You can use your models to trade your own funds (that's what Simons -- the guy behind Renaissance -- did), but it's probably not worth it. Imagine that you're good enough to beat the market by 500 basis points: you earn 15% per year when the market does 10. Investing your own retirement funds, and starting at 100K, you'll end up just about doubling your money in five years.
Hedge funds typically charge 20% of profits and 2% of assets. Let's say you spend your $100K paying a lawyer to incorporate you, and you take a year off to raise your first $5 million. Over the next four years, your earnings would start at $250K for year two, and hit $332K by year five. Even accounting for the missed year, the earnings from starting a hedge fund would be an order of magnitude higher than those from running your own money.
This is obviously simplified (I'm ignoring taxes and inflation, which if nothing else will get me dirty looks from my fellow libertarians), but it should illustrate why so many PhDs are getting rich running money for second-generation MBAs.
Hedge funds typically charge 20% of profits and 2% of assets. Let's say you spend your $100K paying a lawyer to incorporate you, and you take a year off to raise your first $5 million. Over the next four years, your earnings would start at $250K for year two, and hit $332K by year five. Even accounting for the missed year, the earnings from starting a hedge fund would be an order of magnitude higher than those from running your own money.
This is obviously simplified (I'm ignoring taxes and inflation, which if nothing else will get me dirty looks from my fellow libertarians), but it should illustrate why so many PhDs are getting rich running money for second-generation MBAs.