How big and long does a track record account need to be in order to be taken seriously?
- Thread starter zbojnik
- Start date
You can start to get interest from individuals at about 12 months, but usually they'll need to know you first to have something to convince them.
At two years you should be able bring on individuals relatively easily, but they'll be cautious. If you're good, you should be able to raise about $2MM this way within a fairly short period.
At three years you'll start getting legitimate interest from early adopter family offices, but many of them will either just test the waters with a small amount, or just follow your monthly progress for a while. They'd like to see you at closer to $5MM AUM before getting more serious.
At 3-4 years audited history and $10MM AUM, you'll be taken seriously by most family offices and high net worths.
Institutions (banks, endowments, pensions, etc.) won't even consider you until close to 5 years audited history and $20MM AUM. There are exceptions, but most of these are looking to allocate $2-5MM minimum and can't have more than a 10% interest in the fund. Frankly, regardless of returns, you just aren't worth their time.
Having said that, it all goes out the window with pedigree. If you graduated from Harvard, Columbia, Yale, etc. and worked for 10 years at Goldman, JPM, Credit Suisse, etc. then it'll dramatically speed things up. Also, if it is your second or third fund, and the first was a success, you can usually get interest just on hypothetical returns alone.
At two years you should be able bring on individuals relatively easily, but they'll be cautious. If you're good, you should be able to raise about $2MM this way within a fairly short period.
At three years you'll start getting legitimate interest from early adopter family offices, but many of them will either just test the waters with a small amount, or just follow your monthly progress for a while. They'd like to see you at closer to $5MM AUM before getting more serious.
At 3-4 years audited history and $10MM AUM, you'll be taken seriously by most family offices and high net worths.
Institutions (banks, endowments, pensions, etc.) won't even consider you until close to 5 years audited history and $20MM AUM. There are exceptions, but most of these are looking to allocate $2-5MM minimum and can't have more than a 10% interest in the fund. Frankly, regardless of returns, you just aren't worth their time.
Having said that, it all goes out the window with pedigree. If you graduated from Harvard, Columbia, Yale, etc. and worked for 10 years at Goldman, JPM, Credit Suisse, etc. then it'll dramatically speed things up. Also, if it is your second or third fund, and the first was a success, you can usually get interest just on hypothetical returns alone.
Ok. But does it matter if my account was $1,000 or $10,000?
You wouldn't believe how many random pikers there are with great returns on small accounts. Give them real money and WATCH it dissapear.
LOL.
Yes, that does matter. Around here you'll see a ton of quotes about how "trading $1MM is the same as trading $100MM", or "$10K is no different than $1MM, it's just bigger trade size". That is absolutely untrue, and almost every capital allocator out there knows it.
If your account is only $10K, you're gonna have a tough time for several reasons.
1) There are hundreds of jokers claiming 100% annual returns on a $10K account. They are completely unable to scale it, both mechanically and mentally.
2) If you're getting such good returns, why do you only have $10K?
3) You don't have any serious skin in the game. The worst that can happen to you is that you lose $10K, while you're clients are risking millions.
If you wanna be taken seriously, you'd better at least have $100K (preferably closer to $400-500K) of your own capital at risk along side your investors. If that seems daunting, you just aren't ready to manage OPM yet. Allocators don't want to send money to some joker who thinks $100K is a lot of money. You need to be able to trade millions without giving it a second thought. If you can't pull that money together, the only way to speed it up is to take on a partner who has it and is willing to risk it. Obviously, he'll be taking a large portion of the company too. Also, the trading system becomes property of the company.
'Epic' is on this. Outliers notwithstanding, serious money does not run after trivial accounts...
Who is looking to invest $1MM, $5MM, or $20MM and give full trading discretion to a "normal person"? That is the whole point. When it comes to hedge funds or discretionary managed accounts, investors are looking for the outliers. They want abnormal intelligence, commitment, and drive. Otherwise they would just hire some local adviser to diversify their portfolio across a bunch of mutual funds. If you have those characteristics, you'll be able to get there.