|
 gnarsed
|
|
Total Posts: 92 |
Joined: Feb 2008 |
|
|
ridge/rida down small. rief up.
what factor moves did you think would be most painful? |
|
|
|
 |
 gnarsed
|
|
Total Posts: 92 |
Joined: Feb 2008 |
|
|
ridge/rida down small. rief up.
what factor moves did you think would be most painful? |
|
|
 |
 leftskew
|
|
Total Posts: 25 |
Joined: Sep 2019 |
|
|
It has been a while since I analyzed last, but I thought they had exposure to the anti-beta/low vol one and quality, and I don't think those factors have performed well recently. But I wouldn't be surprised if they were making changes. |
|
|
|
 |
| |
 |
 zee4
|
|
Total Posts: 89 |
Joined: May 2010 |
|
|
Are these numbers YTD or Feb only? Regardless, -5.87 and -7.86 do look ugly. |
Бухарский |
|
|
 |
 chika
|
|
Total Posts: 13 |
Joined: Aug 2004 |
|
|
These are YTD performance based on a few funds I track
what is the data source for this table? |
|
|
 |
 zee4
|
|
Total Posts: 89 |
Joined: May 2010 |
|
|
Looks like HSBC Global Markets report to me. |
Бухарский |
|
|
 |
 elf
|
|
Total Posts: 38 |
Joined: Mar 2009 |
|
|
RIDGE is down 1.6% in Feb, down just under 7% YTD. |
|
|
 |
 jslade
|
|
Total Posts: 1243 |
Joined: Feb 2007 |
|
|
https://www.quora.com/How-reliant-is-Renaissance-technologies-on-HFT
Appending here for the record
James Baker, same math as Renaissance Tech from same source Updated 5 years ago · Upvoted by Tom Groves, One of the founding partners at LindenGrove Capital, a Macro hedge fund and Jack Wei, Hedge Fund Analyst · Author has 200 answers and 4.7M answer views What are the investment strategies of James Simons/Renaissance Technologies? I understand he employs complex mathematical models, along with statistical analyses, to predict non-equilibrium changes. Originally Answered: What are the investment strategies of James Simons/Renaissance Technologies? I have known Jim Simons, Bob Mercer and Peter Brown since 1965, 1974, and 1979, respectively. Renaissance has also hired senior researchers who had formerly worked for me for years. None of these people has ever told me anything about Renaissance's investment strategies. My observations below have been obtained entirely from publicly available records. In particular, the core strategy is publicly known. It's the details that are proprietary. There are millions of details, and they are essential to the performance. However, the question was about strategy, so that is what I will try to answer. The core strategy is portfolio-level statistical arbitrage carried to the limit and executed extremely well. Basically, portfolios of long and short positions are created that hedge out market risk, sector risk and any other kind of risk that Renaissance can statistically predict. The extreme degree of hedging reduces that net rate of return but the volatility of the portfolio is reduced by an even greater factor. The standard deviation of the value of the portfolio at a future date is much lower than its expected value. Therefore, with a large number of trades the law of large numbers assures that the probability of a loss is very small. In such a situation, leverage multiplies both the expected return and the volatility by the same multiple, so even with a high leverage the probability of a loss remains very small. The general properties of the strategy can be deduced from the statement of Renaissance for the Hearing of the Senate Permanent Subcommittee on Investigations, dated July 22, 2014. [https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=6&ved=0CEcQFjAFa hUKEwjVl_LOifrHAhWJ1h4KHTBAAj8&url=http%3A%2F%2Fwww.hsgac.senate.gov%2Fdow nload%2F%3Fid%3Db81368f4-6448-4867-8572-f2340418d029&usg=AFQjCNGlNbiS9DOE_N jQ8Ks_BT_X54dIPw&sig2=s0RdwL0a8afNv6lUBfyxVQ&cad=rja]
Renaissance collects "all publicly available data [they] can that [they] believe might bear on the movement of prices of tradable instruments--news stories, analysts' reports, energy reports, crop reports, weather reports, regulatory findings, accounting data, and, of course, quotes and trades from markets around the world." Their models "use this data to make predictions about future price changes." The hearing was specifically about the Medallion fund, about which the statement says "The model developed by Renaissance for Medallion makes predictions that are profitable only slightly more often than not." With these properties, there were two reasons that Renaissance would like to have a call option on the portfolio that it has designed: leverage and protection against Black Swan events. Leverage is needed because, unleveraged, the rate of return of the portfolio is low. However, because the volatility is much less than the expected return there is no limit to how high the leverage could be without increasing the probability of a loss, at least according to the models. Through years of use and refinement, Renaissance knows that its models are very reliable. However, they also know that there is always the risk of something happening that is not covered by the models, in particular something that is outside prior experience, which is called a "Black Swan" event. Thus, a call option is ideal: it can provide high leverage and can provide protection both against the very low probability of a loss greater than the option