MBP

@macrocephalopod @AgustinLebron3 @FundamentEdge This is an exact description of Millennium’s business (at least their business 7-10 years ago). Fundamental managers provide the signal for the central book.

I would say that the dominant approach in multi-managers now is “quantamental” especially in equities (not so much in fixed income or macro). Center books, alpha capture (external and internal), factor and sector hedging overlays, replication. Far from having failed, it became so ubiquitous that we don’t notice it any more. I think people thought that “quantamental” would mean fundamental managers using lots of quant inputs but in fact it turned out to be much more profitable for fundamental managers to be inputs into a quant investing process.

I was an early intellectual convert to the concept of quantamental investing: blending the best of fundamental & quantitative investing. It just struck me as an obvious concept Blend what fundamental investors do well: > Forward-looking judgment under uncertainty > Underwriting cash flows in situations where data doesn't yet exist (new product cycles, regulatory inflections, management changes, new categories) > Finding the qualitative gap between consensus narrative and operational reality > Building relationships with people who are close to source fundamentals: management, customers, suppliers & competitors > Understanding expectations & positioning With what quantitative investors do well: > Signal breadth, systematically ranking 5,000 securities > Systematic arbitrage of human behavioral anomalies that create consistent & recurring alpha pools > Statistical rigor and compounding of small signals > Systematic sizing, portfolio construction & risk management > Systematically blending & ingesting data into the investment process TLDR, fundamental is strong on depth & judgment, quant is strong on breadth & discipline. Shouldn't 1+1 = 3? They also fail in opposite directions, which is in theory excellent for Sharpe ratio, leverage capacity the orthogonalization and ROE potential for larger shops. Well, it didn't work out that way. Much of the hedge fund complex, including the Tiger Cubs & multi-managers, in the 2010s attempted quant overlay strategies. Some persist (mostly replication or quant center book), but not at nearly the scale, performance or impact that many (including myself) once believed. The reasons are mostly banal: culture clash & mutual distrust, factor crowding, overfitting, and unwillingness to stick with variance on a new strategy (see 2018-2020 quant winter). It's just too easy to pull the plug when P&L goes red (in fact, often, LPs will expect it...). Over the years, with a front row seat to this trend since 2008, I became very "quanty" as a stock picker & PM, and I attribute much of the success I did have as a stock picker to these approaches: screening with multi-factor models, heavy & early user of alt data approaches, detailed factor dashboards, etc. Even before LLMs, I would push investors to become more "quanty" in their investment approach. I'm not sure how many referrals I've made to Empirical Research Partners over the years (best research shop on street for this, along with Adam Park from Trivariate). I even built this concept out into curriculum in our Fundamental Edge Factor Academy. Quant overlay didn't make up for bad stock picking, but it could help you keep it on the rails and pick up small alpha here and there. I was laying out my thesis on the future of fundamental investing last week to a quant at a client, and he said "Brett, isn't this just the next version of quantamental?" I thought for a minute and I said "yeah, you're right". There are all sorts of efficiency pickups from AI. "Push a button models" are on their way. Data work will be accelerated massively. A well-trained analyst will be able to understand a business with incredible rigor at a fraction of the time. These efficiency pickups are great, and likely alone won't shift the curve of alpha pools. The juicier opportunity, in my opinion, is the unlock that agents afford in becoming bionic, and with MUCH less friction blending quantitative & fundamental processes. Back testing your sector, your approach, correlating KPIs with data updated in real time, searching for NLP signals in transcripts, surfacing your hit rate on this "trade type", steering you towards the probabilistically "steep part of the return curve", monitoring crowding & unwind risk and proactively hedging, monitoring macro risk & proactively hedging, monitoring every relevant data point (structured & unstructured) on every KPI that could impact the stocks in your portfolio, in an automated 24/7/365 approach. If you think through all of these possibilities that agents afford, you can see a situation where investment process becomes much more efficient AND investment judgment becomes much deeper, more disciplined and systematic with support of the agentic exoskeleton. What's interesting to me is that many of these uplifts could do something for fundamental investing for the first time: make it scale. I *always* struggled to have a view on more than 15-20 names at any given time. Which was why I was very good in concentrated firms and not so good when I had to run 80+ stock portfolios. That may be different now. Maximizing agents, could I have strong comprehension on 60 names now? 80 names? 100 names? I'm not sure. But could, for the first time, a small group of fundamental investors overlay human alpha into a quantamental book of 300-500 names? Could, finally, 1+1= 3? This is a philosophical rant, obviously. But as I sit here I am very interested to see what the next 3-5 years holds for firms who embrace agents in the investment process. Will we see smaller teams scale massive books? Will we see the resurgence of quantamental strategies, and will they work this time?

