Whales or minnows? Sizing up crowded trades

Strategies for measuring crowding in trades can help to avoid its effect, writes quant fund founder

Sometimes, the more we think about the meaning of a seemingly obvious concept, the more it resembles a paradox – paradoxically, you might say.

A topical example of this is the crowded trade. The phenomenon has become a major talking point in the analysis of disappointing recent performances by many alternative beta and risk premia funds.

And while its central premise seems self-evident – when investors pile into any given trade, its future returns are de facto degraded – there is of course a

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