hey all! !I'm back! I've been out of this board for a while. Gosh, a lot has changed. Well, let me tell you this. I've been in the institutional world for a while, then I went to prop trading which I thoroughly enjoyed then went back to institutional world again for stability reasons,etc. You will NEVER get 50-95% cut you'll get as a prop trading when you are managing OPM. What do you expect? What will your investors get 5% out of the deal? if you are expecting a prop deal a la Bright, Worldco, Andvoer, then forget it. So, Andre is actually giving a decent cut of 10% of net profits. Now, for $2.5M that's about $250K pay. Not bad. Not super. But as a hedge fund, he's charging his clients probably 20%. So, you basically get half of the proceeds. I guess at this scale it might not mean much. But if you were running $50M then the money starts to be more than a small change. Let's say conservative 20% return on $50M. That's $10M. And 10% cut is $1M. Very good pay. Or if you were running $100M. 20% return. That's $20M. 10% of that is $2M/yr paycheck. Very good. But I think for most prop traders the deal is probably NOT practical because their strategies are not very scaleable. So, even if they have $5M to manage they wouldn't know what to do with it. So, in that case, it's BETTER for you to continue to go prop. I mean if a good prop trader makes $500K then he's most likely will keep 95-100% of it. In order to make $500K, in the institutional world you gotta manage a much large asset base. But the flip side is that you get a good 6 figure base salary. And your bonus can run into the high 6figures. But you'll always feel a little underpaid if you worked in prop before. That's the curse of being in the prop world before. haha. But there's a price of everything in life. Risk vs Stability. just a thought
In 1966-68 I lived in a suburb of Zurich after living in Greenwich,Conn for many years. Would be fun to return to Adlisvil and just trade a little. 50/50 or better deals are common and something I have been used to when I traded OPM on POA's. I've never traded more than 100,000 shares of a given equity in a stream (think 30 dollar stock) and I only trade short term (not as slowly as your example which looks like 50% a year perhaps).
Some prop or individual traders may have scalable, diversified strategies, but don't always have enough capital to trade them. Point is, it is unrealistic to conclude that prop traders "wouldn't know what to do with $5M". Strategies used by individual traders with relatively small capital (~ $30k - $200k) differ from strategies used by hedge funds or CTAs who manage millions. Despite that, hedge fund people require only real track records from "good traders", who (in most cases) can only show real records of their 'not scalable' strategies. If an individual trader has moderate/large capital and good, scalable strategies - he/she will have no interests in using them to make someone else rich. This leads to a following situation: - individual traders will do what they currently do, - hedge funds won't find any ind. trader who will match their criteria. HF will rather recruit traders from other HF or i-banks. On real records. If a trader has ~$200k - he can open 10 accounts, trade 10 different, uncorrelated strategies, and show only one acct where performance was the best. Hardly a proof that he is indeed a good trader. On some other thread Mr. vhehn told us that "backtesting is useless, show us the real trades". Majority of CTAs backtest and then trade their strategies, yet when a fund wants to "add diversification to a program" - suddenly backtesting becomes useless, worthless, etc. Finally, Mr. Lueti looks for a good AND uncorrelated (with his HF) records. "Good returns" are not enough, they must be uncorrelated or - even better - negatively correlated with what they currently trade. Otherwise it wouldn't make any sense to hire someone who matches employer's records.
Maybe I'm missing something, as I have no experience working with funds or firms, but what is to prevent a proven trader from executing trades for a fund (remote), while at the same time trading his own account? Is there a regulatory issue? If it is just a matter of entering trades in another system, and dealing with the issue of scalability, why wouldn't that be potentially attractive?
Andreas, so is access to capital all you have to offer? And you expect to find successful traders willing to take such a deal for a mere 10% cut without any additional contractual benefits? While leverage can be had all around at low financing rates of 2 to 3%? You must be kidding... To make this an attractive offer it would have to encompass at least: - a regular employment contract under swiss law (including AHV/IV benefits) terminatable at three months' notice - BVG based defined contribution pension plan (2. Saeule) - yearly net base salary of CHF 150,000 to 200,000 - 10% cut of profits Only at that point, such an offer would become worthy of further consideration and potentially sacrificing the blessings of self-employment. And I'd even bring my own type C residence permit and throw in MBA and PhD degrees from HSG to boot.