After working for 50 years, and achieving business success most people dream of, my father had a problem. What to do with his money?
Some people dismiss this as a “first-world problem” — not worthy of righteous intellectuals’ concern. But it was still a problem — his problem — and my father wasn’t alone. When interest rates are zero, and inflation is not, putting your money in the bank — whether a thousand dollars, or a million — is the exact mathematical equivalent of asking someone to remove half your cash over the next fifteen years. Think about that: work for fifty years, stick your money in a bank; and then, fifteen years later, half of it is gone.
What about the stock market? Investing in the “stock market” sounds like a good idea, until you actually study the history of the stock market. When you do, you will see that stock-market “corrections” cause a third of your money to instantly vanish, and that subsequent bear markets can — and have! — lasted for several decades at a time. A person who “bought the dip” in 1969 would have waited for 25 years to get his money back. Conceivable maybe for a twenty-year-old, not-so-smart for a man pushing 70.
You could invest in real-estate, but this was the industry in which my father had built his nest egg, and his goal was to take money off the table, and perhaps to wind down a bit and enjoy life. Real-estate investing requires diligence, and work, and brings with it endless heartache.
So what was left? What does a man with cash actually do with it, when he wants to take a break, and step back, and not work so goddamn hard?
My father found an answer. Hedge funds. Let someone else steward his capital, and make it grow. After all, hedge fund managers are financial experts. Why not leave a tough job to experts?
The title of this article tips my hand, so you already know that my father’s plan didn’t work out as expected. But it wasn’t for lack of caution.
For here is something you don’t know about my father, but you’ll have to accept my word for it: my father is the most thoughtful, cautious man I know. You remember that fact I threw at you several paragraphs ago — about how stock-market corrections can make 33% of your money disappear overnight? That came from my father. He taught me that growing up. Indeed he mentioned it often, because he had lived through it, more than once, and he worried it would happen again.
His caution extended beyond investing. Growing up, whenever I came up with an idea — whether sensible, or preposterous — my father always urged me to slow down, think through the possibilities. Sure, this assumption might work out, and that goal might happen… but what if it didn’t? What if the thing you’re counting on doesn’t materialize? It’s fine, go ahead with your plan, but have contingencies. Recognize there is a spectrum of possible outcomes, and plan accordingly. My father is a living, breathing Value-at-Risk calculation. He taught me that life, and the events that unfold within it, do not always fall within one standard deviation.
So when he decided to invest his money in hedge funds, my father did so in his typical cautious, plodding — sometimes maddeningly so — way.
No rush. Think. Do research. Assume the worst, and try to minimize risk.
He placed phone calls. He spoke to people — friends, business associates, advisors, experts. He sought their opinions. He asked for references. He bought access to hedge-fund databases, which contain deep and accurate information about thousands of hedge funds strategies and performance.
He checked the manager’s records for disciplinary violations, criminal convictions, bankruptcies, judgments.
He decided to diversify. Sure, hedge funds sound great, but you can’t have complete confidence in any single one. You don’t want to risk everything on one fund, or one manager. And my father is a cautious man.
Ultimately, he invested in over a dozen hedge funds. They were a mix of different kinds of strategies, and different kinds of managers. He invested in a credit fund, a long-short equities fund, a fund that traded commodities, a fund that traded volatility, even a fund that traded live cattle. The managers running these funds were similarly diverse: a Harvard-educated amateur hockey player! A former chairman of NASDAQ! A credit expert from New Jersey! A recent Chinese immigrant with a math PhD!
How did it work out? Here’s the scorecard.
Losing money is one thing; it’s to be expected when you invest in risky funds. But outright theft?
Let’s examine how my father’s money was stolen. We’ll look at each theft in turn.
Out of the all methods that hedge funds use to rip you off, Ponzi schemes are the least interesting. And, out of all types of fraud, Ponzis should be the easiest to spot. In a Ponzi scheme, no investing actually takes place. There is no trading. A Ponzi operator simply take the money from new investors, and give it to old investors. To spot this kind of fraud, an investigator need only walk into the hedge fund office, and ask to see the trading records. Game over.
