martingale? haha listen theres alot more to it then cutting just the losers.. that was a very blanket statement.. not to defend the anonymous guy.. i don't know him.. but he might have criteria as to what under performing is rather then just a dollar percentage amount... i know i would consider alot more then just what the guys last years returns were.. everyone knows that volatility in trading can set someone back a year a good bit but in the long run the portfolio can see huge returns.. plus there is so much more to assessing the risk of a manager and in that assesment your judging his performance.. a guy risking very little to make alot is better then a guy risking tons to make pennies.. less risk with more return even if its a lesser amount then another trader is better in my opinion..
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Trading Wisdom for Aspiring Hedge Fund Managers
- Thread starter darkhorse
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martingale? haha listen theres alot more to it then cutting just the losers.. that was a very blanket statement.. not to defend the anonymous guy.. i don't know him.. but he might have criteria as to what under performing is rather then just a dollar percentage amount... i know i would consider alot more then just what the guys last years returns were.. everyone knows that volatility in trading can set someone back a year a good bit but in the long run the portfolio can see huge returns.. plus there is so much more to assessing the risk of a manager and in that assesment your judging his performance.. a guy risking very little to make alot is better then a guy risking tons to make pennies.. less risk with more return even if its a lesser amount then another trader is better in my opinion..
Quote from marketsurfer:
10,000 plus funds-- 5 trillion of assets with more coming everyday creates quite a universe from which to choose....
Well, reasonable estimates of the hedge fund industry put the size at somewhere between 1.6 and 2.5 trillion.
http://www.forbes.com/sites/halahtouryalai/2012/03/01/hedge-funds-a-2-trillion-industry/
In addition to the above, the largest funds (e.g. $5 billion or more) are going to account for a substantial portion of that.
Then on top of that, you said your guy refuses to pay management fees, which cuts out an even bigger chunk of successful managers. (If a manager can successfully raise on his own terms, why is he going to waive fees for some guy who is practically guaranteed to redeem at the drop of a hat?)
Same goes for lock-ups too. You can find funds without lock-ups, but the more restrictions you put in place, the more high quality managers you exclude.
And then on top of THAT, while hedge fund strategies may differ, a huge majority of them are heavily correlated. You've got a truckload of value guys, a truckload of merger arb guys, a truckload of distressed debt guys, and so on. There is just not that much differentiation at the margins in a lot of these spaces. And the mention of being too quick to cut a strategy is right too -- sometimes an entire strategy space (value, merger arb etc) is running hot or cold. It doesn't make sense to cut it for that reason and miss the return to form.
And finally, last but not least, the long tail of the industry includes thousands of tiny little funds with the lifespan of mayflies - guys who are trying to take their shot, not quite making it, and closing their doors in a year or two. This portion of the industry is in constant turnover.
Put it all together, and I would guesstimate the total asset amount available for your guy's "no management fee, trade 'em like stocks" strategy isn't even 10% of $5 trillion, maybe more like 5%.
But I agree on the gambling thing anyway, at least from this guy's perspective. The way you describe it, he sounds like a bored sheik fucking around with racehorses, as opposed to someone actually trying to make money. I'm not really sure what's professional about that at all.
There are many under the radar funds that are not included in Halah's estimations, I believe these types of operations that trade non traditional assets easily double the forbes estimation of the institutionalized hedge fund market.
with that said, only the most established funds can charge 2/20 or more-- its a dream to think a start up fund could even charge a management fee in the present environment.
surf
with that said, only the most established funds can charge 2/20 or more-- its a dream to think a start up fund could even charge a management fee in the present environment.
surf
Quote from marketsurfer:
There are many under the radar funds that are not included in Halah's estimations, I believe these types of operations that trade non traditional assets easily double the forbes estimation of the institutionalized hedge fund market.
with that said, only the most established funds can charge 2/20 or more-- its a dream to think a start up fund could even charge a management fee in the present environment.
surf
Not necessarily... depends on who you're marketing to (and how well you can position yourself)... OPM can be stratified into tiers, similar to startup funding:
1) friends and family
2) small investors / angels / allocators
3) large investors / institutional etc
The second group remains accessible for those with track record, risk management and methodology chops - plus the communication skills to well articulate such - with management fee negotiable based on investment size. (Management fees can also be waved in exchange for a bigger performance incentive, e.g. 0 and 24.)
Sustainability is also a key factor. Bottom line, the less needy you are, and the more talented you are at networking and outreach, the more picky you can be.
Quote from marketsurfer:
There are many under the radar funds that are not included in Halah's estimations, I believe these types of operations that trade non traditional assets easily double the forbes estimation of the institutionalized hedge fund market.
p.s. By non-traditional assets do you mean illiquids? Because the farther one gets from high volume exchange-traded products, the harder it becomes to implement short-term trading strategies (which are the only kind of strategies it makes sense to evaluate on a quarter to quarter basis).
Trading Wisdom 06: Signs of a Market High Point
"There are times when the market gives the impression it is fading into nothingness. Volume becomes very low, trading ranges become very small, volatility becomes very low. Also, there is very little change in market levels and day-to-day fluctuations are minimal. Looking back at history, when that happens it is almost always a sign of a market high point."
- Dick Arms
JS Comment:
How does this compare to the old saw, "Never short a dull market?"
What are some of the underlying reasons a 'fading into nothingness' market may presage a reverse?
How important are news / event catalysts when volume and volatility have all but dried up?
Get Trading Wisdom via e-mail
"There are times when the market gives the impression it is fading into nothingness. Volume becomes very low, trading ranges become very small, volatility becomes very low. Also, there is very little change in market levels and day-to-day fluctuations are minimal. Looking back at history, when that happens it is almost always a sign of a market high point."
- Dick Arms
JS Comment:
How does this compare to the old saw, "Never short a dull market?"
What are some of the underlying reasons a 'fading into nothingness' market may presage a reverse?
How important are news / event catalysts when volume and volatility have all but dried up?
Get Trading Wisdom via e-mail
Quote from darkhorse:
Trading Wisdom 06: Signs of a Market High Point
"There are times when the market gives the impression it is fading into nothingness. Volume becomes very low, trading ranges become very small, volatility becomes very low. Also, there is very little change in market levels and day-to-day fluctuations are minimal. Looking back at history, when that happens it is almost always a sign of a market high point."
Get Trading Wisdom via e-mail
ahh my thoughts entirely wrapped up here... the drift before the cliff.. haha
Quote from darkhorse:
Trading Wisdom 06: Signs of a Market High Point
"There are times when the market gives the impression it is fading into nothingness. Volume becomes very low, trading ranges become very small, volatility becomes very low. Also, there is very little change in market levels and day-to-day fluctuations are minimal. Looking back at history, when that happens it is almost always a sign of a market high point."
- Dick Arms
JS Comment:
How does this compare to the old saw, "Never short a dull market?"
What are some of the underlying reasons a 'fading into nothingness' market may presage a reverse?
How important are news / event catalysts when volume and volatility have all but dried up?
Get Trading Wisdom via e-mail
This is the key to front running.
For those who know my jargon. Citation 6 is the CCC. And the why of scoring using the three variables.
What allows a trader to take the full offer of the market is the offset of the two market variables. PEP was deduced from this characteristic.
For position trading (on any of the slower fractals) the window length varies. For PVT it is up to 1 1/2 hours. For SSR you have days to take the oppotunity.
The relationship of VDU, FRV and PV is quit clear and of highest utility.
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