Hedge Fund Question

K

KS2007

If a fund can get 1-5 million to start from an an investor...with the promise of more money in the future...obviously based on performance...do you think it's smart to go ahead and set up the fund from the start? Or is it wise to start by creating an incubator fund?
 
its not but how do you compare?
. setup & running costs: in % of AUM, in % of perf?
. credibility, when you try to attract extra capital: if your perf profile & ratios are good, you are way more credible if you've had a proper "fund" running for a while. at the other extreme, you just run a managed acct for a while (PoA-basis) and you just get the account & perf audited... then only, setup a proper fund once the total commitments are of the size you are happy with...
. independence: ability to choose your brokers etc... negotiate tight rates & spreads...

depends what the incubator offers you...
 
I am interested to learn more about an incubator fund...

Is this just a managed account to grow assets and build performance record until you are ready to set up the fund properly?

If so can anyone tell me how to go about doing that??
 
Quote from KS2007:

If a fund can get 1-5 million to start from an an investor...with the promise of more money in the future...obviously based on performance...do you think it's smart to go ahead and set up the fund from the start? Or is it wise to start by creating an incubator fund?
More...

1. You never promise, anything, for a fund. I, almost, got in big trouble when one of the marketing guys "promised" a return to a prominent investor. Fired the guy for acting stupid.

Anyways, never use the word, "PROMISE". Seriously, they can sue you for fraud, even before they invest money into your fund. Promised return and expected return has 2 completely different meanings.

2. It's a matter of having your trades audited by a well known firm. But when you get an investor, you wouldn't want to tell your investor to wait a few months for the fund to open up. So... open the fund up if you can cover the costs.
 
I don't think you read this correctly. It appears the investor is "promising" to give the manager even more money if performance is good.

Nevertheless, you are correct in that you should never promise or guarantee performance of any kind.



Quote from TSGannGalt:

1. You never promise, anything, for a fund. I, almost, got in big trouble when one of the marketing guys "promised" a return to a prominent investor. Fired the guy for acting stupid.

Anyways, never use the word, "PROMISE". Seriously, they can sue you for fraud, even before they invest money into your fund. Promised return and expected return has 2 completely different meanings.

2. It's a matter of having your trades audited by a well known firm. But when you get an investor, you wouldn't want to tell your investor to wait a few months for the fund to open up. So... open the fund up if you can cover the costs.
More...
 
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