Can someone explain the difference between a CTA and single member CPO? Is it just in the pooling of funds vs. separate accounts? My understanding was that CPOs distribute funds to different CTAs, who in turn do the actual trading/investing. What sort of documentation does one need to become a CPO as opposed to a CTA?
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CPO startup
- Thread starter RockMachine
- Start date
I agree with you completely. That is the reason I asked if any know any CTA/CPO/HF manager who can deliver this!
Any one?
Returns like this are unrealistic and I would run the other way if someone presented it to you. Over the short term possibly Victor Neiderhoffer? Long Term capital? = Mean reversion strategies that actually believe the efficient market hypothesis.
There are several of pools/cta's that have option selling strategies that work more often then not, however when they stop working they tend to blowup.
Or possibly a fund that has large exposure to illiquid securities with wide spreads like SPACS
Amaranth
I think if you have an appetite for risk then allocate a small portion of your portfolio 10%?
Any one?
Returns like this are unrealistic and I would run the other way if someone presented it to you. Over the short term possibly Victor Neiderhoffer? Long Term capital? = Mean reversion strategies that actually believe the efficient market hypothesis.
There are several of pools/cta's that have option selling strategies that work more often then not, however when they stop working they tend to blowup.
Or possibly a fund that has large exposure to illiquid securities with wide spreads like SPACS
Amaranth
I think if you have an appetite for risk then allocate a small portion of your portfolio 10%?
avg. margin to equity comes out around 12% over historical testing. My actual number as of today is 11.8%. Up 80% max dd 27% ytd. audited. Going to launch my CTA and Pool by August. Although there is a lot of paperwork etc.
Just in case you might happen to encounter a drawdown one day, I recommend you keep expenses low enough so your business can survive on the annual fees alone (i.e. the "2" part of 2-and-20). You might hit a period where you're below the HWM for 9 or 12 consecutive months, and not earning profit incentives (the "20" part of 2-and-20) at all. It may not have ever happened in historical testing, but it might happen in the unpredictable and capricious future. Wouldn't it be a shame if you lost your business because of a plain old drawdown?
It's a fairly simple calculation. Tote up your fixed costs, the expenses you've gotta pay no matter what. Divide by your pool-wide average annual fees (which will be less than 2% because you will give discounts to some investors) and that's the minimum AUM to meet your nut.
For example, these might be a CPO's fixed costs. You'll notice that I omitted office rental costs(!):
Assume in this example that half of the CPO's AUM pays 2% annual fees and the other half negotiated a discount, to pay 1%. The pool-wide average annual fees are 1.5%. So this example CPO would need 75700 / 0.015 = $5.05 million under management, to break even, when below the High Water Mark and not receiving profit incentive income.
It's a fairly simple calculation. Tote up your fixed costs, the expenses you've gotta pay no matter what. Divide by your pool-wide average annual fees (which will be less than 2% because you will give discounts to some investors) and that's the minimum AUM to meet your nut.
For example, these might be a CPO's fixed costs. You'll notice that I omitted office rental costs(!):
- Annual Audit: $8000
Annual NFA membership: $1000
Accounting statements: $9600 ($800/month)
Legal, for D-Doc updates: $1000
Data feed: $3600 ($300/month)
Tax prep and K1s: $4500
CPO (your) salary+incometax+SocialSecurity: $48000 ($4000/month)
Assume in this example that half of the CPO's AUM pays 2% annual fees and the other half negotiated a discount, to pay 1%. The pool-wide average annual fees are 1.5%. So this example CPO would need 75700 / 0.015 = $5.05 million under management, to break even, when below the High Water Mark and not receiving profit incentive income.
Quote from MGJ:
Just in case you might happen to encounter a drawdown one day..
Fortunatley I socked away enough to live comfortably for a few years. Actually my plan after leaving Wall Street was to just trade my own money. However after talking to friends they convinced me to start a CTA/ Pool. Unfortunately funds feel special when they manage other peoples money, they can look you straight in the eye and say "Although negative, we outperformed the market". No wonder that the average Hedgefund lasts 5 years.
I think theres plenty of room out there for someone who's got talent and knows how to treat his most valuable assets.
avg. margin to equity comes out around 12% over historical testing. My actual number as of today is 11.8%. Up 80% max dd 27% ytd. audited. Going to launch my CTA and Pool by August. Although there is a lot of paperwork etc.
mer 12%
ytd up 80%
mdd 27%
This is outstanding.
How often you trade per tradable per YEAR?
How many tradables you trade?
How much money under management toi generate such return?
Thanks,
Quote from 88888888:
Backtesting over last 25yrs while adjusting leverage I get returns of 26.3% max dd of 13.5
What is your definition of "max dd"?
Per trade?
Peak to valley per end of month?
Peak to valley per end of day?
Peak to valley per intraday?
Are you NUTS! Why don't you ask for a "peak-to-trough drawdown" per heart beat?
Monthly results are a picture of each 22 trading days of activity. Even that is delving into the minutiae. Are YOU required in your job to have your performance audited every 22 days? Intraday? Jesuschrist...