How to start a Hedge fund?

[lovethetrade]

I always wonder why do people give these people money to gamble away?

That would be like you giving a stranger 50K to fly over to Vegas and spend a week there. They get all the fun and action, you just get the empty bank account. I cannot figure out why people hand HF managers so much money to underperform the index (At best) or lose it all.

Prestige and good marketing. Funds market themselves as institutional with a nice address and prospectus which instills trust.

Most people are their own worst enemy and deserve what they get. Sad but true.

 

[sle]

The problem is that for years already it is impossible to put your money in Renaissance. So what's the value for people who want these returns? Zero possibilities. So although you are right about the returns the example is useless, it is like hindsight trading.

That's a general problem. There are several multi-manager platforms out there that, to my knowledge, never had a losing month in 20 years. Pretty much all are closed to the outside investors.

At best, you can have only one out of two, good returns or good capacity. So, because of that, funds that are any good are almost always closed to the outside money (or have ridiculous fees) and funds that are actively raising funds are a dubious vehicle at best. It's not that different from any other variable commodity, from girls in high school to real estate.

 

[marketsurfer]

Prestige and good marketing. Funds market themselves as institutional with a nice address and prospectus which instills trust.

Most people are their own worst enemy and deserve what they get. Sad but true.

As the name suggests, hedge funds are to hedge your other holdings - not usually hedge themselves-although they can- they should be used as a non correlated hedge for your other assets-- Not as a stand alone only investment ideally. Diversification across hedge fund strategies is key if they are not used to hedge particular asset classes. This is why FOF's can make sense, along with custom designed portfolios of funds.

So, yes of course they may lose money when your other holdings are gaining. That's part of the purpose and of course, the chance for outsized gains.

 

[OddTrader]

Do you have:

a) talent
b) experience
c) knowledge
d) credibility
e) edge/alpha

HF is as much as a investing game an social game where you have to meet clients face-to-face to sell yourself and your capatibilities. It's more about trust and strategy than the historical performance.

If you really want to do this you can start your journey by register as a CTA, start your LLC, invest your own money and persuade family, relatives, friends and coworkers to invest money in your fund. Your first goal would be to get your fund above $1 million dollars in assets, next major goal is $10 million. Work hard and build AUM step by step.

Just curious: Why CTA? How CTA is related to LLC? How about CPO?

 

[OddTrader]

Is this fellow below the same guy?

Warren Buffett is all set to win a $1 million bet with this hedge fund
Institutional Investor

Christine Idzelis, Institutional Investor

Mar. 1, 2017

http://www.businessinsider.com/vang...1-million-bet-with-warren-buffett-2017-2?IR=T

“Though there are thousands of professional investment managers who have amassed staggering fortunes by touting their stock-selecting prowess, only one man — Ted Seides — stepped up to my challenge,” Buffet said in his letter, signed Feb. 25.

Hedge-fund manager concedes losing bet against Buffett but hints at ‘doubling down’

http://www.cnbc.com/2017/05/03/hedg...ainst-buffett-but-hints-at-doubling-down.html

Ted Seides admits to losing a 10-year bet with Buffett against the returns of the S&P 500.
Seides says "doubling down" today would be a better option.
"Investing in hedge funds is a bet against continuing bull markets," Seides writes in a Bloomberg story.

Lauren Thomas | @laurenthomasx3
Wednesday, 3 May 2017

And today Seides conceded defeat, writing about his experience on Bloomberg.

High hedge-fund fees weren't the only reason for the loss, either, Seides explains.

Seides lists other factors, such as price and risk, and argues Buffett won because he "actively" chose what turned out to be the best investment over the 10-year period: the S&P 500.

"My guess is that doubling down on a bet with Warren Buffett for the next 10 years would hold greater-than-even odds of victory," Seides wrote.

https://blogs.cfainstitute.org/investor/author/tedseides/page/2/

Alternative Investing: The Little Blog of Start-Up Hedge Funds
By Ted Seides, CFA

Ted Seides, CFA, shares 10 lessons he has learned from investing in small and start-up hedge funds.

 

[OddTrader]

Sorry pal no agreement there on fee structure, never heard of 0x10 or worst 0x5 until and unless some structured scaling is in place i.e. big sum broken into pieces with later portions charging less fees and incentives.

Do not know what you stand to gain from "disinformation" that would mislead a newbie and vulnerable "wanna be".

Some one mentioned Friends and Family and that is better way to go about rather than investing savings $100K into starting a HF going through all sorts of regulations etc.

Last time I heard was 0x0! Very generous offer!

Perhaps should consider starting a 50%/50% venture with investors who contribute funds while traders contribute trading skills! Trader then would share 50% profits generated.

 

[bln]

Just curious: Why CTA? How CTA is related to LLC? How about CPO?

Different regulations and registrations for CTA and HF. In a CTA the customers funds are segregated in different sub-accounts. In a HF the funds are co-mingled into one pool.

You still need a LLC ("registered company") to operate a CTA business. Still need lawyer and accountant (for the LLC).

CTA is good structure for a one-man operation. I have seen listed CTA's as small as $20,000 in AUM.

 

[OddTrader]

Different regulations and registrations for CTA and HF. In a CTA the customers funds are segregated in different sub-accounts. In a HF the funds are co-mingled into one pool.

You still need a LLC ("registered company") to operate a CTA business. Still need lawyer and accountant (for the LLC).

CTA is good structure for a one-man operation. I have seen listed CTA's as small as $20,000 in AUM.

My perception according to the books I read is both CTA and CPO are different structures of hedge funds.

Some CTA funds can be quite large in size.

For CTAs, the investors would have to take their own risks for uncontrollable losing positions that could cause unlimited loss?

How about one-man CPO?

 

[OddTrader]

As the name suggests, hedge funds are to hedge your other holdings - not usually hedge themselves-although they can- they should be used as a non correlated hedge for your other assets-- Not as a stand alone only investment ideally. Diversification across hedge fund strategies is key if they are not used to hedge particular asset classes. This is why FOF's can make sense, along with custom designed portfolios of funds.

So, yes of course they may lose money when your other holdings are gaining. That's part of the purpose and of course, the chance for outsized gains.

I think that investing in hedge funds solely for hedging purpose would be very well stated.

Speculating-type (hedge) funds perhaps should be properly called something else. May be simply called 'Speculating Funds'! D: