And, as I said, good discussion, and to each his own.
Don
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Is having your own hedge fund good idea vs. staying as prop.
- Thread starter PhiSigmaIota
- Start date
And, as I said, good discussion, and to each his own.
Don
You do come across some investors who are, for the lack of a better word, "needy."
"Leave me alone or you're getting your money back" typically works. Maybe one of these days I'll quit doing the hedge and give you guys a call.
"Leave me alone or you're getting your money back" typically works. Maybe one of these days I'll quit doing the hedge and give you guys a call.
Quote from Don Bright:
(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
I think for equity day trading there are some major advantages for going the prop route in many cases.
Some of us fall into the category of doing longer-term futures/forex (no equities) trading (one trade a week for example). Assuming for various reasons one is unable or unwilling to day trade equities, I'm not sure what kinds of benefits prop firms can provide.
I've heard of a few futures prop firms. I think these mostly cater to teaching individuals the firms' own strategies to trade (frequently day trading futures/forex).
For the trader who falls into the category of wanting to trade longer-term using their own strategies in futures/forex, I would assume any prop arrangement would end up being very similar in terms to a hedge fund as far as 2/20 split more or less. It would basically be acting as a hedge fund incubator, and thus give roughly the same terms. This is just based on my limited research, correct me if I'm wrong please.
Some of us fall into the category of doing longer-term futures/forex (no equities) trading (one trade a week for example). Assuming for various reasons one is unable or unwilling to day trade equities, I'm not sure what kinds of benefits prop firms can provide.
I've heard of a few futures prop firms. I think these mostly cater to teaching individuals the firms' own strategies to trade (frequently day trading futures/forex).
For the trader who falls into the category of wanting to trade longer-term using their own strategies in futures/forex, I would assume any prop arrangement would end up being very similar in terms to a hedge fund as far as 2/20 split more or less. It would basically be acting as a hedge fund incubator, and thus give roughly the same terms. This is just based on my limited research, correct me if I'm wrong please.
Quote from PhiSigmaIota:
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..
you use an administror or you do it yourself. I'm not advocating going into a prop office but rather opening several prop accounts andtrading from your own office....remote trading.
good luck!!
My idea was also staying in the prop office, do the equity trading and use the office space. I have to use an administrator but I always thought I would need a prime broker for being able to trade other instruments that I would not be able to trade in the prop shop(i.e. futures)Quote from marketsurfer:
you use an administror or you do it yourself. I'm not advocating going into a prop office but rather opening several prop accounts andtrading from your own office....remote trading.
good luck!!
So the administrator basically calculates the NAV from the different trading accounts(equity& futures) on a daily basis?
I have remote trading option for a long time and I will continue to have it.
Typically, you have to do an incubator fund with your own money, under the watchful eye of an auditor. The cost is about 5k. I took a slightly different route. I did an incubator with a small number of investor's money and didn't do an audit until I had established myself and attracted larger clients. Clients who contribute sizable amounts to your fund will typically require an audit but when I needed one I was well equipped to absorb the cost. If you start a hedge fund small with understanding investors, using your own personal trading history, you will get where you want to go a little faster. At least that was my experience.
If you have X years experience trading prop you may be able to start a fund with 5M+ and have an easier time absorbing the costs of getting one started tho.
Funny thing....I applied to every prop shop on the planet (not bright, never heard of them at that time) and I couldn't get a bite to save my life. Now it seems all you need is a pulse and a bank account to catch on. Times have changed I guess.
If you have X years experience trading prop you may be able to start a fund with 5M+ and have an easier time absorbing the costs of getting one started tho.
Funny thing....I applied to every prop shop on the planet (not bright, never heard of them at that time) and I couldn't get a bite to save my life. Now it seems all you need is a pulse and a bank account to catch on. Times have changed I guess.
Quote from ptunic:
I think for equity day trading there are some major advantages for going the prop route in many cases.
Some of us fall into the category of doing longer-term futures/forex (no equities) trading (one trade a week for example). Assuming for various reasons one is unable or unwilling to day trade equities, I'm not sure what kinds of benefits prop firms can provide.
I've heard of a few futures prop firms. I think these mostly cater to teaching individuals the firms' own strategies to trade (frequently day trading futures/forex).
For the trader who falls into the category of wanting to trade longer-term using their own strategies in futures/forex, I would assume any prop arrangement would end up being very similar in terms to a hedge fund as far as 2/20 split more or less. It would basically be acting as a hedge fund incubator, and thus give roughly the same terms. This is just based on my limited research, correct me if I'm wrong please.
My idea was also staying in the prop office, do the equity trading and use the office space. I have to use an administrator but I always thought I would need a prime broker for being able to trade other instruments that I would not be able to trade in the prop shop(i.e. futures)Quote from marketsurfer:
you use an administror or you do it yourself. I'm not advocating going into a prop office but rather opening several prop accounts andtrading from your own office....remote trading.
good luck!!
So the administrator basically calculates the NAV from the different trading accounts(equity& futures) on a daily basis?
I have remote trading option for a long time and I will continue to have it.
Who is friedmaq?? I wrote this and it went under this user's name .. bizzarre???Quote from friedmaq:
My idea was also staying in the prop office, do the equity trading and use the office space. I have to use an administrator but I always thought I would need a prime broker for being able to trade other instruments that I would not be able to trade in the prop shop(i.e. futures)
So the administrator basically calculates the NAV from the different trading accounts(equity& futures) on a daily basis?
I have remote trading option for a long time and I will continue to have it.
Let's say you can make 15% per annum, with volatility of 30% above and below that figure - for example if you are a reasonable long/short stockpicker, or an average global macro trader.
Try living off that and then compounding it if you have a 500k account. If you borrow $10 mill from Bright, what if you have a down year? -15% and you are now in hock to them for $1.5 mill, not good.
A fund is clearly the way to go. $10 mill and you put your own 500k into it. Pay yourself 50-100k salary from the management fee, and if you deliver the returns then in 5 years you'll have made $10 mill in profit on the original capital, giving you say 2.5-3 mill in incentive fees. You will also have attracted more capital, so your fund will now be 50-100 mill. One 15% year gives you a 3 mill payday. Not bad.
Try living off that and then compounding it if you have a 500k account. If you borrow $10 mill from Bright, what if you have a down year? -15% and you are now in hock to them for $1.5 mill, not good.
A fund is clearly the way to go. $10 mill and you put your own 500k into it. Pay yourself 50-100k salary from the management fee, and if you deliver the returns then in 5 years you'll have made $10 mill in profit on the original capital, giving you say 2.5-3 mill in incentive fees. You will also have attracted more capital, so your fund will now be 50-100 mill. One 15% year gives you a 3 mill payday. Not bad.