How much do hedge fund traders earn?
80000hours.org
80000hours.org
A little message to the intelligent engineers, scientists, mathematicians out there: don't be taken in by the propaganda of the finance industry. The upside is potentially good, but on average, nowhere near as good as you are made to believe (and certainly not worth giving up your passion for). Ditch the hype and focus on contributing something more meaningful to the world - you'll probably be happier and perhaps financially better off!
- People who are constantly looking for a new gig. They have a model, they have experience, but either they can't find the appropriate fund for their style, or they have a bad streak.
- People who can make money, but only in small size. Some guys I know sit and home and trade. Enough to pay themselves, but not enough to even get a fund job.
- People who were on the team or near some star trader. Amazing how many of those there are, and how little it rubs off.
On the whole I'd say don't believe the hype. It's very hard to get a seat, and hedge fund managers are not smarter at recruitment than tech people. So you'll spend a long time in that support style role, wondering whether you'll ever get to be the main guy.
- most consultants
- "lifestyle businesses"
- "worked at facebook, give me money"
So much hype in both industries, for similar reasons. There are always ways for smart people to make money. Most people with some experience in either industry are doing better than the national average but hardly wealthy and generally spend too much money.
I do get the impression there's better pay in finance though. $250k as an experienced engineer strikes a lot of people as high. $250k for someone w/ a few years at a good hedge fund is... about right, maybe even low.
1) they're used to the benefits that come from a company that is swimming in cash
2) they didn't personally take any of the risk to create that firehose of cash but they want you to treat them like they did.
3) they don't realize it, but they're used to working in very protected environments. Typical career paths look like top-tier college -> Google / FB / Twitter / whatever. None of this prepares them for sitting in a room with some shitty Ikea desks and trying to make hard decisions that will have a direct impact on the companies growth. No, we don't have the time or resources to build a new JS framework.
I'd much rather higher someone from a second-tier US college or from overseas that can show me a time when they took significant risk / projects they built from scratch.
^ All of this is in relationship to < 20 employee companies trying to get from zero to 1.
When I quit, it took guts, because a job in finance does give you a false sense of comfort and security. But looking back, I was infinitely happier from day one, and am better off than my peers who stayed in their front office roles (this, of course, is not guaranteed and ymmv). I also feel my potential to grow is much more than my past colleagues, who still seem to be trapped in their job's safety net.
Now I'm a passionate engineer and building good products makes me happy, so that's what I do. I have, through my company, launched a couple of private SaaS products, and hope to launch another, more public product soon. I also do a bit of property development in the UK. Whatever time is left over, I use to play tennis or spend time with family. It's great!
As an aside, the software engineer complaints about technical interviews always makes me laugh. Finance ones were even worse. Mostly useless and much more intense and time consuming. Engineering is tough because it's hard to point back at prior performance in a tangible way. Anyone can sit in a large corporation and write some for loops. It's much easier to hide in the background in software. Trading was easier to vet: "someone gave me $30m and I didn't lose any of it".
So it is with money and finance.
It's valuable for middle/upper management to have someone 'technical' in meetings. Often as a sounding board/is this kind of thing possible/how should we do X/can you explain how Y works/explain it to me like I'm 5. You're providing what feels like 'general knowledge', but is actually knowledge/perspective gained over a number of years working on/in technology.
And depending on the industry, you might also be wheeled between projects and end up having the same conversations again and again just with different people.
From a personal perspective it feels like you're not learning anything (and you probably aren't), and it's a waste of your time. Rather than explaining to people the difference between message queues and databases you'd rather be building systems and solving 'hard' problems (either problems that are hard, or not involving 'soft skills' :-)).
In both finance, tech as well and every other field, if you can make money for other people, you can make money for yourself. Traders who can make money consistently always have options, they dont need worry about who can give them a job.
...funds are doing just okay...
