Quant Macro Investing

Risk Taking Disciplined

Even Better Than the Real Thing – 700% this decade

Even Better Than the Real Thing – 700% this decade

December 7th, 2009 by Mebane Faber

One of the best real time examples of using AlphaClone is comparing a clone to the underlying manager this year (which is real time and out of sample). In this case we take a look at the returns for David Tepper’s Appaloosa fund via Dealbreaker.  Year to date the fund is up a whopping 119.7% gross and 84.62% net (those pesky 2% and 20% fees!!).

How about following Tepper on AlphaClone?  Taking his top 10 picks, equally weighted and rebalanced quarterly, would be up 126% through the end of November.  That not only beats Tepper’s gross returns, but also goes  to show how nicely it replicates the fund’s performance.  You’d certainly be bank heavy with some of his positions like BAC, C, FITB, VCI, and BC.

So to my readers who are institutions, family offices, endowments, and money managers – doesn’t this sound a lot better than dealing with all the lockups, headaches, K-1’s, tax inefficiency, career risk, fraud, and transparency risk of allocating to these funds?

And check out the returns since 2000 – beats the market by a mile.  While the S&P had negative returns over this period, following Tepper resulted in a 7 bagger.

December 9, 2009 - Posted by | Indicator setup

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