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DWEX the dynamic index made by Darwinex

It is true that unlike an investment fund, where assets have income like stock dividends or bond coupons, the 'DWEX has loads, ie traders commissions.

On the other hand, a traditional investment fund has operating expenses that are not present with the ‘DWEX’.

I think the best solution would be:

Consider the DWEX simply as an investment portfolio like mine. The DWEX normally reward traders as if it were a traditional private investor.

And the value of DWEX, is the net value of the portfolio, equity less payable commissions. So the investor has a net performance, it will have no commission to pay, since it will already have been paid.

This solution seems viable and simple, seems to me the best. We need the DWEX be a good solution for investors AND traders. If DWEX is a unhealthy competitor to direct private investment on Darwins, there will be a big problem.

I’m not an expert, but is not a benefit of buying performance to traders on the basis of VaR 20% while the Dwex a VaR of 6% ?

Hello Klondike, you are right saying we should care about the amount of money we allow investors to put in the DWEX. We need to resolve how to properly compensate darwin providers, before we start selling officially the DWEX. We could even close the index if we don’t find any approach alligned to DARWIN providers’ interests.
For the time being we are going to limit the liquidity of the DWEX to 50K eur per darwin in it. Once we reach that allocation, we are going to close it, until we decide what to do.
Thank you for your feedback

5 Likes

Hello Javier,

If I look the things with my eyes of investor, abandon the DWEX should not be an option in the long term strategy of Darwinex.

Rather, it will be several variants of a product like DWEX.

Personally I’m an passionate of Darwinex, I spend hours to find the right Darwins, I even share my public portfolio on a French forum. I turn around breakeven.

http://videobourse.fr/forum-forex/viewtopic.php?f=11&t=13177

What I mean, is that for the average person, it will not be easy to effectively invest in Darwinex by directly managing a portfolio of Darwins.

Last evening I was at a conference organized by the Swiss Bankers, the theme was the FinTech and to summarize the essence of the future would be the “Robot Advisors”.

The Dwex is a form of Robot Advisor.

It is not conceivable in the long term that Darwinex does not offer a form of Robot Advisor.

Indeed, you are a FinTech, your message can not just be "here a selection of 1’000 Darwin’s, just get on with!

2 Likes

Sorry, if following already have been discussed, but why you can’t use that simle model for pay performance fees?

Start point

  1. Performance fees applied on monthly basis.
  2. At starting each month you select some DARWINs for including into DWEX, get a total investors fund and divide it on the same parts for each selected DARWIN (“buy” the DARWINs).

End point

  1. At the end of current month you fix trading results for DARWINs in DWEX (“sell” the DARWINs)

  2. Let $ResultOf is array of trading results in percent for each DARWIN in [DARWIN1, DARWIN2, … DARWINn].
    $ResultOf = [ $ResultOf[ DARWIN1 ], $ResultOf[ DARWIN2 ], ... $ResultOf[ DARWINn ] ]

  3. Let $TotalNetResult is sum of $ResultOf array values. It is correct due to each DARWIN have got equal parts of funds, isn’t it?

  4. If $TotalNetResult <= 0 then no DARWINs get any perfomance fee. Go to Start new month.

  5. If $TotalNetResult > 0 then select to $WinDarwins only those DARWINs, which wins in that month
    (so $ResultOf[ $WD ] > 0 for $WD in $WinDarwins). The DARWINs, which loses in this month get nothing

  6. Let $SumOfWinDarwinResult is the sumof trading results in % for all $WinDarwins

  7. Let $TotalNetProfit is a total profit in $ for investors funds in this month.

  8. Let $TotalNetPerfomanceFee = 20% * $TotalNetProfit. Or you can take other value than 20%.

  9. For each profitable DARWIN calculate its part of total net perfomance fee proportionaly its trading results:
    $FeePartForDarwin[ $WD ] = $ResultOf[ $WD ] / $SumOfWinDarwinResult for $WD in $WinDarwins

  10. Finally, calculate perfomance fee for profitable DARWINs:
    $FeeForDarwin[ $WD ] = $FeePartForDarwin[ $WD ] * $TotalNetPerfomanceFee for $WD in $WinDarwins

Example

Lets imagine there are only 5 DARWINS in the DWEX: DARWIN1,… DARWIN5

Investors funds are $66667.

Each DARWIN get $66667 / 5 = $13333

DARWIN1 wins 20% in a month.
DARWIN2 wins 15% in a month.
DARWIN3 wins 5% in a month.
DARWIN4 loses 5% in a month.
DARWIN5 loses a 5% that month.

$ResultOf = [20%, 15%, 5%, -5%, -5%]

$TotalNetResult = 20% + 15% + 5% - 5% - 5% = 30%
It is > 0!

