Interesting look at Jane Street Capital, quant shop du jour. I’ve heard of their difficult interview process. Interesting they have the capacity to do some discretionary trading as well.
Category Archives: Hedge Funds
DrawDown Fever
Everyone, everywhere has no tolerance for draw down. More than rate of return, drawdown seems to be the ultimate optimization metric. “If I reduce the drawdown I can increase the leverage and viola!” This usually ends badly. I love this article because it shows that no matter who the manager is or what the strategy is, drawdowns are inevitable. Institutions manage money because they are supposed to be more sophisticated, only to do exactly what retail does (panic at the wrong time) and charge you a nice fee for it.
https://blog.thinknewfound.com/2016/02/god-buffett-three-oenophiles/
Take Down of Universa (Taleb’s old hedge fund) in WSJ
Awesome takedown of this poorly written paid advertisement by WSJ on Universa returns:
And they (Empirica, Universa, Taleb, etc) seem to do this often:
http://www.businessinsider.com/watch-out-investors-the-black-swan-funds-arent-that-good-2009-6
Apparently for 2-5k, you too can be an ‘amazing’ or ‘smartest guy I know’ in the WSJ!
Good Post on Position Sizing
Good post on position sizing techniques of qualitative managers. Good quantitative managers spend a lot of time on this, but their strategy with robust historical data lends itself to it. By now I’m sure most people have heard of kelly betting? I think most qualitative PM’s utilize some form of fixed position sizing based on trial & error….I think there is room for improvement.
https://whatheheckaboom.wordpress.com/2010/10/30/position-sizing-in-value-investing/
Edit: 7/14/15
Another excellent post/pdf on position sizing h/t @rjs2006
http://www.grizzlyrockcapital.com/Diworseification_GrizzlyRock.pdf
We’re All Doing the Same Thing
I think even fundamental guys have to be thinking this too:
You can still get rich but it becomes more lottery/musical chairs then an intellectual endeavour or learning a skill
“Star” Managers
Process, teams, training matter.
One of the most idiotic things about corporate America is the concept that in order to get a big raise you have to leave a company and then come back. Sup with that?
https://hbr.org/2004/05/the-risky-business-of-hiring-stars/ar/1
Free Hedge Fund Database
$23MM+ VIX Error
While I don’t know this individual personally, I know his shop and many former employees.
1) Outright 200MM notional VIX futures position is insane, perhaps if it’s hedging a 100B book or something. I know he likes to trade big but relative to the size and volatility…..
2) How do you forget expiration day with that kind of position size? Admittedly, when I first started out I screwed up an SPX expiration trade – thinking I could trade it on Friday when they actually stop trading on Thursday and price Friday morning.
3) More importantly, why would you trade a 200MM notional VIX futures front month INTO expiration?! Especially a vehicle that is known to be gamed often and easily, literally like playing roulette!
http://nypost.com/2015/04/12/incorrect-date-costs-broker-nearly-23m-in-liabilities/
Hedge Funds, WikiLeaks, and Insider Trading
I come across some cool sh*t when researching job leads. I came across this totally random, from WikiLeaks regarding a Head Hunters pitch document to provide services to locate a CIO for Stratfor Cap. I had never heard of them before but apparently they were a Global “Intelligence” firm that has provided a lot of information to hedge funds, Gerson Lehman Group anyone?! I guess they thought they should be profiting from their info instead. I could be wrong but I don’t think econ data, especially foreign econ data, is considered insider trading? And wouldn’t you just know it – Goldman Sachs plays a big role! Started by George Friedman, I read his book “The Next 100 years” and found it to be quite entertaining actually, he’s very pro United States!
Read #4 first for some background:
http://mic.com/articles/4833/top-5-stratfor-wikileaks-revelations-so-far
Stratfor Site:
https://www.stratfor.com/about
And the pitch document:
Million Dollar Finger?
I hate FT newsgate. Interesting article nonetheless on outsourcing of prop traders.
http://www.ft.com/intl/cms/s/0/bb7b77d8-c347-11e4-ac3d-00144feab7de.html#axzz3UP7qEfz9
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