Many quant trading firms make 50%-100% annual returns, each year, over the past 15-20 years. The secret is leverage. And they do not accept outside investor money.
Many hedge funds outperform the market. However, the returns after fees, to the passive outside investor underperform S&P500.
But yes, publicly traded active ETFs generally underperform. But counter example is VGT or QQQ, both historically outperformed S&P500.
> Many quant trading firms make 50%-100% annual returns. The secret is leverage
Hu lol no XD you're way over stating it. While it happens _sometimes_, 50% or 100% is insanely rare, even for the top tier hedge funds.
Most HF work at predefined annual volatility, often in the 7% to 10% range. A typical _top tier_ sharpe is in the >=2 range, we're more talking about a 10%/25% averaged annual returns.
> However, the returns after fees, to the passive outside investor underperform S&P500.
That doesn't even make sense with the figures you posted. Most HF operate under the 2:20 or 3:30 range, sometimes 0:40 for the top 5. If you take a pessimist 10% returns on 10% annual vol, against the S&P 10% averaged returns at 20% vol, you're still double the risk adjusted returns, gross. Factor in 20 to 40% performance fees and you're way above the S&P.
> A typical _top tier_ sharpe is in the >=2 range, we're more talking about a 10%/25% averaged annual returns.
High-frequency low latency trading: Sharpe 10 or higher
Mid-frequency low latency trading: sharpe 4 to 5
Hedge fund statistical arbitrage: sharpe 1 to 2
Hedge fund long/short, event driven, global macro, etc: sharpe 0 to 1
And yes, HFT and MFT scales to billions in annual PnL for single firms.
There’s a reason quant HFT firms pay the most, and are ranked above OpenAI in pay and prestige. Hedge funds are tier 2 in comparison but not bad either.
However, the medallion fund has averaged 66% for 30 years before fees. Analyzed naively, that would be $4T from $1M - but it's not, because in order to keep it working, they have to cap the size. Many strategies only work when you don't affect the market too much. So for the rare continually successful, market beating funds, it's probably better to think of them as generating something like a fixed dollar return per year. So they have a very effective money machine, but it's minting billions, not trillions.
Math class does not teach practical knowledge such as personal finance or health.
Citadel returns since 1990 is 38% annual returns before fees to outside investors. They have a 5:50 fee structure. There are hundreds of more firms, staying out of the public eye.
You don't need to know anything about finance or health to know how percentages and compounding work.
Besides, I knew nothing about construction when I discovered that the contractor I hired to pour a patio was overcharging me by 30%. All it took was a bit of geometry I learned in grade school.
Pay no attention to math in school and you'll be prey to every scammer who did, and you'll never realize it.
The problem with looking at which funds over-perform is they just close the funds that under-perform so all the existing ones over-perform... by the sheer power of survivorship bias.
> No, it's actually the reverse. You have to compare at equal annual vol, and the S&P already has something like 20%.
Stop thinking like a hedge fund.
TQQQ commonly is used as a benchmark because it represents a low-friction, practical alternative to VTI, VOO, and even private equity investments including hedge funds trading public securities.
Once your Sharpe is high enough, you stop caring about volatility. The only volatility is how many zeros in your almost-always positive PnL.
Hedge funds (and traditional asset managers) care about drawdown, vol, sortino, beta and all that shit. But hedge funds have a different business model than prop trading firms.
Many quant trading firms make 50%-100% annual returns, each year, over the past 15-20 years. The secret is leverage. And they do not accept outside investor money.
Many hedge funds outperform the market. However, the returns after fees, to the passive outside investor underperform S&P500.
But yes, publicly traded active ETFs generally underperform. But counter example is VGT or QQQ, both historically outperformed S&P500.