My CTA hired for a single manager CPO: What percentage should I ask for?

M

mgdpublic

A guy came to me and plans on starting a CPO pool with me as the single manager. He incurs the costs of setting up the fund, raising money, and admin. All I do is trade and research, but I have a 17 year track record of live profitable trading. What percent would you think is fair or at least standard for something like this? He is charging client 2/20. Thanks for your input.
 
At least a third of what he is getting to start, increasing as he builds his client pool, which will of course increase if you continue to turn positive results. Eventually, if you are the aggressive type, you can force him to give you the majority by threatening to walk away once he has built the business around your management.
 
You do not give enough info to give an accurate answer, it depends on the fund's expected size, also if you are exclusive to him or will still have other trading income outside but anyway... In our case a starting point for negociation would be 50 basis points on AUM + 10% of gains above LIBOR, high water mark also. We sometimes end up paying a manager more than that but it's a good starting point for negociating.
 
We are free to raise outside money and the expected amount of money under management is definitely unknown. His goal is $25mm under management within a year but he is probably very conservative.
I just spoke to a lawyer familiar with this space and he said that CTA's hired by CPOs typically take the full 2 and 20 after expenses and the CPO tacks on 1%. It seems odd though that he'd be taking all the startup risk, admin costs, and money raising responsiblities and only get 1% . Hell, tpm's get 20% of everything don't they? For the record he is offering me 40% of everything before expenses.
 
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