Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Stock Mania ! - Mutual Funds that can short. -- Ignore unavailable to you. Want to Upgrade?

To: dumbmoney who wrote (51)	5/3/1998 12:05:00 PM
From: Knighty Tin	Respond to of 129

DM, I don't take it personally. This is discussion, not attack. <G> Large size does not mean that you have to underperform the market. That is a myth perpetuated because most large funds are closet indexers anyway. This goes back to the main theme of this thread: these managers are not using all the tools available to them to beat the market. If you are just going to buy stocks, yes, size matters a lot. You cannot buy a position in Genzyme Transgenics and expect it to significantly impact your performance if you are a $25 billion fund. The co. is simply too small and to buy a position that will help your performance, you would need to own about 20% of the co. Not exactly a liquid play. But there is no reason why a mega fund cannot be doing credit spreads in T-Bonds and T-Notes. Vinick, when he was at Magellan, tried to enhance performance by buying govts. His timing was horrible and he no longer manages Magellan. But the thing that amazed me is that he bought all those long bonds when he could have played the market much more efficiently and safer with options and futures. I don't think that possibility even crossed his mind. Part of the problem might have been the short-short rule. But, as noted earlier, that is no excuse for current managers. There are plenty of liquid instruments out there that give managers a chance to outperform in any market environment. For example, how many intl. fund managers bought puts on the Japan Index before the last decline? How many tech fund managers bought puts on the SOX? They are not outperforming for two reasons: 1. Most are simply not good enough, and it wouldn't matter what investment techniques they used. 2. Those who are good enough are fighting with one hand behind their backs by limiting their asset classes. Good performance can be just luck for a bull market or a bear market. It is not just luck for a complete cycle. The problem as I see it is more the fact that so many fund cos. are using "team" approaches, or, as one of my former bosses liked to crow, a disciplined approach, which hides the identity of the folks who outperform and those who underperform. And, in and of itself, the team approach and the concept of a discipline limit returns to index levels. The thoughts are all made out of ticky-tacky and they all look just the same. I do agree that picking a good fund manager is very difficult. That is why I think many otherwise intelligent people are turning to index funds. And, as they do, more "managed" funds start to resemble index funds. However, I think this is a bad development and I don't like it. Better the goofus gunslingers of the 1960s than the boring indexers of the 1990s. At least the gunslingers were trying to win the game. One caveat. Some of my thoughts reflect a prejudice toward wealth creation instead of wealth maintenance. I feel that if you are not improving, you are losing ground. Many will disagree with that approach and all indexers disagree with it. Good luck, MB