So how was my father fooled by this? Today, years later, he’s the first to admit his mistake was silly, and that he should have been more suspicious. But in fact he was suspicious. The monthly returns for this particular fund were so good — almost too good — that they raised concern. And yet… and yet. This was not some fly-by-night startup hedge-fund that had just recently popped into existence. It had been operating for over a decade. It was run by a famous man. Its investors included other wealthy and famous people. The authorities knew of this fund. They knew about its excellent returns. This fact, more than any other, gave my father comfort: if there was something illicit going on, then surely the SEC would have discovered it, during the many years the fund had been operating. They didn’t.
Now let’s turn to another hedge fund that my father invested in, and another way hedge funds can steal your money.
The term “marking to market” means deciding how much something is worth. When you buy a stock — let’s say, one share of Microsoft — you know how much that share is worth. You paid $20 dollars for it. So at the moment you buy it, it’s worth exactly that: $20 dollars.
Imagine six months pass. Now how much is your share of Microsoft worth? Determining this is equally simple: just look at the stock-market price of Microsoft. If it’s $30 dollars, you just made a profit of ten dollars. You don’t have to actually sell your share to calculate the profit. And if you’re a hedge fund manager, you can feel completely justified in charging your clients a portion of this ten-dollar profit. This is your business model, after all: make profits for your investors; keep a portion for yourself.
But the thing is, a lot of hedge funds don’t invest in plain vanilla stocks. Indeed, the appeal of some hedge funds is that they invest in exotic assets which are complex, hard to find, and not simple to trade. After all, anyone can buy a share of stock using his Ameritrade account. Why should you pay high fees to a hedge fund to do that?
Therefore many hedge funds seek, and invest in, complex assets that regular people have a hard time buying and selling.
Like, for instance, a PIPE. A “PIPE” is the acronym for a “private investment in a public equity.” Without bogging down in detail, let’s describe a PIPE as a financial instrument that is a combination of debt and equity.
The actual mechanics of PIPEs aren’t important. What is important is that there isn’t a stock-exchange for PIPEs. If you’re a hedge fund, and you want to invest in PIPEs, you call up small companies in distress, and you negotiate with their CEOs, one-on-one, and at the end of that negotiation, you walk away with a piece of paper that cost you, say ten million dollars. You hope that piece of paper will go up in value.
Now, a year passes, and you need to decide how much that piece of paper is worth. This is an important question, because the answer tells you how much you can charge your hedge-fund clients at the end of the year. Remember that hedge funds charge, typically, 20% of profits.
So, to take a simple example, if your PIPE investment makes a profit of $10 million dollars, you can charge investors $2 million dollars in fees. Which is very nice, because it helps pay for your house in the Hamptons, and your kids’ private schools, and maybe a jet card.
But it does raise a troubling question. How exactly should a hedge fund decide how much a PIPE is worth? Sure, you paid one million dollars for it, but a lot of time has passed. Maybe the company you invested in is doing well. Maybe it’s not. Who can be sure?
There’s no “PIPE Stock Market” where you can look up the current price of a PIPE. In fact, the PIPE you now hold is a one-of-a-kind financial creation. Who knows how much it’s worth?
I think you can spot the problem. How do hedge funds “mark-to-market” their investment in PIPEs, or fine art, or collectibles, or private companies, or whatever? How do they determine what things are worth?
I’ll tell you how. They pick a number out of their ass, and declare, “The PIPE is now worth X!”
And they say this with great conviction. And lo and behold — guess what? — somehow, miraculously, that number is never lower than the price at which the PIPE was purchased. Never.
And the hedge fund manager writes a warm and heartfelt letter to his investors, explaining that the fund enjoyed a terrific year, and that its investment in PIPEs yielded a +20% return. Oh, and that, the hedge fund manager will claim his fair share of that profit as his fee.
To be fair, sometimes a hedge fund hires a “valuation expert” who is paid by the fund to offer an arms-length, third-party opinion about how much a PIPE is worth. These valuation experts use complicated math, and formulas, to make valuation decisions.
You remember the thing I told you about how hedge-fund managers have a house in the Hamptons that needs to be paid for? Well, valuation experts also have houses that need to be paid for. Maybe not in the Hamptons. Maybe in Sayville. But still.
Guess what happens if the valuation expert doesn’t come up with the “correct” valuation after being hired by a hedge fund? He is fired by the hedge fund. Another valuation expert is hired in his place. The new valuation expert understands the lesson. Somehow, miraculously, his complex math comes out “just right.” The PIPE is worth more today than it was yesterday!