$WinDarwins = [DARWIN1, DARWIN2, DARWIN3]

$SumOfWinDarwinResult = 20% + 15% + 5% = 40%

$TotalNetProfit = ($66667 / 5) * 30% = $4000

Then
$TotalNetPerfomanceFee = 20% * $TotalNetProfit = 20% * $4000 = $800
It is total fee, which will distributed between profitable DARWINs.

$FeePartForDarwin[ DARWIN1 ] = $ResultOf[ DARWIN1 ] / $SumOfWinDarwinResult

$FeePartForDarwin[ DARWIN1 ] = 20% / 40% = 0.5 = 50%
$FeePartForDarwin[ DARWIN2 ] = 15% / 40% = 0.375 = 37.5%
$FeePartForDarwin[ DARWIN3 ] = 5% / 40% = 0.125 = 12.5%

And finally,
$FeeForDarwin[ DARWIN1 ] = $FeePartForDarwin[ DARWIN1 ] * $TotalNetPerfomanceFee

$FeeForDarwin[ DARWIN1 ] = 50% * $800 = $400
$FeeForDarwin[ DARWIN2 ] = 37.5% * $800 = $300
$FeeForDarwin[ DARWIN3 ] = 12.5% * $800 = $100

And for not profitable DARWINs:
$FeeForDarwin[ DARWIN4 ] = $0
$FeeForDarwin[ DARWIN5 ] = $0

4 Likes

Thank you, good stuff!

That’s the approach I had in mind as well. However, it is not necessarily the most fair approach under all circumstances.
Just take a different example.
Month 1:
Darwin A + 15%, Darwin B - 10%, Darwin C -5%
Performance is 0 => no revenue for the traders

Month 2:
Darwin A - 1%. Darwin B 2%, Darwin C 4%
Performance is 5% => revenues for trader b and c. Despite making 14% for the fund trader a gets nothing :confused:

That’s why I suggested the fund could have a “memory” and is paying the traders corresponding to their performance for the fund. Would need to think a bit on how this could be realized best though. Suggestions? Or is this idea absurd anyways? :dizzy_face:

2 Likes

My idea of treating the ‘DWEX’ as an ordinary portfolio is it silly ?

What is the problem that escapes me ?

Thank you so much, guys!

This leads to a big debate we are having internally, too. I will work on a detailed post explaining our stance on this (we have given it a veeeeeery deep thought) and it would be good to hear your thoughts.

You’ll hear from me in the coming days!

1 Like

It would be hard to sell to investors why they need to pay performance fees on losing months as is the case with an ordinary portfolio of individual darwins.

3 Likes

Imagine there are only 2 DARWINS on the DWEX. 100 GBP are invested in each of them:

A loses 20% (we have 80 left)
B wins 20% (we have 100+20- 4 perf. fees = 116).

All in all, the investor would have paid for losing money, which does not sound very attractive to investors as @KlondikeFX suggests.

No, with my solution, the investor never pay commission. Commissions are paid by the DWEX. The value of DWEX would net, paid commission.

As an investment fund whose share of the gross return is cut by management fees, etc.

5 Likes

Ah now I understand. That’s an interesting solution as well.

1 Like

Of course !

But there is no other solution in my opinion.

A winning trader must be paid for his performence.

The performence of Dwex results from the addition of 80% of earnings and 100% of losses !!

I pay my commissions to winning traders on my portfolio, though my portfolio is losing. How could it be otherwise for Dwex?

That seems obvious!

2 Likes

This approach seems to be equivalent to adding in investor’s portfolio group of DARWINs, which selected for DWEX for current month. This operation processed only for investors, who buy DWEX as a group of DARWINs and processed by darwinex.com. Investor can’t change DARWINs in this group, he can only “sell” all DARWINs in group at once (“sell” DWEX).

Lets imagine there are only 5 DARWINS in the DWEX: DARWIN1,… DARWIN5

Let we have one investor, he buy DWEX and allocate $66667.

So, to his Portfolio added following DARWINs:

DARWIN1 with $13333
DARWIN2 with $13333
DARWIN3 with $13333
DARWIN4 with $13333
DARWIN5 with $13333

because each DARWIN in DWEX group must get $66667 / 5 = $13333

Let as in example above

DARWIN1 wins 20% in a month,
DARWIN2 wins 15% in a month,
DARWIN3 wins 5% in a month,
DARWIN4 loses 5% in a month,
DARWIN5 loses a 5% that month.

