I would like to know who you got that quote from, I got a quote for 35,000 for an audit, and 4 quarterly reports and that was not even a big 5 firm. The 35,000 is a yearly figure, I was wondering if anyone has any comments on this. Is this a normal ballpark number, and could I get a big 5 for around the same amount for the same services, and I do not think the 35,000 included any of the back office stuff Thanks
Starting a Hedge Fund
- Thread starter ktm
- Start date
Metooxx,
Can I get a big 5 for 35 on an annual basis and can you clarify what you mean by signing off as opposed to fees, I do not understand what you are referring to. I know I am putting emphasis on a accounting firm, but I have securities lawyers and I think I have decided on a pb so this is the only expense I have not yet allocated resources for, the 35 does not bother me I just want to know I can get everything I can out of that 35. Thanks
Can I get a big 5 for 35 on an annual basis and can you clarify what you mean by signing off as opposed to fees, I do not understand what you are referring to. I know I am putting emphasis on a accounting firm, but I have securities lawyers and I think I have decided on a pb so this is the only expense I have not yet allocated resources for, the 35 does not bother me I just want to know I can get everything I can out of that 35. Thanks
Hi All,
Having worked in both institutional sell(Street)/buy side(large mutual fund & quant firm) running billions and now doing this prop thing, I think this is what I see as the pros & cons of hedge funds vs prop firms.
I think the main pros of prop firms is that it gives you freedom. You come in the office at the start of the day and you trade and go home at 1pm PST. You don't have to deal with institutional clients, performance reporting, raising capital, and myriads of other issues that are involved in running a business.
But the cons of prop firms are many too. Many "new" traders come in the industry and just blow themselves out and just churn with commissions and get bitter about trading, the industry, the experience etc. Making money consistently in the market is not an easy task. And not only that, you are not going to make that much $ initially unless you are really good already.
And I'm really surpised by a few traders here who think that after trading for 6months or 1yr they can go out and start a hedge fund too. I'm not bashing ktm or anything. I have a lot of respect for you. I've longed wanted to start a hedge fund myself and having great academic credentials, worked on the Street, and on big institutional buyside experience, I'm STILL hestitant and biding my time. But I really wish you the best of luck. A man's determination will move mountains.
A "real" hedge fund is the ultimate prize for a long successful career in finance/investment. Many Wall St. veterans after working on trading desks, M&A group, etc. for 10-15yrs of great successs, THEN decide to start their own hedge fund and bring some of their institutional clients along and start with about $50M-$100M. The other side is big buyside money managers working at huge multi-billion dolalrs complex like Vinik at Fidelity. After a that kind of career, then they start their hedge fund.
That's the "usual" path of hedge funds. It's the ultimate plum for doing well in investment/trading career. Not something to start overnite. Though there are tons of stories of rogue hedge funds that rip investors of millions. But those are the minority, not the majority.
Of course, there are other paths to hedge funds too. Many people start with families, friends, and other people they have helped. And after a good track record, they can easily raise $10-$50M more. There are marketing firms out that can help raise hedge fund capital for a substaintial l fee though. But the most important thing is to have a GREAT record. If you have that money will automatically come to you! ktm, i think you are chosing this path and hopefully you'll get there. best of luck!
Now, let's get back to the comparision here.
If you are going to be a small-to-medium sized trader, then it seems on the surface it might be better to be a prop trader. With $1M account, and if you are ANY good hopefully you can generate a few hundred thousands dollars in income after a 50-90% cut depending on firms,etc. Not a bad living , but not a big swinging guy hedge fund guy either. But the thing is I can't see a prop trader doing pure intraday trading to get take home income of more than maximum of $1M-$5M(if that at all). I've yet to meet one. But that's still a very nice salary!
But if you have the necessary credentials, GUTS, track record, and entrepenuerial spirit, then hedge fund should definitely be the way to go. There's no other way one can rake in $10M-$100M+ or more annually.
So, everything has its pros and cons. Just wait the various options and go for it. What's right for one person might be wrong for another.
I don't understand this singular view on this board. Everyone THINKS their worldview has to be correct and no other choices. Dang. No wonder we have religious wars. The world is more complex and multi-faceted. It's not black and white.
good luck!
trader99
Having worked in both institutional sell(Street)/buy side(large mutual fund & quant firm) running billions and now doing this prop thing, I think this is what I see as the pros & cons of hedge funds vs prop firms.
I think the main pros of prop firms is that it gives you freedom. You come in the office at the start of the day and you trade and go home at 1pm PST. You don't have to deal with institutional clients, performance reporting, raising capital, and myriads of other issues that are involved in running a business.
But the cons of prop firms are many too. Many "new" traders come in the industry and just blow themselves out and just churn with commissions and get bitter about trading, the industry, the experience etc. Making money consistently in the market is not an easy task. And not only that, you are not going to make that much $ initially unless you are really good already.
And I'm really surpised by a few traders here who think that after trading for 6months or 1yr they can go out and start a hedge fund too. I'm not bashing ktm or anything. I have a lot of respect for you. I've longed wanted to start a hedge fund myself and having great academic credentials, worked on the Street, and on big institutional buyside experience, I'm STILL hestitant and biding my time. But I really wish you the best of luck. A man's determination will move mountains.
