Can a "big picture" person survive his 20s in finance?

[doctorwes]

I'll pull some numbers out of the air, but would love to hear opinions that are more well-informed than my own. In the crudest possible terms,



X = LIBOR + 4%, Y = 3 years, Z = 5% p.a. standard deviation



Most importantly, your process has to be consistent and rigorous enough so that this "maverick fund manager" can convince herself it will keep working in the future. That might mean you have to disclose a lot more than you want to; I don't know about that.

[apine]

but doc, he's overweight and middle aged. his numbers will have to be higher than that. you know that people like to have their money managed by young athletic types. your x,y,z would work for those types.

[tristanreid]

[b]apine:[/b] [i]but doc, he's overweight and middle aged. his numbers will have to be higher than that. you know that people like to have their money managed by young athletic types. your x,y,z would work for those types.[/i]



Yes, but low-metabolisms are prized in some positions. It's easier to catch an overweight middle aged type when he tries to throw his yoke*.



* Most large companies use jelly donuts as rewards for excellence at the detail-oriented subordinate work. (For example, much of the reason for overfeeding CEOs is that employees grossly overestimate their chances of getting to that weight, and this allows companies to feed their employees in future "dreamnuts" that evaporate upon reality's "intrusion".) In a target company, the work done in aspiration for these feedings is done and remains with the company, but these executives (who ate more, but are no better than an average selection of people at creative roles) are present cash sinks. PE profits by firing them and capturing the "value added". They simply feast on the leftover donuts.



That's why they call them 'fat-cats'.



I can make unsubstantiated assertions about the devious inner-workings of the world! I'm a big-picture person!



-t.

[nnja]

Well, I'm sure there's a general form of the solution: define functions X(a,w), Y(a,w) and Z(a,w) that would inspire, say, a maverick fund manager with several hundred million to a few billion AUM to take me on as a protege, for age = a and weight = w...

[nodoodahs]

Assume a quantitative system with annualized Libor+4% return and 5% p.a. stdev over some agreeable verification period.



The implied CAGR/StDev is just south of 2.00.  Does reaching the same CAGR/StDev with a higher CAGR, say Libor+15% and StDevof 10% p.a., sound more, less, or equally appealing?



The implied Sharpe of the assumed system is just south of 1.00.  Does a system with equal Sharpe but increased variability sound more, less, or equally appealing?



It just occurred to me that a consistent CAGR/StDev with higher CAGR implies a higher Sharpe.  Interesting ...



The assumed system with annualized Libor+4% return and 5% p.a. stdev requires quite a bit of personal assets to trade it for a living.  Assuming Libor is 1% over the annual cost of living increase, then there is only 5% return available for funding lifestyle, meaning one has to have 20x their desired annual pre-tax income in the market in order to live off of it.  That sucks.  If that's a "good" system, no wonder everybody wants to manage money.  The higher CAGR with same CAGR/StDev ratio seems much more do-able with only a 6x income requirement.



Thoughts?