"The mind is not a vessel to be filled but a fire to be kindled.."Plutarch The comment has been made here before, likely more than once: As we go along the path of our research, our ability to see - to interpret the data, and the shapes that are formed from that data - tends to improve. This is not only true of newer shapes forged from amalgamations of newer data - and additional sources - but of older shapes, as well. Recently, I stumbled over a series of charts first published in July 2019 in the Feed post, "Ranking Strategy Speed for Top Quants, Market Makers," which remains among our more fascinating discoveries. Therein, we compared average stock position sizing for a list of notable trading and hedge fund firms, from Renaissance Technologies (RenTech), D. E. Shaw, and Two Sigma to Jane Street, Hudson River Trading (HRT), and Tower Research Capital (TRC). Citadel Securities and Susquehanna Securities were in the mix, as well. The rankings were roughly delineated between [...]
"My wife says, 'If you've got time to lean, you've got time to clean.' So, if I'm exhibiting any sloth-like behavior, she puts a rake or a broom in my hand pretty fast..." - Tim Lind, Managing Director, DTCC Data Services For the first episode in its podcast series, "Advancing Financial Markets. Together." Alphacution's Director of Research, Paul Rowady joins the Depository Trust & Clearing Corporation's (DTCC) Managing Director, Data Services, Tim Lind and Executive Director, Marketing and Communications, Bari Trontz for a spirited and illuminating discussion entitled, "Passive vs. Active Strategies: How Data Can Help Keep Your Investments in Shape."
"Do or do not. There is no try." - Yoda Today, a post by efinancialcareers was first to report - followed by Bloomberg News - that Jefferies Group would be spinning out the quantPORT division of its Jefferies Investment Advisors (JIA) subsidiary. According to these sources - and regulatory filings - quantPORT (branded as such in 2018) began as a proprietary systematic equity trading team within Jefferies in 2006. As of January 2020, quantPORT claimed regulatory AUM of $3.7 billion. quantPORT's website lists $5 billion as a milestone in 2017. The bet? Better fundraising on the outside; better incentives (and more risks) for the guys behind the wheel... Now, given that Alphacution knows the key players in the story here, it's been on our radar to dig the stat arb data out of the Jefco filings for a long time, if possible. Today's news provided a catalyst to do just that... A few disclaimers before we get to a couple early samples of chart candy: As an "other reporting [...]
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 [...]
Set aside some time to watch Alphacution Riffs Ep 4 wherein we walk through the foundational hypothesis; key highlights; an extraordinary case study involving Citadel, Millennium Management, Point72 and Vanguard (teaser); and, the strategy behind the release of our latest - and, most impactful - study to date, "The Context Machine: Estimating Asset Manager Technology Spending" (April 2018). And, for those of you with a slightly longer attention span, stick around for another "public service announcement" at the end of this one (starting around 11:17) - as we did in the Director's Cut for Ep 3 - Proprietary Trading, Extreme Automation. The urge to provide value to the human capital component (i.e. - you, me, and everyone in our audience and beyond) - which is actually coming to life as a direct result of our technology focus - seems to be gaining momentum... Enjoy... And, as always, if you value this work: Like it, share it, comment on it - or discuss amongst yourselves - and then send us firstname.lastname@example.org. [...]
Executive Summary Riding the wave of the FinTech juggernaut, technology now permeates all aspects of the financial services ecosystem; front-to-back, top-to-bottom and across the entire business segment spectrum. Any lingering gaps between technology strategy and business strategy are closing; making them indistinguishable from one another. And yet, for all the promise of the revolutions in artificial intelligence, cloud and big data, such attempts are met with unforgiving challenges. Most players in this ecosystem are still using dulled intelligence tools to navigate this rapidly changing and increasingly techno-centric landscape. Finding balance between the primary engines of productivity - information technology and human capital - continues to be conducted like a game of Marco Polo. Operational alpha - a kissing cousin of terms like digital transformation and process re-engineering - is a growing theme among the pantheon of new vernacular in this space that seeks to illuminate such challenges. However, despite its descriptive elegance, operational alpha remains an emerging and elusive concept. In the midst of an evolving supply chain, solution providers [...]
Here's a quick jolt of provocative thought, just in case your brain - like mine - has become a little soft over these summer months: Talk of AI and various other forms of process automation have reached a fever pitch. With that phenomenon comes a flood of new intelligence - and also a heavy dose of mythology. Sometimes the difference between the two is not immediately obvious. The idea that automation has a tendency to kill jobs is one of those if-then statements that is rarely if ever questioned. In the world of trading, quantitative (aka - automated) strategies have earned a reputation for becoming incredibly successful with few employees, thereby supporting the prevailing wisdom. Well, it turns out that "quant shops" just might scale headcount relative to assets under management (AuM) differently than other managers with other trading strategies - and not in a way that is supported by prevailing wisdom... Alphacution just sent a completed draft of its first major asset manager study over to the editor. This [...]
You can track shifting asset class and/or strategy allocations over several years for a long list of asset managers, and then add it all up to arrive at a data-driven industry trend. Easier said than done. This is an extremely heavy lift without the aid of a database that has already aggregated such information - if at all. But, we think there is another way to generate such a signal that yields a similar conclusion (if you know how to read the tea leaves). Hint: As always, it still comes down to the people... That preamble aside for the moment, we will spare you the geek-speak and give you the cart before the horse: In the exhibit below, based on US Securities and Exchange Commission Form ADV data for 181 large asset managers (w/ AUM >$10 billion) over the 5 years ending March 2017, Alphacution's newest analytic - assets under management per employee, or AUM/e - indicates, upon calculation of total weighted average AUM/e for all reporting funds per period, that strategy trade durations have been lengthening. Translation: On average, asset [...]