Just for context, my trading style is quantitative, based strictly on fundamental indicators. It uses factor modeling to forecast returns and allocates based on prospects for returns. It is best characterized as Global Macro Forex, trading commodity driven economies against commodity consuming economies. It also hedges against downside by placing hedges on economies heavily reliant on foreign investments The statistics are:

  • 0.72 annualized sharpe ratio
  • 17% annualized return
  • 0.04 beta to stocks
  • 120 something days of track record

So now the question, I'm planning on forming a CTA (commodity trading advisory) and managing funds once I turn 18. I am looking to find out what kind of value retail/individual investors look for in these kinds of alternative investments?

If someone also answered whether this strategy is worth making a fund out of that'd be nice but the question remains the one stated.

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    I trade forex anytime I think I have too much money. – Pete B. Mar 23 '17 at 16:56
  • Over what time period is your bullet point data? Or is this really about 120 days? Generally retail investors want to see historical performance with any fund. – quid Mar 23 '17 at 17:04
  • @quid yes, 120 days of track record exist on my strategy. – FX_NINJA Mar 23 '17 at 17:15
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    I'd say you need a lot more track record before you have a track record at all. – quid Mar 23 '17 at 17:16
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    I applaud you for having goals, and I hope that you would not allow any random person to dissuade you from them. But how can I or anyone else honestly answer the question on if you should open a fund? Retail investors look for two things: low risk, and great returns. Many have money in a savings account and a mutual fund that has a huge beta at the same time. What need will your product meet is a question that you have to answer for yourself. Oh and the answer is not Forex trading. – Pete B. Mar 23 '17 at 18:20

I'm not downvoting you because I can relate, in a way, to your post and I think this is a good topic to have on this site. We had a question a couple weeks ago where someone, like you, took some friend's money to trade with but didn't know how to give the money back or calculate the net-return. It is not smart to take and invest other people's money when you have zero industry experience and when you do not understand the legal requirements of handling someone else's money.

Within the first 12 months of my brokerage account I had returned something like 150%, I doubled my money plus a bit. The next year was something like -20%; if I remember correctly the next year was worse, then up again for year four. Year 1 I thought I was a genius and had figured this whole thing out, year 2 put me in my place and year 3 kicked me while I was down.

You have 6 months of pretty solid returns, good for you. I don't think that means it's time to set up shop. Really, I think you need to sit down and think long and hard about the implications, legal and otherwise, of holding other people's money. Running a fund is significantly different than trading your own money.

Retail investors don't, typically, have a good memory. Great, you made me 17% last year, and 25% the year before but right now I'm down 10%, so give me my money back because I would have been better off in an savings account this year. This is why index funds are in vogue right now. Lots of people have had money in active funds that have trailed or matched the "safe and passive" index funds, so they're angry. Retail folks get jittery the instant they lose money, no matter how much. You need to be ready to contend with "What have you done for me lately?" the instant something turns negative, no matter how positive your returns have been.

At your stage in the game you should get a job and continue putting your own money in to your own system and be ready to lose some of it. I doubt there is anyone outside your immediate family who will hand a random 18 year-old kid any significant amount of money to trade their system based on 6 months of success; certainly not more than you have in there currently.

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