DARWIN instead of PAMM? – the trader view
You already manage friends & family money via PAMM or MAMM schemes, and legitimately ask: DARWIN instead of PAMM?
Granted – if you’ve traded for long enough, listing a DARWIN is hardly inventing the “managing investor capital / healthy leverage” wheel.
Here’s our take: listing a DARWIN is fully compatible with managing capital elsewhere, because your listed DARWIN is…
Incremental & Anonymous
All we do is source additional capital for investable strategies. You keep whatever existing arrangements you choose to keep.
You’re not required to to disclose your identity to investors or use your commercial trading name (we will not know, unless you choose to disclose!). NB: as an FCA regulated manager, we take our obligation to identify customers very seriously, but this is a different matter altogether.
Needless to mention, if you’re managing capital for a higher success fee elsewhere, that´s fine by us!
Whether you hold regulatory license to manage investor capital, or not, DARWINs are legal, for legally and to a large extent economically (since we manage investor risk independently) it’s Darwinex that manages capital invested in your listed DARWIN.
We’re OK taking on that responsibility because our proprietary risk management framework protects investors from unexpected losses. Not to mention that investors value the additional safeguard, which results in your benefit.
Your DARWIN’s Investor Appeal is rigorous, independent and intuitive. Rating your experience, risk management, discipline, timing, performance and scalability, provides you with an unique opportunity to shine where lucky monkeys struggle.
Further, since high investor appeal predicts future risk adjusted return better than conventional risk/return measures, skilled traders enjoy more investor credibility, faster, than they could accrue individually, all at no effort or expense other than importing an existing track-record from a generally inferior broker.
Last, but not least, the DARWIN process aligns traders with investors for mutual long term success. By NOT rewarding traders for investor commissions, DARWINs overcome perverse incentives wherebyPAMM managers are conflicted into writing their own pay-check at investor expense (all it takes is rake in a bunch of trades and churn investors to “solve” a bad trading month).
High trader payout
Do you think that 15% DARWIN take home success fee is less than 30% on a PAMM account?
Think again. To earn your 30% PAMM success fee you:
- Earn 30% on spreads and commission schemes which are likely higher than our execution costs
- Carry your regulatory license (or at least, ought to)
- Ought to take customers through a suitability assessment (or risk legal action, if you fail to)
- Attract your investors – carrying little credibility, since you’re not credible if advertising your own talent
- Care for existing investors – who will tell them that managing a PAMM account does not amount to becoming their financial crystal ball?
- Run multiple versions of the same underlying strategy to cater to different investor risk appetites
Reflecting on the above, is 15% incremental NET, without sunk cost, really a bad addition to less 30% GROSS with sunk cost?
S0, to DARWIN or not to DARWIN?
That’s the thing: DARWIN is not a forced choice, but an additional option for anonymous, legal and credible revenue at 0 sunk cost, particularly since, unlike PAMMs, DARWINs don’t leak intellectual property to investors… but that’s a topic for another post!