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Comment by reverend_gonzo | Hacker News Reader

Which is really odd, since if they had any idea of what they were doing, they wouldn't need to sell. Trading is among one of the few industries out there where you don't need to have anything like a customer.

What you do is make money, and if you're making money, well, you don't need to ask anybody else for money. This tells me that its a bunch of executives who either don't know anything about trading and/or don't have any coherent strategy, and are really just trying to throw enough buzzwords out there to get investor capitol.

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Peter Muller has the most succinct summary of this that I've seen in his (very worthwhile) opinion piece on proprietary trading [1]:

Sharpe Ratio, Marketing department

≤ 0: Runs the firm

0.25: Very important; involved in all investment decisions; major focus on asset gathering

0.5–1.0: Secondary

1.0–2.0: Almost superfluous

≥ 2.0: What marketing department?

[1] https://faculty.fuqua.duke.edu/~charvey/Teaching/BA453_2004/...

For others: https://en.wikipedia.org/wiki/Sharpe_ratio

> if they had any idea of what they were doing, they wouldn't need to sell

Having spent some time in the industry, I disagree, you're always trying to maintain or increase AUM. Funds constantly sell to existing and future limited partners (investors). Internal prop trading desks sell to management in order to keep their allocated VaR and to risk for similar reasons. Traders themselves sell to their boss and peers. VCs sell their top quartile-ness. All of the above sell to their junior staff to keep them around.

The thing is you don't know if you are good or lucky until many years into your career and someone has to put up the capital until then. Even the top funds with great track records can one day stop producing results, at which point people abandon ship.

> Trading is among one of the few industries out there where you don't need to have anything like a customer.

You can usually make a lot more money with Other People's Money than with in-house money.

>" Trading is among one of the few industries out there where you don't need to have anything like a customer."

Trading yes but a hedge fund or any fund really implies customers no?

Hedge funds have customers because the majority of them don't beat the market in the long run.

If a hedge fund is consistently highly profitable, they stop taking customers. For example, see RenTec's Medallion Fund, which is only open to its own employees.

Depends on their Sharpe and capacity. Really, only prop shops have no customers, and even those were often backed by someone in the early days. RenTech's Medallion fund doesn't have customers, but it did for much of its history, and they have lower Sharpe programs with more market depth (and many customers).

That said, the track record for Bay Area hedge funds trying to do things "the Silicon Valley way" without experienced founders (experienced in trading) is pretty grim. The ones who succeeded had a track record of doing it before.

>"Hedge funds have customers because the majority of them don't beat the market in the long run"

Interesting do you have any data to look at regarding that? How do they justify their 2 and 20 then?

Well, originally the purpose was to 'hedge' your other investments. Typically, hedge funds invested in ways that would do well when the rest of the market struggled. Even if they don't best the market over the long run, they could be worthwhile investments to protect your wealth during ,Arlen downturns.

Right, they don't hedge at all now do they? Its mostly just high speed trading?

In short, having someone do HFT with your money can be a hedge because HFT strategies often do better when markets are volatile and other funds lose money.

Exactly, if they can't extract their wealth from the market, they extract it from their customers.

"Trading is among one of the few industries out there where you don't need to have anything like a customer."

Yes, but knowing how to trade is obviously very important, it's not just picking stocks, it's risk management, regulatory issues, and tons of industry specific knowledge.

That said - if they have 'tech that works' they should be able to partner with a few financial people and wrap a fund around it without too much trouble.

That so much negativity is on Glassdoor is really a bad sign.

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