As the Sweet 16 games get underway tonight, it’s the just about the time where we see who made their NCAA picks based on favorite mascot, who picked based off of favorite/disliked teams, and who tried to pick by statistics. There’s no other statistician out there that knows how to use his ability to appeal to the masses like, Five Thirty Eight’s, Nate Silver.
At the beginning of the tournament he came out with the probabilities of each team advancing to the next round (original stats here), and he would update the numbers as the tournament went on (current predications). At the beginning of the tournament, Dayton had a 24% chance of beating in state rival Ohio State rival, and if you’re familiar with Ohio sports culture, that was a very meaningful game, with the Dayton Daily News poking some deserved fun at those NFL players from Ohio St. who like to announce their school during Monday Night Football as ‘THE’ Ohio State:
Photo Courtesy: The Dayton Daily News
But Dayton’s chances got even smaller to advance to the Sweet 16, with only a 7% chance, according to Silver’s original stats. But Dayton must have been emboding the words of Dumb and Dumber’s famous quip, “So you’re saying there’s a chance.” In fact, Dayton did beat Syracuse in the 3rd round, and this is what happened.
Now, Dayton is slated to be the underdog for the third time in a row tonight – taking on #10 seed Stanford to see who advances to the Elite 8. Before the tournament started, Dayton’s chances at an Elite 8 run were 2.28%, and that now stands at a 50% chance! Surprising what a little success does for your odds.
So who do you usually pick for your portfolio – the Duke’s of the investment world, or the Dayton’s? Do you play it safe and go with the best record and highest seed? Or try and uncover talented teams which have flown under the radar but are ready for a big upset (we actually did a Managed Futures Bracket for those who want to find some underdogs).
Consider the following two charts of managed futures programs since their inception to December 2008:
The #1 Seed Man AHL: The #11 Seed M6 Capital:
(Disclaimer: Past performance is not necessarily indicative of future results)
Who would you have picked for your investment bracket? The decade long track record, billions under management, 900%+ return, and brand name of the #1 seed? Or the three year track record, 40% return, millions under management #11 seed? Most investors go with the ‘safe’ pick. But how have these two seeds performed in the ‘tournament’ over the past 5 years? AHL is down -15.09%, while M6 is up 28.91% {past performance is not necessarily indicative of future results}. Only a very small fraction of investors chose the #11 seed over perennial favorite Man AHL back in 2008, but managed futures version of the march madness Cinderella didn’t listen to the hype or the investors voting with their checkbooks. They just kept practicing, kept working on their fundamentals, and got down to outperforming the orders of magnitude larger manager. David can beat Goliath every now and then.
So who’s an under the radar sleeper (investment) team right now, looking to pull off the upset over the next three to five years? We just happen to have a few good ideas on that, having studied the managed futures brackets day in and day out for the past 10 years. We think these five managers have just the right mix of seniors, ball handling, and coaching to upset the #1 seeds Winton, Transtrend, and the like…
– M6
– Covenant
– Eco