Starting a Hedge Fund

Don,

Thanks for the response. I see on your website that there is a 1% per month charge on naked positions above 2X equity. I take it this is above and beyond the regular margin costs?

I agree with you that sometimes a trader will be better off trading with Bright, Echo, Worldco, ect. I agree that it's much easier for most individuals to put up a small amount of money and start trading then to have to raise money from others. However, depending on the traders style a Hedge Fund may be appropriate.

1) Someone who is an intermediate term trader and does not want to hedge every position (which you charge 1% per month) may find a Hedge Fund structure a good way to go.

2) The main benefits are flexibility to invest in whatever you wish (I understand is a double edged sword).

3) A fee structure that gives investors a means of paying for "absolute returns" vs a traditional fund manager who charges 1.5% a year regardless of whether the investments went up or down.

I agree with ktm on the point that the reasons people will invest in Hedge Funds is a matter of trust at first. Even George Soros had to start somewhere!

Don I respect you and your firm and I appreciate your contributions to this site. I hope that we can agree to be open to both options! :D
 
Originally posted by Warrior
Don,

Thanks for the response. I see on your website that there is a 1% per month charge on naked positions above 2X equity. I take it this is above and beyond the regular margin costs?

>Read further, there are no "margin costs" ..

I agree with you that sometimes a trader will be better off trading with Bright, Echo, Worldco, ect. I agree that it's much easier for most individuals to put up a small amount of money and start trading then to have to raise money from others. However, depending on the traders style a Hedge Fund may be appropriate.

No, only Bright Trading ,not those other firms :-)

Hedge funds are never "appropriate" if you plan on making money (not "ROI")

1) Someone who is an intermediate term trader and does not want to hedge every position (which you charge 1% per month) may find a Hedge Fund structure a good way to go.

Not really, you are simply gambling with other peoples money, why not gamble with your own. If you pay 1% to us (or anyone else) is irrelevant..since you have to pay out 90% of the profits to the "investors"... If you simply risk your own ($25K), and make $250K it is the same as making 10% on $2.5 million (of investors money) from which you get to keep a small fraction.

2) The main benefits are flexibility to invest in whatever you wish (I understand is a double edged sword)
.
>>>Why not try roulette? Pai Gow? Craps? (I'm just trying to put this in perspective...If you think you have the ability to make money doing anything, simply do it yourself...and you don't have someone else to account to...and to sue you, look over your shoulder, and be a general pain in the xxx.)

3) A fee structure that gives investors a means of paying for "absolute returns" vs a traditional fund manager who charges 1.5% a year regardless of whether the investments went up or down.

>>> You are right to only pay $$ based on success rather than charge for services (I am on record with how I feel about that "criminal" activity).

I agree with ktm on the point that the reasons people will invest in Hedge Funds is a matter of trust at first. Even George Soros had to start somewhere!

>>> Suggestion: Just tell the people (investors) to pay you 10% of what they were going to invest with you, that way you make money, and they only lose 10%

Don I respect you and your firm and I appreciate your contributions to this site. I hope that we can agree to be open to both options!

>>>I am more than happy to be "open" to anything, it is just that "hedge funds" have become the new "pyramid scheme" or "ponzi" scheme for the most part. We have tried our very best to offer a logical alternative to anyone who actually believes that they can make money trading. Those that don't think they can make money trading will continue to "raise capital" by using any means necessary.

****Please trust that I am not at all directing this "rant" to you personally, and that there may be a reason to start a hedge fund that I have not heard yet (I doubt it)....and believe me, I have heard of a million ways for fools to be parted from their money, I just wish they would be done in another industry. Ours is already full of brokers, analysts, and other vermin....

Now to the smiley face!! :-) Feel free to call and chat, if we haven't already. And this hardly a "recruiting" post...since I probably have upset you...but I really hope not....
:):)
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Don,

I appreciate your response and I actually agree with you for the most part as I stated in my last post.

****Please trust that I am not at all directing this "rant" to you personally, and that there may be a reason to start a hedge fund that I have not heard yet (I doubt it)....and believe me, I have heard of a million ways for fools to be parted from their money, I just wish they would be done in another industry. Ours is already full of brokers, analysts, and other vermin....

Now to the smiley face!! :-) Feel free to call and chat, if we haven't already. And this hardly a "recruiting" post...since I probably have upset you...but I really hope not....

>I agree that there are some really bad brokers, analyst, Hedge Funds and as you have admitted, trading firms. But there are also a few good ones out there in each of these areas.

p.s. I'm not upset with you at all! :)
 
Now I've had it.

You need not look outside your own organization for the snake oil salesman. Now tell me George Soros and Phil Cohen would be much better off trading with a prop firm like yours. I guess if they show up with 10B, you'd pump them another 30x just for the asking eh, Don.

You had my respect. You don't any longer. I respect prop firms as an entity but you give them a bad name. You are doing nothing but promoting your own firm and services here. You don't fully answer most of the questions put to you and you consistently put down any method of making money that is not the "Bright way". You show up a few months ago and already have almost 500 posts. This is turning into the Don Bright promotional board as you float from discussion to discussion taking over the direction of the dialogue and throwing in the prop firm cheerleading. You have your brainwashed minions helping you along, inviting you to chime in on every discussion and give us the "Bright opinion".

I started this thread to seek out some software to help manage my back office. I have said earlier that I never asked anyone to give me money to invest for them and that I never will, yet all you do is promote yourself and recruit for your firm....begging others to come to your firm and churn like hell so you can make money from their commissions. You say that no one who is worthy would use other people's money to trade. Why does your brother own a prop firm that has to provide you with income? Using your argument, if you could make money on your own by trading - why do you need to go to all the trouble of the constant recruiting for your firm and competitor bashing?

