Comments on: Famous gambler says hedge funds can’t beat the dealer forever http://allaboutalpha.com/blog/2007/08/21/famous-gambler-says-hedge-funds-cant-beat-the-dealer-forever/ Hedge funds, portable alpha, 130/30 and alpha-centric investing Thu, 18 Mar 2010 13:53:53 +0000 http://wordpress.org/?v=abc hourly 1 By: David Merkel http://allaboutalpha.com/blog/2007/08/21/famous-gambler-says-hedge-funds-cant-beat-the-dealer-forever/comment-page-1/#comment-20983 David Merkel Wed, 22 Aug 2007 19:21:57 +0000 http://allaboutalpha.com/blog/2007/08/21/famous-gambler-says-hedge-funds-cant-beat-the-dealer-forever/#comment-20983 Someone at Reuters needs to take algebra again, or provide us with more details on their calculation. At an 8% decay rate, one will be at 2/3rds the original pool in 5 years. At double the rate, roughly 2/5ths of the original pool. Perhaps the missing link is an 8% creation rate, leaving things static now, but at 2/3rds the original size if the decay rate should double? If hedge funds are mature in terms of percentage of total assets, we should expect the number of players to shrink. Many smaller firms will be at a competitive disadvantage. Both Thorp and the guy at Reuters can be right here. Someone at Reuters needs to take algebra again, or provide us with more details on their calculation. At an 8% decay rate, one will be at 2/3rds the original pool in 5 years. At double the rate, roughly 2/5ths of the original pool. Perhaps the missing link is an 8% creation rate, leaving things static now, but at 2/3rds the original size if the decay rate should double?

If hedge funds are mature in terms of percentage of total assets, we should expect the number of players to shrink. Many smaller firms will be at a competitive disadvantage. Both Thorp and the guy at Reuters can be right here.

]]> By: Good to Go Pile . . . « Trading for the Masses http://allaboutalpha.com/blog/2007/08/21/famous-gambler-says-hedge-funds-cant-beat-the-dealer-forever/comment-page-1/#comment-20976 Good to Go Pile . . . « Trading for the Masses Wed, 22 Aug 2007 18:39:20 +0000 http://allaboutalpha.com/blog/2007/08/21/famous-gambler-says-hedge-funds-cant-beat-the-dealer-forever/#comment-20976 [...] Famous gambler says hedge funds can’t beat the dealer forever [...] [...] Famous gambler says hedge funds can’t beat the dealer forever [...]

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