Joe Vidich manages the Manalapan hedge fund, which was launched in May 2001, noted for its impressive statistical performance, during more than 10 years since the start of the fund, Vidich has averaged a compound annual net return of 18% (gross performance 24%) with a maximum reduction of only 8%.
This modest maximum reduction is exceptional for an investment fund that capitalized during 2001 to 2011, a period of time that included two massive bear markets, Vidich has tremendously outperformed its sector.
During the corresponding period of time, the HFR Equity Hedge index rose only 4% annualized with a maximum reduction of almost 29%, less than a quarter of Manalapan’s performance with almost four times the reduction, the index underestimates the average maximum reduction due to the smoothing effect of diversification.
Reflecting the combination of good returns and moderate losses, the Gain to Pain ratio of the Manalapan fund is very high at 2.4.
Vidich combines long-term investments with short-term operations that provide additional returns, for the investment portion of the portfolio, Vidich begins by formulating a general overview of the economy and the stock market, then Vidich looks for issues that will lead him to sectors and subsectors.
As a final step, Vidich performs a fundamental analysis and observes the commercial activity to select the best individual actions within the selected sectors, Vidich’s time to enter and exit these positions is strongly influenced by what he calls his evaluation of the action of the price of feeling in relation to events.
Vidich or its analysts listen to about 300 conference calls each quarter, market action after these conference calls can provide important clues to Vidich, for example, if a company reports generally bullish news in its conference call, and the next day the market is on the rise, but stocks are down, Vidich would consider this price action as a bearish indicator.
Before starting his fund, Vidich spent a dozen years as a market maker and owner operator of several small brokerage firms, Vidich explains that, since the order flow of retail investors is heavily biased, the market maker is by definition, a short-term operator.
For each purchase order that a full market maker has to change the resulting short position, Vidich feels that due to his many years of experience as a market maker, his trading skills are highly developed on the short side.
Although the issues of long-term investment and position exchanges are fundamental to the investment approach of Vidich, it is an extremely active operator, the turnover for the fund is approximately 20 times, of which approximately 15 Sometimes it is short, Vidich’s net exposure varies widely, and has oscillated between 80% net long and 37% net short.
Vidich’s firm, Manalapan Oracle Capital Management, is located in a small city in downtown New Jersey, Vidich is an amateur artist, and the Manalapan offices can function as an art gallery, as his paintings adorn each wall, his style oscillates between post-impressionism and the abstract, with some paintings that have a foot in each field.
Vidich says that he is not technically competent, and in fact his paintings that include figures of animals have a primitive style, but he has a strong sense of color, there are clear influences of Gauguin and Van Gogh in his work, the more stressed he is the more painted , Vidich seems to enjoy whatever he is doing, whether trading or being interviewed.