At a certain point, this kind of marking-to-market fakery comes to an end. In the case of PIPEs, perhaps the company you invested in goes bankrupt. Or maybe the private firm in which you bought stock is itself acquired for a much lower price in a legitimate market transaction which cannot be ignored.
But this can take many, many years. And in the meantime, the hedge fund manager has pocketed millions of dollars of fees. Perfectly legally.
Hedge funds specialize in investing in risky, illiquid, hard-to-value stuff. But sometimes, fund managers decide to invest in something so freaking “out there” that even they feel the need to differentiate it from their run-of-the-mill investments.
Take Philip Falcone. Please. After making a fortune calling the 2008 housing-market crisis, Falcone’s hedge fund, Harbinger Capital, enjoyed a sterling reputation. Falcone was a Harvard grad, a college hockey star who turned pro for a while, and a prescient investor with balls of steel. My father had heard about his hedge fund, and he wanted in. Be careful what you wish for.
Almost as soon as my father invested, things went south. Falcone declared that he would invest $2 billion dollars of investor money in a telecommunications startup with a risky business plan. The plan was: to take spectrum already allocated by the government for satellite communications, and without permission, to re-purpose that spectrum for use by cell phones. For the plan to work, everything had to go just right: the regulators needed to approve, and the science needed to work. Neither happened.
It turns out that the cell-phone technology interfered with GPS systems — causing Garmins to direct drivers off the road, and military drones to veer off target. The government, unsurprisingly, rejected Falcone’s plan.
But the point is, those of Falcone’s investors who didn’t want to go along with such a half-assed, risky scheme, had no choice.
Falcone set up what the hedge-fund industry calls a “side pocket.” These are special side deals where investor money gets funneled. When investors’ money is locked up in a side pocket, investors cannot ask for it back. (Technically, they can ask. But the side pocket is constructed specifically to prevent investors from getting money back. Side-pocket money can be locked up for decades.)
The theory behind side pockets is: some deals are very complicated, and they take a long time to come to fruition, and in the meantime, they are completely illiquid. (When an investment is “illiquid” that means it’s hard to sell. If you try to sell an “illiquid” investment in a hurry, you’re going to take a big haircut on its value, and lose money which you wouldn’t necessarily have lost if you were more patient.)
Side pockets are perfectly legal, but they have a well-deserved reputation for being unfriendly to investors. I mean, look, maybe I do want to invest alongside Phil Falcone — he went to Harvard! He was a hockey star! — but, maybe I’m not super-enthusiastic about trying to violate the spirit of FCC spectrum allocation rules, okay? And maybe I don’t want to invest in a Vietnamese casino, when gambling is not yet, you know, legal in Vietnam. (Yeah, that also was in a Falcone side pocket.)
The point here isn’t to make fun of Phil Falcone, whose investment in LightSquared, the telecom firm, went to a value of zero dollars, and who… well, wait, actually, that is the point.
Because in addition to losing my dad’s money in that cockamamie scheme, Falcone was also accused by the SEC of “borrowing” $113 million dollars of investor money to pay his own personal taxes. And also, of trying to manipulating bond prices. Falcone admitted wrongdoing and settled with the SEC.
The little guy in the story, my dad, lost over a hundred thousand dollars in that fund. He lost that money because, even after my father lost faith in Falcone’s investment strategy, and even after my father asked for his money back, Falcone refused to return it.
The “refusing to return investor money” part of the story? That part is perfectly legal, by the way. It’s just the way hedge funds operate. Like it or lump it. You want to play with the big boys? You have to accept the big-boy rules.
I started Collective2 in order to destroy the hedge fund industry. Collective2 is a fully transparent, open, investing-and-speculating platform. We use the internet, and software, to make risky investing more transparent, less subject to fraud, and — frankly — a lot more fun.
Every problem I describe above — Ponzi schemes, valuation games, side-pockets, lock-ups — is eliminated by Collective2.
The first thing you need to know about Collective2, and maybe the only thing, is this:
At Collective2, your money stays in your account.
At Collective2, you never give your money to anyone to “manage.” You never write a check. You never wire money, or deposit it elsewhere. Your money stays in your brokerage account. Period. End of story.
Through the magic of Collective2 software, trading strategies are “executed” within your brokerage account. You choose which strategies get deployed, and at what quantities. You select these strategies by examining hypothetical performance statistics on the Collective2 web site.
