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Fine inactive Darwins who are disrespectful to Investors

There are inherent pitfalls of social trading signals against traditional investment structures I am afraid. One of them is that a mandated professionnal money manager will not leave over its customers and run away overnight while quite some Darwins pilots will do so.

Some argue that a trading volume remuneration like happening at ZuluTrade is pushing traders to act unruly and that may be a real concern. However the HWM performance fees also have their counterside evil effect especially on young Darwins which sums up in the fact that when you are making a drawdown and escaping from the HWN, knowing that you won’t make a dime anymore for a couple of weeks or ever, it is easier to just drop the Darwin and start a new one or switch to an adjacent one which you already own. That happens quite a lot and I figured it out by looking closely at the DarwinIA results over time but this must he a broader phenomenom. On the other hand, when you are paid on commissions only, after a 50% DD, you can continue to trade and make money on your past investors (not only on new ones with the perf fees) so your investors can fear about your ability but not your will to fix it the next day.

On Darwinex though, I have seen too often times Darwins ceasing all trading after sometimes a not so unshamefull DD of -20%. Since Darwin pilots do not have a written contract with their investors they can come and go as they please and that is plain wrong for the investors to face all those unprofessionnal behaviors.
After a huge DD or max DD, an investor needs to know if either the trader will resume operations in order to retrieve the loss (so if staying invested is an option), or even to catch an opportunity to enter the Darwin at this very time. Failing to realize a proper judgement on the Darwin’s future control can only create a secondary psychological loss and financial complication for the investor if he feels “given up”

In futures trading, at most brokers, if you don’t monitor your maintenance margins, be it intraday or overnight, and you get a margin call then margin cut, then you could be charged a fine. If you repeat such infraction which shows risky behavior to the risk departmenent (whether it is automated or not), you will be charged a higher fine and so on. This way to train the clients is the good way to educate them : fault > punition. That’s what you deserve in some cases.

Well, at the risk of shocking, I am asking Darwinex to punish Darwin owners who act without responsability to their investors.
Say for instance, that the Darwins did not warn after 10 days the investors that it was the end of their Darwins and/or they did not put themselves in hiatus/holidays mode, then frigging fine them 50 €. Second time it happens, 100 €. And make it clear in an announcement aka ruleboard.
Or else, do not pay them past performance fees they are due. Put the fees payments on hold until they indicate their future intentions on running the Darwins.

Please think about something along those lines. Investors are in on a too neutral market place at times, populated by non managers (wannabees) for the most parts. An investor cannot lose money then lose weeks of time being “in the blue” because time is money and sometimes more important than money itself.

In this topic and some others, Darwinex imho needs to show some degree of responsability higher than the one its contributors will be lacking. More rules to fill the gap between with professionnals. Unexpected behavior should not be tolerated too much on social trading sites if consistent confidence is to be achieved

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:clap:
I completely agree. Irresponsible behaviors should have consequences if Darwinex wants to keep investors’ trust.

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Perhaps rewarding a responsible and professional attitude of the trader would be more judicious than punishing the bad ones?

An attribute in this sense would perhaps be possible?

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We are full of suggestions but there is no change since 6 months. :smiley:
There would be things more easy to implement than fines, but they dont’t do.
For example closing inactive darwins or darwins with zero equity.

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Just like I prefer a lower volatility Darwin to a high volatility one because once your money is gone, it’s gone (my dream would have been a new VaR set at 5%), I prefer the route of prevention by punishment, because losing time x money cannot be retrieved back, so an encouragement (reward) to the responsible owners would not put at stress enough the non-responsible owners. But that’s just me.

Depending on amounts, the investor can suffer a lot more (of missed income or retrieval of loss) than a few bucks fine charged at the infringer.

Also, once @bianka mentionned an owner could die in a car accident. Why not ! Maybe setup an extra safety net : if the Darwin runner does not log into the site after x days, then automatically set it’s Darwin as inactive and warn investors.

Or let the user choose : if the Darwin pilot has not passed any trade in X days of our choosing, alert the investor that the Darwin is not trading enough to our taste so we can take a decision.

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I complained for 6 months of inactivity of HBU …
Now we have 9 months of inactivity @ HBU … :smiley:

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Oh… didn’t notice until you mentioned. Inactive trader should be remove from Darwin !

