> The point of a financial market is to allocate capital to its most productive uses. Someone who is very good at allocating capital should be allocating a lot of capital, not her own Robinhood account.
These two facts are not connected at all. There's no reason to assume the market cannot work or reliably find the "most productive" uses of capital in the aggregate.
> And an efficient market would allocate a lot of capital to her
Then that would give a single individual more control over the market than is healthy and would naturally tend towards inefficiency. The basic presumption here is that centralization of the economy around a limited number of entities is great for efficiency. I can find no examples in history of this and I can find many where this actually just increases corruption.
Given everything we learned about the "too big to fail" era I find articles like this to be obvious and grotesque lies.
I studied a lot of finance in grad school, at world leading elite finance school, and I am a very successful investor myself and can give you sound advice up and down the market and quibble your use of terminology.
Big is bad, actually. Centralization of power in a small number of hands creates structural market distortions, generates corruption, and diminishes the freedom of all.
So either they have to be big to play outside public markets. Or small enough that they can still exploit things... For actual hedge I might actually want to go for later. Especially if you look at premiums on say EA. And possibility of getting your money out in reasonable time.
>Somewhere out there is a person who’s spent years running a 4 Sharpe ratio at her $5 million friends-and-family hedge fund, or her Robinhood personal account, but she never gets a job at a big hedge fund.
Weird numbers to pick here. I know like 10 guys off my personal contact list who can do 4 Sharpe at 5 million easy. The "game" in hedge funds isn't 4 Sharpe at 5mio AUM, its 1.5-2 Sharpe at 1b AUM or 1 Sharpe at 10b AUM, both of which are infinitely harder than 4 Sharpe at 5mio AUM. You can do 4 Sharpe at 5mio AUM after 6 years at a BB in anything that's not equities or delta 1.
> Weird numbers to pick here. I know like 10 guys off my personal contact list who can do 4 Sharpe at 5 million easy
Sure, but the pool of people who can get into hedge funds overlaps a ton with the pool of people who have done "6 years at a BB in anything that's not equities or delta". That's like... where hedge fund recruiters go poaching, isn't it?
I think the article was talking about random retail investors who can do this stuff, which seems relatively more rare.
The WSB community most likely obliterates that metric, and I mean the broader community not the regards buying lotto tickets. You don’t need to look at Hedge Funds for good trading, you need to look at them for insider trading knowledge. IMHO that’s all they have on others because the only data that’s not available is that … inside stuff.
A bit off-topic to the post, but maybe very relevant to HN techbros seeing this article, and musing about becoming (lower caste) finance bros...
You know how there's a boots on the ground truth to what an early tech startup's Incentive Stock Options are actually worth nowadays, and how people should think about them (but that most startups won't admit)?
With that secret reality in mind, how should software engineer candidates considering working for a hedge fund or private equity job think about the compensation there? Maybe especially about "carry"?
A recruiter for a firm seeking a "Principal" level engineer, which would require moving to NYC, mentioned compensation of "$X salary, 50% bonus, and $Y carry". Where $X is a usual current non-FAANG Senior+ startup SWE salary, and Y is only a bit larger than X.
The recruiter opened by stating the single number $((X*1.5)+Y), as if it were the annual TC familiar to us from levels.fyi.
When I Google for "carry", it sounds like some speculative share of something unclear about some investments the firm owns or manages, and then this share might vest over 5-10 years, if I remain with the firm that long. The $Y dollar amount sounds like it's a fixed amount bonus or capped value of a share. Also unclear whether there's an additional $Y+ grant of carry each year.
If this were most tech startup ISOs, I would know that the ISOs were probably worth $0 or less, and in some ways rigged to be that way, even if the company has a successful exit from which people with real shares profit.
For this $((X*1.5)+Y) job, the $X salary alone will cover a lifestyle of renting a modest apartment in Brooklyn, plus decent savings building from whatever the rest of it is. I'm unclear whether the bonus and carry make it even competitive with Google L6, though.
