You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Hedge funds
- Thread starter Vinny1
- Start date
Quote from Ebo:
Do you believe EVERYTHING you read on a web sight?
I am in a HEDGE fund and I am telling you that is incorrect.
...also, many 'hedge funds' may have only 3 partners/investors...but hundreds of 'traders'....an investor can put up 2 million and then let you and 9 otheres trade 200k each...the fact that you may have given him a 10-20k 'cushion money' doens not make you an owner of his hedge fund.
What is the process of starting a hedge fund and how does one go about getting investors? Seems like it can be quite lucrative for the fund manager,once he has say about $100 million in assets under management.Charge 2% a year in management fees for a total of $2 million.Invest everything in safe instruments like govt. or muni bonds earning say 5% a year,so that would be $5 million a year in interest,take 20% of it,which is $1 million.And voila,you just made $3 million in a year for doing practically nothing.Didn't even have to risk any of your own money.Just the problem is finding the investors.
IMHO,
The problem is not finding investors. The problem is finding a scalable strategy that churns out 15% a year regardless of market conditions, with low volatility and low drawdowns. Those are the characteristics institutional investors (the big money) are looking for.
If you can find that, and the fund has capacity for your theoretical $100MM without degrading performance...the money will follow. Having started a hedge fund (that was closed due to lack of funding), and while in the process of trying to find a workable strategy to raise another fund, I have learned that there is no easy way to make money. (Especially in this market)
A friend of mine at another fund, whose performance was roughly 11% last year, and 23% the year before, had assets under management grow from $100MM to just under $300 MM in just one year. If the performance is there, the money will follow. Focus on performance.
Good luck!
MYD
The problem is not finding investors. The problem is finding a scalable strategy that churns out 15% a year regardless of market conditions, with low volatility and low drawdowns. Those are the characteristics institutional investors (the big money) are looking for.
If you can find that, and the fund has capacity for your theoretical $100MM without degrading performance...the money will follow. Having started a hedge fund (that was closed due to lack of funding), and while in the process of trying to find a workable strategy to raise another fund, I have learned that there is no easy way to make money. (Especially in this market)
A friend of mine at another fund, whose performance was roughly 11% last year, and 23% the year before, had assets under management grow from $100MM to just under $300 MM in just one year. If the performance is there, the money will follow. Focus on performance.
Good luck!
MYD
Quote from Vinny1:
Charge 2% a year in management fees for a total of $2 million.Invest everything in safe instruments like govt. or muni bonds earning say 5% a year,so that would be $5 million a year in interest,take 20% of it,which is $1 million.And voila,you just made $3 million in a year for doing practically nothing.Didn't even have to risk any of your own money.Just the problem is finding the investors.
You're so brilliant! LOL
You won't attract many investors with 5% p.a. minus fees - only 2% net for investor. Try to make 15%/year with low drawdowns, then money will flow into your fund.
Quote from DT-waw:
You're so brilliant! LOL
You won't attract many investors with 5% p.a. minus fees - only 2% net for investor. Try to make 15%/year with low drawdowns, then money will flow into your fund.
For the past 3 years,most equity mutual fund returns have been negative,and there are funds with multi billions of dollars under management.Why do those investors stay with them?But i don't think 15% return a year is that difficult.For my long term investments,i buy high paying dividend stocks and write out of the money calls on them every 2-3 months.I also buy municipal bonds,since the interest is exempt from federal taxes.I've done quite well doing this.My question,how do hedge funds go about raising assets,especially if one has never managed money for others in the past?
Quote from Vinny1:
Charge 2% a year in management fees for a total of $2 million.Invest everything in safe instruments like govt. or muni bonds earning say 5% a year,so that would be $5 million a year in interest,take 20% of it,which is $1 million.And voila,you just made $3 million in a year for doing practically nothing.Didn't even have to risk any of your own money.Just the problem is finding the investors.
So you're returning 5 million a year and charging 3 million a year for a net return of 2%? After inflation you have a real return of (2% - (Inflation Rate for that year)). The average inflation rate over the past 80+ years has been around 3.2%, I believe. The inflation rate is now somwhere in the 2% range if I recall correctly. Either way you'd have a negative real return now or if my inflation numbers are off you are returning somewhere around 0%.
Once you are rich the name of the game is capital preservation rather than appreciation. However, no high net worth individual or institution is going to be stupid enough to pay you 3 million a year for a negative return -- or at least a lot of them won't for any extended period of time (it isn't hard to find a few stupid rich people, finding a lot of them and keeping them is).
Ik
My question,how do hedge funds go about raising assets,especially if one has never managed money for others in the past?
Friends & Family. They are the only ones who will trust you. Then, you have to build a track record. Large institutions won't even invest until you've been on their radar screen for 2-3 years. So, this is not a get rich quick scheme. You have to have great performance for a couple of years before you can expect to get serious assets.
Or, you can hire a fund raiser and swap some of your fee for their marketing. Often times it's 20% of your revenues that they'll take.
Or, try going to an incubator who will take a chunk of your equity, if they think you're talented enough to fund.
Here are two such incubators:
www.focusinvestmentgroup.com
www.capitalz.com
Good luck.