Chris DeMuth Jr.'s  Instablog

Chris DeMuth Jr.
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Chris DeMuth Jr. is the founder of Rangeley Capital LLC. Rangeley is an investment firm that focuses on event driven, value-oriented investment opportunities. Rangeley Capital and his value investing forum, Sifting the World (StW), search the world for misplaced bets. Rangeley exploits them for... More
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  • connellybarnes
    , contributor
    Comments (536) | Send Message
     
    Didn't your previous plot show the returns from IPOs were mean reverting back downward? I'm a fan of passive management in general* but it seems one should weight on factors that add value and are stable over time.

     

    * I'm not generally a fan of active management in mutual funds or hedge funds, especially if they invest in larger market cap securities that are easy to quantitatively replicate in a portfolio, e.g. value, momentum, quality, etc, since most managers invariably underperform their appropriate quantitative benchmark. I am a fan of obscure situations such as those your fund invests in, and having counterparties that are retail traders.
    20 Nov 2013, 01:02 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (9957) | Send Message
     
    Author’s reply » Yes, IPOs are downwardly mean reverting. Also, when their spread above market returns is high, it tends to be when markets are high too.
    20 Nov 2013, 01:24 PM Reply Like
  • bazooooka
    , contributor
    Comments (3649) | Send Message
     
    This may be a good trading/hedging vehicle. And may become a great short someday if the market turns south as IPOs often fall disproportionate to the market - not to mention there may be some etf design flaws that can be exploited.
    20 Nov 2013, 01:38 PM Reply Like
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