Apparently, short vol strategies have gotten crowded, according to the recent Bloomberg piece. When I read this, I thought how about factor based strategies -- value, growth, etc.? Aren't they overcrowded as well?

At the same time, we see Private Equity as an asset class getting more and more popular among investors, especially for those who are long term oriented.

How does one figure out what strategies are popular at a given point in time? What do you look at? Is funds flow a good measure?

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    $\begingroup$ People talking about them on quantstackexchange would be a good proxy. $\endgroup$
    – LazyCat
    Commented Oct 25, 2019 at 1:28
  • 2
    $\begingroup$ look for a nice head and shoulders pattern - or Batman ears - on the chart... sorry, just couldn't resist ;-) $\endgroup$
    – demully
    Commented Oct 25, 2019 at 9:16
  • $\begingroup$ Kritzman has done some quantitative work trying to identify overheated sectors. Not sure how valid it is. alphaarchitect.com/2019/10/14/… $\endgroup$
    – Alex C
    Commented Oct 25, 2019 at 16:24

3 Answers 3


Look to see if the "premium" of the risk/strategy has diminished. In your example of selling volatility, the strategy would be to sell "implied volatility" higher than "realized volatility". If the premium does not compensate investors for the costs (actual and opportunity) and risks of the strategy, the strategy is probably getting crowded.

In the case above the "premium" could be as simple as taking implied vol - historical realized vol. More sophisticated traders might include some forward looking forecast of realized vol. Others that are isolating vol might include hedging costs,etc. Those that are applying a strategy should have some view/ model of expected returns, risks and costs.

As for longer term/illiquid strategies that aren't traded, the anecdotal evidence suggested by others on this question is useful. Market developments, which are subject to interpretation, can provide some insights as to whether a strategy is too hot. For example in private equity, 1) there were a number of recent "failed" IPOs--a method of exiting an investment by private equity LLPs, 2) the recent announcement of people looking to create a retail product (https://international-adviser.com/is-private-equity-the-next-frontier-for-retail-investors/) etc. These could be interpreted as top-of-the-market behavior, emblematic of an "overheated" strategy.

  • $\begingroup$ But how would you estimate the aforesaid premium? $\endgroup$ Commented Oct 25, 2019 at 21:01
  • $\begingroup$ Thanks, this is interesting. Regarding the first point, what if one is an allocator does not own these strats? Those who are in need of capital probably wouldn't advertise their "eroding edge", would they? $\endgroup$
    – AK88
    Commented Nov 1, 2019 at 3:37
  • $\begingroup$ The second point on "the failed IPOs" does not seem to be the biggest play in town (at least from the overall pool of Private Equity strats). People still seem to exit successfully and record healthy 6-7% annual returns. $\endgroup$
    – AK88
    Commented Nov 1, 2019 at 3:41
  • $\begingroup$ @AK88 I’ve had funds tell me that the returns in their strategy were not great and return capital. Depends on the integrity of manager and your relationship with them. Even as an allocator, you can look still run analytics on the return drivers and imbalances of a strategy. $\endgroup$
    – AlRacoon
    Commented Nov 1, 2019 at 3:47
  • $\begingroup$ @AK88. Yeah for some strategies it is less clear than others and will require some creativity and interpretation on a mosaic of data and information to determine whether it is an opportune time to invest or divest. $\endgroup$
    – AlRacoon
    Commented Nov 1, 2019 at 3:50

"How does one figure out what strategies are popular at a given point in time?"

  • flow of funds into asset classes
  • text analysis of news stories (e.g. CLOs/leveraged loans)
  • job adverts

EDIT: you could also look at what slower moving 'investors' (e.g. pension fund consultants) are recommending/allocating to (the idea being that by the time they figure it out, the time for the strategy has come and gone).


Well, in my opinion, before that one would look into answering such questions that you have, there are more important questions or information, if you will, required to be assumed.

I guess my point is that we might want to work and define the problem first, with maybe some similar questions as:

  • How much resources would you be managing?
  • What might be the risk tolerance?
  • What limitations would you be having?
  • Which markets are you focused on?
  • Are you only focused on Private Equities or other assets such as commodities?
  • How knowledgeable and or skilled your asset allocation team may be?

And this list would go on.

However, apart from your resources and limitations, there are usually a few sectors that given a 3-5 years period, would perform better.

One can design a system, which is rather difficult, to find those sectors, and then dive from there, and find much detailed ways to allocate assets, and that would be a strategy.

In US markets, in my opinion of-course, these waves of sectors would come and go every few years, and sometimes less.


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