Yet another talk with a pro at a hedge fund that do really well in quant trading. Things I've learned:
1. Fund of fund are doing badly recently. Many of them actually lie to investor. Showing off formula, model but actually there are none. Models are made up just to trick naive investors. There are hedge fund managers who are like a celebrity, dating super models, for the sake of advertising their business. On the other extreme there are funds who perform really well and barely anyone knows.
2. As well as the CTA industry, a lot of them hire scientists, but they don't have a systematic approach. And since no one in the quant trading actually knows the other's strategy, they don't know if their strategy are different from other or not. Even though a lot of CTA advertise to have a "different" strategy. The CTA industry is a less than zero-sum game.
3. There is this biggest CTA used to perform really well, until 2009 and a lot of new CTA were founded, making the industry more competitive. The biggest CTA started to intervene the system, in order to advertise to the customers. And they lost the edge since then. Lost more in bad year, and make less in good year.
4. There are many type of clients in hedge funds. The pension funds, who are normally old managers. Don't care much about the work. And got paid really low. when dealing with this kind of client one won't wear an Adamar watch. There are wealthy individuals, who are easy to deal with since they have knowledge. There are people who works for Morgan Stanley for 10 years. These are risk-adverse, and one should advertise a safe portfolio. There are also confident investors, who are bored with the world of investing. One should advertise a Vietnamese stocks to this type of risk-seeking investors. There are even clients who are sexually frustrated :((. These are easy to manipulate.
The conclusion is that a lot of hedge funds out there trick clients. Make up shits. Pretend to have strategy but actually don't. There are a lot of dirty tricks to get the clients. But there are a number of funds out there who has a truly scientific approach. Open culture like facebook Google. One is Bridgewater. Brevan Howard seems not to be one.