Ok, a lot of posts and no one answered my question. I'm looking for a deal like the ones that are common at London firms. So far I contacted: Schneider, Futex, The Met Group and Marex Spectron. Was wondering if anyone knows any more?
How is the guy a con artist? There are no free rides in the actual business world. If my goal is to get an additional $900K in buying power, is someone supposed to just hand it to me?
Chuck asked for a firm that backs a trader 100%. MikeMcD from Mercenary doesn't even offer what the OP asked for and he wasted 4 pages of this thread schilling his deal and got caught redhanded. summary of last 4 pages: OP asked for a firm that backs 100% Mercenary Trader wants risk capital and is only giving the trader 20% profit. my thought: a trader has to provide risk capital and only gets 20% of what he earns and his risk capital is eaten into first? screw it! there are plenty of bucket prop shops that offer 80% or higher profit split w/ risk capital. stop wasting time, Mike.
Fair enough, but that's not a "con", that's just a mismatch between buyer and seller. The guy did say that his offer also had some other features that a firm providing 100% backing might not have. Just seems like a normal sales pitch to me. Throw it out there and see if it sticks. That's the 'American Way'. Let's face it, it's probably more competitive to get into a firm where you get 100% backing, so having an alternative on the table might not be a bad idea. Not saying that the OP won't eventually get 100% backing, but there's no guarantee he will, either.
Well, I take some issue with this. I'm not accusing this guy of anything unbecoming, but this is a very standard deal in the industry for first dollar risk. There are several firms out there that run this model. The problem I have with it is they do a lousy job (perhaps intentional) of making sure the trader understands they have first dollar risk. I use to have guys come to me on here to read over their agreements and explain to them that they have all the risk. They would keep saying, no, that is not what the firm said. It took hours upon hours of me going over the contract with them for them to get it. Here is what makes me VERY suspicious of these deals. I'm not going to name the firm, but one of them approached me a few years back with a deal like this. I smelled a rat and called them out and said, how about this. I'll put up 100% of the capital. I'll give you 100k, all my money. However, I don't want ANY leverage. ZERO!!!!! Just let me trade MY capital for you so you can get your "so-called" look to see if you want to back me. They f*cking balked at that. I said why not? I'm putting up all the money. I'm taking all the risk. I don't want your leverage. Just let me trade my account with my own notional funding and let the chips fall where they may. Then they come back and say, make it a million. I politely told them to go f*ck themselves. These guys are so shady. I call their bluff and they run. Anyway, I don't trust these deals in general and if a trader wants leverage they can get it going prop. Put up 100k and give it to Bright. Don will give you several million on that. Build a track record. Then let a 3d party marketer raise you money.
dude wow.. i'm not familiar with any part of this kind of prop.. leveraging of traders risk capital.. but its cool as hell how you can't just advertise without scrutiny on ET.. love it.. Devil is in the details as they say.. if a deal is to good to be true.. keep reading the details.. and i always think to myself.. HAS ANYONE OUTSIDE OF MY FAMILY OR BEST FRIENDS really ever gave me a great deal... especially in the drug business and trading.. no one is handing out favors they are handing out bad odds and dependency.. The chances that the deal that rings your door bell is the best one your gonna get is close to nil...
Come on Mav, widen your perspective a little. First of all, as to earlier talk of con jobs... a con requires some kind of switcheroo or deliberate deceit. If a deal is a deal as fully stated up front, how is that a con? Second, re, "they do a lousy job (perhaps intentionally) of letting the trader know they have first dollar risk." Holy shit, are you serious? That makes me laugh out loud, for two reasons: 1) I'm sorry, but any trader who doesn't understand the terms of a major contract he just signed is a fucking idiot. If you really have friends who can't read and understand fine print -- hell, BOLD and UPFRONT print -- then they really shouldn't be trading millions of dollars. Maybe they shouldn't be trading period. You don't have to be a genius in this business, but you can't be a moron. 2) Who wins in a "deceive them on first loss" model? If the trader has any intelligence, he will nail down the explicit terms of the contract before he signs. And as soon as he finds out about the first loss provision, if he doesn't like it, there is no deal. If he finds out after he signs, he either quits or he sues. Who wins here? What is the gain for the deceiving party in even attempting what you suggest? Re, what made you "very suspicious" -- you are making me laugh out loud again! Look, time is money for successful organizations. These guys don't have time to dick around. If I had a funding program and you came into my office saying "Look I don't want your money, just let me trade my 100K", I would tell you to piss off too! You know why? Because you would be WASTING MY TIME... which, in many respects, is just as important as my money! Now why would someone be "shady" just because they don't want to give time or energy to some piker with a weird chip on his shoulder and the desire to trade a Scottrade account? As for "just go to a prop shop..." You know what, yeah, that's a way you can go. But we know how prop shops make their money too. At the typical prop shop you are expected to do incredible volumes of round-turn commissions. The prop shop trader might be profitable. He might be unprofitable. But either way, as long as he doesn't blow up spectacularly, the commission-collecting shop can make a killing off all his round turns. Now, there is NOTHING WRONG WITH THAT. I am not casting aspersions on Don Bright's operation whatsoever, and prop can be a good way to go for lots of traders. But consider this: - What if you have a methodology that is not conducive to the style or trading demands of prop shops? - What if you like to buy illiquid micro-caps, or only trade options spreads, or something to that effect? - What if you like being your own boss, running your own show, and don't want the associations or requirements that "going prop" requires? There are lot's of ways to skin a cat. And it's not a no-brainer to just "go prop." Plenty of traders have zero affinity for that environment or its requirements whatsoever. Just not their brand of vodka.
