Hedge Funds

DIY Quants

“Too much money chasing too few ideas” has been the death knell for investment fad after fad. This will never cease to be so. – Howard Marks With the recent announcement at Point72 of a $250MM investment in quantitative trading platform Quantopian and a recent FT article, there has been a surge in interest in Do-It-Yourself quant strategies. Here’s one from WSJ.   There are some significant challenges for these startups in my opinion*: Has…

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Hard Times at Hedge Fund High

Edit: I wrote a post concerning the future of hedge funds sometime ago and it languished in the Drafts Folder. In the meantime, Ben Carlson of A Wealth of Common Sense posted this which is a far better and more concise explanation. I guess you have to be quick these days! So I’ll only summarize some additional thoughts here. I came across this excellent link on twitter of a scanned Forbes article from 1970 entitled “Hard…


More about RenTech

I’ve written a little bit about RenTech in the past; Here is an article with an interview with Jim Simmons that essentially explains his biz model. And here is one on a ‘tax arbitrage’ trade utilizing basket options to avoid gains and I assume market impact. Below is an older article I just stumbled upon from 2014 with some additional insight revealed during their basket options court hearing. Of note: In one year they executed 26-39MM…


Factor Premium/Discount & Market Timing

Smart beta is the new new thing, I even wrote about it here. There has been some interesting writing on it recently that shares some concerns with the popularity of this approach which I will attempt to summarize: Factor investing can work but it can become relatively ‘cheap’ and ‘expensive’ due to performance chasing and affect future returns. Here is a chart of relative returns of the Value Factor: Great visual explanation of the time…


Speculation in a Path Dependent World

I’m happy to publish my first paper on SSRN entitled, “Speculation in a Path Dependent World”  I found many otherwise talented managers entering a multi-manager platform (assigned capital with strict risk limitations) having a difficult time transitioning. The paper is my simple attempt to suggest an alternative framework for new or potential managers dealing with drawdown risk. Any and all feedback, comments, advice, diatribes are greatly appreciated!  


Smart “BEE-ta”

I recently attended EDHEC conference on “Smart Beta”. Although the concept isn’t new and these ideas have been in use for a few years now by market participants, it was interesting to see how pervasive these products have become and the overall interest by large asset allocators. If you’ve heard of the Fama-French 3 factor model, or the Value factor, Momentum Factor, etc. then you should be familiar with this concept. If not, a simple…


An Evening with Niederhoffer

The father of volatility selling…and blowing up via short premium. He is one strange bird. He was wearing what looked like a lady’s hat and pink Vineyard Vines pants that were ill fitted. It’s hard to describe how he speaks, it is slow, calculated, strained, he seems to struggle and trail off only to finish the sentence strong. He’s tall, much taller than me, and it takes awhile to see it and you have to listen…


More VOL Funds & Musings

It’s a bit of a hobby of mine to collect return data from vol funds, let’s see who is around in a few years. More can be seen here. Catalyst Hedged Futures Strategy (HFXAX) Fact Sheet Presentation It looks like a cross between term structure trade (calendar) and long OTM delta butterflies:  http://www.futuresmag.com/2012/08/31/walczak-finds-safe-harbor-options?page=1 And in entertainment news, I went on a sort of mini-rant on twitter regarding this article: http://www.investmentnews.com/article/20150623/FREE/150629974/bond-fund-alternative-is-turning-heads-with-hot-performance Marketing a put-write strategy as…


Interview with James Simon

Very interesting interview with James Simon of Renaissance Technologies, what might be the most successful hedge fund to date. It is also one of the most secretive. This is an hour long and quite a treat. (the good stuff is between minute 25-45) Normally I would have just posted this on LargeCapLinks as an interesting video to watch when you’re bored but there was too much good stuff in here: No one knows exactly what the…


No Picture

First Loss Capital Model

I found it interesting how little I knew about the structure of ‘prop firms’ from an investor/partner perspective. After talking to some colleagues I’ve pieced together an idea of what it is which I will explain below. But full disclosure, I could have misunderstood the explanation! The ‘first-loss’ model is very much like a brokerage account but with more leverage. It’s like FXCM for equities. Your primary concern is risk management (you don’t want to…