Popular Articles

15 Fascinating Quantitative Hedge Fund Strategies

Nathan Anderson | April 28, 2016

Businessman tries to solve problems

Lets start with the basics then we’ll get into the specific strategies:

Quantitative investing is an approach for implementing investment strategies in an automated (or semi-automated) way. This approach lends itself well to (1) using large or unique data sets, (2) refining them into explanatory information, and (3) deploying that information via as trades using technology. Every quant investor is looking for an edge, so we’ll explain how these elements are used to capture edge.

The Story of How Shkreli’s Hated Move Almost Saved Him

Nathan Anderson | December 28, 2015
due-diligence, hedge fund, ponzi, shkreli

Shkreli trying on his new matching Tiffany’s bracelets

If infamous ‘pharma bro’ Martin Shkreli’s public statements since his arrest are any indication, he is likely to wage a trial by public opinion over the next several months.

Shkreli has already called his indictment a witch-hunt based on his much-hated move of jacking up drug prices rather than based on any legal wrongdoing. There seems to be some sympathy for this angle, and I wouldn’t be surprised to see upcoming pieces profiling his ‘introverted and misunderstood’ personality over the coming weeks. The talking heads have already begun to debate whether his unethical behavior with regarding to drug pricing merits the “response” by authorities.

The 5 Worst Types of Hedge Fund Investor

Nathan Anderson | September 4, 2015

Hedge fund marketing is a tricky sport, and there are some pitfalls to be aware of when meeting with investors. Here are 5 of the worst types of meetings that hedge fund managers experience and how to interpret or avoid them.

6 Hedge Fund ‘Arbitrage’ Strategies that Aren’t Really Arbitrage

Aaron Rabinowe | September 3, 2015

hedge fund arbitrage strategiesHow often do you encounter a perfectly good product that is advertised as something it’s not? RedBull doesn’t actually give you wings and Axe Body Spray doesn’t make women break into your house. What these advertisement methods share is appeal to their target audience.

The academic definition of ‘arbitrage’ is a method of making money on price differentials where a risk-free profit can be earned.

Top 7 Hedge Fund ‘Edges’ That Aren’t Actually Edges

Nathan Anderson | September 3, 2015

baby-tigerA key question that comes up in most due-diligence meetings is the oft dreaded “what is your edge?” The answer is often the difference between an allocation and going home with nothing. From my meetings with many managers I’ve found that most answers boil down to several cliches. Be sure to avoid these common answers that will turn off an experienced hedge fund investor:

15 Weird Hedge Fund Strategies That Investors Should Know About

Nathan Anderson | August 24, 2015

sheepThere’s a big world outside of long/short equity and plain vanilla strategies.Here are some examples:

15. Life Settlements — Several hedge funds literally invest in the life insurance claims of others, hoping they’ll die early so they can collect. The Private Placement Memorandum’s for these funds often cite ‘risks’ such as cures for cancer or heart disease, and other medical breakthroughs that could unexpectedly prolong life.

How to Perform Hedge Fund Due-Diligence Like a Pro

Nathan Anderson | August 23, 2015

sherlockThere are several objectives to hedge fund DD (and it’s not all about making sure the manager isn’t a Madoff.) It helps to recognize from the outset that each hedge fund is first and foremost a business, and for businesses to be successful, they need to have a differentiated product, and a repeatable process for creating that product. In other words, what is the manager’s differentiating ‘edge’, what is their process for exploiting that edge, (and how does it fit into your portfolio)?

Hedge Fund Investors Are Funding Rogue Traders

Nathan Anderson | August 17, 2015

rogue-traderA rogue trader is a trader who risks extreme amounts of firm capital without authorization and then loses it. (Conversely, a rogue trader who MAKES billions is called a “managing director.”) Rogue trading happens when poorly designed incentives are coupled with weak operational controls. Before getting into the risk this presents to your hedge fund investments, let’s review history.

Top 9 Hedge Fund Marketing Mistakes

Nathan Anderson | June 22, 2015

fall#9. Neglecting PR Opportunities — Despite the JOBs Act and the loosening of ‘mass solicitation’ rules, most hedge funds are still so terrified of the SEC that they will do anything in their power to ignore perfectly legal PR opps.  Ray Dalio, founder of Bridgewater Associates, was recently featured on the cover of Absolute-Return Magazine, giving an exclusive interview. If done correctly (ie: legally), TV appearances, magazine articles, and speeches can be a great boost to credibility.

5 Ways Hedge Funds (Accidentally) Become Black Boxes

Nathan Anderson | July 15, 2014

box

Years ago I had the pleasure of sitting in the shortest meeting of my life between a hedge fund manager and an investor. The manager represented a well-known algorithmic trading firm. After the standard awkward quant-manager introduction and shmoozing effort, the investor began asking questions about the investment process. The manager gave several vague answers, much to the frustration of the investor.