
At 78, Scientist Is Starting a Hedge Fund - softdev12
http://www.wsj.com/articles/at-78-scientist-is-starting-a-hedge-fund-1437693849
======
pcrh
The Medallion Fund cited appears to be the one that made its impressive
returns by gaming the tax system:

[http://www.bloomberg.com/bw/articles/2013-07-03/the-irs-
chal...](http://www.bloomberg.com/bw/articles/2013-07-03/the-irs-challenges-a-
hedge-fund-tax-trick)

~~~
yellowstuff
The Medallion Fund has been phenomenally successful for decades. They are
being challenged for an aggressive accounting trick, but there are a lot more
things contributing to their success than one accounting trick.

~~~
aet
Such as?

~~~
yellowstuff
They have very smart people with PhDs in disciplines including NLP and
cryptography inventing models to predict prices, and other very smart people
refining the technology and execution. They are extremely secretive about the
details of the strategies beyond that, and they probably change fairly
frequently anyway. Slightly more detailed info:

[http://quant.stackexchange.com/questions/998/strategy-of-
ren...](http://quant.stackexchange.com/questions/998/strategy-of-renaissance-
technologies-medallion-fund-holy-grail-or-next-madoff)

[https://quantivity.wordpress.com/2011/05/08/manifold-
learnin...](https://quantivity.wordpress.com/2011/05/08/manifold-learning-
differential-geometry-machine-learning/#more-5397)

~~~
pcrh
Those links appear to suggest two things:

1) secrets

2) magic sauce

While the possibility of "magic sauce" is in theory possible, its existence
would suggest that it is currently possible to mathematically describe the
behaviour of stock markets in such a way as to generate 35% p.a. returns by
trading entirely based on this description.

A priori, this seems very unlikely.

Alternatives, such as an unusual access to information, and/or efficient use
of existing laws, e.g. those surrounding taxes, are much more plausible.

------
whatok
Such a clickbait title. Former hedge fund employee starting a hedge fund a bit
more accurate.

~~~
melling
There are over 10,000 hedge funds in the world. Somehow 'former hedge fund
employee' doesn't mean much as a news headline.

[http://www.reuters.com/article/2015/06/19/us-hedgefunds-
laun...](http://www.reuters.com/article/2015/06/19/us-hedgefunds-launches-
idUSKBN0OZ1KF20150619)

~~~
rudiger
He spent seven years at Renaissance, arguably the world's top-performing hedge
fund management company.

~~~
melling
Yes, I know that. We have all watched James Simons, right?

[http://www.youtube.com/watch?v=QNznD9hMEh0](http://www.youtube.com/watch?v=QNznD9hMEh0)

What does that have to do with being a more appropriate news headline? I was
responding to the 'clickbait' comment.

~~~
mattlutze
The title is click-baity because we're supposed to say, "oh, there's someone
old and not in hedge funds getting into it, he must have some crazy cool thing
he's going to do."

Except, if he was employed by one of the top hedge fund management firms, none
of that impression is true. So, click bait and misleading.

~~~
melling
No, the title is suppose to be catchy and accurate, which it is.

[https://en.m.wikipedia.org/wiki/George_Zweig](https://en.m.wikipedia.org/wiki/George_Zweig)

Some Hacker News "title police" who thinks it's more accurate to simply say
"former hedge fund employee" is simply wrong. There are millions of former
hedge fund employees.

Why can't people add real value to the conversation or say nothing?
Understanding how the trading algorithms work, for example, would be
interesting.

~~~
mattlutze
From the article,

> It is Mr. Zweig’s first foray into the hedge-fund world since leaving the
> famously secretive and profitable quantitative hedge-fund firm Renaissance
> Technologies LLC in 2010. He agreed when he left not to compete against
> Renaissance for four years.

later,

> Mr. Zweig first turned to hedge funds as an investor while amassing a nest
> egg for his disabled daughter. In 2003, he interviewed for a job with East
> Setauket, N.Y.-based Renaissance, founded by former Cold War code breaker
> James Simons. Renaissance has achieved near-mythical status for the
> performance of its Medallion fund, which has averaged returns of more than
> 35% a year since the late 1980s through 2010.

