| May 23, 2016
| May 22, 2016
Are You Holding Out On Me?
Investors want to know everything about a fund, and most quantitative funds will not share their models. This alone is often viewed as a lack of transparency and many investors see it as a key point of discomfort relative to traditional equity and fixed income funds. For contrast, when a traditional manager shares their portfolio holdings investors call it “full transparency”. This is belief seems intuitive but is actually pure fallacy.
| April 28, 2016
There is some evidence to show that following ‘smart money’ investors can replicate some hedge funds returns (via tracking public 13-F forms) but there are also some big caveats.
| April 26, 2016
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.
| September 3, 2015
- One Bad Line of Code Will Destroy the Fund
In 2012, Knight Capital Group, one of the largest market-makers in the industry, lost $440m in 30 minutes due to a glitch in their trading system. As CIO Magazine put it, “If that bug could affect Knight, it could happen to any company.”
Strong words and a scary thought. So why is this nightmare scenario a rare occurrence at quant funds? Knight Capital traded directly on the exchange, as have most broker/dealers that experienced flash crashes or rogue trades. That means those big mistakes when straight from the firm to the trading floor with no filter.
| September 3, 2015
How 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.
| September 1, 2015
A 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:
| August 24, 2015
From an investor’s perspective some of the best responses we’ve heard include:
“We’re the largest private recipient of IPO syndicate in our region.” This was from a manager who has great relationships with major banks in his region and pretty much just flips IPOs for fairly absurd returns. This is entirely a relationship edge.
There’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.