CristQuant🪓

Can you build a hedge fund by combining the verified live results of independent traders? I like the idea. I’m still undecided about how far you can get without understanding the strategies behind those results. The concept is appealing: • Give traders a platform to build verifiable track records. • Select promising traders and strategies. • Combine them into one portfolio. • Manage sizing, correlations and risk centrally. The traders keep their logic private. The allocator evaluates their results. In theory, you could discover many independent sources of return that would otherwise remain in individual accounts. I remember how promising Quantopian looked before it closed in 2020. More recently, I’ve been following Darwinex INDX with interest. These are different implementations, and a drawdown in INDX alone doesn’t invalidate the idea. But they bring me back to the same concern: How much of the selection process is simply data mining other people’s equity curves? A verified live record tells you that the results happened. Establishing whether they reflect a repeatable edge is a much harder problem. A trader can make money for several years through some combination of skill, favourable conditions and luck. Even an honest, disciplined trader may have weaknesses in the strategy that the market has not exposed yet. Survivorship bias adds another problem: we see the attractive records of those who made it through, while many failed accounts disappear from view. I see this when talking with traders. Sometimes the equity curve looks convincing, but discussing the actual process leaves me wondering how someone could feel comfortable putting money behind it. Now select the most attractive records from a large pool and optimise their combination. You can end up with a beautiful historical portfolio while still knowing very little about why it should keep working. Different traders don’t necessarily mean different risks. Apparently unrelated strategies may depend on the same market conditions. What looked like diversification in the historical data may turn out to be variations of the same idea, using slightly different indicator settings. And the selection and allocation process is itself a trading strategy. With limited history and many choices about whom to include, when to replace them and how much to allocate, there is plenty of room to overfit. I still want the community fund idea to work. But increasingly, I find myself paying more attention to the thinking and temperament behind the trading: how someone develops ideas, tests assumptions and deals with uncertainty. Personally, I don’t trade other people’s systems. I need the conviction that comes from doing my own research. That is probably part of why I ended up becoming a trader myself. But I understand the appeal of allocating capital to other traders. And a “meta-strategy” that combines their performance into a diversified portfolio still strikes me as a very appealing idea.