#3. Revenge of the Fallen is the best Transformers movie but to be clear that is a bar so underground that it says nothing good about RotF

[velvetvexations]

don't get shot by a sniper your takes are good

It's okay, my epitaphs is going to just be a list of my hottest takes.

[faneliacosplay]

Top 10 of 2018

C2018 was a year is this nicest way I can sum it up. My precious fur-baby passed away after fighting a horrible illness and is in a happier place, my health went crazy (still is as of writing), and I finally broke free from an abusive toxic person who had been controlling me for a huge chunk of my life. Despite the bad things that happened, I want to focus on the good things of 2018. One of things I began doing in January of 2018 was at the end of every week, I would write down all of the good things that happened to me, be it sewing, watched a good movie, spending time with a friend, etc. So without further ado, here’s my Top 10 of 2018! (I CAN’T BELIEVE IT’S ALREADY MARCH!!)

1. The Ancient Magus’ Bride

-      I’ve been a lifelong fan of Beauty and the Beast-like stories ever since I watched the classic Disney film. The manga kept popping up in my recommendations for the majority of 2017 and I remember seeing a poster at my local theater for a premiere showing of the first 3 episodes of the then-upcoming anime (I have since regretted not going to this showing). I finally caved and bought the first two volumes of the manga and literally went back to the store two days later and bought the next 2 volumes. I’ve always been a very picky person with my romance be it movie, novel, anime, manga, etc., but this quickly became one of my favorites with it’s excellent world-building, relationships, and don’t even get me started on how gorgeous the animation is! If you want an excellent Beauty & the Beast adaptation, you won’t be disappointed. (I am unashamed of crying happy tears in public while watching the final episode)

2. Satoshi Kon’s Filmography

-      My New Year’s resolution was to watch all of the late Satoshi Kon’s works, starting with his debut film Perfect Blue. I had wanted to watch this film for several years, and it did not disappoint. (I kept spamming for people to go and see it when it got a theatrical re-release in Fall 2018) Next was Kon’s final project Paprika, which I watched about 3 times in May and many times over 2018 and still notice something new every time I watch it. Finally, I watched *the* film that I have wanted to watch for many, many years (since 2004 to be exact): Millennium Actress. I was not prepared for how moving this film would be with its themes of the past vs. present, how an ordinary encounter can lead to something so much more, and lastly: love transcends time. If you could only watch one of Satoshi Kon’s works, please choose to watch Millennium Actress. Unfortunately, I wasn’t able to watch Kon’s other two works, but I aim to in 2019 (along with reading his works)

3. Slayers

-      I watched some of Slayers back in middle school and in summer 2016, but never took off with it until in 2018. I knew I would like this funny series about the adventures of a fiery sorceress, dumb as a stump swordsman, optimistic hero-in-training, and an overly-serious chimera, but I had no idea it would become one of my top 10 favorite anime series! I haven’t laughed so much with an anime in a while, and I greatly appreciated it since my fur-baby passed away and this was one of the last anime we watched together. There’s just something about 90s fantasy anime that’s just so appealing. I will throw in that while I love the tv series, the films are worth watching too, with The Motion Picture being my favorite. If you need something to cheer you up, I highly recommend Slayers!

4. Venom

-      Confession: I did not have high hopes for this movie. I was the only one among my friends who was uninterested in this film whenever we would watch the trailers/promos/etc. Eventually after this movie came out, my friends and best friend convinced me to see it. My sociology buddy told me “This movie wasn’t marketed right! Go see it!!” and another told me “This is the best action rom-com of 2018.” The next day my family asked me if I wanted to see it and Bohemian Rhapsody (also an excellent film) and I said “Sure!” This film has since spawned never-ending jokes between me and my best friend. (I ended up making her a Venom scarf for Christmas!) If you’re trying to get someone to see this film, don’t show them the trailers depicting it as a dark, gritty, action thriller, show them the home video trailer depicting it as a rom-com because that’s exactly what it is. I still can’t believe that a movie about a human falling in love with a man-eating gooey alien is real.

5. The Shape of Water

-      “2017 will be remembered as the year men screwed up so badly, women started dating fish.”- Jimmy Kimmel, 2018 Oscars. I’m beginning to see a pattern for stories of humans falling in love with monsters. My mom and I wanted to see this film after the trailer dropped in summer 2017 and were disappointed when the film didn’t play here. However, sometime in February 2018, this film played in our town for one weekend, so we dashed to the theater. I don’t even know where to start with how beautiful this film is and since several people I know still haven’t watched it I’ll just state this: Please watch this film. It earned the 4 Oscars it won. (It earned all 10 it was nominated for!)

6. Spider-Man: Into the Spider-verse

-      I almost didn’t see this film. 2018 was a pretty hectic year for me and I didn’t really keep up with films/entertainment news, so I saw no trailers for this film (except for a really short tv ad). All I knew was what my best friend had said: “Brianna, let’s go see Spider-verse. In 3D.” (y’all, 2018 was the year of listening to my best friend) It was so nice not only to see a different Spider-Man, a diverse cast, a well-curated soundtrack, and a completely new style of animation that makes you feel as though you’re reading/watching a comic book??? Sign me up! I’m so happy this film won the Oscar!!

7. Macross Frontier Movies

-      I’ve fallen deep into the Macross hole in the past year or two and have no plans of crawling out. The 2008 series Macross Frontier was my first and favorite entry in the series so far. I knew that there were two recap/alternate retelling films made, so when I was free one day I watched them and I was really surprised that I enjoyed them more than the tv series!? I haven’t really mentioned this, but my big problem with the tv series of Frontier was it’s ending being not too good. I don’t want to ruin it since Macross (particularly made after 2001) is a bit unknown in the USA, but I will say that if you want to get into this franchise, start with the Frontier movies or with the iconic Macross: Do you remember love? film. The music is just as good as the tv series, same with the costumes, and the writing is much better! The performance of Northern Cross at the climax of The Wings of Goodbye was really moving. Not “Do you remember love?” moving, but pretty close.

8. Sailor Moon Theatrical Double-Feature

-      Everyone who knows me knows that I’ve loved Sailor Moon for pretty much all of my life (ever since the 3rd & 4th seasons aired on Toonami back in the day!) A holiday tradition for me was to watch the 2nd theatrical every Christmas Eve, unfortunately my two VHS tapes finally gave out in 2016. Thanks to Viz Media, this past summer saw theatrical re-releases of all 3 Sailor Moon films. Shockingly, my local theater was showing the films subbed so my mom and I bought our tickets right away. It was so surreal seeing these films that I grew up with on the big screen, and I know non-Sailor Moon fans won’t get this, but hearing/watching the whole “Moon Revenge” sequence in the theater was so intense. This part never got to me as a kid for some weird reason and I had no idea I was crying until my mom pointed it out at the end of the film. With the 2nd film, seeing Luna transform into a human was emotionally moving as always, just 10 times more since it was on the big screen with that nice surround sound system. That night when I got home, I didn’t get any sleep since I still couldn’t believe that this happened. The now 20+ years old Sailor Moon movies got released for the first time in USA theaters. This is an experience I’m going to remember for the rest of my life.

9. Cardcaptor Sakura: Clear Card Arc

-      I was so excited when a sequel to Cardcaptor Sakura was announced. Like Sailor Moon, I watched this series as the heavily-edited Cardcaptors on Toonami. When I got older and learned that there was more anime out there besides the ones I saw on TV, I went back and watched Cardcaptor Sakura to get the whole, magical story and even read the manga, which I believe is the greatest children’s manga ever made. I loved every single moment of the new series and felt as though I were watching another episode of the classic series. The only thing that felt different was that the animation is no longer hand-drawn. (it’s still good) When you reboot or make a sequel to a series be it tv, film, or book, sometimes it’ll miss the charm that made it so enjoyable in the first place. Clear Card thankfully still carries the charm its predecessor had.

10. Little Witch Academia

-      I had started this anime around holiday 2017 but didn’t finish it until early 2018. This was one of the most optimistic series I’d ever had the pleasure of watching. I don’t want to compare the two, but the inspirational message that Kiki’s Delivery Service gave me when I was 10, was the exact inspirational message you will find in Little Witch Academia. (and that I needed to hear as a 20-year-old) I was starting to get a bit depressed and losing confidence in myself with my science grades getting lower no matter what I tried, as well as other things in my personal life. After dropping Science, I had a long wait between classes, so I decided to start watching Little Witch Academia again. Seeing our protagonist Akko trying her best at flying a broom and failing was me with my science grades, but her determination to get her broom just a few centimeters off the ground was so inspiring to watch. After this I watched the other Studio Trigger works I had yet to see, and while they’re all good in their own way, none of them have left the imprint LWA left on me. Sometimes when I get frustrated or lack confidence in myself, I tell myself Shiny Chariot’s words of wisdom that motivated Akko throughout the series: “Never forget your beautiful dreams. Believing is your magic!!”

[geek-gem]

Transformers The Last Knight

So I got the tags dealt with and before this I was waiting around to get the wait I think it was a DVD I played I just looked at the movie its a Blu Ray and DVD and digital edition.

Just looked inside the cover yeah Blu Ray.

Yet well my thoughts on the film, I copied this from my DeviantArt journal. Prepare for my thoughts on this yet it's not so detailed.

Edit went to the last post I made by mistake forgot to say played some Transformers Devastation before seeing the film I'm replaying the story beat Devastator and just wanted to share that. Basically waited to grab the movie and then I watched the film.

At last after all this time I've finally seen the film. I didn't go see it in the theater because I stopped giving money to the Bayformers. Now we have Bumblebee and I absolutely adore that film I've seen it twice, felt like seeing it a third time because a article I shared on Tumblr revealed stuff that made me think today, "I need to watch The Last Knight and probably see Bumblebee again for a third time" whatever shit.

To be honest about all kinds of stuff. Seeing Bumblebee a 2nd time got me to be a Transformers fan again despite I kept calling myself a ex fan.

Also for this movie I was already thinking I'm gonna hate it and say this is worse then Age Of Extinction.

Seeing the film now.......I watched it on my PS4.

Honestly you may hate me for my opinions. Especially I'm gonna be a little dramatic.

..........that was honestly fun.

Let be honest and don't wanna lie I thought a stupid negative thought saying I hate it. Yet during my watching of the movie.

Let me say it's an absolute mess of a film.....it is absolutely messy.....my God especially I wanna make this clear. I don't want anymore Bayformers ever again.

Yet okay yeah I felt happy.

I'll be honest I laughed a lot....mainly towards the humor.....and I was basically having fun.....Jesus those trailers just......that feels like false advertising in some ways. Or not really because......

Wanna say in a weird way this would be a nice climax for the Bayformers but I'm not gonna spoil anything.

I think I'm happy I finally saw it and I had a nice time actually. Because I'm not angry because I had a nice time.

But I will say it was long. Yet I had fun.....

Even though with well people have talked about this their is a mid credits scene spoiling that surprise. Not gonna say what it is.

I'm glad this is the last Bayformers because we now have Bumblebee. Which is a amazing film. Yet I seriously had fun and I wasn't upset.

Even though I feel like I spoke with my money and others not seeing it probably.....

It was fun while it lasted. Basically so I mainly enjoyed myself watching this.

You know been thinking about maybe making a list and think I'll add Bumblebee to the list of live action films.

What are my favorites in ranking counting Bumblebee even if it's a reboot.

1: Bumblebee.

2: Transformers 2007.

3: Transformers Dark Of The Moon.

4: Transformers The Last Knight.

5: Transformers Revenge Of The Fallen.

6: Transformers Age Of Extinction.

.......that's shocking yet I was really wondering should I add The Last Knight there at that ranking?

Anyway so yeah......gonna say during the beginning had to rewind a because my mom's sister brought my toddler niece to say goodnight and kissed her on the forehead basically cute shit and it's weird watching Blu Ray on PS4. Also had subtitles in case.

Well yeah I don't want anymore Bayformers seems like that's happening. Because wow what a way to go out and this wasn't supposed to be the last film. Maybe it's some what for the best or just imagine if.....just I'm glad with Bumblebee being successful were gonna get better films.

Yet I honestly had fun and was well invested in quite some stuff or just a fun time.

Alright hopefully in this rebooted universe we get another big film.

[gjfjgfj]

Best Surround Sound Movies

📷

Best Surround Sound Movies In truth, why shouldn’t we be? If you are a cinephile, then there may be a high chance that you already have a hefty, pinnacle-notch domestic cinema theatre or surround sound setup at domestic (in case you haven’t but, we’re sure you’ve got been strongly thinking about it!). But are you positive your surround sound system is “the quality” out there? Well, in case you’re not, we propose testing it with the Best Surround Sound Movies on the market.

Primarily, the concept of surround sound systems is used in movie theatres and is now being widely included into domestic cinema systems. Frankly speakme, it doesn’t count number whether you’re a sucker for suitable sound satisfactory or you adore an excellent film — surround sound films and surround sound systems in a domestic cinema device can virtually trade the game extensively.

Now, what precisely is surround sound? To sum it up in a few phrases, surround sound systems refer to sound that appears to be coming from all round you — it is as if it surrounds you, just like the time period suggestions at. Usually, whilst you watch films or listen to tune via speakers, you will know in which precisely the audio system are situated. However, with surround sound structures, it’s miles as if you are engulfed by way of the sound around you — as if the motion inside the movie is truly taking region for your surroundings.

Now that we’ve cleared the air on what surround sound and surround sound structures are, it’s time to dive deep into the nice surround sound films.

Table of Contents  How to Test a Surround Sound System 1. The Bombing Raid Scene from Unbroken (Year of Premier: 2014) 2. The Opening Scene (Chapter 1) from Baby Driver (Year of Premier: 2017) three. The Ferry Scene from Spider-Man: Homecoming (Year of Premier: 2017) four. WALL-E Gets Thrown Into Space From WALL-E (Year of Premier: 2008) 5. Chapter 7 From Star Wars: The Force Awakens (Year of Premier: 2009) Best Blu Ray Movies for Surround Sound 1. The Dark Knight (Year of Premier: 2008) 2. Casino Royale (Year of Premier: 2006) three. Bohemian Rhapsody (Year of Premier: 2018) 4. Black Panther (Year of Premier: 2018) five. Avatar (Year of Premier: 2009) Best Dolby Atmos Movies to Test Surround Sound Setup 1. The Avengers: Infinity War (Year of Premier: 2018) 2. La La Land (Year of Premier: 2016) three. Saving Private Ryan (Year of Premier: 1998) 4. Mad Max: Fury Road (Year of Premier: 2015) 5. Inception (Year of Premier: 2010) Best Surround Sound Movies on Netflix 1. Godzilla vs Kong (Year of Premier: 2021) 2. Wonder Woman 1984 (Year of Premier: 2020) three. Interstellar (Year of Premier: 2014) 4. Swiss Army Man (Year of Premier: 2016) 5. Bird Box (Year of Premier: 2018) Does Netflix Have 7.1 Surround Sound? Surround Sound Movies With Best Sound Mixing 1. Transformers: Revenge of the Fallen (Year of Premier: 2009) 2. Gravity (Year of Premier: 2013) 3. American Sniper (Year of Premier: 2014) 4. Pacific Rim (Year of Premier: 2013) 5. TRON: Legacy (Year of Premier: 2012) Surround Sound Movies With Best Sound Editing 1. Jurassic Park (Year of Premier: 1993) 2. Fight Club (Year of Premier: 1999) three. Star Trek: Into Darkness (Year of Premier: 2013) four. Oblivion (Year of Premier: 2013) 5. Master and Commander: The Far Side of the World (Year of Premier: 2003) Conclusion How to Test a Surround Sound System In our opinion, there’s no better manner to test your surround sound setup than watching some of the satisfactory acknowledged film scenes which have been regularly used by audiophiles and cinephiles all throughout the globe. Even the excellent surround sound structures on the market want checking out.

While maximum folks recognise the way to set up a surround sound gadget, we regularly get stuck with regards to testing the surround sound structures’ sound great and features.

Therefore, it doesn’t matter whether or not you have got a 5.1 or a 7.1 surround sound machine, or possibly you have a Dolby Atmos surround sound device, the most fool-evidence and simple manner of checking out your surround sound machine out is via gambling a number of the subsequent scenes from films:

1. The Bombing Raid Scene from Unbroken (Year of Premier: 2014) The Bombing Raid Scene from Unbroken (Year of Premier: 2014) This particular scene from Unbroken is one which you sincerely must watch, so as to check your surround sound audio system. In reality, you could even listen the propellers as though they have been rotating right above you. Our crew of experts felt as if they were simply there, in struggle, with their hearts skipping a beat whenever the enemy’s weapons swerved beyond them

2. The Opening Scene (Chapter 1) from Baby Driver (Year of Premier: 2017) The Opening Scene (Chapter 1) from Baby Driver (Year of Premier: 2017) This beginning scene from Baby Driver greets you with a humming, ringing noise which truely sounds like it’s hitting you from each path, in particular while you are using your surround sound system. This scene rolls in with the enduring John Spencer Blues Explosion music, titled ‘ Bellbottoms’. If you have got heard this song before, then you definitely are completely aware about how precise it’s far. And with a surround sound domestic cinema device? You are going to need to look at the scene on loop!

Three. The Ferry Scene from Spider-Man: Homecoming (Year of Premier: 2017) The Ferry Scene from Spider-man: Homecoming (Year of Premier: 2017) Calling all Marvel fans available! We all recognise that Marvel movies are packed with action and super history ratings and surround sound. The ferry scene from Spider-Man: Homecoming entails the movement-packed face-off among Spider-Man and the Vulture is actually going to make you understand the great sound effects in this film.

Four. WALL-E Gets Thrown Into Space From WALL-E (Year of Premier: 2008) WALL-E Gets Thrown Into Space From WALL-E (Year of Premier: 2008) WALL-E is honestly, a cinematic masterpiece. With very little verbal verbal exchange inside the first half of the film, this animated space movie is based closely on its soundtrack and sound outcomes. This specific scene from WALL-E, however, is easily one of the first-class scenes to test your surround sound device. In reality, even though it is a fictional, lively movie, it’s miles safe to say that it’s far without problems one of the best space films obtainable!

With this scene, particularly, you must attempt watching it together with your eyes closed. WALL-E is thrown into area, whilst his buddy Eve, comes speeding right at the back of him. With the bolts, jerks and clicks of WALL-E’s robot motion, and the gentle spraying of the extinguisher he propels into space on, this scene is one of the best ones to check ambient sounds.

5. Chapter 7 From Star Wars: The Force Awakens (Year of Premier: 2009) Chapter 7 From Star Wars: The Force Awakens (Year of Premier: 2009) When you believe you studied of area and sci-fi as well as movies that are not simplest a visible treat but also an audio deal with, one of the first movies that involves mind is none other than the space film Star Wars: The Force Awakens. This unique scene from Star Wars sounds outstanding.

While there are a honest amount of loud noises in this movie, this precise scene, however, proves which you don’t want loud noises that allows you to definitely appreciate and phone a movie one of the suitable surround sound films. In this scene from Star Wars, Rey’s man or woman is brought in whole silence. Since it’s a area and sci-fi movie, there’s quite a piece of swaying and swooshing you could hear, as Rey senses the exchange in ecosystem of the planet she known as domestic.

You May Also Like: 12 Best Running Headphones in 2021

Best Blu Ray Movies for Surround Sound They say that your home cinema equipment and surround sound machine is simplest considered ‘excellent’ if the movie you’re watching is, which, to be honest, we do accept as true with. To make the maximum from your surround sound system, you have got to look at a film which no longer simplest sounds astounding but is likewise an audio deal with. Here are a number of the first-class Blu Ray films to observe to your surround sound device, with perfect audio engineering:

1. The Dark Knight (Year of Premier: 2008)  The Dark Knight (Year of Premier: 2008) The Dark Knight is certainly a conventional, and we’re certain that anybody who considers themselves to be a hardcore audiophile will agree. Right from the opening scene, this film sets the bar, mainly with all the on display movement. It is truely one of the best Blu Ray films obtainable. As a matter of fact, the Joker’s crazed, deranged and psychotic laughter also leaves a specific sort of impact, when you pay attention it to your surround sound setup. The audio engineering of The Dark Knight’s heritage rating is clearly one to amaze.

