Really Rich Guys - Top 10 Traders

[El Diablo]

ND,

I know they weren't pulling my legs since I or people I know well had money in all of them. I'm not talking about just hedge funds, though. Four that I were involved in were a straight quant options market hedge fund, a defense industry hedge fund, and two private equity funds. Three of the four started out with about a million in personal and friends money, then raised between 5-10M, then raised between 50-150M. Three of these were Bay Area, one was NY/DC. These are the ones I was involved in, I'm familiar with a number of other folks out here who have had similar experiences quickly scaling up the amount of money they manage.

[El Diablo]

Finance guys,

Does broader access to more sophisticated and configurable algos as well as the ability to get real-time feedback on their performance make it harder for hedge fund guys to separate themselves from the pack in terms of consistently outperforming returns? Is stuff like that pushing them to make higher and higher variance plays?

[poker1O1]

This thread is absolutely awesome because of the amount of knowledge of inputs. I'd love for you guys to recommend a reading list for the trading industry (PM me or post)

[mmbt0ne]

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Roughly how much do the junior and mid-level staff at a top hedge fund make?

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do you mean Jr. analysts? Jr. researchers? Jr. administrative assistants? Jr. managers?

mid level those above? etc.

it's just a like a normal company. in order to attract the best, you must a) make it a great place to work, b) offer competative salaries, c) offer promotion (in the case of my hedge fund based entirely on merit).

combination of those gets you the best people. period.

out of the 14 people in my group, 2 switched from mckinsey (harvard undergrad, & grad), 1 turned down a goldman offer after interning there and here, a few others are from top schools who turned down other goldman type offers, & i was a former poker player who loves finance.the rest either came straight from undergrad or switched from IB/consulting.

overall, if you think Jr./mid-level folks get paid insanely high wages, you're wrong. think about it? if you were a top Jr level person at goldman and knew somebody at X was getting paid insanely more than you & that you were the same skill level, you'd go work at X for slightly less money. this happens until competition pushes that insanely high wage down to competative levels.

Barron

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So, roughly how much do the junior and mid-level staff at a top hedge fund make?

[ArturiusX]

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Finance guys,

Does broader access to more sophisticated and configurable algos as well as the ability to get real-time feedback on their performance make it harder for hedge fund guys to separate themselves from the pack in terms of consistently outperforming returns? Is stuff like that pushing them to make higher and higher variance plays?

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Don't hedge funds now days essentially copy index funds and make slight changes to add +5% on their return, thus turning them into hyper index funds?

[The DaveR]

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Finance guys,

Does broader access to more sophisticated and configurable algos as well as the ability to get real-time feedback on their performance make it harder for hedge fund guys to separate themselves from the pack in terms of consistently outperforming returns? Is stuff like that pushing them to make higher and higher variance plays?

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Don't hedge funds now days essentially copy index funds and make slight changes to add +5% on their return, thus turning them into hyper index funds?

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Not really.

[ArturiusX]

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Not really.

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o ok

[VanVeen]

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Managers who put up 29% annual returns over a 15-25 year period can hardly have those returns ascribed to luck instead of skill. 1 year? Sure, why not. But not 20.

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najdorf, from your posts in other threads (which are pretty awesome, btw) i'm surprised you would make a statement like this without qualification. you haven't bothered to mention how many managers have entered the industry over the last 25 years, what their average level of return is, what the SD of their returns is, what the survival rates are, etc. without that information we cannot assess the relative contributions of luck vs. skill in these isolated cases. certainly there's a minimum level of competency required to ascend to the position in the first place (luck probably plays a huge role, though!), but what distinguishes these dudes from avg managers, if anything?

moreover, there are myriad factors complicating our analysis. it is not improbable that their wild success has afforded them luxuries (better access to privileged information, greater 'timely' influence, etc.) unavailable to less fortunate mortals. can benefits of that kind help 'average' managers maintain comparable returns? how could we ever tell?

i don't think anyone has bothered to provide substantive evidence that we aren't collectively falling prey to the survivorship bias by lionizing Buffett & his peers. it's just not an easy thing to look at.

[VanVeen]

diablo,

perhaps an ignorant question, but what do you mean by 'real-time feedback on their performance'? how would one test a probabilistic predictive model over a short period of time (i guess another question is, what's a short period of time?)?

[DcifrThs]

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Finance guys,

Does broader access to more sophisticated and configurable algos as well as the ability to get real-time feedback on their performance make it harder for hedge fund guys to separate themselves from the pack in terms of consistently outperforming returns? Is stuff like that pushing them to make higher and higher variance plays?

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you can apply algorithms to whatever you want. yes though, it is hard for a typical long/short equity fund to separate itself from other long/short equity funds. however, a typical 'hedge fund' may be too broad a term.

algorithms can be used for anything. just b/c they exist and/or are being used, doesn't mean that their use is generating returns for those using 'em. i.e. using them for risk controls.

the real time feedback thing is probably what is the worst thing for tons of people. if you can't separate yourself from yoru results, you have a serious problem.

i think human nature pushes a steady percent of funds to take higher and higher variance plays. but i think it does make sense that within a group of similar strategy hedge funds, the cost of not separating yourself vs. the cost of blowing up seems attractive in a low volatility environemtn.

did i get at what you wanted?
Barron