Harvard announces mass firing of its hedge-fund managers

Originally published at: http://boingboing.net/2017/01/26/harvard-announces-mass-firing.html


To be accurate, they’re only firing the ones that work for the endowment’s underperforming internal investment firm. They’ll still be employing external hedge-fund managers, so they’re still drinking that pricey Kool-Aid


Studies have shown that algorithmic stock picks perform as good as, and in some cases better than, broker stock picks. There are two kinds of human managed funds that outperform computers, insider traders and Ponzi schemes. One would rather expect an Ivy with a historic reputation for business to do the math and recognize this. Ergo, they’re either not as savvy as their reputation suggests, or they’re mismanaging their principle. Either way, their benefactors, who presumably want their contributions to be used as profitably as possible, would be well advised to investigate Harvard Management Company misuse of their donations. I know that if I gave a few million to my alma mater, I’d take an interest in how they managed it.


Are you suggesting that they should be doing more insider trading and investing in (or creating) more Ponzi schemes?

Also, isn’t the MBA programme fundamentally a Ponzi scheme?


So you think the sacked traders were trading stocks? You think the stock traders were discretionary and not algo?

Curious - why do you think these two things?


Studies have also shown that cats outperform brokers.


I’m suggesting HMC should fire all their brokers, in house and out, and hire programmers and mathematicians (but I repeat myself) instead. They’ll make more money. And I’m suggesting that if they don’t make more money that way, it’s statistically likely the managers outperforming the algorithms are breaking the law, in which case they should still fire them. However, since HMC’s performance has a known history of trailing behind the general market, it’s probable they’re not breaking the law, but they are losing money. I’m of course assuming they both want to maximize return on their investments and stay on the right side of the law. If they don’t want to do both of those things, they should categorically ignore said advice.

Because it doesn’t take 230 people to manage an all algorithmic portfolio. While HMC’s returns are public, their internal practices obviously aren’t. But most conservative funds make the mistake of extending the wisdom of diversification to including both human money managers and software. Those funds often lag in the market. There are temporary exceptions, honestly human picked stocks that outperform computers, but in the balance human picked stocks lose to computers. It’s bad business to let brokers pick stocks directly. It’s a practice in rapid decline and its days are numbered by sheer market forces. The question is how much will stubbornly hidebound funds waste before they accept that human active management is basically welfare for tea leaf readers.


Psst, Harvard geniuses, I got a secret for you: broad-based index funds. Don’t tell anybody else, though.

E.g, Vanguard Total Market Index Fund (VTSMX) vs Morningstar Hedge Fund Index (HHF.A):


But those brokers earn their millions, because they’re so highly skilled and talented and they work so hard

The dude working with the chainsaw all day, though…no skill, no talent, lazy. Obviously. I mean, if he was worth anything he’d be rich, right?

That’s just how it works; it’s all a consequence of the immutable natural laws of economics. Ain’t no rigged system here.


I read that as an argument for doing away with stock markets altogether.

Not that I’m a fan of the insane rewards given to the tea leaf readers, nor am I protecting their ‘right’ to those rewards. But I just don’t see what value to stock market can add to the economy (rather than selected individuals bank accounts) if the function can be better performed by an algorithm.

I’m also not, as you can probably guess, a fan of high frequency trading. When this is a viable way to ‘beat’ the market, rather than actual knowledge about the market, then the purpose of the market has fundamentally changed. (I love the applied use of physics, even though I hate what it was used for)


I’m not opposed to the idea of public investment, people being able to invest money far and wide in the ventures of others. But I certainly agree with you that the system has been massively perverted. However, I don’t think technology can be blamed, it merely highlighted and amplified the systemic flaws.

A big problem, however, is that a paradigm for fair and equitable investment markets would not serve the concentration and consolidation of the personally ultrawealthy at the expense of overall economic health via their giant head-start, and dirty tricks such as market manipulation, so the people and firms with the greatest influence in both the marketplace and the regulatory policy have a vested interest in opposing reforms. As such, I strongly suspect that if reforms ever do actually occur, it will probably only be by the mechanisms of economic and technological evolution. So technology that disrupts entrenched positions is, IMHO, a positive thing, even though it can be unnerving.


Now we’re getting there…

Next up: abolish limited-liability corporations.


Oh, neither am I, although that only applies to the first purchase. But after that … what’s the point, where’s the market good? The company sure as shit isn’t benefitting from all that HFT going on in its name.



There is a legitimate need for a society to have a mechanism that facilitates capital investment.

There is absolutely no need for a mechanism to whip that capital through a thousand different corporations in a day.

We need to get the finance industry turned back into a vehicle for investment rather than a fucking casino.




I wonder if a cap on trades/time_period would be useful? Each stock can only be traded once per trading day, for instance.

‘Front running’ suddenly becomes worse than useless since at best you end up holding a stock you didn’t really want for 24 hours, and at worst it could be used to trick opposing algorithms into buying ‘bad’ stocks. Panics and market crashes would presumably play out in very slow motion, allowing time for pause and reflection rather than OMFGWTFBBQ!!1! becoming the preferred strategy. But it would still allow actual investors (in the old sense of the term) to buy into or out of stocks as they want. It might also encourage companies to think more about the long term, rather than nothing beyond the next quarter.


I agree. This makes “playing the market so a few people can make millions” more important than “investing in businesses to so they can do good things, and so I can make money for my retirement.” I wish there was a 0.01% fee on all trades or something. A great big huge capacitor can help many complex systems that need to be smoothed for long term useful goals rather than short term useless selfish gains.

Never happen.


The trading tax proposed by Bernie was designed to fund his education plan, but it was also intended to reduce market volatility by imposing a financial disincentive on non-productive high-frequency trading.


I don’t want to make money from the kind of evils that brokers looking for maximum return on investment will inevitably support. I’d rather just blackjack strangers in dark alleys - it’s more ethical.


I know this is sorta off topic, but what the fuck is going on with the article image of the crest? WTF is that hairline… line… doing in an other wise very clean image. It doesn’t look like it was used to cut something out or anything and it even overlaps the triangle. I am going to let this bother me all day if I don’t find a distraction…

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