It seems that there are many people out there making extremely consistent money using high frequency trading algorithims. These people are well capitalized and have high costs / expensive infrastructure. 1) Do these people have any incentive to seek outside capital? I heard that some of these people have zero losing months. They might lose for a day or a week but never a losing month. If that's the case, I'm wondering if they'd even bother seeking outside capital and just risk their own money instead. Is that what they do or does more leverage from outside capital provide enough of an incentive? 2) Are there resources out there (maybe magazines, literature from a fund of funds) that actually have data on these companies and offer opportunites to invest in them? It just seems like typical retail investors know nothing about this world. If there are that many hedge funds succeeding in HFT, I'm wondering why they are not more well known among investors.
They don't seek outside capital. They are closely held partnerships. Even if they wanted to they are generally structured in a way that doesn't allow taking outside money.
Not very often. The times I've seen groups looking for money was when they were splitting from a firm and needed some start up cash to get going on their own. There are a couple of HFT funds that have come and possibly gone. Not too long ago, I ran across a group that was looking to get money for futures trading. They claimed to be doing ultra high freq trading. However, something seemed suspicious and it didn't quite add up. I think you have to take a HFT fund with a big grain of salt. Generally speaking, there just isn't a need for a lot of trading capital when doing HFT. The most likely scenario (imo) is the individual/group splitting off on their own and needing startup funds.
Thanks. It's funny that you replied to this thread because I was just reading your other thread that explained your background. I'm in Chicago, I'd love to hear more about what you've been discussing. I execute orders for a futures desk now, but I'd love to give prop trading a shot.
Chicago is such a great city. I can't be too specific here or someone might figure out who I am but if you've been there a while we might know some people in common. Everyone kind of gets around. Not sure what you'd like to hear more about as I'm kind of winding up my posting in these forums. I guess I could see some HFT firm need some startup capital but if they are asking around to people they don't know it would seem suspicious and ill-planned to me. We could run all our strategies on about 5% of our capital. That's probably pretty typical. I don't know any legit HFT company who is capital constrained. But I don't know everybody so I guess it could happen. If you want to try a trading company I think you should. Chicago has quite the mix from desks full of manual traders to the super exclusive PhD only type where you have to know EVERYONE for 10 years before getting in. I left 2 years ago so I'm not sure who's hiring and who is still around.