State of Market – Jan 2021

There's blood in the streets right now; obviously, we all know about Melvin and their >30% losses, but P72 just came out with their 10-15% loss, and Maplelane also down 30%. I expect to see the other funds coming out with their numbers, but based on these L/S spreads, I don't expect them to be great either.

There's gotta be teams/funds that start to get cut soon. Does anyone hear any rumors? How's everyone doing?

Comments (44)

 
Jan 27, 2021 - 11:15pm

I genuinely wonder how professional investors can be so very bad at their jobs. My 401k DOUBLED in 2020 in a passive growth fund. My active side stock investments are up 90%. I'm not brilliant or special. It's mostly true for anyone who isn't a total moron. Y'all are getting paid 2/20(?) for this sh*t? You deserve to be out of a job.  

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Jan 28, 2021 - 12:43am

prospective1234

Professionals attempt to delivery superior risk adjusted returns

-30% is a good risk-adjusted return?

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  • Analyst 1 in CorpDev
Jan 28, 2021 - 12:38pm

Compared to the majority of reddit users who will probably lose close to all of their life savings when everyone collectively sells at $420.69 or $1000 or whatever limit they put in. -30% is probably above the median return of all those "invested" in GME. Having a pandemic leading to stimulus checks from the government and leading to people having extra time on their hands to start playing around in the market is a black swan enough of an event. On top of that, the likelihood of 2 million Reddit users to agree to collectively short squeeze a HF is a once in a lifetime event. Please tell me how you making 100% in your 401k in a year where the overall market was up 66% from March would prepare you to see this coming while managing billions of dollars

 
Controversial
Jan 28, 2021 - 1:10pm

 

Please tell me how you making 100% in your 401k in a year where the overall market was up 66% from March would prepare you to see this coming while managing billions of dollars

That's my point. People are paying 2/20 to incompetent salesmen who throw around their pedigree earned by their parents or grandparents. If I had $2 billion to invest in the stock market, it sure as hell wouldn't go to one of these moron hedge fund managers. Might as well throw it in an index fund with almost no fees. At least you avoid the structural short-comings of making huge one-time investments in stocks that show your strategic hand. 

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  • Intern in IB-M&A
Jan 28, 2021 - 3:34am

I totally understand what you're saying - I've made some great picks over the past year - but the game is totally different managing a fund of $2bn. There's so much regulation + so many obstacles to dodge.

 
Jan 28, 2021 - 11:19am

 

I totally understand what you're saying - I've made some great picks over the past year - but the game is totally different managing a fund of $2bn. There's so much regulation + so many obstacles to dodge.

Right. Like, answering the challenging questions: how big and where should my house be based on the salary I am paid off of $40 million of fees set against a few million in expenses?

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  • Intern in IB-M&A
Jan 28, 2021 - 11:52am

Lol more like "how can I allocate $200mm in capital to this one stock that I KNOW is undervalued, but without spiking the price?" If you put in a market order then it'll be obvious you're taking a large position in a company, because the price will shoot up. That's just one really easy example, but I know there are many more questions. Another example: let's say you're Warren Buffett with a multi-hundred billion dollar fund. How do you allocate your capital when you'll take a controlling interest in any illiquid stock that you purchase? Or, how do you allocate so much capital when you'll have to openly report it after taking too big of an investment (there's a law where you have to publicly report that you've taken a stake in the company when you own a certain percentage of their stock - like 5% or something). If you do this then your hand is quickly shown to the public - as we've seen this week, it's sometimes a bad idea to show your hand to the public. People can either jump in right away, limiting your profits because you couldn't take as big of a share of the stock, or they can go on a brutal short campaign, or they can short squeeze if you're taking a short position in a company (slightly different situation, but it's still worth mentioning), etc. 

 

It only gets harder and harder as your fund gets bigger and bigger. This is why guys like Warren Buffett are SO impressive - once your fund is at like $100bn, it's almost impossible to beat the market even by only a percent or two. The larger your fund, the more you have to spread it out/the harder you have to work to find good securities, and the more your fund acts like a SPY or VTI because it's basically becoming the Nasdaq100 as it gets bigger and bigger. 

 
Funniest
Jan 28, 2021 - 6:51pm

Inside a hedge fund today:

Analyst: "Sir we're up 1000% on our gamestop position, and all the data points to this being the peak, we need to sell off"

Manager: "We can't"

Analyst:" What, why?"

Manager: "Diamond fucking hands, we're riding it through"

 
  • Associate 3 in HF - EquityHedge
Jan 28, 2021 - 9:40am

Srs question... if your fund did ok/well through this gamestop blowup, do you think some clients redeem from you to plow into the guys down 20-30% (at attractive terms) to play the mean reversion?

 
Jan 29, 2021 - 12:00pm

No - i work for a fund that actually is still up (knock on wood) and was on the right side of the trade. We're actually more nervous that allocators just turn away from hedge funds altogether because of awful risk management displayed by some of these funds that are now down > 30%

 
  • Associate 3 in HF - EquityHedge
Jan 29, 2021 - 12:08pm

The whole "how much of your own wealth is in the fund" is a thing for some allocators. Anyone know how much of Gabe's own net worth was in the fund? Curious if he was just arrogant (and lit most of his own net worth on fire because he thought he was right), or reckless (pressing the short because he didn't have much of his own money in the fund and didn't really care).

 
Jan 28, 2021 - 1:58pm

They are saying that they are locked out because the hedge funds contacted the brokers and locked them out purposefully.  

 

Where I am confused is.  It looks like the GME is so illiquid and the reditors have broken the market.  If the market is broken, then you need to halt trading to fix it (ie circuit breakers as one example).  I agree that if they are just blocking them out to block out traders that's wrong.  but if all these shares are trading and not  enough liquidity is in the market to clear orders what happens. I imagine fixed contracts need to trade first.  thus Options and Shorts get filled first then you can repoen to buying.  I know usually orders are a first come first serve, but it seems fishy that no one would step in to try and assist the market with liquidity.    

 
Jan 28, 2021 - 8:36pm

Candlestick also down 10-15%

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