Now let's continue this. Someone says, "I want to find someone willing to give me 100% backing." Okay fine. But here you are presented with a chicken-and-egg problem: If you already have a strong enough / deep enough track record to garner 100% backing on a meaningful level, then you don't need to consider a funding program in the first place. You can just hook up with the right marketing consultants, plug yourself in at the right networking events, do a decent job of selling yourself, and gather your capital from HNWIs or set up a deal with Tudor or SAC or whatever. But here is the thing: There are successful traders out there who know what they are doing works... and believe in their program to sufficient degree to want a shot at the big time... but nonetheless aren't trading enough capital, or haven't been trading it for a long enough period, to get the attention of high net worth investors and institutions. Consider: Capitalization is a real hurdle. No institution wants to be the first to put a million bucks into your fund. Most high net worth investors don't want to be the "big fish" either. It's a lot easier to raise capital in, say, 500K and 1MM increments if you are already running a couple million. And this is EXACTLY where a first-loss funding program comes in. Take the following hypothetical, but realistic, scenario: - You are a successful trader with a personal asset base of 500K. - For the past few years you have been grinding out 30% returns with 10-15% drawdowns. - You believe in yourself and your methodology. You would like to scale up and get bigger, because 30% on 500K is, let's face it, not a whole lot after taxes and inflation. You're making about as much as a dentist, but with far less job security. There is something fucked up about that. - You decide to put 250K of your capital into a first loss program and trade it against a $2.5MM allocation. In doing this, you also reduce your notional position size so that max drawdown will fall in the 5 to 7.5% range, instead of 10-15%. - Via first loss, you are risking 250K of your own capital over the course of your first year in business. But, in so doing, you are betting on yourself and your future. - If you have a good year -- as you fully expect to, and most ANY startup or fund needs a good first year to take off -- then look what you have achieved: * You have significantly increased your own earnings (via capturing a chunk of profits on $2.5MM). * You have developed a year's worth of trading with a capital account base in the millions, making it easier to attract high net worth investors who prefer not to be the first million. * You have established a relationship with a funding provider who is also in the business of making traditional investments in successful managers, once they have proven themselves. In essence, you have risked 50% of your capital base -- making a logical bet, on your methodology and yourself -- with the chance at graduating from "small time" (individual trader) to rapidly emerging hedge fund manager, with an AUM that could ultimately grow from $2.5MM to $50MM, $100MM, or whatever your outer strategy capacity is. Everybody wins in this scenario. You win because you went from being a 500K solo artist no one ever heard of, to running millions or tens of millions in AUM via making an intelligent bet on yourself. The funding allocator wins because, even more so than splitting profits on your initial funding, they have found an excellent new manager to invest in. And, if your program is strong enough, you now have the connections and viability to potentially garner a seven-figure outside investment in the fund itself... someone who wants to buy a piece of your management company, who can also make MORE introductions to the right investors, the right networks, and so on. (Raising capital is a people business!) But of course, you don't have to sell ANY of your management company (the fund itself) either... you can keep it all to yourself if you choose to. That's another great aspect of the first loss program. If you really believe in yourself, you would RATHER take the risk -- which is manageable -- if it also means you maintain 100% ownership of the biggest winning trade you ever made (the newly established fund itself, with a multi-million-dollar track record accrued). Not a bad upgrade from starting out with a dentist's take (150K). There is just one catch though, but it's not really a "catch" because we all knew it anyway: To make a play like this, you HAVE TO BELIEVE IN YOURSELF and you HAVE TO BELIEVE IN YOUR PROGRAM. These guys who want others to throw money at them without taking a risk themselves... I mean how the fuck does that work? The typical hedge fund manager who goes out on his own, starts his own shop, already takes serious risk along these lines... career risk, capital risk of starting up an operation, going without other more stable sources of income, and so on. Asking someone to put up a portion of their own risk capital as first loss, and to trade in such a manner that drawdowns will stay inside 10% (their own allocated piece), while giving them the HUGE upside that comes with success, is not at all a bad or unfair deal. And in fact, if the allocator has the right connections, it's a fucking GREAT deal... how many sources do you know with the capitalization and willingness to hand out millions of dollars, potentially stake you for even more on straight up investor terms, and then legitimately introduce you to tens or even hundreds of millions MORE on top of that? Again, the "catch" is that you have to be a damn good trader with a damn good program, good enough to believe in yourself (and yes, good enough so that you have enough capitalization to put up a chunk as risk on yourself)... but is that really a "catch" at all? Isn't that just the deal we know and love called capitalism? Unless you're a trust fund baby, you don't get rich by any other way than taking bold, calculated risks. Ok, thanks for interrupting my evening workout. Back to the weights
Dark Horse, I'll admit I'm too tired to read through your entire post. Let me try to put this a different way. First of all, lay off the accusations. I never said it was con, that was another poster. I never even said what they were proposing was unethical. I simply said it was not, in my opinion, a good deal for the trader. Jesus, had no idea I was going to be read my rights. Second, my beef with these types of deals is not what is "in" the contract. It's what is "not" in the contract. Yes, of course the trader understands the first loss provision. What the trader does not understand is how or if they are going to be backed. Most these types of firms do NOT spell that out in the contract. It's very ambiguous. The "investors" they talk about are very secretive and they never tell you who they are. And as a cop out they always say things like, well, it depends on whether the investor likes your performance. A lot of times traders get strung along forever and the backing never comes. Now, I know what you are going to say. Hey, that's the risk they take. Maybe. But it's still a bad deal in my opinion. Is there some guy out there where this deal will work because the prop model is not the right fit for them and they can't find backing anywhere else? Sure. I can buy that. But make no mistake about it, they are the exception, not the rule. And in the future, if you are going to attack me, make sure you attack me for something I said, not someone else. That will make this dialogue go a lot smoother. Good night.