Reasonable revenue split as trader

AlphaMale said:
Hi Bob, thanks for the note, in this case it's actually for the Chinese market. We're running tests for similar strategy for US equities that looks equally promising.
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"YIPES!!"
I know it's unpopular to say, but ultimately, there are provisions in Chinese commerce that are outside of anyone's "law" -- a principle nuked in Western civilization with the Magna Carta. (Totally serious here.) As much of a fan of BABA as I am, I would not put a dollar there, long-term. Xi could decide tomorrow that Blah-Blah-Blah, and your money is *gone*, and with zero recourse. I'm sure there's *wonderful* things going on there, but my mind, it's playing Russian Roulette with a very big cylinder: there's still a bullet waiting for the hammer.:confused:
 
@AlphaMale, if you don't mind sharing, are you concerned at all about protecting your IP? Is there a clause for that? If there is, is it realistically enforceable?

Also curious if the strategy requires lots of capital to be worth running, cause if it's not why not run it yourself and build it up?
 
IP is no issue, software is running on our server which we just connect to their trading account - plug n' play. Running the strategy requires about 5 min of work per day.
 
i'd say as long as you don't have to integrate anything into their infrastructure and just pay them 90% until you have enough money but i'm not sure how that could work with them being 'in charge of risk management'. it's lower than a junior hf pm so you should expect not to have to give everything away as well as make all the money. i agree with everyone else it depends completely on the specifics of the contract.
 
AlphaMale said:
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?
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I did that for a while. I charged 20% of profits on a high water mark basis..
 
AlphaMale said:
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?
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I would say it depends on much capital they will allocate to your book. If it's sub $10m I would opting for something higher than 10% of net returns above high water mark.

You do the math, how much capital will you manage, what is the size of your expected return in pct and $. What will your cut in $ be. Then you know if it's worth it or if you should ask for something higher.

Other considerations is if it will be your full time job and only income, or will you have a regular job beside running a book for them. Tax rate on this income?

Also put in how much effective time you will spend on them. That is also part of the calculation.
 
Well, actually at "steady state" it's no more than half an hour per day, later, with bigger AUM it will take some more coordination but not vastly more.
 
This is just for my own curiosity. Does anyone think that creating trenches is a good idea? In other words, the more money is invested, the less percentage the creator gets. So the more backers invest, the more they keep, but at the same time the creator gets more money even though the percentage of the total is smaller. Win-win?
Example:
10% of 100M
5% of 250M
2.5% of 500M
1% of 500M+
 
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