compensation as % of PL

CMPT · February 27th, 2009, 8:02 pm

I have two trading systems and am approaching HFs for seed capital.What is are ranges for compensation as % of PL (i.e. revenue to the HF)1) if capital is HF proprietary?2) if capital is from client?ThanksCMPT

Errrb · February 28th, 2009, 2:01 am

It depends first of all on your "track record". Assuming it is spectacular then there are prop. places who can propose to get up to 30% of pnl ussually for high frequency strategies with high sharpe. Elsewhere the range will be between 10-20%. Probably the median is closer to 12%. A lot of things of course depend on how convincing your story about the systems.

DanM · August 10th, 2009, 7:44 pm

There's really no rule of thumb here, but if you don't have any real track record then you shouldn't expect much (if anything) from institutional investors. Depending on the nature of your strategy and how much capital you feel you need to get it off the ground, your best bet may be to scrape together a minimal account and start trading on your own. Even just a few months of real performance on small capital will carry considerably more weight than any amount of paper trading.

DominicConnor · August 11th, 2009, 6:14 pm

As the others say, it is highly variable, and we have one outfit providing venture capital and trading facilities that will take a minority equity stake in the HF business, ie you'd get a lot more than 30%...If you can demonstrate that your stuff works...

CMPT · August 12th, 2009, 11:30 pm

I will have an opportunity to pitch my system to the ic at my firm in the next few weeks.If pitch is successful my firm will seed a fund which my system will run (I helped shepherd another system that I designed and built through seeding at my firm; but I was working for another trader whose name is now on the fund and who did not use the parameter values that I recommended, even though they were used at to sell the system at ic!)