$100B hedge fund

[nitro]

Quote from optioncoach:

.25% is still $250,000,000 lol...... Of course you need to raise $100 billion but once you do..... risk-free $250,000,000

To run a $100B bond hedge fund, your yearly expenses are probably > $100M/Yr for non salary based costs. That cuts into say the $250M to $500M in the expense ratio profits for the hedge fund. That still leaves something like 150M to $350M in salary/bonus money available...

My guess is that only the very top people in these firms make tons of money, like Gross. The rest are making "just" great money, say $1M a year plus bonuses of 10% - 50% of salary.

PIMCO I believe runs $250B. Very few actively managed funds overperform. That is where these people make their money...

nitro

 

[droskill]

I think it's a mistake to assume they have any one strategy. My guess is that they are employing any number of strategies at a time and then concentrate on money management between the strategies. Just my opinion...

 

[trillenium]

Quote from quant:

I had the pleasure of attending a meeting with one of their directors last week. Their RIEF (Renaissance Institutional Equities Fund) is doing pretty well... 19% net of fees over the last 12 months.

If that is true - I rest my case

Congratulations !!

 

[psytrade]

trill the current fund is not 100 billion, its around 10. The only reason 100 billion was mentioned, is that the scalability of their strategy is estimated at 100 billion.

 

[Tatnic]

Quote from mtzianos:

How exactly does Renaissance's methodology of (quoting original message):

"The firm relies on a system to make thousands of rapid-fire, short-term trades daily to take advantage of small, fleeting anomalies in various markets."

I thought I read in the Times last year that his new fund will buy and hold stocks for months and years in addition to his shorter term trades. Did anyone else read that? Maybe I was hallucinating?

 

[sigguy]

I thought I would shed some light on some people's misconceptions...

My line of work isn't in trading, but I do research for a trading company that, although well respected, is nowhere near as eminent as Renaissance (for those of you who are looking at my name and thinking "Susquehanna," think again. Those are my initials). Like many of you, I can only speculate on the details of what Rentec actually does, but I've been to a few colloquia on their campus (purely scientific--as in, having nothing to do with finance) and spoke with some of the people working there. They couldn't say much, understandably, but were able to give me a general idea of what it is they do. I seem to remember phrases like Wigner Random Matrix Theory, scale invariance, Fermi-Dirac statistics peppering their conversations.

These are physics terms, not surprisingly. Many of the people working there are scientists, rather than the engineers or applied mathematicians hired by their competitors, and the environment there is extremely academic. Trading is done purely by computers in a section of their property filled with giant computers which they affectionately call "The Factory." The people who get paid the big bucks do their work on computers and chalkboards instead.

 

[Batman28]

hey thanks for the post sounds really interesting..

 

[nitro]

Quote from sigguy:

.... I seem to remember phrases like Wigner Random Matrix Theory, scale invariance, Fermi-Dirac statistics ...

If you see what problems this physics solve, it makes perfect sense that they translate to similar problems in Finance. Random Matrices have tremendous applications to so many theoretical and applied sciences. For example, they are used in communications theory in cellular networks!

The key to the whole thing is Statistical Mechanics, or it's modern way of saying the same thing, [Quantum] Field Theory.

Boy one day I am going to do a blog on this whole thing but I just don't have anywhere near the time. There is nothing more interesting...

nitro

 

[RedDuke]

Quote from nitro:

If you see what problems this physics solve, it makes perfect sense that they translate to similar problems in Finance. Random Matrices have tremendous applications to so many theoretical and applied sciences. For example, they are used in communications theory in cellular networks!

The key to the whole thing is Statistical Mechanics, or it's modern way of saying the same thing, [Quantum] Field Theory.

Boy one day I am going to do a blog on this whole thing but I just don't have anywhere near the time. There is nothing more interesting...

nitro

When you do, please let us know. It looks like it would be a very interesting read.

 

[stephencrowley]

Quote from nitro:

If you see what problems this physics solve, it makes perfect sense that they translate to similar problems in Finance. Random Matrices have tremendous applications to so many theoretical and applied sciences. For example, they are used in communications theory in cellular networks!

The key to the whole thing is Statistical Mechanics, or it's modern way of saying the same thing, [Quantum] Field Theory.

Boy one day I am going to do a blog on this whole thing but I just don't have anywhere near the time. There is nothing more interesting...

nitro

nitro, you are dead on. Quantum field theory, and more specifically, quantum statistical mechanics (schrodinger mechanics) and brownian motion are extremely powerful subjects, far beyond the normal uses of "brownian motion" you see thrown about. Also, an amazing thing to note is that probability has absolutely no reference to chance or randomness in its defintion, and on the "smallest scale" things are in fact deterministic, but the observables are not completely deterministic, but "random within some bounds" or also known as parametric randomness