What do investors really want?
The long/short industry seems to go through a severe existential crisis every time the market "hits a soft patch." Investors are rudely reminded that downside protection only means limited downside with virtually no upside. The industry has operated from a "build it and they will come" product supply model. If the objective is to build sustainable businesses, it is high time we paused and looked at the world from an investor's perspective. This will provide crucial context to build a long/short product that meets investors' demands step by step.
Lessons from the 2007 quants debacle
"And so castles made of sand,
melt into the sea,
eventually."– Jimi Hendrix
In August 2007, cross-sectional volatility took markets around the world by surprise. Although indices did not move much, constituents jumped across the board for a few days. Soon, rumors of unwinding from various quantitative...