@DurableCreators Dialysis providers: Davita and Fresenius have 70-80% market share.

Been working on creating a table of (mostly US-based) monopolies, duopolies, and oligopolies. Not everything is a perfect fit but wanted to create something to start tracking these sorts of companies. Any suggestions on stuff to add/remove/change etc? Nothing is set in stone.

@glukianoff One more deep cut: The Elevator Drops. Tremendous first album

@glukianoff Also The Three O’clock

What bands do you think were so talented they should have been a lot bigger than they actually ended up being? I will start. Veruca Salt.

@JacobAShell Maine, in general. Northern Maine in particular.

Is anyplace in America quiet? In the city it's nothing but wailing sirens and loud music from the next apartment. In the suburbs it's nothing but dogs barking and lawnmowers roaring. In the countryside it's gunshots and woodchippers. Is noplace quiet?

@asymmetricinfo 10-15 years of being squeezed by PBMs on reimbursement. No coincidence that the only one semi-surviving (CVS) bought a PBM 15 years ago.

Why is the drugstore business model failing?

@mattyglesias Ellsworth(?) isn’t very rural for Maine. That said, I found tahini in Greenville this summer.

@Tyler_A_Harper PWM is great. BGR is good as well.

Except in Maine. The Portland airport is a national treasure. And by national treasure I mean security is nice and fast and there’s a store with good magazines and a place to get good beer.

@jessesingal Jellyfish - Spilt Milk

What is an album you think is brilliant but that got criminally little acclaim or attention? Bonus points if it's by a band that suffers/ed a similar fate.

@LongShortHC @jimbovelure Those shops are alpha machines but the pods themselves are not. their competitive advantage is not the pod structure or PM selection, it's risk managment, speed of execution, and quantiative modelling. the pods come and go, with avg turnover of 40%.

@jimbovelure Now do Citadel, Millenium and Point 72 on a gross (pre-fee) beta-adjusted and sharpe ratio basis. These shops are alpha machines, unequivocally.

Had a DM question asking for advice for a brand new analyst working at a pod shop. Noodled on it, and figured I would share the thoughts broadly in case helpful. I am far from the most tenured and successful pod PM - spent 4 years as a PM at combo of D.E. Shaw (not a pod)…

@ZReitano Meant Greenstone

All drugs are not created equal. Greenstone Pfizer is now Ro’s exclusive provider of sildenafil and generic viagra. Couldn’t be more excited to offer patients access to the highest quality medication and unrivaled levels of transparency. medium.com/ro-co/all-drug…

@ZReitano @vishalgulati_ What makes you think the Greenhouse generic is better than any others?

@vishalgulati_ Many quality players and want to enable patients to show how much quality matters to them (which they haven’t been able to) will lead to greater competition, transparency, and quality.

@chrissyfarr Simple - reserves.

I have a dumb question... Why does Devoted need to raise that much for a new MA insurance business? ($300 million) Curious if anyone has theories. twitter.com/DB_Sweeney/sta…

@Valuetrap13 Also, WBA needs more volume in pharmacy and can’t figure out how to get it without cutting price. This was my biggest problem w the co and stock. CVS willing to cut deals on PBM side to get more pharmacy volume. CVS been a big share gainer vs WBA.

@Valuetrap13 Pessina super successful in EU but doesn’t have answers (yet) on how to fix US biz.

@Valuetrap13 2 big issues: Will front comps ever recover from AMZN and dollar stores? And, never ending margin pressures on RX biz from PBM/payors. Margins still higher than CVS in pharmacy with lots of room to contract

@jayparkinson @SherpaaHealth Really? I thought HRA/HSA funds couldn't be used for subscription services, per IRS regs. maybe I mis-understood. I honestly thought $HQY told me this.

@jayparkinson Can @SherpaaHealth customers pay thru HSA and HRA?

@jayparkinson Agree with your point. But many folks are conditioned to use HRA or HSA funds, so innovators would want to be reimbursable thru these accounts, "qualified medical expense"...thoughts?