2. Casino Royale (Year of Premier: 2006) Casino Royale (Year of Premier: 2006) Let us begin by using saying the history rating and soundtrack of Casino Royale is certainly awesome. With the best sound results hitting you from all the right locations, this movie is a need to watch in your surround sound setup. You will even experience the blow of every punch, inside the oh-so-famous preventing scene. This movie has sound consequences showcasing pinpoint accuracy.

Three. Bohemian Rhapsody (Year of Premier: 2018) Bohemian Rhapsody (Year of Premier: 2018) We all recognise how nicely Bohemian Rhapsody did whilst it were given launched all of the manner again in 2018. With an outstanding sense of song and sound, this film will sound like an audiophile’s heaven, specifically with a strong effective system and the distorted guitar riffs. The finale of this movie is what’s going to simply get you in awe of the audio masterpiece that Bohemian Rhapsody is.

Four. Black Panther (Year of Premier: 2018) Black Panther (Year of Premier: 2018) Another terrific film which released in 2018, and some other one in every of Marvel’s lovely creations, is Black Panther. Although it has a one of a kind take on the whole superhero genre of films, it additionally sticks genuine to it. With a whole lot of on display screen movement, brilliant sound engineering and brilliant ambient sounds, Black Panther goes to be a satisfaction to watch when you have your Dolby Atmos connected up (or every other surround sound machine for your property cinema system, for that depend).

Five. Avatar (Year of Premier: 2009) Avatar (Year of Premier: 2009) Avatar is the holy grail in relation to 3D cinema. After all, it was one of the most costly films made, and did take quite a chunk of attempt. But, certain enough, the efforts didn’t visit waste. Not simplest is it a pretty visually attractive movie, however it’s also music to the ears — literally! The sound fashion designer of Avatar didn’t fail to impress our specialists with the high-quality audio engineering and sound mixing. With a huge surround impact, this film will fill your entire room with the maximum sensitive sounds, however additionally gained’t omit out at the action sequences which consist of the gadget gun fireplace.

Best Dolby Atmos Movies to Test Surround Sound Setup Dolby Atmos is a well-known call within the surround sound world. It has dominated each business cinema setups in addition to domestic cinema setups. Here are a number of the exceptional Dolby Atmos movies to check surround sound setup:

1. The Avengers: Infinity War (Year of Premier: 2018) The Avengers: Infinity War (Year of Premier: 2018) That’s right — but any other Marvel movie that tops our list of the good surround sound movies to look at to check your house cinema system. With loud noises, hovering song and exceptional sound consequences modifying, this film marks the beginning of the very last conflict with Thanos. The Dolby Atmos soundtrack is remarkably super, specially with surround channels .

2. La La Land (Year of Premier: 2016) La La Land (Year of Premier: 2016) La La Land reminds you of the proper essence of Hollywood. Right from the hole scene to the quit, it has some of the fine and funniest moments, which your property cinema gadget will assist you’re making the most of. Ryan Gosling and Emma Stone actually stole the show with this movie. Kudos to the sound designer of La La Land due to the fact the movie soundtrack is virtually an audio deal with, in particular on the Dolby Atmos!

Three. Saving Private Ryan (Year of Premier: 1998) Saving Private Ryan (Year of Premier: 1998) Best movies to watch with surround sound Directed by way of none other than the widely recognized Steven Spielberg, this movie is certainly on our listing of a number of the quality films with a compelling sense of sound. With multiple factor clean photographs, device gun fireplace and iconic bullet time sequences, Saving Private Ryan will sound superb together with your Dolby Atmos.

Four. Mad Max: Fury Road (Year of Premier: 2015) Mad Max: Fury Road (Year of Premier: 2015) If you need to actually revel in and respect the splendor of surround sound and a extremely good surround sound device, one of the first-rate films to look at with surround sound, of route, is Mad Max: Fury Road. Right from the opening scene, this film has a lot to provide. Having said that, however, there are chances that your surround channels may not totally choose up the sound consequences — at the least, that is what our team of professionals observed when checking out this movie out on a lower surround sound system.

Nonetheless, with Mad Max: Fury Road’s hovering track and soundtrack filled with electronic beats, it’s far no marvel that the movie has gained no longer best the Best Sound Editing award, however at the side of that, Mad Max: Fury Road was also the recipient of the Best Sound Mixing Award. Both of those awards were given at the 2016 Academy Award. Needless to say, Mad Max: Fury Road is a movie you have got were given to watch.

5. Inception (Year of Premier: 2010)  Inception (Year of Premier: 2010) Christopher Nolan is understood for his difficult, notion-upsetting and properly-plotted storylines. Along with a touch of outstanding and unique sound engineering, Inception is a have to-watch for all of the house cinema gadget proprietors out there, particularly when you have the Dolby Atmos. As a rely of reality, we have been intrigued to learn that the sound effects used on this Nolan advent were copied and used in diverse different movies.

Inception is every other academy award-prevailing film. Just like Mad Max: Fury Road, it has received the Best Sound Editing award, as well as the Best Sound Mixing award. Along with these awards, Inception additionally received the Best Sound award on the British Academy of Film and Television Arts. But that’s not the stop of it — this Chritopher Nolan masterpiece also obtained the Sound Effect award on the Motion Picture Sound Editors.

Best Surround Sound Movies on Netflix You can locate a number of the excellent films to check surround sound on Netflix. Here’s a short listing you may explore:

1. Godzilla vs Kong (Year of Premier: 2021) Godzilla vs Kong (Year of Premier: 2021) None folks are new to the world of Godzilla and that of King Kong. With the preceding films of these two beasts being hits all around the global, you may expect the equal from Godzilla vs Kong too. You are going to sense their wrath and pay attention their roars on your entire room. Don’t bounce out of your seat if you pay attention a low growl from your rear speakers! Even with all the panic, screaming and squealing in the crowd scenes, the sound engineering has been made to such perfection that you only awareness on what’s critical — Godzilla and Kong.

2. Wonder Woman 1984 (Year of Premier: 2020) Wonder Woman 1984 (Year of Premier: 2020) Wonder Woman 1984 is but another movie that showcases pin factor accuracy, particularly in terms of its audio engineering and sound layout. The first scene is both an audio & visible deal with, and it will get you hooked to the film nearly right away. With a variety of gadget gun fireplace, factor clean photographs and quite a few crowd scenes, your entire room is going to be packed with Wonder Woman’s awesome powers. It is one of the exceptional films to expose off your surround speakers and surround channels.

3. Interstellar (Year of Premier: 2014) Interstellar (Year of Premier: 2014) Yet some other iconic space movie to feature to our list of the first-rate movies to look at with surround sound of direction, Interstellar. While this film turned into a touch confusing to some (in reality, we suppose it is safe to mention that this film confused every body in some unspecified time in the future or the opposite), there may be no denying the truth that it has were given a number of the first-class sound outcomes and the nice sound editing there’s.

With a sturdy consciousness on ambient sounds as well, Interstellar surely units the ecosystem. Right from the opening scene to the ultimate scene, this movie is an audio deal with, especially with the gap surroundings having a alternatively large and arresting presence!

Four. Swiss Army Man (Year of Premier: 2016) Swiss Army Man (Year of Premier: 2016) For all the Daniel Radcliffe fans obtainable, this film is for you. This movie is full of some of the best and funniest moments that you could make the maximum out of the use of the Dolby Atmos, or every other surround sound home cinema device for that matter. There is no point denying the amazing sound modifying in this movie — our crew of specialists changed into totally in awe! Swiss Army Man is in reality a movie you’ve got got to watch yourself, if you want to truely appreciate it.

Five. Bird Box (Year of Premier: 2018) Bird Box (Year of Premier: 2018)  Netflix Original Bird Box is a sci-fi film with a massive sprint of horror in it. It revolves around a mother, portrayed by the proficient Sandra Bullock, who fights for survival, whilst rescuing her children, in opposition to something this is taking the lives of many, many others. From the group of humans that live on, they realize that the only manner to live alive is to blindfold themselves and not glance at anything it’s far this is killing everyone else. Now, with everybody being blindfolded, you could understand the importance of counting on first rate and precise sound results.

Does Netflix Have 7.1 Surround Sound? While Netflix presents surround sound within the settings of 3.1, five.1 and 7.1, not all the movies and suggests on Netflix help a number of these settings. You won’t be aware of this, however within the past, although Netflix should provide a massive variety of movies and video fine settings, they have been no longer capable of cater to desirable first-class audio. Later on, with the introduction of five.1 Dolby Digital Plus, Netflix took it on board. Yet, having said that, no longer all of the shows and movies on Netflix are enabled to guide these surround sound settings.

So, how are you meant to understand if the movie you are watching has 7.1 surround sound? Well, a lot to our unhappiness, there is no list on Netflix that helps you to understand which movies or shows have surround sound to be had. However, as consistent with the assist web page on Netflix, any movie or television display which has surround sound enabled could have the Dolby Digital icon sitting proper next to its name while you look for it.

Surround Sound Movies With Best Sound Mixing Check out these surround sound films with nice sound blending to test your new surround sound machine:

1. Transformers: Revenge of the Fallen (Year of Premier: 2009) Transformers: Revenge of the Fallen (Year of Premier: 2009) Whether you were a fan of the entire Transformers franchise or no longer, you will ought to admit that Transformers: Revenge of the Fallen is one of the first-rate surround sound movies with the first-rate sound blending. Your whole room could be full of soaring track and a honest amount of electronic beats while you watch this film to your new domestic cinema tools. With the huge and arresting presence of the robots, which are pretty often immersed in excessive on display screen motion scenes, it’s far safe to mention that those strong transformers want nothing much less than a potent effective surround sound machine!

2. Gravity (Year of Premier: 2013) Gravity (Year of Premier: 2013) It would be in reality insane to no longer list 3-time Oscar winning Gravity as one of the fine surround sound films with the first-class sound blending. It is but some other amazing, thought-scary area movie that just receives you hooked to the screen. With a lovely play of soft and loud noises, Gravity honestly is aware of a way to hold you down (pun intended? Definitely!). With particular sound effect and outstanding sound blending, Gravity is one of the few films that honestly and in reality steals the show.

Three. American Sniper (Year of Premier: 2014) American Sniper (Year of Premier: 2014) Under the route of none apart from Clint Eastwood, American Sniper is a film with some of the first-rate sound blending there may be. After all, it has won the Best Sounding Editing and the Best Sound Mixing nomination at the Academy Awards. No doubt that this film goes to sound past amazing for your Dolby Atmos!

Four. Pacific Rim (Year of Premier: 2013) Pacific Rim (Year of Premier: 2013) Pacific Rim reminded us strongly of the whole Transformers franchise. Nonetheless, Pacific Rim is a exceedingly enjoyable film, and is actually a sight for the eyes, and it’s far alternatively clear of the tremendous quantity of attempt that has gone into the production and direction of the movie. Much to our surprise, we located out the Jager cockpit turned into in fact an real set — there was no need of CGI in creating it! And in case you idea the visible appeal of Pacific Rim became mind blowing, wait till you listen the movie’s sound consequences. Absolutely incredible.

Five. TRON: Legacy (Year of Premier: 2012) TRON: Legacy (Year of Premier: 2012) The sound dressmaker of TRON: Legacy virtually took their process very, very seriously. The film isn’t always most effective clearly fun to look at, however the sound results are tremendous too. Our professionals strongly trust that it’s far one of the high-quality surround sound actions with the best sound mixing. TRON: Legacy has big sound consequences, showcasing pinpoint accuracy. The movie additionally has a extremely good history score, which we have been hooked to. All in all, this movie is a have to-watch, especially if you want to show off your house cinema machine!

Surround Sound Movies With Best Sound Editing These films incorporate the best surround sound editing. Check them to check your surround sound setup:

1. Jurassic Park (Year of Premier: 1993) Jurassic Park (Year of Premier: 1993)  To begin with, we think it’s far simplest honest if we start out by means of pronouncing that Jurassic Park has a phenomenal heritage score. Add to it some of the maximum brilliant sound edits and sound consequences, and bam! Jurassic Park proves to be an iconic audio masterpiece, even these days. It is a movie with a fair proportion of each audio & visual drama, which wishes no creation nor description.

2. Fight Club (Year of Premier: 1999) Fight Club (Year of Premier: 1999) Even nowadays, Fight Club stays to be a cinematic piece of artwork. With pretty a piece of twists (especially inside the plot!) and turns, the sound of this movie hits you from all angles — pretty actually! With multiple Fight Club scenes, soaring music, a whole lot of on screen movement and plenty of, many punches, your entire room is going to be packed with the sounds of loud noises and coffee blows. Although we assume that once watching the movie as soon as, it loses its element of surprise, it nevertheless remains a movie we will pass lower back to time and time once more.

Three. Star Trek: Into Darkness (Year of Premier: 2013) Star Trek: Into Darkness (Year of Premier: 2013) ow should we have a listing of the excellent surround sound movies with the pleasant sound modifying and leave out Star Trek? This iconic sci-fi film doesn’t want any introduction — that’s simply as plenty records as we are going to give you on Star Trek! You have got to watch it for its sound outcomes, for its pinnacle-notch modifying and its brilliant experience of path.

4. Oblivion (Year of Premier: 2013) Oblivion (Year of Premier: 2013) Tom Cruise starrer Oblivion is a film with a exquisite historical past rating and film soundtrack. While we were looking ahead to a little greater out of this film, we ought to admit that it is a film with the intention to have you admiring your cinema system every time you watch it. There is not any denying the fact that it’s far quite a visually appealing film, but along with that, the sound outcomes are spectacular too.

Five. Master and Commander: The Far Side of the World (Year of Premier: 2003) Master and Commander: The Far Side of the World (Year of Premier: 2003 When it involves discussing sound effects, Master and Commander: The Far Side of the World needs to be a part of the dialogue. With unique sound results, we accept as true with that this movie has mastered surround sound, particularly with the pinnacle-notch audio engineering and sound effects editing. Your complete room goes to experience like the ocean, and you’re without a doubt going to listen the waves crash towards your rear audio system.

Conclusion And there you cross! Here is our comprehensive and absolutely designated guide at the first-rate surround sound films which you want to check out. For a surround sound film to be taken into consideration ‘suitable’, it need to have wonderful audio engineering as well as extraordinary sound enhancing and sound mixing. Of route, if you want to certainly make the most of an amazing surround sound movie, you need to make sure that your house cinema system and surround audio system stay as much as the standards!

If you’ve got any questions, doubts or queries, feel loose to drop a remark in our comments segment beneath, and our specialists gets returned to you with an answer in no time. If there are any merchandise you have got in mind that you would really like for us to review and examine, do write to us.

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Revenge of the Humans: How Discretionary Managers Can Crush Systematics

This is the entirety of a three part series that was originally published byIntegrity Research and titled The Great Quant Makeover - Part 1: How Discretionary Managers Can Cope with the New Systematic Realities, Part 2:The Rise of the Quants and How Some Successful Discretionary Managers are Responding, Part 3: Revenge of the Humans or How Discretionary Managers Can Crush Systematics

Six months ago I found myself in our Estimize office sitting across the table from a hedge fund portfolio manager who said something I honestly couldn’t believe. According to this PM who runs a $500M long/short book at a large multi-manager fund, he was taking a data science course at night, after work. He told me, “if I don’t learn how to do quantitative analysis I’m not going to have a job in two years.”

A second said the same thing to me a week later.

Two weeks after that I received an email from the “school” providing that very course, inquiring if I could teach a data science class, specifically for finance, to 25 members of a hedge fund who had contracted them.

These are just a few anecdotes among many in the absolutely massive transformation taking place right now within the discretionary institutional management industry. Discretionary managers have woken up, and are now scrambling to understand what’s taking place and how they must change in relation to it. Many will not survive the shift. Others will take advantage and be better off for it.

This piece takes a deep dive into the following themes and how institutional managers can begin to effectively redirect themselves:

Investors have woken up to the asymmetric risk they were taking on with active discretionary mutual funds, hedge funds and RIAs who were basically playing with beta instead of generating alpha. Now they are pulling their money.

Asset flows are moving into “passive” ETF strategies and will continue to move further into smart beta ETF strategies, long only active management is headed to the grave.

Hedge fund assets are flowing out of discretionary and into quantitative systematic strategies which have produced far more consistent alpha. They also blow-up less often.

Most classic systematic alpha strategies are based on price; volume and fundamentals have been arbitraged out and are now betas. This has precipitated a race to build new alphas with new data sets.

Discretionary managers are scurrying to incorporate new data sets, but lack the understanding of how to analyze their efficacy and more importantly, how to incorporate them into their discretionary trading processes.

If discretionary managers remain disciplined and execute their rubric faithfully, they can crush systematic quants, but they must solve the religion vs. science question first.

The organizational structure of discretionary management teams along with the type of people they hire is broken and outdated for today’s challenges. Changes are starting to take place, but all too slowly for many players to survive.

Building the right infrastructure will remain pertinent to surviving this shift. Both quant and discretionary firms must hire teams that include engineers, product managers and quants to suss out new data sets.

On June 20th, Estimize will be hosting the L2Q (Learn to Quant) Conference, a one day seminar designed for discretionary institutional PMs, analysts, and traders who know they need to move quickly and efficiently towards building quantitative processes. Segments will be taught by preeminent buy side, sell side, and unique data experts with vast quantitative investment experience at Two Sigma, PDT Partners, WorldQuant, Wolfe Research, Deutsche Bank, and others.

But before that, let’s take a deeper dive into the topics above, and why we felt a whole conference was necessary to explore them.

1. Getting Paid For Playing With Beta Is Over

Looking back, it’s hard to understand why anyone was willing to give most discretionary fund managers money in the first place. The truth is, most PMs were simply playing with beta, whether it be momentum, mean reversion, value, growth, sector or market cap. Managers were leveraging these far more often than they were actually generating alpha. Now we can all argue over whether correctly timing the use of betas is in itself alpha, but that argument is made moot by the fact that the vast majority of PMs were unsuccessful at this in the long run and eventually blew up.

The greatest trick the industry ever pulled was making LPs believe that they could consistently leverage beta and not get caught with their hand in the cookie jar, giving up years of returns in a matter of months. Over and over, fund managers took their “two and twenty” to the bank in the years they happened to be on the right side of that equation. Then they blew up. Instead of fighting back to their hurdle, they just closed shop and opened up a new one, somehow convincing investors to play the same asymmetric game of risk once again. Heads I win, tails I take a vacation for a year and someone gives me another coin to flip later.

Don’t get me wrong, there are managers who have proven track records of not blowing up while playing with beta, and some even generate true alpha, but they are few and far between. Good luck picking the correct fund manager.

Why did it take the market so long to wake up? We can start with the great answers you’ll hear from friends of mine like wealth manager, Josh Brown. He fully understands the social and egotistical aspect of being invested in these funds, not because it’s the rational thing to do, but because of the accompanying prestige. The same can be said for managing your own personal portfolio; it’s something to talk about at a cocktail party. And while it seems our current political climate echoes the movie Idiocracy, financial market education and investor behavior have actually taken a huge leap forward since the ‘08 crash. I find it interesting that retail investors actually got smart before pension funds, pulling money from active managers, closing their brokerage accounts, and investing in passive low cost ETF strategies.

