You can add location information to your Tweets, such as your city or precise location, from the web and via third-party applications. You always have the option to delete your Tweet location history. Learn more
What do you do? You build a factor model and use it to hedge out as much of the factor risk as you can. Specifically, you want to find stocks that are not held by many PMs but have similar factor exposures to the stocks they do hold, and use them to hedge the factor risk.
This costs, both in t-costs to adjust the hedge and because the hedge is short factors with positive expected return -- but it reduces the volatility of the portfolio by more than it reduces the return, so the Sharpe improves and you can apply leverage to juice the return.
To put numbers on it say you have 100 PMs each of whom has a Sharpe of 0.7 and they are on average 25% correlated with each other because of all the factor exposure. You can apply 2x leverage and give each PM $200m to manage, for 10% vol and an expected return of 14%
If you hedge the factor exposure you might get that correlation down to 10%. Now you get more diversification so you can lever up 3x and give each PM $300m to manage. Your vol is still 10% but now your expected return is 21%. It might cost you 2% to implement the hedge, but
you have still increased the expected return from 14% to 19% and increased the expected Sharpe for the fund (before fees) from 1.4 to 1.9
Anyway that is (part of) how Citadel/Millennium/Point72 are able to make money so consistently, I hope you enjoyed it, please smash that like button etc etc.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.
