Establishing a track record to attract OPM

S

SnoopDogg

Has anyone had experience doing this? What brokers do you recommend? Do the returns need to be audited by a independent CPA firm? It it advisable to set up an RIA - Registered Investment Advisor, first?

How much in assets under management is required to be credible to attract outside money? For example, if one establishes an outstanding return with a relatively small amount of money, say 100K, is that too small to be taken seriously by high net worth investors? I am assuming attracting institutional investors is out of the question. How long of a track record is necessary? Would be great to hear from anyone who has been there, done that. Thanks.
 
A guy at one of the big fund-of-funds asset gathering companies summed up the dilemma quite nicely:

An emerging manager is searching for a VERY special type of client: smart enough to recognize the benefits of investing with CTAs / hedgefunds / absolutereturn managers, but at the same time, dumb enough not to realize that there are many other well established, successful, long-track-record managers besides you.
 
An emerging manager is searching for a VERY special type of client: smart enough to recognize the benefits of investing with CTAs / hedgefunds / absolutereturn managers, but at the same time, dumb enough not to realize that there are many other well established, successful, long-track-record managers besides you.

Well, most seasoned asset allocators at sophisticated endowments such as Harvard or Yale, or pension funds like CALPERS, know that size is the enemy of performance. Think Fidelity Magellan. They are on the lookout for small managers because they know that is where the best risk-adjusted returns are. I am just wondering how best to get on the radar screens of far, far, less sophisticated potential investors would be. I know the Tuna website has a minimum fund size around 5 or 10M, so my returns, however wonderful, would not show up there.
 
I suggest VERY STRONGLY that you read "Hedge Hogging" by Barton Biggs.

The key to attracting money is that money attracts money. Investors like to see that "you eat you own cooking" as they say and substantial initial investment with your own funds is required. Managers can be traded at a whim for returns. What really seems to get the ball rolling is when you have a plan, some record of success and a substantial stake of YOUR OWN MONEY that you are going to put at risk.

When Mr. Biggs is can't sleep well at night due to the fact that he thinks he's underfunded (and has been able to attract over 200M at that point), kinda makes you think a little.

Once again, I suggest you do some more research and read the book.
 
Snoop, I'm no expert by any stretch but check out AutumnGold.com. I'm not affiliated with them at all, just a newbie trader scouring for hedge fund info. I think you can list your fund for like 100 bucks. I've been checking out the different trading styles and have seen funds as small as $60,000 all the way up to $2-3 billion. I'm sure there are many other sites, this one helped me study how other funds do their 'thang'. I too eventually aspire to the 'OPM' biz, but I haven't even started trading my own account yet! Ha! Good luck, bro!
 
Fidelity Magellan is an example of a extremely large fund with POOR performance. Hence, an example of bigger not necessarily being better. Didn't think I would have to explain, that one, lol.
 
Quote from horribilicus:

A guy at one of the big fund-of-funds asset gathering companies summed up the dilemma quite nicely:

An emerging manager is searching for a VERY special type of client: smart enough to recognize the benefits of investing with CTAs / hedgefunds / absolutereturn managers, but at the same time, dumb enough not to realize that there are many other well established, successful, long-track-record managers besides you.
More...

i may not be the biggest

i may not be the best

but damn, i can find some nice escorts!

imo thats the key
 
You can always get some education, pass the 65, and get a job with an established IA. Chances are you will start out in account development or something. Essentially marketing the firms services to prospective clients. You have to pass the 65 if you want to do anything besides file papers for the IA. Once you have proven yourself, you will become a portfolio manager. This is a good way to learn the ins-n-outs of the IA business (which is essentially what you seem to be trying to do) while at the same time getting the word out there that you are someone that can be taken seriously. That is, if you are really as good as you are implying you are.

Problem with working for another firm is that you have to pay your dues, which might require you to adopt someone else's trading (investment) strategy for a while. During this time you won't really be making much money. You will also have to learn how not to shove your personal strategy onto every client that walks through the door. Recommending the same strategy to every client is a no-no. To be a good IA (IAR) you need to be versatile and knowledgeable. In this case, in order to be competetive, you should charge in the neighborhood of 1% of assets under management. You won't be able to pay the bills until you get at least 4-5MM under management.

Or you could always start a hedge fund. (Very different than your standard IAR) The manager of a Hedge Fund usually has a substantial amount of his own money at stake. Hedge funds are really the only way that the SEC allows you to charge "performance based fees". This is why they are usually limited to rich people. The SEC allows IAR's to charge performance based fees to "sophisticated" investors (>$1.5MM net worth or >$750,000 under management). If you take your fees as a percentage of gains from an average Joe, you get in big trouble.

If you don't yet have the funds or the track record to start one, you might consider setting up an "incubator hedge fund". I've never done it, but it is nice in theory. They allow you to start a hedge fund with at least some money while at the same time keeping a performance history and (if your good) allowing you to build up a more substantial amount of money. Then the process of becoming a recognized hedge fund is "supposedly" easier because you've already proven yourself as a successful fund manager.

Just a couple thoughts.
 
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