As for the tens of thousands of small RIAs, why would I give them my money either if I can buy a smart beta ETF for 20bps that does basically the same thing they were for 100bps? You’re gonna tell me that all those mom and pop RIAs managing $40M are executing those smart beta strategies as efficiently and accurately as iShares? Please. It’s only a matter of time before Betterment or some other robo-advisor allows its clients to algorithmically allocate a portion of their portfolio to these strategies. Heck, I wouldn’t be surprised if one of them also provided the ability to use simple, proven, market timing overlays in order to rotate in and out or long and short certain smart beta strategies.

Hedge fund PMs have to realize that even though they are in last car on this disruption train, the conductor is coming to clip their ticket as well. They will either evolve or die, like any other industry disrupted by better efficiency. I think it’s obvious that there will be far fewer of them as most will not successfully shift to generating alpha.

2. All Investing Is Active, Even The Passive Kind

Let’s clear something up, there’s no such thing as “passive investing”. The words we use matter because they form the basis for how we think about things and the actions we take. The developed western world is ripping itself apart over an inability to win a “war on terrorism” because, for propaganda purposes, we decided to say we were fighting a war on a military tactic (you didn’t have to study war theory in school like me to know you can’t win a war against a tactic).

All investing is active, even the decision of how to weight an index, what goes into that index, and how to allocate your capital amongst different asset classes. Just because the computer keeps your allocation levels static does not mean you’ve abdicated responsibility for investment decisions. This is why I’m such a big fan of smart beta, because it does away with the ignorant notion that you can avoid making a decision on beta to begin with. We all have to, so we might as well make that decision in an informed and active way.

In any event, we’re going to continue to see massive flows of capital out of “active” long only mutual fund and long/short hedge fund strategies and into these. The question on everyone’s mind is, how will this affect the market? My best guess is that we’re not going to see the downside of massive systemic risks some are warning about when everyone is indexing. The latter part of 2016 and beginning of 2017 prove that even with all the indexed money, correlations can still drop quickly when macro factors evolve. After the 2016 election, cross-asset correlations that have existed for the past decade began to break down as pictured in the charts below.

Exhibit 1: Cross-asset correlations have fallen sharply

3. Assets Are Flowing From Discretionary to Systematic

You don’t have to look too deeply to see this massive trend in strategy allocations playing out. WorldQuant LLC, with its growing team of over 600 employees, including more than 120 PhDs and 275 researchers, has been managing systematic investment strategies for Millennium Management since 2007. At Point72 (SAC) we’ve seen Cubist outpace the discretionary side of the firm by a wide margin with now over 40 systematic PMs. Balyasny has quickly shifted focus and is building a stable of systematic managers to effectively do something with their huge AUM growth. Other multi-manager platforms like Schonfeld, Paloma, AHL, Engineer’s Gate and GSA have added significant assets. Paul Tudor Jones is attempting to remake his firm by hiring a bunch of systematic managers, and others are following suit. And let’s not even get started with the continued dominance of firms like Renaissance, AQR and Two Sigma, where you probably can’t even give them your money if you tried.

I would say that the nerds are the new kings of Wall Street (Midtown), but frankly they (myself included) would cringe at that statement given their propensity to run in very different circles than the rest of the money manager crowd. This group is mostly made up of unassuming nerdy PhD types that you would probably take for accountants on the subway. They have serious mathematical and scientific training and have usually honed their craft on other data sets before coming to the financial world.

The fact of the matter is that there’s simply more efficacy to what these managers are doing than the vast majority of the discretionary trading world, and they’ve (mostly) put up the numbers to prove it. And I’m not just talking about returns, these groups are producing real alpha. Their strategies are meticulously backtested in and out of sample before going live, and are scaled up over time. Many discretionary managers launch a book with $500M in play from day one, I can count on one hand the number of systematic funds that have done that in the past 5 years.

And while some systematic funds don’t perform well, you’ll be hard pressed to find any massive blow ups akin to what’s regularly seen on the discretionary side. Pension funds can certainly deal with paying 2 and 20 if they have more confidence that their returns from year 1 through 3 aren’t going to all disappear in year

The flow of capital from discretionary to systematic strategies is going to continue, as it should. That will have its own repercussions, which we’re already starting to see.

4. Quants Dig For New Alpha

A 2012 tell-all book from a former Goldman Sachs trader revealed how the Great Vampire Squid often endearingly referred to their unsophisticated clients at “muppets.” While they rightfully got skewered for that comparison, they were certainly onto something when their trading desks would remark internally that they were basically taking candy from babies.

However, many of the muppets are gone now and that’s left far less alpha in the market to capture. Relative value and statistical arbitrage strategies are about capturing asset mispricings associated with the irrational behavioral aspects of fear and greed. This isn’t going to change any time soon, the muppets aren’t coming back, they’ve wised up. Less alpha overall will lead to a drop in the number of hedge funds and the amount of hedge fund assets that can generate enough alpha to command high fees.

It truly is amazing to watch a data set go from being an alpha to a beta over time. I’ve seen the sell side analyst estimates data set owned by Thomson Reuters IBES travel this path over the past 15 years. Yes, there will always be alpha available to be arbitraged which is associated with the irrational behavior of humans in markets, but most alpha generated by systematic traders is associated with an informational advantage.

About five years ago many of the classic stat-arb strategies stopped working due to an influx of competitors. There simply wasn’t enough alpha to go around. This precipitated the smartest firms to search for new data sets with predictive power, or reflexivity. Fast-forward a few years and an all out arms race is now under way.

I love to use the example of the company that is selling data captured from new car insurance registrations. They get this data daily, and it’s incredibly accurate at calling new car sales. So instead of waiting until the end of the quarter to find out how many vehicles GM sold, you can basically get a running count of growth on a daily basis. Obviously that’s going to give you an advantage in trading those auto names, that is until everyone else is using that data. At that point, the data set goes from providing alpha you can capture, to a data set that you must be looking at in order to avoid an informational disadvantage. In a sense, it becomes beta.

So the arms race is in full swing, and there is now a serious lack of qualified talent to analyze all of these different data sets and incorporate them into the existing multi-factor models. While the quantitative research process into the efficacy of a data set hasn’t changed much, firms are struggling to build a process around the testing pipeline. The most efficient firms like WorldQuant have been able to take advantage of that competency to move quickly and decisively to incorporate new alphas.

This brings me to my last point about the systematic testing process. In the next section of this article, I’m going to heavily malign the discretionary buy side for being fairly clueless about how to undertake this entire process. The truth is, even most (but not all) systematic quants suffer from a severe lack of creativity and original thought when it comes to generating hypotheses around how to take advantage of a given data set. From our experience working with discretionary firms at Estimize, they are two steps even further behind the quants as it relates to incorporating new data sets.

Let’s just go back to the car sales example for a second. Would you know exactly how to take advantage of that data to run an event study and generate alpha? Probably not. You’d likely want to talk with someone who’s been trading autos for 10+ years to get their take on what they think moves auto stocks and how having a good projection of sales would impact those names. A good quantitative research process requires an ex-ante hypothesis for some level of causation and not just correlation. We need to know roughly why something works, not just that it works, or else we won’t know why it stops working, and as history has proven, everything stops working at some point.

Being able to hand over an easily testable clean data set, and a bunch of original thoughts about how to generate alpha is imperative for data firms to succeed at this process.

5. Quantamental, Systamental, Factor Aware…Call It What You Want

The rise of the systematic quants and their use of these new data sets also had an impact on the poor returns of the discretionary world over recent years. First, the HFT guys killed the day traders making it impossible to pick up pennies. Next, the stat-arb guys crushed the swing traders playing in the couple of hours to one week timeframe. Were they the primary factor of poor discretionary returns? Probably not, but significant none of the less.

A few years ago the first big discretionary firms started making attempts to hire data scientists and acquire new data sources. They’ve mostly failed to integrate any of this into an actual investment process. Then about 6-9 months ago another chunk of the more forward thinking discretionary firms gave in to the realization that they needed to make big changes. It’s not as if discretionary PMs weren’t using data driven statistical approaches to gain an edge, or that none of them had quants on the desk to help, they were just very few and far between.

You may have seen Paul Tudor Jones almost publicly berating his organization in a strange showing of frustration from such a legendary investor. Steve Cohen has been very public about his attempt to shift Point72 in the data driven direction, even commenting that it’s incredibly hard to find good talent these days (we’ll get to this in a minute). The guys who have been successful in this game historically see the writing on the wall. Hell, even the first episode of season two for the show Billions features main character Bobby “Axe” Axelrod giving his team the condensed 3 minute version of this piece, albeit in a much louder tone. So whomever the producers of that show are talking to, this whole thing has seeped into the mainstream buy-side consciousness now.

The shift that needs to happen is similar to the way players were drafted in Michael Lewis’ book, “Moneyball”. Consider how hard the scouts fought against being replaced by algorithms that were far more accurate than they were, and even in the face of all this evidence, refusing to change. Then consider how much money was on the line in baseball, and the astronomically larger amount on the line in our world. You would think that would precipitate a much quicker shift, but in fact, it will only mean a slower one due to the fear of change when dealing with so much money.

As quants, we are taught how to go through the research process to validate the efficacy of a data set or tool. Everything is derived from this process, and there isn’t too much leeway, it is designed as good science. Yes, as mentioned above, you still need a level of creativity in order to do good research. However, discretionary managers don’t even have the framework for understanding how to do that research, or incorporate new things into their decision making process. This is the largest hurdle to making the shift, and I believe less than 20% of managers will clear it.

This shift isn’t just about using new data sets, like Estimize, or the car sales example, it’s about fundamentally buying into the notion that PMs need to be making investment decisions based on putting the odds in their favor by looking at statistics, and not just being gunslingers or bottoms up value guys. That’s an affront to their entire way of doing things, just as it was for the baseball scouts.

6. Algorithms + Human Experience = Optimal Trading

A passage from Michael Lewis’ latest book, “The Undoing Project,” speaks so directly to the issue discretionary firms face today. Lewis writes about a specific behavioral experiment performed on a set of first year residents and accomplished oncologists. In the experiment, the scientists asked the accomplished doctors to tell them how they make a decision regarding whether a patient has cancer from looking at an x-ray. The doctors all tended to give the scientists a 10 point checklist with a 1-10 rating for each of the 10 points, add up the points and you can accurately determine whether it’s cancer or benign. The scientists proceed to give a set of x-rays (the outcomes of which are known only to them) to the doctors and the residents, asking them to determine whether each is cancer or not. They also give the doctor’s checklist to the residents to use.

I think you can guess what happens next. The oncologists who supplied the rubric in the first place show almost zero ability above random to accurately determine whether the x-ray was cancer or not. They didn’t follow their own rubric, suffered from an astounding amount of representative heuristic, and failed to do their job well. Meanwhile, the first year residents were able to score far higher accuracy rates on average and therefore would have been able to help their patients. They were simply acting as the human measurement component of an algorithm.

Similarly, most discretionary PMs would likely supply a rubric for how they make decisions, but when it comes down to it, they don’t actually adhere to it. No set of new data or analytical tools thrown into the “mosaic of information” that the PM is supposed to be paying attention to will matter unless they are disciplined enough to remove their ego from the equation and reduce themselves to being a human algorithm.

There’s an inevitable question that arises from the above, what’s the point of the human PM if we’re going to ask humans to basically be algorithms? Why not just run a fully systematic strategy and remove the human all together after the quantitative research process is complete? Could a first year analyst and some good portfolio construction software more faithfully execute the signals than a PM with 20 years of experience? Science would seem to say yes. That said, there’s obviously a more optimal scenario where that 20 years of experience alongside the discipline to execute the rubric faithfully results in better outcomes due to the ability to see regime changes in the market, something quantitative strategies built on linear analysis have a hard time doing.

It’s my belief that good quantamental / systamental / factor-aware PMs can crush the systematic quants if they are disciplined. Systematic strategies are designed to make small bets across a lot of names using half a dozen or more different signals that each have a weighting in the stock selection and exposure model. A lot of them hit for singles, consistently. But that also means that when a really fat pitch comes down the plate based on all the data, they can’t swing for the fences. This is the advantage of discretionary managers. With the right discipline, they can take a big cut with a 7% position in their book when all the data lines up, and reap the rewards of the hard work.

While it’s been a tough run of it recently, there are reasons to believe this is a great time to enter the market with a solid quantitative approach to discretionary trading. The chart below shows that while there may be many secular headwinds for the discretionary investing world, the cyclical nature of this industry is extremely strong, and we’re certainly at the deepest part of the trough regarding performance, with only one direction to go.

7. There’s Plenty of Talent, You’re Just Hiring the Wrong People

The last part of this puzzle is obviously the people. And here’s the sad truth: the way that discretionary hedge funds have staffed themselves historically is almost criminal (there were actually some real criminals in there too!).

Picture the normal funnel to becoming a PM running a $500M long/short equity book. You grew up in a wealthy family in a wealthy town, usually in the New York metropolitan area, parts of Silicon Valley, Chicago or Michigan. You went to Harvard, Yale or Princeton. You took an IB analyst position at Goldman or another bulge bracket. You spent a few years there learning how to build a financial model before a hedge fund picked you up for an analyst spot. You made friends with your PM, who if you were lucky did well, and 5 years later when the firm had more capital than it knew what to do with, your PM told the firm to give you $200M to play with.

At no point in this process did you ever have to exhibit a lick of skill for the job that you’ve just been given. Yes, you are probably a very smart individual, and you worked hard, but we all know that smart does not equal good in the investment world. Every step along the way you were selected not for the trait which would make you the best qualified to do that job, you were selected because you jumped through the hoops which lead to the correct selection bias. The sad truth is that hedge funds are run by white dudes who grew up in Greenwich, and they like (and trust) working with white dudes who grew up in Greenwich and look like them.

And look, this isn’t some idealistic push for equality bullshit comment, it’s about results. If you are hiring these people exclusively, you are not selecting for skill and you will not be able to make the shift to a more data driven quantitative approach, I guarantee it. If I were starting a fund from scratch, I’d rather have a more racially, socioeconomically diverse group of kids from schools other than the Ivy’s than those from Yale who studied political science.

And don’t get me started on the lack of women running money. Every single study ever done says that they are more successful than men due to a range of behavioral and psychological factors. Yet firms tend to overlook women for PM positions due to their inability to play the game that gets them the capital allocation. And of course, we come back to the fact that the entire industry is designed to hire for people that look like the people who are currently in charge.

Firms need to start incorporating measurement of variables pre hiring that actually correlate to success as a PM. They need to start selecting for skill, not just smarts. Our Forcerank platform is beginning to be used for this purpose, and I expect others will pop up over time. I also expect some kind of psychometric testing firm to be created soon which has done the research to identify certain skills and traits that correspond to success in different strategies. You don’t want the same kind of people running momentum models as the ones running deep value.

There isn’t a lack of talent, you just need to look in the right places and be willing to elevate people who might not look, talk, or act like you.

8. Building the Right Team

The other major personnel issue we’re seeing firms grapple with is the question of how to structure their teams to incorporate the quantitative research and data science capability. Some approaches have been successful, and others have failed.

Each firm, whether quant or discretionary, is going to need a centralized infrastructure that is capable of imbibing a new data set and making it available across the firm. Many systematic multi-manager funds, and large centralized managers are already setting up data teams to search for, ingest, clean, and quickly analyze new data sets to test for alpha in their multi-factor models. The heads of these teams are getting paid big dollars, upwards of $2M a year to run this process that feeds the heart of the machine - and there aren’t many good ones out there. The imbalance of supply and demand for this position is causing some funds to make poor hiring decisions in order to simply get someone in the door. The role itself is incredibly multidisciplinary in nature and requires a strong understanding of the quantitative research process, a decent technical background, the ability to travel across the globe to conferences meeting with hundreds of potential vendors, sniffing out what’s real from what’s bullshit, determining what startups will be around tomorrow and which won’t, and then haggling over price. Please tell me which previous role prepares you for all of that?

The firms that don’t hire well here are going to fall behind and see their returns suffer as data sets more quickly than ever move from being alphas to betas as they get arbed. This doesn’t happen overnight, it takes years for alpha to get arbitraged from a data set, but many won’t have as much capacity as those previously, along with a larger stable of systematic managers, things will speed up.

The centralized infrastructure and data acquisition team is going to also house engineers, a product manager, and optimally a quant who can do basic descriptive work on a data set to determine whether it’s clean and reliable enough to have PMs use.

And that’s where the centralized team should end.

Each PM or “pod” should then have a quant, an engineer or two, and a data analyst placed on their desk directly. Here’s why. Each PM is going to be trading different names, and have a need to access different sets of information. Fighting over centralized quantitative research capacity with other pods is a disaster. And then receiving some kind of report that doesn’t fit into your actual process is useless. Each PM is going to have a different checklist or rubric with different signals. And the key is the data analyst, they need to have a deep understanding of the industries the PM is trading so that they can work in coordination with the PM and the quant to build a process that can be effectively utilized. I’ve seen people in this role who also have some coding experience so that they can rapidly prototype stuff for the quant before the centralized team goes out and does the job in a production-ready way. The quant, of course, will be testing different data sets for efficacy, and handing them over to the engineers to build factor models.

A quantitative approach and a commitment to data science by firms is not a thing you do in some other room. The only way this is going to work is if you build cross functional teams on the PM’s desk and support them with a data and infrastructure team at the top.

How Far Down the Rabbit Hole?

So if you’re a PM, do you need to take that data science class at night? Yes, but not for the reason you think. PMs aren’t going to be writing python code and working in R to do quantitative research, that’s not their job. But in order to effectively communicate and run their teams they are going to have to understand all the pieces to the process. And most of all, if they aren’t educated as to how all of this works, how are they ever going to trust the data and signals coming out of the process when the time comes to make buy and sell decisions?

On June 20th the L2Q conference hosted by Estimize is going to give discretionary PMs, analysts, and traders a one day overview of the different pieces they need to get up to speed on in order to effectively build and run their teams. The goal of the conference is not to have everyone walking away knowing everything, it’s meant as a jumping off point, to give a sense of perspective for where managers need to go next, and we’ll have the vendors there that can help them take the next steps to getting educated. We’ll also have a number of heavily vetted data vendors which can fit into this process and add alpha generating signals, including our own Estimize and Forcerank data sets.

Hope to see you there!And if you are interested in discovering more alpha using the Estimize data set, please contact us today!

[dstevensartgallery]

Dave’s Brain Farts; At the 'Costa' My Sanity

Hello internet, and welcome to another one of Dave's Brainfarts. This is where I talk about all things comics, games, toys, movies, and general nerdery.

Considering the subject of my last few rants on here, it should be abundantly clear by now that I really do not like the literary works of Mike Costa.

I'd never even heard of the guy up until 2009, when it was announced that he would be the lead writer on the new Transformers ongoing series, after the 'All Hail Megatron' series. All I knew about him, going into Transformers 2009, was that he had previously worked on IDW's G.I. Joe series, which had gotten pretty positive feedback.

And boy was Transformers 2009 a let down, lemme tell ya...

The series was dead on arrival, though most of the initial flack was targeted towards Don Figueroa, who had done the art for the series, Costa was just as much to blame for many of TF 2009's problems. Most of the complaints towards Don were about his design choice for the Transformers, mainly that he had taken on an aesthetic closer to the Michael Bay movies. They weren't bad designs, but I think what ticked fans off about them were mostly the facial designs of the characters, and the fact that this was shortly after the release of Transformers; Revenge of the Fallen, which was still leaving a bad taste in people's mouths.

But I'm not here to talk about Don Figueroa, I'm here to talk about the guy who's name I made into a terrible pun in the title.

Apart from the art, the other failing point of Transformers 2009, or as it was known at the time, Transformers Ongoing, was the writing, the complete lack of direction, lack of character, and lack of effort.

Let's summarize the events of Ongoing;

Arc 1; Humans are hunting down the Autobots after the events of All Hail Megatron. Ironhide is killed by humans. Hot Rod is being angsty. Optimus is being a whiny bitch and steps down as Leader. Bumblebee is made Autobot leader. The humans and autobots form an alliance.

