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

Quote from TradStSOX:

Can you tel us your rt cost on E's? or PM me if you prefer. I could by all means compete with the majors, they have the cost edge over us and we have the maneuverability edge over them where we can see their cards but we don't have any for them to benefit from lol.
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Give me a call, we can chat a bit. Mention this thread (old man here, bad memory, LOL).

702.739.1393

Don
 
As Arnie Spanier would say:
MY TURRRRRRRRRRRRRNNNNNNN!!!!!!!!!!

In the HF vs Prop arena:

1. Prop trader DOES NOT get to run his own business 100%. In that Prop trader MUST follows the rules/procedures laid down by his firm. Examples: Such as how many shares he can own per position, such as how much of a lost per position until Prop firm tell him to sell and other laws/rules Prop places on their traders.

2.This 100% payout. The main issue to consider is the NET PROFIT to the Prop trader. Prop trader has to pay to the prop firm “ALL EXPENSES” commish, interest, desk fees all “Other FEES”. The Beauty of hedge fund all cost are pay out of the hedge fund.

Other previously discussed issues are:

3.HF trader can trade in any area he thinks his fund can make money.

4.Have a negative year in Prop must find a job next yr. Have a negative year in HF. hopefully next yr will be better.

The ONLY REASON and the ONLY REASON why most Prop traders don’t go HF is yes It is difficult to raise capital . The other disadvantage of HF: owner must deal with administrative issues.

In truth it is easier to START as a Prop trader than a HF trader.

HOWEVER, if HF is monitored by many of these Funds of Funds and his HF shows say 20% to 30% a year returns(about what some of Don Bright’s trader earn) then money would come pouring into his hedge fund.


IN RECAP: The benefits of being a HF trader clearly are better than a Prop trader: it’s just a lot more difficult to get started for HF, therefore many traders turn to prop trading.
 
Most often many good traders simply like to present to families, friends and others their (high quality) namecards printed with such as "Managing Trader of ABC Hedge Fund at ABC Capital", rather than "Prop Trader at XYZ Brokers". LOL. :D
 
Quote from timcar:

As Arnie Spanier would say:
MY TURRRRRRRRRRRRRNNNNNNN!!!!!!!!!!

In the HF vs Prop arena:

1. Prop trader DOES NOT get to run his own business 100%. In that Prop trader MUST follows the rules/procedures laid down by his firm. Examples: Such as how many shares he can own per position, such as how much of a lost per position until Prop firm tell him to sell and other laws/rules Prop places on their traders.

2.This 100% payout. The main issue to consider is the NET PROFIT to the Prop trader. Prop trader has to pay to the prop firm “ALL EXPENSES” commish, interest, desk fees all “Other FEES”. The Beauty of hedge fund all cost are pay out of the hedge fund.

Other previously discussed issues are:

3.HF trader can trade in any area he thinks his fund can make money.

4.Have a negative year in Prop must find a job next yr. Have a negative year in HF. hopefully next yr will be better.

The ONLY REASON and the ONLY REASON why most Prop traders don’t go HF is yes It is difficult to raise capital . The other disadvantage of HF: owner must deal with administrative issues.

In truth it is easier to START as a Prop trader than a HF trader.

HOWEVER, if HF is monitored by many of these Funds of Funds and his HF shows say 20% to 30% a year returns(about what some of Don Bright’s trader earn) then money would come pouring into his hedge fund.


IN RECAP: The benefits of being a HF trader clearly are better than a Prop trader: it’s just a lot more difficult to get started for HF, therefore many traders turn to prop trading.
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This is freaking so wrong its ridiculous. Let me start with the most obvious falacies:


<i>3.HF trader can trade in any area he thinks his fund can make money.</i>

totally wrong--- the trader needs to follow the mandates of the fund regarding style. willie nillie cowboy trading cross the board is not why investors invest in hedge funds. style drift away from the strategy the investor purchased is frowned upon and grounds for early redemptions or worse.


<i>4.Have a negative year in Prop must find a job next yr. Have a negative year in HF. hopefully next yr will be better.</i>

you can't be serious. have a negative year in a fund, investors pull their money, leaving you upside down with high overhead and negative cashflow. this must be one of the most naive' statements on et this year.

I could go on and on about this post, but i'll save that for later.


later from mela in NYC,

surf
 
Quote from timcar:

As Arnie Spanier would say:
MY TURRRRRRRRRRRRRNNNNNNN!!!!!!!!!!

In the HF vs Prop arena:

1. Prop trader DOES NOT get to run his own business 100%. In that Prop trader MUST follows the rules/procedures laid down by his firm. Examples: Such as how many shares he can own per position, such as how much of a lost per position until Prop firm tell him to sell and other laws/rules Prop places on their traders.


I think having a hundred investors and every regulatory body in thw world looking over shoulder, not to mention full disclosure financial audits every year makes Prop seem like a cake walk.

