Just wanted to put an idea out there to Matthew/Rod (C2 Founders), which is designed to attract higher net worth, and institutional capital to C2 trade leaders…
Currently, For C2 investors, there are plenty of systems to choose from, which meet the demands of many types of individuals, from complete amateurs looking for quick profits (at high risk/leverage) to the more prudent investors, who want gradual, low-risk capital growth wth minimal risk. Most systems fall between the two extremes.
What I wanted to propose, as part of C2 development going forward, is for the founders to develop a leaderboard or some kind of ‘additional’ (possibly ring-fenced) listing of strategies which meet the lower-risk, conservative investor criteria - one where C2 provide (similar to the very successful Morningstar Ratings) some kind of risk-grading or ‘stars’ out of 5 for trade-leader strategies which meet the specific needs of professional/institutional money. The objective is to attract the larger funds/pensions/insitutional capital to C2.
While I would say 90%+ of systems currently on C2 would never qualify, there are some, including one strategy which I have developed with this objective in mind (SPX Liquid Stocks), which would be of interest to higher net worths, and institutional capital…
To attract this sector, C2 would need to develop a separate leaderboard which is designed specifically for meeting these types of professional investors.
Some of the key criteria’s to take into account could be:
(1) Highest priority: The strategy should trade liquid markets only, eg., stocks which trade high volume, such as S&P 500 stocks only. Larger funds would need the liquidity in order to fill large-scale positions.
(2) Some kind of partial/full hedging of the long-portfolio with a neutralizing short position, eg., long stocks dollar value hedged by 50% short hedge using SPY ETF’s, to protect against systematic/macro risk. This is also a critical risk management criteria for institutional capital, which would also add it’s own risk management instruments to the core C2 strategy.
(3) A good consistent track record from the trade-leader, producing excess alpha returns (eg., minmum 20% better than S&P benchmark), with low drawdowns. Plus the obvious 3-6 month minimum track record.
(4) Plus any other factors C2 deem fit, to meet HNW/institutional needs.
A top 20 (or 30 or 40) leaderboard can be developed for these types of strategies, which can then be stratgically targeted specifically to the larger funds.
To compensate trade-leaders for such strategies (which would also have the added effect of attracting more intelligently structures strategies, which would heighten C2 respectability as a genuinely valuable alternative hedge-fund center for serious, risk-astute investors), C2 can develop a compensation package for the Trade-Leader as follows (example only, can be developed further)…
For every $100k attracted, the TL gets paid 3% annually (equating to $250/month). So if a fund invests $1m into a strategy, the TL would get paid $2500/mo from that investor, minus the usual C2 commission etc. This would not require any major changes to the already successful C2 payment/compensation infrastructure. This level of compensation would immediatly get the juices flowing for trade leaders to start looking at developing more professional, well-rounded liquid strategies.
To conclude…
I believe there is a large market for professional investors, including high net worths, and institutional capital out there, which I feel (I could be wrong,as I do not have all of the data) C2 is not fully tapping into…
Currently C2 leaderboards etc., have far too many strategies which are (for want of a better word) a joke - often too high risk, get-rich-quick types which abuse leverage and have too short a life to be taken seriously. This is probably a key reason C2 is not attracting this capital (yet).
However C2 has the potential with it’s existing infrastructure, to provide a platform for the better, more engaging strategy developers who meet the needs of larger funds/institutions. A deep-data leaderboard (similar in some respects to MorningStar’s fund ratings) can be created and targeted by C2 to the larger cap investors. The leaderboard can include much more key data such as Sharpe/Sortino, Alpha, etc.
For instance, the below strategy I developed trades (1) only S&P stocks for max liquidity, (2) hedged 50%-100% of the position using short SPY ETF’s, depending on market conditions and volatility, and (3) has a consistent track record (although still young), which significantly beats the S&P500, with low drawdowns, which I fully expect to continue to do so…
By developing a leaderboard, and better compensation (which I believe insitutional investors would be more than happy to pay for), it also elevates the reputation of C2 towards a much more respectable brand where funds can allocate some of their capital into up and coming trade leaders, who take key factors they demand, into account.
What do investors/trade-leaders think? Ideas…
