managing accounts

[Aaron]

Quote from chinook:

Thanks Aaron for taking time to answer all of these questions. I wish you a trading year with minimal drawdown

My pleasure. I enjoyed the thread. Good trading to you, too!

 

[Manu]

Quote from Aaron:

SSF's are the odd bird -- half security, half futures contract. They were the motivating factor behind the Commodity Futures Modernization Act of 2000. And then they ended up not being nearly as successful a product as many expected.

I believe if you are a registered CTA you can consider SSF's to be futures contracts and don't have to worry about SEC registration as an investment advisor (as you would if you start trading equities for clients). You might call the NFA to ask for sure about this. Don't bother calling the SEC. The NFA is extremely helpful, the SEC is non-helpful.

Yes, Aaron, you're correct!!!
I just called the NFA, and the customer service represtative affirmed that for SSF trading, SEC registration is NOT required; it does however require some "online training" (sounds pretty benign).

 

[DarthSidious]

Quote from Aaron:

Hi chinook,

Schindler Trading is a sole proprietorship and the Schindler Fund is an LP -- no LLC's. The management fees from the Schindler Fund are earned income -- so I have to pay FICA but I get to contribute to a solo-401k.

The Schindler Fund profits, both for me personally (I invest in my own fund) as well as for the other partners, are reported to us as futures trading income on our Schedule K-1 (Partner's Share of Income, Deductions, Credits, etc.). Just like you get a 1099 from a broker, you get a K-1 from a partnership. We who are US taxpayers take the trading profits number from the K-1, put it on a Form 6781 where it gets split as 60/40 long term and short term capital gains.

Hi Aaron,

Great post. Provided exactly the information I was looking for, but let's try a concrete example here.

AceTrader runs SuperFund. SuperFund has
AceTrader's money $100k
Investor1's money $200k

AceTraders' comp is 2%/20%

End of the year, fund has made 151k profit; paid $1000 in data fees.

Let's simplify by using year end figures

Fund Assets = 300k + 151k = $451k - $1k = $450k

AceTrader's portion
A) management fees = 2% of $450k
B) perf. fees = 20% of $100k + 100% of 50K

A is "earned income" with FICA etc. tax payable. B is 60/40.

Is the math right? Anyone?

Thanks!