How to raise capital for a Hedge Fund?

[Erick Gomez]

Truth is, track record Has very little importance when it comes to raising capital.

Everyone who starts a hedge fund has a great track record, otherwise they wouldn't be doing it. Therefore, the 3 most important things are why is your strategy different and better than the 1000's of other funds doing the same thing?
Try telling hedge fund investors you buy stocks and look at charts to make decisions-- u will be laughed at and not raise dollar one outside of naive friends family. The reason is if an investor
Wanted that strategy he would invest with a known superstar type fund that does the same thing - not a risky start up.

Next, does your strategy make sense going into the future? Real hedge fund investors understand that its not some track record of past results that makes money-- only unsophisticated investors think this way. Rather its the robustness of the strategy for the future.

Thirdly, who is your 3rd party administrator? After Madoff, trust has left the business -- you need a respected 3rd party administrator.

surf

Good points. Thanks for the comments.

 

[Erick Gomez]

Starting a Hedge Fund isn't something you start from trading a personal account. It's like fantasizing to be a Formula One driver while driving the kids to school. Most people who start hedge funds already have experience (and seed Money of several tens of millions) from managing money in an institutional setting. The compliance requirements are enormous.

However, the easiest route to managing other people's money in the least constrained manner from a strategy and regulatory perspective will be as a managed fund service (account linking) or as a CTA/CPO.

Even then, you better think long and hard if your making money consistently with a solid strategy. Another way to leverage your expertise is to form a trading group.

What it would be the benefit of creating a trading group? Because the main idea it is to be able to raise capital to increment the management assets.

 

[xandman]

LoL. Trading Group? I don't remember why I said that. Perhaps, I meant joining a prop group for capital.

Pooling of resources and assets to get institutional access is the only thing I can think of now. For all I know, you could be extremely wealthy already.