good returns and a negative correlation to traditional investments during times of stress.
Read the full article at http://seekingalpha.com/article/1117201-in-search-of-an-absolute-strategy.