According to the article, proponents say this can add two percentage points of returns while reducing volatility. The article also has a dissenting view that says there is no free lunch. Strangely the article does not have ticker symbols or even specific names of these funds, unless I missed it. I exchanged emails with the author and one of the funds is the ING 130-30 Fundamental Research Fund (IOTAX). Neither Yahoo nor Morningstar had much on the fund.
This concept is in the same general realm of the low beta pairs trading I wrote about a couple of weeks ago, at least that is the idea behind the funds. The 2% of alpha mentioned seems like it could be rather unpredictable. Getting the longs or the shorts or both wrong could easily result in a lag. The article makes it seem like the longs and shorts would be bottoms up stock picking which potentially adds in a layer of volatility.
I am not necessarily drawn to the specific strategy of the fund but I find it interesting that there may be more attention given to concepts that focus more on low beta absolute returns. Here I am not talking about strategies that try to shoot the lights out but more along the lines of capturing most of the return of the market with just a fraction of the volatility.
On a completely unrelated note; this picture is from Bolivia. Holy cow!
5 comments:
if you take the proceeds to go long, (and you pay interest along the way), how do you cover a short position when the cash has been depleted?
Roger, a few years ago we were backpacking the beautiful country of Bolivia - the road in your photo is probably the infamous Yungas Road nicknamed the 'The Most Dangerous Road in the World' starts high up in the mountains near La Paz and goes down to the jungles by Coroico with 3000ft drop-offs along the way. The locals will happily sell mountain bike rides down it that include tourist spots to view the remains of overturned trucks and buses - yes it's a 2 way road!
-Gal
From La Paz in Bolivia, you can take a dirt road that descends about 12,500 feet east to the junle. There are tour operators that offer the route by mountain bike. Just watch out for the big trucks and 5,000 ft. drop.
Gal, you type faster than me:)
Anon-2
thanks for the Bolivia info.
I got a bunch of pictures from this place emailed to me from a buddy.
I'll put up another one later.
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