FXWW News/Trade Ideas

Update on opportunities in the funds management industry

As we all know, there are very few traders being trained in the institutional space and in fact the preponderance of electronic pricing systems is making the job of the interbank dealer and/or prop trader almost redundant. That means that most of the new talent must come from the ranks of the retail trader.

  • FX as a pure asset class has not really come to pass like many had expected but there is still a vast amount of institutional money around the globe which will look to invest in FX-only funds/managers. I am noticing once again a lift in demand for multi-manager systematic programs (after a noticeable drop-off post-2008). Individual discretionary managers still have their followers but with a maximum capacity of around $500 million (at the most), these managers are quickly filled. Industry guidelines in terms of compliance and regulation have also become much stricter making it harder for a single manager to operate in the space. The bigger funds continue to get bigger and as I’ve said many times before, they have taken over from the banks as the gatekeepers of the institutional war-chest. They have now become accumulators of other smaller managers, acquiring them in return for allocations and resources.
  • Managed accounts and signal services in the retail space are very fast-growing segments of the FX industry. There are some new brokers which specialise purely in managed accounts and have 5 or 6 managers each with assets under management of between $10/$50 million. The advantages for managers in this space is the ease of entry and the large sales-force (ie brokers) who will promote you aggressively. The dis-advantage is the fickleness of retail investors who could withdraw all their funds almost instantaneously for little reason whatsoever. Signal services are also very popular but are more attractive for the ‘trade picker’ rather than the pure trader. Here you just need to be able to pick more winners than losers with a slightly positive risk-reward ratio and you could have 500 followers at $50pm. Not a bad little earner 🙂

All FXWW registrants will get an email in the next 12/15 hours outlining an incubation opportunity with an emerging hedge fund. If you are serious about a career in the FX industry, then you must treat all of these opportunities as job interviews and present yourself accordingly.

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