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

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.

4 Likes

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?

3 Likes

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?

2 Likes

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.

2 Likes

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!

4 Likes

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:

3 Likes

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

1 Like