My advice is to take on investor money when you are ready- I mean, why not when you can just outsource the paperwork and have more funds at your fingertips- but always just be the best trader that you can be. If the size cap on your strategy is ten million, keep rolling along until you get to ten million. At that point, you have the luxury of either a) keeping on w/ small size but making a sweet living b) retiring altogether and contemplating life from your deck chair in the bahamas or c) taking a portion of profits and putting them aside for development of new strategies that can take you to the next level once they are developed (if you are still hungry for it at that point). And when the connections have all dried up and the musical chairs are precious few and the bull long gone, you can get a laugh by throwing a bone to the hotshots on the skids and laughing at all the butt kissing coverletters coming in on your fax machine.
Ever heard of Long Term Capital Management, genius? Or how about Victor Niederhoffer, another esteemed Harvard PhD? No wonder you guys blow up so frequently. You are so damn dense that a frying pan to the face doesn't even wake you up.
in response to your post, the traders documented track record outweighs all degrees, education and pedigree. surf
I don't know about that...In alot of instances yes...But a few years ago guys popped up out of nowhere, former analysts, etc...opened up hedge funds.. How about Red Coat Capital...Heard they just jumped ship and left their offices...Guy was a former entertainment analyst and was funded up to 400 million of Hollywood money...No track record there other than making upgrades and uh upgrades... Now he is gone..
Vulture wrote: "I agree w/ the spirit of your post. You are absolutely right that the big money does not want big returns, they are more concerned w/ capital preservation. I know someone at a $900 million fund out of Minnesota, and their target is 15% a year. Sounds ridiculously low until you realize that they want to keep their max drawdown around three percent or something equally small. MUCH more oriented towards preservation than blowing the doors off. The bigger you get, the more you want to skew your specialty towards preservation rather than profits. The rich are generally more interested in staying rich than getting richer. Money is like quantum physics in that size has weird ramifications that you wouldn't expect." Yes, I totally agree! Also, they you can't really do outsize returns when you are managing past a billion dollars. very difficult. With a few hundred millions you can still "double" or maybe even a little over 100+% return. But as you get closer and closer to a billion or over, you asympotically reach maybe 20-30% which is still very very good from historical long-term market returns! You wrote,"I also agree that a guy who does not know how to trade should get as much of an edge as he can by getting a first class education. If you can make it into the ivy league, heck yes, do it, you want to put all the odds in your favor that you can. The thing that pisses me off is when these guys confuse educational background with trading ability. They are apples and oranges to the extreme. Nothing wrong with a kickass education, nothing wrong with polishing the resume til it shines, but the idea that an education makes you a better trader- or gives you a right to think you are better than anyone else for any reason- is just damn dumb. And I say this as an "educated" person who has studied in four countries, so I am not some high school drop out railing against the system. " Again, true. Education is just an edge to get into the door. But I don't think it actually makes one a better trader so to speak. You wrote,"The number of individuals who are actually good traders in the purest sense- who can make a solid living from trading and trading alone- no bells and whistles, no connections, no high powered quant calculators, no built in structural advantages- has always been small. And while some of these individuals are very smart, some of them are "stupid"- in an academic sense- as well. This is the point I've been trying to hammer home. It burns me that some folks around here think that their intrinsic net worth as people is higher because they have a few extra bullsh*t calculations rolling around in their heads." TRULY GOOD TRADER is very very difficult to find or become. Most sell side traders(i.e Wall St/IB types) are NOT what I call traders - they are market-makers earning the bid/ask. You wrote,"And the idea that working at a big shop is better than a small shop is silly too. A 50 million dollar shop that has five people will have the same paycheck distribution as a quant oriented half a billion shop with ten times the employees to pay. The only difference is the "prestige" of the "name" which, to me at least, is not worth jack. My own beautifully anonymous name is enough for me. Especially when you add in the ability to live in any gorgeous, low population, tax advantaged place you want versus getting smacked w/ a 57% tax rate, an astronomical cost of living, a ridiculous commute, putting on a monkey suit every morning, and kissing ass all day. " Well, a half a billion dollar money management shop is VERY VERY small actually. The quant firm I was with had a $2Billion and the one before that had about $40B(but it's more of the mutual fund type. argh!). $500M is a drop in the buck. We had $2B dollar and only had 13 people in the entire quant firm! And half of those people are in research(phds quants type and me) and 2 traders just for execution, 2 marketing people, 1 secretary, 2 IT/sysadmin people. that's it. It's just economy of scale. It doesn't take more people to manage more money. it's called technology of scale. hehe. And no one kisses anyone's asses! What pisses off is this! Only stupid Wall St/IBs lowly new "analyst" who just recent college grads from Ivies has to kiss all and slave all day for next to nothing salary and think it's all so "prestigious". haha. They haven't been in finance long enough! They don't even know what trading is about or managing money. I'm so glad I left the sell-side to be on the true people of finance- buy side. happy trading! trader99
haha! Have you read the book "When Genius Failed" it's the story about LTCM. Very good book. Another classmate of mine worked at LTCM. Anyhow, just for correction. Niederhoffer didn't get a phd from harvard. he went there undergrad, then got an MBA from Univ. of Chicago. Anyways, that's my point all along on this board. SUperquants don't have real trading experience or if they do they don't internalize it the same way normal people do. LTCM had leverage 100:1 and blindly believe in models that should work 98% of the type. But it only takes that 2% of the time to wipe you out when you leverage to the hilt.. That was their Achille's heel... BTW, Stattrader, where do you work now? on the Street or on the buyside at a hedgie? trader99
obviously your knowledge of hedge funds is limited to what you've read in the popular press. believe it or not, LTCM is not the only quantitative fund out there. we have a directory of hedge funds, three inches thick, many of which are quantitative and produce great returns year in year out.
Yep. In fact, most quant hedge funds are VERY RISK ADVERSE! They try to earn steady , very quantifiable returns... In fact, even the strategies that LTCM used was actually relatively safe - relying on mean-reverting types of arbitrage. It's just the leverage got out of hand.
This is not entirely correct in my understanding. They got so full of themselves that some of them started taking directional trades. In addition, the "brains" of the operations thought they knew better than not only the markets, but other theoreticians as well. There was a paper that came out before the leverage got out of hand that showed that daytraders and arbs could not be counted upon to bridge the liquidity gap in certain circumstances. This seems really obvious to you and me, but this is the only thing these guys respect. The interesting thing is that they ignored _EVEN_ their peers! nitro