Quant Macro Investing

Risk Taking Disciplined


Look at Tudor’s recent report (Tudor is a huge hedge fund with AUM over US$10 billion).


1. Quantitative based trading is not a small part, in particular for the “Equity Strategies” categories:

YTD to end of Q3 2009

Gross P&L (US$ Millions, p.3 of the report)


1. Global Macro Strategies

Discretionary Macro                                    937.5

Quantitative Macro                                       128.7

2. Equity Strategies

Discretionary Equity Long/Short                9.4

Quantitative Equity Systems                      72.2


2. What worked (p.4)?

“Trend following models contributed to most of the gains for the quarter.

The FX models in developed and emerging markets also performed well…

… gains this quarter from (i) equity market neutral systems trading in the US, and (ii) stock selection in Europe and the emerging markets.”


3. Capital allocation as of 1st Oct 2009 (p.5)


Discretionary Macro 75%

Quant Macro 13%

Discretionary Equity Long/Short  6%

Quant Equity Systems  6%


4. Capital allocation (Macro Sub-strategy)

Global opportunistic  53%

Quant macro systems   15%

Commodities   14%

Fixed income   8%

Foreign exchange   6%

Emerging markets   4%


5. Capital allocation (Equity sub-strategy)

Quantitative equity systems   48% (systems for individual equities)

Long/short Asia/Emerging Markets   32%

Long/Short Europe   20%




October 31, 2009 Posted by | ABCs for Investing, ABCs for Quant | 1 Comment

Jesse Livermore’s seven trading lessons

See link here.

October 31, 2009 Posted by | ABCs for Investing | 1 Comment

Soc Gen’s Albert Edwards on market turning points

Lead indicators to identify turning points – here for more info.

October 31, 2009 Posted by | Indicator setup | 1 Comment

Wall Street recommendation

Such data available from Bloomberg – quite handy isn’t it?  I wonder if similar data available in Asia, and if this indicator helps to identify turning points for market.


(Pragmatic Capitalist) … the reason why 95% of all investment banks and advisors maintained at least a high level of buy and hold ratings all last year.  They want to keep you in the game.  See the chart below and notice the consistent 5% sell ratings by analysts.  Do you mean to tell me that during one of the greatest collapses in economic history the level of stocks rated “sell” never moved above 5%?  That is an utter embarrassment for the entire Wall Street community.  In my own business I rarely have more than 5% of the entire stock market on my BUY list.


October 31, 2009 Posted by | Indicator setup | 5 Comments

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October 30, 2009 Posted by | Internal Research | Enter your password to view comments.

Exotic Bets to Hedge a Portfolio

NY Times

WHEN the global markets plummeted after Lehman Brothersdeclared bankruptcy in September last year, a handful of alternativeinvestments remained stable or even made money for investors. Among them were “managed futures,” which are not for everybody.

Managed futures use computer-driven trading models that can go either long — that is, betting on rising prices — or short, betting that prices will fall, in a variety of futures contracts.




October 30, 2009 Posted by | ABCs for Quant | 1 Comment

Building your trading track record

Check out below.  You need a way to show that you don’t have many different accounts for trading, and x years later cherry picking the best performing account as track record.  Maybe one way is to declare your user name before starting, somewhere in a public place like this blog, and better do it in many other blogs.  Still, it is tricky as one may declare different accounts in different places, and pick the best one years later?  Suggestions welome.


The Kirk Report




Now everyone can mirror the trades of their favorite money manager in real-time:

“Daniel Carroll, who started investing when he was 15, thinks he has a way to let average investors learn about investing while experts manage the money. In 2008, he started kaChing, a Web site where 400,000 amateur and professional investors manage virtual portfolios. Others have logged on to see what the investors on the site are doing and make the same trades in their own real portfolios.

On Monday, kaChing is to add a new twist. Customers can set up brokerage accounts that automatically mirror the trades of a money manager, some of them professionals.” New York Times

Anything that improves on performance accountability is a good thing in my view. If the platform works, it will create a competitive playing field so that the best investors and traders out there will receive the respect and opportunities they deserve.

However, the main concern I have (and others like Tadas Viskantahave expressed) is how investors may use this new feature. If investors use it to “chase performance” (which is likely) and invest their money only with the top performers for any given period (most likely over the most recent time frame), I suspect they’ll be unhappy with their long-term performance especially if they jump ship once the hot handed money manager’s performance fades and the recent outperformance isn’t consistently sustained. We’ve seen the same thing occur in how investors pick mutual funds and other investments. In essence, today’s top money manager may be (and is most likely) tomorrow’s biggest loser and while kaChing has done some good things to avoid that problem, it is important to at least acknowledge this problem if you plan to integrate their service within your overall investment plan.

For more info on kaChing, read more at The New York Times or visit the website directly at kaChing.


New York Times


October 19, 2009


SAN FRANCISCO — The trouble with mutual funds is that investors can feel as though they have put their money in a black box. The 90 million Americans with money in funds know little about fees, what securities their money is invested in and who is in charge.

