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Quant trading strategy like Medallion Fund uses don't scale. That's why Warren Buffet has more personal wealth than Medallion Fund has AUM. Outside finance, bu

Quant trading strategy like Medallion Fund uses don't scale. That's why Warren Buffet has more personal wealth than Medallion Fund has AUM. Outside finance, but similar business is sports betting syndicates. They can make 30-70% yearly return with low volatility. If you bet in 100 events per week and the expected return from each bet is just 0.5% (after expenses) you make consistent 30% return with very low volatility. If you make 1% per week you get almost 70%. That's great return for the investment but the size of investment is typically limited to tens of millions. Brokers don't like it and close accounts when they notice them. There is increasing amount of work involved when the amount of money increases.

Maledictus 7y ago
Do you have more information about this? I thought "the bank always wins" (or the broker in this case).
- melling 7y ago
  Jim Simons https://news.ycombinator.com/item?id=21423845 https://news.ycombinator.com/item?id=21423845 Maybe Ed Thorp too: https://en.m.wikipedia.org/wiki/Edward_O._Thorp https://en.m.wikipedia.org/wiki/Edward_O._Thorp
  - phyalow 7y ago
    And barely a drop about TGS on the clearnet (aside from some paywalled BBG articles). They are basically the continuation of Ed Thorps business Princeton Newport Partners.
    - deepnotderp 7y ago
      TGS is extremely secretive https://www.google.com/amp/s/www.cnbc.com/amp/2014/05/09/mystery-13-billion-philanthropists-revealed.html https://www.google.com/amp/s/www.cnbc.com/amp/2014/05/09/mys...
  - look_lookatme 7y ago
    That comment links to a Youtube video I just watched and it's interesting that he directly confirms that there is an upper bound to the amount of money their model can manage and that they are comfortable limiting the scope of the game as a result. I guess that kind of honesty is easy when you are billionaires making money off your own money.
- Nokinside 7y ago
  Bookmakers make their profit from the margin between the odds they give. Example. If the probability of outcome is exactly 50-50, he odds they give are 1.9 and 2.11 and they pocket the difference (completely fair odds without margin would be 2.0 both sides) It does not matter what the outcome is. If they balance the bets for and against perfectly, there is no risk. They generally try to balance their liability but having preferred winner can increase profits with some additional risk. If people place bets on the other side more, bookmakers move the odds to balance the bets from both sides. At some point the odds can be skewed so much that professional better can make money even after the bookmaker takes his margin. That money is taken from other betters. But if the bookmaker is not fully balanced it can come from the bookmakers pocket.
  - Maledictus 7y ago
    Thank you.
deepnotderp 7y ago
Total aum of all rentech funds is something like 110 billion and they've still managed to keep good returns on it.
luc4sdreyer 7y ago
> They can make 30-70% yearly return with low volatility. Can you source this? If it was that easy to get a consistent 50% return then why aren't more people doing it?

Maledictus 7y ago

Do you have more information about this? I thought "the bank always wins" (or the broker in this case).

melling 7y ago
Jim Simons https://news.ycombinator.com/item?id=21423845 https://news.ycombinator.com/item?id=21423845 Maybe Ed Thorp too: https://en.m.wikipedia.org/wiki/Edward_O._Thorp https://en.m.wikipedia.org/wiki/Edward_O._Thorp
- phyalow 7y ago
  And barely a drop about TGS on the clearnet (aside from some paywalled BBG articles). They are basically the continuation of Ed Thorps business Princeton Newport Partners.
  - deepnotderp 7y ago
    TGS is extremely secretive https://www.google.com/amp/s/www.cnbc.com/amp/2014/05/09/mystery-13-billion-philanthropists-revealed.html https://www.google.com/amp/s/www.cnbc.com/amp/2014/05/09/mys...
- look_lookatme 7y ago
  That comment links to a Youtube video I just watched and it's interesting that he directly confirms that there is an upper bound to the amount of money their model can manage and that they are comfortable limiting the scope of the game as a result. I guess that kind of honesty is easy when you are billionaires making money off your own money.
Nokinside 7y ago
Bookmakers make their profit from the margin between the odds they give. Example. If the probability of outcome is exactly 50-50, he odds they give are 1.9 and 2.11 and they pocket the difference (completely fair odds without margin would be 2.0 both sides) It does not matter what the outcome is. If they balance the bets for and against perfectly, there is no risk. They generally try to balance their liability but having preferred winner can increase profits with some additional risk. If people place bets on the other side more, bookmakers move the odds to balance the bets from both sides. At some point the odds can be skewed so much that professional better can make money even after the bookmaker takes his margin. That money is taken from other betters. But if the bookmaker is not fully balanced it can come from the bookmakers pocket.
- Maledictus 7y ago
  Thank you.

deepnotderp 7y ago

Total aum of all rentech funds is something like 110 billion and they've still managed to keep good returns on it.

luc4sdreyer 7y ago

> They can make 30-70% yearly return with low volatility. Can you source this? If it was that easy to get a consistent 50% return then why aren't more people doing it?