> Most of the finance guys I know in New York make what I would consider great money... but their lifestyle is such that they save almost none of it.
I don't know, is how well you're doing really based on how much money is left after you choose to spend a bunch of it? If I make $2m/year but have several expensive mortgages to pay and therefore I don't save very much, that means I'm doing "just OK"?
If your job requires you to live in a specific place or have a hellish commute, then I think comparing (and griping about) like for like is fair.
E.g. a finance analyst whining about his tiny NYC apartment to his friend in Indianapolis with a tiny apartment, etc.
"Just ok" also means different things in NYC compared to San Francisco compared to Austin compared to Cleveland.
^ This. I was greatly disillusioned. When looking for positions after PhD, recruiters told me people were making 800k (after bonus) and I got an offer from a supposedly top hedge fund for... 120k, with an expected 50%-100% first year bonus. Not guaranteed, of course.
I'm not saying that isn't nice money, but in NYC it is not absurd. Plus, one can make that with a less risky lifestyle at many of the BigCo software firms. Finally, as a science PhD, I was skeptical of completely going 'zero sum' in terms of my contribution to society in life.
I think the article might have some survivors bias, you can't say "I'm going to be a hedge fund trader" and equate that to the average income if you survive thirty years. It's cut throat and people burn out or get unlucky, we need the drop out rate. Also quant funds are getting bigger and must have a pretty different compensation scheme.
During a mass hiring event, they wouldn't even bother to pick up a resume if it fell down on the floor by mistake. When questioned about the practice and asked if those candidates were just unlucky to not make it, the hiring manager replied- He didnt want to hire unlucky people.
Am I seeing it wrong? Is the compensation really for convincing Joe Public to part with his money for a really terrible deal?
Well, yeah, that's the point, isn't it? I thought these funds can't.
The average hedge fund seems to eat all its excess returns in fees. But around a third of all hedge funds, mostly upstarts, die in the first few years [3].
By analogy, if you can understand that Kleiner and Google create excess returns while most VC funds do not, you can understand why a similar exponential dynamic is at play with hedge funds.
[1] http://www.investmentreview.com/files/2009/12/18-241.pdf
[2] http://m.pionline.com/article/20141222/PRINT/312229982/big-p...
[3] https://www.forbes.com/forbes/welcome/?toURL=https://www.for...
I don't disagree that most hedge funds are poor investment vehicles, but that's the nature of active investing. If the majority of hedge/mutual funds underperform the market, and you choose to invest in a fund of funds (essentially an index of their net performance), it doesn't really take a $1M bet to see who is going to lose.
I don't think Buffett would take a bet he didn't feel extremely confident about winning, but Ted Seides was just foolish. The only rational reason I can see for taking the other side of the bet given its terms was to generate publicity for himself and his own fund at the expense of some reputation a decade down the line. If he profited from that, I guess it was worth it for him. I really can't imagine he seriously believed he'd win.
And most people will never fully understand that until it happens to them. Then you have this eye opening moment, and you understand.
Nothing lasts forever. Conditions change in every arena of competition, not just the market. If a professional basketball player is incredibly successful until their bodies literally begin to degrade, do we raise philosophical questions about the inherent attribution of their skill?
People don't seem to respond well to the quant fund examples, so how about this - how has Warren Buffett consistently beat the market through Berkshire Hathaway? If he ceased beating the market this year, would it because he has been lucky all these years? Would it be because the market conditions that supported his success have fundamentally changed? If so, why does that indicate his performance was due to chance?
People were asking this back during the dotcom boom, when he lagged the market by a huge percentage.
Gotta wonder how many Warrens were unlucky enough to have this happen early on in their careers.
I recall reading a stock book back in the 1980s that claimed that Buffet's legendary status at the time was entirely due to his purchase of Geico
I'd even let you change your list Jan. 1st of each year as long as we agree that any hedge fund found to be a fraud of some kind counts as a zero in your sum.
