What happened at Archegos? A lot has been published already, but many critical questions have still not been asked. After a factual summary / press review, this article asks the missing critical questions.
Geode handles $700 bn of Fidelity’s index tracking assets. Geode Diversified, the much smaller hedge fund business, took a 36% loss on COVID’s volatility rally. It is now getting the axe.
Infinity Q may be the new variance swap skeleton. The New York hedge fund has just been suspended by the SEC pending valuation of its variance swaps and its full liquidation.
The fund’s main investor is handling the fund, while the founder is on administrative leave.
‘Roaring Kitty’, the rebel redittor behind GameStop, is actually a registered principal. His actions and background will harm him, his employer, and will change the industry.
This post explains Keith Gill’s actions, his investment and his supervisory background, and the responsibility of his employer, as they are stated in the class action lawsuit. We ask questions and ponder the long-term consequences.
‘When you combine ignorance and leverage, you get some pretty interesting results.” Warren Buffett
Three good notes from the derivatives research teams of Morgan Stanley, Société Générale, and Nomura point to a potential squeeze in the VIX, as a result of the increasing retail activism. This technical post explains the contents of the research papers. Spoiler alert, yes, the VIX is prone to a squeeze.
GameStop’s rally and its short squeeze are more than just market exuberance. Thanks to low-cost trading, employees working from home, and a Fed-induced market rally, retail traders are pushing the market to new highs and enjoying the excitement of the rally. Worse, social media allow them to focus on a few instruments, with wild rallies.
It is only a matter of time before this party is over, for this stock or the market. We should start thinking of the aftermath.
The fight against one of the largest frauds in banking history (Eur 55 bn and counting) is progressing, with the indictment of Sanjay Shah by SKAT, the Danish Tax Agency.
Our article explains the Cum/Ex fraud, as well as ‘dividend arbitrage’ activities in general.
If you are not in the RIA space, you may have missed a profound change in the area. Robo-advisors are taking a solid market share, and their AUMs are now in the multi-billions. The big boys (Fidelity, Vanguard…), were actually forced to create their own such services not to be left out of this new segment.
Robo-advisors are not really growing at the expense of the usual wealth managers (which still better grasp complex situations), but are concentrating on the under-served low AUM investors. Robos charge a fraction of the existing management fees, thanks to artificial intelligence. They only offer the human touch past a certain $ nominal, therefore bringing the number of advisors per client really low. In fact, Robos also help the usual RIAs with the practical aspects of asset management (cash handling, rebalancing…).
Two leaders, Betterment and Wealthfront, are preparing for the next step of their growth. This article gives an idea of how the senior changes should impact their future.
Nope, portfolio managers shouldn’t keep the best trades for themselves (at the expense of other investors).
BlueCrest moved its best traders into a management-owned fund, and used AI to replicate their trades in the main fund. Unfortunately, the replication was poor, and investors redeemed and sued when the intel of the new approach came out.
The SEC is now forcing BlueCrest to compensate investors $130m for the underperformance, with a $37m penalty on top.
Quant hedge funds have had a bad year. One of their core factor, value, a staple of investment for many years, has strongly underperformed.
Quants rely on backtests to see what has performed / is performing well. In a changing universe, models naturally have short lifetimes as a result. In this covid world, the past really doesn’t reflect the future anymore, and many models do not work at all. Some quants have self-doubt on the validity of their approach (see the previous post on Inigo Fraser Jenkins).
It’s probably way too early to call for the demise of quant investing, but COVID surely brings a regime shift.