A Fund vs. Your Own Money

$100 AUM

2% MNGT fee= $2m

12 R.O.I. = $12M

10% of that = $1.2M

= $3.2M - $1.0 - $1.5 M Expenses = $1.7M+

Slim margins...but doable I guess. Anything less than $100M AUM
wouldn't be worth it.

As for the "free time " and stress...that's not true. I'd sleap a lot better at night running a real biz then trading my own small acount.

You would have premises, staff.....so you could be flexible with your time..like any other bizz. But the day trader trading his own account has the worse job in the word, I.M.H.O. Wher'es the flexibily in that?
 
I've heard that was sooo pre 2007? More like 2/10 nowadays?

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think you mean 2/20 and 2.9M?
 
Quote from chipmunk:

A.U.M. R.O.I. 2/10% profits
$100M 12% $4.4M - $1.5M exp.: $3.9M

$10M 25% $700,000 - $60,000 exp = $640K
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I was referring to the math above.
2/10 @ 100M 12% = 2+ 1.2 = 3.2 - 1.5 = 1.7.
2/20 @ 100M 12% = 2 + 2.4 = 4.4 - 1.5 = 2.9 (not 3.9)

Not making a statement about what fee structure you should expect. Though now that you asked... I would rather take 1/20 than 2/10, unless of course I expected to return less than 10% which would be the crossover point. But then I have no idea why investors would have interest in that structure
 
Quote from chipmunk:

I've heard that was sooo pre 2007? More like 2/10 nowadays?

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think you mean 2/20 and 2.9M?
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Hard to imagine anyone working for 2/10...

I guess I'm in the minority, then, since everyone else seems to hate trading OPM. I personally enjoy it, even at far below $100mm AUM, and it's a nice supplement to my own trading income. The startup process is definitely challenging, which is precisely why trading your own money is a very nice *complement* to trading a fund.

I started with a couple million of my own money, and very slowly grow that the first 2 years... during those early years, fees from OPM probably didn't even cover startup expenses. So, again, it's a good thing I was trading my own money as well.

But now I have tripled AUM over the past year to ~$15mm. If my historical returns hold up, I'll make as much from managing OPM as I do from investing my own funds. So, I see that as a very good thing... I'm doubling my returns on gains.

I personally also enjoy the "work" involved in running OPM money. I see my relationship with my investor as a cooperative one, and I genuinely thank them for the opportunity. But I also make it clear that any investment I take is very optional, from my point of view; I'm doing them a favor, not the other way around. I've rejected more than one investor, and I've even told existing investors to take their money out, if they rub me the wrong way.
 
Quote from heech:

Hard to imagine anyone working for 2/10...

I guess I'm in the minority, then, since everyone else seems to hate trading OPM. I personally enjoy it, even at far below $100mm AUM, and it's a nice supplement to my own trading income. The startup process is definitely challenging, which is precisely why trading your own money is a very nice *complement* to trading a fund.

I started with a couple million of my own money, and very slowly grow that the first 2 years... during those early years, fees from OPM probably didn't even cover startup expenses. So, again, it's a good thing I was trading my own money as well.

But now I have tripled AUM over the past year to ~$15mm. If my historical returns hold up, I'll make as much from managing OPM as I do from investing my own funds. So, I see that as a very good thing... I'm doubling my returns on gains.

I personally also enjoy the "work" involved in running OPM money. I see my relationship with my investor as a cooperative one, and I genuinely thank them for the opportunity. But I also make it clear that any investment I take is very optional, from my point of view; I'm doing them a favor, not the other way around. I've rejected more than one investor, and I've even told existing investors to take their money out, if they rub me the wrong way.
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15 mil is nice amount, congratu. Seems after all your investors liked the high sharpe..:(
 
0/30 swing for huge gains..Big drawdowns but big pay days.


Even at $7m... year 1 -25% Feed then B*S*...keep collecting funds.

Year 2: +70% = $1.47m+ for you.

Year 3: Flat.

Not a bad way to do it.
 
and your R.O.I. in 2012 was?

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I personally also enjoy the "work" involved in running OPM money. I see my relationship with my investor as a cooperative one, and I genuinely thank them for the opportunity. But I also make it clear that any investment I take is very optional, from my point of view; I'm doing them a favor, not the other way around. I've rejected more than one investor, and I've even told existing investors to take their money out, if they rub me the wrong way.

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I agree with what you said...I can't work out why many hate the thought of managing O.P.M.

But you aren't managing large Inst. money this way for sure. H.N.W. But it's way to be in both "camps" and if oit works for you good for you.
 
Nice if you have got it.

If i had $2m I wouldn't be chasing O.P.M. to manage..in fact I'd retire.
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I started with a couple million of my own money,
 
Quote from macintash:

15 mil is nice amount, congratu. Seems after all your investors liked the high sharpe..:(
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Ha!

Unfortunately, not really. My Sharpe has been pretty consistently high. It was over 2.5 for my first year, and then dipped to something around 1.6 for my second year (cumulative since beginning)... and for the last year has stabilized around 1.9.

In my first year, with a pretty attractive Sharpe and no real draw-downs (and I thought a good "quant" story)... I tried going to a few larger hedge fund conferences. (Plunking down average registration fees of around $3k-5k.)

General responses were:

1) we don't chase performance.
2) we aren't interested in quant strategies.

I don't think I walked away with ANYONE remotely expressing interest... so that was extremely disappointing. It's really taken a lot of time to gradually build up credibility. (One guy who I exchanged business cards with at the first conference eventually got in touch again in year 3, and got me an investor for $200k.)
 
But you aren't managing large Inst. money this way for sure. H.N.W. But it's way to be in both "camps" and if oit works for you good for you. [/B]
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I agree, not likely I'll be accepting investment dollars from pension funds any time soon. But I mean, that *really* is a different can of worms from a business point of view...

My investors are currently smaller fund of funds + HNWI. And I think that population can get me to a couple hundred million. Won't get me to billions, but my strategy would be max'ed out long before then, anyways.
 
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