Arc 2; The Autobots go to war with North Korea... no, seriously.

Oh, and there's a one shot where Spike murders a Decepticon.

Arc 3; Americans are mad that the Autobots are working with humans and use knockoff mind controlling Megatron guns to try and kill them. 

Arc 4; Autobots leave earth to fight Galvatron on Cybertron.

Considering I could summarize most of those arcs in one sentence tells you just how much depth there was in them. Out of the 30 or so issues that went into Ongoing, only TWO ever got more than 3 stars, these two issues are considered the best of the series and are character studies of Optimus Prime and Megatron, which brings up both of their personal histories in the IDW G1 continuity, except Mike Costa did not write these issues, James Roberts did.

From what I was able to gleam from Costa's run of Transformers, I found his writing to be really lacking, he had an inability to properly portray characters or even give people character, the story kept flip flopping all over the place. Things just happened without explanation, Optimus quitting over the death of Ironhide was one such dumb move, Hot Rod partnering with Swindle was another dumb move, and then there was the whole 'International Incident' arc (the aforementioned Autobots vs North Korea story).

His writing is lazy, his characters bland, he tries to set up big plot twists that always fall flat, his stories are riddled with inconsistencies and plot holes, and that's not even the worst of it.

I can tolerate bad writing, most of the time, but what really set me off about Mike Costa was the fallout after Ongoing.

With how badly received the series was by fans, how did Costa respond to the fact that people didn't like his Transformers comic?

By blaming the readers, and blaming the source material.

I can't find the interview in its entirety, but the summarize, Costa first blamed Transformers fans by basically saying, 'they don't know what they want'. He also followed up by saying he didn't know how to make a series about giant robots who turn into cars and trucks interesting or realistic.

Um, Mike, I don't know if you've noticed this but... YOU ARE A WRITER! IT IS YOUR JOB TO MAKE THE STORY INTERESTING!

If you didn't think you could do it, why did you even do it at all?

Suffice it to say, while I'm willing to, sometimes, tolerate bad writing, I have no tolerance for a writer who cannot own up to their shortcomings, or accept the fact that people don't like their work,  and I have no tolerance for a writer who will act like a whiny little pissant who blames his shortcomings on his audience and the source material.

So why am I talking about Costa again, despite having no respect for the guy or anything he writes?

That is because, not only did he write the single most hated Transformers series of the 2000's, he had to go and get his filthy mitts on Venom as well.

Now, like most kids of the 90's, my initial exposure to Venom was through the Spider-man TV series. I knew who Venom was, but I was never really into him at the time, he was just a dark Spider-man, I didn't even know who Eddie Brock was, and to be honest, I didn't care, Eddie didn't interest me, the Venom symbiote did.

I wouldn't learn more about Eddie and Venom until the cinematic trainwreck that was Sam Raimi's Spider-man 3. And all I got from that movie was that Eddie was just a scumbag reporter, who got his comeuppance for being a scumbag reporter, and couldn't accept the fact that he was a scumbag and wanted revenge on Spidey for ruining his life because he's a scumbag.

I actually wouldn't get into Venom comics until I was in college, when I picked up on the Agent Venom run of the comics, usually referred to as 'Venom Volume 2'. I orignally got into this series because I had been reading X-23 comics, which had been cancelled, but I had heard through the internet that Laura would be making an appearance in Venom (this was coming up on the Circle of Four crossover featuring Agent Venom, X-23, Red Hulk, and Ghost Rider). I didn't  want to just pick up some issues without first, maybe, getting a taste of this new Venom run, because I wanted to see what made Flash Thompson different from Eddie Brock.

And to be honest, I liked Flash more as Venom than I did Eddie. I could identify with Flash, I could sympathize with Flash. Rick Remender and later Cullen Bunn told a very compelling story for the former high school bully turned super soldier.

This run of Venom also introduced one of my favorite Marvel characters, Andrea 'Andi' Benton, aka Mania.

Things kinda went south for Flash though after the series was cancelled after 40 plus issues. He was a minor character in the Marvel NOW run of Thunderbolts, before leaving the team, and then was picked up by Brian Michael Bendis and added to the cast of Guardians of the Galaxy... where Flash was completely under utilized, got an upgrade when Bendis retconned the Planet of the Symbiotes story, and turned Flash and Venom into an 'agent of the cosmos'. This started Flash's next solo series, which unfortunately only lasted 13 issues, Venom Space Knight.

While there were some things I liked about Space Knight, it really wasn't as good as Venom volume 2, plus it really did feel like Robbie Thompson, the writer of Space Knight, wasn't able to do a whole lot with the character while Bendis had more control over him in Guardians... despite not using him at all half the time. Bendis had basically written Thompson into a corner.

Space Knight did see the return of Flash's sidekick Mania near the end of the serie, however, she would only return for the finale before the series ended with Flash returning to Earth, and Agent Venom and Mania swinging off into the night declaring 'Long Live Venom, Long Live Mania'.

This is where Costa went and ruined everything, as he always does.

When Marvel announced there would be a new Venom series in 2016 with a new host for the symbiote, me and other Flash fans were skeptical. After an ending like Space Knights, which had Flash and the Venom symbiote as partners and friends, and the declaration of 'Long Live Venom', why were we getting a story where the two would separate? What was going to change in Flash's relationship with Venom that would make Venom choose a new host? The incentive into Venom volume 3, was that this was an all new bad Venom, there would be 'no more Lethal Protector', and 'no more Agent of the Cosmos'. Despite it being announced that the host would not be Flash Thompson, or Eddie Brock, all incentive covers used the Eddie Brock design of Venom. 

Translation; Costa was saying ‘My Venom is better than yours’.

So I picked up the first issue, wondering just what could have caused Flash and Venom to separate, and... we didn't get an explanation, at the start of the series, Venom is already separated from Flash, having inexplicably devolved into a Gollum like gremlin thing and attacking a hobo.

Weak...

The book then introduced the new host for Venom, Lee Price.

Lee Price is, without a doubt, one of the most hated Venom hosts since Mac Gargan, his character is non-existent, his design looks like it was ripped from a Final Fantasy game, and the big selling point about him is that he can 'mentally overpower a symbiote'. How does he do this? By physically abusing the Venom symbiote and beating it with a chair. And what was Lee's big plans for the Venom symbiote? Use it to take over Black Cat's criminal empire, but try not to go too big and risk getting the attention of groups like the Avengers.

To say initial reactions to Lee Price and Mike Costa's first few issues were negative would be an understatement. These issues were reviled.

Costa did manage to do one thing with Lee Price though, he managed to get Eddie Brock fans and Flash Thompson fans to stop fighting each other and unite over how terrible of a character Lee Price is.

We see Lee Price's character is once again a mixture of Costa's lack or originality and laziness. Lee is like Flash Thompson in that he is a former soldier and war amputee (Flash Thompson having lost his legs in Iraq while Lee Price lost all the fingers on one of his hands), Lee is like Mac Gargan in that he is a criminal (because he couldn't get disability benefits for MISSING HIS FINGERS), and his Venom form is basically just a ripoff of Eddie Brock, except it's pointier and, for whatever reason, has bright white knuckles.

The extent of Lee's character, is that he's edgey, and that's it.

Well, that's not it entirely. During the crossover event, Venom Inc, a psych profile of Lee was posted on Marvel's website, which does further detail Lee's backstory and character and mentality.

Except you wouldn't get ANY of this just from reading Mike Costa's run of HIS OWN CHARACTER, because Costa has proven inept at character writing.

Should be noted the psych profile of Lee Price wasn't even written by Costa either.

Weak...

Venom, at its core, is a character driven narrative, it is about the relationship and struggles between the host and the symbiote, and if you cannot get readers to identify with the characters, or get the readers interested in the character, then that narrative falls flat.

In the span of six issues, Costa manages to destroy any development the symbiote had over the course of Venom volume 2, degrading it into a gollum like creature because Lee is able to 'corrupt' it. Despite Venom trying to maintain Flash's heroic influences, Lee is apparently able to mentally overpower the symbiote's influence, and any time the symbiote resists him, he abuses it.

About six issues in, we had the 150th issue of Venom, which celebrated the return of Eddie Brock as the host for Venom, having beaten Lee Price and taken the symbiote from him.

That's when I noticed a change in the Venom fandom, because up to this point, everyone hated the Costa run so far, no one liked Lee Price, they wanted him gone, and now, finally, that wish had been granted, and now Eddie was back in the suit. Basically, Costa had managed to gain the support of Eddie Brock fans in one issue.

To be honest, Eddie coming back and bonding with the symbiote again made little to no sense to me. I had done research on Eddie's comic history, since all I knew about him was from Spider-man 3, and the few bit appearances he had during Venom volume 2. But from what I had gathered, after separating with Venom the first time, Eddie hated symbiote, fanatically hated them. When he became Anti-Venom, and had the ability to 'cure' super powers, this only bolstered his hatred for symbiotes and that he was the cure for them. He fought Flash Thompson once during the Spider-Island event and almost killed him, before Flash fought back by making the Venom symbiote latch onto Eddie, and how did Eddie respond to this?

By screaming "NO! NOT AGAIN!"

Eddie would later return in volume 2 when he decides to go on an anti-symbiote crusade, where he goes around hunting down other symbiote hosts and murdering them, until he's captured by crime master and forcefully bonded to the Toxin symbiote.

Once again, he hated the experience.

Eddie would soon become an Agent Venom knockoff in the Carnage comics where he would wind up killing the Toxin symbiote, except not really, kinda, I don't even know what happened there. But, to put it plainly, Eddie pretty much has hated every symbiote bonding experience since Anti-Venom.

So to have Eddie randomly come back and bond with Venom again, makes absolutely no sense, even more so the fact that this time, instead of treating the need for the symbiote like a drug addiction, as most writers have done in the past, Costa has Eddie and Venom as lovers...ew...

You do remember the parts where he called Venom a demon, tried to destroy the symbiote as Anti-Venom, and went on a symbiote murdering crusade right? Did Costa even read or research any of Eddie's previous canon before deciding to do this, because I really don't think he did.

So, anyway, in Venom 150, we got a bunch of short stories, one written by Costa showing Eddie in his first outing in his old suit, where he kills a guy, and assaults a priest because the Venom symbiote doesn't like him. And then Flash fans finally get an explanation about how Flash separated from the Venom symbiote. To add insult to injury, it's written by Robbie Thompson, the writer of Venom Space Knight, who is, once again, written into a corner, this time by Costa. 

Considering Thompson had tried to end Space Knight on a high note, this short comic is a slap in the face.

Flash Thompson and Andi Benton are out one night, taking on a street gang. Following this scuffle, the two decide to have pizza on a rooftop. 

Andi leaves and Flash decides to stick around a bit longer, and is jumped by a 'rogue government agent' (that's the only description I could find) named 'Agent X'. 

X uses a sonic weapon to blow the Venom symbiote off of Flash, and suddenly, despite this happening to the pair numerous times throughout Flash's tenure with the symbiote, this time is apparently the straw that broke the camels back for the symbiote, and it runs away. 

This leads directly into the events of issue 1 where the Venom symbiote is attacking some random hobo before latching onto Lee.

When I initially ranted about this on twitter, people were quick to defend Costa by saying I should be mad at Thompson for being the one who wrote the short, but really, it was only done because Thompson had to tie it into Costa's narrative. So, yeah, this one is Costa's fault.

The story is forced, and it is the dumbest explanation for why Flash and Venom separated after how things ended in Space Knight, and is completely disrespectful to everything the two had been through over the course of Flash's tenure as Agent Venom. It is disrespectful to the work Bunn and Remender put into him, and it's disrespectful to Thompson by forcing him to write this story after the work he put into Space Knight.

There is no other way for Flash Thompson fans to take this except as a slap in the face.

So now Eddie Brock is Venom once more, and Eddie's fans are now, after regarding this series with so much scorn, now consider Eddie's return as the wonder cure that somehow miraculously made this series a lot better. Hate to tell you guys, but anything times 0 is still 0.

Costa follows up Eddie's return with the 'Land Before Crime' story arc, which as Eddie teaming up with  Stegron, under ground, because reasons, also, Lee Price is let out of prison on good behavior... despite having murdered two inmates and that being brought up at his bail hearing.

Either Costa really doesn't understand how things work, where he's intentionally making things hard for Lee Price to motivate him towards a life of crime by making him not qualify for disability benefits. 

(I looked this up, in some cases, missing fingers would not qualify you for disability benefits if you were working a job where missing your fingers wouldn't impede your ability to do your job, i.e. working as a school teacher or any job that doesn't require the use of your hands. But considering Lee would have been medically discharged from the military, and likely would only be able to qualify for work in labor intensive fields, jobs that would require the use of his hands, he SHOULD qualify for disability benefits.)

But then Costa also makes things unnaturally favorable for Price, such as being released from Prison, despite flimsy reasoning from his lawyer, and the fact that Lee murdered two inmates while in prison, which SHOULD have torpedoed any chance he had at freedom.

I didn't talk much about Costa's 'land before crime' story, because there really wasn't much to it.

Anyway, Lee's release would culminate in Venom's big crossover with Dan Slott's amazing Spider-man, Venom Inc.

I've ranted about Venom Inc enough times for everyone to know why I hate the story so much, so I'll just sum it up as best I can without ranting too much about it.

Lee Price and a gang of thugs ambush Mania in Philadelphia, Lee stuns her while he has his gang set her on fire with flamethrowers and they steal the Mania symbiote from her and leave her in the hospital. 

Flash Thompson learns about this and tries to enlist Spider-man's help in order to track down the Venom symbiote and eventually recover the Mania symbiote. This leads into a confrontation with Eddie Brock at Alchemax, where a piece of the Venom symbiote falls into a vat of a cure made by Alchemax in order to calm the symbiote's violent tendencies. During the scuffle, the 'cure' is dumped on Flash and creates a new Anti-Venom suit, reminiscent of Flash's Agent Venom costume, but with the colors inverted.

Meanwhile, Lee Price has renamed himself 'Maniac', once again showing Costa's complete lack of originality, and is spitting up pieces of the Mania symbiote onto people to mind control them and make them his 'Made Men'. His first move is to take over Black Cat's gang.

Agent Anti-Venom and Spidey build a 'symbiote detector' and track down Price, only to get their asses handed to them by the Made Men. You know, despite Flash now being a walking anti-symbiote weapon, he gets beaten pretty easily.

Spider-man is brainwashed by Lee, who now plans to use the Mania symbiote to take over the entire New York criminal underworld by possessing the 'Five Families'. This completely flies in the face of the whole 'trying not to draw attention to himself' ploy he was doing back at the start of the series.

Andi returns, using powers from her Hellmark (a brand she received back in Venom volume 2), and joins up with Flash to rescue Spider-man. They free Spidey and team up with Venom and Black Cat to weaponize the Anti-Venom and take down Lee.

They succeed, but for whatever reason (Slott and Costa don't even try to come up with one), Price is defeated, but keeps the Mania symbiote.

Venom Inc is riddled with inconsistencies, poor character writing, a bad plot, and a back handed ending. The characters are either written as incompetent or one dimensional, all to try and make Lee look more intimidating by comparison, and Lee completely fails as a villain. 

While both Alpha and Omega issues are handled by both Costa and Slott, Slott handled the Spider-man tie ins while Costa handled the Venom tie ins. Costa's two issues were both just 22 page fight scenes, with the results all happening off panel. If Slott had plots set up in the Spider-man issues, Costa would undo them in his stories in the laziest ways possible.

The comic is, once again, a slap in the face, this time, to Mania's fans, who had to suffer through the first issue by watching Andi, a teenaged girl, getting set on fire by a group of men, and then she is absent up until the fourth issue. After all the effort of trying to reclaim her symbiote from Lee, Andi winds up not getting her symbiote back, and Dan Slott and Costa don't even try to come up with an explanation as to why.

Dan Slott is known for treating side characters like throw away trash, usually in order to build up Spider-man, or whoever the lead is, so it's not surprising he'd pull a stunt like this. Costa, on the other hand, gets to keep his uninteresting OC around at the expense of a much better character.

But I digress.

We now get to the final arc of the 2016 Venom run, 'The Nativity', which was advertised that the Venom symbiote has been hiding something from Eddie, something that could 'completely shatter Eddie's trust in the symbiote'!

And what is this secret?

The symbiote's pregnant again.

The first issue leads no where, it just serves as a remind that Venom Inc. happened, with a confrontation with Jessica Drew that has Venom temporarily bond with her to explain all this. 

Eddie is then captured by Mac Gargan, the Scorpion, in order for Scorpion to take the new symbiote once Venom spawns it. But Eddie escapes and runs to Alchemax so Venom can, erm, gives birth...

When it appears the new spawn is a 'still born', Scorpion gives up and leaves. And the series ends with Eddie and Venom leaving the new spawn, which is actually not a still born, in the hands of Alchemax. Because a shady company that used to be run by Oscorp is clearly trustworthy.

Suffice it to say, that this does not 'completely shatter' Eddie's trust in the symbiote, and if it did, it comes off more as this secret only sort of inconveniencing Eddie, as opposed to shattering his trust in it.

With Donny Cates taking over as of this month's new Venom series, Cates has managed to do a better job writing a 'Eddie's trust in the symbiote has been shattered' story in ONE ISSUE, than Costa did in an entire arc.

With Cates at the helm, and having mentioned in a livestream that 'Mania will have a role' in this story, as well as the fact that this will host a cast of supporting Venom characters both new and old, I have higher hopes for this series more than I did for Costa's run.

So, that's the entire 2016 Venom run in as much of a nutshell as I could put it. It is, in all honesty, the weakest run of Venom I have ever read, it had a lousy start, became riddled with inconsistencies as things went on, and just became bland and uninteresting.

And yet, Eddie Brock fans ate it up. It may just be because I'm a Flash Thompson fan more so than an Eddie fan, but, you have to realize that this just was not a good run.

Costa's writing did not change from the start, the story did not magically improve just because Eddie became the new host of Venom again, having Eddie back in the lead role but regressing him back to his 90's persona is not groundbreaking or new or original. I would hope that readers would see this, but it seems Costa, and Eddie Brock fans are so mired in blind fanboyism that they can't see or understand this.

Bringing Eddie back was somehow this band-aid that would fix everything that Costa had managed to destroy with Lee, that bringing Eddie back fixed everything that was wrong with the book. But it didn’t, the only reason Eddie fans suddenly liked Costa and everything about this book suddenly was simply because he brought THEIR Venom back, he didn’t improve anything about Eddie, didn’t change anything, he regressed him back to the 90′s, which has become a trend at Marvel, since they seem to have it out for their legacy characters right now. Having Eddie back did not change anything, didn’t improve the story, did not fix any of the problems present.

The story is inconsistent, Lee's motivations keep changing and he never stayed on point, his character is non-existent, and failed as both a lead character and antagonist. 

Flash Thompson's separation from the symbiote is one of the most forced and insulting aspects of the story.

Catering to everyone's 90's nostalgia boner by making Eddie like he was in Lethal Protector, trying to be an anti-hero but having trouble with the symbiote's violent tendencies, is lazy, it's been done, give us something new.

Giving Mania, her fans, and Cullen Bunn the biggest 'eff you' ever in order to bring Lee Price back into the game is lame and insulting. You depowered a hero in order to make a villain look better and it failed miserably, because Lee did absolutely nothing while in possession of the Mania symbiote and had others doing his dirty work for him. 

And I refuse to call Andi's symbiote the 'Maniac' symbiote, it is not Lee Price's symbiote, it does not belong to him, it belongs to Andi and she should get it back.

As stated before, Venom is a character driven narrative, but if the the characters aren't interesting, and the reader can't identify with the character, then the narrative fails. And considering this run started out with Lee Price, and then shifted to Eddie Brock, and neither of them came off as interesting or relatable, this means Costa failed to write a character driven narrative not once, but twice.

