Valentine's Day Special: Franklin US Opportunities v SPY ETF, Quantedge v H2O Multibonds

Firstly, a Happy Valentine’s Day to all who are single or with someone they love. It bring memories of this movie in 2010 featuring Anne Hathaway, Taylor Swift, Julia Roberts, Asthon Kutcher, Bradley Cooper, Jennifer Garner…

https://www.google.com/search?q=valentine%27s+day+2010+cast&rlz=1C1GCEB_enSG865SG867&oq=valentine%27s+day+2010+cast&aqs=chrome..69i57j0l3.5007j1j4&sourceid=chrome&ie=UTF-8

https://www.youtube.com/watch?v=1K45RdE2qlk





Let’s move on to busting myths:

1.       Quantedge Global Fund vs H2O Multibonds.
Quantedge is still one of the best hedge funds in the world. From Sep 2014 to 31 Dec 19, they achieved 74.2%, averaging 11.1% per year. However, H2O Multibonds achieved more than double of Quantedge, achieving 162%. Annual return 20.1%.

While Quantedge had spectacular returns, it has a lock up of 3 years I think. While H2O is daily dealing. Quantedge had one key weakness, it has tremendous volatility. In 2008, it was down as much as 70% and in 2018, down 30%. 2019 was a good year as it achieved over 70%. The key to greatness as a hedge fund manager is to achieve the highest possible Sortino ratio, which means to achieve very high returns while minimizing volatility. H2O Multibonds’ volatility was only around 15% during the period compared to 25% for Quantedge.

Remember, if you don’t suffer a huge drawdown you will live to fight another day!



Myth 2: ETFs are better than funds.

Let’s compare SPY US ETF which is S&P500 ETF, and iShares Russell 3000 ETF against Franklin US Opportunities Fund.

From 2015 Feb to 13 Feb 2020, Franklin achieved 12.1% per year, SPY achieved 12.1%, the same. IWV which is the Russell 3000 ETF was the worst at 11.6%. RAG Index which is the Russell 3000 index is not investible.

There is withholding tax of 30% on dividends in the US so if you bought the ETF you will have your returns from dividends cut by 30%. The dividends paid contributed to 16.68% returns for SPY and 15.2% for IWV (Total return – price change). If you cut them by 30% the returns will be 72.4% for SPY instead of 77.4% and 68.4% instead of 72.9%. Effectively, adjusted for taxes, SPY’s returns will be around 11.1% and IWV at 10.6% per year, around 1 percentage point lower per year. It turns out that you are better off on average by 1 to 2 percentage points by investing in a fund if you are doing this for the long term.


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