Millennium index rebal down hundreds of millions again
According to BI the famous MLP index rebal teams were down hundreds of Ms in November on top of being down $900M earlier in the year - what's going on here? how are these guys surviving? appreciate they've printed $ in 2022/2023 but these seem like pretty insane losses
Not in the rebal trade at all but when you have printed money for a decade plus while running the largest strategy at multiple firms, your leash is just a lot longer. Usually these journos also don’t have the full picture since calling someone to pitch a story of “hey they were down in March then made a bunch of it back and are now drawing down again” isn’t exactly a splashy story. Not to say this is what happened, but my point is that these stories are always going to describe tail end events when the reality is typically more centered.
Except the biggest source of unfairness is that the past decade (up till 2021) was easy bull market conditions (zero/declining rates, less quant disruption, more fundamental market, no trade wars, no inflation, COVID-induced liquidity), so these PMs that "printed money" got lucky with timing and accumulated most of their track records during a bull market - a luxury not given to new PMs just starting out. That doesn't mean these PMs are inherently smart or better than new PMs - not sure why the industry gives these "old guns" so much benefit of the doubt when it's pretty damn clear their entire career was based on lucky market timing.
You should leave the industry while you can
Not to say these guys aren’t hitting your typical mlp drawndowns of any other pod, but I’m sure Glen has a great deal of leeway with losing money plus they have a much bigger book than you’d think. Hundred mill is not nearly as much to these two teams as it is to a pod with 500mm to 1b.
Again, see my reply above - basically these PMs that "printed money" in the past decade just got lucky with market timing (big bull market/liquidity tailwind from 2008 to 2021) that the younger PMs starting out post 2021 never enjoyed. So not sure why the industry doesn't acknowledge this and gives older PMs infinite opportunities to lose money and fuck up and still get hired, while young PMs (starting out after 2021) are shafted after 3-6 months on a job on a mere 5% drawdown. Doesn't sound fair to me.
See my reply below:
Except the biggest source of unfairness is that the past decade (up till 2021) was easy bull market conditions (zero/declining rates, less quant disruption, more fundamental market, no trade wars, no inflation, COVID-induced liquidity), so these PMs that "printed money" got lucky with timing and accumulated most of their track records during a bull market - a luxury not given to new PMs just starting out. That doesn't mean these PMs are inherently smart or better than new PMs - not sure why the industry gives these "old guns" so much benefit of the doubt when it's pretty damn clear their entire career was based on lucky market timing.
Is index rebal such a niche strategy such that MLP was the only team running it? The answer is obviously no. He’s obviously extremely successful doing what he does and he’s clearly better than the rest even with the market conditions or we’d hear about any other fund doing well/drawing down with this strategy. I understand your point but it’s also pretty disingenuous to say the best index rebal PM simply rode on good luck this whole time and doesn’t have any additional value or insight learned over the course of his 10+ year stint vs a fresh PM to navigate rough market. Is your solution to just fire his team and let him walk to another fund? Or give more leeway to dozens of PMs who blow up?
Hey look it’s our friendly neighborhood LARP retard again. Why don’t you scurry off and keep shouting about why sellside salespeople should get fired again. That was more entertaining than reading your drivel about how rebal PMs clearly benefited from ZIRP policies. lol the kind of retarded undergrad level shit you spew is honestly amazing
The Millennium index rebalancing losses you’re referring to highlight the challenges faced by even the most sophisticated quantitative and systematic trading teams. Based on the WSO dataset and general insights into the industry, here’s what’s likely happening:
Rebalancing Complexity: Index rebalancing strategies often involve significant trading volumes in illiquid or volatile markets. This can lead to slippage, adverse price movements, and increased transaction costs, especially when large positions need to be adjusted quickly.
Market Conditions: 2023 has been a year of heightened volatility and unpredictable market behavior. Factors like inflation, interest rate hikes, and geopolitical tensions have created an environment where traditional models may struggle to adapt, leading to outsized losses.
Crowded Trades: Many funds employ similar strategies, leading to crowded trades. When multiple players are trying to rebalance or adjust positions simultaneously, it can exacerbate price movements and amplify losses.
Survival Despite Losses: While the losses are significant, Millennium and similar funds often have diversified revenue streams and strategies. Their ability to "print money" in prior years (e.g., 2022/2023) provides a cushion to absorb these hits. Additionally, their scale and access to capital allow them to weather such periods better than smaller players.
Risk Management: These funds typically have robust risk management frameworks. While losses in specific strategies or teams may be substantial, they are often offset by gains in other areas or by the overall portfolio's performance.
In summary, while the losses are eye-catching, they are not necessarily indicative of systemic issues within the fund. Instead, they reflect the inherent risks of operating in highly competitive and volatile markets. Millennium’s ability to survive and thrive likely hinges on its diversification, scale, and historical profitability.
Sources: The Scrooge Rally | The Daily Peel | 12/27/22, JPow Speaks | The Daily Peel | 1/27/22, We might be at the bottom in Multifamily (MF), Return of Tech Earnings? | The Daily Peel | 7/21/22, Resurgence of Equity L/S in 2023
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