Feeling old

Yesterday witnessed a watershed event chez Macro Man.  Much to your author's chagrin and despite his best efforts, Macro Boy the Elder (aged 13) bested him for the first time ever in a game of 1-on-1 basketball.  As recently as the spring Macro Man would have put the over/under for his demise at 2017 or 2018; somehow his son closed the gap and surpassed him with bewildering speed.

Is this somehow an analogue for his professional life?  In many ways, it's tempting to say yes.  During the financial crisis and its immediate aftermath, he was a successful part of a small team of macro punters that made 10% per year with low vol and almost no drawdowns.   For reasons largely beyond our control, the fund was wound down in 2010.  Fast forward a few years....and no one other than the fund's founder is in any kind of seat, trading or otherwise.

Has the world changed so much that the skills that translated into superior performance a few years ago are now obsolete to the point of irrelevance?  To be sure, macro is not exactly the flavor of the month amongst investors and allocators, and a shrinking pie naturally leads to fewer risk taking opportunities.     Moreover, the emphasis on risk/compliance/legal functionalities after Madoff has squeezed the ability of small funds to survive and prosper, so AUM has tended to congregate in a handful of mega-funds rather than be dispersed across a broad range of hedge fund investment vehicles.  It's ironic, really....as regulators have embraced the mission to obliterate "too big to fail" across regulated banking institutions, you may be seeing the same issue arise in the much more loosely regulated world of leveraged fund management.

Moreover, even where there is appetite to take risk, it seems as if much of it is centered in quantitative models, be it HFT or quant asset allocation.  Macro Man touched on this issue in March, and things unsurprisingly haven't changed much.    The quest for the Holy Grail of a consistently profitable model is a tempting one, and it's frankly unsurprising to see the demand where it is.  However, we've learned the hard way over the years that models generally fail when exposed to shocks or other unforeseen circumstances that a more discretionary investment approach can pick up on, so the apparent lack of interest in discretionary investment professionals is curious.

It's a little hard not to sound like a grumpy old man, even though mid-40's isn't- or shouldn't be- "old".   But in a world dominated by coders on the one hand and box-tickers on the other (no MBA/no CFA/no dice), it feels like the experience of analyzing and trading part market cycles is an active detriment.  Either that, or the quality of Macro Man's analytical skills, like his basketball skills, has eroded badly since his younger days.  However his mind, unlike his jump shot, still feels fresh and sharp. 

But it doesn't matter how many jumpers you make if you can't get in the game.