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fricchettone
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Subscribe to read | Financial Times
In 2018 Ken Griffin’s Citadel hired a group of scientists and analysts whose weather forecasts were more accurate than those of most meteorological offices.
The recruitment of the 20-strong team was unusual for a big hedge fund in a sector largely focused on stocks, bonds and currencies. But it has been a critical part of a push by Griffin’s $54bn-in-assets firm to build out a wide-ranging commodities business encompassing both futures and physical trading.
The bold bet on raw materials has paid off, helping Citadel make a record $16bn in 2022 to displace Bridgewater as the most successful hedge fund of all time, according to research by LCH Investments.
When the historically subdued gas market exploded into life amid the lifting of Covid-19 lockdowns then Russia’s full-scale invasion of Ukraine, Citadel was perfectly positioned to reap billions of dollars of trading profits.
“Citadel are very strong in gas and power,” said Pierre Andurand, founder of hedge fund Andurand Capital and one of the world’s top energy traders. “They do a lot of work on supply and demand. They take big bets and keep them for months.”
Even by the hedge fund industry’s standards, Citadel is secretive. Investors say privately that it has long been difficult to get detail on the firm’s trades while, compared with many hedge funds, the firm’s investor communications give relatively little information.
A spokesman said the firm conducts hundreds of one-on-one meetings with investors and holds investor calls.
Having such a large exposure to commodities has given Citadel an edge over rivals in recent years, according to people familiar with the firm who said its flagship funds can run a quarter or more of their overall portfolios in commodities.
“Citadel’s institutional energy trading and commodities operation was surely a big benefit to their eye-popping year,” said Jim Neumann, chief investment officer at Sussex Partners, which advises clients on hedge fund investments.
Most of the firm’s rivals have not built up in commodities to the same extent given the sector provided less attractive opportunities than equities or bonds for so long pre-pandemic, particularly when adjusted for the risk of big losses.
Many, including Brevan Howard, Astenbeck Capital and Armajaro, even shut commodities funds last decade against a backdrop of wild price swings and lengthy periods of falling prices. Most now only have commodities exposure of a single-digit percentage of their assets, if at all.
Citadel entered the commodities business in 2002, hiring a group of former Enron traders.
Its exposure is markedly higher than a decade ago, according to investor documentation seen by the Financial Times, so when commodity prices start to move it can gain a big advantage over rivals. It reaped billions of dollars in 2021 just from betting on gas and power, say people close to the firm.
Last year proved even more lucrative as Russia’s assault on Ukraine sent markets into panic about sanctions and energy shortages. The volatility — with prices jumping first in March and again to a record high in August — provided a wealth of trading opportunities.
The team behind Chris Foster, Citadel’s senior portfolio manager for natural gas and someone with a reputation for punchy bets, has helped generate billions of dollars for the fund, according to people familiar with the firm, who say Citadel made $7bn-$8bn from commodities last year.
Griffin and his senior team are attracted by the size of the asset class, its low correlation with other markets and its complexity. In gas, supply can be mapped and analysed by his large teams of researchers while the many gas hubs across the US and beyond offer numerous prices that can be traded.
Forecasting demand is much harder. Weather heavily influences usage, which is higher during hot summers because of air conditioners and in cold winters as homes are heated.
This is where Citadel is seen as having a crucial advantage, with its traders fed information by a weather team that uses supercomputers to run forecasts and includes specialists in areas such as thunderstorm and tropical cyclone prediction. Much of the team is based in London — well placed to capitalise on volatile European gas and power prices.
It has been bolstered in recent years with hires out of academia. Head of weather Nicholas Klingaman, formerly at the UK’s National Centre for Atmospheric Science, specialises in “sub-seasonal” forecasts. Such predictions, typically for up to two months ahead, are far more difficult than shorter-term forecasts and highly lucrative if accurate.
Citadel’s physical commodities business — which trades the raw materials and is led by former Morgan Stanley head of commodities trading Jay Rubenstein — traded more than 1.1tn cubic feet of gas in 2021 and is now a major physical gas player in the US.
Citadel’s gains from gas and other commodities played a big part in its record 38.2 per cent performance last year, which brought its annualised return since launch in 1990 to 19.7 per cent. About 70 per cent of Citadel’s investors are institutions, including universities and pension plans.
“Clearly 38 per cent a year is unsustainable,” said Andrew Beer, managing member at US investment firm Dynamic Beta. “On the other hand, if you have the best information, smartest people, locked up capital and nearly unlimited borrowing capacity from Wall Street, why not try to shoot the lights out?”
