macrocephalopod

This is a good question! Some possible answers - 1. Infrastructure that is too expensive or too hard to build yourself (eg colocation, low latency data feeds, compute clusters, fpgas) 2. Data that is too expensive or simply impossible to buy (eg historical tick data)https://twitter.com/mobile_mm/status/1373427747901542402 …

8. All these strategies work until they don't. I suspect the shelf life was getting shorter over the last 20 years. So connected to 4, 1 + R&D costs

And downtime costs

Great point. I’d also argue that most institutional hedge fund LPs are compulsive to gather non-correlated strategies managers (quants) until the jackpot hits. Then they leave. To some extent, all top quant managers experience this after their outlier year of huge + returns.

Strategies work until they don’t, until it gets arbed out, until the strategy gets flooded with capital, etc. But the best quant managers will find the next big opps - always. Never ever redeem from a top quant fund. You’ll never get back in again & you’ll regret it.

Unless of course top quant funds have issues of their own. And I'm not sure about "always" :) but yes, gathering uncorrelated strategies makes sense, as well as assuming a short longevity for the working ones

1 trick ponies are self evident. They present that way, they present as narrow specialists & there’s no mystery for the LPs that they’re done when the strategy sunsets, e.g. merger arb in late 90s, convert arb in early 2000s. I consider elite vol generalists to be evergreen.