For those of you who are CTAs/Fund managers or are other informed parties, how do you avoid 'hot money' investors i.e. investors who trade around funds: some try and buy into drawdowns and sell at new peaks as if the fund/CTA were a stock they were swing trading, others bail/redeem during the first drawdown. Save for the lock-up technique how else can a fund manager avoid hot money investors and if you have to adopt a lock-up, what is a 'fair' lock-up, irrespective of the strategy. Thanks!
We only allow additions and redemptions at month ends, so the most anyone can trade is 12 times per year. If someone wants to make an addition or redemption every month, that's fine with me. I actually encourage our partners to lighten up on their Schindler Trading investment if it has grown to an outsized portion of their portfolio, and vice versa if it has shrunk. Schindler Trading has no lock-up and I don't think lock-ups are good for investors. We encourage our investors to take a long term outlook, but if someone's financial situation changes and they need their money, they ought to be able to make a withdrawal. We trade futures and can liquidate in a matter of minutes. I can see if you are investing in venture capital or real estate, then you can't liquidate very quickly and a lockup makes sense for the overall good of the fund.