Friday, March 18, 2005

Defying gravity

Forbes' Rich Karlgaard writes about Ken Kam's fund: "He's created a fund, MOFQX, that has a low-risk beta score of only 0.48, yet has more than doubled the returns of the S&P since it was founded in November 2001. MOFQX's return is calculated after Ken skims off a hedge-fund-like 1.95% management fee. But who's complaining?"

How does Kam do it? is his "virtual stock market" that anyone can play for free. Karlgaard likens it to fantasy baseball and notes that there are 70,000 player/fans. The cool part is that Kam tracks players' success and identifies the current best 100 (players know about this) on a month-to-month and two-years rolling basis. There are 1,400 "superstar" investors and Kam picks the 100 best of the best each month to manage the MOFQX portfolio.

Kam sounds like an innovator who understands that the web signals new markets and new information conduits. Call it open-source fund management and note that it defies gravity, being off the risk-return trade-off schedule that we take for granted.