Tom Brady, Louis Bacon and the Game Changers

“From the point of ignition to the final drive, the point of the journey is not to arrive.” - Neil Peart   New clues are emerging on the nature and pace of change... Here's the setup: Unlikely and unexpected virtuosity often serves as the catalyst for a dynastic run of success. Moreover, legend has it, that it's usually the will over and above the skill that fuels the initiation and duration of that run. While skills eventually decay, it's the will to keep finding a way to win - to distinguish oneself or team relative to the competition - that's the defining factor. Of course, whether it be a football field or a market landscape, like a moving sidewalk, everything happens as the ground is constantly shifting below our feet. What happens to Tom Brady next, I'm not here to predict. He is merely a reliable hook to drag your attention to this point in the story because the debate about whether his game has changed to favor running, mobile [...]

By |2020-08-17T07:14:02-04:00January 23rd, 2020|For Subscribers|

BlackRock, Bridgewater, Citadel: The Decline of Speculation at Scale

"Capitalism has defeated communism. It is now well on its way to defeating democracy." - former HBS professor, David Korten “The most important question facing humanity is this: Can we reach global empathy in time to avoid the collapse of civilization and save the Earth?” - Jeremy Rifkin, principal architect, "The Third Industrial Revolution   "...Bizarre..." and "...inscrutable..." is how one notable content aggregation platform has recently described Alphacution's work (after we maxed out their popularity scores with the articles in question - and while being the youngest research and advisory group to be competing for attention with the likes of the Wall Street Journal, Bloomberg News and the Financial Times, among many others). On that score, I'd say we're punching well above our weight class. But, with this - uh - compliment, it seems like as good a time as any to pause for a minute and perform a few extra Mark 'The Bird' Fidrych moves on the mound before making the pitch for today's (1st Mad Lib here) [...]

By |2020-10-05T21:30:09-04:00October 24th, 2019|Open|

Those Fees Are No Laughing Matter!

Image Credit: Arpad Busson and actress Uma Thurman attend the premiere of Zulu during the 66th Cannes International Film Festival  - Hubert Boesl/DPA/Alamy He pressed "record" on the cassette machine, leaned back and took a long, deep drag from a cigarette. "Let's begin," he said with a heavy accent. In a risky break from protocol, and much to the frustration of my partner - Quantlab co-founder and chief scientist, Ed Bosarge - I asked if I could bum one of his smokes. "But, of course," the Frenchman said with a smirk... Scene: Swanky leather-drenched, art-stuffed office, midtown Manhattan, 1998. Arpad "Arki" Busson, then already at 35 a legendary rainmaker for legendary hedge fund managers, like Tudor Investment's Paul Tudor Jones, had agreed to meet with two of the top geeks from a quant trading upstart to pitch their new strategy to his EIM Group, a prestigious fund of funds (FoFs) platform of the era. In a bizarre twist of unacknowledged credentials, it was difficult to pretend to ignore the fact [...]

By |2020-08-17T07:14:07-04:00September 16th, 2018|For Subscribers|

Virtu: Q1-2018 Update on Extremes

With volatility spiking in Q1 of 2018 - and the successful porting of KCG's intellectual property (IP) prior to that in late 2017 - VIRT earned a welcomed reprieve from the conditions of recent quarters, as we predicted here (and elsewhere prior to that). In the exhibit below, Alphacution's as-if modeling of the combined entity - Virtu + KCG pre-Q3 2017 - yields a level of net trading income that would not have been seen since Q1-2016. Meanwhile, Alphacution's tracking of adjusted net trading income per employee - a proxy for our common look at revenue per employee (RPE) - starkly illustrates the path through the most recent maneuvers: Persistent declines in top line "productivity" since its most recent peak in early 2015 ultimately led to the acquisition of KCG, which closed in July 2017. Swift transfer of KCG's IP onto Virtu's infrastructure along with elimination of redundant technology and human capital allowed this productivity measure to bounce off its lows in Q3 2017 to finish the year as strongly [...]

By |2020-10-14T21:45:13-04:00May 15th, 2018|For Subscribers|

JPMorgan’s Massive Collaboration Experiment

Sitting in on the Symphony Innovate 2017 conference last week in New York, the figure that stood out for me was not that Symphony had already achieved 250,000 users so far in 2017 - more than doubling over 2016 - but that J. P. Morgan (JPMC) represents about 60,000 of those users. (Did I hear that right?!) This is roughly 25% of JPMC's current total headcount of over 240,000 - and, upon further analysis, is likely concentrated within their corporate and investment banking division (48,748 employees for Q2-2017), asset management division (21,082 employees for Q2-20170), and to some extent the operations and infrastructure group known as corporate center (32,358 employees for Q2-2017). And while numerous other bulge banks (like Goldman Sachs and Bank of America) and large asset managers (like Blackrock and T Rowe Price, who claimed 6,800 users) are significant partners, backers and/or users of Symphony's communications platform, it occurred to me that with 60,000 seats, JPMC's footprint here just might represent that largest experiment in collaboration along the [...]

By |2020-08-17T07:14:08-04:00October 10th, 2017|For Subscribers|

Top Hedge Funds: AUM per Employee = Trading Strategy?

We have been playing with some new equations; looking to see if anything interesting can be learned from benchmarking assets per employee across various firms. (It turns out that adding this analytic to our suite of other "per employee" metrics yields significant insights.) In the figure below, we took the top 10 hedge funds ranked by assets under management (AUM) and then re-ranked that list by AUM per employee. We also tossed in Virtu Financial and KCG (Getco) for giggles - and to test the extremes. Notice anything interesting? Based on what you might know about these trading companies, how would you label the X-axis? Here's some additional data to consider: The correlation between assets and headcount is not perfect by any stretch, but it is signal-worthy. Also, this trick works best on mature, ongoing firms whose operations and business are relatively consistent. Headcount level doesn't seem to matter. Albeit at the extremes of tradings firms, Virtu Financial generated nearly US$800 million in revenue (2015) with 148 employees - so [...]

By |2020-08-17T07:14:10-04:00December 14th, 2016|For Subscribers|