patrick.net

My understanding is that passive funds perform just as well as actively managed funds over the long term, and that they significantly outperform managed funds after accounting for fees.

YesYNot says

My understanding is that passive funds perform just as well as actively managed funds over the long term, and that they significantly outperform managed funds after accounting for fees.

It depends on how you define performance. Raw return is not necessarily the best measure to those who invest in hedge funds.

Besides, we have been in a secular bull market for many decades. It is easy to believe in passive investment. Going forward, this is not necessarily true.

Peter P says

Rin says

Spinach and it's from New Orleans, not the NYC region. The creamy sauce is almost like Hollandaise, though not eggy

Hmm, I thought it was a mix of water cress and herbs.

I've only had it in the New England region and if those were included, it's probably more a part of the sauce because the main visible ingredients were the spinach & bread crumbs.

I'll ask the restaurant manager, when I'm out for seafood again.

YesYNot says

My understanding is that passive funds perform just as well as actively managed funds over the long term, and that they significantly outperform managed funds after accounting for fees.

The success of actively managed funds is highly dependent upon the prop trading teams. On the average, few will ever beat the long term indexes, over time, however, some will.

Rin says

The success of actively managed funds is highly dependent upon the prop trading teams. On the average, few will ever beat the long term indexes, over time, however, some will.

My point is that they do not beat the long term indexes on average. Furthermore, randomness can explain any success or string of successes of well respected fund managers.

Bill Millers fund beat the S&P 500 for 15 consecutive years after fees. Even he said that it's luck, because if the calendar year ended on a different month the streak would not have been there. Also, when you ask the question of how likely is it that one fund manager out of the lot beat the S&P for 15 straight years at some point during the time that the S&P has existed, the odds are 75%. So, it would be unlikely not to have such a trader. However, people attribute this to skill or brilliance, when it is really just luck.

Who cares about Bill Miller?

Geroge Soros, Paul Tudor Jones, Jim Simons, etc. are much more interesting. There are many more. They make so many trades that it is statistically significant.

I know of Bill Miller only from reading yacht magazines. His Utopia has too narrow a beam IMO.

How do you know it is statistically significant. Out of the thousands of fund managers that start, do you not expect a few to do much better than average due to random chance?

You can believe in anything. In the end, the whole point of statistics is to justify any position.

Peter P says

You can believe in anything. In the end, the whole point of statistics is to justify any position.

This statement is silly crap spewed by people who don't understand statistics. Do you really believe it? Statistics can only be used to justify two opposing positions when one person is misusing it.

YesYNot says

Statistics can only be used to justify two opposing positions when one person is misusing it.

Statistics is meaningless until it is interpreted. Language is fallible. Ultimately, we choose our own meaning. Truth is relative.