Lessons from Citadel on risk & diversification

Can you trade the stock market with AI? Yes: Renee Yao launched Neo Ivy Capital, a billion-dollar** AI hedge fund that uses AI in trading and investing to generate alpha. In this episode of Odds on Open, she explains how she built a quant hedge fund from scratch, scaling to over $1B AUM** with advanced AI hedge fund strategies that adapt to markets in real time and show how to trade stocks with artificial intelligence at scale.Unlike traditional firms that rely on armies of quant researchers and static machine-learning models, Renee (who used to work as a QR Analyst at Citadel and Portfolio Manager at Millennium) reveals how machine learning in trading has evolved into true self-learning AI. She breaks down why most funds still depend on crowded factor bets, and how her fund’s approach delivers uncorrelated returns — a real edge in the hedge fund career path and a blueprint for the future of systematic investing.**Note: According to a recent Form ADV filing, Neo Ivy Capital oversees about $1.02 billion in assets under management. This figure represents total regulatory AUM, which is broader than the ~$313M reported in 13F-disclosed securities and may include additional holdings or leverage.We also discuss...- Citadel hedge fund strategy and risk management lessons after 2008- Why diversification and breadth of edge matter in a quant hedge fund explained- How Neo Ivy uses AI in trading and investing to generate uncorrelated returns- Why machine learning in trading has evolved into true self-learning AI- The three barriers to entry for AI hedge funds: modern AI, infrastructure, portfolio design- Why large funds rely on crowded factor bets while Neo Ivy delivers pure alpha- How fund size impacts scalability and alpha opportunities- What it’s like moving from Citadel and Millennium to founding a fund- How to start a hedge fund and build infrastructure from scratch- How self-evolving AI models adapted during COVID market shocks- The role of modern tools like LSTMs and transformers in AI hedge fund strategies- Career and life lessons from the hedge fund career path and staying disciplined00:00 Intro01:14 Renee Yao’s journey to founding Neo Ivy02:28 Joining Citadel after the financial crisis04:13 Hedge fund diversification and breadth of edge04:45 Why Neo Ivy trades with AI strategies07:50 How self-learning AI adapts to markets09:40 Causation vs correlation in AI hedge funds10:33 Barriers to entry for AI hedge funds14:47 Risks of crowded factor bets explained16:39 Why big funds struggle with AI talent17:29 From PM at Citadel to hedge fund founder18:47 Challenges of launching a quant hedge fund20:25 Biggest constraint for AI hedge fund startups22:08 How AI hedge funds adapted during COVID24:04 Modern AI tools used in quant trading25:13 Building hedge fund infrastructure from scratch26:26 Career advice for aspiring quants and traders28:55 Adapting career goals to changing job markets31:57 Life lessons from trading and risk management32:51 Staying disciplined while running a hedge fund34:38 Obsession and belief in AI hedge funds35:41 Closing thoughts on hedge funds and life