His writing is lazy, inconsistent, tries to build interest on shock value alone and fails, tries to throw plot twists at you that fall flat. If the whole 'Eddie's trust in the symbiote is put to the test' thing was supposed to affect Eddie, it really didn't come off as such. A lot of stuff in the books just 'happens' with no explanation or build up, it comes off as Costa just saying 'it happened because I said so, deal with it'.

I just... really did not like this series, and I refused to buy any more issues with Costa's name on them, I simply chose to hate read them in the comic store, or read online scans. I'm looking forward to the Cates run of Venom, because Cates has managed to build more interest in one issue than Costa did in the entire 2016 run, and I'm interested in how Cates is going to continue with this new 'Rex' arc.

Costa's series deserves to be thrown onto the ash heap and forgotten.

[optimusphillip]

OptimusPhillip Reviews 21: Studio Series 13 Megatron

Last week, I reviewed Studio Series Voyager Optimus, and so now it’s only fitting that I review Studio Series Voyager Megatron. Now, this Voyager Megatron is based on his appearance in Revenge of the Fallen, while the Prime I reviewed is technically based on the first movie, but Prime didn’t really go through any major design changes for Revenge, so I think pairing these two up still works.

Tank Mode

Being the Revenge of the Fallen version, this Megatron transforms into a Cybertronian tank. Unfortunately, I couldn’t find any clear shots of the tank in the film itself, so I can’t give a proper comparison. However, I will say that, in those brief glimpses I did catch, they do share the same general profile. The only deviation I noticed is the lack of wings, since Megatron was a flying tank in the film. However, when compared with concept art of his tank mode, he’s practically a dead ringer. If I had to nitpick, the angle of his side intakes is off, but that’s about all I can pick out. It’s been suggested that this toy was actually based on those concept images, and while I can’t find a primary source for that claim, it does make sense given the similarities. Honestly, I really like the look of this, probably even more so with the wings left off, though there are aftermarket options for those if you really miss them. And yes, he does still have the exposed robot head in this mode. It was in the movie, so it has to be there. If that turns you off, you’re going to be disappointed. Personally, I think they do a decent enough job of integrating it into the design, though it is still kind of silly.

Unfortunately, the tank is a bit lacking in functionality. He has four caster wheels on the bottom, which allow him to roll surprisingly well, but the turret is sadly static. Due to the transformation, there is no rotation, and the main barrel only moves downward. However, the side cannons move up and down, so there is that.

The figure is primarily cast in a light gray plastic, with a darker gray (bordering on black) for the treads, as well as the cage around his head. In addition to that, he gets some silver paint apps on the rear of the turret, as well as some bronze picking out mechanical elements, such as booster rockets and the internal mechanisms of the treads. I can easily see someone calling this color scheme drab, but I personally think it works. Megatron in the movie mostly bare silver anyway, so it wouldn’t make sense to give him an elaborate paint deco here. Maybe he would’ve looked better all in silver, but I think the gray works well enough, plus it makes the details that are painted silver stand out more.

Conversion

Megatron’s conversion process is much more of what I like compared to Prime. There’s a lot going on, but it all works in manageable chunks that don’t clash into each other too often. His legs form from the tank treads, while the arms fold out from the tank body, and the turret collapses into the space they leave behind. The only issue I really have is that, when going back into tank mode, it can be difficult getting the tabs on the chest, arms, and turret to line up right. Also, be a little careful with some of the extra leg armor pieces, as they’re just on friction hinges and prone to pop off if you aren’t. It’s nothing major, though. All in all, I’d say it’s a fun, clean transformation... though it does leave some issues in robot mode.

Robot Mode

In robot mode, Megatron is looking about the best he’s ever been. Gone are the disproportionate arms of the Leader and the giant wing kibble of the 2009 Voyager. He’s beefy, spiky, and very screen accurate. On display in this mode is a lot more of the bronze, highlighting the inner workings of his chest and waist. It gives a lot of depth to the design and breaks up the gray very nicely. I really like the head sculpt here. All the jagged shapes and layers are captured beautifully, especially the pseudo-crown shape on the top. What really impresses me, though, is the mouth. It’s rather small, but not only is it picked out in paint, but the teeth are individually molded. It’s a really impressive sculpt on such a relatively small figure. 

Going around to the back, the same silver from the tank mode is still present, as well as his jetpack from the movie, also done in silver. Unfortunately, these thrusters don’t form the rear of the tank, but I don’t think there’s a way they could’ve done that while still having a clean robot mode.

Though clean may not be the best word to describe it. While the backpack is very smooth, his torso is visibly hollow from the sides. It sucks, but I can deal with it. It’s only really visible if you look at it straight on with nothing in the way, so it’s hard to see in most poses. Plus, I don’t see any way they could’ve prevented this, since there isn’t much room for extra paneling inside.

Moving onto articulation, he has a staggering amount. Of course he has a ball jointed neck, universal shoulders and hips, bicep and thigh swivels, 90 degree elbows and digitigrade knees. In addition to that, however, he gets articulated fingers. His left hand is in two parts, allowing him to open and close his claws with impressive range, and he even has a jointed thumb on his right arm... even though he has no proper hand. Also, not only does he have an ankle rocker, but he has outward hinges on the toes, though the tolerances on my figure means that the extra armor bit tends to get in the way. Still, it’s a nice touch that gives a bit of added detail to his tread feet.

Of course, Megatron is equipped with the pincer arm he had in the movie. It’s very nicely detailed, with lots of molded in joints and mechanical elements, and of course the fusion cannon inside, done up in silver. While it can’t transform into a normal arm like in the movie, it does still have the previously mentioned jointed thumb, so it’s not completely useless as a hand. And of course, he has his flip-out blade weapon, which he infamously used to stab Optimus through the back before shooting him down in the Forest Battle scene. At 8 centimetres, or 3 inches, it’s impressively large on him (stop giggling!). Along with his fingers, the blade is done in a soft plastic, so there’s little danger of breakage or injury. Still, the blade is nicely detailed, with jagged edges and more mechanical details. It even has some surprisingly sharp points to it, though I doubt it could do any actual damage.

Studio Series has put a large emphasis on scale, so naturally some size comparisons are in order. When both are standing upright, Megatron stands about a head taller than Optimus. While that does seem strange, as near as I can tell rewatching scenes from the movie, that is accurate scale.

Backdrop

Like the rest of the Studio Series line, Megatron comes with a backdrop displaying a famous scene from the movie: in this case, the Forest Battle scene. While I don’t think it’s an exact match for any particular shot, it does match the overall scenery of the sequence really well. Though strangely, the top left corner of the image seems to have a much lower resolution than the rest. You can see the jagged pixels on the highest branches, while the lower brances are smooth and crisp in comparison. I don’t know what that’s all about, but I’ve seen it on other copies, so I don’t think it’s just an error on mine.

As usual, you can stand Megatron in front of the backdrop, and he fits pretty snugly on the platform. Fortunately, he tends to be pretty stable thanks to his gigantic heels, so there’s little danger of him toppling back unless you put him in some extremely backheavy pose. Once again, there’s no room for another figure, so you can’t get any active melee scenes, at least without additional support, but just posing the figure on its own, it’s a good look.

Final Thoughts

Studio Series 13 Megatron is a really well done toy. While it does have some minor issues here and there, he’s screen accurate, highly posable, properly scaled, basically everything Studio Series sets out to be. Combine that with an engaging yet smooth transformation, and this is probably the best representation of Revenge of the Fallen Megatron to date. Of course, whether this figure is worth it to you depends on whether you like that movie’s take on Megatron in the first place, and if you didn’t then this toy isn’t for you. However, if you’re like me and are a fan of this take of Megatron, I would strongly recommend him.

[placetobenation]

Steve’s Box Office Report: June 2009

Top 10 Films for the Month of June:

1. Transformers: Revenge of the Fallen – $402,111,870

2. The Hangover – $277,322,503

3. The Proposal – $163,958,031

4. The Taking of Pelham 1-2-3 – $65,452,312

5. Land of the Lost – $49,438,370

6. My Sister’s Keeper – $49,200,230

7. Year One – $43,337,279

8. The Hurt Locker – $17,017,811

9. Imagine That – $16,123,323

10. Away We Go – $9,451,946

Honorable Mentions:

1. My Life in Ruins – $8,665,206

June Winners: Transformers: Revenge of the Fallen, the Hangover, and the Proposal

We now officially kick of the summer of 2009 with the month of June, and coming off a pretty successful May the year had some solid momentum going into June and the slate of films for this month seemed to be a wide range of films mainly focusing on adults. With some big films coming out at the end of May looking to keep building their gains into June, it was going to be interesting to see how the slate of films from this month would do in terms of success or failure. That said, we did have a few films that made it into this category with the first being the action film Transformers: Revenge of the Fallen, the sequel to Transformers where the war between the Autobots and Decepticons continues with Sam Witwicky caught in the middle as the ancient Decepticon the Fallen looks to harvest energy from the sun. Coming off the success of the first film from two years ago, it was smart to strike while the iron was hot and despite the mixed reviews from critics who deemed this film inferior to the first, the film would be a huge success and finished well ahead of the first film which also meant the franchise was sure to continue. The next film from this month that makes it into this category is the comedy the Hangover, a film about a group of friends who can’t remember anything from their bachelor party in Las Vegas and they try to piece the night together while trying to find their friend. With a unique premise and a prime spot at the beginning of the month, the film would earn positive reviews from critics and managed to debut at number one in its opening weekend just barely edging out Up. It would go onto have a very lucrative run despite other comedies coming out during the month and it would set up the beginning of one of the most unlikeliest franchises in history. The third and final film from this month that makes it into this category is another comedy and that is the Proposal, a film about an executive who forces her assistant to pretend to be her fiancé to prevent her from being deported. Unlike the Hangover, this film received less favorable reviews from critics though they praised the chemistry between Sandra Bullock and Ryan Reynolds, and it would still debut at number one in its opening weekend and went to have a fairly successful run by finishing in the top 3 for the month. So while it was a bit disappointing to only see 3 films from this month make it into this category, the three films did very well that they alone were able to carry the month of June to a sustainable level.

June Losers: The Taking of Pelham 1 2 3, Land of the Lost, and Imagine That

Now while there were a few films from this month that did very well and got into the winners category, there were a couple of films that did not do as well and ended up being included in this category. There were a few films from this month that didn’t make a lot of money, but they were in a position where they could at times though the films included as the losers were in a position to do somewhat well and they didn’t. The first film from this month that makes it into this category is the action thriller the Taking of Pelham 123, a remake of the 1974 film of the same name about a train dispatcher who must negotiate with a criminal who takes possession of a subway car. Despite having some solid star power involved, the film would end up receiving mixed reviews from critics who deemed it not up to the level of the original 1974 film, and after a soft opening weekend it would fall rather quickly and ended up being forgotten amongst the mass audience. The next film from this month that makes it into this category is the adventure comedy Land of the Lost, based on the TV show of the same name where a paleontologist, his assistant, and a survivalist travel through a space-time vortex and appear in an alternate reality. Despite some decent hype going into its opening weekend, the film would receive negative reviews from critics and wound up bombing in the box office, particularly against fellow film the Hangover which performed far better despite not having as much hype behind it. It would quickly fall off in the coming weeks and ended up being one of the bigger bombs of the year. The third and final film from this month that makes it into this category is the comedy Imagine That, a film about a workaholic and his daughter as her imagination would help lead to his success. Much like Eddie Murphy’s last failed film Meet Dave one year ago, he once again heads up what ends up being a failure as this film also received negative reviews from critics though they weren’t as harsh towards this film as they were to Meet Dave. However, the end result ended up being the same as the film would become a flop and was another loss in a string of recent disappointments for the once profitable Murphy. There was no doubt that this trio of films were major disappointments and were unable to help prop the month of June up, but thankfully the winners of the month were successful enough to try and overcome these losers.

The Surprise/Story of June 2009: Transformers rules supreme again as Revenge dominates June 2009

We go back to July 2007 when the first Transformers movie came out and there was a lot of question as to whether that film would succeed or end up falling flat on its face, and in the end the film wound up being very successful as a solid summer blockbuster which meant that the franchise was going to continue. Flash forward now to June 2009 and we have the release of the second film Revenge of the Fallen, and once again it proves to be a tremendous success by making just over $400 million which tops the first one by a significant margin. Even though it came out at the end of the month, it was able to once again utilize the 4th of July holiday period to rake in a bunch of money and as a result, it was able to easily take the top spot for the month by a great margin. Even though the month was mainly controlled by the Hangover and the Proposal which both did very well, neither was able to compete with Transformers on a grand scale and once again it was pretty clear that the Transformers franchise was going to continue on as a third film most certainly had to be in the works by this point.

Overachiever of June 2009: The Hangover

In what seems to be a recurring trend for this year, we have another clear cut choice to be named the overachiever of the month. Going in, there were a couple of films that had some question as to what film could potentially break out and have a great run, and in the end the film that does just that is the Hangover. No doubt this was an interesting film given its plot of a group of friends who can’t remember what they did during their bachelor party in Vegas, and in addition the four main stars of the film had not really established themselves as major leads. Plus coming out the same weekend as Land of the Lost which had a bit more hype behind it and there were questions as to how this film would end up doing, but at the end of the day the Hangover proved to be the more successful film as it debuted at number one in its opening weekend. It would continue to play well over the month even against other big comedies and finished with an amazing $277 million which was way more than I think anyone ever expected, and because of that the Hangover is more than deserving to be the overachiever of the month and we will see if this spawns into something bigger for a potential Hangover franchise.

Underachiever of June 2009: The Hurt Locker

Now unlike the overachiever of the month which seems to be getting to become the easiest choice to make in these recaps, choosing an underachiever of the month is slowly becoming much more difficult in certain months. Looking at the films from this month, there were a few that did seem to have solid expectations though they didn’t deliver on them, but at the same time those expectations were not high enough to be included in this category. As a result, the film that receives this award is a pretty surprising one and that is the war film the Hurt Locker, a film about a EOD team who serve in the Iraqi War and the conflict between the newly installed Sergeant and his squad. The film had a lot of buzz behind it when it first came out in 2008 at various film festivals around the world, and by the time of its release this month there was plenty of solid hype going into it. The film would receive critical acclaim from critics who considered it one of the best films of the year, and as we will see in the next category it would go on and be one of the top dogs in awards season. However, the reason it is named the underachiever is because I feel like it never reached it maximum potential and part of the reason is because it peaked at showing in only 535 theaters. As a result, there was no way that the mainstream public even with word-of-mouth was going to help prop the film up to bigger heights, so it wounds up being named the underachiever of the month simply based on the prospect of what it could’ve been.

June 2009 Awards Watch: Transformers: Revenge of the Fallen, the Hangover, the Proposal, Land of the Lost, the Hurt Locker, and Imagine That

As we head into the summer, the award contenders prior to this month had been pretty light in terms of all three big awards. However, that changes here as we have six films from this month that make it into this category and a few of them would become laden with at least one of the big three awards. The first film from this month that makes it into this category is Transformers: Revenge of the Fallen as it would be nominated for one Academy Award (Best Sound Mixing) which it wouldn’t win, but on the flip side it would end up winning three Golden Raspberry Awards (Worst Picture, Worst Director, and Worst Screenplay) while also being nominated for four more (Worst Actress, Worst Supporting Actress, Worst Screen Couple, and Worst Prequel, Remake, Rip-Off, or Sequel). The next film from this month that makes it into this category is the Hangover which would win one Golden Globe Award (Best Picture – Musical or Comedy), and that is a huge win for this film which also seemed to help push towards a potential franchise. The next film from this month that makes it into this category is the Proposal which would be nominated for one Golden Globe Award (Best Actress – Musical or Comedy) which it wouldn’t win, but fortunately for star Sandra Bullock her year was far from over. The next film from this month that makes it into this category is Land of the Lost which would win one Golden Raspberry Award (Worst Prequel, Remake, Rip-Off, or Sequel) while being nominated for six more (Worst Picture, Worst Actor, Worst Supporting Actor, Worst Screen Couple, Worst Director, and Worst Screenplay), and it’s amazing that one month had two films in Revenge of the Fallen and Land of the Lost be so panned that they would control most of the Golden Raspberry Awards. The next film from this month that makes it into this category was the Hurt Locker which would win 6 Academy Awards (Best Picture, Best Director, Best Original Screenplay, Best Sound Editing, Best Sound Mixing, and Best Film Editing) while being nominated for 3 more (Best Actor, Best Original Score, and Best Cinematography). It would also be nominated for 3 Golden Globe Awards (Best Picture – Drama, Best Director, and Best Screenplay), and this would solidify its standing as one of the best reviewed films from the year. The final film from this month that makes it into this category is Imagine That which would win one Golden Raspberry Award (Worst Actor of the Decade) while being nominated for one more (Worst Actor), and it was interesting to see this month see a near 50/50 split in the films that were nominated for one of the good awards and ones that were up for the bad award.

Overall Thoughts of June 2009:

Overall, the month of June 2009 ended up being a pretty interesting month that saw some films success, but at the same time some films did fairly miserably and kept the month from reaching the heights it could’ve. It was pretty clear that the top 3 films from this month carried the majority of the month, but everything underneath did not do enough to help those 3 films out and many of them ended up being some of the worst bombs of the year. Compared to June of 2008 where that month had a lot more successes, this June was a bit of a step down which was fairly disappointing considering how well the month of May did. Now it wasn’t enough to completely bring down what 2009 had done to this point and with what was to come for the rest of the summer, it was going to be interesting to see how the rest of the summer would play out. As for the month of June 2009, it was a fairly successful month though it wasn’t up to what it could’ve been and it does end up feeling like a bit of a disappointment.

Final Grade: B+

[calvinzeepeda79]

Revenge of the Humans: How Discretionary Managers Can Crush Systematics

This is the entirety of a three part series that was originally published byIntegrity Research and titled The Great Quant Makeover – Part 1: How Discretionary Managers Can Cope with the New Systematic Realities, Part 2:The Rise of the Quants and How Some Successful Discretionary Managers are Responding, Part 3: Revenge of the Humans or How Discretionary Managers Can Crush Systematics

Six months ago I found myself in our Estimize office sitting across the table from a hedge fund portfolio manager who said something I honestly couldn’t believe. According to this PM who runs a $500M long/short book at a large multi-manager fund, he was taking a data science course at night, after work. He told me, “if I don’t learn how to do quantitative analysis I’m not going to have a job in two years.”

A second said the same thing to me a week later.

Two weeks after that I received an email from the “school” providing that very course, inquiring if I could teach a data science class, specifically for finance, to 25 members of a hedge fund who had contracted them.

These are just a few anecdotes among many in the absolutely massive transformation taking place right now within the discretionary institutional management industry. Discretionary managers have woken up, and are now scrambling to understand what’s taking place and how they must change in relation to it. Many will not survive the shift. Others will take advantage and be better off for it.

This piece takes a deep dive into the following themes and how institutional managers can begin to effectively redirect themselves:

Investors have woken up to the asymmetric risk they were taking on with active discretionary mutual funds, hedge funds and RIAs who were basically playing with beta instead of generating alpha. Now they are pulling their money.

Asset flows are moving into “passive” ETF strategies and will continue to move further into smart beta ETF strategies, long only active management is headed to the grave.

Hedge fund assets are flowing out of discretionary and into quantitative systematic strategies which have produced far more consistent alpha. They also blow-up less often.

Most classic systematic alpha strategies are based on price; volume and fundamentals have been arbitraged out and are now betas. This has precipitated a race to build new alphas with new data sets.

Discretionary managers are scurrying to incorporate new data sets, but lack the understanding of how to analyze their efficacy and more importantly, how to incorporate them into their discretionary trading processes.

If discretionary managers remain disciplined and execute their rubric faithfully, they can crush systematic quants, but they must solve the religion vs. science question first.

