PERFORMANCE IN DOWN MARKETS

“A market downturn is the true test of an investment philosophy” Seth Klarman

“I feel the most objective test as to just how conservative our manner of investing is arises through evaluation of performance in down markets” Warren Buffet

“True managers need to be tested in multiple business cycles to prove their compound annual return is consistent over long periods of time” Thomas Kahn

"I have consistently told partners that we expect to shine on a relative basis during minus years for the Dow, whereas plus years of any magnitude may find us blushing" Warren Buffett, Partnership Letter 1962

“If you run your portfolio to be fine in an upward market, if you're in the game, you will have exposures that you wish you didn’t have in a worse market” Seth Klarman

"The other characteristic I look for in a money manager is when I look at their record, I immediately go to the bear markets and see how they did.  I want to make sure I've got a money manager who knows how to make money and manages money in turbulent times, not just bull markets"  Stan Druckenmiller

“Good long-term performance results from beating the market in bad times. Caution should not be seasonal.” Christopher Browne

“As money managers we have to build portfolios that can survive all environments – neutral, positive, negative ... and worst-case.” Zeke Ashton

“Because ensuring the ability to survive under adverse circumstances is incompatible with maximising returns in the good times, investors must choose between the two” Howard Marks

“Outperform the market in bad times” Julian Robertson

"The cost of performing well in bad times can be relative underperformance in good times." Seth Klarman

“We would rather underperform in a huge bull market than get clobbered in a really bad bear market” Seth Klarman

"We truly believe the key to investment success is losing less than the market during declines - losing small is more important that winning big.  The math works and it keeps you in the game when you should be"  Brian Krawez

"The true investment challenge is to perform well in difficult times.  It is unfortunately not possible to reliably predict when those times might be.  The cost of performing well in bad times can be relative underperformace in good times.  We have always judged that a worthwhile price to pay" Seth Klarman

"I have pointed out that any superior record which we might accomplish should not be expected to be evident by a relatively constant advantage in performance compared to average. Rather it is likely that if such an advantage is achieved, it will be through better-than-average performance in stable or declining markets and average, or perhaps even poorer-than-average performance in rising markets" Warren Buffett, Partnership letter 1960

"We are really set up so that if the market is up 40 or 50 percent, we're not going to keep up with it. Our investors know that, and we know that. But we think we can keep up in a reasonably good market of 10 to 20 percent, and we'll beat the socks off of 'em, I think, if the market is down or flat" Julian Robertson

"I expect bear markets to be most favourable for the fund in terms of relative performance.  Generally speaking, this means I expect the fund will fall less than the market in a bear market.  Similarly, I expect that in the event of a general bull market in stocks, the fund will not shine so brightly in terms of relative performance.,  The math of investing would favour the fund, however, over several bull and bear market cycles because, on a percentage basis, lost dollars are simply harder to replace than gained dollars are to lose.  The emphasis will always be placed first on preventing the permanent loss of capital, and good results should follow" Michael Burry

"When the market goes up, I try to capture 70 to 80 percent of the move, and when the market goes down, I try to lose only 30 or 40 percent of it"  Martin Taylor

"There is a time when it's essential that we beat the market, and that's in bad times.  Our goal is to generate performance that is average in good times (although we'll accept more) and far above average in bad times.  If in the long run we can accomplish this simple feat (which time has shown isn't simple at all), we'll end up with (a) above-market performance on average, (b) below-market volatility, (c) highly superior performance in the tough times, helping to combat people's natural tendency to "throw in the towel" at the bottom, and thus (d) happy clients.  We'll settle for that combination" " Howard Marks

"For years I’ve literally drawn a curve that says how much I’m willing to lose in the portfolio overall for any given movement in the market. At one end of the curve is a 1929-style event, where I’ve concluded I can accept being down around 30%.  At 50%, 40%, 30% downdrafts I want to be down no more than half that level. If the market’s up or down 5%, I’m willing to match the market. Then on the upside the capture ratio starts to tail off. Say the market is up 30%, we can be up 20% and that’s just fine. My job is to deliver on that utility curve, and to beat it if I can." Adam Weiss