> After seven years at Renaissance, where he said he developed a system that
> allowed the firm to trade certain instruments for the first time, Mr. Zweig
> signed the noncompete agreement with Renaissance. Renaissance declined to
> comment.

For the last 12 years he's been in the world of hedge funds. It's not like
he's coming off theorizing the quark and saying "let's try this hedge thing".
Indicating his expertise would have been more factual.

It would also have made the link less interesting to click on WSJ's home page.
I don't fault WSJ for getting clicks, but lets call it what it is, yeah?

------
sanxiyn
"founded by former Cold War code breaker James Simons"

That is a weird description. Yes, Simons did that, but a normal description
would be "former mathematician".

~~~
valdiorn
>former

Implying that he stopped being one at some point??

------
princeb
>Signition is a play on words including “signal” and “recognition.”

but i could not help but think of "momentum ignition", a strategy that is a
little bit more sinister than what amounts to no more than statistical methods
for return and risk estimation.

edit: on further thought "sigma ignition" is a rather darkly funny way to
think about it too.

------
bmir-alum-007
[http://web.archive.org/web/20150724000231/http://www.wsj.com...](http://web.archive.org/web/20150724000231/http://www.wsj.com/articles/at-78-scientist-
is-starting-a-hedge-fund-1437693849)

------
discardorama
Click-baity headline. Yes, he's 78. Yes, he's starting a hedge fund. But he
worked at Renaissance (the gold standard of hedge funds) from 2003 - 2010, and
was preparing to start it for the 4 years the non-compete was in place.

------
curiousjorge
Scientists starting hedge funds isn't a new phenomenon. I forget the name
(kinda telling) but it was an all star team of physicists and nobel prize
winners doing some triangular arbitrage (?) and then blowing up spectacularly.
Apart from HFT, lot of quant or algorithm based funds never seems to last
longer than the market will let them. You see successful money managers but
rarely are they quant based strategists. It never made sense as to why you
would need so much science in a field where investing and trading is an art
half of the time. I might not be understand how quants typically work which
adds to my biased thinking but we've seen many like this. Reminds me of what
Warren Buffet said "It is better to be approximately right than precisely
wrong."

~~~
fauigerzigerk
What continues to amaze me is that there does not seem to be any convincing
scientific evidence that predictive patterns can be found in past price
movements, and yet many reputable investment firms are throwing a lot of money
at this problem.

I understand that not all quantitative approaches depend on finding patterns
in past prices, but some do.

I am completely undecided on this one. It baffles me. It's not like every
company applying materials science also experiments with witchcraft somewhere
in the basement, so what's going on here?

~~~
nabla9
There are predictive short term patterns, but once the knowledge of the
patterns spreads, they start to disappear. There is also constant change in
long term patterns because the world outside financial market changes
unexpected ways.

Financial markets are self reflecting system where people who invest are
inside the the system and change it.

If you discover pattern that makes money, you must keep it secret and
establish firm that tries to exploit it. If you are successful, others notice
it and start to analyze your game and the edge starts to disappear. You may
use machine learning to discover constantly new patterns but that does not
change the situation, because others also use machine learning to detect new
patterns.

Portfolio managers seeking high alpha are often poker players, because Poker
and alpha seeking are very similar games.

~~~
fauigerzigerk
But banks also employ technical analysts who use well known technical signals
like support and resistance. Your and lumberjack's theory does not apply to
them and yet they get paid.

~~~
nabla9
>But banks also employ technical analysts

No they don't. Technical analysis is to professional trading what astrology is
to astronomy and big banks don't use them. Those books are snake oil sold to
hobbyists and small time traders.

Large banks, investment management firms use completely different statistical
methods.

