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So you wanna be a money manager? - Open Knowledge

Nov. 24th, 2002

05:03 pm - So you wanna be a money manager?

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From:selfishgene
Date:November 24th, 2002 06:28 pm (UTC)
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The one problem I can see is that there is a lot of upside for a risk taking fund manager but no downside. He is not putting his own money in and he can simply shrug if he loses. Of course, this could apply to any fund manager with little personal stake in the fund.
It is an ingenious scheme for recruiting talent - very 'cluetrain'.
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From:crasch
Date:November 24th, 2002 07:11 pm (UTC)
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Yes, that is a risk. However, there are several factors that attenuate it. First, each m100 member only influences 1/100th of the fund's assets. So even if one member's performance drops dramatically it doesn't affect the fund overall that much. Second, the m100 group is re-evaluated monthly. Continued ranking in the m100 depends on continued stellar performance. Third, keep in mind that m100 members are paid based on the fund's assets. Although the amount Marketocracy can pay them now is nominal (due to the small size of the fund), as the fund gets bigger, this amount will increase. For example, there are over 40 mutual funds with assets over $10 billion. At $10 billion in assets 0.3 basis points is worth $300 K/year. This represents a fairly large opportunity cost, if a member makes a risky gamble and loses.

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