Of course this is still risky, and of course you can lose money. But the point is, when you don’t actually hand your money to a stranger, you don’t need to worry about that stranger stealing it. Losing money is one thing. Having it stolen by a crook is something very different. Collective2 eliminates that problem.
The mark of a Ponzi scheme is that the trading strategy which the manager claims to be using isn’t actually being used. Typically, in a Ponzi scheme, no trading is actually done. It’s all imaginary.
Here’s the thing about Collective2. That simply can’t happen. Your money stays in your brokerage account. You can see every trade as it happens.
As it happens.
In real time.
When I speak to industry veterans from the world of hedge funds, and I explain this part of Collective2, they are astounded. “You mean, when I execute a trade, every client sees the trade as it happens? And they can see my strategy’s profit and losses as they happen?”
Are these hedge-fund veterans made uncomfortable by this notion — that customers can see what they’re up to? Perhaps.
Because not only does Collective2 prevent Ponzi schemes (of course it will be obvious when a strategy doesn’t place any real trades, since you can see all trading activity within your account); Collective2 also lets customers understand when “style drift” occurs — that is, when strategy managers promise to trade in one fashion, but actually trade in another.
And because you know how strategies are performing minute-by-minute, you don’t have to wait for your end-of-quarter investor report to receive bad news. You can see instantly that a strategy isn’t working, and can pull the plug that minute.
No wonder hedge-fund veterans grow uncomfortable when they hear about Collective2.
Let’s talk about how this process of “pulling the plug” actually works in practice.
Let’s say you use Collective2, and you choose a strategy, and you decide, after some time, that you don’t really like the strategy you chose.
Guess who you need to talk to? No, you don’t need to place a phone call to a hedge-fund IR representative, asking for your money back. You don’t have to write a certified letter to anyone, begging for a redemption.
You just speak to… yourself. You say, “Dude, this strategy isn’t working so great. Let’s stop.” And that’s it. Maybe you shut off Collective2 completely, or maybe you choose another strategy you like better. It’s your choice. Because it’s your money. And you never have to ask anyone’s permission to stop trading.
The weirdest thing about the hedge-fund industry is how obsessed it is with credentials.
Which isn’t so surprising, when you consider how easy it is for hedge funds to steal investors’ money. And how common it is for hedge funds to defraud investors (recall my father’s personal scorecard: four of the funds my father invested in were fined or shut down by the SEC). Given the prevalence of fraud, perhaps we should not be surprised that investors gravitate toward people with fine “pedigrees.”
But wait. The largest Ponzi scheme in history was operated by a former chairman of NASDAQ.
Phil Falcone, who used my dad’s money to pay Falcone’s personal taxes, and who refused to return the money when asked, went to Harvard.
Which raises the question: What good are credentials, when they don’t seem to mean anything?
In fact, you could make an argument that fine credentials not only are useless, but also are counter-productive. If every investor seeks out only Harvard-educated hedge fund managers, and there aren’t enough of them to go around, then won’t every investor in the world be slicing the same small pie? Won’t everyone be piling into the same conventional trades?
Wouldn’t it be better to seek out strategies operated by people with unusual backgrounds, or with deep experience in vertical industries, or with novel philosophies and ideas?
I mean, look, I wouldn’t write a check to some guy in a Moscow basement, who hasn’t studied in the United States… but, maybe, just maybe, I might use Collective2 to “allocate” a small piece of my capital to him. Because remember how Collective2 works: the gentleman in Moscow can’t access my money, and he can’t abscond with it. All he can do is apply a trading strategy to it. And I can watch every trade as it happens. And so, who knows. Maybe I’ll take a flier on him. Maybe he’ll lose. Maybe he’ll win. But at least I have the opportunity to see how he does.
This is perhaps the most exciting aspect of Collective2. Collective2 is an open platform. Anyone with a strategy can run it on Collective2.
But wait. If anyone can manage a strategy on Collective2, how do you know who is a good manager, and who is not?
Simple. You look at the Collective2 track record. Every trade is there. You can see which investors, if any, followed each trade. (Sometimes trades are not followed by any real-life investors, which of course should make a potential investor more cautious.)
For those strategies that are followed by real capital, you can see how much capital is following each strategy, each trade, each position! You can see which trades were executed at which brokers, at which prices, at which quantities. And of course you can see how well or poorly each strategy has performed overall.
