In light of the momentum crash, growth to value shift, whatever you want to call it, any news on the street? Heard multiple quant funds that had huge losses yesterday. Starting to feel like maybe some bigger players might unwind
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Cliff is definitely fist-pumping right now
How huge of a loss? I am guessing the damages will mainly be on the CTAs. Heard that some long/short equity funds were hit as well, but limited exposures mean that damages were not catastrophic.
Limited exposures how? If anything peak exposure as gross is super high, and many L/S neutrals were positioned for election outcome and then got hurt badly by vaccine.
Many of these firms have a fund level limit on the exposure to these factors. Individual pods are required to keep exposure below 15% for example. Those who don't have such risk managements in place probably got their YTD returns wiped out at least.
Trust me, know too well. And very few have 15% by the way. It’s more than that. Not to mention there was de-gross happening too, so even on names that don’t carry a lot of momo could’ve unwound. Counter intuitive but that’s how it is. So most of the neutral shops at pod level (even fund level) still tend to have tons of exposure, even if small in context of overall factor risk you have to think in context of how little absolute alpha you need to have a great year, bps bleed fast.
What do you think is the damage to L/S guys and who was hurt? It was surprisingly mild in my neck of the woods, as it was neutral at the market level but I heard some lower-turnover quant guys posted a few bad days. Not enough to derail the year, though.
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