Attention: Prop & Hedge Fund traders. I need the Varsity for this question!

K

KCM

First post, but I have been a fan of the site for a while.

Question is: Where do the experienced(positive track record) prop guys go for the best deal without using exaggerated leverage? Does anyone know of some respected hedge fund seeding programs?

A little background: I have traded at two top twenty investment banks and at a hedge fund for over ten years. I trade equities, futures, and forex. I am interested in building a marketable track record and would like to know where the best place to do this would be. I have had a positive, if infrequent, trading record in my personal account for years, but have started trading in my p.a. on a daily basis for the last five months. The hedge fund I work for tracks how I do against various benchmarks(ie. we do have some discretion), so I do have a longer track record, as well. I am looking to make this move at the end of this year, when I will have a full year track record in my p.a. under my belt.

I would like to move to a prop shop that lets me trade for the house or into a hedge fund seeding program. An ideal situation would let me trade from home, but I am willing to move anywhere to make this happen. I know that most seeding funds are hard to get into and will give you a bunch of money($10M-25M+), but offer a bad split(10-20%) of the profits. I have seen on this site that the Bright Trading and Assent's of the world give you a great payout, but will let you hang yourself with exaggerated leverage. I am willing to use reasonable leverage(2-3X) and put up some of my own money. I am willing to take a reasonable split of the profits. Ideally, I wouldn't have to use any of my money at all, but I wouldn't be paid unless I show a profit. I have a sound strategy(ie. others have used it profitably for years, but, it's not a holy grail) and would be willing to learn new ones, as well.

Where can I trade for the house without all the leverage? Is anyone in a seeding program they really like? I can't seem to find an ideal situation and would really appreciate any help. If you are uncomfortable posting a name, please send me a private message. Thanks!
 
The only "hanging" of oneself is done by one's self, LOL. No need to use "excess leverage" - trade the way you like, within risk parameters, keep your profits...up to you.


All the best in your search, regardless!

Don
 
Quote from KCM:

I am willing to use reasonable leverage(2-3X) and put up some of my own money.
More...

If this is all you need in terms of leverage then just open your own retail account. Do you need to hold postions overnight? How much capital is the minimum you need to trade your strategy? How much money are you willing to put up? How active will your trading be, do you make 100 trades a day or only a few a week? The FX part you shouldn't need a prop firm for because there is sufficient leverage in a retail account for FX, probably Futures too. You might want to answer these questions on here first so people can give you a better recommendation for a place that fits your needs.
 
Don,

I am unclear about a couple of things. From what I have read on this forum, you offer $1M of buying power if I put up 25k, right? Is this only under the strategies you prefer? For instance, I read on your site about the boot camps you run where certain strategies are taught. So, is this $1M hedged, as in an arb strategy or pairs trading? Can I bring my own strategy? Under what scenario do I lose my $25k. How much does my account have to drop? 2.5%? I really keep 100% of my profits? Besides collecting desk fees and commissions, what incentive does Bright Trading have to do this?

Thanks,
KCM
 
UDon'tKnowMe,

Thanks for the reply. You are right about the leverage. I'm looking mainly for a place to trade equities. I can do forex on my own. A little help with futures to trade the bigger contracts would always be helpful. So, let me clarify. Ideally, I'd like $5M-$10M with no money down on my part and a 60%-40% or 50%-50% split of the profits. While I have seen a place or two that will give you $1-$1.5M with this kind of split(or worse) and no money down, I would need at least $2M of capital to make this worth the time. I am hoping that with my background and a one year track record at the end of the year, I can find a place like this. Who knows, maybe not?
Access to extra capital, above and beyond the $2M, is why I would be willing to put up some of my own money. If some of these places will give someone with no market experience or track record $1M-$1.5M with no money down, there must be places that will give you more money for experience and track record. In the event that I can only find the $1M-$1.5M deal, then maybe my money would be a "good faith" deposit or "hurt" money towards extra capital. I don't want margin leverage like most places are willing to give you. In other words, if my account has a draw down of 10%, both my money and the prop shop lose 10%. Not, I lose 100%. If I hit a certain threshold or they don't like my results, they are free to pull the money and fire me.
To me that is the true meaning of proprietary trading. You are taking a risk on the trader and that is why traders are willing to give up a large % of our profits. Most of the "prop" shops I see on this site seem to be nothing more than market access and excessive leverage. Huge leverage might be great when you have some sort of dollar neutral or arb strategy, but not if you take directional positions.
Does anyone know of a place like I previously described? I have only found two places, but surely there must be more. Please send me a private message if you don't want to mention the name over the board.

Thanks,
KCM
 
Quote from KCM:

Don,

I am unclear about a couple of things. From what I have read on this forum, you offer $1M of buying power if I put up 25k, right? Is this only under the strategies you prefer? For instance, I read on your site about the boot camps you run where certain strategies are taught. So, is this $1M hedged, as in an arb strategy or pairs trading? Can I bring my own strategy? Under what scenario do I lose my $25k. How much does my account have to drop? 2.5%? I really keep 100% of my profits? Besides collecting desk fees and commissions, what incentive does Bright Trading have to do this?

Thanks,
KCM
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"Stock Exchange Floor Trading" business model is what we engage in. Traders P&L is theirs. Traders are basically running their own trading business withing our structure. Capital use is based on Risk, not "margin" or "leverage." If you put in $25K, make $20K you have $45K...drop $5k, now at $40K, just like any other business, hedge fund, or retail account. We trade billions of shares every year, economies of scale. We pay for the Exchange memberships, traders just pay annual dues.

If your strategy works well, great.

Don
 
If you have a profitable strategy why would you want to give away half of your profits? Commissions are so low these days that you are asking to pay a huge premium for access to capital, and reduced risk in the event of blow up.

A lot of guys, including myself, trade directionally with $1-5M bp for $25-50k down. You should be able to limit your risk with stops and never have a blow up situation if you are a good trader.
 
Based on what you said in terms of clarifying what you need, I would suggest Trillium Trading, they are under Schonfeld's umbrella. You didn't clarify but I am assuming you need this buying power for overnight directional plays?
 
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