I have thought about this before, but you may need a prime broker for other transactions if the prop shop does not offer futures for example. Can you run an offshore fund (LTD) with US based LLC without a prime broker?Quote from marketsurfer:
why not trade your hedge fund at a prop shop taking advantage of the leverage without the primebroker hassles and requirements?
surf
Is having your own hedge fund good idea vs. staying as prop.
- Thread starter PhiSigmaIota
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Quote from TradEStar:
True..but you don't ONLY get 20% to 30% of the profits made off trading the $10 Mil
True..but when you have a losing year 20 to 30% of profits is zero and with a fund you still get the 2% management fee
yes, you don't "need" a primebroker with small relative capital regardless of structure. if you do go the prime broker route, i know most have high minimums and you will need someone/firm to introduce you if you don't meet their requirements--another layer of fees normally.
my solution would be to use several prop shops, if needed, untill you reach critical mass and want the services of a prime broker.
Quote from Chuck Krug:
True..but when you have a losing year 20 to 30% of profits is zero and with a fund you still get the 2% management fee
Agreed, that's why I said it's ok to run a hedge fund if you don't plan on making any money (not exactly a good career move, however LOL).
Don
What about that the prop shop that you work do not offer Futures trading? Because even though the fund will trade mostly equities, I would like to have access to round the clock financial futures trading.
So lets say you make the arrangement with the prop shop and open the hedge fund account, how would you do other transactions that the prop shop can not offer without the prime broker? Do you open another account with a futures broker aside from the main account? How does the mechanics work then(NAV calculation, clearence etc)?
Thank you for your assistance, I really do appreciate it..
Don,
This is not necessarily true. You can make an excellent living managing a hedge fund. Your earlier points are well taken but you also have to remember that it's hard to put a price tag on "owning your own business" and "being the boss." If you make your investors money they will love you for it and you will have more money coming in the door than you know what to do with. Like anything, it's a great responsibility but anything worthwhile requires hard work.
I could have taken the prop route and probably made more money but I have no regrets. If you start a hedge fund you will meet some very interesting people, and some very strange ones.
And...even if you do go prop I suspect you aren't going to walk in the door and have access to $10M of buying power. I would imagine you'd have to prove yourself for a few years before you get to that level? Perhaps I'm wrong, I don't know. Never traded prop.
With a hedge....make your investors money in the first quarter and you'll be swimming in inflows. No reason you can't charge 1, 2 or 3% and 20, 25, 40, and 50% on different profit levels. There's tons of money to be made in the hedge fund business.
This is not necessarily true. You can make an excellent living managing a hedge fund. Your earlier points are well taken but you also have to remember that it's hard to put a price tag on "owning your own business" and "being the boss." If you make your investors money they will love you for it and you will have more money coming in the door than you know what to do with. Like anything, it's a great responsibility but anything worthwhile requires hard work.
I could have taken the prop route and probably made more money but I have no regrets. If you start a hedge fund you will meet some very interesting people, and some very strange ones.
And...even if you do go prop I suspect you aren't going to walk in the door and have access to $10M of buying power. I would imagine you'd have to prove yourself for a few years before you get to that level? Perhaps I'm wrong, I don't know. Never traded prop.
With a hedge....make your investors money in the first quarter and you'll be swimming in inflows. No reason you can't charge 1, 2 or 3% and 20, 25, 40, and 50% on different profit levels. There's tons of money to be made in the hedge fund business.
Don,
A couple things that come into play here:
Not that I argue with you, but some things are unclear. In general, but specifically at Bright since you are the one responding here:
Does bright offer futures?
Secondly:
Prop Trader: Experienced trader with access to and uses 5 million, with 50k in account. He loses 60k in one shot. What typically happens? He's either done w/o added capital or buying power is reduced to didly(sp?) squat. Does Bright work differently than this typical prop situation?
Same trader but in fund structure: 5 million capital, loses 250k. What happens? He's still in business. He can go on as usual. What if he loses another 250k? He's still in business.
So there are benefits. Of course if all you do is compare 20% vs. 100% on = capital then you have an answer. But that's not the only issue. In this kind of prop you don't grow then from your 5mil capital to 150mil capital in various markets. Apples/Oranges as it pertains to the growth potential.
FD: Private/Prop
A couple things that come into play here:
Not that I argue with you, but some things are unclear. In general, but specifically at Bright since you are the one responding here:
Does bright offer futures?
Secondly:
Prop Trader: Experienced trader with access to and uses 5 million, with 50k in account. He loses 60k in one shot. What typically happens? He's either done w/o added capital or buying power is reduced to didly(sp?) squat. Does Bright work differently than this typical prop situation?
Same trader but in fund structure: 5 million capital, loses 250k. What happens? He's still in business. He can go on as usual. What if he loses another 250k? He's still in business.
So there are benefits. Of course if all you do is compare 20% vs. 100% on = capital then you have an answer. But that's not the only issue. In this kind of prop you don't grow then from your 5mil capital to 150mil capital in various markets. Apples/Oranges as it pertains to the growth potential.
FD: Private/Prop
Excellent points USA. This is another reason I went Hedge. My risk was pretty much zero. I could have blew out and started over with my own money and probably start another hedge.
Quote from ProfitTakgFool:
Don,
This is not necessarily true. You can make an excellent living managing a hedge fund. Your earlier points are well taken but you also have to remember that it's hard to put a price tag on "owning your own business" and "being the boss." If you make your investors money they will love you for it and you will have more money coming in the door than you know what to do with. Like anything, it's a great responsibility but anything worthwhile requires hard work.
I could have taken the prop route and probably made more money but I have no regrets. If you start a hedge fund you will meet some very interesting people, and some very strange ones.
And...even if you do go prop I suspect you aren't going to walk in the door and have access to $10M of buying power. I would imagine you'd have to prove yourself for a few years before you get to that level? Perhaps I'm wrong, I don't know. Never traded prop.
With a hedge....make your investors money in the first quarter and you'll be swimming in inflows. No reason you can't charge 1, 2 or 3% and 20, 25, 40, and 50% on different profit levels. There's tons of money to be made in the hedge fund business.
(Good discussion points)
IMO, being a fully independent, 100% payout, come and go as you please trader is being your own boss. Also, having "investors" is like having your mother watching every thing you do when you first start dating, LOL. We monitor risk of course, but traders can and do use $millions to trade with with a lot of discretion.
And, "make yourself money" and you can write your own ticket, more career options available.
Again, just the route my brother and I took. I, personally, had "investors" for about 3 months waaay back when, what a nightmare.
But, obviously "to each his own."
Don