Capital Available for Traders

[rwk]

Quote from Maverick74:
... just wanted to make sure I and the rest of us here understand exactly what you are offering. It appears as though you are basically allocating 100k in which the trader is going to keep 10% of his/her profits and give up the other 90%. Put another way, you are offering 10k for them to trade. If they already have an IB account, they already have 10k since IB has a 10k minimum.

Actually, the compensation is half of 2/20, so a $100k allocation would be $1k + 10%. Obviously, a trader cannot live on that even with a 100% return. What RAPA is offering, in theory, is a chance to be "discovered" by showing a performance that is tamper-resistant.

There are prop firms that will give most anybody a shot, but require that the trader put up cash to cover losses and perhaps pay for training. Then there are prop firms that don't require cash, but they're highly selective, as are investment banks, hedge funds, etc. What is lacking is a way for someone with no pedigree and little cash to get a start. I think what RAPA has done is noteworthy, but it remains to be seen whether it will work.

The sticking points, beside that the whole idea is still evolving, seem to be with giving RAPA access to the trader's IB account and details of the methodology. The 50/50 split on fees may work for initial allocations, but it will become onerous once the trader has established credibility and the allocation raised to something that could possibly support a business. There is also an article of faith here that asset allocators will show up in sufficient numbers and accept RAPA's preformance reports as sufficient due dilligence. That's a stretch. The social networking and journaling features will probably not get used much.

 

[mickson]

Quote from sle:

The sizes of the allocations are, for the lack of better word, staggering. Did I get that correct, you have 1.2 million to allocate to the top 5 traders?

That is correct and also $100k to the top trader on the 7th December.

I am able to significantly increase this number from my existing investors but they want to see more talent on the leaderboard. It is a chicken and egg situation. So I am asking the ET community to support this initiative and tell friends, colleagues who you think are talented to post their performance numbers on our leaderboard. This way I will be able to raise more capital for investing.

Another point is just because you are not in the top 5 ranking doesn't mean investors won't allocate funds. Investors are looking for traders who are consistent money makers with less impressive RAPA scores but have a clear methodology nicely articulated on their wall.

 

[Maverick74]

Quote from mickson:

That is one way of looking at it.

OK, that's the way I understood it. I was trying to help out my friend Pekelo who at times has trouble understanding content presented on web sites. I just want to make sure people understand. On a few other threads most of ET seemed abhorred at the idea of giving away 40% of their profits. This is 90%.

I'm not knocking your model. Again, like TST, there is a marketplace for what you are offering. Fwiw, this model has been tried at various prop firms. To be more specific and name names, Coastal is doing something similar. You fund an account there and put up a track record and they introduce you to institutional investors. I can't vouge for whether or not they follow through or not, but this concept is not a new one. It's been around for years.

 

[mickson]

Quote from rwk:

Actually, the compensation is half of 2/20, so a $100k allocation would be $1k + 10%. Obviously, a trader cannot live on that even with a 100% return. What RAPA is offering, in theory, is a chance to be "discovered" by showing a performance that is tamper-resistant.

There are prop firms that will give most anybody a shot, but require that the trader put up cash to cover losses and perhaps pay for training. Then there are prop firms that don't require cash, but they're highly selective, as are investment banks, hedge funds, etc. What is lacking is a way for someone with no pedigree and little cash to get a start. I think what RAPA has done is noteworthy, but it remains to be seen whether it will work.

The sticking points, beside that the whole idea is still evolving, seem to be with giving RAPA access to the trader's IB account and details of the methodology. The 50/50 split on fees may work for initial allocations, but it will become onerous once the trader has established credibility and the allocation raised to something that could possibly support a business. There is also an article of faith here that asset allocators will show up in sufficient numbers and accept RAPA's preformance reports as sufficient due dilligence. That's a stretch. The social networking and journaling features will probably not get used much.

Excellent points every one is worthwile. I will respond more fully a little later as soon as I finish my gym workout

 

[Maverick74]

Quote from rwk:

Actually, the compensation is half of 2/20, so a $100k allocation would be $1k + 10%. Obviously, a trader cannot live on that even with a 100% return. What RAPA is offering, in theory, is a chance to be "discovered" by showing a performance that is tamper-resistant.

There are prop firms that will give most anybody a shot, but require that the trader put up cash to cover losses and perhaps pay for training. Then there are prop firms that don't require cash, but they're highly selective, as are investment banks, hedge funds, etc. What is lacking is a way for someone with no pedigree and little cash to get a start. I think what RAPA has done is noteworthy, but it remains to be seen whether it will work.

The sticking points, beside that the whole idea is still evolving, seem to be with giving RAPA access to the trader's IB account and details of the methodology. The 50/50 split on fees may work for initial allocations, but it will become onerous once the trader has established credibility and the allocation raised to something that could possibly support a business. There is also an article of faith here that asset allocators will show up in sufficient numbers and accept RAPA's preformance reports as sufficient due dilligence. That's a stretch. The social networking and journaling features will probably not get used much.

