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June 2010,Newsletter

July 14, 2010

The last month had been a very tough month for the entire absolute return community and unsurprisingly, the missing volatility from the bourses affected the performance adversely. As of June 30, we were 6% down, on an absolute basis, though we have still been able to beat the broad index by  .6% margin.Almost a whisker!

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13 Comments leave one →
  1. manu permalink
    July 14, 2010 10:10 pm

    In the comparison bar chart, what are the x and y axes?

    Also, the daily mean return is 0.57%? I’m probably misunderstanding it, but doesn’t it imply that the annual mean return would be something like 150%?!

    • July 15, 2010 5:33 am

      The Y axis, almost always when dealing with sophisticated funds, are about NAV values. They by default start at 10.
      The X axis is the index of the trading days in the month.

      And going ahead for the second question, I would refuse to comment apart from gesturing just a smile.

      I would say, yes you are on the right track, but you are just noticing one aspect of the deal:

      1. Its mean daily return and not median daily return.
      2. Standard deviation is high(How are you using this value? The classical parameter of risk. This is not exactly,simple compouding @ 0.57%)
      3. We use leverage.
      4. Because the use of sophisticated derivatives to play vega or gamma, there is a considerable skew added to the return graph, so traditional Gaussian statistics are not true.

      But that being said, this is one of those things which very few people notice. And I use this, to underpromise and kind of overdeliver. I usually talk to them of 25% officially, but to expect 35-50% unofficially.
      Good observation!

      Soham

  2. manu permalink
    July 15, 2010 3:25 pm

    Never mind, I basically don’t understand your first line:

    “As of June 30, we were 6% down, on an absolute basis, though we have still been able to beat the broad index by another 6% margin.”

    6% down for the month or in some other timeframe? Again, the index beat is in which timeframe? The index returned approx 4.5% in june, if you beat it by 6% in June, you would have returned a total of 10.5% for the month of June which would have lead to an approx 10.5/20 = 0.55% daily return which would be close to your daily mean return. I understand that this is a very rough approx (distribution of returns is important, etc) but it should be close.

    So, I guess I don’t understand the 6% down on absolute basis part. I was initially thinking you were down for the month and so was surprised about the large mean daily return.

    As for the bar chart, it is very confusing, because the red bars in the middle are invisible and secondly, I don’t see a 6% difference as of the last trading day. IMHO, a line chart would be better (and also show the NAV re-indexed to 10 at the 0 x value)?

    Your unofficial returns are mouth-watering 🙂 Congrats on the good performance!

  3. July 15, 2010 3:55 pm

    Manu,

    I guess, there were a few things left dangling, due to the lack of experience in publishing such an important piece of document.(Guess I will have to outsource even this).

    1. The statistics are the datasets derived from our operations since inception

    2. The bar chart is for this month only. (June 2010)

    3. Thank you for drawing my attention to a particular point, and I am apologetic about a gross negligence on my part. Keeping in view, of the transparency of this entire blog/news flowing from my operations, I am putting my apology on a public forum rather than mailing you directly or at worse, just sidestepping it.
    The index beat is only .6% and not 6% (6% beat is to be rejoiced not to be felt consoled about, the line at 4 page quotes “but acting as a minor consolation to you… beaten by 6%” , which now reads as “… beaten by .6%” )
    Once again, I am apologetic. And I hope this error on my part doesnt dilute the intensity of my efforts.

    Thank You.

  4. manu permalink
    July 15, 2010 5:50 pm

    I don’t think there are too many issues. The typo probably confused me. And, if the bar chart had labels on the axis and the stats table title mentioned that they are stats over a longer timeframe, it would be faster to understand.

    I don’t mean to pick on errors for the sake of doing so. Thanks for fixing the typo, its not a big deal. It does make sense now – I wasn’t sure why 6% was a whisker! 🙂

    All said and done, your daily return/std dev is still terrific.

  5. July 15, 2010 5:55 pm

    About the quality of graphs, from the next newsletter I assure you, you will find better and clearer graphs.

    The reason I am concerned about that typo is the show of professionalism(or lack of it). I take serious efforts to not paint my performance in a flattering light, if there was nothing to be flattered about. And when such typos creep in, it can confuse folks.

    Soham

  6. anon permalink
    July 18, 2010 12:19 am

    Weren’t you down 6% as of June 29th (instead of June 30th)? “As of” is usually used to indicate the closing price/value as of that date.

    • July 18, 2010 12:40 am

      I have a penchant for rounding off when revealing my data unofficially. 🙂

      • anon permalink
        July 18, 2010 6:26 am

        rounding off? with dates too?!

  7. Soham Das permalink*
    July 18, 2010 6:30 am

    🙂 I like your sense of humor.
    There are no dates attached, only the trading days session number.

    • anon permalink
      July 18, 2010 6:49 am

      I was talking about the date referenced here: “As of June 30, we were 6% down, on an absolute basis”.

      • July 18, 2010 10:55 am

        Right. So? Do you expect it to be higher or lower?

        Here Absolute basis, is meant as MoM.

  8. anon permalink
    July 18, 2010 4:38 pm

    As I said in my first message, I expected it to be June 29th and not June 30th. I have a problem with the date not the percentage. Never mind, my fault perhaps, I am probably misunderstanding something.

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