For those of us who weren't around to play during the financial crisis, this is our first time seeing vol get extreme and liquidity get fked. Making this post and hoping it will become a thread where people will post what they're hearing circulating about different funds' positioning and winners/losers so far. Weeks like we just had cause rumors and gossip to spread like wildfire, so stay sharp and skeptical
I'll start with what I've heard, no particular order. Please correct me if any inaccuracies!
Up
- Moore – bacon supposedly made discretionary call on covid, playing out well. Up close to 30 points according to story I saw
- Brevan – up
- Saba – got long protection on cruises back in january. Great rr. Killing it
- Brevan – similar situation as moore, not up as much
- Chenavari – big % return short EUR CDX got attention, but it's on a fund that's a small chunk of their asset base, so...
- Kirkoswald – RUMOR coffey profiting
Down
- Bridgewater – came across terminal this AM. Down a massive 20% in Pure Alpha, which is supposed to run a vol half that. Big deal.
- Bluecrest – no return numbers, but their rv book is facing same issues as other multimanagers
- Solus – RIP
- Millennium – RUMOR 'big' loss relative to their risk targets (i.e. down a couple hundo bps at most lol)
- Pointstate – down ~10 points ytd
- Natixis H2O – shocking, I know. Down like a third I think
Funds I'm curious about: Capula, Exodus Point, Citadel (chatter about their equities book at start of week), Tepper, Druck
Interested in numbers for Citadel, P72, MLP, Squarepoint, Quadrature.
Moore – I have zero unique visibility on this, but it reminds me of how Michael Platt started swinging harder after he returned institutional money a little while back (like Bacon just did). Makes complete sense, as your mandate has shed a lot of constraints. Also, old-school macro guys tend to thrive under this kind of vol. The vol sellers in disguise, the FI RV guys, who have gotten a fk ton of inflows recently, have a bad time under this kind of vol. One camp makes money, and the other camp loses, when markets cease to 'mAkE sEnSe.'
Mily – 'Liquid' is always a relative term. Conditions this week were fked in super 'liquid' stuff (one obvious example you can check out is straightforward levered CTD basis trades). This is the kind of thing that is not a problem most of the time. And then it is. C'est la vie. When everyone wants to 'quickly reverse their book,' well, it becomes a problem!
So I spoke to a rates vol trader who sits down the row from me. I never traded volatility. I mean, I've dabbled trading gamma/theta but it was a test and trial kind of thing. So I spoke to him and asked him what the desks edge was? The most senior vol trader on the desk makes like 100m a year just by himself which is pretty insane and he's been doing this for 20 years. So he said he doesn't model garch/arch or try to predict where volatility will be in the future but only care about if one vol is richer or cheap to another. Essentially trading the relative value. He said for far out of the money, they model using SABR and try interpolate points across the curve. So I asked him... if the RV trade goes against you, what do you do? He said he gets out of it. I mean, is this common? Let's say I'm looking at same delta teenies or wings between calls and puts and I see their vol ratio is out of line relative to the historical. I mean what is the edge? Anyone can look at this. Maybe because most people trading options only care about the direction of the underlying hence the opportunities such as these are plentiful and mean reversion is more common than trading cash or delta one derivatives?
Pretty much how all vol arb groups doing in a nutshell. Of course they have different ways of modelling the vol but essentially all are trying to find richly priced vol and selling it.
Edge is very small, even if you have superior model you can still get caught with pants down when lack of liquidity or sudden shifts in underlying like last two weeks when you suddenly realize your book's VaR just became realized losses.
Not true, most institutional / buyside want to trade options for vol. Directional bets using options is very expensive and mostly retail.
Millennium down 2.7% mtd so far in March, down 1.9% ytd
Well, you can track hedge fund performance through a) Eurekahedge b)Funds Portal c)HFM Global d) Preqin and see who is down and up. You can also track some top-performing medium sized hedge fund on Daedalus Investment Platform through https://daedalus.investments (although the aim of the platform is to invest)
De Shaw roughly flat ytd in Composite fund