Investments and Investment Firms to Avoid

[The White Coat Investor]

I had an email today:

Dear White Coat Investor,

I really like your website. It provides a valuable resource to the
medical community. I've recently started working for an investment
fund in Arizona (probabilitycapitalgroup.com), and am trying to find
ways to reach medical professionals to educate them about the benefits
of investing in volatility products (like UVXY, for example). I'm
unsure of how to best proceed as I am relatively new to the industry.
I'd appreciate your advice on how I can get in front of doctors to
discuss this emerging industry. Any help you could provide would be
appreciated.

This was my reply after reading the firm's website and ADV2 (they charge 2 and 20 and have just $7M under management) and looking up UVXY, which shows perhaps the worst long-term investing chart I've ever seen):

I appreciate your compliment and you thinking of me when you wish to reach out to medical professionals. I will give you some blunt advice just like I give docs that ask me how to improve their financial situations and patients who ask me how to improve their medical situations.

I'm not a big fan of investing in "volatility products" nor of paying 2 and 20 to advisors/investment managers. I'm afraid our goals are nearly perfectly opposed so I don't see how any sort of partnership is going to work out well.

Please stop targeting doctors. We don't need your "help." There are plenty of other investment advisors out there that view us as "whales" and try to help us by charging 2%+ of AUM, slowly bleeding the investing accounts of people who have dedicated their lives to helping you when you are sick and injured without regard to your ability to pay them. In fact, I would recommend you find a new firm to work for that will allow you to not later regret your career. Seriously. There are a lot of great firms out that that really help their clients. It is very hard to add enough value to overcome 2 and 20 no matter what your investment strategy.

Do you think I was too harsh?

 

[conniebird]

Nope!

[Complete_newbie]

lol that UVXY - anyone invest in 2000 and live to tell the tale?

[Complete_newbie]

Also I love how solicitation emails work

 

"Hey WCI(or whoever has any popular entity/community etc). Love your work! Big fan!.... now give me all your money and connections. k? thnx"

 

lulz

[Kamban]

what is this 2 and 20, since I am not much into these type of investments.

[Complete_newbie]

2% of total Assets under management.

20% of any profits they make over hurdle rate (think some promised base rate).

That used to be the case but hedge funds are slowly dying due to index revolution...and WCI emails.

[VagabondMD]

Rex wrote:

If anything you have gotten softer over the years

Click to expand...

I agree. You held back just a bit.  

[WallStreetPhysician]

Unless you are this fund, you cannot charge 2 and 20.  That fund also does not take outside investors, nor does it tell anyone how they make their money.

[Complete_newbie]

WallStreetPhysician wrote:

Unless you are this fund, you cannot charge 2 and 20.  That fund also does not take outside investors, nor does it tell anyone how they make their money.

Click to expand...

The Renaissance corp - every quant's wet dream. Got a super nerdy friend in there,who tells me...nothing. They are like palantir; of the finance world.

[Zaphod]

Like UVXY? Are you serious? Pretty sure he doesnt even understand the fund or volatility in general or he wouldnt have worded it so vaguely and horribly. Curious as to how he gets paid from recommending an ETF, and why that one. Weird.

Full disclosure, I personally love UVXY, its absolutely one of the worst products ever conceived. Its already down over 42% this year, lost 93% last year. I confess to not having touched it or related products as of late, since it seems the market is severely under pricing any Trump related craziness which is unduly high.

I would have paid to see your face after looking this fund up.

[uptoolate]

Harsh? Hah!  This guy probably doesn't even smell the smoke.  Met with my 'insurance guy' yesterday.... "It is difficult to get a man to understand something, when his salary depends on his not understanding it."  As well as his ability to sleep at night.

[childay]

I looked up the fund, wow!  I can see all the benefits already!

[Zaphod]

childay wrote:

I looked up the fund, wow!  I can see all the benefits already!

Click to expand...

This is why I say he wasnt very versed on the strategy or sales. There is no way the firm puts people into funds like UVXY as a long term hold, they most likely have a strategy of selling options on VIX, UVXY, etc...gaining from the predictable premium for selling insurance, and maybe even signals to flip long every now and then. The money is made shorting these funds, not being long. I guarantee they would flip if they knew that was the perception this guy was giving people.

Shorting volatility can actually be a very profitable, predictable strategy and its structurally in your favor as volatility is designed to grind towards a mean, and reverts like wild. These long volatility etfs, especially the double leveraged ones are on a calculated path to zero with some crazy crazy spikes in between (but blips in longer term). If you understand the underlying instruments, and size according to risk and sensibility, you can do very well.

However, this person didnt even know enough themselves to even frame the pitch correctly, and framed it as if he was selling literally the worst long fund in existence. Pretty hilarious. Volatility is complicated and several layers of derivatives exist between the equation and the etfs like UVXY that people may be familiar with, thus making it even more complicated.