The organizational structure of discretionary management teams along with the type of people they hire is broken and outdated for today’s challenges. Changes are starting to take place, but all too slowly for many players to survive.

Building the right infrastructure will remain pertinent to surviving this shift. Both quant and discretionary firms must hire teams that include engineers, product managers and quants to suss out new data sets.

On June 20th, Estimize will be hosting the L2Q (Learn to Quant) Conference, a one day seminar designed for discretionary institutional PMs, analysts, and traders who know they need to move quickly and efficiently towards building quantitative processes. Segments will be taught by preeminent buy side, sell side, and unique data experts with vast quantitative investment experience at Two Sigma, PDT Partners, WorldQuant, Wolfe Research, Deutsche Bank, and others.

But before that, let’s take a deeper dive into the topics above, and why we felt a whole conference was necessary to explore them.

1. Getting Paid For Playing With Beta Is Over

Looking back, it’s hard to understand why anyone was willing to give most discretionary fund managers money in the first place. The truth is, most PMs were simply playing with beta, whether it be momentum, mean reversion, value, growth, sector or market cap. Managers were leveraging these far more often than they were actually generating alpha. Now we can all argue over whether correctly timing the use of betas is in itself alpha, but that argument is made moot by the fact that the vast majority of PMs were unsuccessful at this in the long run and eventually blew up.

The greatest trick the industry ever pulled was making LPs believe that they could consistently leverage beta and not get caught with their hand in the cookie jar, giving up years of returns in a matter of months. Over and over, fund managers took their “two and twenty” to the bank in the years they happened to be on the right side of that equation. Then they blew up. Instead of fighting back to their hurdle, they just closed shop and opened up a new one, somehow convincing investors to play the same asymmetric game of risk once again. Heads I win, tails I take a vacation for a year and someone gives me another coin to flip later.

Don’t get me wrong, there are managers who have proven track records of not blowing up while playing with beta, and some even generate true alpha, but they are few and far between. Good luck picking the correct fund manager.

Why did it take the market so long to wake up? We can start with the great answers you’ll hear from friends of mine like wealth manager, Josh Brown. He fully understands the social and egotistical aspect of being invested in these funds, not because it’s the rational thing to do, but because of the accompanying prestige. The same can be said for managing your own personal portfolio; it’s something to talk about at a cocktail party. And while it seems our current political climate echoes the movie Idiocracy, financial market education and investor behavior have actually taken a huge leap forward since the ‘08 crash. I find it interesting that retail investors actually got smart before pension funds, pulling money from active managers, closing their brokerage accounts, and investing in passive low cost ETF strategies.

As for the tens of thousands of small RIAs, why would I give them my money either if I can buy a smart beta ETF for 20bps that does basically the same thing they were for 100bps? You’re gonna tell me that all those mom and pop RIAs managing $40M are executing those smart beta strategies as efficiently and accurately as iShares? Please. It’s only a matter of time before Betterment or some other robo-advisor allows its clients to algorithmically allocate a portion of their portfolio to these strategies. Heck, I wouldn’t be surprised if one of them also provided the ability to use simple, proven, market timing overlays in order to rotate in and out or long and short certain smart beta strategies.

Hedge fund PMs have to realize that even though they are in last car on this disruption train, the conductor is coming to clip their ticket as well. They will either evolve or die, like any other industry disrupted by better efficiency. I think it’s obvious that there will be far fewer of them as most will not successfully shift to generating alpha.

2. All Investing Is Active, Even The Passive Kind

Let’s clear something up, there’s no such thing as “passive investing”. The words we use matter because they form the basis for how we think about things and the actions we take. The developed western world is ripping itself apart over an inability to win a “war on terrorism” because, for propaganda purposes, we decided to say we were fighting a war on a military tactic (you didn’t have to study war theory in school like me to know you can’t win a war against a tactic).

All investing is active, even the decision of how to weight an index, what goes into that index, and how to allocate your capital amongst different asset classes. Just because the computer keeps your allocation levels static does not mean you’ve abdicated responsibility for investment decisions. This is why I’m such a big fan of smart beta, because it does away with the ignorant notion that you can avoid making a decision on beta to begin with. We all have to, so we might as well make that decision in an informed and active way.

In any event, we’re going to continue to see massive flows of capital out of “active” long only mutual fund and long/short hedge fund strategies and into these. The question on everyone’s mind is, how will this affect the market? My best guess is that we’re not going to see the downside of massive systemic risks some are warning about when everyone is indexing. The latter part of 2016 and beginning of 2017 prove that even with all the indexed money, correlations can still drop quickly when macro factors evolve. After the 2016 election, cross-asset correlations that have existed for the past decade began to break down as pictured in the charts below.

Exhibit 1: Cross-asset correlations have fallen sharply

3. Assets Are Flowing From Discretionary to Systematic

You don’t have to look too deeply to see this massive trend in strategy allocations playing out. At Millennium, we’ve seen WorldQuant blow the doors off the barn with returns and inflows of capital. At Point72 (SAC) we’ve seen Cubist outpace the discretionary side of the firm by a wide margin with now over 40 systematic PMs. Balyasny has quickly shifted focus and is building a stable of systematic managers to effectively do something with their huge AUM growth. Other multi-manager platforms like Schonfeld, Paloma, AHL, Engineer’s Gate and GSA have added significant assets. Paul Tudor Jones is attempting to remake his firm by hiring a bunch of systematic managers, and others are following suit. And let’s not even get started with the continued dominance of firms like Renaissance, AQR and Two Sigma, where you probably can’t even give them your money if you tried.

I would say that the nerds are the new kings of Wall Street (Midtown), but frankly they (myself included) would cringe at that statement given their propensity to run in very different circles than the rest of the money manager crowd. This group is mostly made up of unassuming nerdy PhD types that you would probably take for accountants on the subway. They have serious mathematical and scientific training and have usually honed their craft on other data sets before coming to the financial world.

The fact of the matter is that there’s simply more efficacy to what these managers are doing than the vast majority of the discretionary trading world, and they’ve (mostly) put up the numbers to prove it. And I’m not just talking about returns, these groups are producing real alpha. Their strategies are meticulously backtested in and out of sample before going live, and are scaled up over time. Many discretionary managers launch a book with $500M in play from day one, I can count on one hand the number of systematic funds that have done that in the past 5 years.

And while some systematic funds don’t perform well, you’ll be hard pressed to find any massive blow ups akin to what’s regularly seen on the discretionary side. Pension funds can certainly deal with paying 2 and 20 if they have more confidence that their returns from year 1 through 3 aren’t going to all disappear in year

The flow of capital from discretionary to systematic strategies is going to continue, as it should. That will have its own repercussions, which we’re already starting to see.

4. Quants Dig For New Alpha

A 2012 tell-all book from a former Goldman Sachs trader revealed how the Great Vampire Squid often endearingly referred to their unsophisticated clients at “muppets.” While they rightfully got skewered for that comparison, they were certainly onto something when their trading desks would remark internally that they were basically taking candy from babies.

However, many of the muppets are gone now and that’s left far less alpha in the market to capture. Relative value and statistical arbitrage strategies are about capturing asset mispricings associated with the irrational behavioral aspects of fear and greed. This isn’t going to change any time soon, the muppets aren’t coming back, they’ve wised up. Less alpha overall will lead to a drop in the number of hedge funds and the amount of hedge fund assets that can generate enough alpha to command high fees.

It truly is amazing to watch a data set go from being an alpha to a beta over time. I’ve seen the sell side analyst estimates data set owned by Thomson Reuters IBES travel this path over the past 15 years. Yes, there will always be alpha available to be arbitraged which is associated with the irrational behavior of humans in markets, but most alpha generated by systematic traders is associated with an informational advantage.

About five years ago many of the classic stat-arb strategies stopped working due to an influx of competitors. There simply wasn’t enough alpha to go around. This precipitated the smartest firms to search for new data sets with predictive power, or reflexivity. Fast-forward a few years and an all out arms race is now under way.

I love to use the example of the company that is selling data captured from new car insurance registrations. They get this data daily, and it’s incredibly accurate at calling new car sales. So instead of waiting until the end of the quarter to find out how many vehicles GM sold, you can basically get a running count of growth on a daily basis. Obviously that’s going to give you an advantage in trading those auto names, that is until everyone else is using that data. At that point, the data set goes from providing alpha you can capture, to a data set that you must be looking at in order to avoid an informational disadvantage. In a sense, it becomes beta.

So the arms race is in full swing, and there is now a serious lack of qualified talent to analyze all of these different data sets and incorporate them into the existing multi-factor models. While the quantitative research process into the efficacy of a data set hasn’t changed much, firms are struggling to build a process around the testing pipeline. The most efficient firms like WorldQuant have been able to take advantage of that competency to move quickly and decisively to incorporate new alphas.

This brings me to my last point about the systematic testing process. In the next section of this article, I’m going to heavily malign the discretionary buy side for being fairly clueless about how to undertake this entire process. The truth is, even most (but not all) systematic quants suffer from a severe lack of creativity and original thought when it comes to generating hypotheses around how to take advantage of a given data set. From our experience working with discretionary firms at Estimize, they are two steps even further behind the quants as it relates to incorporating new data sets.

Let’s just go back to the car sales example for a second. Would you know exactly how to take advantage of that data to run an event study and generate alpha? Probably not. You’d likely want to talk with someone who’s been trading autos for 10+ years to get their take on what they think moves auto stocks and how having a good projection of sales would impact those names. A good quantitative research process requires an ex-ante hypothesis for some level of causation and not just correlation. We need to know roughly why something works, not just that it works, or else we won’t know why it stops working, and as history has proven, everything stops working at some point.

Being able to hand over an easily testable clean data set, and a bunch of original thoughts about how to generate alpha is imperative for data firms to succeed at this process.

5. Quantamental, Systamental, Factor Aware…Call It What You Want

The rise of the systematic quants and their use of these new data sets also had an impact on the poor returns of the discretionary world over recent years. First, the HFT guys killed the day traders making it impossible to pick up pennies. Next, the stat-arb guys crushed the swing traders playing in the couple of hours to one week timeframe. Were they the primary factor of poor discretionary returns? Probably not, but significant none of the less.

A few years ago the first big discretionary firms started making attempts to hire data scientists and acquire new data sources. They’ve mostly failed to integrate any of this into an actual investment process. Then about 6-9 months ago another chunk of the more forward thinking discretionary firms gave in to the realization that they needed to make big changes. It’s not as if discretionary PMs weren’t using data driven statistical approaches to gain an edge, or that none of them had quants on the desk to help, they were just very few and far between.

You may have seen Paul Tudor Jones almost publicly berating his organization in a strange showing of frustration from such a legendary investor. Steve Cohen has been very public about his attempt to shift Point72 in the data driven direction, even commenting that it’s incredibly hard to find good talent these days (we’ll get to this in a minute). The guys who have been successful in this game historically see the writing on the wall. Hell, even the first episode of season two for the show Billions features main character Bobby “Axe” Axelrod giving his team the condensed 3 minute version of this piece, albeit in a much louder tone. So whomever the producers of that show are talking to, this whole thing has seeped into the mainstream buy-side consciousness now.

The shift that needs to happen is similar to the way players were drafted in Michael Lewis’ book, “Moneyball”. Consider how hard the scouts fought against being replaced by algorithms that were far more accurate than they were, and even in the face of all this evidence, refusing to change. Then consider how much money was on the line in baseball, and the astronomically larger amount on the line in our world. You would think that would precipitate a much quicker shift, but in fact, it will only mean a slower one due to the fear of change when dealing with so much money.

As quants, we are taught how to go through the research process to validate the efficacy of a data set or tool. Everything is derived from this process, and there isn’t too much leeway, it is designed as good science. Yes, as mentioned above, you still need a level of creativity in order to do good research. However, discretionary managers don’t even have the framework for understanding how to do that research, or incorporate new things into their decision making process. This is the largest hurdle to making the shift, and I believe less than 20% of managers will clear it.

This shift isn’t just about using new data sets, like Estimize, or the car sales example, it’s about fundamentally buying into the notion that PMs need to be making investment decisions based on putting the odds in their favor by looking at statistics, and not just being gunslingers or bottoms up value guys. That’s an affront to their entire way of doing things, just as it was for the baseball scouts.

6. Algorithms + Human Experience = Optimal Trading

A passage from Michael Lewis’ latest book, “The Undoing Project,” speaks so directly to the issue discretionary firms face today. Lewis writes about a specific behavioral experiment performed on a set of first year residents and accomplished oncologists. In the experiment, the scientists asked the accomplished doctors to tell them how they make a decision regarding whether a patient has cancer from looking at an x-ray. The doctors all tended to give the scientists a 10 point checklist with a 1-10 rating for each of the 10 points, add up the points and you can accurately determine whether it’s cancer or benign. The scientists proceed to give a set of x-rays (the outcomes of which are known only to them) to the doctors and the residents, asking them to determine whether each is cancer or not. They also give the doctor’s checklist to the residents to use.

I think you can guess what happens next. The oncologists who supplied the rubric in the first place show almost zero ability above random to accurately determine whether the x-ray was cancer or not. They didn’t follow their own rubric, suffered from an astounding amount of representative heuristic, and failed to do their job well. Meanwhile, the first year residents were able to score far higher accuracy rates on avera

from Tumblr http://ift.tt/2qxrdzF

from Tumblr http://ift.tt/2prnOCm

from Tumblr http://ift.tt/2qc7AMN

[calvinzeepeda79]

Revenge of the Humans: How Discretionary Managers Can Crush Systematics

This is the entirety of a three part series that was originally published byIntegrity Research and titled The Great Quant Makeover – Part 1: How Discretionary Managers Can Cope with the New Systematic Realities, Part 2:The Rise of the Quants and How Some Successful Discretionary Managers are Responding, Part 3: Revenge of the Humans or How Discretionary Managers Can Crush Systematics

Six months ago I found myself in our Estimize office sitting across the table from a hedge fund portfolio manager who said something I honestly couldn’t believe. According to this PM who runs a $500M long/short book at a large multi-manager fund, he was taking a data science course at night, after work. He told me, “if I don’t learn how to do quantitative analysis I’m not going to have a job in two years.”

A second said the same thing to me a week later.

Two weeks after that I received an email from the “school” providing that very course, inquiring if I could teach a data science class, specifically for finance, to 25 members of a hedge fund who had contracted them.

These are just a few anecdotes among many in the absolutely massive transformation taking place right now within the discretionary institutional management industry. Discretionary managers have woken up, and are now scrambling to understand what’s taking place and how they must change in relation to it. Many will not survive the shift. Others will take advantage and be better off for it.

This piece takes a deep dive into the following themes and how institutional managers can begin to effectively redirect themselves:

Investors have woken up to the asymmetric risk they were taking on with active discretionary mutual funds, hedge funds and RIAs who were basically playing with beta instead of generating alpha. Now they are pulling their money.

Asset flows are moving into “passive” ETF strategies and will continue to move further into smart beta ETF strategies, long only active management is headed to the grave.

Hedge fund assets are flowing out of discretionary and into quantitative systematic strategies which have produced far more consistent alpha. They also blow-up less often.

Most classic systematic alpha strategies are based on price; volume and fundamentals have been arbitraged out and are now betas. This has precipitated a race to build new alphas with new data sets.

Discretionary managers are scurrying to incorporate new data sets, but lack the understanding of how to analyze their efficacy and more importantly, how to incorporate them into their discretionary trading processes.

If discretionary managers remain disciplined and execute their rubric faithfully, they can crush systematic quants, but they must solve the religion vs. science question first.

The organizational structure of discretionary management teams along with the type of people they hire is broken and outdated for today’s challenges. Changes are starting to take place, but all too slowly for many players to survive.

Building the right infrastructure will remain pertinent to surviving this shift. Both quant and discretionary firms must hire teams that include engineers, product managers and quants to suss out new data sets.

On June 20th, Estimize will be hosting the L2Q (Learn to Quant) Conference, a one day seminar designed for discretionary institutional PMs, analysts, and traders who know they need to move quickly and efficiently towards building quantitative processes. Segments will be taught by preeminent buy side, sell side, and unique data experts with vast quantitative investment experience at Two Sigma, PDT Partners, WorldQuant, Wolfe Research, Deutsche Bank, and others.

But before that, let’s take a deeper dive into the topics above, and why we felt a whole conference was necessary to explore them.

1. Getting Paid For Playing With Beta Is Over

Looking back, it’s hard to understand why anyone was willing to give most discretionary fund managers money in the first place. The truth is, most PMs were simply playing with beta, whether it be momentum, mean reversion, value, growth, sector or market cap. Managers were leveraging these far more often than they were actually generating alpha. Now we can all argue over whether correctly timing the use of betas is in itself alpha, but that argument is made moot by the fact that the vast majority of PMs were unsuccessful at this in the long run and eventually blew up.

The greatest trick the industry ever pulled was making LPs believe that they could consistently leverage beta and not get caught with their hand in the cookie jar, giving up years of returns in a matter of months. Over and over, fund managers took their “two and twenty” to the bank in the years they happened to be on the right side of that equation. Then they blew up. Instead of fighting back to their hurdle, they just closed shop and opened up a new one, somehow convincing investors to play the same asymmetric game of risk once again. Heads I win, tails I take a vacation for a year and someone gives me another coin to flip later.

Don’t get me wrong, there are managers who have proven track records of not blowing up while playing with beta, and some even generate true alpha, but they are few and far between. Good luck picking the correct fund manager.

Why did it take the market so long to wake up? We can start with the great answers you’ll hear from friends of mine like wealth manager, Josh Brown. He fully understands the social and egotistical aspect of being invested in these funds, not because it’s the rational thing to do, but because of the accompanying prestige. The same can be said for managing your own personal portfolio; it’s something to talk about at a cocktail party. And while it seems our current political climate echoes the movie Idiocracy, financial market education and investor behavior have actually taken a huge leap forward since the ‘08 crash. I find it interesting that retail investors actually got smart before pension funds, pulling money from active managers, closing their brokerage accounts, and investing in passive low cost ETF strategies.

As for the tens of thousands of small RIAs, why would I give them my money either if I can buy a smart beta ETF for 20bps that does basically the same thing they were for 100bps? You’re gonna tell me that all those mom and pop RIAs managing $40M are executing those smart beta strategies as efficiently and accurately as iShares? Please. It’s only a matter of time before Betterment or some other robo-advisor allows its clients to algorithmically allocate a portion of their portfolio to these strategies. Heck, I wouldn’t be surprised if one of them also provided the ability to use simple, proven, market timing overlays in order to rotate in and out or long and short certain smart beta strategies.

Hedge fund PMs have to realize that even though they are in last car on this disruption train, the conductor is coming to clip their ticket as well. They will either evolve or die, like any other industry disrupted by better efficiency. I think it’s obvious that there will be far fewer of them as most will not successfully shift to generating alpha.

2. All Investing Is Active, Even The Passive Kind

Let’s clear something up, there’s no such thing as “passive investing”. The words we use matter because they form the basis for how we think about things and the actions we take. The developed western world is ripping itself apart over an inability to win a “war on terrorism” because, for propaganda purposes, we decided to say we were fighting a war on a military tactic (you didn’t have to study war theory in school like me to know you can’t win a war against a tactic).

All investing is active, even the decision of how to weight an index, what goes into that index, and how to allocate your capital amongst different asset classes. Just because the computer keeps your allocation levels static does not mean you’ve abdicated responsibility for investment decisions. This is why I’m such a big fan of smart beta, because it does away with the ignorant notion that you can avoid making a decision on beta to begin with. We all have to, so we might as well make that decision in an informed and active way.

