The Ledger
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Fund manager failures almost invariably stem from character, not lost skill
“We have a long-term conviction that skill is persistent, that if somebody is good, They stay good. Unless, almost invariably, when it goes wrong, it's actually a character thing rather than a skill issue.”
Marshall Wace became Europe's largest hedge fund by constantly capping capacity
“And the paradox about Marshall Waste is we've grown to be the largest equity hedge fund in Europe, Because, in my opinion, we constantly closed. Because other people grew to be big and blew up. Because they were too big.”
Marshall Wace expects ESG strategies to be a rich source of alpha
“We launched an ESG fund, and that's a very exciting area, which we, having been pretty cynical about it as an alpha source, we now think actually it's going to be pretty alpha rich.”
Marshall Wace was the second-largest disclosed short seller in Wirecard
“We actually just had one of our best ever experiences as a firm on the short side, which was Wirecard, where we were the second biggest disclosed short.”
Marshall: Marshall Wace optimizes portfolio construction and capital allocation to alpha, not returns
“The thing you're optimizing is not a return objective. It's an alpha objective. So it's the performance of those ideas against whatever the benchmark is. And you create information ratios and risk manage around the alpha. And for our managers, it's actually th…”
Marshall Wace's Eureka Fund generated 9% long alpha versus 3% short alpha
“And if you look at the long-term record of the Eureka Fund as a proxy, our long-term annualized alpha on the long side is about nine percent, and our short side about three percent.”
Marshall: Beyond a critical mass threshold, fund size is a disadvantage
“Although you need a certain amount of size to have critical mass and pay the bills, beyond a certain level, size is most of the time a disadvantage. And so it's a sadness to me in a way that there are so many barriers to entry now and that it is getting more c…”
Sell-side broker portfolios generated substantial alpha in Marshall Wace's initial trial
“And much to my surprise, because I was pretty skeptical about it, I had the typical arrogance of a buy-side guy, They actually generated a lot of alpha.”
Marshall Wace Uses Z-Scores to Quantify and Manage Short Crowding
“We have rules about individual stocks, both on the long and the short side, in terms of how big we can be in the positions. But we also implement it at the aggregate level. So we have a crowdedness factor. So we have a Z-score approach to measuring short crowd…”
George Soros provided half of Marshall Wace's $50M launch capital
“We raised fifty million dollars of rich half was from Soros.”
Marshall Wace seeded its TOPS strategy with $200M from the Eureka fund
“And so we, having measured it for about a year, we then said, or Ian said, let's put some capital behind this. And we put, by that stage, Eureka was a kind of two, two and a half billion dollar fund. We put two hundred million, so 10% of the fund, into a progr…”
Marshall Wace held its Wirecard short for two years before its collapse
“We held that position for two years, and then when it went like a puff of smoke, went from about a twelve billion dollar market cap to zero in three days.”
Marshall Wace closed its Eureka fund at $2B in 2001, returning capital
“And that's why we closed Eureka when it was two billion in 2001, gave back capital. And we've frequently closed our funds all the way through the life of the firm.”
Over 3,000 contributors have been measured in Marshall Wace's TOPS system
“We have 1000, well, historically, upwards of 3000 people who have contributed to TOPS and been measured. For long periods. Three, five, 10, 20 years in some cases.”
Marshall: Marshall Wace operates around 15 fundamental strategies using quant inputs
“Then we have the fundamental side which has evolved from having essentially one strategy when we started to now there's around 15 strategies run by fundamental managers and Covering different sectors and different geographies, but they also then benefit from a…”
Marshall Wace was roughly the third hedge fund established in Europe
“We were about the third hedge fund in Europe.”
Marshall: Marshall Wace limits strategy capacity to force capital diversification
“So we've always worked on the basis, first of all, that we were size constrained in everything we did, and that led us to allow different strategies to develop their life and to distribute the capital as much as possible, really.”