Rapid CTA/CPO/HF Growth

Discussion in 'Professional Trading' started by CPTrader, Nov 7, 2005.

  1. The article below refers. Great growth by QIM. Good for them! I am curious as to peoples thoughts on how they achieved this rapid growth. It seems the critical phase for a CTA/CPO/HF Mgr is moving from the $0-5M regime into the $5-10M regime and then after AUM exceeds AUM it seems future growth comes fairly "easy" assuming performance is at least average. Of course this is an oversimplification, but the purpose of this post is to solicit broad discussion/opinions.


    Charlottesville, Virginia-based Quantitative Investment Management's assets under management have risen dramatically in the past three months, increasing from $11.4 million at the end of July to $42.4 million at the end of September and, with the addition of another $32 million in new client assets this month, and to more than $74 million, said John McAllister, vice president of marketing.

    "The new investors included high-net-worth individual and institutional investors," said McAllister. He declined to name the investors.

    QIM's flagship product is the low-volatility Global program, which employs some 1,500 quantitative trading models that utilize pattern recognition to predict short- and medium-term price movements in global futures markets. The Global program has achieved a compound annualized return of 22.3% since its December 2001 launch, and is up 13.6% year to date.
  2. Rapid growth? 3-4 large "hot money" investors/funds are sometimes all it takes to make a small hedgie swell with assets. But this same hot money will flee like hell a the first inkling of reduced returns. So, where's the "growth" in that?

    Also, the disruption in "ramping up" and then reducing the overhead to accomodate this hot money, in many cases is not worth it, especially since these same large investors often demand reduced fees.
  3. Very good points risktaker. I strongly belive that most HF mgrs, ESPECIALLY those with new funds must insist on lock-ups! Too much hot-money out there, that will "posion" you, if you don't act wisely to protect your interests.

    Thanks again, and I'm looking forward to more thoughts on this topic!
  4. How about a 6-12 mos "lockup" with a 3% penalty for immediate withdrawals or some similar arrangement?

  5. I think you need a lockuop WITHOUT the penalty. Hot money will pay the penalty and move on - unless it is really steep like 10%. A 3% penalty won't deter them from bailing on you.

    Investors will counter that liquid strategies like managed futures, global macro, long-short equity do not need lock-ups becuase the liquidity is there. The rebuttal to this is that the lock-up is not to avoid liquidity problems caused by redemptions but to have a solid/steady investor base who truly understands the stratgey and are not just chasing past returns.