Since leverage is the topic du jour: what’s the leverage like at quant shops?
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That’s for a medium to long term equity market neutral strategy (holding period days to months).
That’s two sided leverage so you might see 5x long side and 5x short side for total 10x leverage. Typically several hundred positions on each side with a single name position cap of 3-5% of AUM (0.3-0.5% of gross book size)
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So much more leverage than Archegos, but pretty tightly hedged to major risk factors (market, country, sector etc) and very diversified so a single name halving or doubling due to idiosyncratic factors would cost you like 1-2% of AUM at most.
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Biggest risks are generally a big move in a single quant factor (eg momentum crash) or an unwind of a big quant strategy holding similar names (like what happened in Aug 2007). Equity market neutral strategies rarely blow up but they can bleed.
End of conversation
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