Managed Futures
The Medallion Fund, Skepticism, And A Failure To Comprehend - March 4, 2020
March 2020 - Managed Futures
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Explosively, professor Bradford Cornell’s recent brief analysis of the performance of Renaissance Technologies’ Medallion fund states that “to date, there is no adequate rational market explanation for this performance.”
I find this conclusion interesting — not because of its contribution to our understanding of the Medallion fund’s performance (such efforts have devolved into a parlor game), but because it accidentally reveals an implicit worldview that, upon reflection, is a root cause of the dismal record of active management.
This belief rests on the conceit that investing is essentially a human activity — and therefore human reason must be able to explain the results of such activity.
There is a continuum of expressions of this worldview, ranging from the dogmatic assertion that active investing must be based on either cash flow analysis or short-term price movement to authoritarian claims that there can be no investment activity without human talent.
Through dictatorial educational programs and a homogeneous workforce, we have reached a point where this perspective is unquestionably accepted. This acceptance allows us to pretend that everything worth knowing is already known and in use, making any alternative unimaginable.
The problem is that such doctrinaire views have consequences.
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