My experiences as a Hedge Fund Startup

[heech]

I'm not aware of the 50% limitation on institutional money... but it sounds very viable this is part of the new Dodd-Frank reforms just passed.

In any case, I've always been told institutions don't *want* to be more than 20% of your AUM. The legal regulation in this case isn't really an issue.

The only exception are probably seeder hedge funds which would be willing to put up to $25-50 mil for the right manager, but expect a substantial % of equity (40%).

 

[GekkoToBe]

Quote from heech:

In any case, I've always been told institutions don't *want* to be more than 20% of your AUM. The legal regulation in this case isn't really an issue.

The figure I've heard thrown around is 10%.

 

[Martinghoul]

I am not sure what sorts of institutional investors you might be referring to... In reality, there's all sorts and different groups behave quite differently. From what I know, apart from private investors (angel-like), the only other group that looks at startup funds is the FoF community. They're emphatically NOT nice to deal with, but they do "seed" funds, as many perceive that their business model is like that of a VC. Moreover, some are convinced that return on capital is a lot better with smaller startup funds, rather than with large established ones. Obviously, all would depend on your strategies and whether it fits their portfolio. Finally, I'd say that the caveat might be that you're still too small to be on their radar screen, but who knows.

 

[trader3cnd]

Quote from HFStartup:

Einstein was right when he said everything is relative!

I have to warn you that any references to Einstein from people who do not understand his work - like you obviously - are a widely accepted sign of a crank or a troll. This is not my invention; it is a well-known rule in science. So if you want to be taken seriously, then try to avoid any references to Einstein.

As far as your experiences, they are below average. You have conveyed no new and useful information to anyone who is looking to start a hedge fund other than documenting your frustrations. There is nothing special about it. I expected much more and I was really disappointed. I was also surprised by your reference to doubling an account and then losing it all. This sounds like someone who had no concept of risk and money management yet that person wanted to manage the savings of other people.

 

[RockMachine]

Quote from trader3cnd:

I have to warn you that any references to Einstein from people who do not understand his work - like you obviously

So this fella, a self described man of faith has a goal to manage assets of others. Not only does he get rejection for yrs. but also
blows up and comes back for more. On paper HFstartup is a nobody but so am I! I started my fund 2.5 yrs. ago and recently
got my first customer. Look at our history, we as Americans were created by people of faith. On paper we do stupid things like donating more to the needy around the world then anyone else. We have people that run into burning buildings to rescue those in need.

The experiences this fella has lived are real and inspiring to those of us who haved tried the same thing. Caution should be taken by others not to ridicule him, why? because he might decide to no longer share and expand on this topic. People like him have a simple model= "Never give up" U-S-A

 

[HFStartup]

Quote from trader3cnd:

I have to warn you that any references to Einstein from people who do not understand his work - like you obviously - are a widely accepted sign of a crank or a troll. This is not my invention; it is a well-known rule in science. So if you want to be taken seriously, then try to avoid any references to Einstein.

As far as your experiences, they are below average. You have conveyed no new and useful information to anyone who is looking to start a hedge fund other than documenting your frustrations. There is nothing special about it. I expected much more and I was really disappointed. I was also surprised by your reference to doubling an account and then losing it all. This sounds like someone who had no concept of risk and money management yet that person wanted to manage the savings of other people.

Trader3cnd, you are absolutely right! I really know very little about Einstein or physics for that matter. In fact, I made that comment as a joke. Based on your reaction, I may or may not make it as a hedge fund manager, but I definitely won't make it as a comedian...

As for my experiences and whether they convey new and useful information, all I can say is that there is nothing new under the sun. I wouldn't make the claim that I or my hedge fund are anything special or unique.

However, you made a point which I feel is very important to address, and that is concerning the loss of my trading capital...There is something called the "Trader's tuition." The term Trader's tuition refers to the large losses that traders make on their way to becoming better traders. Often these losses result in depleted accounts (as was mine). It is typical for almost every trader that survives long enough to stay in the game to go through this process because it seems to be the best teacher. Without a healthy respect of the markets and risk management, a trader will never excel. Though unpleasant, I have been enriched as a trader because of these experiences. Please note that all my losses and experimentation were done with my own money and I (and my family) absorbed all of the painful consequences for those losses. They are not something I care to ever repeat so I am very, very careful and never exceed leverage of 2:1.

Lastly, you wrote: "I was also surprised by your reference to doubling an account and then losing it all. This sounds like someone who had no concept of risk and money management yet that person wanted to manage the savings of other people." Once again, you are absolutely right and that was the point I was trying to make. I had NO understanding of risk management at that time. The losses I mentioned above changed my whole perspective and I now prioritize risk management before profits.

My intention in my original point was to simply point out my flaws and mistakes, not complain. I just want people to understand that I started out on the wrong foot in the hopes they may avoid it.

Thanks for your comments.

 

[OddTrader]

Quote from HFStartup:

Trader3cnd, you are absolutely right! I really know very little about Einstein or physics for that matter. In fact, I made that comment as a joke. Based on your reaction, I may or may not make it as a hedge fund manager, but I definitely won't make it as a comedian...

As for my experiences and whether they convey new and useful information, all I can say is that there is nothing new under the sun. I wouldn't make the claim that I or my hedge fund are anything special or unique.

However, you made a point which I feel is very important to address, and that is concerning the loss of my trading capital...There is something called the "Trader's tuition." The term Trader's tuition refers to the large losses that traders make on their way to becoming better traders. Often these losses result in depleted accounts (as was mine). It is typical for almost every trader that survives long enough to stay in the game to go through this process because it seems to be the best teacher. Without a healthy respect of the markets and risk management, a trader will never excel. Though unpleasant, I have been enriched as a trader because of these experiences. Please note that all my losses and experimentation were done with my own money and I (and my family) absorbed all of the painful consequences for those losses. They are not something I care to ever repeat so I am very, very careful and never exceed leverage of 2:1.

Lastly, you wrote: "I was also surprised by your reference to doubling an account and then losing it all. This sounds like someone who had no concept of risk and money management yet that person wanted to manage the savings of other people." Once again, you are absolutely right and that was the point I was trying to make. I had NO understanding of risk management at that time. The losses I mentioned above changed my whole perspective and I now prioritize risk management before profits.

My intention in my original point was to simply point out my flaws and mistakes, not complain. I just want people to understand that I started out on the wrong foot in the hopes they may avoid it.

Thanks for your comments.

Fair enough. Please keep sharing your experiences, good/happy or bad/sad.

Would you mind others to share their different experiences on your this thread?

 

[HFStartup]

Quote from OddTrader:

Fair enough. Please keep sharing your experiences, good/happy or bad/sad.

Would you mind others to share their different experiences on your this thread?

All are welcome to share their experiences if the postings will be of benefit!

 

[Chuck Krug]

My own experience from dealing with management companies.
They want you to bring at least 5 million and charge about 0.6%/ year.
This is to operate a fund under the umbrella of an existing fund management comp.

 

[Hydroblunt]

Quote from heech:

I'm not aware of the 50% limitation on institutional money... but it sounds very viable this is part of the new Dodd-Frank reforms just passed.

In any case, I've always been told institutions don't *want* to be more than 20% of your AUM. The legal regulation in this case isn't really an issue.

The only exception are probably seeder hedge funds which would be willing to put up to $25-50 mil for the right manager, but expect a substantial % of equity (40%).

I'm actually told it's a FINRA regulation and the number may be 10% although 20% sounds more correct. However, most FOFs institute tighter standards on themselves and 10% is normal.