Just curious what people think of these kind of ads: https://uk.linkedin.com/jobs/view/262204610 I've seen many of these, asking for live P&L track record with Sharpe 3+. Now - in my own experience it's very hard to have Sharpe significantly higher than 1.5 over the long term when trading real sizes... unless maybe you're in the business of selling options and you have a very lucky run. A quick look at the leaderboard on www.fundseeder.com will show the same, there are some exceptional Sharpe but usually they're accounts sub $1mm. Even Renaissance Technologies is below 2 I think. So back to the above job ad - is it just CV fishing from a recruiter? Are they actually looking for HFT / market-making algos? (this particular ad says : "Holding periods will be intraday / non-latency sensitive (minutes/hours) to couple days max." which is not quite HFT). Is there a different way to calculate Sharpe, say using yearly data? Thanks,
It's hard to know if its fishing... I guess they don't need massive capacity as they are a prop firm, but it's still difficult to achieve those kinds of SR without HFT. Generally I think they're only going to get people who are deluded, or who have a very short track record and have been lucky. There will also be a certain kind of strategy (anything 'short gamma' like option selling as you say) that they will biased towards, which is very dangerous (sharpe is a poor measure of the risk of this kind of strategy). If you sort by SR on fundseeder and look at the top accounts you can see that they are pretty ugly track records, or very short. I'm always being told by people that it's 'common' to get sharpes over 2 over multi decade long careers but I've never seen any evidence of it. No doubt someone will pop up in a minute who has done exactly that. GAT
I am one of them and if you read my first post, I say it is done on a mid 6 figures account and I wouldn't be able to do it with significant capital.
In my experience, if you confine your product universe to very liquid instruments, it's virtually impossible to achieve a Sharpe of anywhere near 3. Most reasonable sized-CTAs have Sharpes of arnd 1, at best. It sounds like these guys are full of it.
3+ Sharpe is definitely possible in personal retail accounts with a basket of semi-scalable methods. Would it still work in a hedge fund impacting it with large assets? Not really sure. On a side note, my opinion is that it is silly to apply to a hedge fund if you have a frequent trading system with a high Sharpe. You might as well use daily compounding to your own benefit and grow your own wealth - slow but steady. Hedge funds hire and fire all the time - they will eat you up and spit you out while laying claim to all your hard work.
Actually, Sharpe ratios of 3 and higher are pretty common in high frequency trading. It's also not uncommon for these guys to achieve RoC of 30%, since they turn their capital a few times a day. Main issue, of course, is capacity and half life of the strategy.
Not true. If you have a strategy that has capacity of 5mm and Sharpe of 3+, you will make more money working for a fund then trading your own account. Payout for higher Sharpe stuff could be as high as 30%, you have capital to draw on and you have a support system. It only makes sense to run your own capital if your strategy is severely capacity constrained. If you are bringing in a 3+ Sharpe strategy, you can put IP clauses in your contract
Yeah, sure... I certainly wasn't referring to high-freq stuff, but rather to your traditional, household name CTAs. Moreover, capacity of really high Sharpe stuff is normally constrained by other factors, e.g. availability of leverage.
Not to underestimate the value of a support system, but your claim depends on how much of the capacity you can fund yourself. If your choice is between your own $100k and keeping 100% payout on it vs running $5M of the funds money and keeping 30%, obviously the latter is better if you continue to make money(!), can keep them from copying you, they actually pay you as they say, etc. If you can fund 1/3 of the capacity yourself, the trade off between 100% and a 30% cut is about breakeven. I would not join a fund unless you could see meaningful advantages, both in terms of better trading capabilities and expected take home. Also, with good Sharpe numbers like those, you should be aiming for 50%.