Author Topic: When to jump!  (Read 3331 times)

user33

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When to jump!
« on: September 09, 2013, 08:53:13 AM »

Looking for some advice/past experience ... basically I invested baout 50k into a MAN fund ( hedge fund ) in July 2010
over the last 15 years is has made returns of about 9% per year ... but since 2010 it is a disaster ie I am now down 10%.
question is,  should I sell out and invest this elsewhere or hang in there and wait to see if it starts to pick up again???
( this is not money that I require now .. )

any advice   would be great!

thanks

matchewed

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Re: When to jump!
« Reply #1 on: September 09, 2013, 09:03:32 AM »
Sell. Considering the S&P 500 performance since 2010 has been about a 50%(http://goo.gl/sR4IuT) a 10% loss is in my mind unforgivable, not even taking into account whatever fees you're experiencing. Cut your losses now and move it to a more reasonable investment.

KingCoin

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Re: When to jump!
« Reply #2 on: September 09, 2013, 11:42:03 AM »
Depends on a few things.

1) How do you expect this fund to perform in a volatile or falling market? If it's going to be a winner in those scenarios, a 10% decline may be forgivable, as it will act as a hedge when the market turns sour.

2) How does this figure into your portfolio as a whole? If your assets are sufficient, and this is part of an alternative asset class bucket, it may be fine.

3) What does the fee structure look like? Paying the traditional 2+20 is a tough pill to swallow in an illiquid market with few opportunities.

4) What is the explanation of the underperformance? Do they trade a strategy that regresses toward the mean or is the loss simply water under the bridge?

fiveoclockshadow

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Re: When to jump!
« Reply #3 on: September 09, 2013, 12:10:12 PM »
Hedge funds are as an asset class pretty awful.  I wouldn't get in one or stay in one for any period of time.  If you have a large chunk in there and it is volatile then perhaps you may want to get out over time rather than all at once, but get out one way or another.  And read up a bit on investing and most importantly behavioral finance errors.  Most investors are their own worst enemy and buying into a hedge fund is a strong indicator of such!  The good news is you've got nice chunk of an investment and it hasn't done too horribly - that's far better than a lot of folks.  Move it to sensible asset classes and you should be good.

Nords

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Re: When to jump!
« Reply #4 on: September 09, 2013, 08:50:33 PM »
Looking for some advice/past experience ... basically I invested baout 50k into a MAN fund ( hedge fund ) in July 2010 over the last 15 years is has made returns of about 9% per year ... but since 2010 it is a disaster ie I am now down 10%.
question is,  should I sell out and invest this elsewhere or hang in there and wait to see if it starts to pick up again???
( this is not money that I require now .. )
any advice   would be great!
thanks
Trick question.  We've heard this one before.

You should figure out what your goals are for your entire portfolio, and then come up with an asset allocation plan. 
http://www.bogleheads.org/wiki/Main_Page

Once you've decided what sorts of assets you want to invest in then you can decide how this hedge fund matches your asset classes.  Maybe it's part of your 10% devoted to testosterone-poisoned actively-managed alternative investments, or maybe you've decided that you want to stick to low-cost passive index funds. 

I'm pretty sure that you'd prefer to control your portfolio's costs, and I bet that the hedge fund has some pretty eye-watering expenses.  You may not have minded those expenses when the fund was regularly spewing out 9% APY, but I bet it hurts pretty badly when the fund is down.  Putting together an asset allocation plan will help you figure out your overall expenses and how much this hedge fund is consuming.

user33

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Re: When to jump!
« Reply #5 on: September 19, 2013, 02:40:29 AM »

Thanks all for this advice

Quick update  I have just sold this fund ....

now back to basics!   ( and also time to remove the testosterone fueled expectations!!! )