2.This 100% payout. The main issue to consider is the NET PROFIT to the Prop trader. Prop trader has to pay to the prop firm “ALL EXPENSES” commish, interest, desk fees all “Other FEES”. The Beauty of hedge fund all cost are pay out of the hedge fund.

I'm sorry, but do you really think the "hedge funde" (you) doesn't pay expenses? Much higher than mos most prop. And your profits are paid from net anyway, right?


Other previously discussed issues are:

3.HF trader can trade in any area he thinks his fund can make money.

4.Have a negative year in Prop must find a job next yr. Have a negative year in HF. hopefully next yr will be better.

The ONLY REASON and the ONLY REASON why most Prop traders don’t go HF is yes It is difficult to raise capital . The other disadvantage of HF: owner must deal with administrative issues.

In truth it is easier to START as a Prop trader than a HF trader.

HOWEVER, if HF is monitored by many of these Funds of Funds and his HF shows say 20% to 30% a year returns(about what some of Don Bright’s trader earn) then money would come pouring into his hedge fund.

 Well, "maybe" just "maybe" but this is after all the hard work of the first year, raising money, etc. Like saying that after you've made a $million, then others will fund you. But, by then, you don't need it. Cart and Horse type of thing IMO.



IN RECAP: The benefits of being a HF trader clearly are better than a Prop trader: it’s just a lot more difficult to get started for HF, therefore many traders turn to prop trading.
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As always - "go for it" - whatever works for you. We'll be here if you decide you need/want to trade with us.

All the best,

Don
 
My TUUURRRRRRRRRRRNNNNNNN!!!!!!!!!!

Again

Yes, Yes, Yes and no doubt about it YES::: “It’s a lot easier to start as a Prop Trader than a HF trader SIMPLY BECAUSE one can put up a small amount of capital to trade with larger capital.”

If one is willing to work hard at the HF model one can make ssoooooooo much more money at it.

Let’s look at someone we all know and love MR. “MAD MONEY” MAD MAN James Cramer.

1. A HF trader can trade with as much capital as he can raise or his PB gives(he’s not limited to what the PROP FIRM gives him). Look at Cramer his initial capital was small as he earn 20% to 30% year after year his trading capital balloon.

2. Cramer traded relentlessly day after day, most PROP traders cannot daytrade like Cramer b/c each transaction comes directly out of the PROP trader profits.

3. Cramer owned his firm. He felt like it’s the “me vs the world’ is this why he got up so early, why he worked so hard, b/c he was in control of his own destiny.

The first two are the reason why HF is ssooooooooo much more profitable. Cramer is worth so much today by being a HF guy for these first two reasons.
HF guy can trade as much capital as he can get/obtain/acquire(either though more capital raised or increased from Prime Broker) and each trade is not immediately deducted from your P/L.

YES, the HF must give some earned % back to his investors YES. Does Prop trader give back some of his profits. Of course, in the form of all FEES the Prop firm can charge their traders.

To say you control your business(YES within the Prop firms outline) you get 100% of profits(YES after Prop firm takes its fees first) is not 100% correct. Some Props control their traders more, some Props give less then 100% profits, some Props payout once a month but that argument is for another thread.

Now nothing wrong with going PROP trader at Bright Trading, IN FACT they do provide a good in that they allow limited capital traders to trade with more capital and also provide some guidance on trading (DAMIT did he just say something nice about Bright Trading must be drunk LOL) but in comparison a trader can make ssooooooo much more money as HF guy vs PROP trader guy.

Give me HF trader over PROP trader every time YES!!!!!!!! Can I raise $10 million to trade tomorrow No!!!!!!!!
 
OK....we have teams who run hedge funds. They pay full retail commissions...have tried to move hedge funds to Bright, cannot. They pay 6 cents per share to Goldman vs. one tenth of that with us. Then pay themselves only 20%.

Do you really think HF trade for free? A lot of overhead involved. When you say "the fund" pays for it, and you're "the fund" then you pay for everything.

All the best,

Don
 
Quote from Don Bright:

OK....we have teams who run hedge funds. They pay full retail commissions...have tried to move hedge funds to Bright, cannot. They pay 6 cents per share to Goldman vs. one tenth of that with us. Then pay themselves only 20%.

Do you really think HF trade for free? A lot of overhead involved. When you say "the fund" pays for it, and you're "the fund" then you pay for everything.

All the best,

Don
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Not sure why your 'example' hedge fund is not able to move to a cheaper broker. I ran a hedge fund for a couple of years, traded the capital through a direct access brokerage firm, and was paying less than half of Bright's commission rate at the time (much lower than that, currently).

So, while it's easy to pick and choose worst case examples to highlight points that you might want to make, we should 'keep it real' by letting people know that hedge funds are able to get extremely competitve commission rates, as well.
 
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