Total profit for DWEX group of DARWINs is
(20% + 15% + 5% - 5% - 5%)*$13333 = 30% * $13333 = $4000
and for perfomance fee will be allocated
20% * $4000 = $800 and after collecting fee for the next month investor have to have
$66667 + $4000 - $800 = $69867

In this model
DARWIN1 get fee 20%(profit) * $13333 * 20%(fee) = $2666.67(profit) * 20% = $533.33
DARWIN2 get fee 15%(profit) * $13333 * 20%(fee) = $2000(profit) * 20% = $400
DARWIN3 get fee 5%(profit) * $13333 * 20%(fee) = $666.67(profit) * 20% = $133.33

$533.33 + $400 + $133.33 = $1066.67

As you can see, $1066.67 > $800, which investor must pay from his profit to DARWINs

DARWIN4 get (-5%)(profit) * $13333 = -$666.67(profit)
DARWIN5 get (-5%)(profit) * $13333 = -$666.67(profit)

And after collecting fee investor will have
$66667 + (20% * $13333 + 15% * $13333 + 5% * $13333 - 5% * $13333 - 5% * $13333) - $1066.67 =
$66667 + ($2666.67 + $2000 + $666.67 - $666.67 - $666.67) - $1066.67 = $69600.33

$69600.33 < $69867 (-$266.67)

I found a mistake in my previous post.
In example I wrote
$TotalNetProfit = $66667 * 30% = $20000

but correct is
$TotalNetProfit = ($66667 / 5) * 30% = $4000
where 5 is count of DARWINs in DWEX

I’ll fix it.

So, if we look at the DWEX as a group of separate DARWINs we get different results instead if we look at DWEX as a one financial instrument with (30/5)% = 6% profit in this month.
Why? I don’t understand it clear. When I started this post I think that I’ll get the same results for group and for one. May be there are some mistakes…

2 Likes

It is possible that such approach is look as unfair, but is correct because each DARWIN in DWEX stops being isolated and begins to work together with others DARWINs in DWEX and each DARWIN in DWEX is responsible for wins or loses of the others in current month.

However, the idea of “memory” is attractive.

1 Like

I have a much more simple question about DWEX.
On the header I read 15 darwins in index, while below on the chart I read 32 darwin in index.
Someone can explain that?

Change the time frame to 3 months and it will show you 15 Darwins :wink: Need to look at smaller amount of data to show the daily change of Darwins.

2 Likes

Hello All …

It is my view that, in the beginning anyway there should be a certain amount of discretion involved in how traders are rewarded for their individual performance when contributing to DWEX.

These are some basic principles I think may work as a start:

  1. DWEX does not have a profitable month, quarter, then I don’t see a requirement for traders within it to be paid anything. The whole idea of DWEX is that it should be a prestigious achievement to be part of it, and the good months should more than make up for it.
  2. Although we all like transparency - I don’t think that profits has to be calculated equally at all times. Eventually once the product has fully matured this would be great, but instead Darwinex may decide to introduce an element of profit sharing for traders who participated in the DWEX over a certain period. This could carry a range of financial incentives, as long as there is a strong correlation between revenue generated by DWEX and payouts.
  3. As per the original idea - I still feel that a monthly rotation (re-calculation) of DARWINS could work well.
  4. The goal of DWEX should be conservative but above average return over a long sustained period of time. I would be happy to see a 10% per year or thereabout if possible.
  5. In addition to the above - a 'small" prize or funded account can be a reward for the first time you make it into the DWEX. After all - the DWEX needs to be promoted … and this seems to be an OK extra.

:slight_smile:

1 Like

Hello, i think you have no right to use the strategy, without paying for its use, if the trader strategy is profitable in this month even have Dwex does not profitable. this month. Traders will want to participate in this, if it is a profit depends on the work of other traders

I see this structure like DWEX as an employer and Darwins as employees.
DWEX algorithm is choosing his employees. They are hired for a certain period (as long as they met the criteria).
It is DWEXs own choice and risk which Darwins will be hired. If you hire people you pay them for their service to you. You pay all employees and give suitable reward just to the positive/best ones.
Expectancty is that DWEX (and Darwins in it) will produce profit in a long run.
DWEX is kind of a product, that could charge performance fees and management fees. And it has his its own income from commisions that are coming form trading. Management fees could be shared with all Darwin (employees), performance fees are shared between profitable Darwins only based on their performance. And the top Darwins can be extra rewarded directly form DWEX commisions income.
In this scenario everybody is giving something and recieving something.

  • DWEX investors are paying managment and performance fee for the trust and security of DWEX system
  • Darwins employees are getting paid management fee for being hired (they are doing something right to be hired in the first place).
  • Profitable Darwins are getting paid also with performance fee, which might not be full 20% but still must be good enough
  • Top Darwins are rewarded extra and DWEX is happy to give them some reward from its own profit
5 Likes