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Making Money A Primer to Derivatives Trading
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jj90 Offline
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Posts: 326
Joined: Jul 2015
Post: #26
RE: A Primer to Derivatives Trading
Let me share my experience regarding raising AUM.

In 2014 I went around and tried to raise AUM with a decent long term track record of >30% at the time and 7 years on a moderate sized account. Institutional money was not interested on the premise I had too much risk because of the returns I was posting. Yes, that's correct: they don't want you putting up good numbers because that signifies risk to them. Sure my Sharpe wasn't that great and I didn't know my Sortino, so I could have been more prepared, but hey I at least expected a round of due diligence. Never made it that far.

The reality of the situation with institutions is they want pedigree and placement. I reached out to my contacts in the institutional world and they broke it down like this: If you are a hotshot noname with good numbers that's a pass. If you are coming out of grad school with an MBA and no actual money managing experience except maybe a 10K account, here's a job at a bank asset management firm. After 5 years, maybe of you posting 5-10% absolute returns, here's a few million to get yourself started. I know guys who posted track records year/year >50% that couldn't get money allocated.

Why is this the case? 1)Size. It is true managing 100M is different from 100K.
2)Consistency. They don't want massive equity swings.
3)CYA(cover your ass). If things go wrong, they can at least say we vetted our candidate and he had the requisite background.

I also tried raising money within my contacts of HNW's. Got more progress there, based on just my P&L curve but ultimately the capital amount did not make sense. Keep in mind you are running a business here and there are operating costs.

Now I manage my portfolio and have no one to answer to. If you can post 40% year over year, you don't need OPM.

If you want to manage money professionally, your best shot is to go do an MBA and go corporate for a few years then break out. Good luck breaking in as an outsider. The vast majority of hedge fund managers broke in from the inside. For every guy you see that turned 10K into 1M and got allocated money there is 20 more who went to Harvard, Wharton, etc and make well north of >1M in comp.

I had a fintech startup in 2013(robo advising) and raising AUM there was just as difficult. Commitments up to 1M and it didn't work out. Good luck out there.
12-29-2016 01:29 PM
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Messages In This Thread
RE: A Primer to Derivatives Trading - jj90 - 12-27-2016, 05:48 PM
RE: A Primer to Derivatives Trading - jj90 - 12-27-2016, 11:57 PM
RE: A Primer to Derivatives Trading - jj90 - 12-29-2016 01:29 PM
RE: A Primer to Derivatives Trading - jj90 - 12-29-2016, 06:18 PM
RE: A Primer to Derivatives Trading - jj90 - 12-30-2016, 10:23 PM
RE: A Primer to Derivatives Trading - jj90 - 01-02-2017, 03:56 PM
RE: A Primer to Derivatives Trading - A.S - 01-08-2017, 11:56 AM
RE: A Primer to Derivatives Trading - Omad - 01-13-2017, 02:03 PM
RE: A Primer to Derivatives Trading - jj90 - 01-09-2017, 11:27 PM
RE: A Primer to Derivatives Trading - jj90 - 01-12-2017, 09:52 PM
RE: A Primer to Derivatives Trading - jj90 - 01-13-2017, 01:44 PM
RE: A Primer to Derivatives Trading - Omad - 01-13-2017, 03:50 PM
RE: A Primer to Derivatives Trading - jj90 - 01-14-2017, 01:33 PM
RE: A Primer to Derivatives Trading - jj90 - 01-20-2017, 02:31 AM
RE: A Primer to Derivatives Trading - jj90 - 02-11-2017, 04:47 AM
RE: A Primer to Derivatives Trading - jj90 - 02-21-2017, 02:56 PM
RE: A Primer to Derivatives Trading - Omad - 05-15-2017, 04:49 PM

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