essentially you want a system with a sharpe of above 1.5 (absolute min, i'd say) and you are willing to pay no mgmt fee and 1% incentive fee. now, that kind of single market sharpe will require an average trade length of below 24 trading hours, that means slippage becomes an issue, that means ... i doubt it will work out fine for anyone. you probably end up with semipros smelling "hedge fund spirit" and running for you. in my eyes this is no proOffer and will not attract proAttention. just my thoughts. might be provern wrong. nevertheless, nothing bad about offering a deal, good luck to your endeavour. peace
Thank you for the input. 1. No management fee because he's not managing the fund. 2. QQQQ because it shouldn't disturb his activity. IF a true pro, I don't think he would mind an extra $100k+ (e.g.) per year w/o disturbing his stuff. Nevertheless, a truly sensational (& quantifiable) low risk/high return always could be evaluated separately.
One approach your associate might use to get something that's above and beyond the norm is to start with an existing system - AST, Timing Cube, etc. and then improve it via signal filtering. This boils down to data mining exercise. The filter would try to reject signals with above average loss probability based on some set of market variables known at the time the signal is given. I wrote up this approach in the Market Technican's Journal in Spring 1991 and have used to it to generally good effect. Any solid modeling system will do the job ( Nnet, GA, Decion Trees, with Boosting, etc). The key, as always, is a decent candiate set of indicators. A class I give on TA is currently going throug this exercise for a simply buy rule for stocks depressed on a short-term basis on declining volume. The basic signal earns about 0.6% per 5 day hold on OEX 100 issues but with signal filtering the best 10% of the signals produced about 1.5% on a validation test. Might be worth a try.
So you have a system that compounded returns 140% a year for its best (10%) plays. 1.5% per 5 days (60 periods) Nice. I think we have a winner!
Really??? Move over LTCM, move over GS. Woo hoo, reminds me of that 2-Unlimited tune... No, no, no, no, no, no, no, no, no ,no ,no, no there's no limit! No, no, no ,no, no, no, no, no, no, no, no, no there's no limit!
Any lucky fool with a consistently profitable index system can easily and quickly build his own capital/leverage/buying power to run it himself without giving away 95% of it. This offer sounds like a joke, are you putting us on? I know this must be an early April Fools, but if I'm wrong, forgive me.
To add to all the problems, QQQQ have the rule that does not allow taking short positions on a down tick. Timing i.e. long short becomes much difficult in that environment. Is this rule waived for larger accounts?