Raising Capital as a Discretionary Trader

P

prestonhouse

I've been trading for 2 years in the spot fx market. This January marked the beginning of my trek to build a consistent 2 year track record before I try to register with barclays and other places and try to raise funds. I'm studying for my series 3 right now and plan to take it by end of June. (having to teach myself options, which is slowing me down a bit).

I've recently had the amazing opportunity of having a hedge fund manager here in my hometown of Charlotte, NC begin to meet with me, and show me the ropes a bit concerning trading as a business. He has a decent sized fund (>10m). He was initially a discretionary trader when he first began to dabble in the markets but eventually taught himself coding language and transitioned into a quant trader. He is very biased and is trying to convert me. It is his thought that it's very hard for a discretionary trader to raise institutional capital. He says that you really need to have a quantitative method.

My question is this: Is that true? From a couple of threads I've perused, I notice that there are some fund managers in these here forums. Would any of you care to comment on this? If you have a 2 year track record with steady growth and very limited drawdown, a solid sharpe ratio...is it possible to raise some seed money as a discretionary trader?

Also...I should define discretionary as I think of it...to me discretionary is a trading system that has a manual pull of the trigger. A very strict set of rules governing the trading methodology and risk parameters, but ultimately a discretionary decision on whether a trade is taken or passed.

Any thoughts you professional traders out there???
 
Quote from prestonhouse:

I've been trading for 2 years in the spot fx market. This January marked the beginning of my trek to build a consistent 2 year track record before I try to register with barclays and other places and try to raise funds. I'm studying for my series 3 right now and plan to take it by end of June. (having to teach myself options, which is slowing me down a bit).

I've recently had the amazing opportunity of having a hedge fund manager here in my hometown of Charlotte, NC begin to meet with me, and show me the ropes a bit concerning trading as a business. He has a decent sized fund (>10m). He was initially a discretionary trader when he first began to dabble in the markets but eventually taught himself coding language and transitioned into a quant trader. He is very biased and is trying to convert me. It is his thought that it's very hard for a discretionary trader to raise institutional capital. He says that you really need to have a quantitative method.

My question is this: Is that true? From a couple of threads I've perused, I notice that there are some fund managers in these here forums. Would any of you care to comment on this? If you have a 2 year track record with steady growth and very limited drawdown, a solid sharpe ratio...is it possible to raise some seed money as a discretionary trader?

Also...I should define discretionary as I think of it...to me discretionary is a trading system that has a manual pull of the trigger. A very strict set of rules governing the trading methodology and risk parameters, but ultimately a discretionary decision on whether a trade is taken or passed.

Any thoughts you professional traders out there???
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It is unlikely you will raise much in the way of funds. But more importantly, your chances of achieving an interesting 2-year track record with good stats is a 100 to 1 shot.
 
Quote from TraderZones:

It is unlikely you will raise much in the way of funds. But more importantly, your chances of achieving an interesting 2-year track record with good stats is a 100 to 1 shot.
More...

It is hard, but it can be done. I've done it personally (3 losing month in a 2-year period, all single digit while profitable months are in the mid double digits) and I think anyone with a passion and work hard enough can do it.
 
Preston,

If you have a strong record, I am sure you will be able to raise some funds, no matter your trading approach. You may want to start out by trading as a prop trader for a fund and if you're consistent, your risk limit will be lifted to a million or two in no time.
 
Good luck, raising capital is much harder than trading. On inspection, it appears that the majority of institutional assets are going into quantitative strategies and out of the old guard. A good example is the growth of DE Shaw or Renaissance fund base. Good luck my friend!
 
it's interesting you mentioned renaissance. i've been following them for a bit. they absolutely killed it in 08 when everybody lost their shirt. i think they did around 80%. then they followed that up in 09 with another >50% return. and i know they are all quants....interesting
 
Quote from CateFul:

It is hard, but it can be done. I've done it personally (3 losing month in a 2-year period, all single digit while profitable months are in the mid double digits) and I think anyone with a passion and work hard enough can do it.
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- without documentation, it is not acceptable.
- does not show the trading metrics
- lot different trading size ($millions) than one person's account
- 2 years does not a career make - luck is what makes a great deal of shorter term "profitable people"
- and a whole lotta other things
 
Stick with getting to know more people in the business. I've seen people trading quite a few million only making about 3% a month compound, with low or even lower drawdowns, for 6 months. The main reason they were able to get capital in front of them was because somebody important enough knew they were doing it at the time. Quant models are great too, but 10 million you're still looking at the managed account arena regardless... Start small and find out more about IB's...They'll be your best friends.
 
Quote from Traveler:

Could you get a job working for your hedge fund friend? Even for slave wages it would be worth it for the experience.
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Not really...he used to manage more money a few years ago and it was forcing him to devote much more time than he wanted to administrative issues, so he scaled back the fund considerably, runs a 1 man shop, trades at home. spends lots of time in other personal hobbies...artistic mostly. doesn't really have a place for me.

however, if i knew how to code he would probably have work for me, helping code out his ideas, etc. but i have 0 knowledge there.
 
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