Understanding the mindset of an Investment Firm

An investor, experienced finance professional and good friend asked me once over lunch in Brickell Avenue:

“Carlos, What is the activity you invest the most in as part of your day to day job as Chief Investment Officer of a Crypto Hedge Fund?”

Like a knee jerk reaction, two words came out of my mouth right away: “Risk Management!”

I know it is not the answer the typical seasonal investor in crypto may be expecting but its certainly the only acceptable answer for him.

No hay texto alternativo para esta imagen

When I explained to him that 60% of my time is based on the magic Three task in Investment, he immediately relaxed and replied back: “That’s what savvy investors are expecting from you!”

Now, what are these three critical task that if they are performed continuously on every single investment decision, the chances of success increases dramatically?

They are very basic really:

1)   Determine the risk level of every trade, investment of position (long or short),

2)   Determine the Expected return of that move and,

3)   Put those two results into the Risk Matrix – Efficient frontier tandem tool.

I am not going to expand in this article on how you should calculate the Risk and the Expected return of an investment but I will say this: “no investment move should be made (even if it is based on a hunch) if you don’t know the risk reward relationship of it.

How does that compare the expected return with the respective level of risk of that investment when you benchmarked against an equivalent alternative?

No investment should be allowed if its ratio is located below the efficient frontier.

There are endless differences between a financial company, a service company and a manufacturing company, but there is at least one thing in common.

The chances of success are based on the compound effect of small but continuous business decisions.

How does that affect you as a Project Funders asking for funding for your startup?


Make sure that you include in your pitch deck a clear selling point of why your project is located on or above the efficient frontier.

And if you can prove it and back it up with good data and information, I can guarantee you that the YES are going to start flowing towards you.