Finding investors to start a hedge fund

[Visaria]

a recent graduate friend of a friend met Ken Griffin in a bar in NYC earlier this year...they chatted about trading...not sure if anything came of it though.

 

[Troy Bombardia]

I was in a really similar situation like yourself. New graduate, built a bunch of quantitative investment models.

Truth is, you can't start a hedge fund without any decent track record. That's why I teamed up with a bunch of well connected friends who handled the money raising and administration side of things.

http://investingtrack.com/about/

 

[NoVoodooHere]

Hi everyone!
I am interested in starting an offshore hedge fund. The problem for me is that I, except from my education (still attending a university where I am studying business and economics), have no real experience. However, I have invested and traded on my own and I have recently developed a really interesting investment strategy.

It is a quantitative investment strategy which I figure might help a bit due to my complete lack of experience. The backtests that I have done on the strategy shows that it would have significantly outperformed the S&P 500. And the goal for the fund would be to have a good relative return compared to the major US indices, not to aim for just a good absolute return.

But, my question is, how can I raise capital to this fund? How can I assure potential investors that I can manage to run a fund successfully? And where do I find these investors?

The only thing that I can say would contribute to my credibility is that I have taken and passed Swedsec licensing tests. I live in Sweden, and Swedsec licenses are usually required for financial analysts, fund managers, investment advisors and so on. Although I am not really familiar with the regulations in the US, but from what I have read I think our Swedsec license is equivalent of your Series 65 license.

But anyway, how do you propose that I handle my situation? Is it still possible/realistic to find investors?

I hope you are joking

 

[marketsurfer]

And closer to home, he should get acquainted with the AP* funds, which are massive hf investors, and with the large Stockholm-based allocator that specializes in emerging managers.

Great advice, Debit.

 

[i am nobody]

A friend loaned his towel to a family of south american's at the ritz in miami-- they ended up buying 30 multi million dollar condos from him making him a millionaire many times over, another guy i know recognized a person getting out of a cab in Fifth in NYC-- and ended up getting over $35 million for hedge fund investment thanks to this single meeting---

This is good for a book, but my experience in reality was different. I was trading and rich people asked me to trade for them. I never asked anybody. Most rich people that I meet after trading for them, confirmed that they would never give me any money if I would have asked them first. They prospect and decide to whom they will give money. They become suspicious if people ask them money. Because they get this question all the time apparently.
Lending them a towel or drinking with them in a bar would surely not have helped me. But one satisfied client lead to more clients. They use their network, and after that you can become part of it.

 

[classiccharts17]

Start with your own money (size does not matter). Build a track record, and by time people will get to know you. Family, friends will eventually join if you are doing well (+20% a year is more than enough). During the first few years, give free tips to friend and family about the markets if they are interested.

These are the best years in your trading career, enjoy it, the moment you start with the hedge fund and managing other people's money all the fun is gone. Administrative and legal stuff, expectations and answering questions from your clients, tax, sending monthly reports.

If you just love trading, focus on your own money. Anyone who wants to join...keep it simple and informal. Thats what worked for me. Find out what works for you.

 

[rmorse]

Start with your own money (size does not matter).

IMO, size does matter. Building a track record with $25K will not bring in investors. Depending on your target market, you need some reasonable size account for it be be interesting. That value will be different for every strategy and investor profile.

I agree with your other comments. Have fun, make money. However if you hope to interest investors in the future, you need a structure to your trading and start to treat it as a business.

Bob

 

[Fundlord]

Use credit, its a business expense-- fly cheap, stay cheap-- hang in the bars and swimming pools/beaches of the best hotels, etc etc etc-- you can do this on the cheap and the potential payoff is astronomical.

I should write a book on this--

You not gonna raise dollar one hanging with average/poor people-- and it costs about the same--and you get nowhere with these "funding sources" listed.

A friend loaned his towel to a family of south american's at the ritz in miami-- they ended up buying 30 multi million dollar condos from him making him a millionaire many times over, another guy i know recognized a person getting out of a cab in Fifth in NYC-- and ended up getting over $35 million for hedge fund investment thanks to this single meeting---

Best advice your going to get, not just in trading/business.

People heavily underestimate the role randomness/luck plays in our life.

Surround yourself with winners, big fish, fat cats not bums and your opportunities increase, who knows someone may take a chance on you even if they don't you will gain valuable insight/information new contacts etc

Good luck.

 

[jonny1lot]

One word: NETWORK. Go to F1 in Monaco, go to the top ski resorts, etc , follow the party circuit of the UHNW's ---- mingle , make friends, that's the key--- or you just might meet a few on elitetrader-----

You just might make friends with a guy or gal whose family are billionaire hedge fund investors-----

In my opinion, these other ideas are bull sh$t-- too much competition-- you need to DIY from the ground up-- trust me, it CAN BE DONE!

This is the correct answer. Networking is a very important factor.

 

[marketsurfer]

This is good for a book, but my experience in reality was different. I was trading and rich people asked me to trade for them. I never asked anybody. Most rich people that I meet after trading for them, confirmed that they would never give me any money if I would have asked them first. They prospect and decide to whom they will give money. They become suspicious if people ask them money. Because they get this question all the time apparently.
Lending them a towel or drinking with them in a bar would surely not have helped me. But one satisfied client lead to more clients. They use their network, and after that you can become part of it.

How does the money find you? This doesn't make sense. Everyone who is seeking capital has a great track record -- so i dont get your point.