Michael Venuto

"A repeatable investment process with structural alpha" That's a good #hedgefund replication model, which essentially is a short term bet that 1. Using only recent returns data, a replication model can accurately estimate the broad #factor exposures driving pre-fee returns of a "target" hedge fund portfolio. 2. Structural efficiency around implementation costs and fees mean that the replication portfolio is likely to outperform the "target" over a brief period. 3. Periodic (weekly or monthly) rebalancing is self-correcting and adaptive to changes in the "target" portfolios. The math works like this: assume a combination of the above means the replication model has a 54% chance of outperforming the "target" over a short window. Repeat the process over a year, and the probability of outperforming rises a lot; do it over three years and the results are even better. This basic concept underpins all systematic (yes, including #CTAs) and most fundamental investment strategies. Where does it go wrong? For plenty of strategies the first part doesn't work: no, you cannot figure out accurately what Citadel or Millennium is doing. Sometimes quants over-engineer replication models -- including regular changes -- which undercuts the "repeatable" thesis. So pick a "replicator" who understands #hedgefunds, thinks like an #investor, has been doing this for years and is not distracted by a dozen other quant science experiments. 🤔 And no, it's not a cheap knock off. It's a technical innovation. A Tesla with 20 parts often works a lot better than an internal combustion engine with two hundred. Touché! 🤺 😀

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As volatility reshapes public markets, investors are recalibrating. On the CFA Institute’s Enterprising Investor podcast, Eric Hanno, CFA, Co-Head of Apollo Aligned Alternatives, discusses how private assets can help build more diversified and resilient portfolios, and potentially offer enhanced returns compared to traditional public equity and fixed income allocations. Listen to the full episode here: https://lnkd.in/evDEjxa4

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Has #QIS cannibalized the #CTA #hedgefund space? Below is a chart of managed futures industry assets under management from BarclayHedge. During a twelve year period where the industry has generated $150-200 bn of gains, AUMs have remained flat, or slightly down. Where did the money go? It didn't go to #mutualfunds (flat at $20 bn) or #UCITS funds (also flat at $10ish bn). Perhaps a piece of the puzzle: Justina Lee from Bloomberg writes an intriguing article about the growth of the #QIS business at J.P. Morgan. (Loooong link below) One area highlighted by Arnaud Jobert, the head of the business, is "trend following." Albourne estimates the overall QIS space at close to $600 bn, and trend is likely a decent portion of this. If anyone has good data on this, please speak up! In any event, I look forward to diving into this on an upcoming Top Traders Unplugged podcast with the incomparable Niels Kaastrup-Larsen of DUNN Capital Management, LLC. https://lnkd.in/dwDRwGQ4

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Dimensional Fund Advisors, a global leader in systematic investing, has extended its transfer agency agreement with SS&C Global Investor and Distribution Solutions for its U.K. fund range. SS&C will provide transfer agency (TA) services for Dimensional's open-ended investment company (OEIC) funds. Learn more in our press release: https://lnkd.in/ekrPzbC2

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One-Month #SOFR (SR1) futures see outsized activity amid funding pressure, SOFR/EFFR basis volatility. Offering monthly granularity for framing SOFR expectations, SR1 has become a critical tool for off-balance-sheet hedging of U.S. repo exposure and RV trading vs. Fed Funds.

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EFFECTS OF LONG-TERM GROWTH TRENDS ON U.S. FISCAL DEBT-TO-GDP RATIO The CBO (Congressional Budget Office) is a frequently cited source in the U.S. when new laws are debated. Interestingly, CBO typically bases its baseline projection on an unchanged long-term productivity growth rate, regardless of specific legislative changes, assuming an economic real growth rate of around 1.8% annually. However, the Trump administration is actively pursuing a series of ambitious, growth-promoting initiatives that could significantly elevate the long-term growth trend. Tax relief for businesses and workforce participation, streamlining complex regulations, and massive investments in AI, robotics, and energy projects—supported by simple legislation, rapid approvals, and immediate tax write-offs—could spark an acceleration wave and substantially alter the long-term growth trajectory. Add to this the attraction of foreign investors building new factories and millionaires relocating to the U.S. via "golden visas," and we might be on the brink of a growth boom. This could potentially reduce the debt-to-GDP burden even without major spending cuts. Below are three scenarios from the CBO model, where they have actually calculated this. Even a very moderate increase in the annual growth trend by 0.5 percentage points per year effectively addresses the issue. Sources: CBO and Deutsche Bank.

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Bitwise Asset Management has filed an S-1 with the U.S. Securities and Exchange Commission to register a potential Aptos ETF. This filing is the initial step toward offering an ETF linked to Aptos in the U.S. market. This development follows Bitwise’s November 2024 launch of the Aptos Staking ETP on the SIX Swiss Exchange, designed to stake underlying Aptos tokens. Next steps include: • SEC review of the filing, with possible revisions • A U.S. exchange’s application to list the product • Final regulatory approval before any public offering Aptos joins a small group of crypto protocols reaching this stage with a major asset manager in pursuit of a U.S.-listed ETF. Process timelines vary, and there is no guarantee of approval. Disclaimer: This is for informational purposes and does not constitute investment advice.

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EM Fixed Income seems largely unfazed by the negative ADP employment surprise in the U.S.: => Many EM currencies gained vs USD => EM rates’ selloffs were driven mostly by local stuff (e.g. a large upside CPI surprise in the Czech Republic or concerns about fiscal expansion in South Korea under President Lee)

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Bernstein unveils ETF execution algorithm The new product launch, developed in close collaboration with Societe Generale, comes off the back of the recent surge in ETFs across the industry. #trading #markets #ETFs #tradingtechnology #execution #algorithm https://lnkd.in/erGykBFN

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🌍 Carbon markets are at a crossroads In 2002, the bond market transformed when FINRA introduced TRACE, bringing price transparency that cut trading costs in half and unlocked trillions in growth. Today’s voluntary carbon markets (VCMs) need their own TRACE moment. Without transparency, standardization, and accountability, billions in institutional capital will remain on the sidelines Pleased to Coauthor this Article with Daniel Ortega Pacheco Sean Penrith Raj Pattni Special Thanks to Jen Stebbing for editorial 👉 Read the full article here: Carbon Herald https://lnkd.in/eH7PqNrt #carbonmarkets #carbonoffset #voluntarycarbon #VCM

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Dynamic bond funds promise agility—switching duration to navigate rate cycles. The perfect solution? Reality: Despite 100 bps rate cuts, these 'all-weather' funds delivered just 3.55% YTD vs 5.4% from plain vanilla short-duration funds. The lesson: More fund categories do not always equal better solutions. Sometimes, outsourcing timing decisions to fund managers backfires spectacularly. Perfect timing is nearly impossible consistently, and the data proves it. Maybe simpler is actually better? Sanket Dhanorkar conducts a thorough analysis to examine dynamic bond funds in this rate cut cycle. In this week's ET Wealth. P.S. Full story on The Economic Times website.

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Since the OTC market is more difficult to measure directly, I have chosen to use observable market proxies. Here is the original Liquidity Capacity (LC) equation with the integrated proxies: SOFR as a proxy for funding costs, Swap spread as an approximation for dealer-imposed spreads, Centrally cleared IRS volume as a proxy for depth and activity in derivatives markets. This reformulation allows for empirical application of the equation while preserving its original logic. It provides a robust metric to assess liquidity stress in complex environments such as the OTC system.

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