CTA Startup

[Aaron]

Quote from SuperVolatility:

Aaron,
I thnk you work from your home office.

funny question - if you trade from home...did you ever had to meet with customers face-to-face and if yes...where did you meet with them..at home?

Sure, if people are interested in coming here, I'm more than happy to welcome them. I've hosted both individual and institutional investors for a conversation and informal presentation around my dining room table or over coffee on the deck. NFA auditors also set up camp for a few days in my dining room when they do their audit.

I've also had meetings at the investors' offices. Or Starbucks and Panera Bread are good places for meetings. Mid-morning or mid-afternoon they are usually pretty quiet. Lunch meetings at a restaurant are good, too.

 

[nihao1234567890]

Quote from Aaron:

....... NFA auditors also set up camp for a few days in my dining room when they do their audit .......

How many days for the audit?

 

[Aaron]

It was four people from NFA's Chicago office for 2-1/2 days. Lots of requests to see investor subscription documents and financial records.

They had a few small suggestions to be better in compliance but found no big issues.

 

[heech]

Aaron,

I don't mean this as a criticism as all... but genuine curiosity.

My attorney is apparently extremely conservative from a legal point of view. He keeps advising me that in order to keep from violating Reg D for my CPO, I basically need to keep my mouth shut in all public forums about the fund in all public contexts, including mentioning returns. Any sort of information could be construed as "advertising" for the fund.

This isn't a CFTC issue, because I understand I can disclosure results with the proper disclosure. But I'm just concerned about the SEC.

I'm completely new to this, and I don't know if my attorney is off base on this, or what. I'd be very interested in your thoughts.

 

[Aaron]

Quote from heech:

Aaron,

My attorney is apparently extremely conservative from a legal point of view. He keeps advising me that in order to keep from violating Reg D for my CPO, I basically need to keep my mouth shut in all public forums about the fund in all public contexts, including mentioning returns. Any sort of information could be construed as "advertising" for the fund.

This isn't a CFTC issue, because I understand I can disclosure results with the proper disclosure. But I'm just concerned about the SEC.

I'm completely new to this, and I don't know if my attorney is off base on this, or what. I'd be very interested in your thoughts.

It isn't entirely black and white. In my case I'm also registered CTA and offer separately managed accounts and it's okay if I advertise the trading program and publish its returns -- with the appropriate disclosures, of course.

But regardless of what I say or do, you should listen to your attorney. If the SEC someday has a problem with you regarding general solicitation for a private investment, having followed your attorney's advice gives you recourse, having followed my advice doesn't get you very far.

Are you also a CTA, Heech? Tell us a little about your trading program. What's your background?

 

[heech]

Quote from Aaron:

It isn't entirely black and white. In my case I'm also registered CTA and offer separately managed accounts and it's okay if I advertise the trading program and publish its returns -- with the appropriate disclosures, of course.

But regardless of what I say or do, you should listen to your attorney. If the SEC someday has a problem with you regarding general solicitation for a private investment, having followed your attorney's advice gives you recourse, having followed my advice doesn't get you very far.

Are you also a CTA, Heech? Tell us a little about your trading program. What's your background?

Good thought, re: attorney advice.

I'm not a CTA, only a CPO. I didn't want to run managed accounts. I wanted to keep it simple, and preferred a pool structure that lets me diversify across more instruments. I was only approved on 1/19 of this year, started trading the fund in Feb. 100% of funds are mine; I've actually been prop trading with full size since last August.

I'm not a very public person... so I don't really like sharing info about myself online. But I'll think about providing a link to my site once it's up later this week. I will say that I've put up some great numbers so far the last 3 months, enough that I'm near the top of most databases for YTD numbers. But I attribute a lot of that to beginner's luck.

If you don't mind me saying so, it seems like the CTA setup is very attractive... I could easily register for CTA, obviously. I could then talk about performance openly...? Kind of a strange setup.

 

[SuperVolatility]

Quote from heech:

Good thought, re: attorney advice.

I'm not a CTA, only a CPO. I didn't want to run managed accounts. I wanted to keep it simple, and preferred a pool structure that lets me diversify across more instruments. I was only approved on 1/19 of this year, started trading the fund in Feb. 100% of funds are mine; I've actually been prop trading with full size since last August.

I'm not a very public person... so I don't really like sharing info about myself online. But I'll think about providing a link to my site once it's up later this week. I will say that I've put up some great numbers so far the last 3 months, enough that I'm near the top of most databases for YTD numbers. But I attribute a lot of that to beginner's luck.

If you don't mind me saying so, it seems like the CTA setup is very attractive... I could easily register for CTA, obviously. I could then talk about performance openly...? Kind of a strange setup.

heech - i did not think CPO was easier than CTA since there is more compliance hassle with CPO's as opposed to CTA.

No?

 

[heech]

Quote from SuperVolatility:

heech - i did not think CPO was easier than CTA since there is more compliance hassle with CPO's as opposed to CTA.

No?

Yes. From a compliance perspective (and possibly perspective) CPO is more work, but doesn't seem overbearing either.

I just meant CPO seemed easier from my trading point of view. I mix pit-based option trading along with electronic futures, and occasionally throw on hedges, etc. I trade 99% fully automated via blackbox application. I just felt more comfortable doing so with a single fund account that I could value/monitor positions with at the end of each day.

I'm also not sure I want to share positions real time. I'm okay with sharing position information, say, end of week or month... but not wild about the idea of sharing more. It may be overly paranoid of me, but I just don't see any value in it.

 

[SuperVolatility]

Quote from heech:

Yes. From a compliance perspective (and possibly perspective) CPO is more work, but doesn't seem overbearing either.

I just meant CPO seemed easier from my trading point of view. I mix pit-based option trading along with electronic futures, and occasionally throw on hedges, etc. I trade 99% fully automated via blackbox application. I just felt more comfortable doing so with a single fund account that I could value/monitor positions with at the end of each day.

I'm also not sure I want to share positions real time. I'm okay with sharing position information, say, end of week or month... but not wild about the idea of sharing more. It may be overly paranoid of me, but I just don't see any value in it.

What about the start-up costs? Is CTA "cheaper" to start that CPO?

 

[heech]

Quote from SuperVolatility:

What about the start-up costs? Is CTA "cheaper" to start that CPO?

Probably. I don't know about attorney fees for the disclosure, since those costs should probably be roughly comparable.

But for a CPO, I:

a) had to register the LP structure as well,

b) found an independent auditor to audit my books. (Rothstein Kass, one of the tops in the industry... and charges accordingly.)

c) found a third-party admin, meaning that investors can be confident the fund is valued correctly each month, and that I can't wire money to my online poker account.

The costs of b) + c) is much higher than the attorney fees, and it comes *every year*. If you just do it by hand on Excel, you can probably eliminate much of it. But I know I wouldn't invest in a fund that didn't have those critical pieces in place, so I certainly wouldn't expect an investor to invest in mine.