Jane Street 7 B's in Profit this Year
Quite the comp pool.
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citadel 9Bs in just the hedge fund, similar # of employees, and not a particularly good year (almost 20 last year)…
The difference is that the 7 billion goes entirely to JS while Citadel only gets a fraction of the 9 billion they made
Well they returned 7B last year. It’s more than 50% Ken + employees.
Well, it's not hard to make 9 billion when you start the year with 60 billion AUM and the S&P500 goes up 24% (which it did last year). Unless you work at Citadel, there's no way to know how much of that 9 billion is uncorrelated alpha and how much is just beta that you could have gotten from an index fund.
(And even if you *do* work there, then sure, you'll get a factor analysis report estimating alpha and beta components of your returns, but those are just guesses and there's still no way to *really* be sure...)
Look up “market neutral”
I am aware. But every fund says they're market neutral, but outside investors have no way to tell which are *actually* market neutral or just saying it. In fact, even the PM himself can't *really* be sure, no matter what the factor analysis report says.
I was at Citadel in 2008 when we said we were market neutral, but then we lost 55% in the crisis, cause it turns out oops, we actually weren't so market neutral after all. You do the best you can, but the world has a lot of correlations that are hard to predict.
For Citadel in 2024 with like 70 billion aum now, what do you think their beta is to the S&P500? Don't tell me you think it's actually 0?
Could not disagree with this more. Citadel in 2008 was a very different organization from Citadel today.
Let's start with, do you think KG wants any material exposure to the S&P 500? The combination of Citadel HF strategies have consistently experienced gross sharpe ratios above 3, while the long run S&P 500 average has been about 0.5 (and highly dependent on US outperformance) - my guess is his desire for any exposure to the S&P is low (perhaps even negative), even prior to considering what clients want. So if he has any identifiable material exposure, why wouldn't he just hedge it?
The best argument for market neutral HF strategies having positive exposure to the S&P 500 is HF leveraging / deleveraging flows are probably correlated to the market. However, the argument on the other side is a lot of hedge funds strategies do well in periods of elevated volatility, which has the inverse relationship to the S&P (and to this point, Citadel did great from 2020-2022, while the S&P did rather poorly). "Market neutral" HF strategies are probably biased long liquidity and long volatility, and when these exposures are netted, the direction of exposure to the S&P is unclear and highly time varying.
At any point in time I doubt Citadel's portfolio has a beta of 0 to the S&P, but I would bet it is almost equally likely to be negative as it is positive. And importantly, the incentives are strongly in favor of hedging any identifiable gaps that naturally form from the composition of strategies, and he has a lot of smart people trying to do exactly that. I doubt they are perfect at it, but when they screw up, I don't see any reason why they would bias in one direction vs. another. And they learned a lot from the screw up in 2008.
I could probably make the case that if the "soft landing" that got priced last year and caught many on the street off guard hadn't happened and the S&P's returns were lower, Citadel might have done even better.
Also, the 7B was just first 3 quarters. Jane street reportedly expects to make 10B for the full year
SBF should have just stay at Jane
He was a billionaire at one point so it was a really good trade for him for a while, he just forgot to unload some risk and realize some of those gains after such a rapid climb.
He’s gotta be borderline suicidal now. Went from privilege his entire life, making a comfortable 7-figs a year at JS, became a billionaire, and is now dropping the soap for bubba on a daily basis in prison probably for the rest of his life.
Dropping the soap for Bubba is the pinnacle of effective altruism, all is according to plan
Who cares everyone there are nerds
I wouldn’t mind being a nerd and constantly pulling in low 7-figures in TC
It's an M&A intern what do you expect lol? These tools probably think it's cooler to be 'investment bankers' working on 'landmark deals featured on WSJ' and 'models and bottles'. Dumb kunt probably watches 'American Psycho' way too many times.
They haven't seen how Russian quants dress like mafia with slick all-black suits in major financial hubs moving in the markets in literally microseconds whilst sleep deprived 'investment banking analyts' dreading to work on a subway with loose tie around their necks and frantically check their Teams/Outlooks on their way to work.
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