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My experiences as a Hedge Fund Startup
- Thread starter HFStartup
- Start date
I do know something. Here are the facts:
The guy has blown a few accounts with a prop trading firm. He claims he does not know how to "daytrade" and has failed at it.
He has no real trading experience except for this "system" that he talks about. Now he wants to start managing money after blowing the account at the prop firm because his "system" for the last few weeks has been successful. Now he wants to manage 100 million dollars because he went long some technology stocks and got luck these last few weeks.
I believe I got all the facts straight and know enough. This thread is so "ET". Its something that can only happen here in fantasyland. Hey, its good to talk and bs on the internet, but dont try this in real life fellahs...
The guy has blown a few accounts with a prop trading firm. He claims he does not know how to "daytrade" and has failed at it.
He has no real trading experience except for this "system" that he talks about. Now he wants to start managing money after blowing the account at the prop firm because his "system" for the last few weeks has been successful. Now he wants to manage 100 million dollars because he went long some technology stocks and got luck these last few weeks.
I believe I got all the facts straight and know enough. This thread is so "ET". Its something that can only happen here in fantasyland. Hey, its good to talk and bs on the internet, but dont try this in real life fellahs...
Quote from retaildaytrader:
I do know something. Here are the facts:
The guy has blown a few accounts with a prop trading firm. He claims he does not know how to "daytrade" and has failed at it.
He has no real trading experience except for this "system" that he talks about. Now he wants to start managing money after blowing the account at the prop firm because his "system" for the last few weeks has been successful. Now he wants to manage 100 million dollars because he went long some technology stocks and got luck these last few weeks.
I believe I got all the facts straight and know enough. This thread is so "ET". Its something that can only happen here in fantasyland. Hey, its good to talk and bs on the internet, but dont try this in real life fellahs...
Why are you such a loser? Stop posting in this thread, you do not even have the absolute minimum IQ to read what the poster wrote.
HFStartup, I sent you a PM.
HFStartup, I wish you best of luck in your quest to start a fund. I have a question for you or anyone else that may know the answer to this. If you are trading a"friends and family account" or an incubator fund...is there anyway to be compensated directly from the accounts? It is my understanding that one cannot be compensated w/o a true HF or a RIA. I just started trading some friends and family money, and I have no intention of making a pesonal profit from them. I enjoy making them money and they are very clear of the downside risks (although if I ever have a down year I have much bigger issues than losing a little of their money). However, I'd like to have them help cover some of my expenses with the profits I am making them. Bloomberg, office rent, interent, newletters, websights, etc. Ideally, I would do something like first 10% is all yours, over that help cover my expenses, once those are covered profit is yours again.
I just cant see investing the time and money in setting up an incubator fund to get nothing in return other then hopes of raising assets (which I'm not so sure I ever want to do anyway).
Any thoughts on how to do this would be appreciated.
I just cant see investing the time and money in setting up an incubator fund to get nothing in return other then hopes of raising assets (which I'm not so sure I ever want to do anyway).
Any thoughts on how to do this would be appreciated.
Quote from trader987654321:
Any thoughts on how to do this would be appreciated.
Charge them a yearly subscription fee to be paid directly rather than from the investment account with, what I'm assuming is, comingled funds.
Figure out your yearly costs and apportion it equally or proportionally to their investment.
If they are unwilling to cover your costs then I question the advisability of investing their money for them.
I know I'm reviving an old thread here...Quote from trader987654321:
HFStartup, I wish you best of luck in your quest to start a fund. I have a question for you or anyone else that may know the answer to this. If you are trading a"friends and family account" or an incubator fund...is there anyway to be compensated directly from the accounts?
Im not clear whether the SEC has any exemptions in the equity world. In the futures world, the NFA/CFTC does offer exemptions. You can trade (and get paid) as a commodity advisor without full registration as long as the funds involved are small... I want to say sub $350k, but you should consult an attorney or the NFA directly for details.
I hope all of you are well. It has been awhile since I have posted to my thread, so I thought I would provide an update of what has happened since I started my incubator hedge fund.
My fund became active mid-August of 2010. I do not want to get into the details of my trading methodology because that is not what the thread is about. However, it is important to understand that for the most part, I trade options on a variety of equity indices based on entry signals generated by statistical models I have developed over the last several years. The focus of the trading is therefore on volatility and as many of you aware, things have been relatively calm and peaceful so volatility has been extremely low. In other words, I have had limited entries.
Since I was sitting in cash in such a low volatility market, I wanted to position the fund to take advantage of a mean regression in volatility I know will eventually occur by buying options. I also took the opportunity to experiment with various types of spreads and did some gamma hedging. There have been a few other techniques thrown in for good measure. I risked small amounts. Some ended up doing ok, but volatility continued its descent, resulting in losing positions.
