Blockhouse Archives

AHL co-founder and Winton founder David Harding, on the '90s convertibles boom he says they missed, and Ken Griffin at Citadel: "I definitely didn't think that... trend following would work as long as it has" "The one I pick on is Ken Griffin at Citadel who he was doing convertibles, which is a completely different world." "A lot of money was made in the '90s out of convertibles." "I'm not saying we could've been Renaissance... but we definitely could've developed convertible arbitrage"

Numerai (@numerai) founder and CEO Richard Craib (@richardcraib) on why buying the S&P isn't really passive: "...the market portfolio is amazing. It's like my favorite thing. One of the things I don't like is that people call buying the S&P passive investing because it really hides the ball." "...in reality it's actually you've got 500 of the world's best CEOs to actively manage your capital all day, every day." "So why do you think the market portfolio is boring? That's almost sci-fi level amazing."

Third Point founder Dan Loeb on buying the Twitter buyout debt: "The Twitter debt was a resale of the financing debt that was offered when Elon bought the company. Morgan Stanley sat on it for a while. It was deep underwater. When it got close to par, they decided to sell it." "Most credit investors were really scared and nervous to buy that, even though it was, like, 96, 97 cents on the dollar. It was yielding around a 12% yield." "We were comfortable enough with the underlying value of the business and with the fundamentals that we made that, at that time, our largest credit position."

Renaissance Technologies CEO Peter Brown on arguing against Jim Simons to add risk during the 2007 quant quake: "I ran into my office, and I found Jim, Bob, Paul Broder, who was the head of risk control, all holed up, and the office was full of cigarette smoke." "Jim was interpreting every little wiggle in various graphs. He was really scared, and he wanted to cut back, and hard." "I argued that we should not cut back, that this was gonna be the greatest money-making opportunity we'd ever seen, and if anything, we should increase our positions. But it was three against one." "And then at one point, miraculously, the whole thing came roaring back, and indeed, it was an incredible money-making opportunity."

Balyasny's Global Head of Quantitative Research Giuseppe Paleologo (@__paleologo) on the LCH study showing just three firms, including Citadel and Millennium, made 38% of hedge fund P&L over three years: "There was this LCH study that showed that 38% of the P&L in the past three years in hedge funds was generated by three firms, 38%." "So this tells you how concentrated the industry is, and it's getting more concentrated." "It's crazy, 40% of AUM is passive." "Passive used to be zero. It's almost 40%."

CNN AI correspondent Hadas Gold (@Hadas_Gold) on Nvidia losing Jensen Huang with no succession plan, days before Tuesday's earnings: "Nvidia famously did not have a succession plan. Jensen Huang was very much against a succession plan." "He said that he just wants everybody to learn how to run the company, but that he wanted to run the company until he dies." "Now he is out. He is completely out of Nvidia." "They're actually supposed to be reporting earnings on Tuesday." "...even though Nvidia's business is still very strong, people still want their chips..." "...a CEO like Jensen Huang who is out, that is going to cause some challenges for the company." "So it's just hard to overstate what a earthquake this is for the AI industry."

Citadel founder and CEO Ken Griffin on what a market maker like Citadel Securities does when you sell $50 million of a stock: "Which means that when you go to sell $50 million of a stock, if there's not a buyer in the market at the exact same instant, you're not pushing that stock price unduly." "The market maker will use their capital to facilitate your trade, and then will hope to find the eventual buyer of your stock at some point in the future." "In the United States, we trade almost 25% of all the equity that trades every day."

Tudor Investment Corporation founder Paul Tudor Jones on watching Bunker Hunt's silver squeeze collapse in 1980: "...I think this silver here is the most valuable asset and resource on Earth." "Someone asked him, 'What are you gonna do with all that silver?' And he goes, 'I'm gonna bury it.'" "...he buys 20 million ounces at 35 bucks." "...it goes to 50 bucks, so at 50 bucks now he's worth about 11 billion..." "The commercials had been just eradicated, because they're sitting there holding physicals and having to put up this margin every day." "...made it liquidation only. Silver collapsed. It went from 50 bucks to under 10 bucks in the space of about eight weeks." "...that had a searing impact on me..." "Right then and there, I would never own anything... or trust anything for the rest of my life."

Jensen Huang founded Nvidia 33 years ago. Bettors now think he won't even keep his seat on the board. 65% say he's off the board by year-end. 91% by 2028.

Balyasny Asset Management founder Dmitry Balyasny on 2008, when Lehman went under: "When Lehman went under, we made the decision to go to cash... People just wanted their money." "I remember like sitting, waiting for the money to come in from the prime brokers... 'No, no, like the wire's coming. It's, you know, check's in the mail.' And we're like, 'It's not here.' Like day after day, it's like, 'It's not here.'" "The CDS indicators, you know, and the spreads of where the market was pricing the credit risk of the banks who we were, you know, getting our money back from was like exploding." "We wound up getting hit with redemptions for probably close to 50% of our capital. And we decided not to gate people."

