Advice on Staring a Hedge Fund

[Vinny1]

What licenses do you need to start a hedge fund? Do you need a Series 7 or any other licenses?

Do hedge funds cold call institutions to raise money? With the do not call lists, I would imagine that they are not cold calling individuals. It must be extremely difficult to raise money for a new hedge fund.

 

[heech]

I'm not specifically encouraging the OP, since clearly he's *very* early in the process. But what you said about requiring I-banking or financial industry experience is nonsense, and provably false.

I will say though, this is clearly a career. The skill-set required is far more than clicking buy/sell and having opinions on market prices.

 

[intradaybill]

Quote from heech:

I'm not specifically encouraging the OP, since clearly he's *very* early in the process. But what you said about requiring I-banking or financial industry experience is nonsense, and provably false.

I will say though, this is clearly a career. The skill-set required is far more than clicking buy/sell and having opinions on market prices.

There are many details you have to be aware of, for setting up and running a hedge fund, from custodian requirements to accounting and reporting, to maintining records. This person seems not to be aware of those details, or underestimates their importance, otherwise he would not be asking. The best way to start a hedge fund these days is to present a solid record with a minimum of 500K initial capital for 3 years to another hedge fund and try to get them to spent the money to start a sub-fund and use their operations. Then, if you grow above 10 Million that is the break point that it is feasible to start your own.

Now, if you think you can go in construction of houses because you renovated your bedroom, it is fine with me. Go ahead if you think I am wrong. Hedge fund is a serious business. You can get into a lot of trouble if you take it lightly.

 

[heech]

Quote from intradaybill:

There are many details you have to be aware of, for setting up and running a hedge fund, from custodian requirements to accounting and reporting, to maintining records. This person seems not to be aware of those details, or underestimates their importance, otherwise he would not be asking. The best way to start a hedge fund these days is to present a solid record with a minimum of 500K initial capital for 3 years to another hedge fund and try to get them to spent the money to start a sub-fund and use their operations. Then, if you grow above 10 Million that is the break point that it is feasible to start your own.

Now, if you think you can go in construction of houses because you renovated your bedroom, it is fine with me. Go ahead if you think I am wrong. Hedge fund is a serious business. You can get into a lot of trouble if you take it lightly.

This position I can get behind: hedge fund is a serious business.

But I emphasize again that it's perfectly possible to succeed in this industry without having an "i-banking" background. Everything can be learned and/or outsourced as needed. There's nothing magical here, and investors respect returns and competency as much as they respect pedigree.

 

[lasner]

Quote from intradaybill:

There are many details you have to be aware of, for setting up and running a hedge fund, from custodian requirements to accounting and reporting, to maintining records. This person seems not to be aware of those details, or underestimates their importance, otherwise he would not be asking. The best way to start a hedge fund these days is to present a solid record with a minimum of 500K initial capital for 3 years to another hedge fund and try to get them to spent the money to start a sub-fund and use their operations. Then, if you grow above 10 Million that is the break point that it is feasible to start your own.

Now, if you think you can go in construction of houses because you renovated your bedroom, it is fine with me. Go ahead if you think I am wrong. Hedge fund is a serious business. You can get into a lot of trouble if you take it lightly.

Agreed....Again don't misunderstand what I'm saying. I'm not looking for a major operation in three years or even five years. I'm looking at this as a long term learning process. For me it's fun it's something I enjoy. If it doesn't blow up and get successful oh well...at least I can still trade my own account and maybe a couple of friends.

It's funny I just got everything set up at interactive brokers. They do have a great platform. I just formed my LLC and I'm not technically a CTA but have an unregistered CTA account with them. Once I hit close to 15 clients I'm going to register with the NFA and convert the account into a registered one.

Like I said I want to start as a CTA and grow into a CPO. Yes this will be a huge learning process.

 

[startraitor]

Even if you are exempt you still need to register with the cftc, crazy isn't it?

Quote from lasner:

Agreed....Again don't misunderstand what I'm saying. I'm not looking for a major operation in three years or even five years. I'm looking at this as a long term learning process. For me it's fun it's something I enjoy. If it doesn't blow up and get successful oh well...at least I can still trade my own account and maybe a couple of friends.

It's funny I just got everything set up at interactive brokers. They do have a great platform. I just formed my LLC and I'm not technically a CTA but have an unregistered CTA account with them. Once I hit close to 15 clients I'm going to register with the NFA and convert the account into a registered one.

Like I said I want to start as a CTA and grow into a CPO. Yes this will be a huge learning process.

 

[Now is Now]

Quote from lasner:

Agreed....Again don't misunderstand what I'm saying. I'm not looking for a major operation in three years or even five years. I'm looking at this as a long term learning process. For me it's fun it's something I enjoy. If it doesn't blow up and get successful oh well...at least I can still trade my own account and maybe a couple of friends.

It's funny I just got everything set up at interactive brokers. They do have a great platform. I just formed my LLC and I'm not technically a CTA but have an unregistered CTA account with them. Once I hit close to 15 clients I'm going to register with the NFA and convert the account into a registered one.

Like I said I want to start as a CTA and grow into a CPO. Yes this will be a huge learning process.

And then there is that little matter....Series 3 and 34 (forex)...



NiN

 

[poyayan]

If lasner has performance and investors backing him already, whether he has i-bank experience or not does not matter. He can either pay someone to figure that out or he can figure it out himself slowly. His performance will be the only reason why he is a fund manager or not.

 

[lindq]

Quote from lasner:



If anyone has any good advice is would appreciated....Thanks

Before you even think about any type of fund, get the experience of trading for even one other investor. Doesn't matter if it is friend, family or business associate...so long as it is someone other than yourself.

The experience of trading OPM is MUCH different than being answerable only to yourself for your trading. You may find it isn't something you can handle, or want to handle.

 

[heech]

Quote from lindq:

Before you even think about any type of fund, get the experience of trading for even one other investor. Doesn't matter if it is friend, family or business associate...so long as it is someone other than yourself.

The experience of trading OPM is MUCH different than being answerable only to yourself for your trading. You may find it isn't something you can handle, or want to handle.

I don't necessarily disagree with you... and I've heard your message numerous times from other people.

In my case, I actually found it MUCH more difficult managing *family* money than investor money. I've found the "professional" investors tend to be realistic about risk/reward, and let me do my thing. I don't feel a heightened sense of stress at all.

On the other hand.... no matter how I tried to ground the expectations of family investors, my feeling is they never quite get it. In fact, I've kicked out most of my family investors at this point (by telling them their risk tolerance isn't a good match).