A Citadel spokesman said “unlike our competitors, Citadel’s commodities team invests globally across a diversified set of products . . . leveraging more than 20 years of long-term, steady investment in exceptional people, analytics and infrastructure”.
There are signs rivals want to get in on the act. Balyasny last year hired a tropical weather specialist and an expert in ocean warming.
Last year was strong for many of Citadel’s peers. Millennium Management, DE Shaw, Balyasny and Point72 all made double-digit gains, even as many equity funds were hit by the technology stock slump. Multi-strategy funds last year delivered their highest level of “alpha” — industry jargon for profits above and beyond the market — since the aftermath of the financial crisis in 2009, according to JPMorgan research.
“If you were less dependent on equity long-short and had more access to other assets you had a better shot,” said Neumann.
But industry insiders say Citadel did so well not only because of its diversification across assets offering some of the best trades in years but also thanks to the size of its bets, with traders encouraged to run positions rather than sit on the sidelines in cash.
“You feel like you always have to be risk-on, there’s pressure constantly from the top,” said one person with knowledge of the firm.
A Citadel spokesman said its investors “entrust and expect us to deploy their capital against the investment opportunities we identify in the market”.
Griffin gets to know his managers’ trades inside out, and will allow more risk to be allocated to a position when he sees a particularly attractive opportunity to profit.
The firm also has a large presence in fixed income and macro, a sector that last year enjoyed its best gains since the financial crisis, as government bond yields and the dollar soared while central banks raced to tame surging inflation.
Its fixed-income and macro fund, which makes both directional and arbitrage bets, made 32.6 per cent, beating many specialist macro funds. The firm notched up record years in four of its five business areas — commodities, fixed income, equities and quantitative strategies.
“The inflation trade was the subprime of 2022,” said Beer. “Like the big winners back then, Citadel went all in and pushed its bet far more than some of its peers.” A person close to the firm said it had a diversified set of strategies in fixed income and macro, all of which did well.
However, some industry insiders believe the size of the bets multi-manager funds take can leave them vulnerable to extreme market events.
“The transparency into these sophisticated firms is not great and there is an acknowledgment that there is substantial risk, given the level of leverage, to black swan events,” said Neumann. “The confidence that central banks will provide relief to mitigate such a shock . . . is embedded in the investment decision.”
A person close to the firm disputed that this assessment applied to Citadel, pointing out that the hedge fund raised $2bn from investors in March 2020 as the pandemic sent markets into turmoil.
Griffin has put the firm’s recent success down to returning to the office early in the pandemic. Industry insiders also attribute it to Citadel’s size, which can offer top traders a bigger book to manage on day one, increasing potential payouts.
Its traders and analysts are now set to enjoy a bumper payday. Citadel last year charged $12bn in expenses and fees to its clients — more than a fifth of whom are employees — driven by the need to reward traders who had performed well.
Bonuses at the firm, announced to staff in late January with payments made last month, were in the multiple tens of millions of dollars for some traders. Expectations are for even bigger figures this year, with some star teams set for payouts of more than $100mn.
The fees are “astronomical”, said one investor — but without them firms like Citadel “cannot compete for talent”.
How Citadel harnessed the weather to claim hedge fund crown
Bold bet on commodities plays large part in lifting Ken Griffin’s firm to record $16bn profitIn 2018 Ken Griffin’s Citadel hired a group of scientists and analysts whose weather forecasts were more accurate than those of most meteorological offices.
The recruitment of the 20-strong team was unusual for a big hedge fund in a sector largely focused on stocks, bonds and currencies. But it has been a critical part of a push by Griffin’s $54bn-in-assets firm to build out a wide-ranging commodities business encompassing both futures and physical trading.
The bold bet on raw materials has paid off, helping Citadel make a record $16bn in 2022 to displace Bridgewater as the most successful hedge fund of all time, according to research by LCH Investments.
When the historically subdued gas market exploded into life amid the lifting of Covid-19 lockdowns then Russia’s full-scale invasion of Ukraine, Citadel was perfectly positioned to reap billions of dollars of trading profits.
“Citadel are very strong in gas and power,” said Pierre Andurand, founder of hedge fund Andurand Capital and one of the world’s top energy traders. “They do a lot of work on supply and demand. They take big bets and keep them for months.”
