Capital
Misallocation
The
Multiplicative
Indictment
The Causal Barbell: Part 1
How much alpha does your hedge fund need to beat the index? You supply the assumptions. The arithmetic does not negotiate.
Market — feeds every tab
Defaults
These are starting values. Move any slider; the indictment is yours.
- 10-year hold
- 1.5-and-20, pod-level netting on, pass-through skipped
- ½σ² variance drag — conservative if the book is left-tailed
- Monte Carlo seed 20260910, 10,000 shared draws
- Cascade impact k = 0.09
- Shiller real total returns, 1871–2023
Tab 6 · Estimator convergence
80% of selected managers have true Sharpe below 0.50
Passed screen
10 of 1,000
Median true Sharpe
0.46
False positive rate
80%
True Sharpe < 0.50
False-positive rate vs. track-record length
Move the track-record slider right and watch the false-positive rate drop — that's how long it takes for the screen to actually work.
True Sharpe distribution — selected managers
The gold line is your screen. Everything to its left passed — and the red line shows how many of them are below a true Sharpe of 0.50.