I wouldn't like jail. So I guess I will be a bit more hush about a proposed venture into hedge funds. Is it really illegal to think outloud about possibly starting a fund. It seems that these hedge fund laws are much tougher than any other laws. For instance, I can legally say that I intend to kill someone and there's nothing that the law can do until I actually do it.
Funding a hedge fund...
- Thread starter praetorian2
- Start date
Just a note. We can talk about raising money in general terms, but I would caution everyone hear about "soliciting" for capital
in any public forum. If you have any questions about hedge fund structure, raising money or clearing services, I would be glad to help. I would also use caution in dealing with hedge fund consultants and other "experts" who say that they can put together a fund for you for a "fee". If these experts could put a 50 mil fund together , why would they do it for other people ? They would make alot more if they could do it for themselves. Very much like a stockbroker, many of these people are experts at selling "themselves". There are several websites that offer advice and information on hedge funds, see:
Planet Hedge Fund www.planethedgefund.com/
HedgeFund.net www.hedgefund.net/
Hedge Fund Association www.thehfa.org/
Van Hedge Fund Advisors www.hedgefund.com
As I have said many times, it's very hard to raise money in this environment and a small hedge fund(under 10 mil), will struggle to stay in business unless they have superior returns and can grow the funds capital. A hedge fund sounds great on paper, but believe me, it is very hard to run a successful one. I would bet that 80% of hedge funds under 10 million, would not be around in five years.
Gene Weissman
Lieber & Weissman Sec., LLC
gweissman@stocktrade.net
in any public forum. If you have any questions about hedge fund structure, raising money or clearing services, I would be glad to help. I would also use caution in dealing with hedge fund consultants and other "experts" who say that they can put together a fund for you for a "fee". If these experts could put a 50 mil fund together , why would they do it for other people ? They would make alot more if they could do it for themselves. Very much like a stockbroker, many of these people are experts at selling "themselves". There are several websites that offer advice and information on hedge funds, see:
Planet Hedge Fund www.planethedgefund.com/
HedgeFund.net www.hedgefund.net/
Hedge Fund Association www.thehfa.org/
Van Hedge Fund Advisors www.hedgefund.com
As I have said many times, it's very hard to raise money in this environment and a small hedge fund(under 10 mil), will struggle to stay in business unless they have superior returns and can grow the funds capital. A hedge fund sounds great on paper, but believe me, it is very hard to run a successful one. I would bet that 80% of hedge funds under 10 million, would not be around in five years.
Gene Weissman
Lieber & Weissman Sec., LLC
gweissman@stocktrade.net
p2,
Mr. Weissman is correct. You can inquire about "how" to raise funds but you cannot "ask" for funds on a public forum--which I think you may have done in one of your posts.
However, these restrictions are not specific to hedge funds; they are based on SEC rules and state laws relating to the sale of securities (i.e., the sale of interests in a hedge fund = the sale of securities). As a result most hedge funds raise funds pursuant to Reg. D. (which provides safe harbors when selling securities).
Typcially, a private offering memorandum (POM) is prepared which makes certain required disclosures. Potential investors are personally contacted--as opposed to a general solicitation.
Also, one clarfication on "prime brokers." Most major firms require 5-10 m to establish a prime brokerage relationship. Many offer "capital introduction" services; however, as you can imagine, the prime brokerage firm must have significant faith in the fund/manager before it will introduce its high net-worth clients.
PS. I am not a criminal attorney; however, I would be to sure that merely saying you are going to kill someone is not a crime. If you have the means and proximity it may be considered assault.
Mr. Weissman is correct. You can inquire about "how" to raise funds but you cannot "ask" for funds on a public forum--which I think you may have done in one of your posts.
However, these restrictions are not specific to hedge funds; they are based on SEC rules and state laws relating to the sale of securities (i.e., the sale of interests in a hedge fund = the sale of securities). As a result most hedge funds raise funds pursuant to Reg. D. (which provides safe harbors when selling securities).
Typcially, a private offering memorandum (POM) is prepared which makes certain required disclosures. Potential investors are personally contacted--as opposed to a general solicitation.
Also, one clarfication on "prime brokers." Most major firms require 5-10 m to establish a prime brokerage relationship. Many offer "capital introduction" services; however, as you can imagine, the prime brokerage firm must have significant faith in the fund/manager before it will introduce its high net-worth clients.
PS. I am not a criminal attorney; however, I would be to sure that merely saying you are going to kill someone is not a crime. If you have the means and proximity it may be considered assault.
Having just left a hedge fund, I have a few quick comments.
1) Most institutional investors need to place money in an investing style. Hedge funds are considered alternative, same as real estate or private equity. They compare returns and volatility over time to the S+P 500. You must give them this kind of info, or else they cannot open the purse.
2) Your style must be something like pairs, long/short, risk-arb, sector, or macro. They need to put you in a category.
3) In order to keep the funding, you have to be nearly fully invested all of the time. Nobody will pay you 1 and 20 for money market returns.
4) A positive note, your trading skills are undoubtedly a million times better than most pm's. In my tenure as a trader at a hedge fund, I had to buy more tops and sell more bottoms than I care to remember.
1) Most institutional investors need to place money in an investing style. Hedge funds are considered alternative, same as real estate or private equity. They compare returns and volatility over time to the S+P 500. You must give them this kind of info, or else they cannot open the purse.
2) Your style must be something like pairs, long/short, risk-arb, sector, or macro. They need to put you in a category.
3) In order to keep the funding, you have to be nearly fully invested all of the time. Nobody will pay you 1 and 20 for money market returns.
4) A positive note, your trading skills are undoubtedly a million times better than most pm's. In my tenure as a trader at a hedge fund, I had to buy more tops and sell more bottoms than I care to remember.
I'm going to have to edit one post so I stay up and up with the federales I guess. I'd rather not post $ returns, but they're in the low 6-figures.
As per some people's criticisims of my accounting for open positions, I'd like to point out that after a pr release in one stock (it's up 30% in 2 days) and the abatement of selling in the other (it's now up 40% since I posted that remark last week) my 40k loss is now an actual small gain, and will probably become a few hundred % gain within a few more weeks. This is why I don't think that 2 positions that I don't count for tax reasons as part of my account should be counted in total returns. They skew my returns way too much because of the illiquidity of the positions, the size of the positions, and the fact that I'd never take such large positions in my hedge fund if I were to start one in relation to position % of total capital.
As per some people's criticisims of my accounting for open positions, I'd like to point out that after a pr release in one stock (it's up 30% in 2 days) and the abatement of selling in the other (it's now up 40% since I posted that remark last week) my 40k loss is now an actual small gain, and will probably become a few hundred % gain within a few more weeks. This is why I don't think that 2 positions that I don't count for tax reasons as part of my account should be counted in total returns. They skew my returns way too much because of the illiquidity of the positions, the size of the positions, and the fact that I'd never take such large positions in my hedge fund if I were to start one in relation to position % of total capital.