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Comment by bpicolo | Hacker News Reader

The market as a whole is up 7%, so really they're down 10%. They lost money in a bull market

What the market is doing isn't really relevant to a market neutral strategy, and that is almost surely what they are running. The goal is to make money consistently, whether market is up or down.

I am on the platform, and yeah they post frequently about looking for market neutral strategies.

Yes. You'd have to really try pretty hard to lose money in this market.

not really. Value based strategies tend to get hurt pretty bad during the tail end of bull markets when euphoria starts to set in, and increases tend to be due to P/E expansion and rosy predictions for the future rather than current performance, and tend to do very well after downturns and things get oversold.

Still, most value funds aren't losing money over the past 5 months.

They are probably market neutral. For as many dollars they are long, they are short an equal amount. Therefore it doesn't matter what the market is doing. It matters that their longs outperform their shorts.

A bull market with pretty low volatility, though. Especially since the early summer. At this point, a 2% daily move in SPX would be a 4 sigma event. Making money from actively trading the market is much harder when ranges are small, and it's easy to die from a 1000 cuts when you don't adapt.

4 sigma event assumes normal distribution and its abundantly clear that stock market distributions are far from normal.

They're not down 10% and market gains are not risk free.

Performance can really only be compared with risk free returns (ie. TIPS). Anything else and you have to look at a bunch of other factors like volatility, VAR etc.

Index gains are just about as risk-free as you can get.

Yeah, indices do never go down...

Wow.

An actual risk-free* investment would be money market or TIPS.

Index funds may be the historically best performing equity investments (when including expense ratio) but no equity investment is risk-free.

That's what a bull market lasting eight and a half years does to public sentiment :)

A crash would make for interesting times, that much is certain.

That's wildly untrue, and to the extent that people think that we are at risk of economic collapse.

This is a ridiculously tiny amount of time to judge performance.

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