Don’t Be a Copycat, Be Original
Recently, we have witnessed a rise in replication strategies marketed to the retail investor that seek to copy the success of the best investment managers. Since hedge funds are thought to be performance leaders, hedge fund replicators are attempting to bring hedge fund performance to retail investors without the high fees associated with hedge funds. Copycat investing, as the name implies, attempts to use sophisticated analysis to select the same stocks of a successful strategy without actually knowing the strategy’s methodology. Of course, being a great replicator requires time and resources if you are doing highly sophisticated analysis. But in most cases replicators can look through quarterly SEC Form 13F filings which require fund managers to disclose fund holdings for funds that exceed 100 million dollars in assets.
Using a replication strategy has limits as the investment strategy being copied might be short term in nature and may not fit investor time horizons and as such results might be drastically different from the original strategy. Another issue is that the original strategy might be exiting positions that replicators continue to recommend. Unfortunately, replicators cannot possibly know exactly when the original transactions are made since this information is not required to be immediately disclosed by hedge funds or other large institutional investors. Finally, too many copycats suggests that the strategy might be overexposed, and its effectiveness could be jeopardized. Investors who choose to go with fund replicators or who attempt replication themselves must do their due diligence to ensure success. Although being a copycat can be challenging it can be rewarding if you can achieve consistent success.
What is better than being a copycat? Being original is always much more satisfying as it gives investors complete control and understanding of why certain decisions are being made. As a replicator or copycat investor you are flying blind and are relying on someone that you hope has an investment mission that aligns with your goals and objectives. As a strategy originator, your investment fees and costs to operate are often much lower than those fees charged by fund replicators. Also, as a strategy originator, your goals and objectives are perfectly aligned with your desired targets. Whether a copycat or an originator, today’s retail investors are demanding better and more successful approaches such as those usually available only to high-net-worth individuals which has given rise to the replication marketplace.
If you do not have the time or interest to be a copycat or an originator then feel free to join Investoristics for a low cost high performing approach for retail investors. Our strategy works well in that it provides returns significantly higher than all major market indices with lower risks. Concerned about the details of our strategy or want to know if our approach is right for you? Give us a call or drop us an email and we would be happy to explain the details of our investment approach.
