Family Office Elite Spring_16

ules of engagement, absolute
return became an active and
disciplined process: “active” being
the dynamic allocation capital to
ideas then receptive to the market
and “disciplined” in retrieving
capital no longer being rewarded
by the market. In contrast to the
traditional asset manager spending
most of his time researching ideas
and building conviction, much
of the absolute return manager
attention and energy is focused on
the portfolio implementation and
ongoing risk allocation process.
The evaluation of investment
strategies should go well beyond the
means of quantitative justifications.
An effective qualitative evaluation
and understanding of investment
strategies are paramount to the
WORK OUT TERMINAL
FIND DROP OFF POINT
manager selection process, and
particularly DROP pertaining OFF to absolute
return
CARRY
strategies.
LUGGAGE
The hedge
fund universe is heterogeneous
in nature. CHECK Applying INthe same
metrics and filters throughout will
HAVE BAGS WEIGHED
systematically fail to correctly
identify managers SECURITY embedding the
highest propensity of delivering
absolute
WALK
returns.
TO LOUNGE
“Statistics are
like a bikini. What they reveal is
suggestive, but what they conceal is
vital.” (Aaron Levenstein)
HAVE TICKETS CHECKED AT LOUNGE
FIND SPACE IN LOUNGE
KEEP AN EYE ON THE FLIGHT DEPARTURE
The core element in the quest
for absolute LEAVE return LOUNGE is a matter of
discipline and humbleness. This
FIND GATE
is very difficult, if not impossible,
to capture WALK through TO statistics GATE and
quantitative analysis.
WAIT AT GATE
Mr. Stanley Druckenmiller explains
BOARD PLANE
it best with “It’s not whether you’re
right or wrong, but how much money
you make when you’re right and how
much you lose when you’re wrong.”
When asked about the behavioral
and personality characteristics of
the successful traders, Mr. Schwager,
author of several books on Market
Wizards, answers with the following
two elements: These are (1) “People
who are successful traders will have
the ability to quickly admit that
they’re wrong.” and (2) “Discipline
is also important.”
These core competencies and
behavioral characteristic are
obviously best understood through
a robust qualitative analysis
framework.
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