Quote from scottmotte:
Hi,
I am hung up on the question of software with regards to a new hedge fund.
.......
Advent provides good software.
In looking to start up a fund, you should consider a few things....
If you are starting an HF simply to trade money for a few individuals for a fee, then you are best served just opening a friends and family account with IB.
If you have grand illusions of running a $400MM fund then you'll need to get good at marketing or hire others whom are good marketers. Then when you've got the money, you'll likely want to hire a 3rd party administrator that will handle the coordination that your initial post was about.
In response to Don Bright's statements. I have no problem with him, but you should realize that he is selling something and his statements aren't totally correct.
Quote from Don Bright:
I have asked this of dozens of potentially good traders. "Why give away 80% of your profits, when trading with us will give you $millions to trade with, and you keep 100% of your profits, and don't have a bunch of friends and relatives and other investors breathing down your neck?"
Whether or not prop is better for you is extremely dependent on your style of trading. For certain strats an organization like Bright Trading would help immensely. For others, all it does is focus risk inherent in a large account onto the shoulders of a small trader. IOW, for many strats they aren't giving you $millions to trade with as he implies.
They are loaning you $millions on the basis that you don't lose any of it. You lose
YOUR money first. So if you have $100K and they let you leverage 20:1 and you lose 5% on the position, you are out of the game. They will not risk their own money.
In a $2MM hedge fund the same situation would still result in a $100K loss, but it would be spread out over many different clients. You personally would only lose $5K and you'd have the ability to recoup the losses for both yourself and clients. If you are a good trader that shouldn't take too long, and drawdowns are to be expected in this industry. 5% is by no means abnormal.
But he is right that you would have investors, friends, and family breathing down your neck. That is what comes with trading OPM.
That being said, if you've already raised over the $30Mil required to register (I think that's the amount, it may be more by now), then go for it, and I wish you all the best.
$30MM isn't required to register a fund. he got the statement backwards. A fund that passed a certain threshold level had to register with the SEC. That is no longer the case, and even when it was, it didn't really make much difference to guys like you.
You can start with as little as you want, but you really need to have a path outlined. If you are really small (<$1MM), you'll need to do all the administration yourself, and Advent is pretty good to do it with. If you're a bit bigger ($2-20MM) then there are several accounting firms that will handle your paperwork for you for a price. If you're above $20MM then I would consider a prime brokerage and 3rd party administrator to take some of the load off of you.
