Using our ecosystem framework as a guide, this is Alphacution's mechanical interpretation of how Jim Simons and the RenTec team gains a persistent edge on the competition; a master class of sorts that may be useful to your trading strategy development, as well...
Inspired by Renaissance Technologies - as described in Greg Zuckerman's book, "The Man Who Solved The Market: How Jim Simons Launched The Quant Revolution - Alphacution leverages the concept of "factor dimensionality" to make a significant enhancement to its ecosystem map framework.
"Education is all a matter of building bridges." - Ralph Ellison How trading firms, hedge funds and asset managers scale - as in, scale assets under management (AUM) or proprietary capital, headcount, data, technologies, and other operational ingredients to support a growing mix of market strategies when their initial market strategies reach boundaries of performance, liquidity, inventory or competitive challenges - is a significant point of fascination here at Alphacution. This is because scaling - real, sustainable scaling - requires simultaneous and interdependent success in both operational and trading strategies. Scaling also becomes a critical issue to measure and monitor from a market macrostructure perspective if you believe the hypothesis that the capacity of alpha is finite, as we introduced in the Feed post, "The Privatization of Alpha." Because if you believe that there are no constraints on the capacity of outperformance - or, "alpha" - then there is no need to pay attention to how various asset managers scale their strategies and their overall businesses. In this scenario, there [...]
