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What strategy? For L/S equity nothing unusual as far as I know
Really? Shit cos vs quality, momentum reversal, small caps dunking on large cap.
my shorts are raging and longs aren’t keeping up (this week Monday and today have both been 1std dev+ moves)
Yep. Painful like December.
It’s been brutal. The garbage rally, quality and crowding underperformance, and sector rotation. Was hoping for a relatively low vol earnings season yuck.
Macro side as well. Never thought an election that was basically decided months ago with two old dudes would cause this much havoc.
What makes it worse is everything being priced in is contrary to what economic data had been coming in at.
and now Taiwan, well off to go risk manage.
Might be a little of what you’re running into:
https://www.wsj.com/finance/stocks/global-stocks-markets-dow-news-07-15…
It’s the “Trump Trade”. Full rotation in equities, the article points to inflationary trends as well.
My impression is most pods are factor neutral to value/growth/size? Why would a rotation of these factors hurt them unless they are closet long term quality and short smid?
Exactly this. Successful pods neutralize heavily so their alpha drives the book. Investing 101
I guess above posters have never worked the HF job or experienced rotations. It’s impossible to hedge out every factor risk.
It’s not like long Cigna / short Humana or whatever is going to perfectly isolate the risk you want. You’re always going to have some factor risk exposure. And when factor moves are huge, even some factor exposure is going to affect you.
Or if you’re long a company that has high AI mix and its closest peer which you’re short has a lower AI mix. Then you’re going to be net long AI and that would probably be shit the last couple days. So is the solution to just short random AI stuff to hedge that net long AI exposure so you’re “AI neutral”? Yea sure but then you add so much other risk doing that. So you figure you might as well be net long AI. You would’ve made enough money YTD anyway.
If your understanding of hedging is I buy this "AI" name and short that other "AI" name and I'm good, then yes, however that's a very naive way of looking at it.
Can you elaborate please?
It was a simplified example illustrate the challenges of eliminating factor risk cleanly.
Good answer, personally I would have kept it to there is "liquidity" and "mtm". If a large part of the market is on the same side does not mean they are wrong, but it matters when some entered/some exited. If you want to call how the PM manages liquidity and short/medium term risk as being "closet long/short" sure.
100%
In the last week, the Russell 2000 has outperformed the Nasdaq by 12% (the biggest 1-week outperformance since the TMT bubble burst) and has outperformed the S&P 500 by 10% (the biggest 1-week outperformance since the Black Monday market crash in 1987).
US equities have seen a strong broadening move - 76% of stocks have outperformed the benchmark in the last week, in-line with the best 1W breadth in at least 20 years. Under the hood there has also been clear signs of risk-on moves with Unprofitable Tech up 11 days in a row, the best ever run for the basket. The Russell's 14D RSI is up to 81, the most overbought level in 7 years.
Oof
Yep, it's been brutal. Heard of a couple small pods blow up so far...
If it's couple small ones that's fine. It's those times when big books are liquidated and crowded longs massively underperform (crowded shorts outperform), leading to extended pain for pods.
This could still be in the works. Let's see...
Any color how quants are doing in this rotation?
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