How to start a hedge fund?
- Thread starter praetorian2
- Start date
virgin
the fee for performance can be whatever you want it to be. Steve Cohen has a hefty 50% fee if I remember right? He can charge that because he returns are that good.
Pre2
You are on the right track. One suggestion if you really want to get into trading. Make a committment to yourself to someday run a hedgefund.
Now start thinking what would it take to be one of the best ??
You might want to change part of your major to business management, if you are really serious about the fund. With the right performance will be able to hire the right people to help you.
such as .........someone to deal with investors (so you don't have to explain why you are buying this company or that)
someone to find new investors......
someone to do legal work...
rtharp
the fee for performance can be whatever you want it to be. Steve Cohen has a hefty 50% fee if I remember right? He can charge that because he returns are that good.
Pre2
You are on the right track. One suggestion if you really want to get into trading. Make a committment to yourself to someday run a hedgefund.
Now start thinking what would it take to be one of the best ??
You might want to change part of your major to business management, if you are really serious about the fund. With the right performance will be able to hire the right people to help you.
such as .........someone to deal with investors (so you don't have to explain why you are buying this company or that)
someone to find new investors......
someone to do legal work...
rtharp
Here is what I got today from RealMoney.com
RealMoney.com's WEEKEND BULLETIN
Promotion
Hedge Fund Conference
You're invited to a Forum for the Hedge Fund Elite! Oct. 7-9th - at the
Bellagio Las Vegas! If you are a hedge fund manager, a senior executive
connected with hedge funds or thinking of starting a hedge fund, your
presence at this high performance event is a professional necessity.
Click here for more info and to register:
http://ad.2clk.net/eclk;3279042;1729382256993567809;6159435;53416;;41154
I guess you will have to enter this URL manually.
RealMoney.com's WEEKEND BULLETIN
Promotion
Hedge Fund Conference
You're invited to a Forum for the Hedge Fund Elite! Oct. 7-9th - at the
Bellagio Las Vegas! If you are a hedge fund manager, a senior executive
connected with hedge funds or thinking of starting a hedge fund, your
presence at this high performance event is a professional necessity.
Click here for more info and to register:
http://ad.2clk.net/eclk;3279042;1729382256993567809;6159435;53416;;41154
I guess you will have to enter this URL manually.
hmm, rtharp, you wrote:
now that is not exactly accurate, is it, you cannot charge what you want in this biz to make it to the top, steve cohen has 1,3 billion in assets and has closed his fund to new investors, and charges more than double what is normal, while his employed traders are allowed to charge their own proprietary fees that range from 20 to 35%.
louis bacon, who charges the industry standard of 20% on net growth, ie not on recoveries from drawdowns, plus the normal management fee on assets under management , and is however unsurpassed in risk adjusted returns in the industry, managed to attract up to USD 10 billion, soros' quantum funds who had the same fee structure attracted up to USD 22 billion, ie in order to attract maximised assets under management that will still enable you to trade your style you will have to ensure a fee structure that is still amenable to large investors, and the latter do very carefully check cost structure vs risk adjusted returns to ensure adequate returns after costs, and basically the 50% that cohen personally charges just don't cut it vs other outperfomers such as bacon in the industry on a NAV basis.
cheers
now that is not exactly accurate, is it, you cannot charge what you want in this biz to make it to the top, steve cohen has 1,3 billion in assets and has closed his fund to new investors, and charges more than double what is normal, while his employed traders are allowed to charge their own proprietary fees that range from 20 to 35%.
louis bacon, who charges the industry standard of 20% on net growth, ie not on recoveries from drawdowns, plus the normal management fee on assets under management , and is however unsurpassed in risk adjusted returns in the industry, managed to attract up to USD 10 billion, soros' quantum funds who had the same fee structure attracted up to USD 22 billion, ie in order to attract maximised assets under management that will still enable you to trade your style you will have to ensure a fee structure that is still amenable to large investors, and the latter do very carefully check cost structure vs risk adjusted returns to ensure adequate returns after costs, and basically the 50% that cohen personally charges just don't cut it vs other outperfomers such as bacon in the industry on a NAV basis.
cheers
Just wanted to add a bit to this explanation of hedge fund fee structures.
Almost all funds have a feature called a watermark. This is so that they will have to recover losses and then go above them before they can earn a share of the profits.
For example if a fund loses 20% and next year makes 20% they probably will not earn any performance fee. This is a very investor friendly feature because theoretically a hedge fund can just see-saw from positive to negative really going nowhere in the long run, but chew through capital by earning performance returns.
This feature was widely cited for Julian Robertson's decision to retire. As you can imagine a 50% or even a 40% decrease is a daunting challenge.
It means that the fund will have to earn 75% - 100% (appx) before they will see one red cent of performance fees.
Many funds choose to close up rather than spend and spend in the hopes of one day reaching over the cliff they fell off.
This is yet another concept that anyone planning on opening a hedge fund should understand and accept.
Also.....many hedge funds have hurdle rates. Sometimes arbitrary (say 10% p.a.) and sometimes set at LIBOR + x%. As the name implies it means that the management would have to generate at least this amount before they earn any performance fee. Usually it is there to prevent investors from taking on massive risk, only to be given paltry returns, which are then shared with management of the fund because of the performance fee.
Almost all funds have a feature called a watermark. This is so that they will have to recover losses and then go above them before they can earn a share of the profits.
For example if a fund loses 20% and next year makes 20% they probably will not earn any performance fee. This is a very investor friendly feature because theoretically a hedge fund can just see-saw from positive to negative really going nowhere in the long run, but chew through capital by earning performance returns.
This feature was widely cited for Julian Robertson's decision to retire. As you can imagine a 50% or even a 40% decrease is a daunting challenge.
It means that the fund will have to earn 75% - 100% (appx) before they will see one red cent of performance fees.
Many funds choose to close up rather than spend and spend in the hopes of one day reaching over the cliff they fell off.
This is yet another concept that anyone planning on opening a hedge fund should understand and accept.
Also.....many hedge funds have hurdle rates. Sometimes arbitrary (say 10% p.a.) and sometimes set at LIBOR + x%. As the name implies it means that the management would have to generate at least this amount before they earn any performance fee. Usually it is there to prevent investors from taking on massive risk, only to be given paltry returns, which are then shared with management of the fund because of the performance fee.
Will they really arrest me. I trade drunk/hungover at least 2 days each week, and my performance isn't that hindered. It's just a fact of life when living next to the fraternity house.
