June 2, 2008, 6:00 am

Managing Your Portfolio Like A Pro: Validea Capital Management Approach

by: The Financial Blogger    Category: Investment, Market and Risk
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Have you ever heard of Warren Buffet? Peter Lynch? James O’Shaughnessy? Benjamin Graham? Well they all have one point in common: they are rich… and they did it by beating the market with a baseball bat. They are so good at it that everybody wants to know which trade they are making and when. Life would be beautiful if we could just copy their method and let it go until we buy our condo in the Bahamas, isn’t?

Well guess what, some nerd think he found how to replicate their investing model and trade like a pro! In fact Validea Capital is an American quantitative investing firm that has in its team Mr. John Reese. This guy is more than a piece of peanut butter with chocolate on the top; his brain might look like it though!

He basically analysed all the best fund managers of all time and created a computer program able to replicate their thinking. Without getting in too much technical details, let just say that he crosses reference several models and pick a few stocks from this analysis.

He now has two programs that created the following funds; Omega American and Omega International. Since its strategy is purely based on quantitative analysis, there is neither industry or geography restriction nor hedging currency strategies.

The computer decides everything and revises its decision once a year according to the new financial statements. In term or MER’s, there are still pretty low at 1.99% compared to other “specialized funds” on the Canadian market. I guess that paying electricity for the computer to run is not too expensive 😉

Are the funds good?

To be honest, it seems to be a very good system and the idea behind the Omega funds is pretty good. Is a computer able to average 15%+ per year on a steady basis? I know that mine wouldn’t but maybe Reese’s computers are able to do such thing. In fact, I am considering buying some of them for my Smith Manoeuvre portfolio since I do not own any international funds (only Canadian for now).

Disclaimer: Those funds are offered by The National Bank but I don’t advertise them. The goal of this post was to inform my readers that such trading technique exists. I do not recommend to buy, to hold or to sell this type of funds. Please see a certified financial planner for more details.

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What kind of returns do these funds boast? Do they have a long history?

by: The Financial Blogger | June 2nd, 2008 (6:57 am)

Unfortunately, they just have been created about 3-4 months ago… so there is no history yet :-(. Since inception (November 2007), the international fund shows a return of 0.80% and the American 0.34%

not much to say about it!

[…] Financial Blogger presents Managing Your Portfolio Like A Pro: Validea Capital Management Approach posted at The Financial […]

[…] in your pocket year after year! Is it because they were able to clone Buffet brains? (Actually Validea Capital is trying to do so). Do they found the last GIC on earth giving a 7% yield? Or are they simply not […]