My account value reaches $600,000 for the first time; launching incubator hedge fund

Quote from tonyalva:

Truth be told. Performance is but a tiny factor in raising capital. If at all. I point you toward the multiple hedgees who blow up then raise twice the amount as they had prior to blow up. Seriously, talking about performance is for the naive wannabes. Everyone has great performance otherwise they wouldn't be contemplating starting an incubator (WTF?) fund. Sorry for the dose of reality. Now go back to play.
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I second what Tony says here. An area fund started with two fund managers and about $7M AUM capital 5 years ago. After 3 years of beating the market they were at $7M in AUM (a few $ had been withdrawn). They then added a marketing partner and in 2 years they are at $55M AUM.

Marketing, Marketing, Marketing!!!!

Not everyone in the world thinks like you or visits forums like this. The reason why ppl invest money in a fund is in part b/c of the returns, but alo in very large part b/c of marketing.

Good luck!
 
Quote from granville:

I second what Tony says here. An area fund started with two fund managers and about $7M AUM capital 5 years ago. After 3 years of beating the market they were at $7M in AUM (a few $ had been withdrawn). They then added a marketing partner and in 2 years they are at $55M AUM.

Marketing, Marketing, Marketing!!!!

Not everyone in the world thinks like you or visits forums like this. The reason why ppl invest money in a fund is in part b/c of the returns, but alo in very large part b/c of marketing.

Good luck!
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ace investment?
 

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Quote from nkhoi:

ace investment?
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No, these guys run a mutual fund actually. They did make one really smart move early on.. all the great managers in the industry were leaving to start hedge funds. They were going to start a hf, but b/c of the herd rushing into that market, they figured that they would do better remaining as a mf.
 
Shorting the VXX, shorting the 3x ultrashort ETFs, these are all strategies that seem to work 99% of the time but then a black swan happens and you blow up. You become fooled into thinking that you are generating alpha, but you are just picking up nickles in front of a steamroller..which works until it doesn't.

I too have been tempted into shorting these instruments in the past (and made some money) thinking that they are flawed instruments which will all eventually decay to zero. But the decay factor is a trade-off for their optionality. These instruments all have the ability to explode to the upside during periods of market extremes, such as the VXX +500% during Oct 2008.

The original poster seems to understand this blow up risk to some extent but, like another person said, he is mistaking beta for alpha.
 
FIRST MONTHLY UPDATE FEB. 28 2011

• My personal account value as of today’s close was $616,668. The account value in the beginning of the year was 569k.

• On the incubator hedge fund I have made some progress as well. I have formed the Delaware incubator LLP, Opened brokerage accounts for the Incubator, and partially funded the accounts. I expect to actively start trading positions on the 10th or 15th of March. My total cost of setting up the incubator was $1600… ($1400 for the guy that setup the incubator, plus $200 for Delaware fees..) I think that’s an investment that might be worthwhile.

• One strategy that I added last month was directly related to some of the comments of some professionals here regarding my short VXX positions. While I have stayed with my original strategy of consistently shorting VXX, I have added a 1 month call “back spread” as a disaster hedge; once those expire I plan to initiate another back spread. The nice thing about this hedge that it doesn’t cost me money and is capping my loss at 15k. I would love to hear your (constructive) comments on this addition.

(Part of the reason of adding this hedge despite my VXX position being a small % of my account, is some backdated hypothetical data showing how the VXX would have performed on 2007-2008, and in October 1987. While both have extraordinary and I wouldn’t expect anything like that very often. I thought it’s still a good idea to take it into my calculations.)

Thanks all of you for your constructive comments, I hope to have my monthly update posted March 3.
 
Quote from lazar206:

FIRST MONTHLY UPDATE FEB. 28 2011

• My personal account value as of today’s close was $616,668. The account value in the beginning of the year was 569k.

• On the incubator hedge fund I have made some progress as well. I have formed the Delaware incubator LLP, Opened brokerage accounts for the Incubator, and partially funded the accounts. I expect to actively start trading positions on the 10th or 15th of March. My total cost of setting up the incubator was $1600… ($1400 for the guy that setup the incubator, plus $200 for Delaware fees..) I think that’s an investment that might be worthwhile.

• One strategy that I added last month was directly related to some of the comments of some professionals here regarding my short VXX positions. While I have stayed with my original strategy of consistently shorting VXX, I have added a 1 month call “back spread” as a disaster hedge; once those expire I plan to initiate another back spread. The nice thing about this hedge that it doesn’t cost me money and is capping my loss at 15k. I would love to hear your (constructive) comments on this addition.

(Part of the reason of adding this hedge despite my VXX position being a small % of my account, is some backdated hypothetical data showing how the VXX would have performed on 2007-2008, and in October 1987. While both have extraordinary and I wouldn’t expect anything like that very often. I thought it’s still a good idea to take it into my calculations.)

Thanks all of you for your constructive comments, I hope to have my monthly update posted March 3.
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Corection. Thanks all of you for your constructive comments, I hope to have my monthly update posted "March 31st".
 
I think OP has crossed a line here. (he caused me to register...).
Anyone following the market & a drop of knowledge will attest that the VIX is something to just stay away these days. Last week we had the VIX climbing 30% in a single day.
Now for the OP to just state bluntly that he profited by going short with VXX is absurd at a minimum & foolish.

Do you really think we will buy in to this?
 
Quote from rodneywkr:

do you mind sharing who you used to set up the delware entity? I am in the market to do they same thing.

thanks
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No problem, I will PM you the info. Would you be willing to to share with us your history/Track record, size, strategy?
 
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