Reasonable revenue split as trader

A

AlphaMale

Hi all, I have just agreed with a local asset manager to run a CTA strategy for them. I have developed the trading system and responsible for order execution, but all the rest (risk managment, compliance, legal, backoffice) etc. are on their side. I don't take any financial risk. They have offered me 10% on net returns at fund level, is this reasonable?
 
I wouldn't do it for less than 35%. 10% is quite low but it depends what you're offering and what are your qualifications.
 
It's a CTA strategy which is expected to return 40% annualized gross, I've been running quant strategies since 2012 with my own RIA firm, PhD but no finance professional qualifications or Wall St experience...
 
AlphaMale said:
It's a CTA strategy which is expected to return 40% annualized gross, I've been running quant strategies since 2012 with my own RIA firm, PhD but no finance professional qualifications or Wall St experience...
More...

I think experience is much more relevant than education but I might have bias. With that in mind and the 40% gross, 25% is more likely to be the ceiling.
 
d08 said:
I wouldn't do it for less than 35%. 10% is quite low but it depends what you're offering and what are your qualifications.
More...

IMO, 35% is unreasonable for this set up. If you were the CTA you would likely not get more than 2/20, 1/25 or 0/30. And that would require all the work and expense they incur. I would ask for 15% but not sign any contract that does not allow you to offer the same strategy for outside investors. If you can only get 10%, you have decide what you can do on your own. Costs about $15K to form the CTA, then you need to pay for compliance, an attorney, an admin, you need back up and perform audits for the NFA/CFTC. If they have a material AUM, it not a bad deal.
 
Buddy get your foot in the door, 15% sounds good but good only for an year plus as mentioned above you have the discretion to run strategy to outsiders with 100% ownership of those revenues.

After one year 15% can be renegotiated to 20% or so. Do not get tied up in the long term contract. Market loves performance so once numbers are backing you then you will put your own price.
 
  • Like
Reactions: d08
I double checked, it's 10% of fund-level returns, so with 20% carry this means half of the carry. The fund has about 50M USD AUM spread across 10-15 strategies. This sounds pretty ok to me, or?
 
AlphaMale said:
I double checked, it's 10% of fund-level returns, so with 20% carry this means half of the carry. The fund has about 50M USD AUM spread across 10-15 strategies. This sounds pretty ok to me, or?
More...

If You are getting 10% before their fees with a material amount of AUM vs 10% of their fee?Just read you contract. It does sound fair to me now.
 
You must log in or register to reply here.
Back
Top