Even by the hedge fund industry’s standards, Citadel is secretive. Investors say privately that it has long been difficult to get detail on the firm’s trades while, compared with many hedge funds, the firm’s investor communications give relatively little information.
A spokesman said the firm conducts hundreds of one-on-one meetings with investors and holds investor calls.
Having such a large exposure to commodities has given Citadel an edge over rivals in recent years, according to people familiar with the firm who said its flagship funds can run a quarter or more of their overall portfolios in commodities.
“Citadel’s institutional energy trading and commodities operation was surely a big benefit to their eye-popping year,” said Jim Neumann, chief investment officer at Sussex Partners, which advises clients on hedge fund investments.
Most of the firm’s rivals have not built up in commodities to the same extent given the sector provided less attractive opportunities than equities or bonds for so long pre-pandemic, particularly when adjusted for the risk of big losses.
Many, including Brevan Howard, Astenbeck Capital and Armajaro, even shut commodities funds last decade against a backdrop of wild price swings and lengthy periods of falling prices. Most now only have commodities exposure of a single-digit percentage of their assets, if at all.
Citadel entered the commodities business in 2002, hiring a group of former Enron traders.
Its exposure is markedly higher than a decade ago, according to investor documentation seen by the Financial Times, so when commodity prices start to move it can gain a big advantage over rivals. It reaped billions of dollars in 2021 just from betting on gas and power, say people close to the firm.
Last year proved even more lucrative as Russia’s assault on Ukraine sent markets into panic about sanctions and energy shortages. The volatility — with prices jumping first in March and again to a record high in August — provided a wealth of trading opportunities.
The team behind Chris Foster, Citadel’s senior portfolio manager for natural gas and someone with a reputation for punchy bets, has helped generate billions of dollars for the fund, according to people familiar with the firm, who say Citadel made $7bn-$8bn from commodities last year.
Griffin and his senior team are attracted by the size of the asset class, its low correlation with other markets and its complexity. In gas, supply can be mapped and analysed by his large teams of researchers while the many gas hubs across the US and beyond offer numerous prices that can be traded.
Forecasting demand is much harder. Weather heavily influences usage, which is higher during hot summers because of air conditioners and in cold winters as homes are heated.
This is where Citadel is seen as having a crucial advantage, with its traders fed information by a weather team that uses supercomputers to run forecasts and includes specialists in areas such as thunderstorm and tropical cyclone prediction. Much of the team is based in London — well placed to capitalise on volatile European gas and power prices.
It has been bolstered in recent years with hires out of academia. Head of weather Nicholas Klingaman, formerly at the UK’s National Centre for Atmospheric Science, specialises in “sub-seasonal” forecasts. Such predictions, typically for up to two months ahead, are far more difficult than shorter-term forecasts and highly lucrative if accurate.
Citadel’s physical commodities business — which trades the raw materials and is led by former Morgan Stanley head of commodities trading Jay Rubenstein — traded more than 1.1tn cubic feet of gas in 2021 and is now a major physical gas player in the US.
Citadel’s gains from gas and other commodities played a big part in its record 38.2 per cent performance last year, which brought its annualised return since launch in 1990 to 19.7 per cent. About 70 per cent of Citadel’s investors are institutions, including universities and pension plans.
“Clearly 38 per cent a year is unsustainable,” said Andrew Beer, managing member at US investment firm Dynamic Beta. “On the other hand, if you have the best information, smartest people, locked up capital and nearly unlimited borrowing capacity from Wall Street, why not try to shoot the lights out?”
A Citadel spokesman said “unlike our competitors, Citadel’s commodities team invests globally across a diversified set of products . . . leveraging more than 20 years of long-term, steady investment in exceptional people, analytics and infrastructure”.
There are signs rivals want to get in on the act. Balyasny last year hired a tropical weather specialist and an expert in ocean warming.
Last year was strong for many of Citadel’s peers. Millennium Management, DE Shaw, Balyasny and Point72 all made double-digit gains, even as many equity funds were hit by the technology stock slump. Multi-strategy funds last year delivered their highest level of “alpha” — industry jargon for profits above and beyond the market — since the aftermath of the financial crisis in 2009, according to JPMorgan research.
“If you were less dependent on equity long-short and had more access to other assets you had a better shot,” said Neumann.
But industry insiders say Citadel did so well not only because of its diversification across assets offering some of the best trades in years but also thanks to the size of its bets, with traders encouraged to run positions rather than sit on the sidelines in cash.
