According to a recent survey published by THE TRADE magazine, financial institutions are using trading strategies developed by a third party for reasons including the following:

1. Access to Specialized Expertise:
   Third-party developers often have niche expertise (e.g., quantitative research, AI models, alternative data), allowing institutions to quickly integrate sophisticated strategies without building them in-house.

2. Cost and Time Efficiency:
   Buying or licensing a proven strategy is often faster and cheaper than developing, testing, and validating a new one internally, especially when time-to-market is critical.

3. Performance Diversification and Edge:
   Incorporating externally developed strategies can offer uncorrelated alpha sources or unique trading edges, helping to diversify risk and improve overall portfolio performance.

Therefore, financial institutions are in constant need of trading strategies with provable success, such as positive Alpha and an attractive Sortino ratio. Without such strategies, there is a risk of losing customers and therewith the AUM (Assets Under Management); a few examples of the risks manifesting are contained in these case studies:

• Clarium Capital: Founded by Peter Thiel, Clarium Capital's AUM peaked at $7.8 billion in mid-2008. However, following consecutive annual losses of 4.5% in 2008, 25% in 2009, and 23% in 2010, investors withdrew funds, reducing AUM to approximately $350 million by 2011.  
• Amaranth Advisors: This multi-strategy hedge fund suffered over $6 billion in losses on natural gas futures in 2006. The significant losses led to rapid investor redemptions, culminating in the funds’ collapse.  
• Melvin Capital: During the GameStop short squeeze in January 2021, Melvin Capital incurred losses of 53%, amounting to $6.8 billion. These losses resulted in a 49% decline in AUM in Q1 2021. Despite attempts to recover, the fund closed in June 2022.