my god to start your oWn fund is it possible?

hi thx for that. It's what i suspected as well. unless you get to $100M+ it isn't going to be worth it.

Do institutions invest in offshore funds? Probably a stupid question. whats the red tape on them doing so?

offshore, sounds so many alarm bells. Scams, laundering, etc...

I was thinking for 100% tax free setting up in Dubai even....but not sure aboutt he reg's no that. Anytihng to get the expenses down.

-----------------------------------------------------------------------------------

I run my own fund and I use it to trade client assets. I can share some insight.

You have the onshore jurisdictions (USA, Luxembourg, Switzerland,...) and the offshore jurisdictions (Bahamas, Guernsey, BVI,...).

In the offshore jurisdictions it is much cheaper to open a fund. They all more or less have the same business model as they all compete with each other. Of course you don't get the same service or the same passporting options when you go offshore.

The rough figures for offshore funds are:
1. You need $15Mio under management to cover your fix fees.
2. Under $25-30Mio you will have a hard time getting banks/administrators to talk to you.
3. You need $80-100Mio to operate comfortably

You will need to pay (rough figures again):
1. $50-100k to create the fund
2. $15-30k/yr in taxes
3. 1%/yr in administration fees
4. 0.1%/yr in custodian fees
5. $15-30k/yr in director fees
6. $15-50k/yr in audit (depending on number of trades)
7. 0.1%/yr in various administrative fees

And then you obviously have brokerage fees (I pay brokerage fees as a % per year but that's because I have a limited number of trades).

Ninna
 
Quote from chimera:

hi thx for that. It's what i suspected as well. unless you get to $100M+ it isn't going to be worth it.

Do institutions invest in offshore funds? Probably a stupid question. whats the red tape on them doing so?

offshore, sounds so many alarm bells. Scams, laundering, etc...

I was thinking for 100% tax free setting up in Dubai even....but not sure aboutt he reg's no that. Anytihng to get the expenses down.

-----------------------------------------------------------------------------------

I run my own fund and I use it to trade client assets. I can share some insight.

You have the onshore jurisdictions (USA, Luxembourg, Switzerland,...) and the offshore jurisdictions (Bahamas, Guernsey, BVI,...).

In the offshore jurisdictions it is much cheaper to open a fund. They all more or less have the same business model as they all compete with each other. Of course you don't get the same service or the same passporting options when you go offshore.

The rough figures for offshore funds are:
1. You need $15Mio under management to cover your fix fees.
2. Under $25-30Mio you will have a hard time getting banks/administrators to talk to you.
3. You need $80-100Mio to operate comfortably

You will need to pay (rough figures again):
1. $50-100k to create the fund
2. $15-30k/yr in taxes
3. 1%/yr in administration fees
4. 0.1%/yr in custodian fees
5. $15-30k/yr in director fees
6. $15-50k/yr in audit (depending on number of trades)
7. 0.1%/yr in various administrative fees

And then you obviously have brokerage fees (I pay brokerage fees as a % per year but that's because I have a limited number of trades).

Ninna
More...




So, why not become a CTA instead?
 
Quote from chimera:

because I trade stocks! I said this many times.
More...

Your expenses are high. It depends on the level of sophistication your clients require. if you are trading just stocks and it's just yourself, you can keep your overhead and startup expenses low. You can run a 5MM fund and make it worth your while.

If you need to run a fund that's more "institutional" then your overhead goes up a lot. I think you can get by with a 10MM fund (to keep the business cashflow flat) if you are aiming to source from family offices. As you grow the business you will have to invest further into it but you can get positive operational cashflow from the get go.

Admin fees are only 1% if you don't satisfy an initial requirement or if you are doing active trading in many currencies or trading OTCs.

Admin and audit fees can be entirely avoided if you run SMAs.
 
Thanks for the post, however I don't like the idea of opining on what size is 'do-able' without knowing how well someone can perform. The raw facts from your figures are:

Setup costs: $50k-100k
Annual overhead: $45-110k + 1.2%

So, a wannabe needs to have enough size/performance to overcome $110k + 1.2% per annum.

Assuming all aspiring hedge fund managers can afford to plonk down (or raise) $100k to chase their dream, we can ignore setup costs. Therefore we can work out the ongoing performance drag from the annual overhead, for each level of fund size:

10 mill: 1.65%-2.3%
5 mill: 2.1%-3.5%
3 mill: 2.7%-4.87%

Add on base salary, office rent, assistant salary, marketing/fund-raising etc, I think we can safely assume costs will be at the upper bound rather than the lower.

