...would be replaced by the irrationality of the Niederhoffer strategies of the world. nothing will change: most people will get less than they could, and there is no system that eliminates that reality.
most of whom will have - by definition - mediocre at best performance records. there are lots of reasons to take the MuFu industry out back and give it a double-tap to the head, but replacing them with a legion of smaller hedge funds won't improve returns for J6P, it'll just be the same sh*t in a fresh wrapper.
Really like this thread..... Seems as though there will be some extremely wealthy traders in the prop business.... The prop business makes the leverage available ...and you get to keep it all....why give it away in some hedge fund formula...? Look at it this way....your style produces an average of $1000 per day....you double your size every month...in one year your monthly rate goes to: 1000 2000 4000 8000 16000 32000 64000 128000 256000 512000 1024000 2048000 .... yes....thats per day ....if you can produce....why give it away.....? The prop business could produce hot players that will enrich themselves....out with the 1997-2000 stuff.... and commence the new.....the prop business is in its infancy....
darkhorse, Thanks for the thread. I think you got a good point. Many traditioanl long only managers are now looking ot hire people from a hedge fund background or some hedging or other nonstandard strategies. It's the beginning... I dont' thinkt he MuFu industry will go away overnite. They are too big for too long. They hold like $6Trillion dollar. They are the market! Even the fast burgeoing growth of hedge funds can't compare yet. HFs in aggreagte have somwhere between $500B-$800B TOTAL across all styles. Geez, even Fidelity Magellan has like $500B. Vanguard Index fund ALONE has $500B. So, a single fund at Fidelity is LARGER than the ENTIRE HF industry. So, definitley there's a lot of room to go. So, keep plugging away guys. Maybe one of us will get funded with a huge capital allocation with a unique strategy or something. There will be blue skies away... But again, there are still institutional barriers like phds, mba, and top school stuff... oh well.
I think the prop firm model is PERFECT is your are running $1M to $5M max. And you get 100% of it. Or a large % of it. Let's see. If you are tradign with $1M and you get 50% returns b/c of leverage, you get $500K. That's pretty darn good. As mucha s senior Wall St people working 90hrs/wk. But forget about starting with $1K and doubling like you said. It's ridiculous. Doubling your size every month? Come on. You are not thinking about DRAWDOWNS. They will double or triple too if you hold onto losers! Just think of it as this. I'll try to aim $X per month or $X per year. That way you dont' think of it as it per dollar. CUz people think of it like this. If I make $1K/day that woudl eb $250K/yr. Whoohoo. They don't think about drawdowns. Just say, I want ot make $250K/yr and what do I have to do to get there..
All the more reason to be optimistic. The elephants don't need to go extinct to create major opportunity for up and coming managers, they just need to have their dominance challenged, which is exactly what is happening. Just getting to where the broad based public even recognizes there are genuinely credible alternatives to MuFu (I really like that moniker) could create some serious opportunity.
It will take a while. Right now, the average retail investors have been SOOO brainwashed that they will say mutual funds equal safe and for mom&pop. HFs are for the superrich who likes to roll the dice. And mom&pop sure ain't want to roll the dice especiallya fter that huge bear market we just had. But mufus were the one really rolling the dice by holding onto losers forever.. It doesn't help HF or alternative asset class IMAGE that we had huge public BLOWUPS like LTCM, Niedderhoffer, David Askin fund, Barings, Orange County, etc. All the public hear is that hfs play with huge leverage and complex stuff like futures and derivatives(when they are pretty simple if you think about it, but don't underestimate people unwillingness to think hard.. hehe). But this is just not true. Most hfs do not play with derivatives. Most don't even use leverage. A lot hedge. A lot are long only without leverage but with tight risk management. The marketing machine of the mufu and other standard asset managers have done a pretty good job.
so if a Fidelity manager wears snakeskin boots, drives a Caddy and drinks Colt 45, does that mean he's a badass mufu muhfuh?
I think there's two points there. Firstly, you can argue that there just isn't enough profit to be made, or enough competent asset managers, so whatever way money gets managed a lot of it will be done badly. I guess that might be true. If it is, well, we're stuck with it. Better hope you can pick the good ones. The other point is a comparison between hedge funds as they are now and everything else, and I'd argue that there's a bit more to it that you suggest. Don't forget that hedge funds themselves operate a myriad of different strategies. There is a world of difference between, say, a long/short emerging market equity fund and a statistical arbitrage fund. Maybe the only thing they have in common is that they're exploiting an under-researched and under-invested market segment. Sure, if the global AUM of hedge funds goes from $700bn to $700 trillion it'll be harder to find those gaps in the market. But we are nowhere near there yet. Here's an example: there are maybe half a dozen hedge funds worldwide that specialise in China, with a combined total of maybe $1bn in assets. Think about how many more there could be before that market got anywhere near saturation point. Then think how much you'd like to be invested in China now, in the hands of an experienced asset manager. Then tell me you still think we're anywhere near the mediocrity point...
I don't agree : Berstein belongs since very long to Wall Street Establishment and at each crisis touching fund managers performance - since it is nothing new - he is very good opportunist to make people think that he has a solution to lower risk and inccrease perf for example with a fund that would manage risk and perf according to the new Black & Scholes "super formula". So Wall Street make them the "new era" of no-risk whereas risk just come the fact that it is a zero sum game. So not only this would not change anything in fact with the multiplication of hedge funds that has now become a NEW FASHION propagated by WALL STREET themselves - why didn't you hear such idea before huh if it was so evident ? - my best guess that they will cause the Next Big Major Crash in Stock Market as the more leveraged the market is the more systematic risk there is. They pretend to democratise Hedge Funds, this makes me laugh: since when Wall Street Managers want to make people win money : it just eat their cake haha ! So it's rather a new way to get the money earned by the middle of the pyramid now that the base of the pyramid has been washed out by the previous bubble, that is to say the so called "rich" risk this time to be really touched when the risk will materialise. And it will because that's how money is extracted and benefits materialise in the pocket of the Wall Street organisers. This industry is an organised syndicate of Crookery and you will make me believe that all of a sudden they decided to become all Saints, what's the probability that their nature has changed tell me That's my opinion and summarised before by The next great hecatomb: the hedge funds http://www.elitetrader.com/vb/showthread.php?s=&threadid=30656&highlight=Hecatomb