"A wise American hedge fund manager once said..." | quant trading clips
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NO CRYING IN THE CASINO retweeted
militia capital, a hedge fund reporting 48.3% annualized returns, has an unusual habit: its portfolio managers avoid comparing how they invest.
david orr says they deliberately avoided those conversations even when the team got together in new york.
“we try not to get correlated”
he thinks preserving their independence matters more than picking up another manager's process.
if everyone starts using the same inputs and signals, another manager may add much less diversification causing worse overall returns.
NO CRYING IN THE CASINO retweeted
300 extra hours a year = 6 extra weeks. He worked a 13.5-month year to everyone else's 12 — for 14 years straight.
Kirk McKeown, founder/CEO of Carbon Arc, ex-Point72 head of prop research, ex-Glenview, explains:
"I worked Sundays from 2006 till about 2020, six-hour Sundays on average."
"Six hours a Sunday, 50 Sundays a year, that's 300 hours. On a 50-hour week, that's six weeks."
"If I'm working 13.5 months a year to somebody else's 12, it doesn't matter how smart you are, you're not gonna beat me to the ball."
"In a knowledge business you compound knowledge value, which makes you faster. Knowledge shortens your time to alpha."
"What scares me most about these tools proliferating for young people: nothing beats doing the work."
"If you haven't pulled apart a three-sheet model, haven't dug through the MD&A in a 10-K, there's value in that apprenticeship that risks being lost."
NO CRYING IN THE CASINO retweeted
Citadel, Millennium, Point72 and BAM are richer, smarter, and faster than you. Here's how small hedge funds can win regardless:
Alix Pasquet (@alixpasquet), managing partner of hedge fund Prime Macaya Capital Management, explains:
"A lot of game theory is very technical and mathematical, but it really reduces to one thing: play weaker players. Don't get into the ring with Mike Tyson. That's not what you want to do."
"We don't try to compete with the pods. They are richer than we are, smarter than we are, move faster than we are, have more resources, and in many cases are better looking. That's bad for our self-esteem, for our ego, and also our wallet."
"We don't compete with them on who they hire. They're interviewing sophomores and juniors in college now. I can't afford to pay an analyst $300,000 plus a bonus including half a million dollars. But the analytical turnover inside these shops is high enough that you get to hire these kids afterwards."
"Whereas pods have been lengthening their trades to weekly, monthly, we like dynamics that are six to 18 months and above. There's names we've owned forever, and there's names we'll own expecting 18 months where the upside happens in weeks."
"Some of these hedge funds pay the Wall Street banks more to get the first one-on-one meeting with management, so they can trade on it. We don't do that."
"I'm rewriting my business plan for the age of AI, and one of the sections is: we have no requirement in our process that says you have to meet management teams. No requirement that says you need alt data. No requirement for Wall Street research. No requirement to hire from certain schools. Strategy is about trade-offs. Let them have that. We'll be right here. There's a lot more advantage here than you would think."
"A lot of game theory is very technical, but it really can be reduced to one thing: play weaker players. Don't get into the ring with Mike Tyson."
Alix Pasquet (@alixpasquet) is the Managing Partner & portfolio manager of Prime Macaya Capital Management, a behavioral long/short fund a decade in, built on refusing to fight the pods on their terms.
"We don't try to compete with the pods. They're richer than we are, smarter than we are, move faster than we are, and in many cases better looking."
We cover:
- Strategy is trade-offs: no required management meetings, no alt data, no Wall Street research. "Let them have that, we'll be right here"
- The time-horizon inefficiency small funds still own: 6-18 month dynamics the pods have abandoned
- Pods are interviewing college sophomores at $300K+, so he waits for the analytical turnover and hires them after
- What a top quant fund taught him: behavioral exploitation at scale, data scrubbing, transaction costs, and temporal stops (if the trade hasn't paid in a set time, get out)
- When the fund wouldn't share its models, he mapped where its employees went to school and studied those departments' sciences
- Idea generation: Phil Fisher found close to 80% of his best ideas came from other investors. Build the network, track the 13Fs
- The top-100 CEO list, five years of crashing the same conference, and the "female test" that surfaced Lululemon
- Why cheap stocks are cheap for terrible reasons now: the information environment that broke old-school value investing
- Your network is your moat, because most hedge funds have restaurant-level failure odds and no terminal value
- Margin of safety as a life principle: 3-5 years of personal cash, and the multibillionaire who still flies coach
Highlights:
00:00 Intro
00:54 Three edges: analytical, informational, and behavioral advantage
09:18 Sponsor break
09:48 Reading for edge: the canon, timing, and change investing
16:40 What a top quant fund taught a fundamental PM
23:24 Data skepticism, alt data, and the quantification fetish
26:50 How small funds compete with multi-manager pods
30:51 Idea generation: networks, 13Fs, and colliding themes
44:44 People as indicators: bull-bear debates and cross-referencing
51:00 Why technical analysis works: a behavioral lens
58:52 The future of the analyst job in the AI era
1:06:54 AI blind spots: wicked environments and non-stationary markets
1:14:34 Personal competitive advantage: energy, power pairs, network as moat
1:23:41 Margin of safety as a life strategy