my god to start your oWn fund is it possible?

[Ghost of Cutten]

Quote from mokwit:

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.

If you can bang out annual returns twice your drawdowns, you will trounce your overhead and money will eventually come to you. Yes you may have to go less conventional routes but so what? This is about starting a fund, not starting a fund in the same approved standard way as every other Tarquin from an I-bank.

As for overhead, if you can't beat 3-4% per annum you are no good anyway. Remember as a sole trader you have even higher hurdles to survive and grow. Living expenses and taxes are a much higher % overhead than any hedge fund in the world has ever paid or ever will pay.

 

[chimera]

i.m.h.o. that's not worth it.

STOP with the C.T.A. thing and trading family/freinds money etc..I am talking about a real company managing inst. money.

The only difference between rich and poor is your mindset.

Be happy with small money and that's what you'll create. Strive for millions and who knows.

----------------------------------------------------------------------------------
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.

 

[newwurldmn]

It's worth it if you are striving for millions. The hedgefunders who are rich got their by making consistent returns over years with other peoples money and then taking a bigger and bigger percentage of the fund each year.

Steve didn't start with 60% of SAC but he's going to end with it.

Quote from chimera:

i.m.h.o. that's not worth it.

STOP with the C.T.A. thing and trading family/freinds money etc..I am talking about a real company managing inst. money.

The only difference between rich and poor is your mindset.

Be happy with small money and that's what you'll create. Strive for millions and who knows.

 

[bln]

Not saying you should be happy with small money. But unless you do not have very good connections you have to start from the bottom and grow your business from there.

Forget about starting a fund with institutional money, they will not even look at you if you do not already have $100M AUM and a track record of minimum 5 years. Institutionals are also very picky with the background due diligence, you should have a degree from a Ivy Leage university and maybe had hold a previous position with a tier 1 bank.

Quote from chimera:

i.m.h.o. that's not worth it.

STOP with the C.T.A. thing and trading family/freinds money etc..I am talking about a real company managing inst. money.

The only difference between rich and poor is your mindset.

Be happy with small money and that's what you'll create. Strive for millions and who knows.

 

[PlinytheTrader]

Quote from bln:

Not saying you should be happy with small money. But unless you do not have very good connections you have to start from the bottom and grow your business from there.

Forget about starting a fund with institutional money, they will not even look at you if you do not already have $100M AUM and a track record of minimum 5 years. Institutionals are also very picky with the background due diligence, you should have a degree from a Ivy Leage university and maybe had hold a previous position with a tier 1 bank.

Speaking from experience working at an institutional fund, your analysis is spot on. We get numerous pitchbook requests every day from potential managers who want a piece of our business. Most managers have excellent performance and a solid presentation, however those are farther down the list in terms of importance for the fund. The biggest thing you need in this business are connections. If we haven't heard of the fund and other industry consultants we use haven't heard of the fund or the manager then your chances of getting a call back are very slim. Most funds that are successful at fundraising have deep connections and typically have ties to an investment bank or other large financial institution via prior work experience or direct sponsorship. Also institutional funds are fickle and typically want to invest in funds that other institutional funds are in. Its sucks for the small manager trying to make a name for himself because his ptichbook will get chucked in the recycling once we see fund assets of only $75 million and no other institutional clients, even though he has a 20% annual return since inception.

 

[chimera]

Sad place it is....so mr investor places his money with a so called professional money manager who then bases his decision on how well conncted the trader is not on his performance. Goes for amny professons though to be fair.

Forget trying to become a better trader, go to cocktail bars, talk, get p*** hire a few ladies and you'll be fine.

it's a bit of joke industry i.m.h.o.

 

[chimera]

lol....why is that?

rather be wrong and with the herd than right but against it?

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



so Its sucks for the small manager trying to make a name for himself because his ptichbook will get chucked in the recycling once we see fund assets of only $75 million and no other institutional clients, even though he has a 20% annual return since inception.

 

[PlinytheTrader]

Quote from chimera:

lol....why is that?

rather be wrong and with the herd than right but against it?

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



so Its sucks for the small manager trying to make a name for himself because his ptichbook will get chucked in the recycling once we see fund assets of only $75 million and no other institutional clients, even though he has a 20% annual return since inception.

There are a few reasons. One is definitely a herd mentality, but it more has to do with risk measures. If a manager only has $75 mil in total AUM, then many institutional funds will be scared away. The reason is that most funds have risk controls that limit position size in terms of overall % of that potential manager's fund AUM. Basically a fund doesn't want to make a $40 mil investment into a $75 mil fund, because their position would make up over a third of the entire fund. The fund I work for has around a 10% cap depending on what asset class or strategy, and we typically don't make investments smaller than $10 mil because its not worth our time and energy. This makes it a tough hurdle for small managers to go from say $25M-$150M in AUM to $Billions in AUM. This is why connections are such a big deal, they can help ease that transition if you know the right people.

 

[Ghost of Cutten]

This sloppy semantics can't go unchallenged. "Institution" just means any legal entity that is not an individual person. 2 friends who form an llp in their garage with 20k is an institution. An offshore money laundered slush fund from 3rd world oil ministers or narco-traffickers is an institution. Some rich guy's vanity fund is an institution.

You need to stop assuming that your particular tiny subset of the world's capital represents all the investment funds that can be tapped. If Madoff, Stanford, and other con artists can raise billions with nothing but a tight-lipped smile and hot air, then a genuinely good trader with a sound track record is only one skilled sales team away from raising millions. I have met and looked at the books of people who CAN'T trade for a living and who have raised multiple millions. So people who actually can trade profitably and consistently in a scalable way, can definitely raise money, so long as they don't listen to ill-founded naysaying from people who couldn't sell ice cream in the Sahara. No offence but the main true barrier to starting a fund is being able to make money trading the markets - everything else is a piece of cake, in comparison.

Quote from PlinytheTrader:

Speaking from experience working at an institutional fund, your analysis is spot on. We get numerous pitchbook requests every day from potential managers who want a piece of our business. Most managers have excellent performance and a solid presentation, however those are farther down the list in terms of importance for the fund. The biggest thing you need in this business are connections. If we haven't heard of the fund and other industry consultants we use haven't heard of the fund or the manager then your chances of getting a call back are very slim. Most funds that are successful at fundraising have deep connections and typically have ties to an investment bank or other large financial institution via prior work experience or direct sponsorship. Also institutional funds are fickle and typically want to invest in funds that other institutional funds are in. Its sucks for the small manager trying to make a name for himself because his ptichbook will get chucked in the recycling once we see fund assets of only $75 million and no other institutional clients, even though he has a 20% annual return since inception.

 

[Ghost of Cutten]

Quote from chimera:

Sad place it is....so mr investor places his money with a so called professional money manager who then bases his decision on how well conncted the trader is not on his performance. Goes for amny professons though to be fair.

Forget trying to become a better trader, go to cocktail bars, talk, get p*** hire a few ladies and you'll be fine.

it's a bit of joke industry i.m.h.o.

We shouldn't be rude to people who give us the inside skinny based on real industry experience. Don't hate the player, hate the game.

The way around this problem is don't try to raise capital from squares until you can tick their comfort boxes. If they were aggressive risk-takers they would be running funds not selecting them.