Strategy Funding
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Hi guys,
I have a question about strategy funding.
I read somewhere that if you give out a $1M of funding, let's say the strategy developer wins a contest, then the strat dev will earn a percentage (e.g. 10%) of the quarterly earnings if the strat makes a profit for that quarter and so on. And if the strat loses for the quarter then the dev does not make any money but does not lose any money either.
My question is this:
If you guys are able to get investors for the dev's strat, let's say $10M hypothetically, will the dev get to share in the greater amount of earnings percentage wise from the $10M, or will the dev only get a percentage of earnings from the $1M?
That was long winded but I hope you understand my question.
Thanks. -
@spancham Hi, yes, understood. The 10% rule applies to the contest entries and to the prizes (1M USD invested, 500k USD invested, etc, see https://quantiacs.com/contest).
However, strategies can get funded by investors even if they do not win contests. In this case 2 schemes are possible:
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a fixed management fee, i.e. the quant earns a monthly fixed fee.
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a performance fee, i.e. the quant earns a monthly performance fee.
It is already happening with quants who submitted systems which developed a long track record. In both cases, there is a mutual agreement between Quantiacs, the investor and the quant on the level of the fees.
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@support
Thank you for responding.- Can you give me an idea pls what is the monthly $ amount a quant can make from the fixed fee? Just a ballpark range.
- What is a 'long track record'? How much time would the strategy have to be running?
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@spancham Hello, the management fee is order of magnitude of a performance fee. Imagine that you get 1m USD allocated, the system has 10% volatility, a Sharpe ratio of 1 for 1 year, and you make 10% in performance fees per year. Instead of choosing a performance fee (which could be zero in bad months) you could choose at the very beginning a fixed fee. In this case, it would be order of 1k USD per month.
The length of the track record depends on the strategy and many factors, let us say no less than some months, longer time for a larger capacity.
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@support
Thank you. That is the level of detail I was looking for.
I presume you meant though the quant would receive a fixed management fee of $10K per month for $1M of funding on a 1.0 Sharpe Ratio strategy? -
@spancham The performance fee is a yearly performance fee as per industry standard. If system makes 100k USD in profits per year (1 Sharpe, volatility 10%, 1M USD invested), then the quant will receive 10k USD per year.
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@support
What if I or my family members wanted to invest in my own strategy?
Where can I find information on Quantiacs 'live' hedge fund services please?
Is that a different company? I cannot find a tab for investors on the site?
Thanks. -
@spancham Currently there is no investor tab, it is part of our roadmap and we are working on that. At the moment we are focusing on improving the software and the data, the new version of Quantiacs is up and running since 3 months only. As soon as the fund is up, we will announce it.
We published a summary of the past 14 contests on the home page, with quant names and allocations made by Quantiacs (own money). Quantiacs has private agreements with investors allocating their money to selected systems, and with quants who developed systems and are getting fees.
If you/your family have enough capital and want to invest in your own algo and bear the risk of downside losses, well, you will be able to do it with Quantiacs (once we start the fund) if you want.
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Hi @support,
The community forum has been quiet for awhile. Hope all is well.
Anyway, I don't believe the system is capturing my algo since the go live for the competition.
It seems static & flat, quite possibly because of the external lib for the Hurst exponent.
https://quantiacs.com/statistic/1464900
Can you have a look pls when you get a free moment.
Thanks.
Sheikh -
@sheikh Hi Sheikh, we are busy preparing the new contest.
The algorithm you mention actually has a lot of flat phases also in sample, why do you think the problem is an external library?
If you run the system in a notebook and plot the equity chart, do you get the same result or not?
Thank you
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@support
Appreciate the response, thanks, yes you're right. -
Hi @support,
If you don't mind, I have a couple of questions with respect to another discussion in the forum that's going on.- What do the rules mean by:
"... an all-time new high profit level must be achieved before further incentive fees will be payable ..."
I understand the investor losses should be recouped first, but I didn't follow the part about "... an all-time new high profit level must be achieved before... "? - Also, during the phase 3 real trading for winners as you described it:
Are we allowed to make updates/refreshes to the strategy during the one year period, such as to re-optimize parameters, e.g. threshold parameters, indicator lookback, etc?
Thanks.
Sheikh
- What do the rules mean by:
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@sheikh Hi,
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it simply means that your system should make a new global high before you are entitled for a payment. If your system makes 1000 at the end of January, 800 at the end of Februray, 900 at the end of March and 1100 at the end of April, your profit will be generated at the end of April and they will amount to 1100-100=100;
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no, once the system starts being traded, it will be traded in the form it was at submission time, i.e. the quant will not be allowed to update parameters/change details. Of course a submitted system can have an adaptive logic, by changing parameters according to the value of some meta-indicator. If the quant believes there is some big change to be made, it is ok to re-submit the changed system, but it will need again to accumulate a track record before being traded.
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