I caught a little bit of Julian Robertson last evening, and found his comments to be similar to the ones Leon Cooperman made four weeks ago to CNBC (Robertson actually made some comments about Cooperman as well, wishing him well).
When the bubble (caused by low interest rates) bursts, people are going to get hurt. … It’s the most difficult time I’ve ever seen in the [hedge fund] business. There are people squeezing shorts, and they’re making a business of it. Furthermore, I don’t really quite know how quants work, but I think they have a way of squeezing shorts … At any rate, I think it’s tougher to be a hedge fund investor than ever before. Hedge funds don’t normally outperform the market, except when the markets go down.
My guesses on his thoughts on quants:
- There were a lot more quants in 2000 and beyond, than back when Robertson was running outside money in the 80s and 90s. Probably 100x more.
- Robertson rode a big bull market from 1980-2000
- He was great at picking shorts and picking longs, based on studying fundamentals and management–it can be hard to do even one of those well. Harder to succeed when the high frequency shops (subset of the quants) are front running good pickers
- Regulations, like FD, were not in effect yet (not that Robertson was a cheater)
Quants rely on identifying and trading out inefficiencies. So do stock pickers. Which group relies more on the other? Me thinks the pendulum does swing, and it swings for thee.
Robertson, like Cooperman, makes me feel less old. From a friend who recently had dinner with him a couple years ago, I understand he’s a classic southern gentleman.
ADDENDUM: Just saw this brief explainer on quant strategies over at Marginal Revolution.