<story><title>Hedge Fund Uses Algae to Reap 21% Return</title><url>https://www.bloomberg.com/news/articles/2017-07-20/hedge-fund-quant-posting-21-return-says-biology-is-secret-sauce</url></story><parent_chain><item><author>habosa</author><text>In the chart, this is how the fund has compared to an S&amp;amp;P index over the past 5 years:&lt;p&gt;&lt;pre&gt;&lt;code&gt;  * 2013 - 5% over
  * 2014 - 15% under (and negative overall)
  * 2015 - 30% over
  * 2016 - 10% over
  * 2017 - About even
&lt;/code&gt;&lt;/pre&gt;
One exceptionally strong year, and pretty uneven otherwise.  Hardly proof that these biology-derived algorithms are the secret to market-beating returns.</text></item></parent_chain><comment><author>huac</author><text>We have no idea what the beta of the fund is; it&amp;#x27;s difficult to talk about performance without knowledge of the fund&amp;#x27;s underlying risk&lt;p&gt;The other problem is scale - this is pretty evidently an advertising attempt in order to raise more cash. It&amp;#x27;s a lot easier to return 20% on, say, $100M AUM than it is on $1B AUM.&lt;p&gt;To be fair -- these caveats are true for almost &lt;i&gt;every&lt;/i&gt; fund you hear about. I do think that&amp;#x27;s kind of my big issue with the article though, that this fund is just like every other fund; it&amp;#x27;s intrinsically an actively managed portfolio with the same shortcomings as any other. It&amp;#x27;s just got a good publicist!</text></comment>
<story><title>Hedge Fund Uses Algae to Reap 21% Return</title><url>https://www.bloomberg.com/news/articles/2017-07-20/hedge-fund-quant-posting-21-return-says-biology-is-secret-sauce</url></story><parent_chain><item><author>habosa</author><text>In the chart, this is how the fund has compared to an S&amp;amp;P index over the past 5 years:&lt;p&gt;&lt;pre&gt;&lt;code&gt;  * 2013 - 5% over
  * 2014 - 15% under (and negative overall)
  * 2015 - 30% over
  * 2016 - 10% over
  * 2017 - About even
&lt;/code&gt;&lt;/pre&gt;
One exceptionally strong year, and pretty uneven otherwise.  Hardly proof that these biology-derived algorithms are the secret to market-beating returns.</text></item></parent_chain><comment><author>alexandercrohde</author><text>I agree, I don&amp;#x27;t believe this would pass a test for statistical significance (of outperforming the market indices).&lt;p&gt;Unless there is a way to break this data down much more finely (by 6-day window, by individual asset) in which case it&amp;#x27;s possible there&amp;#x27;s a high p-value but low-power effect. Even so, if there are more than 100 experimental firms, a single one with p-value .01 isn&amp;#x27;t evidence enough to jumping to big conclusions.</text></comment>