premium and also against the unknown probability of a possibly catastrophic loss due to a Black Swan event. We know all this because these are the business reasons for Renaissance accepting Deutsche Bank's proposal of barrier options. Basically, Deutsche Bank, and later Barclays, sold the equivalent of a call option to Renaissance on the reference portfolio that Renaissance designed. Of course, writing an uncovered call on the Renaissance portfolio would be equivalent to betting against Renaissance at high leverage, which would seem to be a foolish thing to do. The banks covered these options by buying all of the securities in the portfolio. Thus the bank's position was equivalent to a covered call. In other words, the banks' profits and risks were essentially equivalent to writing a put option, which is a bullish position. Because the volatility was very low the probability of a loss for the bank was low and the probability of a loss greater than the option premium was even lower. Except for the Black Swan risk. The probability of a Black Swan risk is unknown. Part of the premium paid by Renaissance and earned by the banks was equivalent to insurance against Black Swan risk. I don't know if the amounts of the premiums were publicly disclosed.
There were many more details in the statements and the testimony at the hearings. However, discussion of further details would detract from the important points that I have made above. In particular, the hearings themselves were about tax issues not about investment strategies. Renaissance explicitly asserted, under oath, that its "models do not factor in tax rates when making trading decisions." Therefore, tax issues, although they might be very important, are not part of the "investment strategy" at least as reflected in the models, so they are outside the scope of this particular discussion. [Edit (added in answer to a comment): The reference portfolio was highly dynamic. There were thousands of trades per day. To accomplish this, the banks gave RenTech's computers direct access to execute trades through the banks' trading desks. This arrangement was part of what created controversy about what should be the proper tax treatment for this particular case. However, I am not a tax lawyer and will not try to analyze those issues. However, if you want to hear more details on the automatic execution of the trades, and questions about how much human interaction was present, that is all discussed in the live testimony before the subcommittee: [Hearings| Homeland Security & Governmental Affairs] Are the consistent high annual returns of Jim Simon's RenTech Medallion Fund due to their ability to execute trades at high frequency? Yes and No Yes, Medallion Fund does do hundreds of thousands of trades per year. In some cases they trade in and out of a given security position within seconds, though some positions are held much longer. No, in the sense that Medallion's success does not appear to be due to them executing trades faster than others so that they can get ahead of price movements caused by large institutional trades, which is the practice that causes "high frequency trading" to be controversial. As Sundeep Bhat has said, no outsider knows the details of what they do. All employees sign a very strong non-disclosure agreement that apparently no employee or former employee has ever violated. However, the broad strategy of what they do can be deduced from public statements by Jim Simons, the founder of Renaissance Technologies, and Peter Brown, one of the current co-directors. This includes Peter Brown's testimony under oath at a US Senate hearing. Basically, Medallion Fund does statistical arbitrage. They gather enormous quantities of data of all types and use statistical prediction to find instances in which one collection of securities or commodities can be hedged against another. An example used by Peter Brown is based on the statistical observation that markets tend to do slightly better on days that the weather is fair than on days when the weather is bad. Thus, if the weather is fair in New York and bad in Paris, you can statistically make a profit by being long on securities traded in New York and simultaneously short on securities in Paris. They do this even if their predictions indicate that the market in Paris will go up, but merely less so than New York. This only works if the securities in Paris are precisely balanced with securities in New York. They won't be the identical securities, so it will be a very complex statistical balance involving many securities or commodities. However, this weather effect is very small. The system works by finding a very large number of such small opportunities. In addition, hedging very different entities against each other requires precisely balancing complex portfolios against each other rather than hedging individual securities. That's the only way to get precise balance. They have a program with a million lines of code to manage all this, and, yes, they do thousands of trades a day. However, the large number of trades is a consequence of them needing to take advantage of a large number of small hedging opportunities and having multiple securities and commodities involved in each hedge. Thanks for the A2A.
