If you had $100m...

[MrGecko]

Say you are a fund manager. For whatever reason, you can't swing trade / scalp / use techniques we are all familiar with, you have to take "proper" investment decisions...

Where would you stick it???? Alot of funds have a maximum cash level, one of the biggest differences between institutional and "retail" - we can all decide to sit on our hands if we like, these boys can't.

So, where do you invest? You can spread it all around Bonds / equities / commodities, and we needn't get into stock / trade specifics....

For Example:

* I reckon utilities are a good bet at the moment, as a sector. Fuel prices have fallen out of the sky, which will have improved the margins. Coming into winter, with consumer spending on the way down, I reckon utilities (electricity, Gas + water) are a good bet. They are still valued on sky high costs and armageddon sentiment.

* I also reckon there will be some good value Junk out there, or low grade Government bonds, maybe "high risk" Brazil and Russia?? Given the extent to which governments have intervened, you would have thought they will have covered their default bases; thats all the world economy needs now. So I'd stick some in these.

* I would want to spread the retail sector - for example, short Marks and Spencer, Long on Aldi. Woolies, WHSmiths come to mind as having potential...

* I would also want to put some in a Money Market fund... after new year, I think things will start to pick up; either they do or we are all out of jobs anyway, so go for it.

* I think there could be some spreads in thh Broker-Dealer sector too: There are fewer clients around, and business is thin on the ground. Alot of Primary Dealers have gone bust or been taken over, so there is a possibility that some IBD's will get "promoted". For those that do, I'd go long, for those that don't, I'd go short - this industry is about to get a whole lot more competitive, some firms are going to suffer.


That'll do for now, you get the idea...

 

[Splitlink]

If I had 100 million? OK, let's stop there........

 

[arabianights]

pnmp

 

[yuapanda]

Well..Over 20 years or so, Equity outperforms Bonds by about 5%, so in theory put it all in equity (or non government bonds) of some sort.

Of course, your year to year performance reports might not be quite as good.

 

[luckyd1976]

Say you are a fund manager. For whatever reason, you can't swing trade / scalp / use techniques we are all familiar with, you have to take "proper" investment decisions...

Where would you stick it???? Alot of funds have a maximum cash level, one of the biggest differences between institutional and "retail" - we can all decide to sit on our hands if we like, these boys can't.

So, where do you invest? You can spread it all around Bonds / equities / commodities, and we needn't get into stock / trade specifics....That'll do for now, you get the idea...

For me in these times if I had 100mil.

I would/could do a couple of things.

1) Consider a monthly Contrairian form of ETFs investing. Basically dip(ing) your toe back in, while you hold the majority in Short term Gov's Or MoneyMark.

2) Move to Preferred Stocks of quality balance sheet companies or start up PIPES.

3) Take advantage of the Volitility and Trade with Collars. Take advantage of one of the Lowest real risk strategies out there.

I like your Utilities call. But for me Im on the side. It's like finding a needle in a hay stack right now. This is a top down event, Everything is falling.

 

[Splitlink]

If I had that much money, at my age, I would be looking to protect my wife, 3 children and 2 grandchildren without the aggro of doing it myself.

Who is the sage of investment these days? Warren Buffet, through his Berkeley Hathaway Fund. I suspect that he is leaving that fund in pretty good hands.I expect those shares are going down, too, and would try to track them to a favourable price and then invest in them.

Split.

 

[fifty2aces]

Well..Over 20 years or so, Equity outperforms Bonds by about 5%, so in theory put it all in equity (or non government bonds) of some sort.

Of course, your year to year performance reports might not be quite as good.

20 years ago, the FTSE was about half what it is today, which is a return of about 4% per year. I doubt bonds returned -1% in that time.

And 10 years ago today, the FTSE was at 5100, so if you bought then you'd be down 20%.

 

[BSD]

To be honest, if I had a 100 mill, I'd be doing exactly what I'm doing now, ie not investing for the long term.

No, I'd continue trading, and there mostly currencies in and out, with the only concession being a somewhat longer time frame, ie no 1 min, 5 min, or 30 min, but probably at a minimum 1 hr, 3hr etc charts.

Think it was Michael Marcus in Market Wizards who remarked that every single business / real estate venture he invested in failed, he was good at trading, and that's what he should have stuck to.

George Soros or say Paul Tudor Jones or Steve Cohen - all running multi-Billion hedge funds, with for example Cohen accounting for 3% of NYSE and 1% of NASDAQ daily turnover alone (!) - are and were superb as short term traders, but would probably have failed dismally if they would have tried their hands at Buffettesque, long term value investing.

And let's not forget: Buffetts wealth rises and falls based on the stock market valuation of his investment vehicle, Berkshire Hathaway, and not on hard cash in the bank based on trading performance as with his hedge fund colleagues.

