Hedge Fund New Money Troubles

[Ripley]

THANKS to ALL YOUR HELP, I WAS ABLE to DEVELOP A SOLUTION for this particular issue/concern.

 

[RCG Trader]

Quote from newwurldmn:

Returns should be calculated on total assets whether deployed or not. Choosing to deploy assets is part of the fund managers job and nothing would annoy someone is getting an investor letter saying, you invested 100,000 and I made 50% and your account balance is 101,000 because I invested 2,000.

If that were the case, then I would have to give the money back. If I have conviction about how I make money, then it is my way, or the highway.

 

[newwurldmn]

Quote from RCG Trader:

If that were the case, then I would have to give the money back. If I have conviction about how I make money, then it is my way, or the highway.

You don't have to be fully invested. But you have to calculate returns on AUM, not capital deployed. In my example above, the return is really 1%, not 50%.

 

[amazingIndustry]

and why would you be forced to add to a position you dont want to take? Who forces you to trade a single cent of a new dollar coming in until you are prepared to do so? You are held accountable for performance and managing risk not for proudly showing off that the invested dollar is working hard (at losing value). I trade outside funds and my investors could not care less whether their money is currently working or not. They only care about the probabilities of me being to continue my track record with similar return and risk profiles.

Edit: This applies to a general hedge fund setting not to an open-end standard mutual-fund structure. (sorry and please ignore if I missed that your setup is different from hedge fund structures

Quote from Ripley:

You don't understand the issue at hand.

If I'm a buyer of a stock upto $20, and the stock is at $25 in my portfolio, and my price target is $30, and I don't want to add more at $25 since the risk reward isn't worth it.

But, with the new money coming in, I would be forced to add more to a position I wouldn't want to add more.

 

[Stu255]

I don't see a problem here.

Simply;

1). Mark to market at EOD.

2). New money = / = old opportunities.

3). As you get larger expect your performance to decrease as you will run into liquidity problems. You can't get 10lbs of potato's into a 5lb bag.

4). Only take new money if you have surplus new opportunities with regard to available liquidity.

5). If you are not finding surplus new opportunities fast enough to meet the new money, then close the fund to new entrants.

 

[ElectricSavant]

amazingindustry,

I do not recall you being the judge of who can participate in threads within ET.

Everyone is welcome to post here in ET and oldtime has just as much right to post here as you do.

ES

Quote from amazingIndustry:

are you the guy who does not even understand triangular fx arb? Were you not the one who claimed trading eurchf vs eurusd and usdchf produces different pnl profiles? If yes, are you confident you are qualified to participate in this discussion? ;-)

 

[ElectricSavant]

I had to regretfully close this thread and delete many posts...so what you are reading now is an edited version of this thread (you may not understand why it was closed).

How so many adults can have such a disregard for the rules of conduct that they agreed to and for each other is beyond me.

It makes me sad and embarrassed for the community..

ES