Is this track record good enough to attract new capital

[jesseah]

It really depends on what kind of outside capital you want to attract. If you want Fund of funds or Institutional money forget it. They are not interested with assets so small (even if you had 50% returns for 5 straight yrs , I think woudl be near impossible to attract that kind of investor. )

With good returns like yours, Friends and family should be easy. Start there and word spreads, you could gain some real assets...

 

[the1]

That's not true. It depends on the connections you make and the returns of your fund. When I did my hedge fund I had a combination of friends, family, outside investors, and other hedge funds. The Hedge Funds I attracted were those who wanted to diversify their portfolios through other managers and other instruments. I managed funds for a precious metals hedge fund (equity) who wanted some managed futures exposure. I developed this connection through one of my individual investors.

Someone on this thread commented about the 20% drawdown one month. That's not that big of a deal as far as institutional investors go. What they will look at more closely is the explosive upside months. How were those returns generated? Was it simply a matter of favorable market conditions or did the OP use a lot of leverage? If you want to attract sophisticated capital you need to be ready to answer some sophisticated questions. On the surface, the OP's numbers look decent but my first question would be an explanation of the big upside months. There is a large deviation between monthly returns -- 14.26%. That is going to draw a lot of attention.

Quote from jesseah:

It really depends on what kind of outside capital you want to attract. If you want Fund of funds or Institutional money forget it. They are not interested with assets so small (even if you had 50% returns for 5 straight yrs , I think woudl be near impossible to attract that kind of investor. )

With good returns like yours, Friends and family should be easy. Start there and word spreads, you could gain some real assets...

 

[Dalmation]

No, returns are basically irrelevant when it cones to raising capital

Everyone has great returns otherwise they wouldn't be raising capital duh

What is your strategy? Why us it different than my other 1000 choices? Will it work in the future or does it depend on a fading edge?

Those are the questions real investors will ask-/ not track record

 

[the1]

Based on my experience, I couldn't disagree more. Money flowed into my fund during periods of positive returns and flowed out during periods of negative returns. I tried to counsel my investors that they should be doing the exact opposite but only a few listened. The ones who did listen performed the best. To the average investor -- even those who are very wealthy -- returns mean <b>everything.</b> Institutional Investors will dig much deeper but the average joe wants to know one thing -- how much did you make last year. Period.

Quote from Dalmation:

No, returns are basically irrelevant when it cones to raising capital

Everyone has great returns otherwise they wouldn't be raising capital duh

What is your strategy? Why us it different than my other 1000 choices? Will it work in the future or does it depend on a fading edge?

Those are the questions real investors will ask-/ not track record

 

[DT-waw]

Quote from the1:


Someone on this thread commented about the 20% drawdown one month. That's not that big of a deal as far as institutional investors go. What they will look at more closely is the explosive upside months. How were those returns generated? Was it simply a matter of favorable market conditions or did the OP use a lot of leverage?

Fully agree. If FoF allocates to 50-150 managers, 20% dd should not be a problem. Whats more important- will it make enough money to cover the (potential) losses of other managers? what are the chances the program will continue to earn? is leverage moderate?

 

[LEAPup]

Quote from Dalmation:

No, returns are basically irrelevant when it cones to raising capital

Everyone has great returns otherwise they wouldn't be raising capital duh

What is your strategy? Why us it different than my other 1000 choices? Will it work in the future or does it depend on a fading edge?

Those are the questions real investors will ask-/ not track record

True. I'm a performance only RIA. I often hear, "Why should I hire you?" If you get "Mr. Big Bucks" wanting in due to your returns, and only your returns, that is a recipe for an account that will go away via acat sooner than later.

Hint: calculate the Beta number for the portfolio you manage, and show investors why they will want you vs. the rest.

Good luck.

 

[jesseah]

Quote from the1:

That's not true. It depends on the connections you make and the returns of your fund. When I did my hedge fund I had a combination of friends, family, outside investors, and other hedge funds. The Hedge Funds I attracted were those who wanted to diversify their portfolios through other managers and other instruments. I managed funds for a precious metals hedge fund (equity) who wanted some managed futures exposure. I developed this connection through one of my individual


A start up fund now has virtually no chance of attracting any real institutional money at all. Maybe a mil or 2 from a personal connection after you start the fund with friends and family money. You were fortunate in your situation. What kind of AUM did you have and after how many years did institutions give you money? And What year was this? Did you market aggressively to hedge finds or were these just friends of investors?

 

[jesseah]

Also, I'm not trying to discourage anyone from starting up. Just pointing out the only real way to get seed capital for a fund these days is via friends and family. Unless of course you ran the prop desk at GS or have a track record at a top hedge fund.

 

[sle]

Quote from jesseah:

Also, I'm not trying to discourage anyone from starting up. Just pointing out the only real way to get seed capital for a fund these days is via friends and family. Unless of course you ran the prop desk at GS or have a track record at a top hedge fund.

Seems like a fair amount of money is chasing the fund community so this might be the right moment to start up a fund. This said, I am a portfolio manager in a billion+ fund, so my vantage point might be different.

 

[peilthetraveler]

2009 = 266% return
2010= 54% return

This is better than me as in 2009 I did 187% and 2010 42%. Of course if I invested with you after your management fees and if you took 20% of the profits off the top, it would be about the same as my returns.


Still, if you get set up, let me know what your minimum investment is.