How can a trader trade for hedge fund without giving away strategy?

Discussion in 'Trading' started by bidask, Nov 21, 2008.

  1. bidask


    i don't understand how it's possible for a trader with a rule-based strategy to trade for a fund without giving away his strategy.

    first, does the typical arrangement involve full disclosure?

    second, even if full disclosure is not required, you are still trading the firm's account. the firm will see all your trades. you also have to sit there everyday with the other traders, so they'll see what you have on your screen.
  2. bidask


    in addition, suppose you have a fully automated strategy. won't you need to put your strategy/software onto their computers?
  3. MTE


    Set up your own hedge fund.
  4. HLB


    How can an employee receive salary from his employer, without actualy comming to work? ;-)
  5. you'd be surprised...
  6. bidask


    well if the he is a "contract trader" then just treat him like a contractor/vendor. he's a business vendor. you pay him as long as he delivers the goods.

    does anyone have direct experience with these kinds of situations?

  7. then you probably need a prop situation.
    but if you are not putting up any capital - whoever is will want to know exactly what you are doing with their moeny.
  8. bidask


    not talking about me, i'm just asking a question because the arrangement doesn't make complete sense to me. it seems to me that the trader wouldn't want such an arrangement unless the fund is willing to start him off with a significant amount of money.

  9. Most funds dont let traders run and do whatever they want anyway.

    I say "most" as there are obviously many exceptions.

    Usually they take good traders and have them trade under the PM's philosphy while bringins some thing of their own.

    Yes - some run "incubator" centers, but once you work for a HF, all your strategies become property of the HF.

    Some make interesting set-ups, like SAC, where the trader agrees to let SAC buy into his own fund if he choses to go on his own.

    The reason to go for a profitable trader is mainly to scale the strategy.
    Often times, however, it is easier to go "prop" and get leverage that way, instead of getting 20% payout on your performance.

    The allure of salary entices people, but I think wrongly, as soon as you start losing money for the fund, you won't be there long.
  10. You also have something of a cross between prop and HF, like a private fund.
    There aren't that many but they exist (this is where I work now)

    Its has very similar characteristics of both and ended up as an ideal choice for me, at least. But, again, this is not for everyone.

    ALso, I am surprised why people still have ooo hedgefund oooo and eeew prop firm eeew.

    I think the prop firms that make $ on % of gains are doing much better as a whole than any HFs. True HFs attract inane amounts of capital, but most of them lose it!

    Prop has a much higher success rate, at least as a firm.

    I am i no way a proponent of Prop vs HF, but from point of view of an independent trader, sometimes an HF is not necesserily a perfect fit.

    A close friend of mine went to work for a high profile fund, wiht a great comp package, (>1mm base), and now the fund is almost under water and they may shut down. His trades are profitable for the year, but the fund's overall isn't + redemptions....

    so.. you decide where you need to be.

    And.. if the question is not for you, why the question?
    #10     Nov 21, 2008