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Hedge-fund managers that do the most research will post the best returns

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Re: Hedge-fund managers that do the most research will post the best returns

#21

Post by dsacco »

fwdpropaganda wrote: post #6
piker wrote: post #2

Wouldn't some sophisticated shops potentially use crawlers, etc. hosted from cloud providers (i.e., third-party IPs) that might significantly skew this data?

I assumed the sophisticated shops ran their own datacenters. Can you imagine RenTech running their code on other people's computers? I can't.

Yes, Renaissance runs everything on its own infrastructure (as do most firms of that caliber, and even a tier below).

That said, many of these firms also ingest data from aggregated sources, so their research would activity be very difficult to accurately track via IP presence.

Re: Hedge-fund managers that do the most research will post the best returns

#22

Post by jeremyjh »

chrisabrams wrote: post #16

In other news, students who study the most for SATs will post the best scores.

No, this is surprising because the only research they measured is accessing SEC filings from the government’s website. Since this is the definition of public information, in an efficient market there should be no comparative advantage to having it because every manager should already be using it.

Re: Hedge-fund managers that do the most research will post the best returns

#23

Post by zechs »

dsacco wrote: post #17
philfrasty wrote: post #8

Earlier quoted context omitted.

Do you know how these algo funds keep a competitive edge for so many years (e.g. Renaissance 30+ years)? I am trying to understand their "kind" of product innovation as in what are the biggest factors they are continuously trying to improve?

Renaissance Technologies has completely automated the process of signal discovery.[1] They don't hire researchers to manually derive novel insights or trading models from data, and they don't really bother with exclusive sources of data. Instead, they hire researchers to improve methods for automatically processing vast amounts of arbitrary data and extracting profitable trading signals from it. When most funds say t…

They automated signal discovery in what kind of data? I have heard their use of unconventional data sources is the source of their success, not automated signal discovery.

Re: Hedge-fund managers that do the most research will post the best returns

#24

Post by auntienomen »

osrec wrote: post #19
avvt4avaw wrote: post #10

Earlier quoted context omitted.

AQR are certainly not a high frequency trading firm, and Renaissance may do some high frequency trading, but they are not primarily a high frequency trading firm. Where did you get that idea? The paper explicitly addresses the point that large-scale systematic collection of public records may be indicative of the kind of fund that outperforms, rather than an indication that the public records add alpha in and of them…

Having worked with AQR, I would say they are more HF + coupled with some tend following than anything else. What makes you say they are not?

Does that just mean that they do their own execution, or does it mean that their short-holding-time strategies are a major profit center?

Re: Hedge-fund managers that do the most research will post the best returns

#25

Post by dsacco »

jeremyjh wrote: post #22
chrisabrams wrote: post #16

In other news, students who study the most for SATs will post the best scores.

No, this is surprising because the only research they measured is accessing SEC filings from the government’s website. Since this is the definition of public information, in an efficient market there should be no comparative advantage to having it because every manager should already be using it.

The market isn't efficient. But more importantly, SEC filings are not the only data these firms use. It's just one source for which these researchers were able to capture access information.

Comparatively speaking, the SEC filings are just a blip next the rest of the data gathered by quantitative funds. Any conclusion that could be drawn from what's contained in this report would be hopelessly misleading.

Re: Hedge-fund managers that do the most research will post the best returns

#28

Post by dsacco »

osrec wrote: post #19
avvt4avaw wrote: post #10

Earlier quoted context omitted.

AQR are certainly not a high frequency trading firm, and Renaissance may do some high frequency trading, but they are not primarily a high frequency trading firm. Where did you get that idea? The paper explicitly addresses the point that large-scale systematic collection of public records may be indicative of the kind of fund that outperforms, rather than an indication that the public records add alpha in and of them…

Having worked with AQR, I would say they are more HF + coupled with some tend following than anything else. What makes you say they are not?

To be clear, when you say AQR is primarily a "high frequency" firm, do you mean they are mostly position neutral with execution in (at most) a few microseconds?

Re: Hedge-fund managers that do the most research will post the best returns

#29

Post by dsacco »

zechs wrote: post #23
dsacco wrote: post #17

Earlier quoted context omitted.

Renaissance Technologies has completely automated the process of signal discovery.[1] They don't hire researchers to manually derive novel insights or trading models from data, and they don't really bother with exclusive sources of data. Instead, they hire researchers to improve methods for automatically processing vast amounts of arbitrary data and extracting profitable trading signals from it. When most funds say t…

They automated signal discovery in what kind of data? I have heard their use of unconventional data sources is the source of their success, not automated signal discovery.

No, every quantitative firm uses unconventional sources of data. That doesn't meaningfully differentiate them (at least, not anymore). For example, Two Sigma has an entire division devoted to sourcing and processing "alternative data." But Two Sigma is not at all comparable to firms like RenTec.

The funds I'm talking about (including RenTec) take in as much unstructured data as they can possibly find, almost indiscriminately, and they tune their processing pipeline to the point that it requires neither manual classification nor munging. In most cases, a trading strategy is sufficiently multidimensional that any particular set of data can be completely public. Exclusive data is helpful, but not required. In many cases people become too dependent on exclusive data and lose sight of the methodology.

This is precisely what I mean: many people think that these firms differentiate based on the sources of data they use. They do not. They differentiate on their ability to automatically extract signals hiding in plain sight. Whether or not the data is public makes very little difference, because the signals come from tens of thousands of indicators combined together.

Re: Hedge-fund managers that do the most research will post the best returns

#30

Post by dsacco »

scarletham wrote: post #12
avvt4avaw wrote: post #10

Earlier quoted context omitted.

AQR are certainly not a high frequency trading firm, and Renaissance may do some high frequency trading, but they are not primarily a high frequency trading firm. Where did you get that idea? The paper explicitly addresses the point that large-scale systematic collection of public records may be indicative of the kind of fund that outperforms, rather than an indication that the public records add alpha in and of them…

They're not HFT, although they are more blackbox / quant than the "traditional" hedge fund, which I think still supports OP's point.

Most "black box" quantitative hedge funds still use massive amounts of public data, even public data that might appear somewhat obvious. They absolutely develop new insights from that data.
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