Leverage/financing into a CPO

H

heech

Hi there,

I've asked a variant of this question before. The answers were helpful but I probably didn't ask the question I wanted to. I'm back to try again.

Basically, I'm in the process of launching a hedge fund structured as a CPO.

I'm pretty risk tolerant with my own risk capital, so I'd want to use a pretty high level of leverage... but this can introduce some significant volatility. For the fund, I'm thinking I want to set it up for a lower level of leverage instead of forcing the higher leverage on all investors.

I've always heard that it's possible for sophisticated investors to "lever up" an investment into a hedge fund if they're risk seeking, instead of the hedge fund forcing it on all investors. Well, how does that actually work?

I know with a CTA I could use notional funding. I can't, with a CPO. What's the alternative?

Am I (as an investor into the fund) supposed to use some sort of debt-financing? Who'd provide that financing?
 
Quote from heech:

Hi there,

I've asked a variant of this question before. The answers were helpful but I probably didn't ask the question I wanted to. I'm back to try again.

Basically, I'm in the process of launching a hedge fund structured as a CPO.

I'm pretty risk tolerant with my own risk capital, so I'd want to use a pretty high level of leverage... but this can introduce some significant volatility. For the fund, I'm thinking I want to set it up for a lower level of leverage instead of forcing the higher leverage on all investors.

I've always heard that it's possible for sophisticated investors to "lever up" an investment into a hedge fund if they're risk seeking, instead of the hedge fund forcing it on all investors. Well, how does that actually work?

I know with a CTA I could use notional funding. I can't, with a CPO. What's the alternative?

Am I (as an investor into the fund) supposed to use some sort of debt-financing? Who'd provide that financing?
More...
Not to be rude but,
Are you nuts?

Get debt to trade with high leverage?

What you will do when you blowup?
And you WILL.
 
Quote from crgarcia:

Not to be rude but,
Are you nuts?

Get debt to trade with high leverage?

What you will do when you blowup?
And you WILL.
More...
Sometimes ET's like a sewing circle. Everyone's got an opinion.

My level of leverage is not "high". The fund I'm planning to launch will have a M/E ratio of 20%, but I'd like to leverage up my own investment into the fund to an effective M/E of 50%.
 
Quote from heech:

Sometimes ET's like a sewing circle. Everyone's got an opinion.

My level of leverage is not "high". The fund I'm planning to launch will have a M/E ratio of 20%, but I'd like to leverage up my own investment into the fund to an effective M/E of 50%.
More...

Is 20% an average or maximum?

if it is an average, how do you calculate your average M/E?
 
Quote from heech:

Sometimes ET's like a sewing circle. Everyone's got an opinion.

My level of leverage is not "high". The fund I'm planning to launch will have a M/E ratio of 20%, but I'd like to leverage up my own investment into the fund to an effective M/E of 50%.
More...
So you plan to borrow to trade?
In this already overbought market?

The leverage that options, or futures offer isn't enough to you?
 
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