A snake oil salesman?...call a spade a spade.
 
Originally posted by ktm
You show up a few months ago and already have almost 500 posts. This is turning into the Don Bright promotional board as you float from discussion to discussion taking over the direction of the dialogue and throwing in the prop firm cheerleading.
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Yup, I agree. I suspect that this is an observation that most of us have made. It is so transparently obvious, that it is now somewhat of an innocuous joke. I will add that a failure to respond directly to points made, but rather an assertion of a plethora of unrelated points (couched as a "reply") is another common observation.

Anyway, on the issue of hedge funds, you may get some leads / insights from books in an Amazon.com search
e.g. Starting a Hedge Fund : A US Perspective
by Sarah Barham (Editor)
 
Originally posted by QuoteBoy
The idea of trading a prop firm's capital the same way you would manage a hedge fund's money sounds great in theory. but, wouldn't it be a problem getting the overnight leverage? Would a prop firm let a trader basically hold onto positions for days and weeks.. the way a hedge fund might?

Don maybe you could enlighten us here. Does Bright let a trader manage money in a longer term fashion like a small hedge fund?
If so, how are capital requirements different?
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Professional and Proprietary firms will allow overnight as long as there is some capital in the account. It would depend on the the trader and the situation for exact #'s.
 
This is the "Self Employment" section, not the "anyone who starts their own business is stupid" section. No class whatsoever. Very cheesy guys. I notice he isn't recruiting here because that would be inapropriate.
 
Now I'll throw in a few things --but they have nothing to do with my firm as I'll stay on topic. I manage an office now for a professional firm. I also know a few hedge fund managers, CTA's and RIA's so I think I can add to this thread a few ideas. Someone else is saying you must trade at a professional/proprietary firm. I disagree with that. To me the cream of the crop are managing off shore funds.

I had lunch with Tom Basso about 2 weeks ago and stay in contact since we are both in the Phoenix area. Tom Basso runs Trendstat. It has been ranked as one of the top 10 funds during many different years.

His systems are fully automated. All of his employees do is monitor the computers to makes sure everything is running and they backtest systems to try to outperform the current systems.

A friend of mine Randy Julian who lives in Newport Beach , CA had the #1 ranked hedge fund last year with a 40% return (I have to check on this it might have been 30% but I'm pretty sure it was 40%) I'll send him an email and see if he would add to this post and offer some advise.



I know he trades off of a few different indicators. I can't say too much as I haven't spent too much time with him. He does train a few guys each year on what he does and gave me the same offer (which I'll take up in a few years when I decide to take my trading to a different level/approach) I wish I could add more about his but I really don't know much more.


Paul Tudor Jones has also been ranked at one of the top ten funds. I know his personal salary he derives off of his fund is $ 100 million a year. This does not include his own trading profits. :)
This is a hell of a lot more than any trader made at a professional firm (to my knowledge and if you know somebody who did I really want to meet them I'll buy them dinner.).


My friend Dave Goodboy just got started with www.marketsurfer.com and his hedgefund. I have no idea how he is doing but will see if he will comment on this thread too.
you can email him and he might be able to offer some advise as it sounds like you are both in the same boat.

There are huge headaches with running a fund. Such as the extra paperwork, having clients call to ask why you are trading this or that? Some major compliance issues, having to raise funds (and this market is proving this it is a difficult time to find new investors).


I don't feel I'm ready for this yet. (I'm only 25 )
But to me this is where the top guns are at.

Yes there are traders that make a few million a year at professional/proprietary firms. The top hedge fund managers do well beyond that. I'm interested in this subject heavily as someday I would like to start my own hedge fund. I've already found quite a few backers on my own and if my father Dr. Van Tharp helped me search for some and wouldn't take very long to raise a few million. I don't even want to consider this till I have a 10 year successful track record and some major experience under my belt. (I was thinking more like I'd be around 45 before I get into this) I finally got to experience a bear market and have found a lot of strategies to adapt. I've hooked up with a lot of successful traders and each time I do I can usually walk away with one new idea.


I'm curious to hear about different things that go on in a top hedge fund. Anyone else care to comment.


Robert Tharp
 
The Chicago Mercantile Exchange has a free publication called
How to Become a CTA .

Not sure if you are looking for a hedge fund of futures , equities or both.
That little book is free and a great read. Call the CME and they can mail you a free copy

Robert Tharp
 
KTM, Candle, et al...I'm sorry if either I misunderstood a couple of posts, or if perhaps, I was misunderstood....

The perception that everything I say here is self promotion is wrong (but understandable)...but I do sit in a pretty good position to see a lot of what is going on in the industry, and it is from this little perch that I make personal observations (definitely not always Bright Trading's). We are approached daily by individuals who are in some way hoping for some guidance...and (believe it or not) it is often away from BT).

We have offered an alternative to dozens of traders who were first going to go into the hedge fund business by showing them how easy it might be to work within our group.

We have hedge funds involved, and some do quite well for both themselves and their investors. A couple of them have already "bought out" their original investors with a sizeable profit...and that is what I like to see happen.

I realize that there are different business models out there, and that some people work better in different financial climates....I was just trying to point out how I feel on a personal level about risking one's own capital vs. others. The success is so much sweeter (IMO).

I am hoping that you will all take my posts at face value, and not criticize my input as mere marketing (since I am much better at marketing than how I have fared on this thread, as you can see).:-)

Honesty on my part doesn't always achieve positive results, but it is all that I want to do here.

As far as the number of posts, I am just competitive and wanted to see my name on the list.


KTM, Candle, Peace!!!:(
 
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