Starting a fund / raising capital

One question: If anyone knows, if you are licensed as a 65, how then, would you manage a 401k or an IRA and they pull fees off of that? Would the account holder be penalized?
 
Quote from Epic:

Both. With both the NFA and the SEC it is not required to disclose proprietary trading results. That is the entire point of the incubator fund. It supposedly allows you to classify a prop account as a discretionary account, which would then allow you to use it for performance history without having to abide by the 5 year prop disclosure rule.

Both of them have a rule stating that performance disclosure for prop accounts is not required, BUT if the manager elects to disclose ANY prop history, he must disclose ALL of it for the past 5 years. This is to prevent cherry picking of only the accounts with good performance.

What I'm suggesting is that the incubator can be a bad thing too. If you have a couple years of bad performance, you cannot simply start another one and act like the first one didn't exist. You also cannot start 5 of them and then run with the one that had good performance. This is because they are all considered discretionary accounts now, and by rule, you are required to disclose the performance of ALL discretionary accounts during the last 5 years that were managed by any of the fund's principals. Disclosure for these accounts is no longer optional.

The only way to get around this is if the offered fund itself has at least a 3 year history and at least 75% of the capital in the fund was people not affiliated with fund's principals. But if that is the case, then it is disqualified from being an incubator anyway.

I was also suggesting before that I think the whole "incubator" loophole is not gonna last very long. Examine the definition of proprietary results.

Any pool or account in which 50% or more of the beneficial interest is OWNED OR CONTROLLED BY;

1) the Advisor or any principal
2) an affiliate or family member of the Advisor.
3) any person providing services to the account.

It's just my opinion, but I think that those definitions clearly place the incubator account well within the realms of prop trading. The regulating bodies have been cracking down on fraudulent solicitation lately. They are being pressured to revise their regs to comply with the JOBS ACT, but the argument is that if they are going to allow everyone to advertise publicly, they must be more strict on adherence to the rules.
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I just saw a disclosure doc where a CTA formed an incubator fund and ran it with his own assets for the first year. In year 2 his own assets made up more than 50% of the fund. Year 3 and later clients assets made up the majority of the fund. He had to leave off the fund's track record for year 1 because it is categorized as proprietary performance. He displayed year 2's performance but had to disclose that fact that it is still "proprietary" since his assets made up more than 50% of the fund. Year 3 and on is displayed as discretionary client account performance.

No doubt the NFA dictated the presentation of the performance capsule. In my opinion this makes an incubator fund a worthless thing because it is nothing more than another proprietary account.
 
Quote from bwolinsky:

This is probably a scam. The drawdown is too low, as there is no fundamental strategy that could ever do that.
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Indeed. 87% return and 10% volatility = 8.7 in Sharpe ratio, virtually impossible with a fundamental strategy!
 
Quote from QuantWizard:

Indeed. 87% return and 10% volatility = 8.7 in Sharpe ratio, virtually impossible with a fundamental strategy!
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I also thought it is a scam but nonetheless the discussion that happened in this thread was quite informative. So, thanks to all the participants and especially to OP to launch such a well-thought out scam :D
 
Returns are 86% in 2011, 155% in 2012, with max drawdown of 8 to 10%. Year to date 2013 has been amazing, at +53%. I am particularly pleased with this given this was achieved only about 15% of profits coming from my non scaleable strategy, much less than prior years. Furthermore returns were achieved with less concentrated bets than prior years. I would say that I am quite surprised how well things are going, and that these returns are almost certain to be unsustainable.

I have posted a screenshot from IB's portfolio analyst before. I don't mind defending these numbers, I am quite proud of them. I don't really get a chance to brag about my returns other than to my mom. Bragging here anonymously is one of the few opportunities I get.
 
Quote from doublet83:

Returns are 86% in 2011, 155% in 2012, with max drawdown of 8 to 10%. Year to date 2013 has been amazing, at +53%. I am particularly pleased with this given this was achieved only about 15% of profits coming from my non scaleable strategy, much less than prior years. Furthermore returns were achieved with less concentrated bets than prior years. I would say that I am quite surprised how well things are going, and that these returns are almost certain to be unsustainable.

I have posted a screenshot from IB's portfolio analyst before. I don't mind defending these numbers, I am quite proud of them. I don't really get a chance to brag about my returns other than to my mom. Bragging here anonymously is one of the few opportunities I get.
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good job
 
Let me compete with you with my long/short strategy


Feb: 7.38%
March: 10.84%
April: -5.11%

Based on 300K funds

Well, I have to say that April max drawdown is at about 10%.
The first 2 weeks is really bad, since when market go down, long drops heavily, and short is rising, all contributed to a 10% loss.

Long/short is not immune. As see, things sometimes against you though hedged.
 
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