Warning to Hedge Fund Manager Wannabe's

Regarding the psychological impact of losses when you're handling investments for friends & family, this is much more common and institutionalized than just hedge funds. It is common practice for many large retail brokerage firms to deliberately take on many new brokers with the knowledge that the majority will wash out. They are then encouraged specifically to reach out to as many friends and family as they possibly can and bring the accounts to the firm. Then, even though that individual broker may wash out, many of the friends and family accounts will tend to remain with the firm. During the time the new broker is with the firm, they get caught up in the buzz and start to believe the hype that the firm's recommended lists represents the optimal investments for their friends & family. By virtue of their newly-minted Series 7, they think they know something about what makes a good investment or a good trade, even though that's not the purpose of a Series 7.

You haven't seen how the major retailers play if you think the movie Boiler Room is only about little fly-by-night firms.
One interesting question is which major player is the name JT Marlin supposed to represent. I know what firm name it almost sounds like, but there are other ways of playing with the name to see the name of at least one other firm.
 
Quote from Walther:

Truly a sad story, I am very sorry for your loss .

There was, no doubt, underlying problem unknown to his friends. Emotionally stable people do not commit suicide over money or a job loss .
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I agree with that...

Trading does affect fragile persons the most. Yet all of us can feel great angst once in a while. But only a few will take drastic steps therafter. After all..... there are many losses in life, and yet not everyone kills themselves over it! I had a friend do the same (age 31) with a wife who was an R.N. and two children; an ostensibly happy marriage. It had something to do with the markets but after looking into it, he was abusing cocaine also and no one claims to have known it.

However I in no way seek to minimize the loss by a friend's demise.

ICe
:cool:
 
this was a sad story. no one knows what pushes another person over the line.

there was a posting about hedge funds advertising they were not interested in people with day trading or prop trading experience with actual advertisements. tried to find but could not find posting. can someone direct me.

sorry for your loss.
 
Quote from zdreg:

this was a sad story. no one knows what pushes another person over the line.

there was a posting about hedge funds advertising they were not interested in people with day trading or prop trading experience with actual advertisements. tried to find but could not find posting. can someone direct me.

sorry for your loss.
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i just found it. PuffyGums
Elite Member

Registered: May 2002
Posts: 1130


01-29-04 02:32 PM



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Quote from sy5050@aol.com:

the reason I asked about prop trading firms being an issue, was b/c quite a few job listing for hedge funds in new york specifically state no prop traders need apply. Just wanted to know if anybody encountered any problems in the industry.
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Definitely some good advice. While not a hedge fund manager, I do manage other people's money and use some strategies more similar to those of hedge fund managers than conventional asset allocators.

Conventional asset allocators have a much easier job -- if their clients lose money, they can blame the market. Hedge fund managers and those with strategic approaches shoulder all of the risk and blame. That's not an easy burden to handle.

Because of that I only take clients on referral. I don't advertise my services and have turned away a number of potential clients who I didn't feel comfortable with. You may think that's not a big deal, but I just recently started my investment advisory firm from scratch and have the burden of my wife's six figure student loans so it's not like I don't need the money. Similar to the post that I quoted, I only take a small portion of a person's portfolio.

I think the best thing that can happen to a trader and future money manager is to blow up early in your career before you get too far down the road. I set up a small investment club a number of years ago for some of my college and family friends but I made all of the decisions (I didn't take a fee). I blew the account up and then took the next 2 years to pay everyone back. They didn't ask but I felt it was the right thing to do. While that experience really put me back financially, it was one of the best things that could ever happen to me because I learned about risk control.

Sorry to hear about the guy who is no longer with us. My heart goes out to his family and friends.



Quote from PoundTheRock:

Swish, sorry to hear about your friend. We take the following precautions to try to prevent such a situation because of course anything could happen:

1. When considering a new investor, make sure the PPM is filled out completely and thoroughly. Follow a procedure similar to the "know your customer" rule.

2. Once you assess the investor's net worth / liquidity, absolutely refuse to take more than 25% of that person's net worth. We constantly turn down additional investments and beat it into the investors' heads that they could lose all of their investment, even though we are more conservative than any typical tech mutual fund.

3. Avoid the hot money crowd. Occasionally, a friend of a friend will come recommended to us. We ask them about their hedge fund experience and how often they switch. If they're evasive or defensive, don't take them.

4. We probably have a different approach than most. We recommend that an investor put in an initial chunk and then wait to see how it goes. If they're happy, then we encourage them to invest additional funds up to our self-imposed limit.

Clearly, these measures won't prevent someone from suing us anyways, but at least the damage is mitigated.

Regards,

PTR
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I believe I read something (maybe in "Market Wizards"?) where he distributed some of the profits from his fund each year to investors as a risk control measure. Even if it wasn't him that I'm thinking about, it's not a bad thing to do if you're a hedge fund manager.
 
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