Bloomberg’s scale fail | USAEMALL.com

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Yesterday Bloomberg published an interesting article on the clutch of Citadel and Millennium “cubs”, like Mike Rockefeller’s Woodline Partners and Mike Gelband’s ExodusPoint, and more recent cublets like Bobby Jain’s Jain Global and Todd Barker’s Freestone Grove Partners.

It’s not yet quite the legacy of Julian Robertson, but it’s getting there. And it’s clear that investors’ embrace of the multi-manager model and capacity constraints at all the top existing players mean this trend is probably only going to get bigger.

However, we found ourselves doing a double-take on this chart lurking within the otherwise-sterling article. Take a look:

Invisible scales are always a dangerous game, and we don’t think Bloomberg has nailed it here.

At a glance, a reader might look at the top bar on each side and conclude that both managers’ gains had been pretty similar — but actually, this is effectively two charts on entirely different scales. Readers are actually being asked to both compare the bar sizes within each chart, and then mentally project that ratio across to the opposite chart. Which is of course doable, but seems… improvable.

If they did have matching scales, here’s how it would look:

At a glance, this makes it a lot easier to see Citadel’s substantially better performance.

Even that though, you might argue, is a bit fussy. After all, the returns of the index itself aren’t really of interest, especially given the chart doesn’t mention when each manager launched.

Why not just show each’s returns as a multiple of the S&P 500? Then you can put them side by side:

Not so equal-looking now, eh?

Millennium’s returns are eye-watering, and the only blotch on its track record of annual gains is a 3 per cent loss in 2008 — in a year when Citadel nearly died. But there’s a reason why Kenny G reigns at the top of the table of the highest-grossing hedge fund managers of all time.

Anyway, the article is still a good, detailed look at the pros and cons of staying in-house at a pod shop or striking out on your own. FWIW, Alphaville thinks that Citadel and Millennium’s grudging embrace of the trend — after generally going scorched earth on people leaving — has a lot to do with their own capacity constraints. As the Bloomberg article notes:

Millennium is the most aggressive in backing former employees and outsiders with its cash. Roughly 10% of its more than 330 investment teams are external, many exclusively running capital for the $68.8 billion firm. Roughly 70% of the multi-manager hedge funds now allocate to outside traders, according to Goldman Sachs Group Inc.

Further reading
— Axes of evil (FTAV)