Making Monkeys Out of the Sohn Investing Gurus | Hacker News Reader

Making Monkeys Out of the Sohn Investing Gurus

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23 pointslxm17 comments

I'm curious - do any HN readers invest heavily in actively-managed mutual funds or hedge funds where you aren't personally involved? I feel like it has become a widely-held belief among young, somewhat-affluent techies that index funds are the way to go, with some preferring to pick their own stocks and very few willing to pay significant management fees for someone to pick their publicly-traded equities. But maybe I'm wrong here? Anyone care to share your pro-active-management reasoning?

> do any HN readers invest heavily in actively-managed mutual funds or hedge funds where you aren't personally involved?

I believe 401k's commonly limit themselves to a group of funds and there is sometimes no "index" option, so I would imagine there are people who are in actively managed funds here.

On that same score, I find rolling one's funds into an IRA whenever possible (change of companies, acquisition of your employer) to be very helpful!

> On that same score, I find rolling one's funds into an IRA whenever possible (change of companies, acquisition of your employer) to be very helpful!

Having direct control of your assets is generally a good thing. One advantage to rolling your assets from a prior employer's 401k (or your own IRA) to your next employer's 401k is that it allows you to fund a backdoor Roth IRA with the single year's contributions. Otherwise you'd have to convert your entire IRA which could be a large (present day) tax bill.

Depends on which part of the capital markets. In large-cap/mega-cap equities I think it is quite hard to add value with active management. There are still large inefficiencies to exploit in the small cap arena. December was a good example. In late December you had a liquidity drought where one could buy just incredible values for a week or so.

That market drop at the end of last year; bandit territory! I only wish I'd had more cash.

I've been about 50-50 regional active funds and indices for most of the last decade. For the last few years, the active funds have been principally Baillie Gifford Japanese Smaller and Baillie Gifford American. I generally get into them alongside dull index funds in the same region; I'm into HSBC American Index C and Fidelity Index Japan, for example.

Generally, when I feel a region is looking good, I get into a mix of index and broad actively managed (with a liking for smaller companies). Reasoning... not much beyond thus far it seems to have worked out well. Those active funds have certainly outstripped the indicies, but with such a small sample size, I'm not so much datum as noise.

I wonder if there's a middle-place to be found between plain dull index, and mad-as-a-hatter active managed.

I'll add that some of these sentiments are cyclical. We have been in an environment for the past half decade where the greatest engines of growth were the megacap leading tech companies. When the largest are in the lead like that it is difficult to differentiate versus the indices. Second, this has been a tremendous bull market. In this kind of market nearly every hedge is a bad hedge which doesn't mean it wasn't a very prudent hedge ex ante.

A flat market is in many ways the best place for actively managed long-short funds to differentiate themselves. Given where overall market valuations are we are probably past the point of double digit market gains for a while (although I could have said that years ago). So I think that skillful active managers will be better positioned. That said, I recognize that I am an active manager so 1. I may be talking my own biases but 2. I think I can differentiate real investment skill from charlatans, which is very hard for even very smart non-professional investors

Do you feel that your approach beats a common benchmark over a ten year period?

Empirically I have outperformed over the past two decades. But lets qualify that the backdrop market environment matters. If the market surges straight up 12-18% a year for years on end I will tend to drag. As a value oriented investor I get less interested when valuations are higher which admittedly can cause underperformance if momentum keeps pushing things up. You can't get off the train too early. I saw too many of my peers think the bull ride was over in 2012/2013 because they got too anchored to post-crisis valuations and failed to see normalized valuations as appropriate.

When the market churns flat I tend to outperform because I have a sizable yield component and my individual name alpha shows its strength. When the market crashed in 2008 I ended up the year on short positions so that really impacts longer run outperformance. In December I went on a shopping spree after being defensively positioned into it which left me much better off than if I had passively been long the whole time.

My point is that no one strategy fits all investing risk thresholds or environments. I like to aim for a nice 7-12%/yr with minimal drawdown volatility and hedges against nasty things happening. I look "stupid" if the market is up 20% in a given year and I am not. Over the longer term nasty things seem to happen every X years which has vindicated the approach thus far.

This doesn't surprise me at all. I'd posit that it is only in the interest of these "gurus" to reveal their stock picks when they are ready to unload them - i.e. when they think the opposite of whatever they are predicting is going to come true.

Throwing darts actually is a viable investment strategy, since it overweights smallcap stocks (everything is equally weighted, after all) and it is known that those outperform largecaps in the long run.

Once again, Buffet, Bogle, etc. are proved right. Indexing is the way to go.

For those interested: Check out bogleheads.org. It's a blueprint for wealth, the slow and safe way.

Thought it said "Making Money Out of the Sohn Investing Gurus". I guess both makes sense.

Really wish I could read this article...

Can anyone link to the article w/o paywall?

(Still don't know why we allow WSJ articles on HN)

https://github.com/iamadamdev/bypass-paywalls-chrome

Search the URL on Google. The AMP mirror coming from a Google domain bypasses the nag.

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