Daniel Carroll, who started investing when he was 15, thinks he has a way to let average investors learn about investing while experts manage the money. In 2008, he startedKaChing, a Web site where 400,000 amateur and professional investors manage virtual portfolios. Others have logged on to see what the investors on the site are doing and make the same trades in their own real portfolios.

On Monday, KaChing is to add a new twist. Customers can set up brokerage accounts that automatically mirror the trades of a money manager, some of them professionals.

“The idea of an asset manager showing all his research, his holdings — it’s unheard-of,” said Mr. Carroll, now 27 and the vice president for business development at KaChing. “In the financial industry, the idea is that information is currency; they protect it with their lives.”

Individuals are desperate for advice and transparency from people who help them manage their money, and mutual funds do not provide enough, said Andy Rachleff, KaChing’s chief executive and a longtime venture capitalist who co-founded Benchmark Capital.

“The mutual fund industry is a $10 trillion industry that has seen no innovation for 25 years. The Internet has had no impact,” Mr. Rachleff said.

KaChing has attracted a roster of prominent early investors from Silicon Valley who have financed the company with $3 million. They include Marc Andreessen, co-founder of Netscape; Kevin Compton of Kleiner Perkins Caufield & Byers; and Jeffrey Jordan, chief executive of OpenTable, the online reservation service.

The angel investors have also been investing their own money through KaChing during the pilot period. “The concept is great — the ability to tap into not just the wisdom of the crowd, but to be able to identify and invest with the particular geniuses in the crowd that stand out,” said Mr. Andreessen, who has invested $100,000 using the site.

Customers will be able to open a brokerage account with Interactive Brokers and link their account with their choice of investors on KaChing. KaChing charges customers a single management fee of 0.25 percent to 3 percent, set by each investor. KaChing keeps a quarter of the fee, and the investors get the rest.

Each time the investors make a trade, KaChing will automatically make the same trades for the customer. Customers can log on whenever they want to check their portfolio’s performance. They can send the investor private messages and receive alerts if the investor does something unusual. With the click of a mouse, customers can stop mirroring an investor.

KaChing rates investors on the site by giving them a score the company calls Investing IQ. The formula is modeled after one used by managers of Ivy League endowments, Mr. Rachleff said, and considers risk-adjusted returns, whether investors stick to their strategies and the quality of the research they provide to explain their ideas.

So-called genius investors are those with high scores that have at least a yearlong record on KaChing. The genius investors sign regulatory documents that they will not break the law, including “front-running” stocks, which is the illegal practice of buying or selling a security for their own account with the advance knowledge of pending orders.

KaChing monitors trades in the personal brokerage accounts of each of its model investors and their families. The site is also a registered investment adviser with the Securities and Exchange Commission.

Only a dozen people have qualified as genius investors so far. They include a retired lawyer in Omaha, a student at Chapman University and the founder of a Bay Areainvestment firm.

For investors, KaChing is a way to make some money on the side or expand their existing business. Andrew F. Mathieson, founder of the investment firm Fairview Capital in Greenbrae, Calif., said he hoped to use KaChing to cater to people who did not meet the firm’s million-dollar minimum.

“Most investment products are sold rather than bought,” he said. “Our vision of this is it’s a product that will be bought by investors on the basis of the information we’re putting on the site.”

October 26, 2009 Posted by | ABCs for Investing | Leave a comment


Invest like the best

Washington Post


Jim Rogers, chairman of Rogers Holdings: Diversification is garbage — it’s something brokers invented to avoid getting sued. You only need four or five good ideas in your life to get really rich if you avoid mistakes. And the one way to avoid mistakes is to stick with what you know. Then, when you see a major development in your area of expertise, you’ll know better than Wall Street when to buy or sell.

October 25, 2009 Posted by | ABCs for Investing | 11 Comments



Gold – these indicators look pretty obvious…  Would they really help decision making?

October 25, 2009 Posted by | Indicator setup | 1 Comment

CDS vs stock index changes

A post on CDS (credit default swap, also here), which attracted interesting replies.  You are welcome to join the discussion.

1.  Very interesting feedback from reader “Frank Fong”:

I have done a analysis on the %CDS change and the corresponding country stock index YTD %.
It shows a correlation about -0.27.
Moreover, I use CDS YTD price change to replace %change,
the result shows -0.32.
It may mean that for emerging markets(higher cds price), their sovereign risk is more related to their index return.

2. (Feedback from me) So that is pretty low correlation…

However, I believe that when CDS moves big way (in whatever % change we define), stock index likely moves.

If there exists some consistent lead time move between them (say CDS usually moves big, then stock market moves big the other way), one can be used as “event risk” indicator to the other…

3. Subsequent email feedback from another “reader”:

The cds price does not vary linearly with cds yield.  The mechanism calculating CDS yield and stock index yield is similar.  I am not suprised to see the correlation btw cds yield and stock index yield is larger in magnitude.  The two correlations show roughly the same information in my opinion.

I am more concerned about finding event risk indicator.  Events which indicate large CDS movement leads to large market movement are not frequent in occurance over a long period so the statistical result may not be significant in identifying such events.  How could you infer such findings?

October 22, 2009 Posted by | Case Study, Cross-asset-class | Leave a comment