Saturday, September 8, 2007

Bookkeeping: Rising Tide Growth Fund Performance

Posted by TraderMark at 11:56 AM TweetThis
I will update the fund's performance every so often, either monthly or quarterly. I am measuring myself against the Russell 2000 since the majority of the holdings in my fund are small and mid caps. Marketocracy.com measures as a default against the SP500.

The fund is now about a month old; and due to a quirk of when I started the fund which was in effect Monday August 6th, my start date for all measurements is the close of Friday August 3rd which just so happened to be (aside from the close on August 15th during the worst of the correction) the lowest close of the year 2007, and in fact the lowest close since early November 2006. So this quirk will hurt my performance in the near term, as the fund was obviously nearly 100% in cash the first day, and it takes time to ramp into positions.

Meanwhile the Russell 2000 ramped up from 755.4 on Monday August 6th to 774.1 by Wednesday August 8th (+2.47%) and a day later on Thursday August 9th it was up to 795.7 (+5.33%). Meanwhile the fund was just transferring from 100% cash to some entry level positions during that time frame, missing out on most of that 2.5-5% jump. So it was a volatile time to start the fund, and if I had officially started 3 days later my starting point for the Russell 2000 would of been 795 instead of 755, well over 5% of difference. Since it took a few weeks to get the fund fully invested that was just bad timing. In 2-3 years time it won't matter much, but for month 1, quarter 1, and year 1 of the fund, that bad luck in timing will hurt near term performance measures.

With that said, since inception the fund is +3.54% vs Russell 2000 +2.70% = +0.84% outperformance. Nothing special there.

However, if I had 'officially' started the mock fund 2 days later, the Russell 2000 (basis 774.1) would of returned +0.21% and if I had started 3 days later (basis 795.7) it would of returned -2.50%. So the fund's Year to date return of +3.54% vs either of those numbers would look more impressive. With the Russell 2000 trading in the 770s/780s for most of the 2 weeks after inception, that is probably a more accurate 'start' point. Mentally I am using Russell 775 as a fair value starting point.

In the past week, the Russell 2000 has returned -2.15% vs the fund's return of +0.11% - so now that I am fully invested some of the returns are looking better. Obviously having the ETF short positions as the #2, #3, and #4 holdings in the fund, along with a >20% cash position the past week also helped to offset the losses in the long holdings.

Posted by TraderMark at 11:56 AM Comments (3) | Edit This Post | Create A New Post

Labels:

3 comments:

Parker Capital Management said...

In hind sight, wasn't it a great time to launch the Fund? You were buying from launch until the 16th when everything was headed down and you likely got some good stocks well below their 52 wk highs and at good discounts...probably a rough two weeks as far as your performance in the beginning but now a few months later it was probably the best time to be allocating all of your cash in mid August -- much better than if you had launched 2 months later near the October 9th highs when you would have been paying a premium.

December 22, 2007 6:02 PM  
TraderMark said...

could be, but truth be told I went into the market slowly. In hindsight if I started 4 days later everything would look better by 5%. That Friday the 3rd of August the market really was near its lowest point so that Monday morning I came in 100% cash of course, and the market rebounded within the week 4%+, so I missed almost all that gain since I was heavy into cash. Many stocks I was interested in ran away from me, making 10-15% type of rebounds. So I tried to ramp up quickly to get 100% allocated in case that was the bottom ... which turned out poorly since I had zero cash 2 weeks later when the market ultimately bottomed in mid August. So I actually suffered a lot the first 6-8 weeks since I had 100% cash on that first run up (early August) then I tried to make up for it by jumping in around a week later, only to be left with no cash to buy at the absolute bottom. A lot of position I bought around day 10-12, fell 10-15% in short order by Aug 16th but I did not have cash free to buy them at that point.

Either way, it will come out in the wash. I would of preferred to start in late February to be blunt as that was the yearly low. As you can see my 1 month and 3 month numbers are actually far better (relatively speaking) than the August numbers, since month 1 was so topsy turvy and the market was so volatile and I was getting my bearings. Going from zero to trying to get the allocations you want is difficult on the front end. The outperformance didn't start until about week 8 or so. So the start date didn't help since the fund really didn't take off until near end of month 2.

December 23, 2007 7:31 PM  
TraderMark said...

actually if you look at the graph linked to my performance (hyperlink in left margin under Rising Tide Growth Fund) you can see what I am trying to explain in a picture form. I actually suffered worse than the market in mid August since I was chasing the market up and all of September and most of October I was only doing "par" with the market. If indeed your theory was true, then I should of been outperforming by buying at the "lows" in August. In fact, I didn't outperform until after October 9th (which is the date you used as the highs). What was happening the first 8 weeks of the fund was everything in the market either went up or down; there was very little discerning. Everything was bad or good. Then we had a 4 week period in October (before the November swoon) where the market was flattish to small trend down. That is where my outperformance began - in fact I was blogging about how this was "my" type of market finally: good stockpicking was rewarded, instead of every stock being beaten to a pulp or every stock rising like mad. Again, the chart clearly showed this. If indeed I started on October 9th, (which was the market peak) my performance would be even better because the first 7-8 weeks or so of the fund I only matched the market (see my orange line versus the indexes). I am speaking of relative performance of course (fund performance vs the indexes). "Everything" went up 10% from when I started to early October - me, the indexes, etc. Then after that is when the separation started.

December 23, 2007 7:39 PM  

Post a Comment

Subscribe to: Post Comments (Atom)

Disclaimer: The opinions listed on this blog are for educational purpose only. You should do your own research before making any decisions.
This blog, its affiliates, partners or authors are not responsible or liable for any misstatements and/or losses you might sustain from the content provided.


Site by codeeo
Original WP Premium theme by WP Remix