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Start-Up Hedge Fund Question
- Thread starter rjontrades
- Start date
Quote from AC3:
Further on C' Dudes point .... .
I should have clarified that you only need a series 3 if you want to trade futures and options (like I do). but its a good thing to have, you should get it anyway, even if you don't need it now, you might want to trade those in the future for your fund.
Assuming you can handle fund accounting yourself, 30K is the bare minimum for startup costs. 60-70K is more realistic. Licensing is different from state to state but with the way the hedge fund regulation is going, a Series 65, like CA, will soon be the requirement. If you don't plan to market/advertise your fund, hold yourself out as investment advisor, and have less than a dozen clients, you can argue that you don't need licensing. If you're going to actively trade your own account along side your clients or fund, you better have clear trading/allocation/compliance policies and good lawyers. You'll need them especially when your account is up 200% vs. -30% for the clients.
Quote from AC3:
Lastly, under these managed accounts the breakdowns of the trades are done automatically by the brokerage by %'s that U set up w/ them ..... U do a deal for a 1000 shares and boom as soon as its done its broken down and put into the respective accounts ... take the trade off no need 2 sweat the %'s its alldone
One question-- to protect again reverse engineering, can you hide your trades from your clients and just have TS report to them their equity curve / daily account balances?
Thanks,
-Taric
Quote from ptunic:
One question-- to protect again reverse engineering, can you hide your trades from your clients and just have TS report to them their equity curve / daily account balances?
Thanks,
-Taric
Good question and under that scenario (Managed Accounts) the ans is no ..... I understand your point completely .....
Quote from BrianLA:
Assuming you can handle fund accounting yourself, 30K is the bare minimum for startup costs. 60-70K is more realistic.
yes, you COULD spend $70 K, but you can easily do it for less. Here is a quick breakdown of the costs I have paid:
lawyers fees $7000
3 Florida company registrations $3000
NFA $1000
miscellaneous so far $1000
offering memorandum materials $1000
running total to date around $13,000
first year audit anticipated cost approx. $15,000
I will do the accounting myself the first year
anticipated first year costs around $30,000 total
the big difference is in legal fees, I got a great job done for $7000, but you can pay MUCH MORE for this if you go to certain places to get the work done
I too said it could be done for 30K. Heck, if you use Prepaid Legal Svc. , HR Block, and run the fund out of your apt, you probably can put the whole thing on your Amex. With 500K and 1 customer, the easiest way to generate income without all the hassles is having the customer giving you trading autho. on his acct. and a profit sharing agreement
Quote from canadian_dude:
I have recently been in the exact same situation as you. I was a successful trader who wanted to start a hedge fund. I am now in the final stage, all legal work complete, and in the process of raising capital.
yes, you can trade your own account on the side, that is legal. Here are other things to consider in my opinion.
The best thing to do is get that fund started, the sooner the better, so you will have an audited track record. Then if you continue to have great results, the fund will grow, your audited results will easily attract new capital.
But $500 K is not enough to start a hedge fund, I won't consider doing it until I have at least $1 million, preferably a bit more than that. Here is why - your fixed costs will cut into your first year results too much.
You can keep costs low, but I have already faced $12 K in costs before even talking to the first potential investor. That is just reality. Assuming the fund starts trading, the first year audit will cost about $15 K, so that means almost $30 K in fixed costs the first year, and that is if you minimize your costs. Many funds spend $75 K in the first year.
Now $30 K as a percentage of $500 K is 6%, that is a very large hurdle to have to overcome, it means your results are dragged down by 6% before you even start. But if you traded $1 million, it would only be 3%, on $2 million its only 1.5%, etc.
Yes, you will have to put in your own money too, otherwise why would anyone else.
If you haven't got your series 3 yet, go out and get it now, that is the first step to starting a fund.
If you need further info, send me a private message and I can give you further advice.
Hi,
I am interested in what makes you confident to take this path of setting up your own hedge fund. Do you have a track record? Do you trade mainly equities or futures/options and do you intend to trade foreign markets or currencies. Also, are you trading a system and is this system automated?
Thanks
Quote from LoosenUp:
I am interested in what makes you confident to take this path of setting up your own hedge fund. Do you have a track record? Do you trade mainly equities or futures/options and do you intend to trade foreign markets or currencies. Also, are you trading a system and is this system automated?
Thanks
I have a personal trading track record, each trade I have ever made has been documented, but not audited. I trade index futures. I have a set system, but its not automated, I have to enter the trades. The fund will only trade the systems I can scale up sufficiently enough for a fund.