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Starting a Hedge Fund
- Thread starter ktm
- Start date
Let's get staright if you have a proper hedge fund 200 million dollars minimum trading currencies it is far better than prop trading firms, but somebody who trades equities as a day trader is unlikely to get anything decent from a few friends. Also how many friends can you have with enough money to build you up to 10 million. Real hedge fund managers are paul tudor-jones soros buffett and people who can afford to put 2 billion into a currency at once, and are now billionaires themselves or are approaching billionaireness. Don Bright are you a billionaire yet?
Originally posted by nicholassegrue
Let's get staright if you have a proper hedge fund 200 million dollars minimum trading currencies it is far better than prop trading firms, but somebody who trades equities as a day trader is unlikely to get anything decent from a few friends. Also how many friends can you have with enough money to build you up to 10 million. Real hedge fund managers are paul tudor-jones soros buffett and people who can afford to put 2 billion into a currency at once, and are now billionaires themselves or are approaching billionaireness. Don Bright are you a billionaire yet?
I actually have a bunch of stats on Hedge Fund sizes and styles.
0.7% of Hedge Funds are focussed on short term trading of
equities. The average size of these funds is 10-20M. In reality,
if you are good it is not difficult to raise this type of money. The
biggest issue cited by the managers of small funds is the need
to turn investors away and limit investment size because of the
need to keep the fund small in order to perform short term trading
of stocks.... the manager's of these hedge funds are "Real
Hedge Fund Managers" in every sense of the word... they just
run very small funds unlike the "big name" managers....
Not much difference from some mutual fund families being big and
famous...and others being small and barely known...... all the
people who manage these funds are "Real Mutual Fund
Managers"... eh.
- Greg
ktm,
the best way to trade multiple accounts is through a "dvp" relationship and a prime broker account. You need minimum 500k usually at firms like bear stearns to establish a prime broker account.
However, after having run a fund for 3 years, I can tell you that it sounds better than it is.
Reasons:
1. you have to "pass through" the cost of legal and accounting fees to the partners. This will cost 30k a year at least if you are trying to raise money from institutions based on your track record. If you pay it yourself it cuts into your margins and if you have a negative year you not only lose invested capital but also lose operating capital. (this is what happened to me).
2. why take 20% of the profits if you could take 100% at a pro firm.
3. Clients,investors are a headache.
4. you need a marketing arm to raise capital - as the calpers guy said to me - if you are at this hedge fund expo then who is trading? It's hard to be focused on trading when you are trying to raise capital, work with operating expenses etc.
I think the pro firm is the best route. If you don't have any capital to put up yourself then simply borrow from an investor or offer them a 50/50 deal. Either way you are left with more than 20% and you don't have the overhead.
Birddog
the best way to trade multiple accounts is through a "dvp" relationship and a prime broker account. You need minimum 500k usually at firms like bear stearns to establish a prime broker account.
However, after having run a fund for 3 years, I can tell you that it sounds better than it is.
Reasons:
1. you have to "pass through" the cost of legal and accounting fees to the partners. This will cost 30k a year at least if you are trying to raise money from institutions based on your track record. If you pay it yourself it cuts into your margins and if you have a negative year you not only lose invested capital but also lose operating capital. (this is what happened to me).
2. why take 20% of the profits if you could take 100% at a pro firm.
3. Clients,investors are a headache.
4. you need a marketing arm to raise capital - as the calpers guy said to me - if you are at this hedge fund expo then who is trading? It's hard to be focused on trading when you are trying to raise capital, work with operating expenses etc.
I think the pro firm is the best route. If you don't have any capital to put up yourself then simply borrow from an investor or offer them a 50/50 deal. Either way you are left with more than 20% and you don't have the overhead.
Birddog
Birddog,
As I think I have said on this very thread before, I have accurately estimated - based my advisers advice and a few guys who have successfully done this - my costs and overhead going forward.
There will be no need to advertise as I am not looking to have 8 figures - "advertising" is not permitted with hedge funds anyway - not sure what you are referring to. If I do well, word will spread and funding will take care of itself. The hedge fund moniker that so many here have fixated upon seems to have different meanings to different people, mostly it seems to be a threat to prop firms for some reason. Again, I am not a daytrader nor will I ever become a daytrader. The notion that someone with my experience, qualifications and record should sit in a commission generating sweatshop scalping all day while I "learn" from a guy who makes more from seminars than trading is insulting. Please do not disguise this as advice.
I started this thread as an attempt to poll any knowledgeable parties about backoffice software, NOT advice on the manner in which to trade going forward. I've received a few good posts and reccomendations to that effect and a mountain of prop firm propaganda. Believe me, I have learned my lesson. This mistake will not be repeated...and I would appreciate it if the moderator would close this thread.
As I think I have said on this very thread before, I have accurately estimated - based my advisers advice and a few guys who have successfully done this - my costs and overhead going forward.
There will be no need to advertise as I am not looking to have 8 figures - "advertising" is not permitted with hedge funds anyway - not sure what you are referring to. If I do well, word will spread and funding will take care of itself. The hedge fund moniker that so many here have fixated upon seems to have different meanings to different people, mostly it seems to be a threat to prop firms for some reason. Again, I am not a daytrader nor will I ever become a daytrader. The notion that someone with my experience, qualifications and record should sit in a commission generating sweatshop scalping all day while I "learn" from a guy who makes more from seminars than trading is insulting. Please do not disguise this as advice.
