Starting a Hedge Fund

Thanks for the site, Warrior...I'll check into that.

I had hoped this wouldn't turn into another one of Don's threads espousing all the many benefits of prop firms. As I've said on other threads in the past, I have nothing against prop firms and those who trade with them and I fully support those of you who choose to go that route.

To compare a hedge fund with someone trading at a prop firm is a real stretch to be nice about it. From the comments I've read here, most prop firms are largely daytraders. When you say that someone receives an "80% payout", you should explain the capital requirements in detail so that we can understand what you are talking about. I can choose not to put any of my own capital into the fund. With as little as 4mil under mgmt and a 10% annual return, I am making 6 figures with no risk of my own capital. Of course I will put a significant amount of my own capital into the fund.

This sounds more like an Amway pitch that I can walk into a prop firm and be given virtually unlimited margin and leverage and be allowed to keep most of my profits. No thanks, I've been to those seminars. If a prop firm wants to make a good investment of all that margin that you guys keep talking about, I'll soon have a website where they can invest some of that money for a nice return.
 
KTM--What is your background, what is your track record for 1yr 5yr 10 yr.--Why in the world would someone give you their hard earned money as opposed to a well established hedge fund or mutual fund with a well established reputation and provened track record.
 
Prop firm? "Payout"?
Work for yourself or for someone else?
If someone's capable of running their own business and they choose to work for someone else because it's easier, less risky, or pays more, well...... that's a mistake. It's a great country we live in where we're able to take calculated risks, and sometimes succeed.
 
My record is less important than the trust of those who would seek to invest capital with me. They trust me to invest their money as I would mine (and with mine). The goal of each investor may be much different depending on their personal circumstances. I took a number of years off from the markets and have only recently returned. In the eighties and early nineties I was very successful. After coming back, I lost money at first but am now averaging a bit under 6% a month for 2001. I realize that's not sustainable, especially with much larger amounts of capital. It's been a very good year.

To answer your question "Why would anyone invest with you as opposed to a reputable hedge fund mgr?"

I have never asked anyone to invest with me, nor will I. All of those who I "help" have come to me. The results spread by word of mouth. I won't divulge to anyone who I invest for or the returns because technically these are not my accounts (except for the one that's mine, of course). I could show someone my own account, but that's about it. All I wanted was a legal, professional way to help those who come to me - and a hedge fund seems to be the way to do this.
 
I have heard from so many people lately who are in the process of starting a "hedge fund." This term is mis-leading, and has been used to deceive people into giving money to someone to trade with. Why would anyone pay someone to trade for them? If the traders themselves were any good, they wouldn't need to use "other peoples money" OPM, to trade with. I have had a least a dozen calls in the last week...this must be the latest venture into the "snake-oil" pit.

And where in the world do they get people to put up this money...family? friends? (not for long).

If you're any good, put up $25K, use the firms' capital to trade with, and keep your profits (instead of charging a few points to your buddies). If you're not any good, then this may be a short term way to pay your bills, but extremely short term.

There may be a legitimate reason for starting a "fund" but I haven't heard of one yet.
 
Hi Don,

Could you tell us what type of flexibilty a trader has in holding overnight positions with your firm?

Can you hold positions for 1 week, 1 month, or longer?

What type of leverage would trader get in this case, 2x, 4x, 10x leverage?

What are the costs involved? Margin rates? Haircut fees?
 
Originally posted by Warrior
Hi Don,

Could you tell us what type of flexibilty a trader has in holding overnight positions with your firm?

Can you hold positions for 1 week, 1 month, or longer?

What type of leverage would trader get in this case, 2x, 4x, 10x leverage?

What are the costs involved? Margin rates? Haircut fees?
More...

Traders can keep 5x their equity overnight without asking anoyone. 1 day, 1 week, or more. Many traders use 30x equity (or more) for their positions. Haircut charges are free for hedged positions (any stocks, long and short) up to 6 times their equity. Minor fees for higher risk. See the website price schedule for (up to) 30x haircut pricing).

Warning** Warning**(ad coming>) We "listened" to everyone, both here on elite and elsewhere about what they wanted, so we: reduced NASDAQ fees (Penny or less,NO ECN fees), reduced haircut fees (lowest I've seen), reduced overall rates to everyone, reduced rent in office and remote, increased Remote Access (via our new "Bright-at-Home" trading platform), we have increased benefits for "trading groups" (to stop groups from trying to leave and wasting time and money forming new trading firms), so why (oh why?) would anyone trade anywhere else? :)

I'm looking forward to the standard rebuttles, but hey, it's a whole new year! :cool:
 
Don,

I asked the same question as Warrior back in the thread.
please do enlighten us asmuch as you can on the subject.

quote
 
Originally posted by QuoteBoy
can you give a quick refresher on haircuts.

thanks,
More...

Haircut is just another term for "risk charge." You are charged interest by the clearing firm for the actual cash you may use (cheap these days!), and then a "haircut charge" will apply form amounts used in excess of "xx" times your equity. Many traders are happy to pay the charge since they want to use so much capital at times...and if you're making $100K/mo, you don't mind paying $10K in haircut charges. 2% yr. or so isn't bad.
 
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