Where is the edge today?
Maybe I’m disillusioned from last summer at a macro HF, but curious where you guys think real edge exists today?
Why don’t we hear about guys like druckenmeiller, tepper, kovner who could crank positive returns year after year in a single strategy?
The premise of MMs is that they are a good product because they can filter PMs quickly, so LPs don’t have to lock in capital for a long period of time. If MMs are the secular trend, that implies that master PM, who just dominates markets in a single strategy, is kind of dead. Appears most HFs have even begun making internal hedges against their rainmakers. (e.g. Brevan allocating capital away from Alan Howard).
Curious examples of guys across any strategy (macro, distressed, l/s, etc) who just clip returns year-after-year and can claim to an “edge.”
Time
I’m sorry but time arb isn’t a convincing edge. Those l/o HFs that claim a 5 yr + horizon for alpha can’t compete with private markets. Liquidity is king, unless your doing something super esoteric that has edge in its correlation.
I wasn't trying to convince you.
It's a very convincing edge when you have the right set of investors. It's not a convincing edge these days if you're a PM at a pod shop.
I’d elaborate too that the time edge can be long or short
SMs do this very well. They hold their longs to the peak and then get schwacked and their shorts until the thing hits an all time high!
I agree in theory, but can you think of any good empirical examples of time arbitrage working as a source of edge? I can think of a few funds that invest over a longer time horizon, but can't think of any that are really convincingly showing that it works.
So why were you disillusioned
Good question. Don't really have much of an answer, curious what others say.
But I do think business intuition can be an edge. That's hard to define, but over my career I've come across some guys who have a natural nose for how a business works . . they can listen to a 10-minute presentation in an industry they know nothing about, and they'll be asking all the right questions 10 minutes later. They still don't know nearly enough to make bets in that industry . . yet . . but their superior business intuition means they'll be able to learn the nuances quickly and find some concept or factor that the public market isn't properly accounting for. In fact coming in as an outsider can be a significant advantage to this kind of person, because he's not encumbered by all the entrenched methods and groupthink that the industry pros are saddled with.
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