

Sorry, your return is too high for us - ahalan
http://epchan.blogspot.com/2011/07/sorry-your-return-is-too-high-for-us.html

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mathattack
The post is ludicrous on so many levels....

1) When people get returns in the 5% a month range, let alone double digits,
they usually shut out external investors.

2) Consistent 1-2% monthly returns are frequently a sign of fraud.

3) If you find something on your own that looks too good to be true, 95% of
the time it is. If someone else is asking for your money that is too good to
be true, you lost that remaining 5%.

4) It is theoretically possible that someone found this once in a million
(billion?) possibility and just can't find money for it. But it's more likely
that they're either fraudulent, misreading their data, or just a looney tune.

~~~
alnayyir
I know a couple fund guys, and one in particular runs a really aggressive
fund. His example sort of presents an exception to what you're saying, but it
mostly doesn't for reasons you'll see in a moment.

I can't really discuss his strategies for producing double-digit-per-month
returns, but suffice it to say, the money involved doesn't "scale". Further,
it's to the fund's advantage from an institutional as well as an individual
perspective to not "outgrow" their ability to maximize their returns on extant
capital.

Their incentives are structured on returns and not money under management.
They're also a purely private fund, it's almost entirely
friends/family/registered investors that are somebody's cousin, etc.

They don't really need more money.

They just need nobody to notice how they're making their money.

Edit:

Worth noting as well that they're not part of the wall street scene nor are
they based out of the greater new york area. They aren't into the
marketing/sales side of running a fund, they're mostly programmer/quant/trader
types that are in it for the numbers game.

~~~
veyron
most HFTs can usually get very favorable leverage terms because they don't
hold naked overnight positions (either they are hedged or just flatten at the
end of the day), artificially boosting return numbers.

There was a similar conversation regarding fred wilson's fund obtaining very
strong returns because they limited the AUM.

------
shalmanese
Past performance is no guarantee of future results. If only more people had
consciously avoided deals that looked too good to be true, Bernie Madoff never
would have happened.

