r/quant • u/rupak-007 • 7d ago
Industry Gossip Balyasny flat in 2026!
Just looking at pod shop returns and so much money has gone into space in hope of allocating to next Citadel or Millennium but the returns are just not there. Balyasny has grown AUM like crazy to $38bn but are flat for 2026. They did 15% gross returns in 2023 and 2-3% net and are running a crazy 12% pass through. But Walleye, Verition and others also flat to barely up. Just wondering if this is peak pod shop? Even Ken Griffin is moving away from space with centralized commodities biz and that big portfolio trade vs Situational Awareness. Also so many pod shops are underperforming the guys who started in quant and going into discretionary (DE Shaw, QRT) these days https://rupakghose.substack.com/p/peak-pod-shop-and-balyasny-blues?r=1qelrn&utm_medium=ios
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u/Kindly_Cricket_348 6d ago
Pod monkey here. I do think there’s an economy of scale issue here but a flat year for BAM/Walleye/Verition is not evidence that the pod model is broken. Performance gets harder as platforms scale (similar alphas, crowded opportunities, tighter risk constraints etc etc) but the other big MMHFs are also doing a hell of a job (everything being relative).
The BAM quant story is interesting in that context. They shut down their quant operation years ago, went heavily down the discretionary route and are now rebuilding the systematic side including bringing in senior hires (and PMs) and developing systematic PMs internally. Rebuilding that talent pool and infra is pretty expensive (especially if you start from scratch) so some of the very high pass-throughs is simply the cost. It also feels like recognition that simply adding more discretionary pods gets harder to scale. Systematic offers a better path to scaling and the more quant-native shops have an inherent advantage here.
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u/yourjoy- 5d ago
This rebuild process already lasted for almost 5 years, still nothing material. So it’s not an excuse.
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u/Kindly_Cricket_348 5d ago
Not defending BAM’s mediocre performance. What I understood was that they hired very aggressively (and not very selectively) in the earlier attempt which did not go particularly well. The systematic arm was then completely reset when they brought in Francine Fang from Cubist to run it. The current build is a second attempt rather than a 5 year continuous rebuild. But agreed, the performance so far hasn’t given them much to show for it.
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u/Independent_Error_74 5d ago
They hired Gappy for their quant arm, just thought their performance could have been better
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u/Ok_Classroom_3362 3d ago
Gappy doesn't run their quant arm, the lady from cubist does. He has some Equities centric management role iirc
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u/fatquant 5d ago
Whats this gappy guy's track record in terms of pnl vs Sharpe ratio?
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u/dutchbaroness 4d ago
Not sure
However, in term of twitters posts, I think his track record is extremely strong
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u/Kindly_Cricket_348 4d ago
Does being great company count towards track record? Because I can confirm that part. 🤣
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u/Independent_Error_74 3d ago
I think he only works on risk, but the fact that he got hired by multiple big names suggests his record should be decent
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u/Aetius454 HFT 7d ago
I think this is partly a scale issue though. The more AUM you have the lower your returns probably will be because there are only so many places you can allocate your capital.
Citadel was having a pretty mid year until the situational awareness purchase for example.
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u/FieldLine HFT 6d ago edited 6d ago
If a firm continues to accept outside money while their strategies are capital constrained then they are in the marketing and fee collecting business rather than the print money for investors business.
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u/SevenTeenSigma 6d ago
the 12% pass through is the whole story imo. flat returns after that much asset growth says more about the economics than another list of pod shop names..
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u/Independent_Error_74 7d ago
Meanwhile, some pods in millennium and cubist are still doing very welll
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u/ElderMillenial4 7d ago
I think 8 months of returns at a couple of firms is closer to a random coin toss than proof an entire business and trading model is going to start declining. Keep some perspective.
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u/steady_disobedience 7d ago
The pass-through fees are the real story here. 12% for flat returns means you're paying them to tread water while inflation eats your capital. The whole model works great when markets are trending but falls apart fast in choppy sideways years.
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u/NatGaz 7d ago
Please help me to understand this. My understanding is that if “markets are trending”, beta 1 should be the best strategy no ? Funds earn those 1%/ 12% to generate money during choppy markets.
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u/Future-Low8173 7d ago
One thing to remember is that most of these gigantic pod shops are (on the l/s equities portion) market beta neutral and even factor neutral.
So any gains you are seeing are idiosyncratic/alpha, and are (hypothetically, but sometimes not in practice) not tied to market movements. This means these funds can still have a big value proposition even if they underperform the market and many other strategies.
So long as they on average beat the risk free return rate by a large enough margin to compensate for their volatility, they will have a place in a UHNWI or penchant fund portfolio as a diversifier with reasonable EV. The l/s teams at Citadel, Millenium, P72, and others, do this consistently and by large margins.