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Removed but visible for consultation or hidden in the dark closet ? Tracability is another topic…

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Hi there, Regarding OVL, I had some demo funds invested which is in red (thankfully virtual funds!), Looks like there has been no trading activity for atleast a quarter, trader seems to have withdrawn their own funds and there still seems to be some investors funds in it, but surprisingly I noticed I would be able to still buy into the fund!
My question is, what controls does Darwinex has in place to reduce the chance of such abandoned funds…in their own and their investor’s interest?

Surely a quarter of no trading activity and trader having withdrawn the minimum account balance should trigger a suspension of further investment into it?

Where can I find more information and early warning about such behaviour by traders and funds?
Thanks

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Welcome back to the forum @lotusbudha!

No closing or alerting mechanisms are in place at the current time.

Investors need to look out for such behaviour when reviewing their portfolio.

Sorry if this is disappointing… it could be introduced further down the road.

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Thank you @bianka for your quick reply, I do keep an eye on Darwinex as a potential platform to invest a lumpsum from a future property sale.
Now that Darwinex has introduced a management fee, I would think it is all the more urgent to find a resolution to this inactivity/orphaned Darwins issue to bring the model more in line with that of a hedge fund.

It cannot be left to investors alone (many who are relatively new to the platform) to be responsible for monitoring this, …I would think by starting to charge a management fee, Darwinex has taken a bigger stake in the management (or mismanagement) of Darwins.

All part of the continued evolution😉

Rgds

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Darwinex isn’t something that can be monitored once per year like a mutual fund.
Having said that, I think that they should send an email to investors if a darwin is inactive for 2 months.
There is already a flag for inactive darwins, they appear in darwinia but not in all-darwins and filters.

Regarding management fees and inactive periods, Darwinex won’t charge management fees while the DARWIN is inactive. Here you can find more details about how inactive periods are delimited:

There would of course still be an opportunity cost though which is what you’re more concerned about, right?

I think it is much better also for Darwinex if investors have their money on active darwins that generate:

  • commmissions (even if wholesale)
  • management fees
  • performance fees

With a simple filter I found that there are 30 darwins with investors and no trades in the last 3 months.

Yes the opportunity cost and time value of money would be the biggest concern…and I meant ‘or mismanagement’ by traders in my last post.

But I also think by switching to a model with share of performance fees and a management fee, Darwinex needs to take a more active management role, it might be so that overall cost to investors remains the same or even reduces due to reduced commission but the fact is the model has evolved, it looks more similar to where my regulated pension fund is and naturally I am comparing with it. I need not be concerned if the fund manager there is going to turn up for work (or continue working from home as the case maybe for now).

Also to quote from Juan’s recent message;
‘New DARWINs are the first step for the DARWIN asset to gradually engage more professional managers and investors…’…I hope further steps are taken to expect professional behaviour from managers, one of which is to give notice of their intention to cease trading activity in a Darwin.

Yes, investors can monitor but Darwinex can Manage (for a fee ofcourse😉)…for example if a notice period before ceasing activity is made mandatory and the last performance fees are only paid if notice given.

I would think there is an element of Risk investing in a Darwin that ceases activity abruptly without notice, there is no chance of recovering its drawdown in my understanding, the loss has to be materialised by selling it.

Rgds

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Thank you for making the case!

On the note of the inactivity notice, after how much time would you expect it? Would it be useful e.g. to have an automatic notification whenever the DARWIn is considered inactive as per the inactivity definition here?

On the note of Darwinex assuming a more active management role with the introduction of management fees, I’ve added your question to tomorrow’s Q&A webinar so Juan and Javi may touch upon this issue there.

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IMO the new definition used for management fees is right for fees but too short to be considered real inactivity, there could be a vacation of 3 weeks.

I think the same lenght used to exclude in main filters would be ok.
I don’t remember if it is 2 or 3 months.

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Thank you Bianca for bringing that to Management’s awareness.

I was just going to say that some of the veterans might be more knowledgeable to comment on the nitty gritties.

For now, I would be content in the knowledge that Darwinex considers this as a Management control function (especially since the change in pricing model), once that decision has been made, the policies and controls will follow suit I would think… probably the easy part with automation.

Rgds

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There are still more than 200k on STV despite the trader states that is inactive in the description.
@bianka
I think it is the best interest for Darwinex that this money is deployed on active darwins.
I think the best way would be to notify the investors if traders’s equity is 0 for 2 weeks, it could be even better than 2 months without trades.
One week can be justified like happened on LVS , 2 weeks is inactivity.

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