CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. -- % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Problem of performance fee equalization

It would only be an option, not a requirement. If an investor did not want to commit for any time period, they need not. But if they were comfortable in making this decision, then they would get a lower fee.

It gives investors an additional option. Caveat emptor.

@StokesBay
It’s the worst option an investor could ever choose!

It must always be possible to sell the Darwin real time, at least if the performance of the Darwin is lower than the last high water mark when the trader would get nothing. It is never acceptable to force an investor held in a losing position against HWM or buy price.

What you suggest could be acceptable in a kind of reward system for long term investors if the Darwin is and stays profitable.

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Perhaps then investors could be rewarded for time invested in a Darwin without committing time. So they are free to leave whenever but if perhaps they stayed for 1 year then the performance fee drops to 15% going forward.

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But this should be within the gift of the Darwin provider; i.e. they set up these terms for their Darwin. Therefore not all providers need to offer these conditions.

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Darwins have the reward structure of hedge funds but can be managed like stocks.
Investors are free to buy and sell darwins or stocks when they want.
For investing patience is the key but it is up to investors, IMO we dont’ need a rule to trap investors.

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Is this incentive not already provided by the HWM?
The investor has the “incentive” of no further fees unless ongoing performance is realised.

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Hopefully with an increase to the quantity of quality traders here and or an increase in investor knowledge and skill and or an increase in the quality of invest-able attribute scores and other investor tools this problem will start to go away for some. Like @juancolonbo says:

We can all help with the first step (quantity of quality traders) by telling all our trader friends about Darwinex on social media and forums.

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So, I don’t understand something from the blog post:


Reason 2: A stable “profit potential / commissions” ratio

Imagine two investors with portfolios with similar trading volumes comprised of:

  • Investor A has invested €1,000 in a single DARWIN.
  • Investor B has invested €500 in two DARWINs that are completely uncorrelated.

With similar trading volumes, let’s assume that each portfolio pays €2 commissions per day. Despite the fact that they are paying the same commission, Investor A has a portfolio with VaR of 10% , while Investor B has a portfolio with monthly VaR of about 7%.

Due to the symmetric nature of the VaR measurement, a 10% VaR portfolio has a greater profit potential than that of a 7% VaR portfolio (if you are willing to assume greater risk, you should be expecting greater return). But as both investors have been charged the same execution commissions, Investor B who has invested in 2 DARWINs to reduce his risk, would have a worse potential profit/commission ratio. Again this might lead to an unwanted outcome where investors maintain under-diversified portfolios.


Why is “potential profit” a thing to even consider here? Shouldn’t we be comparing expected average profit instead? And all things being equal, if I’m understanding this correctly, investor B and investor A in this example should have the same average expectancy but investor B will have a better Sharpe ratio and lower VAR etc. I don’t hate these rebates, but I’m just pointing out some irony that investors get extra incentive to take (supposedly) less risk while making the same average profit. Also, could this incentive maybe push some investors (everybody loves rebates) to lower their standards and fit more Darwins in to their portfolio (thereby increasing their chance of having a time-bomb in it?)

How about a way to quickly calculate VAR of a portfolio and making it easy to add or remove leverage in tandem across all Darwins to get a portfolio to any desired portfolio VAR (with a cap of course)?

How about also a portfolio performance rebate similar to the Darwin operators for portfolio managers and investors?

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As the quality of traders improve, I am not sure it will be so much of a “trap”. I mean the Darwinia stays uninterrupted for 6 months… I am sure investors can learn from it too, not just traders… For every investor money lost to poor trading, how many more is lost to fear and impatience of the investor? We always seem to forget that the same exact things that affect traders affect investors. Entering during highs, jumping ship at the slightest downturn etc.

Look at CIS/HFD etc. even with the incredible trading, you still had investors jumping ship as soon as a - 3% happened. I even remember CIS talking about one of the investors always messaging him after a loss :rofl::rofl: If that is happening to the “stars” imagine everyone else. Yeah okay HFD went to a deeper drawdown later but it doesn’t justify exiting in a 5% DD and probably jumping in at a high again when/if it recovers.

My point is, at some point there has to be an even deeper level of dropping the pure exchange model to save investors from themselves…It has started with the model portfolio but I am sure it will get deeper with time.

The average VAR is 10%… It is not a trap to ask investors to stay 6 months minimum with a minimum 10% stop loss. So they automatically leave the Darwin if they lose 10% of the invested sum before the 6 months are up etc.

