- Joined
- 4/28/10
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Hello Quantnet,
Amidst my exploration in the world of finance and trading, I got two somewhat related questions that could use some enlightenment from the other more experience financiers out there. It is concerning asset management (AM), in particularly fund of funds, and their relation to hedge funds.
1. Do AM firms (i.e. Blackstone Hedge Fund solutions or JP Asset Management) actually trade? Trade in the sense that they have a team of traders conceptualizing strategies, quant or otherwise, and running them over a certain AUM. To my understanding, this are done by the hedge funds and what AM firms do is to put their capital in a variety of hedge funds who in turn trade. Is this correct?
2. Is it possible for a AM firm to have an automated strategy and then ask for a trade allocation from one of these hedge funds to run their, the AM's, strategy from the capital which the AM firm invested in the hedge fund. In a sense, the AM has a strategy which they think will do well but leverges on the already established technology of a certain hedge fund to execute it. The hedge fund still gets rewarded with the 2/20 fee just that it can't intervene in the AM's strategy.
Pertaining to both questions, I can understand the rationale behind it. AM firms do not have or focus on the technology to optimally execute the trades they want. Why compete with DE Shaw who spends everyday optimizing their execution when you can just allocate capital to them.
Cheers,
Donny
Amidst my exploration in the world of finance and trading, I got two somewhat related questions that could use some enlightenment from the other more experience financiers out there. It is concerning asset management (AM), in particularly fund of funds, and their relation to hedge funds.
1. Do AM firms (i.e. Blackstone Hedge Fund solutions or JP Asset Management) actually trade? Trade in the sense that they have a team of traders conceptualizing strategies, quant or otherwise, and running them over a certain AUM. To my understanding, this are done by the hedge funds and what AM firms do is to put their capital in a variety of hedge funds who in turn trade. Is this correct?
2. Is it possible for a AM firm to have an automated strategy and then ask for a trade allocation from one of these hedge funds to run their, the AM's, strategy from the capital which the AM firm invested in the hedge fund. In a sense, the AM has a strategy which they think will do well but leverges on the already established technology of a certain hedge fund to execute it. The hedge fund still gets rewarded with the 2/20 fee just that it can't intervene in the AM's strategy.
Pertaining to both questions, I can understand the rationale behind it. AM firms do not have or focus on the technology to optimally execute the trades they want. Why compete with DE Shaw who spends everyday optimizing their execution when you can just allocate capital to them.
Cheers,
Donny
