Along similar lines, I've been putting together an internal pitch at work, for what's essentially a prop desk, but now goes by another name. Considering the kind of tiny, reliably expected margins, it has to be about 5-50 billion of turn over across the year. Enough nominal so the P/L pays the fixed costs + the rest of us. Ugh.
Hi Rationlize, Are you onshore stateside or overseas? What will be the effect of stateside regulation on proprietary trading on your new venture? This sounds like high frequency market making rather than proprietary (directional) trading to me. I am curious to hear more and find out how your pitch went over with your employer. Cheers Smoker
Overseas. No regulation spoken about. Some tie in to agency business. Directional basis trading, as price maker. TBA.
Hi Rationalize, I hear you; gotta love the overseas life as a Canadian. I havenât filled out an income tax return for over 20 years. I don't quite understand this? Do you mean playing the basis yourself as a speculator in cash/futures arbitrage or market making (same definition as price maker????) for other proprietary traders who are speculating on the basis aka Long Term Capital Management style? or a bit of both? Cheers Smoker
Smoker. Wow you know your stuff. What kind of %'s are asset allocaotrs/ institutions looking for? Like 12% per annum less than 7% drawdowns? Or 18%+ per annum less than 10% d.D's etc? Both? We had this "discussion" before with a very nasty little poster (who thought he was the gods gift to this forum) What % per risk is deemed reasonable? Ed Seykota says 2.5% per trade... Others say 0.5% Some say even less. Any thoughts on this? My method is my method...(simple tredn trading on stocks- long only) I can either take ultra low risk trades or risk a little more to make bigger gains (bigger drawdowns) Generally what is Inst. money looking for? With ll the set up costs anything less than $100m+ A.U.M. isn't worth it..2% and 10%? 1 poor year (say -5%) at $100m AUM you are only looking at $2m fees. Taxes, expenses...it's not so high.
Isn't there a middle ground here? ManagingHNW individual in a "trade for your-self" environemt? So instead of a managing INST. money at say $100M and the massive overheads in that. Go for H.N.W. (friends/family) take a bit more risk and try to manage $5m - $10M? A.U.M. R.O.I. 2/10% profits $100M 12% $4.4M - $1.5M exp.: $3.9M $10M 25% $700,000 - $60,000 exp = $640K OK..just answered my own question. Thx for clearing that one up.
why trade at home, my money, and not a fund? in order of importance, off the top of my head (may have forgotten some): freedom of time / family / friends. i can take days off. i can go play basketball in the middle of the day (like today). i can do things with family or friends that other people can't do. now, you can't start with this. but i've worked enough that i know when i can take time off, and when i have to really buckle down. very few people i know are traders - those who are are good friends. i enjoy that diversity. lots less stress without having to worry about OPM. one of my trader friends (corporate; not equities) said he would be stressing trading his own money, i feel the exact opposite. not having to b.s. with people i don't care about. i enjoy trading, not selling / having to make up excuses. i don't like people who are constantly selling / marketing and WRONG (like i have several ppl here on ignore for that). i've done other business-related stuff for companies which i'd have to do if i was a fund. i don't enjoy that much when it's mine - when it's someone else's, it's much more enjoyable. some of my strategies aren't scalable. i've had lots of friends/family ask me if i took OPM, i know two people (for years) that both told me to let them know if i ever was going to take OPM, they'd have no problem raising $ for me. by the way, when i was first starting, there were several years where i made good money %wise but almost had to go back to a day job because of expenses, etc. i now don't know what my % return is, since that's not relevant to my trading style or needs. i may change eventually, which is why i'll never say never. but i don't want to do it now, and i enjoy my life.
My group switched from 100% prop to a mix of fund management. My main frustration with managing other people's assets is finding people with whom you can have a trusting client-manager relationship. Most people who are looking for a fund manager have very, very, misguided sets of expectations. Having clients is a great experience. If you don't work in a team, it's a great source of networking opportunities. It's also a huge psychological boost to be able to pay off your expenditures and infrastructural costs on the management fees. Nowadays, there's a fine line between retail daytrading and professional trading. Having responsibilities really helps to ensure that you are productive all-week-round.