Best Ideas vs Top Hedge Funds

Our yardstick for success is the win/loss ratio. It’s impossible to lose money if your wins are bigger than your losses.

The future is uncertain, which is why we focus our attention on ensuring that losses (that can be controlled) are managed. The win/loss ratios for both strategies since inception are:


  • Best Ideas Competitive Edge: 4.3x

  • Best Ideas market Timing: 2.9x


To put this into perspective, a long-term win-loss ratio of 2 or more would put Best ideas in the rarefied company of the best performing hedge funds in the world.


To illustrate this, we compared the performance of the Best Ideas strategies to two types of hedge funds.



We converted the Barclay Hedge returns into AUD (using RBA monthly data) to make it an apples-with-apples comparison with Competitive Edge.

Monthly performance, Best Ideas Competitive Edge vs Barclay Hedge Long Bias Index


Hedge Funds are classed as being “Long-Biased” when the average net long exposure of their portfolio is greater than 35%. The Barclay Long Bias Index calculates a monthly average return using data from over 200 Hedge Funds.


When compared to the Best Ideas Competitive Edge (Competitive Edge) strategy, long bias managers fared significantly worse posting +6.84% cumulative performance for the period March-December 2019. Whereas Competitive Edge posted +15.64% for the period.


This is encouraging given that current trends point to towards long biased funds outperforming other hedge funds; long biased funds returned +10.6 % in 2019, 3.4% higher than the overall hedge fund index return of 7.2%.


Monthly performance, Best Ideas Competitive Edge vs Barclay Fund of Funds Index


The index reported a cumulative return of +3.20% between March and December of last year, Competitive Edge holds up when compared to FoF’s, with an alpha differential of +9.94%.


Competitive Edge and the two indices delivered lackluster returns in May. We attribute this largely to a rapidly fluctuating whipsaw market, driven by rising US political tensions and changing Federal Reserve policy.


Monthly alpha differential, Best Ideas Competitive Edge vs Barclay Fund Manager Indices

Note, the performance figures provided by Barclay Hedge are net of management and performance fees. Competitive Edge returns are shown net of management fees and gross of performance fees. Why exclude performance fees from the Competitive Edge returns? Competitive Edge returns are based on a client composite that includes multiple individual accounts, each with a different inception/performance calculation date. In other words, each client’s performance fee is different depending on when they have joined.


We are pleased to report that Competitive Edge outperforms both hedge fund indices by a significant margin even when taking likely performance fees into account.


It is important to remember that Hedge FoF's incur two layers of fees; one levied on the fund when purchasing units of the underlying hedge fund and one paid for by the client.

Survivorship bias is the tendency to view the performance of existing fund managers as a comprehensive sample without considering those that have left the index.


How should we factor in with survivorship bias? Typically survivorship bias results in actual performance being lower than reported performance. So, we could argue that Competitive Edge alpha vs benchmark is likely to be higher.


Moreover, indices, like those provided by Barclay Hedge are subject to Self-Reporting Bias. Self-Reporting Bias is a systemic problem in most survey measures; in this case leading to a lack of data from those funds with less attractive returns.


Again, self-report bias means the true alpha is probably larger.


For these reasons, it is important to take a wholistic approach when evaluating performance.

Whilst we are pleased to deliver results that exceed these benchmarks, we need to take them with a proverbial grain of salt, remembering that biases influence the way such benchmarks are calculated.

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This web page is for informational purposes only. It does not constitute financial advice or take into account the particular investment objectives, financial situations or needs of individual readers. Readers should consider whether any opinions or recommendations on this website are suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. This web page has been prepared with care. However, Guiscard Capital Pty Ltd makes no warrant of any kind in regard to the contents and Guiscard Capital Pty Ltd shall not be liable for incidental or consequential damages, financial or otherwise, arising out of the use of this web page. This web page is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The price and value of investments referred to on this web page and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. The contents of this web page are subject to the provisions of the Copyright Act, 1968, and any unauthorized reproduction of it is subject to prosecution under the provisions of the Act.