Many quant trading firms make 50%-100% annual returns, each year, over the past 15-20 years. The secret is leverage. And they do not accept outside investor money.
Many hedge funds outperform the market. However, the returns after fees, to the passive outside investor underperform S&P500.
But yes, publicly traded active ETFs generally underperform. But counter example is VGT or QQQ, both historically outperformed S&P500.
Hu lol no XD you're way over stating it. While it happens _sometimes_, 50% or 100% is insanely rare, even for the top tier hedge funds.
Most HF work at predefined annual volatility, often in the 7% to 10% range. A typical _top tier_ sharpe is in the >=2 range, we're more talking about a 10%/25% averaged annual returns.
> However, the returns after fees, to the passive outside investor underperform S&P500.
That doesn't even make sense with the figures you posted. Most HF operate under the 2:20 or 3:30 range, sometimes 0:40 for the top 5. If you take a pessimist 10% returns on 10% annual vol, against the S&P 10% averaged returns at 20% vol, you're still double the risk adjusted returns, gross. Factor in 20 to 40% performance fees and you're way above the S&P.
High-frequency low latency trading: Sharpe 10 or higher
Mid-frequency low latency trading: sharpe 4 to 5
Hedge fund statistical arbitrage: sharpe 1 to 2
Hedge fund long/short, event driven, global macro, etc: sharpe 0 to 1
And yes, HFT and MFT scales to billions in annual PnL for single firms.
There’s a reason quant HFT firms pay the most, and are ranked above OpenAI in pay and prestige. Hedge funds are tier 2 in comparison but not bad either.
100% annual returns on 1 million dollars for 20 years is 1 trillion dollars. No one is making that type of return.
Classic passive ETF Boglehead mindset.
Who said anything about re-investing? There are also significant tax considerations (loopholes) that encourage cashing out annually.
Math class does not teach practical knowledge such as personal finance or health.
Citadel returns since 1990 is 38% annual returns before fees to outside investors. They have a 5:50 fee structure. There are hundreds of more firms, staying out of the public eye.
https://www.barrons.com/articles/multistrategy-hedge-funds-p...
Minimum investment $5M. Sorry but the middle class is not allowed.
It teaches you how to work in a quant shop
Besides, I knew nothing about construction when I discovered that the contractor I hired to pour a patio was overcharging me by 30%. All it took was a bit of geometry I learned in grade school.
Pay no attention to math in school and you'll be prey to every scammer who did, and you'll never realize it.
False. Why do people invest in real estate and S&P500 passive index funds?
Because historically they go up.
TQQQ (3x daily return leveraged nasdaq 100) is up 180x since its well-timed inception in 2010.
Though that’s a bit over 40% annually.
No, it's actually the reverse. You have to compare at equal annual vol, and the S&P already has something like 20%. Most HF operate around 10% on AUM.
Stop thinking like a hedge fund.
TQQQ commonly is used as a benchmark because it represents a low-friction, practical alternative to VTI, VOO, and even private equity investments including hedge funds trading public securities.
Once your Sharpe is high enough, you stop caring about volatility. The only volatility is how many zeros in your almost-always positive PnL.
Hedge funds (and traditional asset managers) care about drawdown, vol, sortino, beta and all that shit. But hedge funds have a different business model than prop trading firms.