Two Sigma head of complex feature engines Ben Wellington on what scares him about AI in quant investing: "Everyone says automation. Let's automate everything, and it sounds right." "If I'm building a cardboard box automation, I want the output of that thing to be the same every time." "The thing about adding alpha to a portfolio is you want the opposite... We want orthogonality. We want originality." "If you give everyone a tool, a push-button tool, and the tool is throw all your data in and make a model, and they all hit the button, and they all point at the same place." "That's wonderful, but we're all doing the same thing, and that's terrifying to me for AI in an industry like ours where diversity is the point."

Third Point founder Dan Loeb on the hardest investment lesson he has learned: "I would have to say our investment in FTX." "We could verify it all on the blockchain." "We felt like we had some good company on the cap table with us. We did." "...it wasn't what we thought it was..." "I will say that now our due diligence process, we definitely, like, check bank balances and do, like, the most basic due diligence..."

AQR co-founder Cliff Asness (@CliffordAsness) on a fundraising quip he now calls "staggeringly wrong": "Here's where I was a complete idiot. In going around to raise money in the first six months, I must have had 20 clients say, 'We don't need 22% vol uncorrelated to the market. How about you do a quarter of that?'" "I responded... with a flip tone, 'You want a quarter of the vol? Give us a quarter of the money.'" "I still refuse to admit I was wrong about the math, 'cause I was not. But I was staggeringly wrong because it turns out, Corey, this'll shock you, that down two standard deviations at 20% upsets people more than down two standard deviations at 5%." "Having served on many an investment committee since then, we do not call in the largest standard deviation event. We call in the idiots who are down 35%."

Former Enron gas trader and Centaurus founder John Arnold (@johnarnold), on building "the best seat in the industry" after Enron: "I felt I was among the best. I had also managed to create probably the best seat in the industry." "...my first job out of college was at Enron. I started there when I was 21 years old in 1995... it went bankrupt in late 2001..." "...deciding to start my own hedge fund." "...the classic hedge fund two and 20 structure..." "...intermediary between me and the 20%, right? I was getting the 20%." "...we had very good financial returns early on." "Whenever we had a down month or a down time period, which we had, they weren't calling to redeem, but they would call up and say, 'Do you need more capital?'"

Campbell & Company CEO Kevin Cole on why there's no holy grail model in quant investing: "We don't believe there's any holy grail, or any single model that's going to be the answer in markets." "Markets are not perfectly efficient. But I do like the phrase efficiently inefficient, and that means to me that small edges can be found through hard research, but those edges do get competed away over time. And what was once alpha becomes widely known, it gets commoditized, it becomes beta." "The central risk we face as quants is overfitting, that it's pretty easy to find a good backtest, but just because you find artifacts in past data doesn't mean they're gonna hold going forward." "'Just because you uncover dinosaur bones in an archaeological dig, it doesn't mean that dinosaurs still roam the earth.'"

IDW Group founder and hedge fund headhunter Ilana Weinstein on why remote work made poaching hedge fund talent easier, with a jab from Point72's Steve Cohen (@StevenACohen2): "I will tell you, and maybe I shouldn't say this, but I'll say it, in some ways, my job has become a lot easier in the last couple years." Steve Cohen: "But you're charging the same amount." "They're working from home. They can more clearly see what their value add is versus other people who are maybe just benefiting from being in the room with other smart people." "This year, we have had, which I've never had before, people that we've gone after for years calling us, telling us they're ready to leave."

Balyasny Asset Management founder Dmitry Balyasny on the risk limits every BAM portfolio manager trades inside: "We allocate capital in the form of volatility dollars, and then somebody has an expected Sharpe, and they multiply that Sharpe times the vol dollars to arrive at their expected P&L for the year." "You have a drawdown framework that's very objective and clear that everybody signs off on day one, and that's multi-step, so you're not forced to reduce the portfolio by a large chunk at any one time." "In equity portfolios, you'll have idio versus factor risk limits. And you might say, 'Okay, your idio limit is we want you to run at least an 80% idio, 20% factor portfolio.'" "You have liquidity limits. You have guidelines on things like number of positions and concentration. So lots of things like that, that create a box within which that person can operate."

D1 Capital founder Dan Sundheim on owning Priceline when it was growing 40% a year at nine times earnings: "Booking.com, okay? Which was called Priceline back when I owned it. It was growing 40% a year and traded nine times earnings." "Yes, it didn't make a lot of sense. But like the narrative back then was like, okay, they're just like arbing Google, and like this is like a flimsy business model, whatever." "It's a lot slower than it used to be, and it trades at like 3X the multiple, right?"