Prop Shop Performance
Why is there such a different culture when comparing returns in the HF world vs prop shops such as First NY
It seems like HF look at % based yearly returns while prop shops simply measure the $ amount
Wouldn't both matter especially when taking risk into consideration?
My assumption is that discretionary prop shops are more nimble with less than 50m/trader where HF's are sized up 10x minimum
It's not just the amount of capital but also whose capital it is. There are important legal differences in investment structures but at a very high a hedge fund may have 1 billion in capital from many investors and each investor gets the return on their capital minus whatever fees and costs they pay so for the hedge fund investors return on capital is the metric they care about while for a prop trading firm pnl is closer to firm revenue and more important than percentage return.
This makes sense, although both are looking to maximize returns aren't they? Prop firms wouldn't want to be risking more which would eventually hinder their revenue. I guess what I'm more curious about is how are some traders cranking out such high returns 50%+ simply off of technical price action.
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