The asset management industry manages over two trillion dollars. No, Collective2 won’t put hedge funds out of business overnight.
But the history of the internet is a story of small firms with big ideas, who somehow overthrow the traditional way of doing things. And if there’s one industry that deserves a bit of overthrowing, it’s hedge funds. Just ask my dad.
The hedge-fund industry is fundamentally broken. Let’s replace it with something better. Something like Collective2.
— Matthew Klein is the founder of Collective2.com
I’m presented with this question a lot.
Actually, “presented” isn’t quite the right word.
The question is not usually “presented” to me.
It is flung — the way dog feces are flung at the neighborhood crank’s house, the night before Halloween.
Sometimes even a friend will muster the courage to ask me the question. It happens usually while he’s drinking, and always with a knowing smirk — the smirk of the high-school debater about to deliver a coup de grâce.
I suppose in this age of Twitter wars and angry Facebook rants, I shouldn’t be surprised when someone comes up to me at a party and suggests that I’m a complete fraud, or that my life’s work is a scam.
But I’m not; and it’s not; and here’s why.
First, some background. Collective2 is the website I started 17 years ago. Think of it as a “poor man’s hedge fund.” (Actually, not so poor; many of the investors who use the site are wealthy and sophisticated by most people’s standards.)
The idea of the site is simple. If you are a good trader, you submit your trades in real time to Collective2 (or simply connect your broker account to us). Then other people can “follow” your trades in their brokerage accounts. Through the magic of software, the trades happen automatically. Followers pay you a flat monthly fee to follow your trades in their accounts.
Collective2 presents the performance, in real-time, of thousands of these trading strategies.*
In other words, Collective2 is a marketplace where trading talent can be bought or sold. Collective2 acts as a trusted third party which verifies the performance data of strategies on its platform.
That’s the question, then, isn’t it?
If you create a good trading strategy, why let other people use it for a modest amount of money (typically, strategy creators ask for between $100 and $200 per month), rather than keeping it all to yourself?
Actually, there are several reasons.
First, let me point out the obvious. If you’re going to be snarky and accusatory about Collective2, you might as well set your sights a bit higher.
The same question can be asked of virtually the entire financial industry. Why do top-tier hedge funds accept investor money? If the guys at Two Sigma are so smart (and they are), why don’t they just trade their own money from an unmarked building in Soho? Why go through the hassle of raising capital from investors?
Or more broadly, why have mutual funds? Why run a bond fund? If Bill Gross is such a genius (and he is), why does he bother accepting investor money, and suffering the indignity of annoying questions, or unfortunate P.R.? Why not trade his own private capital from his house in Laguna Beach, and when people ask him what he does for a living, he can just say, “I’m a beach bum. I don’t do anything.”
The answer is: leverage (people want more of it) and risk (people want less of it).
Even Masters of the Universe don’t have infinite cash sitting around. After all, many Hedge Fund Titans live in New York City: there are co-ops to buy, kids to private-school, restaurants to patronize. If you are a managing director at a top-tier hedge fund, and you have a million dollars in the bank, ready to invest, which would you prefer: to earn 20% on your money? Or 30%?
Letting other people invest alongside you, and making money on their money, is a form of leverage. (For those not fluent in finance: leverage means using borrowed money to make more money.) Leverage isn’t always a good thing, of course (you can lose more, too) — but if you have high confidence in your trading ability, using leverage can be a wise decision.
So too in the world of Collective2. No one offering a strategy on C2 is a Hedge Fund Titan — not yet, anyway — and so we’re not talking about the same order of magnitude. But listen, if you are a competent trader, and you have $100,000 sitting in your brokerage account, ready to trade, which would you prefer: to earn 20% on your money? Or 30%?
The mechanism through which leverage is achieved is different on Collective2: no one is allowed to collect “management fees” or “performance fees”; that is not permitted under U.S. regulations. Rather, your customers subscribe to your trading information, and pay a flat monthly fee to receive your buy/sell signals, win or lose.
But the effect is the same. Imagine you are a good trader, and you think that, without Collective2, you can earn 20% each year on your $200,000 trading nest egg. Now imagine that putting your strategy on Collective2 lets you earn an extra $5,000 each month in subscription fees from your followers. That’s the equivalent of another 30% on your capital. Sure, there’s no guarantee you will earn that, but if you build a good track record on Collective2, you can earn that much, and more. (As I write this, a popular strategy developer on C2 is earning more than $15,000 each month from subscriber fees.)
