matisse_henri

[matisse_henri @hennymatisse]

@jeremie0117 @AurelionRsch nah viking still mogs coatue. looks at 2022

[matisse_henri @hennymatisse]

@SmallwoodAl_ it’s so obviously a complete overreaction… i guess fueled by jealousy? i would smash the OVER on avg. performance of these 5 funds in 2027 if anyone is willing to put their money where their mouth is

[matisse_henri @hennymatisse]

“momentum in ways that were hidden”

I’m going to say this only once more..

It��s CROWDING

CROWDING IS THE ALPHA

IT👏 COSTS👏 2 👏 AND 👏 20 👏

[deathTouch @deathtouch2k]

This is the point in time when the market realizes that market neutral funds weren't actually market neutral: they were always levered long style factors and momentum in ways that were hidden, yet correlated to each other. We saw this 2 weeks past liberation day: all the big multimanagers traded down 4-5% together. That's essentially their yearly vol in a week and a half. No one remembers though because LibDay was cancelled by month end, so numbers looked fine.

The answer is it's insanely hard to generate completely factor neutral alpha year after year after year through any market cycle to get big payouts. So surviving PMs found ways to stay one step ahead of risk and be long some factors that were tied to long-term momentum.

Wait until they have to explain to their LPs why they're charging them 5/55% with total passthrough to give them momentum exposure. Passthrough was good until the first negative year, then the business model is impaired permanently.
_____________________________________________________

How I know this now: I know a very senior person at MLP who reports to Izzy personally.

I had a conversation about a related topic with him almost a year ago to this day.

At around the time I launched my first fund, I had an offer to join a Tier 1 multi-manager as a PM, going through the entire ridiculous 14 or so interview process. One of the rounds is to construct a portfolio and they will run it through their risk model and tell you what your idio was.

I had no intention of accepting the role because I was dead set on launching my fund, but I decided to have fun with it and constructed a portfolio I thought would look very high idio on Barra but would be ridiculously imbalanced on fundamental factors.

So I threw in a bunch of phase 1 neuro names on one side, phase 3 oncology names on the other. Put in some more AI-driven larger biotechs on one side, and non-AIs on the other. Balanced on Barra, but comically imbalanced on essentially anything sector-meaningful.

This thing was probably 65% idio risk/35% market risk, max. Model spits out 92%. One of the most sophisticated risk managers in the business. I asked them what model they used to calculate the factors. Answer: Barra + a crowding factor. I guess that's what a few billion in management fees + complete passthrough on expenses buys these days.

Fast forward back to my conversation with the senior MLP executive: I told him I had a concern then, given on liberation day all multi-managers had traded down ~5% together during liberation day. He smiled and said: "How do you think I got here? Being up every year and never having a peak to trough drawdown of 4% is very hard. You learn to stay one step ahead of risk and engineer factors you think will do well in the long term, then generate enough short term alpha to cover during the times when those factors move against you temporarily."

He then added: "Our AUM didn't really spike until the pension funds came in. They loved us, we gave them the spread they need every year. The problem is that they came into every multimanager. Now they think they're diversified, because they own Citadel, Millennium, Schonfeld, ExodusPoint and Walleye. No need to do any work each month, each year."

So that's why I think this is a bigger structural problem than most people do.

[deathTouch @deathtouch2k]

This is the point in time when the market realizes that market neutral funds weren't actually market neutral: they were always levered long style factors and momentum in ways that were hidden, yet correlated to each other. We saw this 2 weeks past liberation day: all the big multimanagers traded down 4-5% together. That's essentially their yearly vol in a week and a half. No one remembers though because LibDay was cancelled by month end, so numbers looked fine.

The answer is it's insanely hard to generate completely factor neutral alpha year after year after year through any market cycle to get big payouts. So surviving PMs found ways to stay one step ahead of risk and be long some factors that were tied to long-term momentum.

Wait until they have to explain to their LPs why they're charging them 5/55% with total passthrough to give them momentum exposure. Passthrough was good until the first negative year, then the business model is impaired permanently.
_____________________________________________________

How I know this now: I know a very senior person at MLP who reports to Izzy personally.