This is actually a pretty good bet for you given how poorly one would expect stocks to perform over the next 10 years
[1] https://en.m.wikipedia.org/wiki/Renaissance_Technologies#Med...
There's a lot of survivor bias in the industry. All the old players have made a lot of money at some point. If they hadn't, they wouldn't be old players.
Thus you end up with most companies having an 'above average' streak in a given year even if the average investment does poorly. https://m.youtube.com/watch?v=rwvIGNXY21Y
First of all, you haven't qualified who you're including in the set of "traders" and who you're including in the set of "winners." Is everyone who signs up for ETrade included? That's like major league baseball players being judged the same as way as high school baseball players. More importantly, have you done the cursory research to account for funds that consistently beat the market? How do you account for the firms that beat the market over periods that span decades? Just ridiculously lucky? What counts as a coin flip? A single trade? A trading day? Are the coins summed per trader or per fund? How are we quantifying this assessment?
It's like every time someone brings up the coin flipping analogy they use these outrageous numbers without any attempt at citing a grounded source in reality. As I say every single time in threads like this: yes, it's incredibly difficult to purposefully and consistently beat the market, but that's worlds away from impossible. There is information asymmetry in the market, relatively few people/firms are capable of identifying alpha based on that, and fewer still are capable of capitalizing on it. But they exist!
Stubbornly repeating the coin analogy is like insisting on proof that basketball players have inherent skill instead of luck, because most people can't make it to the NBA. We have clear examples of firms beating the market consistently for decades at a time, net of fees. I am personally familiar with people whose strategies profitably trade on small pockets of predictable events in timeseries tick data. Their strategies are smaller (~high 6 - low 7 digit accounts using personal capital), but they consistently earn 27-30% each year by trading strategies that are too capacity-constrained for larger firms (and usually they do this after being in the industry for some time).
I make this point not to pick on you (it's not personal!), it's just that I see this repeated in every thread related to trading on HN. Referring to trading as coin flipping when your familiarity mostly stems from news reports flies in the face of people who are capable of developing profitable trading algorithms and who have seen it. It's as if someone told you that it's impossible to develop well-engineered software. It's exhausting. There's this weird leap from (correctly) concluding that most people in the industry can't beat the market, to damning the entire concept.
If you want to say there is a lot of survivorship bias in the industry, sure, I'll agree with that. But what's the point of using Fama's coin flipping analogy if there's no rigor behind it? It precludes so much nuance in fund performance. Many funds can't beat the market at all. Many do beat the market, but they purposely decide to eat away all those gains with fees when they could run a far leaner ship. And the elite do consistently beat the market, until they eventually get large enough to diversify into multiple funds (accepting that most will be mediocre) or they return investor money because they don't need it and their strategies are capacity constrained.
That doesn't sound so stupid.
When firms like RenTec exist and continue to empirically generate market-beating returns over 20-30 year timespans, the burden ceases to be on the critic of a claim to empirically disprove it, especially if it's not even falsifiable. Here, you are doing the same thing as the previous commenter, except you're not using the analogy.
You cannot open your argument with the premise that returns are purely stochastic if that's not self-evident - you need to prove that. But I have never seen a single individual attempt to quantify the analogy, not even in a forced way to make it support their thesis. It's taken for granted that superlative returns are purely chance, and the goalposts are constantly moved whenever someone brings up successful funds.
The answer to the theoretical first question might well be "yes, there are exceptional traders outperforming the market". The second "real-world" question is much more involved:
* can I reliably identify them, ex ante? That's pretty hard.
* do I have access to them? Many of the examples cited (Renaissance Tec, individual traders trading personal account) are closed to outside investors. Many golden investment opportunities are channeled to people that are very well connected (either in the finance industry, or old money, or close to politics). Similarly, there might be legal access restrictions - you must be a qualified investor, or reside in a certain jurisdiction, etc. etc.