Only my opinion obviously, but my take is that one should stick to what one knows and what one is good at, and then great things will happen.

 

[Splitlink]

Maybe, if Buffet's BH Fund had lost a phenomenal amount, compared to the rest of the markets' recent falls, I might change my mind but, with that much money, at my age, I'd want to enjoy some of it and that does not mean doing this! A change is as good as a rest. :clap:

 

[BSD]

True, true, Split

All work and no play, etc.

But, you do have that one pretty well sorted if I remember correctly.

3 or so hrs trading a day, and then off enjoying the rest of the day.

Sounds goooood !!!

 

[Splitlink]

True, true, Split

All work and no play, etc.

But, you do have that one pretty well sorted if I remember correctly.

3 or so hrs trading a day, and then off enjoying the rest of the day.

Sounds goooood !!!

The other side of the fence is always greener.

 

[MrGecko]

To be honest, if I had a 100 mill, I'd be doing exactly what I'm doing now, ie not investing for the long term.

No, I'd continue trading, and there mostly currencies in and out, with the only concession being a somewhat longer time frame, ie no 1 min, 5 min, or 30 min, but probably at a minimum 1 hr, 3hr etc charts.

Sure (inclined to agree) - but you cant: You may be able to hold, say, 6 or 7 % as cash at most, and probably won't be allowed to put more than 15 or 20% of your portfolio in any one "deal" - you HAVE to put it somewhere.

the $100m isnt yours remember, it is your clients. To get your clients to buy into your fund (say its open ended for arguments sake, priced at NAV for simplicity*) you had to write a prospectus and agree on conditions: conditions like maximum cash levels, maximum position sizes (from a risk perspective) etc... you HAVE to put it somewhere or give it back and lose your job.

* Remember a paper I read a while back about the prices on closed end funds... they have a life cycle of trading at a discount -> premium -> discount to NAV IIRC... will hunt out the paper if I can. Something like the "Closed end Fund Puzzle", google it.

 

[Phil Mibbutz]

Tricky one, but I think I'd just stuff it in the mattress with the other £100m.

 

[BSD]

The other side of the fence is always greener.

Sure (inclined to agree) - but you cant: You may be able to hold, say, 6 or 7 % as cash at most, and probably won't be allowed to put more than 15 or 20% of your portfolio in any one "deal" - you HAVE to put it somewhere.

the $100m isnt yours remember, it is your clients. To get your clients to buy into your fund (say its open ended for arguments sake, priced at NAV for simplicity*) you had to write a prospectus and agree on conditions: conditions like maximum cash levels, maximum position sizes (from a risk perspective) etc... you HAVE to put it somewhere or give it back and lose your job.

Good point mate, but I think I'd rather try and compound my way up to my own 100 mill, and then risk say 0.5% or round about there of my private hedge, and where one would probably do a deal where the bulk of the money is in bonds as collateral to ones brokers.

If, for the sake of argument I was trading clients funds in a mutual fund where these max cash exposures rule - unlike as with hedge funds where you are free to do what you want - , I'd probably still put the bulk of assets under management in safe bonds or, no idea what the english term is, short term money accounts where eg at the moment you can get around 5% p.a. here, but have access to the cash immediately, and then go back to concentrating on my area of expertise.

I am no big believer in diversification, but I think that if one wants to go down that route as per your example I'd hire a second guy, I think wearing a trading AND investing hat simultanously is asking for trouble.

But that is just me obviously.

 

[luckyd1976]

Sure (inclined to agree) - but you cant: You may be able to hold, say, 6 or 7 % as cash at most, and probably won't be allowed to put more than 15 or 20% of your portfolio in any one "deal" - you HAVE to put it somewhere.

the $100m isnt yours remember, it is your clients. To get your clients to buy into your fund (say its open ended for arguments sake, priced at NAV for simplicity*) you had to write a prospectus and agree on conditions: conditions like maximum cash levels, maximum position sizes (from a risk perspective) etc... you HAVE to put it somewhere or give it back and lose your job.

For times like these is why I have a top down LT trend trading strategy. Once it kicks in as bearish, I reallocate my %'s. Stocks/Bonds/Cash and Currencies.

For this Fund manager scenerio... Can he/she invest on the short side or the Inverse ETFs? If they can, it's easy to stay invested. Just pick a side and go for it.

My Contrairian Toe Dipping Strategies

Time Frame, Monthly, Quarterly, Whatever
(I prefer Quarterly in bearish times)

1) Use those LongTerm pivot points to increase buyin %'s on Support Points and vice versa

or

2) Use the last bear market Oct 2000- Apr 2003. 30 months or around 10 Quarters To figure out the DCA (Dollar Cost Averageing) to use for the current bearish cycle. Take your Stock Allocation divide by 10 and DCA in while keeping the remaining in STerm cash equiv.

