Is having your own hedge fund good idea vs. staying as prop.

[Chuck Krug]

Quote from Dustin:

A good trader can get $10M from a prop firm. Why go through the hassle of opening a hedge fund?

you don't get 2% management fee at a prop

 

[on the money]

Quote from PhiSigmaIota:

It is nice to see some sarcastic grammer teachers in this community. English is my second language and I do have scarce time to write literary masterpieces when I am trading. I do believe my message is succinct.
You should be very clairvoyant as you assessed my academic and professional credentials from my quick message.

I still do appreciate to get more feedback from sincere ET members. THX

Yes, I am clairvoyant. You got that quick.

 

[PhiSigmaIota]

Quote from Don Bright:

If you planning on making money, it doesn't make much sense to both give away 80% plus another 50% for just $10mil. If you don't think you have a solid edge, then maybe.

I know I'm biased, but our guys can use $millions and keep 100% of their profits, it's up to them to develop their edge (with our help, of course).

Now, if it was $150 million or something, go for it, LOL.


Don

That is exactly what I am debating. Being a prop has many advantages.
The goal or the fund here is start with 10 mil., perform well in the first year and raise more funds and grow it to $150 mil with funds of funds money in 3-4 years.

 

[Midas]

Is it possible to do both, in other words trade a prop. account for income while you build the hedge fund?

It might be worth looking into.

 

[HotTip]

Quote from showyouwang:

I'd probably jump on this offer if I knew my strategies were scalable. There's a lot of flexibility with having that much capital.

Most important point to consider. At the onset a hedgefund has a much lower payback than staying on your own (unless someone does give you $100m+ at the start). But, the longer you show consistent performance, the more funds you should be able to raise, and eventually you'll get to a point where the return finally beats what you could get from staying independent. But, the crucial thing is how scalable are your strategies and what your anticipated annual ROC would be. I'd easily take a strategy that returned 30% annually but was scalable to $5 billion over a strategy that returned 100% but only scaled to $5 million.

 

[marketsurfer]

Quote from HotTip:

Most important point to consider. At the onset a hedgefund has a much lower payback than staying on your own (unless someone does give you $100m+ at the start). But, the longer you show consistent performance, the more funds you should be able to raise, and eventually you'll get to a point where the return finally beats what you could get from staying independent. But, the crucial thing is how scalable are your strategies and what your anticipated annual ROC would be. I'd easily take a strategy that returned 30% annually but was scalable to $5 billion over a strategy that returned 100% but only scaled to $5 million.

even if someone gives you 100million to start, you are only getting 2/20 if you are lucky, extremely lucky. ( mostly, for startups it's now 0/10 or worse) why not take the 100million and trade it on your own for much greater reward??

remember, im talking if you already have the money---hedge fund structure makes no sense unless you need to raise the money.

surf

 

[marketsurfer]

Quote from Midas:

Is it possible to do both, in other words trade a prop. account for income while you build the hedge fund?

It might be worth looking into.

why not trade your hedge fund at a prop shop taking advantage of the leverage without the primebroker hassles and requirements?


surf

 

[TradEStar]

Quote from Chuck Krug:

you don't get 2% management fee at a prop

True..but you don't ONLY get 20% to 30% of the profits made off trading the $10 Mil

 

[Don Bright]

Quote from PhiSigmaIota:

That is exactly what I am debating. Being a prop has many advantages.
The goal or the fund here is start with 10 mil., perform well in the first year and raise more funds and grow it to $150 mil with funds of funds money in 3-4 years.

OK, $10 million, keep 100% assume 20% return. $2 million per year. (We don't really use "Return on Investment" because it doesn't apply to actual trading, our traders make money based on their efforts, the money we let them use is simply another tool to use). We, of course, have traders who make that much.

$10million, 20% return, $2million profits before taxes....give away $1.6 million to investors, give away half of what's left leaves $200K. Quite a difference.

And, grow your own "hedge fund" that's exactly what our family has done over the years.

And, if you do "pretty well" then you still have a good track record based on what "investors" are looking for (beating the "street").

FWIW,

Don

 

[marketsurfer]

Quote from Chuck Krug:

you don't get 2% management fee at a prop

ya don't get it at a start up hedge fund any longer, either. unless you are very lucky!

surf