In any event, we’re going to continue to see massive flows of capital out of “active” long only mutual fund and long/short hedge fund strategies and into these. The question on everyone’s mind is, how will this affect the market? My best guess is that we’re not going to see the downside of massive systemic risks some are warning about when everyone is indexing. The latter part of 2016 and beginning of 2017 prove that even with all the indexed money, correlations can still drop quickly when macro factors evolve. After the 2016 election, cross-asset correlations that have existed for the past decade began to break down as pictured in the charts below.

Exhibit 1: Cross-asset correlations have fallen sharply

3. Assets Are Flowing From Discretionary to Systematic

You don’t have to look too deeply to see this massive trend in strategy allocations playing out. At Millennium, we’ve seen WorldQuant blow the doors off the barn with returns and inflows of capital. At Point72 (SAC) we’ve seen Cubist outpace the discretionary side of the firm by a wide margin with now over 40 systematic PMs. Balyasny has quickly shifted focus and is building a stable of systematic managers to effectively do something with their huge AUM growth. Other multi-manager platforms like Schonfeld, Paloma, AHL, Engineer’s Gate and GSA have added significant assets. Paul Tudor Jones is attempting to remake his firm by hiring a bunch of systematic managers, and others are following suit. And let’s not even get started with the continued dominance of firms like Renaissance, AQR and Two Sigma, where you probably can’t even give them your money if you tried.

I would say that the nerds are the new kings of Wall Street (Midtown), but frankly they (myself included) would cringe at that statement given their propensity to run in very different circles than the rest of the money manager crowd. This group is mostly made up of unassuming nerdy PhD types that you would probably take for accountants on the subway. They have serious mathematical and scientific training and have usually honed their craft on other data sets before coming to the financial world.

The fact of the matter is that there’s simply more efficacy to what these managers are doing than the vast majority of the discretionary trading world, and they’ve (mostly) put up the numbers to prove it. And I’m not just talking about returns, these groups are producing real alpha. Their strategies are meticulously backtested in and out of sample before going live, and are scaled up over time. Many discretionary managers launch a book with $500M in play from day one, I can count on one hand the number of systematic funds that have done that in the past 5 years.

And while some systematic funds don’t perform well, you’ll be hard pressed to find any massive blow ups akin to what’s regularly seen on the discretionary side. Pension funds can certainly deal with paying 2 and 20 if they have more confidence that their returns from year 1 through 3 aren’t going to all disappear in year

The flow of capital from discretionary to systematic strategies is going to continue, as it should. That will have its own repercussions, which we’re already starting to see.

4. Quants Dig For New Alpha

A 2012 tell-all book from a former Goldman Sachs trader revealed how the Great Vampire Squid often endearingly referred to their unsophisticated clients at “muppets.” While they rightfully got skewered for that comparison, they were certainly onto something when their trading desks would remark internally that they were basically taking candy from babies.

However, many of the muppets are gone now and that’s left far less alpha in the market to capture. Relative value and statistical arbitrage strategies are about capturing asset mispricings associated with the irrational behavioral aspects of fear and greed. This isn’t going to change any time soon, the muppets aren’t coming back, they’ve wised up. Less alpha overall will lead to a drop in the number of hedge funds and the amount of hedge fund assets that can generate enough alpha to command high fees.

It truly is amazing to watch a data set go from being an alpha to a beta over time. I’ve seen the sell side analyst estimates data set owned by Thomson Reuters IBES travel this path over the past 15 years. Yes, there will always be alpha available to be arbitraged which is associated with the irrational behavior of humans in markets, but most alpha generated by systematic traders is associated with an informational advantage.

About five years ago many of the classic stat-arb strategies stopped working due to an influx of competitors. There simply wasn’t enough alpha to go around. This precipitated the smartest firms to search for new data sets with predictive power, or reflexivity. Fast-forward a few years and an all out arms race is now under way.

I love to use the example of the company that is selling data captured from new car insurance registrations. They get this data daily, and it’s incredibly accurate at calling new car sales. So instead of waiting until the end of the quarter to find out how many vehicles GM sold, you can basically get a running count of growth on a daily basis. Obviously that’s going to give you an advantage in trading those auto names, that is until everyone else is using that data. At that point, the data set goes from providing alpha you can capture, to a data set that you must be looking at in order to avoid an informational disadvantage. In a sense, it becomes beta.

So the arms race is in full swing, and there is now a serious lack of qualified talent to analyze all of these different data sets and incorporate them into the existing multi-factor models. While the quantitative research process into the efficacy of a data set hasn’t changed much, firms are struggling to build a process around the testing pipeline. The most efficient firms like WorldQuant have been able to take advantage of that competency to move quickly and decisively to incorporate new alphas.

This brings me to my last point about the systematic testing process. In the next section of this article, I’m going to heavily malign the discretionary buy side for being fairly clueless about how to undertake this entire process. The truth is, even most (but not all) systematic quants suffer from a severe lack of creativity and original thought when it comes to generating hypotheses around how to take advantage of a given data set. From our experience working with discretionary firms at Estimize, they are two steps even further behind the quants as it relates to incorporating new data sets.

Let’s just go back to the car sales example for a second. Would you know exactly how to take advantage of that data to run an event study and generate alpha? Probably not. You’d likely want to talk with someone who’s been trading autos for 10+ years to get their take on what they think moves auto stocks and how having a good projection of sales would impact those names. A good quantitative research process requires an ex-ante hypothesis for some level of causation and not just correlation. We need to know roughly why something works, not just that it works, or else we won’t know why it stops working, and as history has proven, everything stops working at some point.

Being able to hand over an easily testable clean data set, and a bunch of original thoughts about how to generate alpha is imperative for data firms to succeed at this process.

5. Quantamental, Systamental, Factor Aware…Call It What You Want

The rise of the systematic quants and their use of these new data sets also had an impact on the poor returns of the discretionary world over recent years. First, the HFT guys killed the day traders making it impossible to pick up pennies. Next, the stat-arb guys crushed the swing traders playing in the couple of hours to one week timeframe. Were they the primary factor of poor discretionary returns? Probably not, but significant none of the less.

A few years ago the first big discretionary firms started making attempts to hire data scientists and acquire new data sources. They’ve mostly failed to integrate any of this into an actual investment process. Then about 6-9 months ago another chunk of the more forward thinking discretionary firms gave in to the realization that they needed to make big changes. It’s not as if discretionary PMs weren’t using data driven statistical approaches to gain an edge, or that none of them had quants on the desk to help, they were just very few and far between.

You may have seen Paul Tudor Jones almost publicly berating his organization in a strange showing of frustration from such a legendary investor. Steve Cohen has been very public about his attempt to shift Point72 in the data driven direction, even commenting that it’s incredibly hard to find good talent these days (we’ll get to this in a minute). The guys who have been successful in this game historically see the writing on the wall. Hell, even the first episode of season two for the show Billions features main character Bobby “Axe” Axelrod giving his team the condensed 3 minute version of this piece, albeit in a much louder tone. So whomever the producers of that show are talking to, this whole thing has seeped into the mainstream buy-side consciousness now.

The shift that needs to happen is similar to the way players were drafted in Michael Lewis’ book, “Moneyball”. Consider how hard the scouts fought against being replaced by algorithms that were far more accurate than they were, and even in the face of all this evidence, refusing to change. Then consider how much money was on the line in baseball, and the astronomically larger amount on the line in our world. You would think that would precipitate a much quicker shift, but in fact, it will only mean a slower one due to the fear of change when dealing with so much money.

As quants, we are taught how to go through the research process to validate the efficacy of a data set or tool. Everything is derived from this process, and there isn’t too much leeway, it is designed as good science. Yes, as mentioned above, you still need a level of creativity in order to do good research. However, discretionary managers don’t even have the framework for understanding how to do that research, or incorporate new things into their decision making process. This is the largest hurdle to making the shift, and I believe less than 20% of managers will clear it.

This shift isn’t just about using new data sets, like Estimize, or the car sales example, it’s about fundamentally buying into the notion that PMs need to be making investment decisions based on putting the odds in their favor by looking at statistics, and not just being gunslingers or bottoms up value guys. That’s an affront to their entire way of doing things, just as it was for the baseball scouts.

6. Algorithms + Human Experience = Optimal Trading

A passage from Michael Lewis’ latest book, “The Undoing Project,” speaks so directly to the issue discretionary firms face today. Lewis writes about a specific behavioral experiment performed on a set of first year residents and accomplished oncologists. In the experiment, the scientists asked the accomplished doctors to tell them how they make a decision regarding whether a patient has cancer from looking at an x-ray. The doctors all tended to give the scientists a 10 point checklist with a 1-10 rating for each of the 10 points, add up the points and you can accurately determine whether it’s cancer or benign. The scientists proceed to give a set of x-rays (the outcomes of which are known only to them) to the doctors and the residents, asking them to determine whether each is cancer or not. They also give the doctor’s checklist to the residents to use.

I think you can guess what happens next. The oncologists who supplied the rubric in the first place show almost zero ability above random to accurately determine whether the x-ray was cancer or not. They didn’t follow their own rubric, suffered from an astounding amount of representative heuristic, and failed to do their job well. Meanwhile, the first year residents were able to score far higher accuracy rates on avera

from Tumblr http://ift.tt/2qxrdzF

from Tumblr http://ift.tt/2prnOCm

[calvinzeepeda79]

Revenge of the Humans: How Discretionary Managers Can Crush Systematics

This is the entirety of a three part series that was originally published byIntegrity Research and titled The Great Quant Makeover – Part 1: How Discretionary Managers Can Cope with the New Systematic Realities, Part 2:The Rise of the Quants and How Some Successful Discretionary Managers are Responding, Part 3: Revenge of the Humans or How Discretionary Managers Can Crush Systematics

Six months ago I found myself in our Estimize office sitting across the table from a hedge fund portfolio manager who said something I honestly couldn’t believe. According to this PM who runs a $500M long/short book at a large multi-manager fund, he was taking a data science course at night, after work. He told me, “if I don’t learn how to do quantitative analysis I’m not going to have a job in two years.”

A second said the same thing to me a week later.

Two weeks after that I received an email from the “school” providing that very course, inquiring if I could teach a data science class, specifically for finance, to 25 members of a hedge fund who had contracted them.

These are just a few anecdotes among many in the absolutely massive transformation taking place right now within the discretionary institutional management industry. Discretionary managers have woken up, and are now scrambling to understand what’s taking place and how they must change in relation to it. Many will not survive the shift. Others will take advantage and be better off for it.

This piece takes a deep dive into the following themes and how institutional managers can begin to effectively redirect themselves:

Investors have woken up to the asymmetric risk they were taking on with active discretionary mutual funds, hedge funds and RIAs who were basically playing with beta instead of generating alpha. Now they are pulling their money.

Asset flows are moving into “passive” ETF strategies and will continue to move further into smart beta ETF strategies, long only active management is headed to the grave.

Hedge fund assets are flowing out of discretionary and into quantitative systematic strategies which have produced far more consistent alpha. They also blow-up less often.

Most classic systematic alpha strategies are based on price; volume and fundamentals have been arbitraged out and are now betas. This has precipitated a race to build new alphas with new data sets.

Discretionary managers are scurrying to incorporate new data sets, but lack the understanding of how to analyze their efficacy and more importantly, how to incorporate them into their discretionary trading processes.

If discretionary managers remain disciplined and execute their rubric faithfully, they can crush systematic quants, but they must solve the religion vs. science question first.

The organizational structure of discretionary management teams along with the type of people they hire is broken and outdated for today’s challenges. Changes are starting to take place, but all too slowly for many players to survive.

Building the right infrastructure will remain pertinent to surviving this shift. Both quant and discretionary firms must hire teams that include engineers, product managers and quants to suss out new data sets.

On June 20th, Estimize will be hosting the L2Q (Learn to Quant) Conference, a one day seminar designed for discretionary institutional PMs, analysts, and traders who know they need to move quickly and efficiently towards building quantitative processes. Segments will be taught by preeminent buy side, sell side, and unique data experts with vast quantitative investment experience at Two Sigma, PDT Partners, WorldQuant, Wolfe Research, Deutsche Bank, and others.

But before that, let’s take a deeper dive into the topics above, and why we felt a whole conference was necessary to explore them.

1. Getting Paid For Playing With Beta Is Over

Looking back, it’s hard to understand why anyone was willing to give most discretionary fund managers money in the first place. The truth is, most PMs were simply playing with beta, whether it be momentum, mean reversion, value, growth, sector or market cap. Managers were leveraging these far more often than they were actually generating alpha. Now we can all argue over whether correctly timing the use of betas is in itself alpha, but that argument is made moot by the fact that the vast majority of PMs were unsuccessful at this in the long run and eventually blew up.

The greatest trick the industry ever pulled was making LPs believe that they could consistently leverage beta and not get caught with their hand in the cookie jar, giving up years of returns in a matter of months. Over and over, fund managers took their “two and twenty” to the bank in the years they happened to be on the right side of that equation. Then they blew up. Instead of fighting back to their hurdle, they just closed shop and opened up a new one, somehow convincing investors to play the same asymmetric game of risk once again. Heads I win, tails I take a vacation for a year and someone gives me another coin to flip later.

Don’t get me wrong, there are managers who have proven track records of not blowing up while playing with beta, and some even generate true alpha, but they are few and far between. Good luck picking the correct fund manager.

Why did it take the market so long to wake up? We can start with the great answers you’ll hear from friends of mine like wealth manager, Josh Brown. He fully understands the social and egotistical aspect of being invested in these funds, not because it’s the rational thing to do, but because of the accompanying prestige. The same can be said for managing your own personal portfolio; it’s something to talk about at a cocktail party. And while it seems our current political climate echoes the movie Idiocracy, financial market education and investor behavior have actually taken a huge leap forward since the ‘08 crash. I find it interesting that retail investors actually got smart before pension funds, pulling money from active managers, closing their brokerage accounts, and investing in passive low cost ETF strategies.

As for the tens of thousands of small RIAs, why would I give them my money either if I can buy a smart beta ETF for 20bps that does basically the same thing they were for 100bps? You’re gonna tell me that all those mom and pop RIAs managing $40M are executing those smart beta strategies as efficiently and accurately as iShares? Please. It’s only a matter of time before Betterment or some other robo-advisor allows its clients to algorithmically allocate a portion of their portfolio to these strategies. Heck, I wouldn’t be surprised if one of them also provided the ability to use simple, proven, market timing overlays in order to rotate in and out or long and short certain smart beta strategies.

Hedge fund PMs have to realize that even though they are in last car on this disruption train, the conductor is coming to clip their ticket as well. They will either evolve or die, like any other industry disrupted by better efficiency. I think it’s obvious that there will be far fewer of them as most will not successfully shift to generating alpha.

2. All Investing Is Active, Even The Passive Kind

Let’s clear something up, there’s no such thing as “passive investing”. The words we use matter because they form the basis for how we think about things and the actions we take. The developed western world is ripping itself apart over an inability to win a “war on terrorism” because, for propaganda purposes, we decided to say we were fighting a war on a military tactic (you didn’t have to study war theory in school like me to know you can’t win a war against a tactic).

All investing is active, even the decision of how to weight an index, what goes into that index, and how to allocate your capital amongst different asset classes. Just because the computer keeps your allocation levels static does not mean you’ve abdicated responsibility for investment decisions. This is why I’m such a big fan of smart beta, because it does away with the ignorant notion that you can avoid making a decision on beta to begin with. We all have to, so we might as well make that decision in an informed and active way.

In any event, we’re going to continue to see massive flows of capital out of “active” long only mutual fund and long/short hedge fund strategies and into these. The question on everyone’s mind is, how will this affect the market? My best guess is that we’re not going to see the downside of massive systemic risks some are warning about when everyone is indexing. The latter part of 2016 and beginning of 2017 prove that even with all the indexed money, correlations can still drop quickly when macro factors evolve. After the 2016 election, cross-asset correlations that have existed for the past decade began to break down as pictured in the charts below.

Exhibit 1: Cross-asset correlations have fallen sharply

3. Assets Are Flowing From Discretionary to Systematic

You don’t have to look too deeply to see this massive trend in strategy allocations playing out. At Millennium, we’ve seen WorldQuant blow the doors off the barn with returns and inflows of capital. At Point72 (SAC) we’ve seen Cubist outpace the discretionary side of the firm by a wide margin with now over 40 systematic PMs. Balyasny has quickly shifted focus and is building a stable of systematic managers to effectively do something with their huge AUM growth. Other multi-manager platforms like Schonfeld, Paloma, AHL, Engineer’s Gate and GSA have added significant assets. Paul Tudor Jones is attempting to remake his firm by hiring a bunch of systematic managers, and others are following suit. And let’s not even get started with the continued dominance of firms like Renaissance, AQR and Two Sigma, where you probably can’t even give them your money if you tried.

I would say that the nerds are the new kings of Wall Street (Midtown), but frankly they (myself included) would cringe at that statement given their propensity to run in very different circles than the rest of the money manager crowd. This group is mostly made up of unassuming nerdy PhD types that you would probably take for accountants on the subway. They have serious mathematical and scientific training and have usually honed their craft on other data sets before coming to the financial world.

The fact of the matter is that there’s simply more efficacy to what these managers are doing than the vast majority of the discretionary trading world, and they’ve (mostly) put up the numbers to prove it. And I’m not just talking about returns, these groups are producing real alpha. Their strategies are meticulously backtested in and out of sample before going live, and are scaled up over time. Many discretionary managers launch a book with $500M in play from day one, I can count on one hand the number of systematic funds that have done that in the past 5 years.

And while some systematic funds don’t perform well, you’ll be hard pressed to find any massive blow ups akin to what’s regularly seen on the discretionary side. Pension funds can certainly deal with paying 2 and 20 if they have more confidence that their returns from year 1 through 3 aren’t going to all disappear in year

The flow of capital from discretionary to systematic strategies is going to continue, as it should. That will have its own repercussions, which we’re already starting to see.

4. Quants Dig For New Alpha

A 2012 tell-all book from a former Goldman Sachs trader revealed how the Great Vampire Squid often endearingly referred to their unsophisticated clients at “muppets.” While they rightfully got skewered for that comparison, they were certainly onto something when their trading desks would remark internally that they were basically taking candy from babies.

However, many of the muppets are gone now and that’s left far less alpha in the market to capture. Relative value and statistical arbitrage strategies are about capturing asset mispricings associated with the irrational behavioral aspects of fear and greed. This isn’t going to change any time soon, the muppets aren’t coming back, they’ve wised up. Less alpha overall will lead to a drop in the number of hedge funds and the amount of hedge fund assets that can generate enough alpha to command high fees.

It truly is amazing to watch a data set go from being an alpha to a beta over time. I’ve seen the sell side analyst estimates data set owned by Thomson Reuters IBES travel this path over the past 15 years. Yes, there will always be alpha available to be arbitraged which is associated with the irrational behavior of humans in markets, but most alpha generated by systematic traders is associated with an informational advantage.

About five years ago many of the classic stat-arb strategies stopped working due to an influx of competitors. There simply wasn’t enough alpha to go around. This precipitated the smartest firms to search for new data sets with predictive power, or reflexivity. Fast-forward a few years and an all out arms race is now under way.

I love to use the example of the company that is selling data captured from new car insurance registrations. They get this data daily, and it’s incredibly accurate at calling new car sales. So instead of waiting until the end of the quarter to find out how many vehicles GM sold, you can basically get a running count of growth on a daily basis. Obviously that’s going to give you an advantage in trading those auto names, that is until everyone else is using that data. At that point, the data set goes from providing alpha you can capture, to a data set that you must be looking at in order to avoid an informational disadvantage. In a sense, it becomes beta.

So the arms race is in full swing, and there is now a serious lack of qualified talent to analyze all of these different data sets and incorporate them into the existing multi-factor models. While the quantitative research process into the efficacy of a data set hasn’t changed much, firms are struggling to build a process around the testing pipeline. The most efficient firms like WorldQuant have been able to take advantage of that competency to move quickly and decisively to incorporate new alphas.

