All great traders, even the likes of Greenlight Capital’s David Einhorn, experience negative periods of performance. One of the only fund manager to operate seamlessly during all market environments was Bernie Madoff, which is to say that hedge fund investors should anticipate loss at some point. The question becomes: should one invest in a fund after they have experienced significant losses?
Investing in a solid hedge fund after a drawdown is a concept that has been debated pro and con, particularly among some in the algorithmic trading community. Among this group the concept of mean reversion is a method that not only applies to traders, but also to hedge fund investors....
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