101–109 of 109 posts
If your predictions are good, I'd be happy to get you $100 million in assets to manage. It's very unlikely that your predictions are good...
It's very unlikely that you're able to get OP $100 million in assets...
Someone asked about how difficult it is to get outside investment.... It's usually very difficult and it takes a lot of money to run a proper fund. Let's say you raise $50M. You can maybe charge 1 and 20,meaning you get 1% of assets each year for running the fund and 20% of profits. 1% of $50M( and keep in mind this is a large raise for someone without a track record on the sell side or inside another fund) give you…
> a Bloomberg terminal $30,000 including data feeds > market data feeds you need $25,000/year for basic market data and fundamental data that you are allowed to warehouse(you can't store data you get from the Bloomberg terminal). Total nitpick: you can get those using soft dollars. But your numbers are spot on. In my job we estimate running a hedge fund with AUM < 250MM is just not worth it.
"steadily beating the S&P 500 for over a year on a weekly basis" Can be achieved by chance alone. If not chance, I can give you a strategy that would be highly likely to achieve such a result: it would take a lot of risk though! I love it when people post this stuff to HN. Naive people try it, loose a bundle to market makers, then go back to their day job.
> "steadily beating the S&P 500 for over a year on a weekly basis" If you're going to make a claim like that, you should actually follow up with the calculations. When you do that, you'll realize that the issue is quite a bit more complex than this shallow dismissal. He has very low correlation to the index, which means he's not just levering beta and getting lucky on a trending market. His standard deviation is smal…
However, his write up is completely devoid of talk of risk (beta is not risk), bankroll, Kelly sizing, etc. This is integral to understanding the trade.
For example, he could have a successful strategy that works in small lots. However, absent from nearly every ML model is the impact on sizing up. As soon as you post a sizable bid, the market will lean against you, and the edge evaporates. Same if you cross bid-ask, plus you're now giving up edge. ML cannot take this into account, at least not very easily and with the usual models.
Most programmers with models like this fall into this last category.
Earlier quoted context omitted.
Thank you for appreciating the article; I tried to disclose all that I could! 1. Yes, I did put my own money in it (low 6 figures). 2. It went as described in the article - for the capital I allocated to Didact, I beat the market (SPY) by ~20% since inception. 3. If I understand your question correctly, this would be the equivalent of the payoff on an optimal lookback option ( https://en.wikipedia.org/wiki/Lookback_o…
>2. It went as described in the article - for the capital I allocated to Didact, I beat the market (SPY) by ~20% since inception. This seems extremely hard to believe. You should be running a multi-billion $ Quant fund if this is the case. The idea that you would try to push this as a newsletter rather than just taking investor money and becoming a billionaire literally makes the story seem farcical.
The strategy has a 18% correlation to SPY, so "beating the market" is the wrong benchmark. The proper reference point is probably 0, when correlation is that low it shouldn't matter much whether the market's up or down.
The strategy had 14% return and .82 Sharpe ratio, so 17% vol. That's bad. With large asset levels and a long track record a Sharpe of 1 might be OK, for 1 year with minimal assets a Sharpe less than 2 isn't necessarily that impressive.
Another huge issue: this strategy was run with less than $1mm. It would certainly perform worse at higher asset levels as market impact becomes meaningful, the only question is how much worse.
Finally, results matter, but fund raising is primarily a sales process. Investors aren't just looking for the highest numbers. They're going to evaluate the people and processes involved, the risk management philosophy, really every aspect of the business. OP has some professional finance experience but it doesn't sound like he has the connections or reputation that would help with fund raising. If his sales pitch was anything like this article I don't think most institutional investors would be impressed (EG, minimal references to risk management, frequent comparisons to SPY performance when that's not an appropriate benchmark.)
For anyone else, what tools do you recommend for generating pretty for system architectures, workflows, etc.?
My heart goes out to this author, but you can tell even by his first table that he doesn't quite understand the mathematics of financial markets, the purpose of a hedge fund, how they grow etc. 1) It's plain by quickly looking at the allocation of capital in investment firms, that AUM is not made by performance; it's marketing. At best people invest when they believe a person is connected to inside information. Sayin…
This was a very enjoyable read. I built a nearly (architecturally) identical system a few years back that also had to be scrapped for different reasons. This brought back a lot of memories. The sanity checks, the index reconstitution issues, dealing with the insanity of security identification and tracking through time. The fun cases are the ones where it's not even clear what the right answer truly is, e.g. company…
The breadth of knowledge demonstrated by author from technology (bringing performance down to 14 minutes) to ML to deep understanding of financial markets is super-impressive.
Granted the author has an educational background in computer science and has been a trader which probably explains many of his abilities but to my small brain it feels next-level achievement.
Maybe I live in average circle of finance but I have never met nor heard of a person who could single-handedly conjuncture and implement such a system. To my knowledge, a typical hedge fund has several highly-paid people in different teams to build and maintain such a system.
I never thought one-person could do it. I genuinely wonder how he managed to wrap his head across this much knowledge. He seem to fall in 10x category. Kudos!