Investing with Traders during a Drawdown?

Discussion in 'Professional Trading' started by CPTrader, Oct 2, 2003.

  1. ETs,

    It seems that despite all the renewed emphasis on due-diligence vis-a-viz thoroughly understanding a manager's trading style/strategy and risk management, that investors ultimately base their investment decision solely on most recent historical performance.

    By extension, it seems that investors are constantly chasing the new hot trader/fund and buying trader's equity peaks.

    Is this necessarily wrong, bad or narrow-minded?

    Can one make the objective argument that an investor should be willing to invest in a trader/fund even during a drawdown, even if it is a historical maximum drawdown?

    Given the above, from a trader/fund manager's point of view does it make any sense to bother explaining your strategy to a potential investor when all they really care about is your most recent monthly/daily numbers? I mean why bother with the charade of discussing the strategy- they (investors) either can't understand it, don't want to understand it, or would rather not be bother with it?

    How do you really make a wise investment decision, apart from just looking at historical data?

    Finally, can/should one invest in a trader with a limited or non-existent track record?

    I am curious as to people's personal experiences in this matter.

  2. Lovelitera

    Lovelitera Guest

    I would definitely invest with a manager who has a stable record and is in a middle of a slump - perhaps because i am a trader.
    It is like buying at a discount.

    I would also invest a smaller sum with a manager without a proven track record if their background warranted it.

    At the same time I would not invest other people's money with the unproven manager because it may leave me open to potential problems.
  3. "Finally, can/should one invest in a trader with a limited or non-existent track record?"

  4. Why not?
  5. because you will probably lose all your money. seems like good enough reason for me.
  6. Rethink your statement and tell me if it still sounds logical. By your reasoning all the great funds with 2, 3 5+ track records should NOT have ever had any investors becuse they too at one point had a limited or non-existent track record.
  7. PetaDollar

    PetaDollar Moderator

    I think these days most people don't know what's in their fund, maybe even what vehicles are in the fund, or that behind it all there's a trader. Manager's track record?? Fogettaboutit.
  8. Peter I think you were a little too witty for me.. I don't quite understand your point ... care to break it down a little bit more
  9. yes i would say that same rule applys to funds. i would let someone else do the testing. the recent market crash sure should have driven that point home. so many people lost 50-70% of their money to inexperienced fund managers. once your money is gone you dont get to go back for a replay. its up to you to stack the odds in your favor.
  10. Any more thoughts on this folks?
    #10     Oct 3, 2003