“You feel like you always have to be risk-on, there’s pressure constantly from the top,” said one person with knowledge of the firm.
A Citadel spokesman said its investors “entrust and expect us to deploy their capital against the investment opportunities we identify in the market”.
Griffin gets to know his managers’ trades inside out, and will allow more risk to be allocated to a position when he sees a particularly attractive opportunity to profit.
The firm also has a large presence in fixed income and macro, a sector that last year enjoyed its best gains since the financial crisis, as government bond yields and the dollar soared while central banks raced to tame surging inflation.
Its fixed-income and macro fund, which makes both directional and arbitrage bets, made 32.6 per cent, beating many specialist macro funds. The firm notched up record years in four of its five business areas — commodities, fixed income, equities and quantitative strategies.
“The inflation trade was the subprime of 2022,” said Beer. “Like the big winners back then, Citadel went all in and pushed its bet far more than some of its peers.” A person close to the firm said it had a diversified set of strategies in fixed income and macro, all of which did well.
However, some industry insiders believe the size of the bets multi-manager funds take can leave them vulnerable to extreme market events.
“The transparency into these sophisticated firms is not great and there is an acknowledgment that there is substantial risk, given the level of leverage, to black swan events,” said Neumann. “The confidence that central banks will provide relief to mitigate such a shock . . . is embedded in the investment decision.”
A person close to the firm disputed that this assessment applied to Citadel, pointing out that the hedge fund raised $2bn from investors in March 2020 as the pandemic sent markets into turmoil.
Griffin has put the firm’s recent success down to returning to the office early in the pandemic. Industry insiders also attribute it to Citadel’s size, which can offer top traders a bigger book to manage on day one, increasing potential payouts.
Its traders and analysts are now set to enjoy a bumper payday. Citadel last year charged $12bn in expenses and fees to its clients — more than a fifth of whom are employees — driven by the need to reward traders who had performed well.
Bonuses at the firm, announced to staff in late January with payments made last month, were in the multiple tens of millions of dollars for some traders. Expectations are for even bigger figures this year, with some star teams set for payouts of more than $100mn.
The fees are “astronomical”, said one investor — but without them firms like Citadel “cannot compete for talent”.
fricchettone
Quantitative Researcher
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Billionaire Ken Griffin Negotiating ChatGPT License For Citadel Empire
Citadel CEO Ken Griffin has taken a different approach from Wall Street banks, who have banned using artificial intelligence chatbots in their offices. Instead, Griffin is currently in the process of obtaining a company-wide license to utilize OpenAI's ChatGPT tool."This branch of technology has real impact on our business," Griffin told Bloomberg in an interview on Tuesday in sunny Palm Beach, Florida. "Everything from helping our developers write better code to translating software between languages to analyze various types of information that we analyze in the ordinary course of our business," he added.
Griffin, who heads the South Florida hedge fund Citadel and capital-markets firm Citadel Securities, touted the chatbot as the "fastest-growing consumer application in the history of the internet." He emphasized: "I'm really excited to see how this changes the world."
Griffin views ChatGPT as a way to streamline tasks for employees, enabling them to be more productive. "It will take an enormous amount of work that's done today by people, and do it in a distinctly different, highly automated, efficient way," he said.
Last year was a banner year for both of Griffin's companies, with Citadel Securities raking in revenue of $7.5 billion and becoming the largest trading unit in the US. Similarly, Griffin's flagship hedge fund recorded a 38% surge due to strong performances in equities and commodities.
The billionaire founder is setting a precedent for the industry at a time when many Wall Street banks, such as Bank of America Corp., Citigroup Inc., Deutsche Bank AG, Goldman Sachs Group Inc., and Wells Fargo & Co., have prohibited ChatGPT from the office.
Billionaire Ken Griffin Negotiating ChatGPT License For Citadel Empire | ZeroHedge
fricchettone
Quantitative Researcher
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fricchettone
Quantitative Researcher
- Registrato
- 26/2/21
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P.A.T.
Nuovo Utente
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Non e' chiaro se questo 15% sia attualizzato come tasso medio di perdita del potere predittivo lungo un determinato orizzonte temporale oppure sia un 15% tasso lineare (100...85...70...)
A me pare che questa affermazione di Tulchinsky sia una grossa sparata, come molte se ne fanno. Se io avessi tra le mani un modello simile, con un po' di leva, neppure eccessiva, e con ben 5 milioni di segnali positivi a disposizione sistemerei il paese Italia in meno di un lustro.
