There have been quite a few cases in recent years, where extremely successful prop traders leave their banks to launch hedge funds, only to see their performance drop substantially. Venture Capitalist and entrepreneur, Marc Andreessen, started the theme yesterday on Twitter and I thought some of the answers really shed a light on the major reasons:
@pmarca or it was the bank's infrastructure and support that helped them win…
— Leonard Welter (@lenwelter) July 13, 2014
@pmarca other team members ( including tech developers), seeing the broader 'flow', prop systems, not having to worry about raising capital
— Leonard Welter (@lenwelter) July 13, 2014
@pmarca 1/ either that they are traders and just hit their avg 7 year mark and were due for a dip in performance, or
— Steven Sinofsky (@stevesi) July 13, 2014
@pmarca 2/ high performance is very contextual and re-creating the support infrastructure is hard (staff, processes) http://t.co/5YVLT0Pdht
— Steven Sinofsky (@stevesi) July 13, 2014
@pmarca in fin mkts, success rate changes in a cyclical manner, so it might not be a matter of input (skill), but of environment (market)
— ivanhoff (@ivanhoff) July 13, 2014
@pmarca flow trading is diff from prop trading. It's analogous to working at startup vs big co. You may be good at one and bad at the other.
— Avish Bhama (@avishbhama) July 13, 2014
@finansakrobat @pmarca maybe, but dont underestimate operational/managerial challenges of running a HF business vs trading
— Geneva Girl (@SardonicaX) July 13, 2014
@AngryArb @finansakrobat @pmarca managing risk limits very diff from managing variable capital pool where investors have embedded put option
— Geneva Girl (@SardonicaX) July 13, 2014
