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Strategies & Market Trends : Roger's 1997 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Fernando Saldanha who wrote (8901)	12/27/1997 7:55:00 PM
From: Pancho Villa	Respond to of 9285

>>Jon, I do not think the objective of a short fund is making money. << I would phrase this slightly diferently. The objective of a hedge fund is not necesarily to beat the index but to try achieving excess risk adjusted return. For example, A hedge portfolio with 50% net market exposure that falls less than 50% of the market's fall (for example, market falls 10% and you only fall 2%), and that raises more than 50% when the market rises (for example, market rises 10% and you rise 8%) is clearly beating the market on a risk adjested basis. If this is combined with leverage, then the market would also be beaten on an absolute basis at reduced risk. Of course the assumption here is that the person has superior stock picking skills, both on the long and short side. Pancho PS: gaging/comparing hedge portfolio return on short time spans (i.e., a day a week is not very relevant as in the short term random factors predominate. In a day anything can happen. for example, I currently have about 0 net market performance and yet last week had a day in which I dropped 3% on an up dayas I was unlucky enough to have my shorts go up and longs go down!