starting a fund...best structure?

[bolter]

Load_the_boat,
Prop desks generally will not profit from the amount of volume you're doing. They are however interested in showing regular trading profits - they have bosess to please and targets to hit like every other business. They are less likely to be less interested in a trader/style that experiences prolonged drawdowns. Go and talk to a few, see what they say. It will be a great experience.

Good luck.

 

[Load_the_boat]

Quote from segv:

My advice to you is to keep it very simple. Trade futures, equities, or forex, but not all three. You will have to satisfy very different regulatory requirements for each class of assets. This translates to direct cost in the operation of your fund. As a start-up you need to concentrate on costs and performance. With low costs and high returns, you can worry about other asset classes later. As the other poster said, managing a fund is more about business than trading. You cannot conquer the world all at once.

-segv

If that is the case maybe I should focus on futures possibly. I can always trade currency futures with the s&p's, oil, etc, etc as I would like a portfolio of markets that are uncorrelated.

 

[bolter]

You misunderstand meaning for prop. Firms like bright, echo, assent, carlin........are not prop, they are pro firms. Prop means their risk capital, not yours.

nana,
Exactly right! Prop=proprietary capital.

 

[segv]

Quote from bolter:

nana,
Exactly right! Prop=proprietary capital.

The definition of the term "proprietary" when referring to trading firms depends on the context. For example, the CME has a very terse definition of "proprietary trading" that requires an employee-employer relationship between trader and firm, along with no risk capital on the part of the individual trader. However, the term is widely used to refer to "arcades" and other such entities trading "in their proprietary interest" or "for their own account". Many firms calling themselves "proprietary" do not fit the CME definition. The point is that one needs to understand in detail the organizational structure of a particular firm before signing a membership agreement. Caveat Emptor.

In any case - The "proprietary" firms that I am acquainted with, those who do not require risk capital from the trader, also do not allow purely discretionary trading. They have lengthy training programs and expect you to more or less trade their methodology. Other "proprietary" firms , those that do require risk capital contributions, will allow one to trade as one pleases provided that the trading does not violate certain risk parameters. My previous comments were in reference to the latter definition of "proprietary" firms. There is overlap in either definition, the only hard and fast rules are with the regulators. The other poster who suggested interviewing at various firms would be a very "educational experience" was right-on. If you can get hired into a "zero-trader-risk" firm that will allow you to trade your discretionary methodology - by all means go for it!

-segv

 

[bolter]

Segv,
I did specifically use the term "prop desk". Anybody who has been professionally involved in this industry for a while will know exactly what I'm talking about. Hope this is clear.

 

[segv]

Quote from bolter:

Segv,
I did specifically use the term "prop desk". Anybody who has been professionally involved in this industry for a while will know exactly what I'm talking about. Hope this is clear.

I understand, bolter. I was just trying to be succinct and descriptive for everyone else who is not a professional involved in the industry.

-segv

 

[ElectricSavant]

Congratulations The USA is where the money is...

Quote from dac8555:

This is a little premature, but it doesnt hurt to plan early.

I have finally turned profitable...YEAH! and found my niche and methodology that works pretty damn well for me. Up about 30% YTD, and think i could maintain a decent track record based on the low risk of my strategy.

In three years...with a good track record, i would like to start a fund.

Here is the question...I am market neutral...and i hedge...so i cant be a mutual fund. Hedge funds are very restrictive in the way that they attract clientelle.....and i am overseas, so my ability to attract clients would be limited to marketing effforts (which are limited by hedge fund charters and rules). hedge funds charters say you cant market directly...if i understand correctly

does anyone know how i can set up an offshore fund where i am permitted to do marketing (only looking to attract about 10mm) in order to finds a client base?

each country is differet...should i stay away from te USA maybe? maybe look at people in Candada, Austrailia, europe?

 

[Hydroblunt]

Quote from dac8555:

This is a little premature, but it doesnt hurt to plan early.

I have finally turned profitable...YEAH! and found my niche and methodology that works pretty damn well for me. Up about 30% YTD, and think i could maintain a decent track record based on the low risk of my strategy.

In three years...with a good track record, i would like to start a fund.

Here is the question...I am market neutral...and i hedge...so i cant be a mutual fund. Hedge funds are very restrictive in the way that they attract clientelle.....and i am overseas, so my ability to attract clients would be limited to marketing effforts (which are limited by hedge fund charters and rules). hedge funds charters say you cant market directly...if i understand correctly

does anyone know how i can set up an offshore fund where i am permitted to do marketing (only looking to attract about 10mm) in order to finds a client base?

each country is differet...should i stay away from te USA maybe? maybe look at people in Candada, Austrailia, europe?

You must be joking. One would have to be very stupid to consider risking any money on someone that has barely a half year of profitability.

 

[nononsense]

Quote from bolter:

dac8555,
[]

It takes about 6 months and $US100K - $250K to establish a offshore fund in somewhere like the Caymans. On top of this you'll need to consider the following:

1. Marketing in the US will likely require a Delaware feeder fund - another $US50K - $100K.
2. You will need to [] find a prime broker.
[]

Would a US-based online broker open an account for your newly established Cayman offshore fund?

Any suggestions or comments?

 

[Batman28]

hmm.. hedge fund. it actually does sound realy sexy. but as someone mentioned, it is more of a business management than investment. the last you want is the business activity getting in the way of ur trading.

I actually like to own my hedge fund sometime in the future.

typical hedge funds have a top dady sitting at the top in 'command control' callin all the shots, with trader teams carrying out the battles..

I recently met a top hedge fund manager in London with $4billion under management.. you'd be amazed at how some of these people are.. he told me a little about hes investment strategies.. and hes pulled off 12% in the past 6 months. but let me tell you this guy does not even know who hes clients are. for marketing hes nicked a top noch ex-Lehman brothers sales manager.

to have true established hedge fund you need a pretty extensive team. although i know someone else who runs a 2-man hedge fund! but these are extraordinary traders.

there are traders who make money. who kill and eat the bones. then there are those who want to own something. own a fund - manage a fund. i suggest if you're really good simply employ a sales team and get them out to raise the capital for you. hedge funds are hardly regulated you hardly need much else..

ever heard of SAC capital? ran by Steven Cohen, - he took home $500million personal profit home last year. but again, the guy is not a salesman. he knows how to trade and he has the scariest trading team in US.

to open a account is pretty easy and many companies offer you all the required services, from middle office, clearing, etc..

anyways, ultimately, if you want to raise capital, drop a post at efinancialcareers.com for a some great sales candidate who can help you out. some of these dogs can sell anything.. dont worry if u aint heard of.. most hedge funds are capped and thus 'closed' for investment.. any new fund starting up can attract capital very easily.

so in short:

1. chose a location. in doesnt really matter where u settle really who cares.

2. employ a sales team in client-rich areas - e.g. london, NY, etc.

3. PERFORM. if u can manage 20%+ in the first year, you can raise 100 millions in months.


with any business start up u gotta put ur whole life into it. tke cre for now.