ES -- DX/CL -- isee -- cboe put/call -- specialist/public short ratio -- trinq -- trin -- aaii bull ratio -- abx -- cmbx -- cdx -- vxo p&f -- SPX volatility curve -- VIX:VXO skew -- commodity screen -- cot -- conference board

Monday, April 27, 2009

 

quant implosion update


following on earlier notes, zero hedge:

Jim Simons monster RIEF fund, which is arguably one of the largest quant funds in the world with $100 billion in total capacity (comps being BGI, Getco and Highbridge, the last of which incidentally was responsible for the massive market spike on Thursday afternoon as it force-deleveraged through its owner JP Morgan), indicate that it is underperfoming the S&P by almost 17% Month To Date. ...

As Zero Hedge has warned, when it comes to quant funds, the performance distribution is not a simple zero sum: the market's very topology is held in place by a smoothly functioning quant sector. Its absence results in abnormal and outsized index gyrations, incidentally like the one experienced by the S&P500 in the last 5 minutes of trading on Friday.

It would be critical for the MSM to pick up on this topic, as the last time RIEF underperformed so poorly was the summer of 2007, which as everyone knows culminated with the global quant implosion in early August that year. The last thing the current jittery market needs right now is a repeat event of that scale.


RIEF is down over (-8%) this month versus an S&P up 9%.

not unrelated -- eric rosenfeld, the professor-cum-LTCM-trader so awfully profiled in "when genius failed", gave a very interesting talk on illiquid crowded trades.

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Rosenfeld mentionned around the 70:00 minute mark that Lehman had to wrap its Swaps already in 2007 with an AIG guarantee. So AIG functionned as a kind of clearinghouse back then.

What would that mean in the context of September 2008 and the Lehman filing? Anybody any ideas ?

 
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