Algorithmic Trading Hedge Funds-Evaluate a new fund
Question 1
What are the fund’s strengths?
Question 2
What are the fund’s weaknesses?
Question 3
What further information would you seek when you meet with the founders?
Question 4
Would you recommend this fund? Answer this question in terms of Professor Vulkan’s four rules for evaluating an algo model. Furthermore, grade the attractiveness of the fund on a scale of 1–5, with 1 being a strong no and 5 advising to invest as soon as possible. Provide a brief rationale for your score.
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Question 5
Three years later, in 2021, your manager asks you to do another assessment of RDJ Investments.
RDJ managed to raise £5 million in its initial seed funding. Following this, its performance was below average for the first 18 months. After a re-evaluation of their processes, the founders decided to hire an experienced systematic trader to advise on trade strategy and assist with regulation. With help from the finance professional, the founders re calibrated their model and carefully tested its sensitivity to slippage assumptions. Since then, they changed their focus to middle-term trend models focused on commodities and bonds. Subsequently, their performance improved. They are attempting to raise funding again.
Does the fund now appear more attractive? What further information would you seek from the fund at this stage? How would you now grade the attractiveness of the fund (on a scale of 1–5, with 1 being a strong no and 5 advising to invest as soon as possible)? Provide a brief rationale for your score.
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