What is the percent hit rate of multi-manager folk in calling just the direction of quarters correctly?
Also, do PMs tend to know when they are likely to have a high hit rate? If so, what is the relationship between how big they make a position and how likely they think they are to get direction right?
Also, how do PMs change sizing in proportion to higher implied vols for the event? Do they look at options markets at all?
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Based on the WSO Dataset, the best PMs and teams at multi-manager hedge funds are right on approximately 54% of their positions, assuming the positions are sized equally. This indicates that they have a slightly better than even chance of correctly predicting the direction of market movements or earnings results each quarter.
Regarding the relationship between position sizing and confidence in predictions, while the specific details aren't provided in the context, it can be inferred that PMs likely adjust their position sizes based on their confidence level. If they believe they have a high likelihood of being correct about the direction of a stock or market, they might increase the size of their position to capitalize on this conviction.
As for changes in position sizing in relation to higher implied volatilities, the context does not provide specific details about how PMs adjust for this or whether they utilize options markets extensively. However, it's reasonable to assume that experienced PMs would consider the implied volatility as a factor in their risk management strategies, potentially adjusting their exposure or using options as a hedge if they expect significant volatility around an event.
Sources: Is the Multi Manager HF Experience Worth It?, MultiManager PM (Millenium, Balyasny, Schonfeld) minimum requirements, How Do Hedge Fund "Geniuses" Einhorn and Ackman Still Have Any AUM?, How hedged are market neutral funds?, How To Quit Your Job (And Still Win)
Bump also interested
Some other related questions for the multi guys out there
1) After earnings events, how fast do guys at the platforms usually turn over their book to whatever else they want to buy? And is there a target max percent of the volume? How do ya'll decide how much to trade per day?
2) When do the platform guys tend to re-position ahead of earnings events? Is it starting a month before, two weeks before? What's the usual cadence?
3) Between earnings events what do the multis even do with their book since there's kind of no events during that time?
My fund’s L/S eqy group usually tries to get out asap while staying under 10-20% of daily volume depending on liquidity and who else is in the name. Repositioning is something like 2 wks before. We are multi-strat so in down periods there’s reallocation to quant/credit strats and some looks for ECM, M&A etc. Just one data point but hope it helps
Helpful thanks!
WallStreetOasis.com please either ban this guy or make a block feature
One thing I would like to point out here, and encourage you to explore: Does getting a beat for the quarter mean a positive price move and vice versa? If not, is hit rate really the best metric?
I meant correctly calling a pos price move but yeah good to point out
Have had qtrs that I basically ran the table and made very little $ because I I missed on sentiment, biggest qtr-related gain I ever had I was prob 60/40 right but nailed the set ups. I’d posit that if you’re much below 50/50 then you’ve got work to do but depends how important qtrs are to your process.
As someone else said, getting beats/misses right is only important if you get the stock movement right.
As a follow up, which has been most puzzling to me: How do you differentiate between beats/misses and what will substantiate a material movement in the stock? What do you look for to indicate this to be the case?
This is what the job is. Figuring out what’s going to actually move the stock. NKE beating on America growth throughout 2023 isn’t pushing the stock when the key debate is on China and their DTC market.
There is no shorthand for this, you just need to understand the company very well, understand what segments/areas are contributing the most to profit growth and what the current narratives are. Isolating the themes in the bull/bear debate tells you what metrics to pay attention to on earnings.
Random Q but are earnings moves really 50-50 if you picked randomly in terms of calling the direction? Or are companies more likely have a pos move vs. neg move post earnings (but perhaps neg moves are larger or something to make expected value closer to zero?)
Is 60/40 basically as good as it gets for calling this stuff?
Also, when you say that you nailed the setups what exactly do you mean?
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