After 40 years in the business, I often get asked by traders how to get into fund management. They sometimes work for firms and are making big bucks for their firm and feel it would be so much better if a share of their trading profits went directly into their pockets. The amount they get not being set on the whim of the Head or Trading. They may be fed up with having a boss, commuting, working with idiots and dream of sitting on the beach clicking Buy/Sell on their laptop.
The reality is I’ve seen many great institutional traders associate their profitability with their own talent. They do not realise how important large capital is and seeing flow. These are the reasons they are successful and they will have neither when they go it alone. They just do not hack it as traders outside their firm. It was working at the firm that made them a good trader and not the other way around.
Despite this negativeness, there are some genuinely good traders out there. There are also institutions out there desperate to find them. Great traders are like soccer stars, once they are great they become outrageously expensive. How to find the next wonderful player before they are wonderful? I have been involved in projects to find these people for prop trading firms. I have related my experience of this before. In 2013 I worked with an energy company which has a large and successful prop desk. Their objective was to run a competition where the prize was a job as a prop trader in the firm. You can see my video blog HERE before the selection. After initial psychometric and game playing tests the group who has all replied to a newspaper advertisement were whittled down to the finalists. These were all paid a week wages and came to the office and were training up on the desk. I gave them one day of introduction to technical analysis. I knew what the data would show them in the ‘live’ trading and set them up to recognise patterns that they should see. Also one or two which are perfectly formed but go wrong. How would they handle that? Then they had two days to trade. They were each given an imaginary Euros 1 million. Their objective was to trade it. Not to protect it. They are not fund managers but proprietary traders. Use it or it will be given to someone else. Real world. When they placed any order there was a note box and they had to make a note of what they were thinking and seeing at the time. If you want to see extreme concentration as two weeks of trading sped by in two days take a look HERE. No one went to the toilet or stopped for lunch in the two days. There was a winner by a long shot. A couple of complete blow outs and three who essentially froze with fear and traded much too small. The person selected was not the person who made the most money. He was judged too much of a loner. Not a good characteristic for the job. There are few companies which have this vision or mandate and so this is is a very unusual experience. I have been privilaged to be involved in the development of the program.
How can other aspiring traders show themselves to the marketplace. Getting a track record on ‘follow the trader’ sites is not the answer. you will get commission from followers but your life is likely to be short. This has no relationship with what a hedge or other fund manager does and will not impress anyone. Probably the opposite.
In this Opalesque TV interview, my friend and best-selling author of the Market Wizards series Jack Schwager, introduces FundSeeder (Fundseeder.com). Fundseeder is a free on-line platform designed to find undiscovered worldwide trading talent. The FundSeeder’s aim is to offer a centralised platform where traders can link their brokerage accounts to create daily, real time verified track records of their performance, and potentially attract capital from investors. The video can be accessed HERE.
Jack and his FundSeeder partners were motivated to launch the website by a major limitation in the current investment world, with “the same small number of curators directing investor assets into the same, small number of super-large asset managers,” says Jack. The current investment environment consequently overlooks a tremendous scope of other traders who have talent and can outperform
larger asset managers, but do not have access to capital. FundSeeder offers a solution, whereby any trader in the world can link their brokerage account to the website, establish a verified track record, and gain access to numerous trading tools, such as a chart of their equity curve. In the future, the sister company of FundSeeder, FundSeeder Investments, will identify the top performing traders and look to allocate to them directly. The mission of the platform is to “democratize and globalise the asset management world”, and could potentially find the next generation of talented traders, including the next Market Wizards.
From now on this is the route I will be sending fellows who come to me and say “I’m a good trader but how do I get into fund management?”
Trevor Neil MSTA MCSI www.betagroup.co.uk