Excellent points.
Don't know if that is what they do but if it were me, having prior knowledge of what others trade, I would do that except for those traders on my site that consistently make money and I have "perfect" knowledge of who they are.
Fundseeder. Opinions? Useful/Not. Risk?
- Thread starter kcgoogler
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Don't know if that is what they do but if it were me, having prior knowledge of what others trade, I would do that except for those traders on my site that consistently make money and I have "perfect" knowledge of who they are.
Yes, it's a net to catch people's success but not in a way you think.
Nobody is gonna bother "stealing" your strategies, that is not the business model. Replicating other people's strategies is too hard, labor intensive and, most importantly, the devil is in details which are easy to miss. I'd be worried about theft by other PMs and dilution of your alpha, but not from the management of places like that.
The business model of an HFH is to get a bunch of smart PMs working for the firm on somewhat predatory conditions. When people's alpha runs out, they are cast aside. People who do not have alpha are pushed out earlier. Best description of this business is "a portfolio of options". Granted, it still mostly blows, but not because of the IP theft.
In general, IP issues present themselves when you want to leave a place like that and they hit you with a non-compete.
PS. Rule of the thumb is "talk your strategies with partners and be mum with fellow PMs"
For the simple reason that a hedge fund depends on their reputation to continue to operate. If they trolled for strategies from hapless potential stars and stole them, then they'd rapidly lose their reputation and brand which is pretty much all they've got, when it would be far easier to simply hire them.
An individual doesn't have their future as a going concern based on their reputation in their dealings with hedge funds, and it's far easier for them to front-run on a fund if they learned the details of each of their strategies.
That said, if your a paranoid person than nothing I or anyone else could say would change your mind, so to be clear here I'm not trying to. It is, however, beyond dispute that most of us don't like working with people who are overly paranoid. I'm lucky that I get to only work with people I enjoy working with. Most hedge fund partners are in a similar position when it comes to hiring PMs. So one is free to be as paranoid as they want, they just shouldn't complain or wonder why when people freely decide they'd rather not work with them.
I have one more concern even if you do the above ...what prevents them from mirroring your trades outside and not giving you a cut.
lest say you are given 1 mil and u get a cut from the profit but as soon as you trade and they can mirror it outside in 100 mil fund without your knowledge and don't give you a cut.
In this they don't need to crack your strategy. e.g Topsteptrader gives 80% .. why would anybody give 80% when they are funding you it does not make sense ......nobody knows unless their infrastructure is audited...
Then don't seek outside funding! No one is ever going to dissuade a paranoid person from being paranoid, you'll always be able to come up with some scenario where your precious is stolen from you. So you don't get to participate in managing other peoples money. It's that simple. Just use your incredible algorithm to make yourself huge sums of money, like all the other famous rich paranoid investors we all...Oh there aren't any of those. Hmmm.