|
"Learning, n. The kind of ignorance distinguishing the studious." |
|
|
 |
 jslade
|
|
Total Posts: 1243 |
Joined: Feb 2007 |
|
|
Brandon Smietana, They call me "Flash Crash" Answered 10 years ago · Upvoted by Andy Manoske, Associate at GGV Capital and Martijn Sjoorda, Former COO asset management firm · Author has 495 answers and 1.7M answer views How likely is it that Renaissance Technologies is a Ponzi scheme? Given how large an outlier their main fund (Medallion) is in terms of extremely good performance over many years? Originally Answered: How likely is it that Renaissance Technologies is a Ponzi scheme? Renaissance Technologies is not even the most profitable quantitative fund. These funds are all doing so well that they do not take outside investors and do not want you to know they exist. Its surprising that Renaissance Technologies has a website and releases its return information at all, because most of these funds do not. Renaissance Technologies is just one of hundred of there firms, although it is one of the larger and older ones. However there are diminishing rates of return to on increasing amounts of capital, so from that perspective Renaissance Technologies is not even generating the highest rate of return for firms doing similar things. When it comes down to it, the market is extremely inefficient. Up until a few years ago, most trading decisions were being made by humans. We still do not even know how to price most of the newer financial assets and there are still fundamental breakthroughs in mathematical modeling of financial markets occurring yearly. Most of the information in SEC filings and about companies is not used for pricing and modeling by most firms. Most firms have no way to adjust the pricing of assets based upon news reports. The majority of information that is relevant to financial markets is information that we are only now integrating into our financial models. Renaissance Technologies' 30% year rate of return is the kind of returns that someone using a naive back-propagation trained neural network generating trading signals would get in 2002. Today you can still generate great returns by taking something that a human trader once did and doing it faster. For instance, by using NLP algorithms to process news reports and using that information to predict price swings caused by news announcements. A human might have an idea about the direction a stock will move and how fast, in response to a new article. However the human cannot process the article and make a trading decision in under 5 seconds, like we can with a computer algorithm. Also the trader has an intuition, but is not going to be as accurate as the algorithm. If we can quantify the price movement and integrate historical data on the past behavior of the asset and other similar companies share prices responding to similar news reports, then we can determine the likely magnitude of the price movement. We can also quantify the uncertainty in our estimate of the magnitude of the price movement. If you can process data faster, integrate more data or make more accurate predictions of market behavior with better algorithms, you are going to see great rates of return. This is merely what Renaissance Technologies does; they use data and mathematics to create mathematical models of market behavior. It should be obvious that any firm with better models is going to produce superior rates of returns. Its also possible to arbitrage volatility and other statistical properties of the market and many of these statistical properties of the market time series are still very inefficient. If you want to see how inefficient the market is, you should do independent component analysis on the market time series for the daily closing-closing price rate of return and decompose the market series over the extracted factors. Renaissance Technologies' performance is not surprising at all. They do not have any finance people; they are a mathematician and physicist shop. Most of these people do not even have enough finance background to construct a believable ponzi scheme. The human fund managers I have talked to have told me that they prefer simple algorithms that they can understand and which they can explain to their investors, over algorithms that more accurately model the market and which produce higher rates of return! They prefer 'simplicity' to achieving high rates of return at lower variances! The question should not be "How likely is it that Renaissance Technologies is a Ponzi scheme?", but rather "Why are we trusting our retirement fund investments to fund managers using 30 year old commodity quantitative methods?". I think Renaissance Technologies is just one example of a trend in finance towards automated markets where trading and pricing are performed by quantitative statistical models instead of ad-hoc human reasoning and intuition. Laurent Bernut, ex-Fidelity short seller, ex-Hedge Funds analyst, ex-CPA, algo trader Answered 4 years ago · Author has 584 answers and 5.1M answer views How can Renaissance Technologies make so much money from financial markets by hiring scientists and/or mathematicians with no domain knowledge of finance? Originally Answered: How can Renaissance Technologies make so much money from financial markets by hiring scientists/mathematicians with no domain knowledge of finance? I have never worked at Renaissance, so please take my answer with a grain of salt, but here is a first hand story that could