[lordnacho]

> The answer to the theoretical first question might well be "yes, there are exceptional traders outperforming the market". The second "real-world" question is much more involved: > * can I reliably identify them, ex ante? That's pretty hard.

The answer to question one, as you say, is yes. If it was purely coin tossing any group of performers would get halved each year (let's not mention skew). Now there are funds that fall quite hard, like Odey. But it's clear there are funds that seem to defy gravity.

Question Two. Here's how I decide if I believe in a fund.

Here's a real life example. A friend of a friend came to a meeting and explained that under certain circumstances, you can buy certain unit trusts cheaper than they're worth. You need to dig out the nitty gritty details of each fund: the holdings, the rules, the fees, trading regulations, and so on. You put all this in a computer, which tells you when there's a mispricing. You need good relations with various counterparties, or you won't get the trade. And you can only do it up to a certain scale, because there's only so much mispricing. And it's sensitive to costs, so you need his particular cost agreements.

This also explains why you'd have to invest in this particular guy. He has the infrastructure and relationships already in place, so even if you knew his method, you couldn't do it yourself.

You're right about a lot of funds being smoke and mirrors though. I used to run one, and the investors never ask the right questions. Mostly they chase returns, but they don't even know how to tell the difference between one track record and another. It makes a huge difference how they're generated, yet most questions are simply trying to put you in a category, like produce in a supermarket.

[chollida1]

> You're right about a lot of funds being smoke and mirrors though. I used to run one, and the investors never ask the right questions.

Wow!!!!!

I've never heard an owner of a hedge fund refer their fund as "smoke and mirrors". I really hope for your sake that you just misspoke.

I'm sorry it didn't work out for you. I understand how hard the industry can be, if you ever think of trying again, don't let your past failures dissuade you.

I'm available to chat if you'd like:)

[lordnacho]

We've already spoken, well emailed. I'm doing prop for an HFT, not a million miles from running a fund. Well, it's better anyway.

As for smoke and mirrors, naturally I mean other people's funds! Mine actually would have won the bet with Warren by a fair margin.

Come to think of it, I was a partner before that in a fund that wasn't so good, but had lots and lots of investors climbing over each other to invest.

[FabHK]

> the investors never ask the right questions. ...

> most questions are simply trying to put you in a category, like produce in a supermarket.

Yeah, and who can blame them? It's very hard unless you have an inside edge. And lamentably many funds cater to those investors, put out nice and shiny brochures, and get good amounts of money to manage.