What do I need to know about "carry" or other aspects of the compensation? What time horizons, conditions, and probabilities are involved?
My portfolio was +94% in 2024 and +52% in the past 6 months (I took a massive haircut thanks to April's tariff saga and by having biblical levels of greed...lesson learned).
How do I declare for the inaugural Hedge Fund Draft?
Of course they do - it's the same as bookmakers or other gambling syndicates, it only makes sense to operate at a certain scale otherwise the rounding errors and stochasticity will kill you.
> The point of a financial market is to allocate capital to its most productive uses.
This kind of thing is basically a paperclip-maximizer trap in another form. That may be the point of a financial market, but it's not the point of a society, so it doesn't really matter what the point of a financial market is, because that point should be constrained and directed in the service of the overall society.
16 comments
[ 2.9 ms ] story [ 30.8 ms ] threadThese two facts are not connected at all. There's no reason to assume the market cannot work or reliably find the "most productive" uses of capital in the aggregate.
> And an efficient market would allocate a lot of capital to her
Then that would give a single individual more control over the market than is healthy and would naturally tend towards inefficiency. The basic presumption here is that centralization of the economy around a limited number of entities is great for efficiency. I can find no examples in history of this and I can find many where this actually just increases corruption.
Given everything we learned about the "too big to fail" era I find articles like this to be obvious and grotesque lies.
(sad bear, or dog in lab with goggles meme)
I have no idea what a hedge fund is.
Weird numbers to pick here. I know like 10 guys off my personal contact list who can do 4 Sharpe at 5 million easy. The "game" in hedge funds isn't 4 Sharpe at 5mio AUM, its 1.5-2 Sharpe at 1b AUM or 1 Sharpe at 10b AUM, both of which are infinitely harder than 4 Sharpe at 5mio AUM. You can do 4 Sharpe at 5mio AUM after 6 years at a BB in anything that's not equities or delta 1.
Sure, but the pool of people who can get into hedge funds overlaps a ton with the pool of people who have done "6 years at a BB in anything that's not equities or delta". That's like... where hedge fund recruiters go poaching, isn't it?
I think the article was talking about random retail investors who can do this stuff, which seems relatively more rare.
You know how there's a boots on the ground truth to what an early tech startup's Incentive Stock Options are actually worth nowadays, and how people should think about them (but that most startups won't admit)?
With that secret reality in mind, how should software engineer candidates considering working for a hedge fund or private equity job think about the compensation there? Maybe especially about "carry"?
A recruiter for a firm seeking a "Principal" level engineer, which would require moving to NYC, mentioned compensation of "$X salary, 50% bonus, and $Y carry". Where $X is a usual current non-FAANG Senior+ startup SWE salary, and Y is only a bit larger than X.
The recruiter opened by stating the single number $((X*1.5)+Y), as if it were the annual TC familiar to us from levels.fyi.
When I Google for "carry", it sounds like some speculative share of something unclear about some investments the firm owns or manages, and then this share might vest over 5-10 years, if I remain with the firm that long. The $Y dollar amount sounds like it's a fixed amount bonus or capped value of a share. Also unclear whether there's an additional $Y+ grant of carry each year.
If this were most tech startup ISOs, I would know that the ISOs were probably worth $0 or less, and in some ways rigged to be that way, even if the company has a successful exit from which people with real shares profit.
For this $((X*1.5)+Y) job, the $X salary alone will cover a lifestyle of renting a modest apartment in Brooklyn, plus decent savings building from whatever the rest of it is. I'm unclear whether the bonus and carry make it even competitive with Google L6, though.
What do I need to know about "carry" or other aspects of the compensation? What time horizons, conditions, and probabilities are involved?
How do I declare for the inaugural Hedge Fund Draft?
Just say you run a “small family office” and enjoy the win ;)
This kind of thing is basically a paperclip-maximizer trap in another form. That may be the point of a financial market, but it's not the point of a society, so it doesn't really matter what the point of a financial market is, because that point should be constrained and directed in the service of the overall society.