Shouldn’t we be comparing the profits of the medallion fund to large market-making operations rather than HFs? 
I don’t think they are primarily market making but they are definitely faster than most HFs. Best to think of them as an operating business, not a fund.
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Does Citadel as a MM have similar returns? Could be a way to compare.
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I expect that citsec and other mms have massively higher return on capital and sharpe ratio but lower margin (profit per $ of turnover).
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I think that is right - mid-frequency with low cost execution. They are predictive over short periods (minutes to weeks). HFT shops are liquidity providers - mostly looking to capture bid-ask spread and rapidly pull all their orders if the market is going somewhere.
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I don't know how fast they are now but I know in Man Who Solved the Market there are references to them being decidedly slow...phoning in trades when competitors were already automated. But they were also early traders on Island according to Dark Pools so...
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Curious how convicted you are that they are not primarily market making? I would guess even if it is not their bid/offer at top of stack they must be profiting from flow driven dislocations, i.e. liquidity providers to the first order of liquidity providers.
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Not super high conviction, I have very little idea what they are doing. I feel like they wouldn’t need $10bn in AUM if they were market making. You would probably structure the fund differently.
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