Establishing a track record to attract OPM

Quote from Cache Landing:

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.
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I have my 65, CFA Level II, and an MBA in Finance. I have thought about taking this route... I am assuming you are referring to independent investment advisory firms. My issue with this is you are more of a salesman, than a money manager. You are paid to hold the clients hand, not manage money. You have to sacrifice your investment strategy to sell whatever the client is most likely to buy into. That said, I may be forced to take this route if there aren't any other viable options.


I did see this link on Green Trader on incubator hedge funds.
http://www.greencompany.com/HedgeFunds/HedgeFundIncubatorFunds.shtml
I do plan on eating my own cooking and putting a significant portion of my net worth on the line. Trouble is 100K IS a significant portion of my net worth, I am not Barton Biggs.
 
Absolutely nothing wrong with only having 100K at your disposal, nothing at all!

Being a salesman is all part of the game. Even the big boys have to do it. Investors are often fickle and need their hands held, all depends on how much money you need and what level of pain you are willing to endure to get it.

You state that you would be putting up 100K of your own capital towards the initial fund, what is the total amount of initial capitalization you are looking for?

Many times, you would be surprised, at how really close you are to people with money looking to invest. Intelligent money is always looking for a place to work. You just have to prove you are the place for that money to work.

A lot of the issues with OPM, in my opinion, isn't the people investing their hard earned money with the potential manager, but rather the manager. It's much easier to accomplish what you are seeking when your personal finances are stable (debt free and significant wealth accumulated in many asset classes) and looking less at how can I improve my income from this venture.

Carl Ichan and Robert Johnson (BET founder that is currently starting own hedge fund) for example, they are proven businessmen and solid investors that will have no problem attracting capital due to their connections as well as their status. They don't need OPM in order to feed themselves and generate income, they need it in order to accomplish their investment goals. This is a critical point. I'm not saying you need to be a billionaire to attract OPM, but it is a lot easier when the person you are "pitching" understands that you have been successful at a certain level other than just being able to achieve a certain level of return consistently, and makes them much more confident to invest.

Put it this way, I would rather invest in a money manager's vision/ultimate goal than invest in a fund/management company that is looking at performance as a way to generate income to support themselves.

Just some thoughts, hope it helps a little, I wish you success on your journey.
 
Quote from SnoopDogg:

I have my 65, CFA Level II, and an MBA in Finance. I have thought about taking this route... I am assuming you are referring to independent investment advisory firms. My issue with this is you are more of a salesman, than a money manager. You are paid to hold the clients hand, not manage money. You have to sacrifice your investment strategy to sell whatever the client is most likely to buy into. That said, I may be forced to take this route if there aren't any other viable options.


I did see this link on Green Trader on incubator hedge funds.
http://www.greencompany.com/HedgeFunds/HedgeFundIncubatorFunds.shtml
I do plan on eating my own cooking and putting a significant portion of my net worth on the line. Trouble is 100K IS a significant portion of my net worth, I am not Barton Biggs.
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Sounds like you are talking about just starting either a mutual fund or hedge fund. If you don't like the idea of holding someone's hand, then these are really the only two options that you have. And yes, it is more difficult to attract OPM this way.

I am a little confused though. If you already have your 65, CFA level II, and finance degree, what have you been doing up until now?
 
Quote from Cache Landing:


I am a little confused though. If you already have your 65, CFA level II, and finance degree, what have you been doing up until now?
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Prior to business school, I worked in investment management in a bunch of dead-end portfolio accounting and operations jobs. No way to make it to the front-office,with that back-office taint on you.

I went to top b-school full-time to escape this horrific dead end, and unfortunately my timing off, and I graduated post 9/11 and Wall Street wasn't hiring. I am currently work as a Management Consultant in the financial services practice of a consulting firm.

I am having an early mid-life crisis at 30, and what I'm realizing is that life is too short to waste time doing something you are not passionate about, just because you get a solid base salary doing it. I'm been managing my own money for 10 years, and I am a hell of a lot more interested in that than anything I do at work.

I've looked at getting a real job at a hedge fund, but I find they are looking for a) someone with a pretty technical skill set eg. Quants with ph.d's in math of physics to do modeling or b) some kid straight out of undergrad to do support work. They generally don't want to pay MBA level salaries, and I don't want to be anyone's bitch anyhow.

I want to run money, and I figure the best and only way to do that, is go balls to the wall and actually physically do it.
 
Quote from SnoopDogg:

I have my 65, CFA Level II, and an MBA in Finance. .
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has 65 been around a long time? who is required to have it, financial planners/investment advisors?
 
Quote from SnoopDogg:

Prior to business school, I worked in investment management in a bunch of dead-end portfolio accounting and operations jobs. No way to make it to the front-office,with that back-office taint on you.

I went to top b-school full-time to escape this horrific dead end, and unfortunately my timing off, and I graduated post 9/11 and Wall Street wasn't hiring. I am currently work as a Management Consultant in the financial services practice of a consulting firm.

I am having an early mid-life crisis at 30, and what I'm realizing is that life is too short to waste time doing something you are not passionate about, just because you get a solid base salary doing it. I'm been managing my own money for 10 years, and I am a hell of a lot more interested in that than anything I do at work.

I've looked at getting a real job at a hedge fund, but I find they are looking for a) someone with a pretty technical skill set eg. Quants with ph.d's in math of physics to do modeling or b) some kid straight out of undergrad to do support work. They generally don't want to pay MBA level salaries, and I don't want to be anyone's bitch anyhow.

I want to run money, and I figure the best and only way to do that, is go balls to the wall and actually physically do it.
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Given the certifications that you already have, I would tell you to start your own IA. This might start a bit slow as you might only be handling money for friends and family at first. But if you're good, word will start getting around. If you charge the normal 1% then once you get up to $10MM under management you'll be making a pretty good living.

You will need to meet the state minimums if you want to take discretion over OPM but if you've got your 65 then you already know that. You'll get more clients faster if you put your money where your mouth is. You have to keep you personal portfolio seperate from all the clients, but you can set up a trust for all client funds. You should then be able to trade this trust similar to your own little hedge fund. Just be careful not to subject the clients' money to an undue amount of risk.

Of course this would also require you to get all the paperwork (disclaimers) together and stuff, but everything takes some money and work to start up. I'm not the expert here, but that's what I would do.
 
Quote from Copernicus:

has 65 been around a long time? who is required to have it, financial planners/investment advisors?
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Really, anyone who wants to act as an invesment advisor charging fees. Financial planners don't necessarily have to have it. It depends on what services that want to offer.
 
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