Posted: Fri Jul 28, 2006 8:11 am
Rabidric and Stan,
You both touch on either end of something I often reflect upon when developing trend trading systems. There is a continuum with "optimal trading system that makes buckets of dough from return" on one end and "optimal trading system for attracting business to make buckets of dough from raising assets" on the other end.
One would think that naturally all clients would want the best return they can get over their time horizon. However, in general, (there are always exceptions) high returns do not attract as many assets as low volatility.
In simple terms, most people are responsible with and work really hard for their money. These same people do not know much about the investment business let alone our unique niche. When they decide to give some responsibility to an outside manager, they tend to be cautious. I think this is pretty natural. Have you ever noticed that you are more nervous in the passenger seat with a driver you do not know well than you are when behind the wheel yourself?
The fact is that there are not as many people with the balls, guts and understanding of this niche to attract a lot of capital to the optimal return model. However, building a business can be done here.
There are lots of people who want a smooth ride and the comfort of a large organization. Return is not as important to these people. You can build a hell of a business but you might not be as proud of your returns over time.
Needless to say, understanding where you fit on this continuum is important. Both ends have their merits. Most of us find a place in between.
You both touch on either end of something I often reflect upon when developing trend trading systems. There is a continuum with "optimal trading system that makes buckets of dough from return" on one end and "optimal trading system for attracting business to make buckets of dough from raising assets" on the other end.
One would think that naturally all clients would want the best return they can get over their time horizon. However, in general, (there are always exceptions) high returns do not attract as many assets as low volatility.
In simple terms, most people are responsible with and work really hard for their money. These same people do not know much about the investment business let alone our unique niche. When they decide to give some responsibility to an outside manager, they tend to be cautious. I think this is pretty natural. Have you ever noticed that you are more nervous in the passenger seat with a driver you do not know well than you are when behind the wheel yourself?
The fact is that there are not as many people with the balls, guts and understanding of this niche to attract a lot of capital to the optimal return model. However, building a business can be done here.
There are lots of people who want a smooth ride and the comfort of a large organization. Return is not as important to these people. You can build a hell of a business but you might not be as proud of your returns over time.
Needless to say, understanding where you fit on this continuum is important. Both ends have their merits. Most of us find a place in between.