I had a conversation about a related topic with him almost a year ago to this day.

At around the time I launched my first fund, I had an offer to join a Tier 1 multi-manager as a PM, going through the entire ridiculous 14 or so interview process. One of the rounds is to construct a portfolio and they will run it through their risk model and tell you what your idio was.

I had no intention of accepting the role because I was dead set on launching my fund, but I decided to have fun with it and constructed a portfolio I thought would look very high idio on Barra but would be ridiculously imbalanced on fundamental factors.

So I threw in a bunch of phase 1 neuro names on one side, phase 3 oncology names on the other. Put in some more AI-driven larger biotechs on one side, and non-AIs on the other. Balanced on Barra, but comically imbalanced on essentially anything sector-meaningful.

This thing was probably 65% idio risk/35% market risk, max. Model spits out 92%. One of the most sophisticated risk managers in the business. I asked them what model they used to calculate the factors. Answer: Barra + a crowding factor. I guess that's what a few billion in management fees + complete passthrough on expenses buys these days.

Fast forward back to my conversation with the senior MLP executive: I told him I had a concern then, given on liberation day all multi-managers had traded down ~5% together during liberation day. He smiled and said: "How do you think I got here? Being up every year and never having a peak to trough drawdown of 4% is very hard. You learn to stay one step ahead of risk and engineer factors you think will do well in the long term, then generate enough short term alpha to cover during the times when those factors move against you temporarily."

He then added: "Our AUM didn't really spike until the pension funds came in. They loved us, we gave them the spread they need every year. The problem is that they came into every multimanager. Now they think they're diversified, because they own Citadel, Millennium, Schonfeld, ExodusPoint and Walleye. No need to do any work each month, each year."

So that's why I think this is a bigger structural problem than most people do.

[matisse_henri @hennymatisse]

you’re wasting your time trying to figure out how MU can trade at 3x earnings. today’s moves were driven by retail — biggest selling flow ever

unfortunately SMH is a meme rn so everything in there is uninvestable

[matisse_henri @hennymatisse]

@BigBreakfastLob @0xFaust12 not really sure what you’re trying to say

[matisse_henri @hennymatisse]

@LepoulpePoulpo @CapitalObserver AQR has $200b aum sir

[matisse_henri @hennymatisse]

@JohannMarkov FTX was stealing customer funds brother 🤣

[matisse_henri @hennymatisse]

@intelarb @TheStalwart there will never be real liquidity there imo

[matisse_henri @hennymatisse]

@TMTLongShort

[matisse_henri @hennymatisse]

@brivael brain injury?

[matisse_henri @hennymatisse]

@aiden0x4 @internetphysics 🤮

[matisse_henri @hennymatisse]

@DasTechnocrat @ContrarianCurse noone is pulling away from the pack. how big of a lead will ant/kai ever have? if a firm’s assets depreciate to zero every 6 months, that businesses is a zero

[matisse_henri @hennymatisse]

@smaysss @Scouting_Col delete

[matisse_henri @hennymatisse]

@redhotnerd It’s a bad example but the concept of using agents to establish trust between counterparties is actually pretty interesting.

If we both have agents harnessed to never lie and those agents know us intimately, we can now do business through them with a lot more trust. Pretty cool

[matisse_henri @hennymatisse]

@SecScottBessent @USTreasury @IRSnews Let’s make US treasuries tax free for US citizens. I would love to buy (for both myself and my country) but the taxes are prohibitive

[matisse_henri @hennymatisse]

@ethanrkho a few thoughts:

1. scaling laws are axiomatic in HF world — MLP can’t really grow. 1b prob a lot easier than getting to 14

2. MLP would be worth a lot more if izzy was 50 years younger

3. prop seems to be valued more than HFs. citsec is worth a lot more than 14

[matisse_henri @hennymatisse]

@JillFilipovic @ezraklein Anthropic bankrupt/Dario in jail WELL before claude poses existential risk. No US company will ship a dangerous product.

BTW that means they’re all worthless! When top labs reach the danger zone they’ll HAVE to stop and others will catch up. Dario is fucked w/o regulation