10% may be a tight stop loss but it is better than the panic selling at - 3% for sure! Throw in the lower performance fee suggested by others above for staying locked in and it makes some sense.

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What do you think DarwinIA pays each month?
10 k? Take your number and multiply it by 90 (or how many months Darwinex exists) and subtract it from the amount shown in the hall of fame. Take that number and multiply it by 4 and you know how much all investors made in 8 or 9 years. So I think they pay much less, at most 1k for each winning round per month (is less than 5k for all winners) per month.
IMO most traders winning prizes don’t make significant money with DarwinIA, so it is more an example for NOT holding a Darwin 3 month or longer.
More transparency onDarwinIA is suggested and appreciated, but not done.

Yes Darwinia is quite a bad investor.
It buys high (after a lucky month) and holds for six months.
For providers is very difficult to make money with Darwinia.
Very cheap marketing for Darwinex,
Many millions of virtual money but ~30k real fees paid every month.
To make money with darwins you have to buy low and hold for at least one year.

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I don’t agree with the one year period. You need a defined exit to sell without exceptions. I am really curious whether I will hold Darwins in my demo portfolio for a year or longer and whether it will make money in a year.

Dear @IlIlIlIlI I’m afraid your calculations are off by several orders of magnitude - Darwinia’s cost is substantially higher than you imply - but it’s the best investment we can make to provide customers with their first experiencing of managing funds professionally.

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Dear @CavaliereVerde,

Here’s 2 questions:

  • Things are good or bad relative to the best available alternative. How well does Darwinia stack up against the next capital seeding scheme paid for by any other broker in the CFD industry?
  • How many professional managers would object to a 6 month committed allocation of capital, without EVER looking for, or hand-holding an investor?

What’s possibly so wrong about Darwinia?

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Thanks for your suggestion.

We look at this as a capacity rationing problem - and the challenge is for traders to make their choice between:

  • Earning 20% success fee on whatever AuM they can get on those terms - knowing that investors will be weary of investing in anyone but the most popular DARWINs OR
  • Agreeing to a potentially lower standalone rate-fee, BUT being eligible to enter diversified portfolios and thus opting to substantially higher AuM allocations.

It’s the classic Fund of Funds problem - the extra layer on top of the individual managers offers investors a degree of curation, diversification and rate discount (the AuM gatherer / FoF manager gets better terms).

To give you an idea, SAC’s model was to charge investors 3/30 (3% management fee and 30% success fee) and pay “Portfolio Units” (DARWIN managers on payroll) 1/10.

Our improvement on the SAC model is offering traders the choice of going standalone (20% success) or selling some capacity at reduced rates to diversifiers.

Obviously, some managers will prefer to stick to their 20%, but others will accept the cut if they lack the bargaining power. Ultimately it’s a question of the absolute AuM.

Thoughts?

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In my opinion Darwinia is a very good concept but what I was saying is that 6 months is the minimum to be considerd an investment so it is not an inspiration for true investors.
Darwinia works very well but is not designed to make money and neither as a model to inspire investors.
True traders and true investors should focus on timeframes much longer than the 6 months of Darwinia.

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As a Darwin provider I would be happy to take lower performance fee % in exchange for higher AUM. Whatever level maximises revenue would be where I would be happiest!

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There is no 6 months investment at DarwinIA, there are two 3 months periods. So if the trader fails first time, he has a second chance to turn a single prize into cash. Why give him more chances for a single prize?
He has the chance of a new prize every month.

It’s not meant to be a good investor.

As a trader it’s easier to make money with Darwinia AuM than it is with real investor AuM because there is no capacity problem and no divergence. No risk the AuM will go away on a DD.

Darwinia inspires me to keep trading responsibly indefinitely. Even though a single prize is 6 months, a good trader can win multiple months within the first 6 months and be earning on that prize AuM simultaneously with the other prize AuM. I’m not going anywhere in 6 months!

Yes it is a 6 month period. The prize is AuM for 6 months regardless of the performance fee schedule. In fact once you earn a second prize the next month, the fees for that second month prize wind up being paid out over 3 different quarters not 2. :wink: (If it was shorter it might be a bummer to win a month and go in to stagnation for 3 months. I think 6 months is about right although I’d love it to be longer.)

I think it’s supposed to inspire good traders and the good traders are supposed to inspire the investors by being good traders :wink:

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Or wait, were you hinting Darwinia prize AuM should be for longer time than 6 months? Like maybe less AuM but more time?

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