"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so" - Mark Twain
For those readers who keep their eyes on markets other than sports betting, the news yesterday that the "iconic $1.5 billion Nevsky Capital is calling it quits" might have raised some eyebrows:
"What is surprising, is that unlike some "one hit wonder" hedge fund wannabe, Nevsky is actually a brand name in the hedge fund community".So why exactly have they decided to refund investors' money and close the Nevsky Fund? In summary:
The decision to stop managing the Fund, after just over fifteen years, has been a very difficult one. This decision has been driven by a growing recent awareness that certain features of the current market environment, which we believe might persist for a considerable period of time, are inconsistent with the achievement of our goal of producing satisfactory risk adjusted absolute returns for you, our clients.The full 'letter' makes for interesting, if unsettling, reading. It's rare to see anyone recognise that conditions have changed and that a successful strategy, in this case one that has 'worked brilliantly for twenty years', no longer works.
In summary, all of the above factors now mean that it is more difficult than ever before for us to accurately forecast macroeconomic and corporate variables. This pushes up our cost of capital and substantially increases the risk of us suffering substantial capital loss on individual positions either because of a forecast error or simply because we could be caught up in an erroneous market trend, which could then persist for far longer than we could take the pain. This has made what we enjoy most – the thrill of analysing economic data releases and company accounts – no longer enjoyable. It is therefore time to accept that what we have done has worked brilliantly for twenty years but does not work anymore and move on. We are confident our process will eventually work again – for the laws of economics will never be repealed – but for now they are suspended and may be for some time; an indefinite period involving indeterminate levels of risk during which we think it would be wrong for us to be the stewards of your money.While the above all refers to the financial markets and the global economy, there are take-aways for those of us looking to find our edges in the sports betting markets. I don't think anyone would argue that the Betfair exchange of ten to fifteen years ago is anything like the Betfair exchange of today. The Premium Charge has, as intended, made it less worthwhile for previously successful traders to continue, while the court-siders have spread far and wide, both geographically and across all sports with liquidity. Nevsky say they "are confident our process will eventually work again" and while I do agree with this to some extent when it comes to sports betting, I doubt that the halcyon days of sports trading will ever return.