shed some light. On June 22nd in NYC, my colleague, who is also ex-US department of Defense consultant and myself, met with one of the foremost US experts on sonar detection (good luck finding him on Facebook, LinkedIn). He is a physicist with multiple PHDs, geeky funny. His expertise is signal processing. It was one of the most refreshing experiences ever. He explained his world. I explained mine. Cotes de Provence Rose, beer and wild berry Zinfandel helping, we tumbled down the rabbit hole talking even about epistemology, the philosophy behind math. His world, signal processing, bears uncanny resemblances with ours. We explored Bayesian probabilistic determinism, which models (Gauss, Poisson etc) to apply to distributions, the cost of false positives (think trading edge), arbitrage between time and action with sparse data (confirmation). We spoke the same language. We were talking real problems: how do distinguish signal from the noise ? How fast ? What is the cost of being wrong ? What is the cost of being right ? Which statistical law applies to randomness ? We entered a massive time distortion. We started around 2 pm and a couple of bottles down the road, but then after what seemed like 5 minutes, we were hungry. It was 10 pm. We could have gone on forever (*) Compare this with glorified journalists, otherwise referred to as fundamental analysts. ●●●●●●“This is fairly valued”... life is unfair darling, so do you really think markets are fair ? “On a sum of the parts valuation”... Frank N. Stein zombie valuation “Fundamentals are strong”... Make fundamentals great again... “Long term story is still intact”... Some HF reality TV celeb says that about Valeant by the way... “On a DCF basis, our target price is +10% above current market valuation” ... stop tinkering the terminal value to rationalise your subjective views “top quality management” ... was also said about Enron, Bear Sterns, Kodak, GM, Chrysler, Too much B/S bingo, too much theory, Bottom line: Physicists approach the markets as a statistical problem. This is practical. MBAs have too much untested theories in their head. It is costly and time consuming to unlearn all that junk. “In theory, theory and practice are the same. In practice, they are not”. Yogi Berra (*) There is no way i could ever afford someone of that caliber; he charges something the size of Liberia’s national deficit per hour. But, he wants to send his granddaughter to Mars and he thinks our algo could be the right fuel, so i invited him to have fun with us. Maybe good guys do not always finish last https://www.quora.com/What-are-the-top-high-frequency-trading-firms : Christina Qi, Partner, Domeyard LP Updated 8 months ago · Upvoted by Marc Bodnick, Co-Founder, Elevation Partners [In wake of the 2020 crisis, this list may change substantially. Will keep you guys posted.] [Updated again February 2019. Original post April 2014.] [If you’re a reporter looking to reference this post, please give credit where due and don’t just copy me word-for-word.] I was originally compelled to respond because many of the answers were outdated (Infinium blew up, Knight had just become KCG Holdings, etc), and wanted to compile a list of current HFT firms for everyone’s reference. These firms are not necessarily the largest by head count or operating capital, but are generally known to trade the most volume (by notional value) and possess the fastest and most deterministic response times. I also thought it would be helpful to list whether they’re a prop shop or hedge fund. Note that some hedge funds have a proprietary arm, and that most HFT strategies fall under prop due to capacity constraints. For those who aren’t familiar, proprietary trading firms (or prop shops) are internal and smaller in AUM compared to your “Top 10 Biggest Hedge Funds”, and you’re probably trading the CEO and Partners’ funds. It’s hard to compare a prop shop to a hedge fund due to strategy and AUM differences. Thus, there’s a natural tendency for HFT strategies to be proprietary. However, we’ve seen a few HFT hedge funds sprout up over the years, though they all reach capacity quickly. We’ve also seen more hedge funds raise venture capital and PE funding recently, as well as a record number of M&A activity in HFT, but I digress. ● ● ● ● ● ● ●Virtu Financial (acquired KCG) - prop shop Two Sigma Investments - prop shop that launched a hedge fund Citadel - hedge fund with prop arm Hudson River Trading (acquired Sun Trading) - prop shop Optiver - prop shop Quantlab Financial (acquired the prop trading arm of Teza Technologies) - prop shop Tower Research Capital (Spire Europe) - prop shop ● ● ● ● ● ●Jump Trading - prop shop Tradebot Systems - prop shop Flow Traders - prop shop DRW Holdings - prop shop RSJ Algorithmic Trading - hedge fund with prop arm IMC - prop shop RIP since last update: Spot Trading If you’d like a larger list, this article by Grainestone Lee is pretty comprehensive. Below is a screenshot (sorry for the highlight over my company - I was very happy to have barely made the list): I confirmed with Jim Simons: Renaissance Technologies doesn’t do HFT. He got pretty annoyed when I asked him. Perhaps it’s a common misconception about their firm. (my note: Simons invested in her Domeyard HFT firm, so makes sense that it is a diversification play for Simons, rather than a competitor; and that she would be able to ask him directly).
|
"Learning, n. The kind of ignorance distinguishing the studious." |
|
 |
|
|
|
|
|