Prop shop splits
A quant is offering to port his algorithms into our engines, and wants a 66% commission on PnL. He says that a typical prop shop will do a 50-50 split on PnL, but in our case it's different since he'll be doing a bunch of extra work to get it working.
We're a family office, have a team but we're missing a quant. Is this guy pulling our leg?
HFT firms can have very high payouts and sharpe dependent so those numbers are realistic assuming a high sharpe
I'm on a multi manager platform and we give quants working on our team single digit to very low double digit payouts, but have access to tons of capital, carry overnight risk and ok with low sharpe signals...
ultimately the question is whether it's economical for you, if it's 6 sharpe and not correlated with you with no overnight risk then probably makes sense, otherwise ehhhhh
I’d say run. Like he said the economics don’t make sense for him to join you. He has to do more work and wants a higher pay out for it. 50-50 could be fair.
But as he said you are not the right platform for him. The people he says will pay out 50-50 are the guys with a platform it’s easier for him to join.
We have the platform, I think it’s more-so because he needs to do some R&D to fit his model from forex to our market. Our team will do the majority of the integration and engineering of the remaining components. He seems to be trying to leverage the fact that we don’t have a financial quant on the team yet — we’ve got a data scientist, infrastructure engineer and trade engine engineer. So 50-50 is typical for performing models?
I’ve seen 80-20.
But most of the bigger prop groups will offer 35% with salary for a guy with a track record.
To go to 50-50 and above I’d expect him to coinvest. If his model works he should have a million lying around anyway.
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