I started this thread as an attempt to poll any knowledgeable parties about backoffice software, NOT advice on the manner in which to trade going forward. I've received a few good posts and reccomendations to that effect and a mountain of prop firm propaganda. Believe me, I have learned my lesson. This mistake will not be repeated...and I would appreciate it if the moderator would close this thread.
wait, before closing this thread i would like to make a few comments. first, we know there is no advertising, but there are 3rd parties that can assist in matching managers and clients, they usually want a cut so this is not always a good option. also, i agree that if you perform, the money will find you, but what kind of money. i am assuming you do not want hot money you want people who will stay in down quarters. as far as advisors, i am not sure what you mean by this, lawyers, accountants, and if not these do you think hiring advisors has been a good deployment of start up capital? there is no need to denigrate any type of style of investing/trading, everyone has their own style ,riskarb, shorting, daytrading, swingtrading. i do agree that there are many out there who make more money selling books and seminars than they ever could in the market, but in my view, they are operating a business like any other, to make money. W.D. Gann's kid was interviewed and he said that Gann made his money from selling books, not from the markets. I am not saying Gann didn't have good insight in the mkts, i use derivatives of his work, but keep in mind that these people are first and foremost running a business. if you are sincerely starting a hedge fund i would like to talk to you about your experiences thus far, kind of like comparing notes. if not best wishes in your endeavor. and i think this has been an educational thread.
KTM,
I found the discussion on hedge funds interesting , not just because this topic can be complex, but because many traders & firm owners have very defined views on this topic. There are several web sites that might give those interested in starting a hedge fund information. Hedge World at www.hedgeworld.com & Hedge Fund Association at www.thehfa.org/ both offer
unbiased information on Hedge Funds & related topics.
As I said earlier, I think this is America and if someone wants to start a Hedge Fund, they should be able to. Having set up several
L.L.C's and traded at a good size hedge fund for a short time, I feel I have a pretty good idea of the costs involved , as well as the rewards of running a firm. Unless someone has access to alot of capital and has a very good track record, the expense of starting a hedge fund would probably not make sense. This probably applies to 99% of the traders on Elite Boards. I think all
traders should be encouraged to be successful . As I have
said earlier, running a hedge fund is like running a business,not
just trading. If any trader wants to seriously consider opening a hedge fund, I would speak to someone who runs one first. I'm
sure they would tell you that their business is a very hard one.
Many traders think that there is less pressure trading other peoples money, rather than their own. In reality, this may not be true at all. As I said earlier, if anyone wants to start a hedge fund ,has a proven track record and access to alot of capital, I would be glad to help.
Gene Weissman
Lieber & Weissman Sec., L.L.C.
gweissman@stocktrade.net
I found the discussion on hedge funds interesting , not just because this topic can be complex, but because many traders & firm owners have very defined views on this topic. There are several web sites that might give those interested in starting a hedge fund information. Hedge World at www.hedgeworld.com & Hedge Fund Association at www.thehfa.org/ both offer
unbiased information on Hedge Funds & related topics.
As I said earlier, I think this is America and if someone wants to start a Hedge Fund, they should be able to. Having set up several
L.L.C's and traded at a good size hedge fund for a short time, I feel I have a pretty good idea of the costs involved , as well as the rewards of running a firm. Unless someone has access to alot of capital and has a very good track record, the expense of starting a hedge fund would probably not make sense. This probably applies to 99% of the traders on Elite Boards. I think all
traders should be encouraged to be successful . As I have
said earlier, running a hedge fund is like running a business,not
just trading. If any trader wants to seriously consider opening a hedge fund, I would speak to someone who runs one first. I'm
sure they would tell you that their business is a very hard one.
Many traders think that there is less pressure trading other peoples money, rather than their own. In reality, this may not be true at all. As I said earlier, if anyone wants to start a hedge fund ,has a proven track record and access to alot of capital, I would be glad to help.
Gene Weissman
Lieber & Weissman Sec., L.L.C.
gweissman@stocktrade.net
Originally posted by ktm
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.
Amen! I am new here but I now have instant respect for you ktm. When I read Bright's comment that there is no valid reason for starting a hedge fund I almost laughed out loud.
You hit the nail on the head with this rebuttal...I look forward to seeing all these middlemen and con artists sucked down the toilet along with the crooked floortraders and useless investment bankers who are getting their comeuppance through technology and competition.
ok, it was long ago, but ktm's point has been lost way back. why should I care, I am thinking..
hedgefund as a term is often misused I think.
some do want to trade their money and partners money. I think it is possible at a prop firm, but I guess it is a lot of paperwork.
having a corporation to do the trading described by ktm does make sense to me.
the myth of the hedgefund for new (and usually not successful) traders is obviously linked to the idea that if they can't make money it's because, well, they don't have enough money.
of course it's silly. but then it sounds so good to trade without even one penny from your pocket, they think.
I agree with gene. it's because they never tried they think there is no pressure in actually trading others people money. of course there is. and it is big.
anyway, my point here is to separate between the 'hedgefund' which is in fact a simple corporation or LLC, and the real hedgefund which is regulated and a complex entity (usually without the trader's money).
I agree with both sides here that anyway, this should not be an excuse to avoid learning and the hardwork of actual trading.
tntneo
hedgefund as a term is often misused I think.
some do want to trade their money and partners money. I think it is possible at a prop firm, but I guess it is a lot of paperwork.
having a corporation to do the trading described by ktm does make sense to me.
the myth of the hedgefund for new (and usually not successful) traders is obviously linked to the idea that if they can't make money it's because, well, they don't have enough money.
of course it's silly. but then it sounds so good to trade without even one penny from your pocket, they think.
I agree with gene. it's because they never tried they think there is no pressure in actually trading others people money. of course there is. and it is big.
anyway, my point here is to separate between the 'hedgefund' which is in fact a simple corporation or LLC, and the real hedgefund which is regulated and a complex entity (usually without the trader's money).
I agree with both sides here that anyway, this should not be an excuse to avoid learning and the hardwork of actual trading.
tntneo