A hedge fund that knows its stuff will be more interested in a) seeing whether you really know what you're doing b) whether or not your style and skill set fits into the prevailing culture and focus of the fund and c) whether or not you have ideas they can use and the potential to come up with more ideas/insights over time. A solid track record will get you an interview, but it will not guarantee you a spot. Especially in the late great bull market, a lot of traders racked up great returns due more to luck and general conditions than anything else. A fund manager worth his salt will grill you intensely to see how much of your record was due to actual skill/knowledge and how much of it was nothing more than right/place right time. This is also assuming they are looking for new talent in the first place- most of these places are very protective of success and have an "if it ain't broke, don't fix it" mentality.
i think this is more than a little wishful thinking.... any of the larger hedge funds are going to focus far more on institutional experience and a solid education. how much money you made trading out of your bedroom isn't going to get you through the door. of course, there are many one man shops managing a couple of million dollars that also classify as "hedge funds" and maybe a daytrading record might count for something there, but if your goal is to work for a DE Shaw or a Citadel, then forget it.
haha. Exactly. My college friend from the Ivy League school that I went to is working for Citadel now after spending 5yrs at Solly's credit derivatives quant! And DE Shaw comes regualrly on campus. My old quant firm, my ex-boss has a phd from harvard in math. And my other colelagues had phds in physics/math from princeton. the barriers to entry are really high especially on the quant side. on the traditional side, one must have at least a top school MBA - i.e. HBS, Sloan, Wharton, Kellog,etc. hopefully people get a better perspective as to why they should/shouldn't daytrade to get a track record to impress institutions..
citadel is a great firm. anyone who thinks education has nothing to do with trading success should take a look at their track record.
Gosh gee Wally, seems to me like we've heard this already. You know you're right Beav, it's all here: http://www.elitetrader.com/vb/showthread.php?s=&threadid=5279
It seems like we complete a circle every few days on this site...Some guys leaving the institutional side going into the daytrading arena only to lean back to the institutional side with the hedge fund stuff... I have to agree with some of the other guys who say why go for only 20% and management fees...Most people who chase after the hedge fund thing spend so much of their free time and trading time chasing down asset allocators, working on proposals, trying to get the legal aspects down pat and unless they have that sure fire funding, it is all a major waste of time... And the few people who I have spoken with who are trying to go down this path are under 10X the scrutiny they would have been back when the Metamarkets of the world were jumping into the game with their brilliant "go long tech stocks" trading system...No one trusts anyone, the concept of putting big money into some hedge fund and becoming the next great big victim(ala Slatkin, Mobley, etc) is about as appealing as getting root canal... And another thing...If people think that big money wants a 100% or 500% return each year, that thinking is just gone out the window...These guys are into protecting what they got(ala Bill Gates putting most of his net worth in bonds)...Once they get to the top they want to protect what they have, not take on the huge risk premium of funding some guy from Kalamazoo who ran his 50k into 500k...There is just too much risk going with the unknown... This environment with all of these crazy stories about scams, con artists, rip offs, it is not going to make it any easier to manage money...I figure the guy from the Ivy League school is right...Go to Yale or Dartmouth and get in with the good ole buys club and then park your rear at a trading desk and build up that kind of credibility...Or if that is not the route just be happy with trading for yourself...Cause I think he is 100% correct, for every superstar trader out there trying to get funding, there are a couple of more Harvard MBA, CAl Tech PhD risk arbitrage, stochastic thingmajig hedge fund guys at the front of the line when the asset allocators open the spiggots for the cash... my two cents worth
Vulture: I agree w/ the spirit of your post. You are absolutely right that the big money does not want big returns, they are more concerned w/ capital preservation. I know someone at a $900 million fund out of Minnesota, and their target is 15% a year. Sounds ridiculously low until you realize that they want to keep their max drawdown around three percent or something equally small. MUCH more oriented towards preservation than blowing the doors off. The bigger you get, the more you want to skew your specialty towards preservation rather than profits. The rich are generally more interested in staying rich than getting richer. Money is like quantum physics in that size has weird ramifications that you wouldn't expect. I also agree that a guy who does not know how to trade should get as much of an edge as he can by getting a first class education. If you can make it into the ivy league, heck yes, do it, you want to put all the odds in your favor that you can. The thing that pisses me off is when these guys confuse educational background with trading ability. They are apples and oranges to the extreme. Nothing wrong with a kickass education, nothing wrong with polishing the resume til it shines, but the idea that an education makes you a better trader- or gives you a right to think you are better than anyone else for any reason- is just damn dumb. And I say this as an "educated" person who has studied in four countries, so I am not some high school drop out railing against the system. The number of individuals who are actually good traders in the purest sense- who can make a solid living from trading and trading alone- no bells and whistles, no connections, no high powered quant calculators, no built in structural advantages- has always been small. And while some of these individuals are very smart, some of them are "stupid"- in an academic sense- as well. This is the point I've been trying to hammer home. It burns me that some folks around here think that their intrinsic net worth as people is higher because they have a few extra bullsh*t calculations rolling around in their heads. And the idea that working at a big shop is better than a small shop is silly too. A 50 million dollar shop that has five people will have the same paycheck distribution as a quant oriented half a billion shop with ten times the employees to pay. The only difference is the "prestige" of the "name" which, to me at least, is not worth jack. My own beautifully anonymous name is enough for me. Especially when you add in the ability to live in any gorgeous, low population, tax advantaged place you want versus getting smacked w/ a 57% tax rate, an astronomical cost of living, a ridiculous commute, putting on a monkey suit every morning, and kissing ass all day.
All right - that does it! I've had enough school for one lifetime, thank you. so I guess I'll just have to be content with making a few million of my own $.
Agree with your notion that big money does not want the risk...It is kind of like a threshold is hit where someone gets to their comfort level and then says, "ok no more risk"...It is all the people in between who want to double or triple their money in a heartbeat...Funny thing is most of them don't want the risk either, just the upside...And alot of the newer money managers wind up with alot of these "passive gamblers" looking for all upside and no drawdown...One only has to read the horror stories about Schwartz and Cook(two guys, btw, who made it into managed money briefly as superstar traders) and attracted a crowd of get me a million overnight... Those big time money managers are all monitoring drawdowns, unless of course they are mutual funds, in which case a stock crash is their "marketing put"; we give u exactly what the indicies do with a bunch of fees added on...When u think about the sums of money that those large funds are managing and the fact that these investors are almost all capital preservation, it makes sense that they are as de-leveraged as possible...And what a great job for those who can get it...Basically promise the return of t-bills plus a few hundred basis points, and if u have a bad year just stay close to flat... The worst nightmare for some sort of hedge fund would be 1999-2000 when they have to chase the market like everyone else for performance and then wind up holding the bag...These are great markets, I would imagine for an established player with alot of assets under management, and a terrible market for a newcomer trying to attract new money...The big guys just get bigger and can underpromise and over return...Now that investors expectations have been ratched down to virtually nothing, these guys can get away with hyper-conservative strategies...
totally agree with this point. i've seen a number of proposals presented to our fund of fund guys, and the ones that get funded always have desk experience at a major institutional firm. no brainer really, who would you rather manage your money, a Harvard Phd with years of trading experience on Wall St., or some guy from Smallville USA trading trading from his house ?