Personally, I think most of the asset management industry is basically a giant rent seeking exercise, charging extraordinary fees (over the long run) for very little value. There are exceptional performers, but they are not accessible to most people. (As a side note, much of their exceptional performance might come from insider information more than exceptional analysis.)
Thus, the standard advice stands: put most in cheap index funds/ETFs, and maybe develop some expertise in certain areas and dabble in it with a fraction of your assets, if you're so inclined.
The reasons that the finance industry is particularly prone to unproductive money skimming (rent seeking) include:
* massive information asymmetry (similar to real estate)
* psychological biases (most people don't realise that someone taking a tiny 2% fee per annum has basically taken half your savings by the time you retire)
* mostly experience goods (or even post-experience goods): enormous difficulty of evaluating quality ex ante, or sometimes even ex post (your pension pays you X per month. Could a competitor have done better?)
* regulatory capture
etc.
The coin analogy is a perfectly legitimate parable to highlight how difficult it is to evaluate asset manager performance. Sure, the actual analysis then still needs to be done, but the outcome, from what I can tell, remains pretty damning.
The answer to question one, as you say, is yes. If it was purely coin tossing any group of performers would get halved each year (let's not mention skew). Now there are funds that fall quite hard, like Odey. But it's clear there are funds that seem to defy gravity.
Question Two. Here's how I decide if I believe in a fund.
Here's a real life example. A friend of a friend came to a meeting and explained that under certain circumstances, you can buy certain unit trusts cheaper than they're worth. You need to dig out the nitty gritty details of each fund: the holdings, the rules, the fees, trading regulations, and so on. You put all this in a computer, which tells you when there's a mispricing. You need good relations with various counterparties, or you won't get the trade. And you can only do it up to a certain scale, because there's only so much mispricing. And it's sensitive to costs, so you need his particular cost agreements.
This also explains why you'd have to invest in this particular guy. He has the infrastructure and relationships already in place, so even if you knew his method, you couldn't do it yourself.
You're right about a lot of funds being smoke and mirrors though. I used to run one, and the investors never ask the right questions. Mostly they chase returns, but they don't even know how to tell the difference between one track record and another. It makes a huge difference how they're generated, yet most questions are simply trying to put you in a category, like produce in a supermarket.
> most questions are simply trying to put you in a category, like produce in a supermarket.
Yeah, and who can blame them? It's very hard unless you have an inside edge. And lamentably many funds cater to those investors, put out nice and shiny brochures, and get good amounts of money to manage.
Wow!!!!!
I've never heard an owner of a hedge fund refer their fund as "smoke and mirrors". I really hope for your sake that you just misspoke.
I'm sorry it didn't work out for you. I understand how hard the industry can be, if you ever think of trying again, don't let your past failures dissuade you.
I'm available to chat if you'd like:)
As for smoke and mirrors, naturally I mean other people's funds! Mine actually would have won the bet with Warren by a fair margin.
Come to think of it, I was a partner before that in a fund that wasn't so good, but had lots and lots of investors climbing over each other to invest.
Suppose I have a 90% chance of making a positive return in any given year. The chance that I'll make money every year for ten years is about 35%. Over 20 years, it's about 12%.
Now, I don't believe that anyone has a 90% chance of making money in a given year. Even if I conceeded that it's possible to have a long-term edge in the markets, I'd say it's more like a 55% chance of making money. So instead of there being a handful of elite geniuses with a 90% edge, I think it's more likely that there are many smart people with a 55% edge, all tossing coins.
I've hidden a lot of things away in this analysis, and I'd need to write a full essay to give the issue its due. For example, I've ignored the possibility to "beat" the market by leveraging up your S&P exposure and charging fees on top. If the S&P goes up, you beat it. If the S&P goes down, you blow up and start again.
[0]https://en.wikipedia.org/wiki/James_Harris_Simons#Academic_a...
That's a fair point. I'm not one for argument by authority.
