[harveynick]

https://www.amazon.co.uk/Quantitative-Equity-Portfolio-Manag...

Caveat: it’s not exactly “easy reading”, and you might want to have the “three blue one brown” YouTube channel on standby.

[artemonster]

Watched every video of them, I am okay with math. Thank you very much! Btw, since quant industry is full of secrets - is there any source on some actual money figures - how much firms make, what are the sums that are required to be shuffled, what are the frequencies of trades, profitability figures? Anything to get a slight glimpse into inner workings of this. Unfortunately googling turns out nothing or scams

[l337]

Hedge funds are a very diverse group: from small shops managing tens of millions to the large funds managing tens of billions.

The very good ones probably make around 20% a year (meaning that they earn around $40M per year per $1B that’s under management).

HFT companies are a different story. The biggest ones make around $1B/year (e.g Virtu, Flow Traders which are public), with a few of them even bigger.

There are many tier two companies making tens - few hundred million dollars per year.

So none of them are really big (compared, to say, a big bank), but they do make a lot of money per employee, and the salaries reflect that.

[Galanwe]

> is there any source on some actual money figures - actual money figures - how much firms make

Yes there are a number of public sources, especially for UCITS funds that have some regulatory requirements to post publish their portfolio composition.

But you probably won't be able to make much sense of these figures, as it needs to be interpreted relative to the orientation of the fund.

See, a hedge fund is not selling "performance" per se, it's selling a reward for assuming a specific kind of risk on your behalf. Lots of people don't understand that nuance, and that's where you see all these messages like "haha my index fund outperformed hedge fund X".

Say you're a super wealthy company, idk, let's take an insurance company for the sake of the example. You have 1 billion dollar lying around and you would like to earn some passive money on it.

You can't just give that money to whatever hedge fund manager will give you the most performance, simply because you, as an investor, already have exposure to a bunch of factors. You cannot afford to have that money exposed to the same risks.

- Suppose your insured clients are mostly from Europe, it would be a bad investment to place that money on something that is exposed to the European economy. It would mean that if some bad macroeconomic factor impacts the European economy, thus making Europeans companies at risk, your dear investment would fall at the same time.

- You probably will need to be able to withdraw a part of that money at some point. Even if not, you will need to have some sort of balanced books to keep track of. Something along the lines of "the overall company reserve should cover 20% of the insured goods of clients". That means you cannot invest on whatever yields good performance, you also have to make sure the volatility of this investment won't put you at risk.

There are thousands of considerations like that, each client will have a different set. This leads to a bunch of different "orientations" of funds. Each client will typically have some kind of preferred allocation that he will balance between multiple funds accordingly.

Some examples:

- CTAs (trend followers) will provide good performance, at the expense of a strong market exposure and volatility.

- Market neutrals will provide pure alpha (no market exposure) but with lower volatility and returns.

- Arbitragers will provide very good returns, very low volatility, but with very small capacity.

- Macro funds will provide returns uncorrelated to the market, but suffer very low vol in certain circumstances.

There is no point in comparing the returns of different orientations of funds. Even comparing the returns of same kind of funds is not really relevant, to have a full picture you would need to k ow exactly what this kind of fund is supposed to deliver in terms of volatility, exposure, returns, etc.

> what are the sums that are required to be shuffled

Usually this is an output of your strategy, not something you decide a priori. Quantitative funds win "on average", so you want to trade as much as you can for the law of large numbers to kick in, until the trading costs catches up.

> what are the frequencies of trades

That completely depends on the kind of fund, and the regulatory enveloppe with which the fund is sold.

Typically that will go from a few microseconds for the best arbitragers to weekly/monthly rebalancing for large fundental funds.