In total, the 25 highest-earning hedge fund managers and traders made a combined $16.8 billion in 2017, making it the best year for the top hedge fund managers since 2013. Forbes includes in its analysis hedge fund managers and traders who now mostly or even exclusively manage their own money and some of them can be found in the top 10 highest earners of 2017.
Knowing that the stock did so well over time, you may feel inclined to believe that maybe holding Netflix stock was not such a big challenge. Nevertheless, the stock lost more than 70% of its value in three different years: 2002, 2004, and 2011. In addition to that, Netflix had two more years with drawdowns of more than 50% in 2008 and 2012.
We can see that the average next-day returns are almost monotonically increasing with the previous day’s order flow. The spread between the top and bottom quintiles is about 12 bps, which annualizes to about 30%. This doesn’t mean we will generate 30% annualized returns, since we won’t be able to arbitrage between today’s return (if the order flow is in the top or bottom quintile) with some previous day’s return when its order flow was in the opposite extreme. Nevertheless, it is encouraging.
Trading electronically in FX has been commonplace for years through Request-For-Quote (RFQ) or click trading. However, the increasing fragmentation of liquidity, accelerating speed of ECN matching engines and market participants, coupled with the proliferation of new trading tools, has created a whole host of fresh challenges and opportunities for corporate treasury departments.
Specialised markets such as cocoa and coffee are becoming the next frontier for the waves of buying and selling generated by algorithmic trading, which has long since carved out a presence in currencies, equities and interest rates.