I offer you a bet. We flip a perfectly fair coin. On every heads you gain 10% on top of your bet. On every tails you lose 10%.
It is fair to say that after 100 flips you may profit. If one million people play this game, someone almost certainly will. But you can expect to lose money on this game. By the end, the average person will have about 60% of their original holdings (0.9^50 * 1.1^50).
In this game it’s possible for winners to exist. It’s not even uncommon! You only have to get at least 53 out of 100 flips as heads. Unfortunately there’s also no function that lets you determine a winner in advance, and the longer you play this game the greater the expected loss.
All of the available evidence shows that publicly-available actively-managed funds are essentially playing this game. As expected, many have incredible winning streaks… right until they don’t.
Yes, Ren Tech’s Medallion Fund exists. But you can’t contribute to it; they don’t want your money. Because that requires scaling market inefficiencies and that in and of itself is an intractable problem. Novel strategies ripe for profit don’t have unlimited capacity. They rapidly exhaust alpha.
I offer you a bet. We flip a perfectly fair coin. On every heads you gain 10% on top of your bet. On every tails you lose 10%.
It is fair to say that after 100 flips you may profit. If one million people play this game, someone almost certainly will. But you can expect to lose money on this game. By the end, the average person will have about 60% of their original holdings (0.9^50 * 1.1^50).
In this game it’s possible for winners to exist. It’s not even uncommon! You only have to get at least 53 out of 100 flips as heads. Unfortunately there’s also no function that lets you determine a winner in advance, and the longer you play this game the greater the expected loss.
All of the available evidence shows that publicly-available actively-managed funds are essentially playing this game. As expected, many have incredible winning streaks… right until they don’t.
Yes, Ren Tech’s Medallion Fund exists. But you can’t contribute to it; they don’t want your money. Because that requires scaling market inefficiencies and that in and of itself is an intractable problem. Novel strategies ripe for profit don’t have unlimited capacity. They rapidly exhaust alpha.