My point with his discovery is that he's empirically demonstrated a capability of uncovering understanding and deep mathematical relationships, which have practical implications. The PHD part is less relevant.
In my opinion, this information decreases the probability that rentech has been consistently outperforming on the basis of pure luck. By how much, though, I can't say.
Kind of a side point but I don't see how this can be true. Wikipedia says Renaissance had $65 billion AUM as of 2015. If we back-track this compounded at 71.8% annually, that means Renaissance must have had at most $1.2 million in 1994, which is implausibly low. And $1.2 million is a maximum, because that figure assumes Renaissance hasn't received any new capital since 1994.
Also, you're assuming everyone who's put money into the fund has never taken it out, which would throw off your math quite a bit.
Hedge fund returns average the same as passive equity
Implies that you should never invest in a hedge fund, because it's possible that they have individual characteristics which mean that they're more or less likely to fail, which you could notice when you invest. eg. Management is obviously incompetent, no track record, incoherent strategy, track record based on being long in a rising market etc.
If you believe that's the case, then you might still get above average returns by doing your homework.
But I guess given that assumption, still only worth it if you have enough money that you're completely able to lose that it's worth you spending the time to try and work out which hedge fund you trust (easier than spending your working days trading yourself).
So if you're an educated hnwi, maybe. If the chain is like you => your employer => your pension fund => some advisor => hedge fund, I'd guess not.
I don't have any evidence for this it's just what I believe.
Pershing Square for example is an obvious choice on LSE and is an arbitrage play as it looks like it will join the FSTE 250 and have to be brought by index funds.
I totally agree you can't easily use these figures as your expected earnings, since you need to adjust for the chance of drop out. (And also future industry prospects and many other factors.) Also agree about quant funds being different.
My instructor in a corporate decision making class talked, ironically about luck in this way
He and his college friend just received PhDs. He was hired by a consulting firm. His friend took a job in wall street.
At Christmas they got together. The friend told him of the time his "firm" manager called him into the office. The manager handed him an envelope and said this is your bonus. The friend said he was so new he didnt think he would get one.
He thanked his boss and left his office.
The friend returned to the bosses office shortly after opening the envelope. He said to his boss "there must be some mistake."
The boss said no, there isn't. We have a small group [of 13 he said later] and this is your share.
My instructor wondered out loud if he should have taken a job in wall street too.
The check in his friends envelope was for $5,000,000
- Prop-trading shops or family offices do the same things as hedge funds, but are not open to the public, benefiting from less oversight or compliance requirement. Jane Street is an example, better (actually successful) examples are Renaissance Technologies and Soros Fund Management.
- Quant funds can be prop shops, hedge funds or mutual funds (or something in between like managed futures/CTA funds).
An interesting downside to this, especially for young traders who get to the high numbers, is that they often begin to treat their bonuses as a given. Once you make seven figures, it becomes easy to assume that your smarts will ensure financial prosperity for the rest of your life. But bonuses in trading are very volatile - I think of mine like an NFL player's paycheck, rather than a software engineer's salary. Competition from different firms, financial regulation and shifts in market structure often come in the way of long term salary guarantees. Over the years, I've seen that those who survive through thick and thin (well, 'thin' in a strictly relative sense) are the ones genuinely passionate about the intellectual challenges of trading.
From Quora: https://www.quora.com/How-much-do-traders-at-big-quantitativ...
If you consider non-PM track roles then the average is lower and if you consider lower tier firms then the average is lower. That doesn't mean that nobody makes $700k -- there's a very famous example of someone at a lower tier firm who took home $10 million.
There are firms where the PM takes the bulk of the money and little filters down to junior level staff.
There are firms where by 5 years you're either fired or getting paid a lot.
There are firms that hire relatively few people and pay junior level staff very well. I don't know if I would estimate as high as $700k, but the median here is going to be very good. These firms make up a small minority.
