matjen wrote: ↑
Sat Sep 09, 2017 6:37 am
avalpert wrote: ↑
Fri Sep 08, 2017 1:13 pm
Recent events sould influence a plan built around a security with little history when it's first test of even minor significance
is a failure (assuming that is what drove the deep decline of course).
Minor significance? Massive hurricanes directly hitting Caribbean, Houston and Miami. Massive earthquake in Mexico. Huge fires out West?
Yes, minor significance as far as tails go - big hurricanes are not infrequent occurences, the earthquake was large but the damage from a reinsuers persepctive uninteresting and the fires out west aren't anything on the far end of the tail - and these are all geographically concentrated, weather events that this supposed diversified reinsurance portfolio isn't concentrated in.
All at once!?! What do you want global thermonuclear war?
That would be a good test, in fact even conventional war on the Korean Peninsula and across the Sea of Japan would be a good test - and let's not pretend that would be a black swan at this point.
In any case, the fund is operating as one would expect and as people like Larry Swedroe acknowledged.
No, I don't think it is.
Larry wrote:First I DO NOT advocate buying CAT bonds, with reason being that they are too concentrated in risks, heavy concentration in US hurricane risks. Rather own diversified portfolio with lots more types of risks and geographically diversified
Dropping 10% because of a hurricane does not sound like operating as a diversified fund without a heavy concentration on US hurricane risks.
Of course there is tail risk. Stone Ridge marked it down in anticipation which seems like the mature thing to do.
The mature thing to do is value it honestly and consistently - since I have no insight into their valuation methods I have no way of evaluating how they are doing on that front.
We will see what the true effect is on their investments. For those thinking about the fund this is probably great news since the next buy in is in October I believe (not that mother nature knows or cares about disaster frequency). Get your uncorrelated assets on the cheap! More here from Bloomberg.
Every Holy Grail search has its true believers who will see every obstacle as a necessary part of the quest - every Holy Grail search also ends unsuccessful. (Well, except for the folks selling tickets to the search at 2%+ a year...)