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This is a good question! Some possible answers - 1. Infrastructure that is too expensive or too hard to build yourself (eg colocation, low latency data feeds, compute clusters, fpgas) 2. Data that is too expensive or simply impossible to buy (eg historical tick data)https://twitter.com/mobile_mm/status/1373427747901542402 …
3. Scale. Say you have $100k in your account. If you are willing to have 30% annual vol and Sharpe 2 you can make $60k in your first year, $96k in your second year, $150k in your third year (minus data and infrastructure costs of course).
If you trade for a hedge fund you maybe get a 15% cut and a $50m allocation with 5% annual vol so you make $750k ($50m x 5% x 2 x 15%) in your first year (minus data and infrastructure costs).
4. Downside risk. Say you have a 1x vol drawdown in a given year. In your personal account this is a loss of 30% of your capital, and you still need to eat and make rent. At a hedge fund you probably get fired but you still make your $150k salary and you can look for a new job.
5. Track record. If you have ambitions to launch a fund, your current employer may help you with the set up, seed you and audit your track record for prospective investors. If you have been trading your PA all this is much harder.
6. Ops and back office. If you work for a fund they probably provide you with IT and hardware support, a risk system, pnl tracking, maybe trade execution and position management (rolling futures, handling dividends, stock splits, delistings etc) which you do yourself otherwise.
7. Market access. Some strategies require leverage and shorting, both of which are hard and expensive to access in a personal acct but easy and relatively cheap for a fund/prop shop with good broker relationships.
scale #2, for listed securities and especially futures / options: rounding to lot sizes at small size will (adversely) affect actual vol and risk profiles. positions will be either undersized (round towards zero) or oversized (round away from zero) on positions at small size.
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