Additionally, 2 and 20 literally does not exist anymore for the vast majority of funds. Downward pressure on fees has been all over the news for the past several years and having the inaccurate data point as well as no mention of recent trends leads me to doubt other data points in this article.
The revenue split also makes no sense and does not account for fund size or strategy which has a huge influence on costs.
As a junior / mid-level front office hedgie I made £120k last year. I wouldn't be surprised if my boss made double that. Not a stunning amount, but easily enough to be comfortable and save for the future. Unless you're an equity partner at a hedge fund, that's what you can expect to earn in the uk.
The appeal of asset management is mostly about the lifestyle rather than the comp: interesting, varied work, with fifty hour weeks and no weekend work. On a per hour basis, you might do better than someone on the sell side, but those guys work a lot of hours.
It seems unwise to try and generalise across even just a generic equity fund, let alone the world of hedge funds.
There are a lot of extra curricular activities though. You need to do dinners and events to build relationships.
cough poor them.
Elementary knowledge of game theory tells us that becoming a hedge fund trader is a great opportunity. Thankfully, now it is easier than ever — just show that you can consistently earn money by trading, and you'll get calls.
You can lose your deferred compensation, which is very common at both hedge funds and banks once you start earning more money.
> Thankfully, now it is easier than ever — just show that you can consistently earn money by trading, and you'll get calls.
Have you ever tried raising institutional money? It's not that easy even if you have a good track record. Many times it will come under extremely investor friendly terms and often it will be a SMA rather than an actual investment. Of course you can raise millions of F&F money, but the economics for most strategies don't work out until you get into the 9 figure range.
I wouldn't refer to getting put on a blacklist as minor
This isn't really a problem - they only take accredited investors because of this risk.
VCs also lose money when startups fail, but they don't ask the founders and employees to pony up past salaries. Understanding of the risk of failure with no recourse is a prerequisite to investing.
You think they should pay up if their customers has realized (or unrealized?) losses?
> Thankfully, now it is easier than ever — just show that you can consistently earn money by trading, and you'll get calls.
No biggie, just download HedgeTrader Pro from pirate bay and get started, right?
I'm not sure if you were being sarcastic, but saying "just open an Interactive Brokers account" is really closer to the sink side of Sink or Swim philosophy. And trading with less than $10,000 on GDAX sounds like a great way to blow out your account (I don't trade forex so I don't know personally, but I'd be concerned about the drawdown periods on that kind of capital...most of the forex traders I know who do it outside of a firm typically work with $150k+ in capital for this reason).
Is cryptocurrency market making/scalping something you personally do?
This is limited liability. It applies to employees and start-ups, too. (If a Boeing employee makes a shitty engineering decision, we don't put them in debtor's prison. Similarly, if a start-up fails we don't pillory them.)
We limit investment in start-ups and hedge funds to wealthy individuals, in part to protect the masses from this principal-agent problem solving.
1 - There are a lot of jobs a few years out of undergrad or MBA that pay low 6 figures.
2 - The hedge fund jobs that are mid to high six figures are much harder to get. It's not "Graduate, sit and wait"
3 - Most of the comp is in bonus, and there is tremendous job risk. (Base salaries top out around 100K) If you make $750K for a good year, and then have 2 bad quarters, you're fired without any bonus, and good luck getting the next job due to the weak track record.
4 - The industry goes through purges every 6-8 years where masses of people get laid off. (2008 was the last - they're overdue)
5 - The industry is cutting employment over time.
We don't mean portfolio management in the sense of advising individuals on what to do with their portfolio, which is what some investment banks use. That's a totally different job.
Like I say, this article is only based on a couple of interviews, and we still have a lot to clear. I'd be keen to get more data.
It gets confusing since some firms can do both. E.g., Goldman or Morgan Stanley are generally well known as investment banks, but they also have an equity research side. But folks who work in equity research aren't called "investment bankers" and "investment bankers" don't work on the equity research side. In fact, there's regulations that try to limit the interaction between the two sides.