I understand the pros and cons. I just think this model is already out there and I think the jury has given it a rather lukewarm response so far. I agree with most of what you said. I'm not sure how much value these RAPA scores are. LOL. The best metric for investing appears to be longevity and RAPA can't offer investors that.

 

[marketsurfer]

This is your chance to manage $100,000

Dear Traders

RAPA Cap Intro™ has announced the first round of capital allocation, to take place on the 7th of December 2012. $100,000 will be allocated to the trader at the top of the RAPA Leaderboard at the end of trade that day.

Eligibility

Available only to traders currently using the IB Trader Workstation (TWS) platform.
Must have 9 consecutive months of trade data available.
The successful trader will earn a 1% management fee and a 10% performance fee.

For your chance to manage $100,000, join the RAPA community, where trading talent is introduced to investment capital. Click here to visit the site or visit our Elite Trader discussion forum here.

Regards,
Michael Berman, Ph.D.
CEO & Co-Founder
www.rapacapintro.com






RAPA Pty Ltd (CAR # 430974) of
Gleneagle Securities (Aust) Pty Ltd (AFSL # 337985)
RAPA Pty Ltd · Level 10, 2 Bligh Street · Sydney, NSW 2000





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[mickson]

Quote from Maverick74:

On a few other threads most of ET seemed abhorred at the idea of giving away 40% of their profits. This is 90%.

I'm not knocking your model. Again, like TST, there is a marketplace for what you are offering. Fwiw, this model has been tried at various prop firms. To be more specific and name names, Coastal is doing something similar. You fund an account there and put up a track record and they introduce you to institutional investors. I can't vouge for whether or not they follow through or not, but this concept is not a new one. It's been around for years.

I think there is a misunderstanding. You are not giving away 90% of your profits. When John Paulson manages say $10 billion, and he makes a 10% profit for his investor, i.e. $1bn lets say he charges 20% performance fee he keeps $200m and the investor keeps $800m (80%).

I don't know where you are getting that you are giving 90% of your profit away. You are being allocated money like a manager and you are charging 1% management fee and 10% performance fee, that simple.

Why would an investor give you money if you are going to keep all the profits?

On your point that this is not a new one. To quote King Solomon, "there is nothing new under the sun". I am sure there are lots of variations of the same concept. We can only comment on ours. We have built an electronic interface that gives us comfort that we can assess a traders numbers. There are no guarantees that past performance will be replicated.

 

[mickson]

Quote from Maverick74:

I understand the pros and cons. I just think this model is already out there and I think the jury has given it a rather lukewarm response so far. I agree with most of what you said. I'm not sure how much value these RAPA scores are. LOL. The best metric for investing appears to be longevity and RAPA can't offer investors that.

I see you are judge, jury and executioner -

I would be interested to see how you define: lukewarm.
I am pretty impressed with our leaderboard so far, 2 weeks into the launch of a new company as well as a the number of new members.

Unless you are an investor don't be concerned about the RAPA Scores. We have put our money where our mouth is and stumped up the first $1.3m as investors relying on these metrics. It is incumbent upon me and my team to convince other investors that we are able to monitor and assess trading talent and therefore grow the amount of capital available.

Finally on the point of longevity you don't know how our algorithm works or the factors it takes into account and their weightings.

 

[Maverick74]

Quote from mickson:

I think there is a misunderstanding. You are not giving away 90% of your profits. When John Paulson manages say $10 billion, and he makes a 10% profit for his investor, i.e. $1bn lets say he charges 20% performance fee he keeps $200m and the investor keeps $800m (80%).

I don't know where you are getting that you are giving 90% of your profit away. You are being allocated money like a manager and you are charging 1% management fee and 10% performance fee, that simple.

Why would an investor give you money if you are going to keep all the profits?

On your point that this is not a new one. To quote King Solomon, "there is nothing new under the sun". I am sure there are lots of variations of the same concept. We can only comment on ours. We have built an electronic interface that gives us comfort that we can assess a traders numbers. There are no guarantees that past performance will be replicated.

No need for the rebuttal. I'm trying to give you ET speak. I completely understand the idea behind splitting profits. But there was a 900 page thread where most of ET seemed to not understand the concept of a split. There is another firm here on ET that does 60/40 splits and a good majority of ET thought it was sacrilegious to give away 40% of their profits. Of course that is not the right way to look at it. But that was their argument.

 

[Maverick74]

Quote from mickson:

I see you are judge, jury and executioner -

I would be interested to see how you define: lukewarm.
I am pretty impressed with our leaderboard so far, 2 weeks into the launch of a new company as well as a the number of new members.

Unless you are an investor don't be concerned about the RAPA Scores. We have put our money where our mouth is and stumped up the first $1.3m as investors relying on these metrics. It is incumbent upon me and my team to convince other investors that we are able to monitor and assess trading talent and therefore grow the amount of capital available.

Finally on the point of longevity you don't know how our algorithm works or the factors it takes into account and their weightings.

I'm not judging your firm. I look forward to your model. As I said, there is a place in the market for you. What I meant by lukewarm is, I know several firms running similar models and I have yet to see anyone of these firms raise the amount of assets that they claim to for good traders. I think they are well intentioned but it's just that it's harder then it looks.