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Eon-Labs KB

Sakana Internal Meeting Memo

Source: Notion | Last edited: 2023-10-31 | ID: 9434330c-8c1...

2023-06-15 Confirmed Understanding of Sakana Capital

Section titled “2023-06-15 Confirmed Understanding of Sakana Capital”

Firm Overview:

  • Baptiste Mangel‘s firm manages 4MinUSDT,withunimpactedcapacitypotentialat4M in USDT, with unimpacted capacity potential at 30M.

  • They’ve been live trading since July 2022.

  • They deal with both crypto and traditional finance entities. Trading Approach and Methods:

  • Their approach involves statistical trading, optimal asset positioning, and directional trading.

  • They use daily data points for Sharpe ratio computation.

  • They trade on multiple platforms without employing arbitrage. VIP Levels and Earnings:

  • A VIP level can earn 2-3 basis points.

  • Higher VIP levels yield more earnings, but the difference isn’t significant for their strategies.

  • They offer sub-account management for external clients; the VIP level corresponds to the client’s main account. Return Factors and Fees:

  • An annual volatility of 50 could yield approximately 150% return annually.

  • Investor risk appetite and account sizes affect returns.

  • They only charge performance-based fees. Volatility Analysis:

  • **The PnL CSV data from July 2022 is live trading data, slightly adjusted for VIP9 level. **The CSV shared is at 50% annual volatility.

  • They compute annual volatility as standard_deviation(%daily_PNL)*(365**0.5) and recommend a 50% annual volatility for their strategies.

  • Additional Note: Explanation of the role of annual volatility and its relationship to expected returns and the Sharpe ratio. Additional Note:

  • Concerning annual volatility: annual volatility is computed as standard_deviation(%daily_PNL)*(365**0.5). It is generally used as a measure of risk/volatility. For example, S&P500 is at ~20-25% annual volatility, BTC is around 75% annual volatility etc. This metric is an efficient way to easily estimate the risks taken and the expected profits: expected annual profits = annual volatility * sharpe ratio. So ~50% annual volatility and ~3 sharpe ratio would result in 150% expected returns. As a rule of thumb, the higher the sharpe ratio, the higher the optimal annual volatility. We generally recommend a 50% annual volatility for our strategies (and the CSV file I shared is at 50% annual volatility).