But in any case, I wouldn't consider either side to manage a portfolio.
The skill difference between your average SWE (or even average college basketball player) and an NBA player is pretty massive (and quite visible). I'd imagine it's much harder to find an someone that says 'yeah that's easy I could do that' about an NBA career...
You're right that you also need to account for the chance of dropping out of the role all together, which is hard. (Though drop out rates are high in both sports and finance.)
Many quantitative funds specifically hire math/stats/comp sci without a background in finance. The interviews will be very math/stats focused with coding (maybe algorithms) thrown in.
Don't expect $300k your first year (or second, honestly). Expect more like $150k. The lucrative compensation will be in bonus, and you (or your team) will eat what you kill. You should research the industry more so you're not walking in blind. "Quant" is an overused term and means different things. That skillset can land you in roles for execution (mostly development), strategy research (much more math/stats), risk management, trading, etc. There are few roles that will start off at $300k+ without any time in the industry, and where it happens those are generally cases of very well-known firms poaching someone from academia.
Prop Shop: a division within some financial institution that invests the institution's own money.
"3.6% of assets under management"
Hold on. Let me take another swig of coffee so I can decorate my screen with it.
How can this possibly be true? This would mean that there is some form of accreditation for investing that allows someone to qualify who thinks that a 3.6% fee is a good investment. Who are their investors? Do they know this?
I have no special access to the markets (no investor status, no massive sums under management) and I pay no more than 0.07% in fees, in total. Were I resident in the US it would be about 20% less.
No wonder they're raking it in.
Thanks for clearing that up.
(If only i had a cloth to clear my screen up too..)
We are, after all, talking about hedge funds. How much variance are you willing to tolerate?
That's it.
Getting rich and doing something with the riches involve two different skill sets that most people can't master in one life time.
Obviously you'd never advise someone to put all their eggs in one basket, but in this case, you're comparing identical baskets - and one of them as a hole in the bottom.
Dumping all your money into an ASX200 Index Fund is a lot different to putting it all into Vanguards Total World Stock fund.
In this case, the basket would be equities.
And in that respect, both are plays in the same market for wildly different charging structures.
It's not an agreement to pay someone 3.6%. The author probably means that since you get 2 and 20, with a bit of performance it ends up being in that ballpark.
http://www.cnbc.com/2016/07/26/hedge-funds-suffer-207-billio...
http://thebamalliance.com/blog/hedge-funds-miss-the-mark/
The trick is that some hedge funds do produce outsize returns, and every rich customer wants to think he's going to pick the winner.
All in all, charging a percentage of AUM is a pretty neat scam they've got going for themselves.
1. Industry matters big time!
2. Reputation of the teams your on matters big time!
3. College (High School..) you go to/went to matters big time!
4. Moving industries can be done ... but in the more mature industries (like finance), it's hard to break in 2 years after college.
5. College really freaking matters (even if you drop out of Harvard).
6. Your humanity must always be top of mind and any of the prior points are swamped by the importance of 'to thine oneself be true'.
Real historical tick data costs five to six figures per year from a well-regarded source. There's a price signaling issue here - if you have legitimately identified alpha, the cost of the data is not unreasonable (just as a colocated server is not unreasonable expensive if you can capitalize on it). If someone has high quality data, why would they sell it on Ebay for that price? It signals several things:
1) They don't care about selling where their customers are,
2) They don't care about leaving (ridiculous amounts of) money on the table,
3) They are probably not going to provide any verification or due diligence for the data, let alone any support for it afterwards.
What are these people doing, scraping Yahoo Finance, throwing it in a CSV and selling it? I find it exceptionally difficult to believe that "with a little Python" you'll be testing anything close to "any strategy imaginable" using this data. Vendors that sell real data do not share many of the characteristics of a fly by night operation.