Setting up a mutual fund rather than private offering...?

H

heech

Any managers out there given some thought on setting up a mutual fund rather than a traditional private investment pool/fund?

I just always took it as a matter of faith that "mutual fund = heavy costs"... and that it only made sense for some huge amount of AUM. But I noticed this fund today, as referenced in a WSJ article quoting MIT's Andy Lo:

http://online.wsj.com/fund/page/fund_snapshot.html?symbol=AMFAX

Net assets of $0.10 mil?
 
Quote from heech:

Any managers out there given some thought on setting up a mutual fund rather than a traditional private investment pool/fund?

I just always took it as a matter of faith that "mutual fund = heavy costs"... and that it only made sense for some huge amount of AUM. But I noticed this fund today
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You're on the right track. There are low-cost plug 'n' play mutual fund registrations available nowadays via several vendors.
 
Quote from Rodney King:

You're on the right track. There are low-cost plug 'n' play mutual fund registrations available nowadays via several vendors.
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Is compliance a nightmare? I can run a one-man shop right now with my CPO. Am I going to have to hire an army of lawyers/accountants to do the mutual fund route?

And... the big question, am I limited to charging management fees, rather than sharing in gains?
 
Yes, you can't charge performance fees and a 2% management fee would be extremely high on a mutual fund, plus you would need to share that with whatever company you team with to launch.

Plus you have a ton more regulatory issues if you are offering a product to retail customers as opposed to QEPs.

5yr
 
Quote from heech:

Is compliance a nightmare? I can run a one-man shop right now with my CPO. Am I going to have to hire an army of lawyers/accountants to do the mutual fund route?

And... the big question, am I limited to charging management fees, rather than sharing in gains?
More...

If your intent was to offer an incentive-fee product, then mutual funds are problematic, although there are tricky workarounds.

Re "hire an army...", generally the answer is: no, that can be outsourced.

I realize now this thread would make more sense with fuller information from OP about his intended strategy, instruments, fees & etc.
 
I'm currently trading exchanged-listed commodity futures/options. I charge 0% management fees in my fund; I'm opposed to the idea in general, and more importantly, have enough of my own assets in the fund that I don't have a problem covering operational "expenses" out of hand. I charge 30% incentive fees.

All in all, sounds like I should stay with my current CPO route.

11-months into this, I'm so far pleased with my funds' performance... (3+ Sharpe, 65% annualized returns, 7% max DD). I'm just looking for an "easier" way to fund-raising.
 
I'm just curious but are you looking for a structure that will allow you to advertise your performance, so to speak? How have your experiences with fund raising gone so far and what are the obstacles to it with the structure you now run?

Quote from heech:

I'm currently trading exchanged-listed commodity futures/options. I charge 0% management fees in my fund; I'm opposed to the idea in general, and more importantly, have enough of my own assets in the fund that I don't have a problem covering operational "expenses" out of hand. I charge 30% incentive fees.

All in all, sounds like I should stay with my current CPO route.

11-months into this, I'm so far pleased with my funds' performance... (3+ Sharpe, 65% annualized returns, 7% max DD). I'm just looking for an "easier" way to fund-raising.
More...
 
Quote from bozwood:

I'm just curious but are you looking for a structure that will allow you to advertise your performance, so to speak? How have your experiences with fund raising gone so far and what are the obstacles to it with the structure you now run?
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Yes, advertising is one consideration. I've been advised to register as a CTA for advertising purposes, since then I can scream my numbers + name from the roof-tops. I didn't want to deal with the hassle of working with managed accounts... but I'm told I should just set the min account size at $5mm.

As far as experiences with fund raising... I'm not sure I'm one to speak. I haven't made much effort beyond returning calls and making sure I'm listed in the proper databases. I plan to attend a few more trade conferences in the next half year in order to get my business cards in a few more hands. I'm just really learning about that part of the business now.

Limitations with the CPO structure... one part that's frustrating is that unlike private equity funds, I'm not allowed to arbitrarily pay out finder's fees. Anyone that I pay a commission to has to be registered with the NFA as well.

Ideally, fund of funds will eventually figure out that I exist, that I deliver uncorrelated alpha, and then pile on. :)
 
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