Set up a hedge fund without investment manager/advisor

[1245]

I think you are taking on unnecessary costs before you need them. If you were my client, based on your description, I would have you create an LLC for the family/friend money for developing your track record. Open a business checking and brokerage account in that name. Run your strategy. When you have a prospective investor for either a SMA or to start your hedge fund, then get your results audited. It will cost between $8K and $15K per year.

Then you can form either a hedge fund or RIA for your business and take on the extra costs. Most allocators doing due diligence for others like family offices or fund of funds, need the extra infrastructure. You can do it later from brokerage statements sent from the broker directly to the auditor.

Individual investors rarely require the auditor. An administrator is only needed for hedge funds before you accept outside funds, not before, to protect the joint monies and provide monthly reporting of income and fees.

1245

 

[oldtime]

Quote from marioeva:

Understood.

I am aiming at serious investors. I have already put decent amount of my own money into the account.

At this stage, I am only looking after trade record. I am willing to pay the fees to get it done properly. If I can save couple grands by delaying the unnecessary services, it will be great.

Because I have not started marketing yet and I am not accepting other peoples money, I do not think I need lawyer to write the offer memorandum or advise on tax issues. When I start marketing in the future, I will get a good lawyer to protect myself.

In order to get track record accepted by the serious investors, can I just give the auditor direct access to my trading account ? Do I have to hire administrator now?

Have I missed anything else?

Thank you.

yeah, you missed the part about making money

 

[marioeva]

Quote from 1245:

I think you are taking on unnecessary costs before you need them. If you were my client, based on your description, I would have you create an LLC for the family/friend money for developing your track record. Open a business checking and brokerage account in that name. Run your strategy. When you have a prospective investor for either a SMA or to start your hedge fund, then get your results audited. It will cost between $8K and $15K per year.

Then you can form either a hedge fund or RIA for your business and take on the extra costs. Most allocators doing due diligence for others like family offices or fund of funds, need the extra infrastructure. You can do it later from brokerage statements sent from the broker directly to the auditor.

Individual investors rarely require the auditor. An administrator is only needed for hedge funds before you accept outside funds, not before, to protect the joint monies and provide monthly reporting of income and fees.

1245

Thank you for the advice, very helpful.

I totally agree with you that I need to save the cost now and only pay for them when I am ready.

Do you think I can just trade in my current individual account without setting up LLC or busniess checking ? Thank you

 

[1245]

Quote from marioeva:

Thank you for the advice, very helpful.

I totally agree with you that I need to save the cost now and only pay for them when I am ready.

Do you think I can just trade in my current individual account without setting up LLC or busniess checking ? Thank you

I think if you're going to run a business, you should keep it outside your person account. You might also do trades for yourself that don't follow your strategy. Keep them separate. Having the LLC also enables you to run other expenses through it. I know someone that made his wife a partner in the LLC. That makes it a two employee firm giving them access to health insurance at the rate given to groups for 2-50 rather than the individual plans that are priced much higher. You can keep the non trading expenses separate from the returns.

 

[marioeva]

Quote from oldtime:

yeah, you missed the part about making money

haha, have spent more time to solve that issue, just not here

 

[marioeva]

Quote from 1245:

I think if you're going to run a business, you should keep it outside your person account. You might also do trades for yourself that don't follow your strategy. Keep them separate. Having the LLC also enables you to run other expenses through it. I know someone that made his wife a partner in the LLC. That makes it a two employee firm giving them access to health insurance at the rate given to groups for 2-50 rather than the individual plans that are priced much higher. You can keep the non trading expenses separate from the returns.

true but a) I do not big money left for other trades b) I am not a USA resident which means the expense cannot help me offset the tax

 

[savagemp5]

U know nothing about Hedge Fund, U shld just be a financial advisor.

- Do you have at least a small small amount of 10 mil of your own fund ? You said you trade own money, who's here in this forum that doesnt first trade their own money ?

- IB has portfolioanalyst, Var and some other very standard tools for HF. Obviously you do not know whats going on, self-awareness is 0. If its a simple tool that you don't even know, why would a rick investor pass u his money ?

- Whose so stupid to ask someone to audit and spend the money ? You audit for higher authorities, not for investors.

- So you want to run a hedge fund like you want to sell hamburgers, like 'now'. Do you expect Goldman or MS bankers to phone u or fly to your house to pitch you the latest Brazilian MuniBonds or gear you up to 100 mil 1:10 ??

 

[Peternam]

Quote from savagemp5:

U know nothing about Hedge Fund, U shld just be a financial advisor.

- Do you have at least a small small amount of 10 mil of your own fund ? You said you trade own money, who's here in this forum that doesnt first trade their own money ?

- IB has portfolioanalyst, Var and some other very standard tools for HF. Obviously you do not know whats going on, self-awareness is 0. If its a simple tool that you don't even know, why would a rick investor pass u his money ?

- Whose so stupid to ask someone to audit and spend the money ? You audit for higher authorities, not for investors.

- So you want to run a hedge fund like you want to sell hamburgers, like 'now'. Do you expect Goldman or MS bankers to phone u or fly to your house to pitch you the latest Brazilian MuniBonds or gear you up to 100 mil 1:10 ??

First learn some english before giving advice...

 

[savagemp5]

A no value add reply lol ?

Only ppl who cannot make money are interested in picking all these small mistakes. is that u ?