So then it's all down to performance. A good trader can make enough to overcome 2.5-5% per annum drag, and investors will look at raw trading performance before overheads (since they are interested in future prospects), and after 1-2 years fund assets should increase if performance is good. So IMO you can still 'bootstrap' yourself into fund management if you are a good enough trader. Obviously it's better to raise more capital, but far more important is good performance. The idea you need 100m to start a fund is overly pessimistic.

Quote from nLepwa:

I run my own fund and I use it to trade client assets. I can share some insight.

You have the onshore jurisdictions (USA, Luxembourg, Switzerland,...) and the offshore jurisdictions (Bahamas, Guernsey, BVI,...).

In the offshore jurisdictions it is much cheaper to open a fund. They all more or less have the same business model as they all compete with each other. Of course you don't get the same service or the same passporting options when you go offshore.

The rough figures for offshore funds are:
1. You need $15Mio under management to cover your fix fees.
2. Under $25-30Mio you will have a hard time getting banks/administrators to talk to you.
3. You need $80-100Mio to operate comfortably

You will need to pay (rough figures again):
1. $50-100k to create the fund
2. $15-30k/yr in taxes
3. 1%/yr in administration fees
4. 0.1%/yr in custodian fees
5. $15-30k/yr in director fees
6. $15-50k/yr in audit (depending on number of trades)
7. 0.1%/yr in various administrative fees

And then you obviously have brokerage fees (I pay brokerage fees as a % per year but that's because I have a limited number of trades).

Ninna
More...
 
not to start but to get upto...any how aren't there easier ways to make some decent money? Like sell $2,997 trend trading courses? lol

----------------------------------------------------------------------------------
Obviously it's better to raise more capital, but far more important is good performance. The idea you need 100m to start a fund is overly pessimistic.
 
You can become a Registered Investment Advisor (RIA). If you have less than $25 mil under management, you just need to register with your state securities authorities and not the SEC.
 
Quote from Ghost of Cutten:

Thanks for the post, however I don't like the idea of opining on what size is 'do-able' without knowing how well someone can perform. The raw facts from your figures are:

Setup costs: $50k-100k
Annual overhead: $45-110k + 1.2%

So, a wannabe needs to have enough size/performance to overcome $110k + 1.2% per annum.

Assuming all aspiring hedge fund managers can afford to plonk down (or raise) $100k to chase their dream, we can ignore setup costs. Therefore we can work out the ongoing performance drag from the annual overhead, for each level of fund size:

10 mill: 1.65%-2.3%
5 mill: 2.1%-3.5%
3 mill: 2.7%-4.87%

Add on base salary, office rent, assistant salary, marketing/fund-raising etc, I think we can safely assume costs will be at the upper bound rather than the lower.

So then it's all down to performance. A good trader can make enough to overcome 2.5-5% per annum drag, and investors will look at raw trading performance before overheads (since they are interested in future prospects), and after 1-2 years fund assets should increase if performance is good. So IMO you can still 'bootstrap' yourself into fund management if you are a good enough trader. Obviously it's better to raise more capital, but far more important is good performance. The idea you need 100m to start a fund is overly pessimistic.
More...

If you are going after institutional money they pretty much won't look at you with less than USD100m and the appropriate 'infrastructure' - compliance officers etc. Also if you don't get to USD100m very quickly you are remaindered goods.

If you can tap HNW contacts agree the above conclusion is still viable but there are no '0 and 22' funds for a reason - you need the predictable cashflow from the 2% to pay the bills same as any business. All the funds I know about that were relying on performance to pay overheads have been through a world of pain.

Also it seems that after raising USD10m or so from contacts many get caught in a trap - they have invested all but are below critical mass and can't get there. One Manager told me he had not paid himself a salary since starting 3 years prior.

You will also spend a lot of time presenting to people who never come through in the end - if they are visiting funds it looks like they are doing their job.
 
Yes, definitely worth it to start and run a CTA operation if you are able to get the OPM (friends and family?). As long as money is separated and not pooled there is not much hassle and costs.

You will trade your own personal account anyway regardless if you have OPM or not, right?
Trades are replicated automatically to the slave accounts, not much extra work there.

I calculate a $1M AUM will give you ~$100,000 annual income (2-and-20). Enough to get going on if you are able to perform.
 
You must log in or register to reply here.
Back
Top