This brings me to my last point about the systematic testing process. In the next section of this article, I’m going to heavily malign the discretionary buy side for being fairly clueless about how to undertake this entire process. The truth is, even most (but not all) systematic quants suffer from a severe lack of creativity and original thought when it comes to generating hypotheses around how to take advantage of a given data set. From our experience working with discretionary firms at Estimize, they are two steps even further behind the quants as it relates to incorporating new data sets.

Let’s just go back to the car sales example for a second. Would you know exactly how to take advantage of that data to run an event study and generate alpha? Probably not. You’d likely want to talk with someone who’s been trading autos for 10+ years to get their take on what they think moves auto stocks and how having a good projection of sales would impact those names. A good quantitative research process requires an ex-ante hypothesis for some level of causation and not just correlation. We need to know roughly why something works, not just that it works, or else we won’t know why it stops working, and as history has proven, everything stops working at some point.

Being able to hand over an easily testable clean data set, and a bunch of original thoughts about how to generate alpha is imperative for data firms to succeed at this process.

5. Quantamental, Systamental, Factor Aware…Call It What You Want

The rise of the systematic quants and their use of these new data sets also had an impact on the poor returns of the discretionary world over recent years. First, the HFT guys killed the day traders making it impossible to pick up pennies. Next, the stat-arb guys crushed the swing traders playing in the couple of hours to one week timeframe. Were they the primary factor of poor discretionary returns? Probably not, but significant none of the less.

A few years ago the first big discretionary firms started making attempts to hire data scientists and acquire new data sources. They’ve mostly failed to integrate any of this into an actual investment process. Then about 6-9 months ago another chunk of the more forward thinking discretionary firms gave in to the realization that they needed to make big changes. It’s not as if discretionary PMs weren’t using data driven statistical approaches to gain an edge, or that none of them had quants on the desk to help, they were just very few and far between.

You may have seen Paul Tudor Jones almost publicly berating his organization in a strange showing of frustration from such a legendary investor. Steve Cohen has been very public about his attempt to shift Point72 in the data driven direction, even commenting that it’s incredibly hard to find good talent these days (we’ll get to this in a minute). The guys who have been successful in this game historically see the writing on the wall. Hell, even the first episode of season two for the show Billions features main character Bobby “Axe” Axelrod giving his team the condensed 3 minute version of this piece, albeit in a much louder tone. So whomever the producers of that show are talking to, this whole thing has seeped into the mainstream buy-side consciousness now.

The shift that needs to happen is similar to the way players were drafted in Michael Lewis’ book, “Moneyball”. Consider how hard the scouts fought against being replaced by algorithms that were far more accurate than they were, and even in the face of all this evidence, refusing to change. Then consider how much money was on the line in baseball, and the astronomically larger amount on the line in our world. You would think that would precipitate a much quicker shift, but in fact, it will only mean a slower one due to the fear of change when dealing with so much money.

As quants, we are taught how to go through the research process to validate the efficacy of a data set or tool. Everything is derived from this process, and there isn’t too much leeway, it is designed as good science. Yes, as mentioned above, you still need a level of creativity in order to do good research. However, discretionary managers don’t even have the framework for understanding how to do that research, or incorporate new things into their decision making process. This is the largest hurdle to making the shift, and I believe less than 20% of managers will clear it.

This shift isn’t just about using new data sets, like Estimize, or the car sales example, it’s about fundamentally buying into the notion that PMs need to be making investment decisions based on putting the odds in their favor by looking at statistics, and not just being gunslingers or bottoms up value guys. That’s an affront to their entire way of doing things, just as it was for the baseball scouts.

6. Algorithms + Human Experience = Optimal Trading

A passage from Michael Lewis’ latest book, “The Undoing Project,” speaks so directly to the issue discretionary firms face today. Lewis writes about a specific behavioral experiment performed on a set of first year residents and accomplished oncologists. In the experiment, the scientists asked the accomplished doctors to tell them how they make a decision regarding whether a patient has cancer from looking at an x-ray. The doctors all tended to give the scientists a 10 point checklist with a 1-10 rating for each of the 10 points, add up the points and you can accurately determine whether it’s cancer or benign. The scientists proceed to give a set of x-rays (the outcomes of which are known only to them) to the doctors and the residents, asking them to determine whether each is cancer or not. They also give the doctor’s checklist to the residents to use.

I think you can guess what happens next. The oncologists who supplied the rubric in the first place show almost zero ability above random to accurately determine whether the x-ray was cancer or not. They didn’t follow their own rubric, suffered from an astounding amount of representative heuristic, and failed to do their job well. Meanwhile, the first year residents were able to score far higher accuracy rates on avera

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Revenge of the Humans: How Discretionary Managers Can Crush Systematics

This is the entirety of a three part series that was originally published byIntegrity Research and titled The Great Quant Makeover - Part 1: How Discretionary Managers Can Cope with the New Systematic Realities, Part 2:The Rise of the Quants and How Some Successful Discretionary Managers are Responding, Part 3: Revenge of the Humans or How Discretionary Managers Can Crush Systematics

Six months ago I found myself in our Estimize office sitting across the table from a hedge fund portfolio manager who said something I honestly couldn’t believe. According to this PM who runs a $500M long/short book at a large multi-manager fund, he was taking a data science course at night, after work. He told me, “if I don’t learn how to do quantitative analysis I’m not going to have a job in two years.”

A second said the same thing to me a week later.

Two weeks after that I received an email from the “school” providing that very course, inquiring if I could teach a data science class, specifically for finance, to 25 members of a hedge fund who had contracted them.

These are just a few anecdotes among many in the absolutely massive transformation taking place right now within the discretionary institutional management industry. Discretionary managers have woken up, and are now scrambling to understand what’s taking place and how they must change in relation to it. Many will not survive the shift. Others will take advantage and be better off for it.

This piece takes a deep dive into the following themes and how institutional managers can begin to effectively redirect themselves:

Investors have woken up to the asymmetric risk they were taking on with active discretionary mutual funds, hedge funds and RIAs who were basically playing with beta instead of generating alpha. Now they are pulling their money.

Asset flows are moving into “passive” ETF strategies and will continue to move further into smart beta ETF strategies, long only active management is headed to the grave.

Hedge fund assets are flowing out of discretionary and into quantitative systematic strategies which have produced far more consistent alpha. They also blow-up less often.

Most classic systematic alpha strategies are based on price; volume and fundamentals have been arbitraged out and are now betas. This has precipitated a race to build new alphas with new data sets.

Discretionary managers are scurrying to incorporate new data sets, but lack the understanding of how to analyze their efficacy and more importantly, how to incorporate them into their discretionary trading processes.

If discretionary managers remain disciplined and execute their rubric faithfully, they can crush systematic quants, but they must solve the religion vs. science question first.

The organizational structure of discretionary management teams along with the type of people they hire is broken and outdated for today’s challenges. Changes are starting to take place, but all too slowly for many players to survive.

Building the right infrastructure will remain pertinent to surviving this shift. Both quant and discretionary firms must hire teams that include engineers, product managers and quants to suss out new data sets.

On June 20th, Estimize will be hosting the L2Q (Learn to Quant) Conference, a one day seminar designed for discretionary institutional PMs, analysts, and traders who know they need to move quickly and efficiently towards building quantitative processes. Segments will be taught by preeminent buy side, sell side, and unique data experts with vast quantitative investment experience at Two Sigma, PDT Partners, WorldQuant, Wolfe Research, Deutsche Bank, and others.

But before that, let’s take a deeper dive into the topics above, and why we felt a whole conference was necessary to explore them.

1. Getting Paid For Playing With Beta Is Over

Looking back, it’s hard to understand why anyone was willing to give most discretionary fund managers money in the first place. The truth is, most PMs were simply playing with beta, whether it be momentum, mean reversion, value, growth, sector or market cap. Managers were leveraging these far more often than they were actually generating alpha. Now we can all argue over whether correctly timing the use of betas is in itself alpha, but that argument is made moot by the fact that the vast majority of PMs were unsuccessful at this in the long run and eventually blew up.

The greatest trick the industry ever pulled was making LPs believe that they could consistently leverage beta and not get caught with their hand in the cookie jar, giving up years of returns in a matter of months. Over and over, fund managers took their “two and twenty” to the bank in the years they happened to be on the right side of that equation. Then they blew up. Instead of fighting back to their hurdle, they just closed shop and opened up a new one, somehow convincing investors to play the same asymmetric game of risk once again. Heads I win, tails I take a vacation for a year and someone gives me another coin to flip later.

Don’t get me wrong, there are managers who have proven track records of not blowing up while playing with beta, and some even generate true alpha, but they are few and far between. Good luck picking the correct fund manager.

Why did it take the market so long to wake up? We can start with the great answers you’ll hear from friends of mine like wealth manager, Josh Brown. He fully understands the social and egotistical aspect of being invested in these funds, not because it’s the rational thing to do, but because of the accompanying prestige. The same can be said for managing your own personal portfolio; it’s something to talk about at a cocktail party. And while it seems our current political climate echoes the movie Idiocracy, financial market education and investor behavior have actually taken a huge leap forward since the ‘08 crash. I find it interesting that retail investors actually got smart before pension funds, pulling money from active managers, closing their brokerage accounts, and investing in passive low cost ETF strategies.

As for the tens of thousands of small RIAs, why would I give them my money either if I can buy a smart beta ETF for 20bps that does basically the same thing they were for 100bps? You’re gonna tell me that all those mom and pop RIAs managing $40M are executing those smart beta strategies as efficiently and accurately as iShares? Please. It’s only a matter of time before Betterment or some other robo-advisor allows its clients to algorithmically allocate a portion of their portfolio to these strategies. Heck, I wouldn’t be surprised if one of them also provided the ability to use simple, proven, market timing overlays in order to rotate in and out or long and short certain smart beta strategies.

Hedge fund PMs have to realize that even though they are in last car on this disruption train, the conductor is coming to clip their ticket as well. They will either evolve or die, like any other industry disrupted by better efficiency. I think it’s obvious that there will be far fewer of them as most will not successfully shift to generating alpha.

2. All Investing Is Active, Even The Passive Kind

Let’s clear something up, there’s no such thing as “passive investing”. The words we use matter because they form the basis for how we think about things and the actions we take. The developed western world is ripping itself apart over an inability to win a “war on terrorism” because, for propaganda purposes, we decided to say we were fighting a war on a military tactic (you didn’t have to study war theory in school like me to know you can’t win a war against a tactic).

All investing is active, even the decision of how to weight an index, what goes into that index, and how to allocate your capital amongst different asset classes. Just because the computer keeps your allocation levels static does not mean you’ve abdicated responsibility for investment decisions. This is why I’m such a big fan of smart beta, because it does away with the ignorant notion that you can avoid making a decision on beta to begin with. We all have to, so we might as well make that decision in an informed and active way.

In any event, we’re going to continue to see massive flows of capital out of “active” long only mutual fund and long/short hedge fund strategies and into these. The question on everyone’s mind is, how will this affect the market? My best guess is that we’re not going to see the downside of massive systemic risks some are warning about when everyone is indexing. The latter part of 2016 and beginning of 2017 prove that even with all the indexed money, correlations can still drop quickly when macro factors evolve. After the 2016 election, cross-asset correlations that have existed for the past decade began to break down as pictured in the charts below.

Exhibit 1: Cross-asset correlations have fallen sharply

3. Assets Are Flowing From Discretionary to Systematic

You don’t have to look too deeply to see this massive trend in strategy allocations playing out. At Millennium, we’ve seen WorldQuant blow the doors off the barn with returns and inflows of capital. At Point72 (SAC) we’ve seen Cubist outpace the discretionary side of the firm by a wide margin with now over 40 systematic PMs. Balyasny has quickly shifted focus and is building a stable of systematic managers to effectively do something with their huge AUM growth. Other multi-manager platforms like Schonfeld, Paloma, AHL, Engineer’s Gate and GSA have added significant assets. Paul Tudor Jones is attempting to remake his firm by hiring a bunch of systematic managers, and others are following suit. And let’s not even get started with the continued dominance of firms like Renaissance, AQR and Two Sigma, where you probably can’t even give them your money if you tried.

I would say that the nerds are the new kings of Wall Street (Midtown), but frankly they (myself included) would cringe at that statement given their propensity to run in very different circles than the rest of the money manager crowd. This group is mostly made up of unassuming nerdy PhD types that you would probably take for accountants on the subway. They have serious mathematical and scientific training and have usually honed their craft on other data sets before coming to the financial world.

The fact of the matter is that there’s simply more efficacy to what these managers are doing than the vast majority of the discretionary trading world, and they’ve (mostly) put up the numbers to prove it. And I’m not just talking about returns, these groups are producing real alpha. Their strategies are meticulously backtested in and out of sample before going live, and are scaled up over time. Many discretionary managers launch a book with $500M in play from day one, I can count on one hand the number of systematic funds that have done that in the past 5 years.

And while some systematic funds don’t perform well, you’ll be hard pressed to find any massive blow ups akin to what’s regularly seen on the discretionary side. Pension funds can certainly deal with paying 2 and 20 if they have more confidence that their returns from year 1 through 3 aren’t going to all disappear in year

The flow of capital from discretionary to systematic strategies is going to continue, as it should. That will have its own repercussions, which we’re already starting to see.

4. Quants Dig For New Alpha

A 2012 tell-all book from a former Goldman Sachs trader revealed how the Great Vampire Squid often endearingly referred to their unsophisticated clients at “muppets.” While they rightfully got skewered for that comparison, they were certainly onto something when their trading desks would remark internally that they were basically taking candy from babies.

However, many of the muppets are gone now and that’s left far less alpha in the market to capture. Relative value and statistical arbitrage strategies are about capturing asset mispricings associated with the irrational behavioral aspects of fear and greed. This isn’t going to change any time soon, the muppets aren’t coming back, they’ve wised up. Less alpha overall will lead to a drop in the number of hedge funds and the amount of hedge fund assets that can generate enough alpha to command high fees.

It truly is amazing to watch a data set go from being an alpha to a beta over time. I’ve seen the sell side analyst estimates data set owned by Thomson Reuters IBES travel this path over the past 15 years. Yes, there will always be alpha available to be arbitraged which is associated with the irrational behavior of humans in markets, but most alpha generated by systematic traders is associated with an informational advantage.

About five years ago many of the classic stat-arb strategies stopped working due to an influx of competitors. There simply wasn’t enough alpha to go around. This precipitated the smartest firms to search for new data sets with predictive power, or reflexivity. Fast-forward a few years and an all out arms race is now under way.

I love to use the example of the company that is selling data captured from new car insurance registrations. They get this data daily, and it’s incredibly accurate at calling new car sales. So instead of waiting until the end of the quarter to find out how many vehicles GM sold, you can basically get a running count of growth on a daily basis. Obviously that’s going to give you an advantage in trading those auto names, that is until everyone else is using that data. At that point, the data set goes from providing alpha you can capture, to a data set that you must be looking at in order to avoid an informational disadvantage. In a sense, it becomes beta.

So the arms race is in full swing, and there is now a serious lack of qualified talent to analyze all of these different data sets and incorporate them into the existing multi-factor models. While the quantitative research process into the efficacy of a data set hasn’t changed much, firms are struggling to build a process around the testing pipeline. The most efficient firms like WorldQuant have been able to take advantage of that competency to move quickly and decisively to incorporate new alphas.

This brings me to my last point about the systematic testing process. In the next section of this article, I’m going to heavily malign the discretionary buy side for being fairly clueless about how to undertake this entire process. The truth is, even most (but not all) systematic quants suffer from a severe lack of creativity and original thought when it comes to generating hypotheses around how to take advantage of a given data set. From our experience working with discretionary firms at Estimize, they are two steps even further behind the quants as it relates to incorporating new data sets.

Let’s just go back to the car sales example for a second. Would you know exactly how to take advantage of that data to run an event study and generate alpha? Probably not. You’d likely want to talk with someone who’s been trading autos for 10+ years to get their take on what they think moves auto stocks and how having a good projection of sales would impact those names. A good quantitative research process requires an ex-ante hypothesis for some level of causation and not just correlation. We need to know roughly why something works, not just that it works, or else we won’t know why it stops working, and as history has proven, everything stops working at some point.

Being able to hand over an easily testable clean data set, and a bunch of original thoughts about how to generate alpha is imperative for data firms to succeed at this process.

5. Quantamental, Systamental, Factor Aware…Call It What You Want

The rise of the systematic quants and their use of these new data sets also had an impact on the poor returns of the discretionary world over recent years. First, the HFT guys killed the day traders making it impossible to pick up pennies. Next, the stat-arb guys crushed the swing traders playing in the couple of hours to one week timeframe. Were they the primary factor of poor discretionary returns? Probably not, but significant none of the less.

A few years ago the first big discretionary firms started making attempts to hire data scientists and acquire new data sources. They’ve mostly failed to integrate any of this into an actual investment process. Then about 6-9 months ago another chunk of the more forward thinking discretionary firms gave in to the realization that they needed to make big changes. It’s not as if discretionary PMs weren’t using data driven statistical approaches to gain an edge, or that none of them had quants on the desk to help, they were just very few and far between.

You may have seen Paul Tudor Jones almost publicly berating his organization in a strange showing of frustration from such a legendary investor. Steve Cohen has been very public about his attempt to shift Point72 in the data driven direction, even commenting that it’s incredibly hard to find good talent these days (we’ll get to this in a minute). The guys who have been successful in this game historically see the writing on the wall. Hell, even the first episode of season two for the show Billions features main character Bobby “Axe” Axelrod giving his team the condensed 3 minute version of this piece, albeit in a much louder tone. So whomever the producers of that show are talking to, this whole thing has seeped into the mainstream buy-side consciousness now.

The shift that needs to happen is similar to the way players were drafted in Michael Lewis’ book, “Moneyball”. Consider how hard the scouts fought against being replaced by algorithms that were far more accurate than they were, and even in the face of all this evidence, refusing to change. Then consider how much money was on the line in baseball, and the astronomically larger amount on the line in our world. You would think that would precipitate a much quicker shift, but in fact, it will only mean a slower one due to the fear of change when dealing with so much money.

As quants, we are taught how to go through the research process to validate the efficacy of a data set or tool. Everything is derived from this process, and there isn’t too much leeway, it is designed as good science. Yes, as mentioned above, you still need a level of creativity in order to do good research. However, discretionary managers don’t even have the framework for understanding how to do that research, or incorporate new things into their decision making process. This is the largest hurdle to making the shift, and I believe less than 20% of managers will clear it.

This shift isn’t just about using new data sets, like Estimize, or the car sales example, it’s about fundamentally buying into the notion that PMs need to be making investment decisions based on putting the odds in their favor by looking at statistics, and not just being gunslingers or bottoms up value guys. That’s an affront to their entire way of doing things, just as it was for the baseball scouts.

6. Algorithms + Human Experience = Optimal Trading

A passage from Michael Lewis’ latest book, ���The Undoing Project,” speaks so directly to the issue discretionary firms face today. Lewis writes about a specific behavioral experiment performed on a set of first year residents and accomplished oncologists. In the experiment, the scientists asked the accomplished doctors to tell them how they make a decision regarding whether a patient has cancer from looking at an x-ray. The doctors all tended to give the scientists a 10 point checklist with a 1-10 rating for each of the 10 points, add up the points and you can accurately determine whether it’s cancer or benign. The scientists proceed to give a set of x-rays (the outcomes of which are known only to them) to the doctors and the residents, asking them to determine whether each is cancer or not. They also give the doctor’s checklist to the residents to use.

I think you can guess what happens next. The oncologists who supplied the rubric in the first place show almost zero ability above random to accurately determine whether the x-ray was cancer or not. They didn’t follow their own rubric, suffered from an astounding amount of representative heuristic, and failed to do their job well. Meanwhile, the first year residents were able to score far higher accuracy rates on avera