 

[BSD]

This is actually a great idea for a thread Mr. G.

What I would really love is to hear from the people we have on this board - and this is one of the very few boards out there where we have some real outperformers - who are in the situation already of having large sums they have to deal with.

We have one very nice guy on this board who turned his initial stake into 40 million trading the DAX.

Be great to hear sthg about that outstanding feat, what changed on the way, did one start thinking more about money rather than just percentages, eg I have no problem risking 1 or 2 or 3 % per trade if its 100K I'm trading with, but if it's 40 mill I start seeing actual numbers and don't want to risk that much any more, did one have to start trading somewhat longer term to account for liquidity, did one start thinking about diversifying as per Mr. G's original idea for this thread, what happened on the way, that would be absolutely great to hear about !

 

[luckyd1976]

I think wearing a trading AND investing hat simultanously is asking for trouble.

But that is just me obviously.

To much diversification can lead to plain match market returns. But when you're talking that much money/style of trading its required. Most funds only focus on % per idea. which is great but the trading and investing hats are about the TimeFrame Diversifications. To me time frame diversification is more important than just diversifiying.

Ex: 50% LTerm Index funds, 30% MTerm ideas, etc...
There's so many thousands of ways to do it.

This is actually a great idea for a thread Mr. G.

What I would really love is to hear from the people we have on this board - and this is one of the very few boards out there where we have some real outperformers - who are in the situation already of having large sums they have to deal with...//what changed on the way, did one start thinking more about money rather than just percentages, eg I have no problem risking 1 or 2 or 3 % per trade if its 100K I'm trading with, but if it's 40 mill I start seeing actual numbers and don't want to risk that much any more, did one have to start trading somewhat longer term to account for liquidity, did one start thinking about diversifying as per Mr. G's original idea for this thread, what happened on the way, that would be absolutely great to hear about !

Early on people only see the percentages. Everyone I mean everyone sees those numbers and/or %'s and Computes out how long til your rich. I did it and we all have done it. But the money does change you as the bigger it gets.

Eventually it'll click and you'll say to yourself (or your clients will tell you) this is great but I cant keep trading like this. You'll see the normal percentage Drawdowns but those %'s are now chunks of money that your investors will pick up the phone and ask you about.

The good part is there are numerous trading ideas and products to always keep your diverisifcation in good standing.

 

[luckyd1976]

I have no problem risking 1 or 2 or 3 % per trade if its 100K I'm trading with, but if it's 40 mill I start seeing actual numbers and don't want to risk that much any more

40mil in a DOW fund (30 companies) 1.3 mil each stock (3.3% risked)

3.3% risked can get managed down even further with PUTS, or 1.3mil in a Individual DOW Collars, or a DOW Contairian PivotPoint system.

1.3 in stock in DOW companies are nothing (AA 100,000 shares to IBM 14,000 shares) Believe it or not you can still stay under the radar with 40mil and diversification.

 

[MrGecko]

To much diversification can lead to plain match market returns. But when you're talking that much money/style of trading its required. Most funds only focus on % per idea. which is great but the trading and investing hats are about the TimeFrame Diversifications. To me time frame diversification is more important than just diversifiying.

Ex: 50% LTerm Index funds, 30% MTerm ideas, etc...
There's so many thousands of ways to do it.

Great point Lucky.

In addition to what I've already said so far, I would want to take a view on some emerging markets. They got pummelled recently, so I think some equity in India would represent good value. As for sectors... I know that cars are going to fly off the shelves... any ideas?

p.s. thanks for showing me how to write in BLUE

 

[breadman]

Sure (inclined to agree) - but you cant: You may be able to hold, say, 6 or 7 % as cash at most, and probably won't be allowed to put more than 15 or 20% of your portfolio in any one "deal" - you HAVE to put it somewhere.

the $100m isnt yours remember, it is your clients. To get your clients to buy into your fund (say its open ended for arguments sake, priced at NAV for simplicity*) you had to write a prospectus and agree on conditions: conditions like maximum cash levels, maximum position sizes (from a risk perspective) etc... you HAVE to put it somewhere or give it back and lose your job.

* Remember a paper I read a while back about the prices on closed end funds... they have a life cycle of trading at a discount -> premium -> discount to NAV IIRC... will hunt out the paper if I can. Something like the "Closed end Fund Puzzle", google it.

MrGecko,
This is the most important reason why everyone who has money to invest in the stockmarket should try and learn to invest it for themselves.I will never put my money with a fund manager again.
Why should you have to be 90%/95% invested at all times. If I had money in a fund and they were in cash for the last year or at least the last six months I would not be looking for them to be sacked, I would be giving them more money. This rule where by you must be invested or you lose your job is no good to the average job investing their money.