AQR

A Flock of Canaries: From Allston to XTX

"You don’t lead by pointing and telling people some place to go. You lead by going to that place and making a case." - Ken Kesey   If you believe - as we do - that everything is connected to everything else, then it stands to reason that all events have potential to be seen as the proverbial canary in the coal mine. Therefore, what we really need to do is notice stuff and connect dots. Here's a few of our latest observations... On February 10, 2020, Bloomberg reported "high-frequency firm Allston cuts employees amid low volatility," and further noted that this move follows XR Trading's 10% headcount reduction in late 2019. This got us thinking about the tier of smaller to mid-sized proprietary trading firms and if any of the available data (which currently tends to be US equities-centric) provide clues as to the health of those firms - as well as that space in the market ecosystem (where prop firms and market makers reside) that we typically call [...]

By |2020-08-17T07:14:02-04:00February 20th, 2020|For Subscribers|

AQR Capital Management: The Ominous Shapes of Strategy

"The cave you fear to enter holds the treasure you seek." - Joseph Campbell   For 12 straight years beginning Q4 2001, AQR Capital Management, LLC (AQR) - one of the great and legendary quant hedge funds of the current era - grew equity positions until peaking at 2,346 (long equity) positions by Q4 2013. Since that time, AQR's long US equity book has found an ominously consistent plateau averaging 2,140 positions. Here, in what would normally seem to be a benign factoid, lie the seeds of the story for why AQR has been suffering performance challenges of late; and, apparently, performance challenges for the foreseeable future according to co-founder and front-man, Cliff Asness. We start that story with the exhibit, below, where Alphacution presents the full 72-quarter record of total 13F (long) positions for the lineage of AQR Capital Management entities beginning Q4 2001 and ending Q3 2019. With these first shapes, we want to highlight that stocks are the dominant product class, thereby implying that there is little [...]

By |2020-08-17T07:14:02-04:00February 9th, 2020|For Subscribers|

AQR: The Shape of Strategy (Teaser)

For 12 straight years beginning Q4 2001, AQR Capital Management, LLC (AQR) - one of the great and legendary hedge funds of the current era - grew equity positions until peaking at 2,346 (long equity) positions by Q4 2013. Since that time, AQR's long US equity book has found an ominously consistent plateau of about 2,050 positions. And, in what would normally seem to be a benign factoid, lie the seeds of the story for why AQR has been suffering performance challenges of late - and apparently, for the foreseeable future (according to co-founder, Cliff Asness). Hold that thought. More (very) soon...

By |2020-10-05T21:33:25-04:00February 6th, 2020|Open|

More Bridgewater Associates: Modeling Ray Dalio’s Modeling

"Treat your life like a game." - Ray Dalio   In many ways, aspects of this research are like playing a game of "Name That Tune." With a few snippets of data, we try to figure out what's going on with a trading or investment strategy - and by extension, the business strategy, too. Certainly, boosting the signal of a snippet or two of data can be done with contextual evidence; other snippets of data from neighboring strategies and players that help improve the accuracy of our interpretations. And yes, by now, this is all starting to sound a little rudimentary. "Of course. Obviously. Sure, that's been well known for a while..." But, though it now seems like years, it's only been eleven months since publishing our first "Hiding in Plain Sight" post. It's an understatement to say that we've learned a ton in that time because certain components of the landscape - a spectrum of strategies; zones and emerging rankings of competitors among them can now be seen with [...]

By |2020-10-05T16:30:58-04:00October 30th, 2019|For Subscribers|

#Hedgefunds: Is the Capacity of Alpha Unlimited?

Like the financial markets equivalent of "dude", or "bro" or the many satisfying derivations of "F**K," the term "alpha" seems to pepper our market discourse in a way that has few peers. Rightly or wrongly, there isn't an investment or trading context into which it is not shoehorned. We hear it everywhere, at all times, and in numerous forms: Achieving alpha... Delivering alpha... Portable alpha... (A strategy that had its heyday around 2006 and has recently tried to make a comeback.) Tainted alpha... (Not gonna go there right now.) And, my personal favorite (for its level of misguidedness), generating alpha... There are conferences named after it, like the CNBC and Institutional Investor ANNUAL Delivering Alpha Conference, now apparently in its 8th year. And, of course, some of the most brilliant and creative companies of all time have been named after it! - and, I'm not necessarily talking about firms like Visible Alpha or AlphaSense or the defunct quant strategy development platform, Alphacet... To be fair, the list of common usages [...]

By |2020-10-05T21:22:58-04:00September 23rd, 2018|Open|

α < ∞ ?

Like the financial markets equivalent of "dude", or "bro" or the many satisfying derivations of "F**K," the term "alpha" seems to pepper our market discourse in a way that has few peers. Rightly or wrongly, there isn't an investment or trading context into which it is not shoehorned. We hear it everywhere, at all times, and in numerous forms: Achieving alpha... Delivering alpha... Portable alpha... (A strategy that had its heyday around 2006 and has recently tried to make a comeback.) Tainted alpha... (Not gonna go there right now.) And, my personal favorite (for its level of misguidedness), generating alpha... There are conferences named after it, like the CNBC and Institutional Investor ANNUAL Delivering Alpha Conference, now apparently in its 8th year. And, of course, some of the most brilliant and creative companies of all time have been named after it! - and, I'm not necessarily talking about firms like Visible Alpha or AlphaSense or the defunct quant strategy development platform, Alphacet... To be fair, the list of common usages [...]

By |2020-08-17T07:14:07-04:00September 20th, 2018|For Subscribers|