So, just like a Hedge Fund Titan — or just like a mutual fund manager — you can gain “leverage” on your own dollars by opening your strategy to the public.
Allowing outside investors to trade alongside you, and pay you a fee, also reduces your risk. Let’s be honest about that. A typical hedge fund charges “2-and-20” — which means they charge an investor a fee of 2% of the money invested with them, plus 20% of the investor’s profits. That 2% is charged no matter what — whether the fund wins or loses. It’s called a “management fee,” and in theory it’s meant to cover fixed expenses that happen every month at a hedge fund, no matter what: you know, rent, administrative assistants, legal and accounting, blow.
But money is fungible, and what you pay with one set of dollars is something you don’t have to pay with another set of dollars. One way to think of that 2% management fee is as a risk-reduction cushion. If trading doesn’t work so well in one month, you still get your 2%. When you’re managing a billion dollars, that’s a nice chunk of change.
Now, listen, if you stink up the place six months in a row, most investors will flee and take their 2% management fee with them. But you’ll get a bit of leeway — more so if you have a long and distinguished track record behind you. That leeway reduces your risk. That’s what you gain by offering your strategy to other people, instead of just trading it alone.
And again, the same incentives that exist in the hedge-fund world exist on Collective2. You sell your strategy for, say, $150 dollars each month. Get 20 subscribers, and that’s gross revenue of $3,000 each month, which comes in regardless of whether you win or lose in any given month. Just as in the hedge-fund world, your subscribers won’t stick around if you lose money, month after month. (And just as in the hedge fund world, you’ll be given a longer leash if your track record is more substantial.)
So, in addition to increasing leverage, putting your trading strategy on Collective2 reduces your personal risk by some small, but non-trivial, amount.
So far, I’ve discussed the financial reasons why a legitimate, talented trading-strategy creator would put his or her trading strategy on Collective2. But there’s another reason, which is not related to money, but, rather, to career development.
Finance is a hard industry to break into. We’ve all read about the glamorous life of hedge fund managers, but how exactly does one go about getting a job at a hedge fund? You don’t fill out an application online, and — truthfully — unless you go to a top-five American university, you won’t see the face of a recruiter at your annual career fair.
I’ve already written about how stupid hedge-fund hiring practices are. But indignation won’t change the world. The fact is, it’s ridiculously hard to get a job at a hedge fund, and in finance in general, and probably always will be.
But there’s one thing “finance people” respect, and that’s money. Prove you can make it for them, and it doesn’t matter one bit whether you went to Harvard or Pomona State. Money talks.
Collective2 lets you build a public, verifiable track record. It’s out there, for everyone to see. Remember: on Collective2, your can’t claim in March that you woulda, coulda, shoulda bought Apple stock back in January. You have to make your buy or sell calls at the time they occur. Collective2 will publish your results. No matter what. Your track record is your track record.
Running a public track record, with other people’s money at stake, is a different beast than sitting alone in your room, wanking your own tiny brokerage account. The pressure makes some people crack. I’ve seen it happen at Collective2: a strategy manager is trading well, starts acquiring his first few paying subscribers, and then… he loses his mind. He just can’t take the pressure of having to perform publicly.
So that’s the non-pecuniary reason that you can find good trading strategies on Collective2. Some people share their strategies with the public for reasons other than money: they are building their career, buffing their resume, trying to break into the business.
For all these reasons, there is always a possibility of finding a good trading strategy on Collective2. Nothing is guaranteed, of course. You can lose money as well as win. But if you’re looking for an alternative to the same old same old investing opportunities, come on over.
* We label Collective2 results as “hypothetical” because (among other reasons) there is no single broker account that looks exactly like the results posted on our site. Even if a trading strategy is followed by live investors in real-life broker accounts, or is driven by the strategy manager’s own live broker account, everyone following a strategy can have different results, based on factors such as individual broker used (we work with many), when investors start or stop trading, how large or small they make their trades, whether they use stop losses, etc. And, finally, in many cases, strategies on Collective2 are not followed by real life broker accounts at all — this is particularly true for newer strategies that have not yet gained subscribers — and so results presented in these cases are based purely on simulated real-time prices, and these simulations have many inherent limitations. So, you know, caveat emptor.