Historically, I am an option seller. I like selling options because I like having time as an ally, so being an option buyer is a bit of an adjustment. However, I wish to maintain exposure to positive black swan events and so a buyer I must be (is that even proper English?).
Anyway, I finished the year down about 6.5%. Not the start I had hoped for! Historically, I always lose money in the beginning as I tend to enter falling markets. However, I have always out-performed the major indices by a minimum of 10%. This was a blow to my ego and also a reflection of my ability to manage money. I am pleased to note that 88% of those losses came from the experimental techniques I was trying rather than my primary trading methodology.
As an adjustment, I am greatly reducing the entry sizes for experimental trades. I have also substantially increased the time I spend in study. I have read some books lately that are outstanding, and I would highly recommend them. They are:
The Black Swan by Nassim Taleb,
The Volatility Edge in options Trading by Jeff Augen,
The Flaw of Averages by Sam Savage,
Trading Options in Turbulent Markets by Larry Shover
The first two blew me away!
I also had a setback when one of my investors ran into unexpected financial hardship and needed his money back, which I promptly did. Fortunately, his capital represented only a small amount of AUM and the majority of the fund was still in cash, so it wasn't a problem. I keep him posted on my progress and maybe some day he will choose to get involved again.
I also had the chance to meet with the investor that accounts for the bulk of my fund's AUM so that I could give him the bad news about my performance thus far. It was hard to do, but I wanted to keep him posted. He really didn't seem to care, as to him it is a negligible amount. Either way, I plan on keeping my investors well informed (not over trivial stuff) regardless of the type of news. Currently, I send out a quarterly report and everybody seems to be happy with that.
Other than that, it is business as usual. I am even more determined to make this a success than when I first started and I have been steadily bringing the account back to its starting point. Even though it is time consuming, I love doing it.
I thank all of you again for your positive ecouragements and constructive criticism.
My fund became active mid-August of 2010. I do not want to get into the details of my trading methodology because that is not what the thread is about. However, it is important to understand that for the most part, I trade options on a variety of equity indices based on entry signals generated by statistical models I have developed over the last several years. The focus of the trading is therefore on volatility and as many of you aware, things have been relatively calm and peaceful so volatility has been extremely low. In other words, I have had limited entries.
Since I was sitting in cash in such a low volatility market, I wanted to position the fund to take advantage of a mean regression in volatility I know will eventually occur by buying options. I also took the opportunity to experiment with various types of spreads and did some gamma hedging. There have been a few other techniques thrown in for good measure. I risked small amounts. Some ended up doing ok, but volatility continued its descent, resulting in losing positions.
Historically, I am an option seller. I like selling options because I like having time as an ally, so being an option buyer is a bit of an adjustment. However, I wish to maintain exposure to positive black swan events and so a buyer I must be (is that even proper English?).
Anyway, I finished the year down about 6.5%. Not the start I had hoped for! Historically, I always lose money in the beginning as I tend to enter falling markets. However, I have always out-performed the major indices by a minimum of 10%. This was a blow to my ego and also a reflection of my ability to manage money. I am pleased to note that 88% of those losses came from the experimental techniques I was trying rather than my primary trading methodology.
As an adjustment, I am greatly reducing the entry sizes for experimental trades. I have also substantially increased the time I spend in study. I have read some books lately that are outstanding, and I would highly recommend them. They are:
The Black Swan by Nassim Taleb,
The Volatility Edge in options Trading by Jeff Augen,
The Flaw of Averages by Sam Savage,
Trading Options in Turbulent Markets by Larry Shover
The first two blew me away!
I also had a setback when one of my investors ran into unexpected financial hardship and needed his money back, which I promptly did. Fortunately, his capital represented only a small amount of AUM and the majority of the fund was still in cash, so it wasn't a problem. I keep him posted on my progress and maybe some day he will choose to get involved again.
I also had the chance to meet with the investor that accounts for the bulk of my fund's AUM so that I could give him the bad news about my performance thus far. It was hard to do, but I wanted to keep him posted. He really didn't seem to care, as to him it is a negligible amount. Either way, I plan on keeping my investors well informed (not over trivial stuff) regardless of the type of news. Currently, I send out a quarterly report and everybody seems to be happy with that.
Other than that, it is business as usual. I am even more determined to make this a success than when I first started and I have been steadily bringing the account back to its starting point. Even though it is time consuming, I love doing it.
I thank all of you again for your positive ecouragements and constructive criticism.