Giorgetti, assumilo !!!!
Blacksmith.
AoK Heaven
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Dovrebbero riferirsi al crowding e alla necessità di fare sempre nuova ricerca.
Toss of a coin that made a one-time game developer top of the quants | Financial Times
Quant firms find themselves in an unending battle to sniff out new signals from trading patterns, find new data sets, explore new approaches and mine any inefficiencies before their rivals do.
“Trading signals decay, whether you use them or not, because if you don’t use them others do,” said Tulchinsky. WorldQuant has a library of more than 5mn signals but he estimates that each signal decays — that is, loses its predictive power — by an average of 15 per cent each year. “In the other direction we keep coming up with new signals so it’s a never-ending cycle.”
He adds that while “crowding is a concern . . . as long as we just keep researching fast enough, keep finding new signals fast enough, diversifying in every possible way, then crowding is more of an intellectual than a practical concern”.
Toss of a coin that made a one-time game developer top of the quants | Financial Times
Quant firms find themselves in an unending battle to sniff out new signals from trading patterns, find new data sets, explore new approaches and mine any inefficiencies before their rivals do.
“Trading signals decay, whether you use them or not, because if you don’t use them others do,” said Tulchinsky. WorldQuant has a library of more than 5mn signals but he estimates that each signal decays — that is, loses its predictive power — by an average of 15 per cent each year. “In the other direction we keep coming up with new signals so it’s a never-ending cycle.”
He adds that while “crowding is a concern . . . as long as we just keep researching fast enough, keep finding new signals fast enough, diversifying in every possible way, then crowding is more of an intellectual than a practical concern”.
fricchettone
Quantitative Researcher
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Uno dei più grossi,potenti e riservati hedge fund al mondo(arbitraggio statistico ad alta frequenza) acquista terreno per costruire un centro di elaborazione intensivo.
TGS Management pays $240M to buy site for Irvine data hub
TGS Management pays $240M to buy site for Irvine data hub
fricchettone
Quantitative Researcher
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La migliore società è quella a socio unico 
"A group of senior modelers who worked under Overdeck threatened to quit if Siegel didn’t take a step back, the Wall Street Journal reported. As for Two Sigma’s succession plans, Overdeck wants to keep an operating role, while Siegel prefers handing control to a chief executive officer and having the duo stay in their chairman roles, according to the Journal."
Cofounders of a $60 billion hedge fund disagree about nearly everything and it's created a ‘material risk’ for their clients
The billionaires' beef at Two Sigma seems pretty petty
Two Sigma's unusual risk disclosure was years in the making, hedge fund insiders say
"A group of senior modelers who worked under Overdeck threatened to quit if Siegel didn’t take a step back, the Wall Street Journal reported. As for Two Sigma’s succession plans, Overdeck wants to keep an operating role, while Siegel prefers handing control to a chief executive officer and having the duo stay in their chairman roles, according to the Journal."
Cofounders of a $60 billion hedge fund disagree about nearly everything and it's created a ‘material risk’ for their clients
The billionaires' beef at Two Sigma seems pretty petty
Two Sigma's unusual risk disclosure was years in the making, hedge fund insiders say
Ultima modifica:
fricchettone
Quantitative Researcher
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Sempre two sigma
notizia letta un mesetto fa ma non sembrano essere uscite altre news.
Il dipendente era in una posizione molto alta
https://www.linkedin.com/in/jianwu6
Jian Wu Bella la frattalità del castello di cenerentola
Two Sigma faces trading scandal after staffer goes rogue with investing model
Morning Coffee: 33-year-old hedge fund quant's vanished $20m+ bonus. Even French traders didn't want to go to Paris, at first
notizia letta un mesetto fa ma non sembrano essere uscite altre news.
Il dipendente era in una posizione molto alta
https://www.linkedin.com/in/jianwu6
Jian Wu Bella la frattalità del castello di cenerentola
Quant Hedge Fund Two Sigma Accuses Employee of Misconduct That Cost Clients Money
- The researcher was put on leave after the accusations
- Two Sigma said the researcher circumvented its models
Two Sigma faces trading scandal after staffer goes rogue with investing model
Firm tells clients that researcher made unauthorised adjustments that resulted in $620m in unexpected gains and lossesTwo Sigma faces trading scandal after staffer goes rogue with investing model
Morning Coffee: 33-year-old hedge fund quant's vanished $20m+ bonus. Even French traders didn't want to go to Paris, at first