Considering starting a small hedge fund good idea? bad idea? advice?

Quote from cooolweb:

whats the point? increase your capital in play.
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With your situation, I can think of only two reasons to let others in. Social capital, and economies of scale. I'm not in your range, so I can't speak to the social capital benefits. However, the strategies I prefer, I believe, would suffer rather than benefit from large scale.

Sounds to me like you are in a good place.
 
Quote from HowardCohodas:

With your situation, I can think of only two reasons to let others in.
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With his situation, he needs to be buying more peanuts for the circus elephants so that they don't trample his clown ass.
 
Quote from Hydroblunt:

With his situation, he needs to be buying more peanuts for the circus elephants so that they don't trample his clown ass.
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hows paycheck to paycheck life?
jealous with envy i see :D

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let me give u a small descrip of my daily life,
wake up @ 10, get fucked by the girl, go out @ 12 with friendsfor mexican lunch, 3pm workout, 4pm, meet up with another girl, fuck her, 6 pm get a massage, 9pm premarket homework, 10pm put on a trade, 11pm late night snack

week after = 50-80k NET++ in theaccount

================

puts your free time to shame, the coffee break u get in between shuffling papers like a bitch




back to work fag! harharhar , I'd laugh in your face in real life, and u know it'll hurt.,
 
Quote from cooolweb:


let me give u a small descrip of my daily life,

wake up at 10pm because the dog wants his bed back, masturbate, go to the mexican stand @12 and split a taco with the neighborhood bums, 3pm run from the cops after stealing from the 99cent store, 4pm masturbate again, 6pm massage some pervert's balls for a dollar, 9pm show up the library and try to annoy the children using the library PC, 10pm go on elitetrader, 11pm eat some dog food

week after = Still a total degenerate loser whose biggest accomplishment is being a subpar troll on www.elitetrader.com
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Thanks for the laughs, clown.
 
Quote from lazar206:

Not more the 10% of my portfolio is in a single stock, I hate having a lot of exposure to a single stock because any single stock can go to zero (remember Lehman, GM, etc.). While I began 2009 buying preferred shares from a whole spectrum of banks, I have added MBS and A- rated bonds at the end of 09 to enhance the return. In the middle of this year I have started selling out of the money long term options which I expect to expire worthless (they are trading now 70% lower then when I sold them.) I know that to do well you need to keep refining your strategy, and so far so good. ( BTW I own 20 shares of apple in my portfolio..)
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i wouldnt start a HF because of this post..
and if you do no one will invest..

you show signs of excessive risk taking.. low diversification and trade counter flow of the market
 
Quote from nukethewhales31:

i wouldnt start a HF because of this post..
and if you do no one will invest..

you show signs of excessive risk taking.. low diversification and trade counter flow of the market
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Thanks for your comment; can you please explain why you think I am taking excessive risk and low diversification? My account value is pretty stable (now standing at 550k) and has had appositive return for 8 of the 9 last quarters. My portfolio includes the following; S&P 500, Emerging market index, preferred shares, technology, MBS, Municipal bonds, some closed end funds, and some options and pharmaceutical companies. My strategy is usually buy and hold for a year or more. I would love to hear where do you see that I am taking excessive risk? (By the way I have some people that seem to like my performance and are really considering investing thru my fund).

Thanks
 
Quote from lazar206:

Thanks for your comment; can you please explain why you think I am taking excessive risk and low diversification? My account value is pretty stable (now standing at 550k) and has had appositive return for 8 of the 9 last quarters. My portfolio includes the following; S&P 500, Emerging market index, preferred shares, technology, MBS, Municipal bonds, some closed end funds, and some options and pharmaceutical companies. My strategy is usually buy and hold for a year or more. I would love to hear where do you see that I am taking excessive risk? (By the way I have some people that seem to like my performance and are really considering investing thru my fund).

Thanks
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hey,

I deal with a multitude of funds in my business and see these pitches everyday.. I dont want to shoot down your ideas of opening a fund.. so dont think that I am. but here are some of the main problems I see with the idea of you being funded by more than friends and family..

generally you do not want friends and family to be vested in your fund.. especially as an newly formed fund with limited track record..

from the pitch on here you said.. nothing more than 10% in one vehicle .. generally max interest in one vehicle would be less than .3% of the entire portfolio.. and would be globally diversified not using an global etfs or emerging market etfs or passive indexing but actual diversification into global markets.. if you dont have a clearing firm lined up where you can buy off TSX/ASX/DAX/ etc... then you are at a disadvantage.. from calculating a lower cost basis than what aapl is at now @ 20 share the portfolio is heavily weighted into aapl at near 1%.

its also best to leave the more risk enhancing and hedging strategies alone while establishing the portfolio and investors as you dont want to show signs of nonproper hedging and excessive risk taking.

also the fund needs to grow in relation to the cash/equity fluctuation as a pair.. for example it look likes some funds are increasing wealth when they are not or if they are its extremely small..

to handle a load like this you need a team of trained traders..
 
Quote from nukethewhales31:

.. generally max interest in one vehicle would be less than .3% of the entire portfolio..
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I'm no expert, but I really don't think 0.3% in any one interest is some kind of industry standard. That sounds excessively over diversified, especially for a hedge fund. Many hedge funds I know take far larger single positions than 0.3%..
 
Quote from Trader KGB:

I'm no expert, but I really don't think 0.3% in any one interest is some kind of industry standard. That sounds excessively over diversified, especially for a hedge fund. Many hedge funds I know take far larger single positions than 0.3%..
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industry standard no.. but its around that number first off hedge funds should have access to more markets
hedge funds should be buying in global and emerging markets so breaking it up ill list a basic standard set of markets
china
australia
brazil
argentina
south africa
canadian
south korea
new zealand
indian

to name a few .3% give 300 trades to full exposure average of 30 trades or so in each market to gain global exposure

excessive over diversification leads to low profits.. generally what happens when diversification occurs is an increase of performance as a function of risk.. if you take a profit:risk ratio and decrease both but drop risk faster than profit through diversification .. you can leverage into enhancing profits.. and keeping risk relatively low.. if not lower through enhancement of leverage diversification.

this is a funds job to create enhanced profit and reduce risk. 10% of funds portfolio in one thing is not managing risk.. 5% in one is not managing risk. altho you do need to weight costs against it..
 
There is an old saying about leaving well enough alone...if you are doing well trading your own account then why is there a need to change that model? I see many folks doing well at what they do, but then they get greedy and decide to make a drastic change only to fail.

Sometimes change is not a good thing. Sometimes it is best to leave well enough alone and be comfortable with what you have. While there are many stories of success, there are also stories of failure and wreck. Actually, there are are far more stories of failure then success...you just dont hear the stories of failure. Not many people come out to say they failed at something. Instead, they brush it under the carpet and never mention it again. However, if they succeed then you never hear the end of it.

So I say to leave it alone and keep going with the existing system.

Some other cool key phrases:
"If it ain't broke, dont fix it."
"Never change a running system."
"Dont change something that is working."
 
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