A "real" hedge fund is the ultimate prize for a long successful career in finance/investment. Many Wall St. veterans after working on trading desks, M&A group, etc. for 10-15yrs of great successs, THEN decide to start their own hedge fund and bring some of their institutional clients along and start with about $50M-$100M. The other side is big buyside money managers working at huge multi-billion dolalrs complex like Vinik at Fidelity. After a that kind of career, then they start their hedge fund.
That's the "usual" path of hedge funds. It's the ultimate plum for doing well in investment/trading career. Not something to start overnite. Though there are tons of stories of rogue hedge funds that rip investors of millions. But those are the minority, not the majority.
Of course, there are other paths to hedge funds too. Many people start with families, friends, and other people they have helped. And after a good track record, they can easily raise $10-$50M more. There are marketing firms out that can help raise hedge fund capital for a substaintial l fee though. But the most important thing is to have a GREAT record. If you have that money will automatically come to you! ktm, i think you are chosing this path and hopefully you'll get there. best of luck!
Now, let's get back to the comparision here.
If you are going to be a small-to-medium sized trader, then it seems on the surface it might be better to be a prop trader. With $1M account, and if you are ANY good hopefully you can generate a few hundred thousands dollars in income after a 50-90% cut depending on firms,etc. Not a bad living , but not a big swinging guy hedge fund guy either. But the thing is I can't see a prop trader doing pure intraday trading to get take home income of more than maximum of $1M-$5M(if that at all). I've yet to meet one. But that's still a very nice salary!
But if you have the necessary credentials, GUTS, track record, and entrepenuerial spirit, then hedge fund should definitely be the way to go. There's no other way one can rake in $10M-$100M+ or more annually.
So, everything has its pros and cons. Just wait the various options and go for it. What's right for one person might be wrong for another.
I don't understand this singular view on this board. Everyone THINKS their worldview has to be correct and no other choices. Dang. No wonder we have religious wars. The world is more complex and multi-faceted. It's not black and white.
good luck!
trader99
cartm,
I think that if you want to try and raise institutional money then you need a big five accounting firm - or even better a firm that specializes in hedge fund accounting. These guys are not cheap. I agree with ACDC about building equity, when you have a fund, but in my opinion, you can trade for yourself and if your record is good, people will want you to trade for them.
The bird
I think that if you want to try and raise institutional money then you need a big five accounting firm - or even better a firm that specializes in hedge fund accounting. These guys are not cheap. I agree with ACDC about building equity, when you have a fund, but in my opinion, you can trade for yourself and if your record is good, people will want you to trade for them.
The bird
Thanks for the comments. I appreciate your balanced and thoughtful discussion. I would not have become upset earlier in the thread had some folks taken to bashing their points across as opposed to attempting to balance their rhetoric. I had made this decision some time ago and have to question the motives of some who are so adamant about a stranger not making this terrible mistake. The "advice" comes from those who have no knowledge of my background, record, or any other facts about my situation...and I wasn't asking for that.
While the point of this thread was not to provide those things and have the board pass judgement on anyones' potential success at the endeavor, it has clearly turned into that debate. I firmly agree with you and a few others in that regard. Like prop trading or anything else in the markets, the success of failure of any undertaking relies largely on the individual behind the effort, their experience, financing, support, ability to achieve consistent results and keeping customers satisfied. With prop trading there is one customer to satisfy. With a hedge fund, there are many.
Some folks here continue to post the "prices" for legal, accounting and back office support. Those were your prices and I appreciate the effort at clarity and disclosure. My prices will differ and for many reasons. We're not buying tennis balls here, we're contracting with service providers. Everything is negotiable. After 25 pages of postings and musing about what everything will cost, I don't think anyone mentioned the possibility of the accountants and lawyers (those who have the most intimate knowledge of the operation) substantially reducing their fees because they (or closely related parties) are investors in the fund. Of course this bartering reduces my take, but it becomes less fixed overhead for all customers as the attorney(s)/accountant(s) are not the primary providers of capital.
Frankly, I am only concerned that the operation is bottom line profitable. I am confident that it will be. I have traded my own account for some time and have other sources of income - as should anyone but the most well capitalized in starting a hedge fund. I have sufficient revenue for living expenses and other income exclusive of any provided by the hedge fund. Essentially, this is a "side job" for me. It is one that will be managed far better than most FT jobs for many (before some of you start bashing the "side job" comment). I will manage day to day operations for some time, but would eventually like to maintain oversight and pass the more active role to a manager who can carry out my trading and investment philosophy. This would leave me time to focus on meeting with larger shareholders and institutions while giving me freedom from being tied to the ticker.
Thanks to all for the advice and best of luck to you in your endeavors.
While the point of this thread was not to provide those things and have the board pass judgement on anyones' potential success at the endeavor, it has clearly turned into that debate. I firmly agree with you and a few others in that regard. Like prop trading or anything else in the markets, the success of failure of any undertaking relies largely on the individual behind the effort, their experience, financing, support, ability to achieve consistent results and keeping customers satisfied. With prop trading there is one customer to satisfy. With a hedge fund, there are many.
Some folks here continue to post the "prices" for legal, accounting and back office support. Those were your prices and I appreciate the effort at clarity and disclosure. My prices will differ and for many reasons. We're not buying tennis balls here, we're contracting with service providers. Everything is negotiable. After 25 pages of postings and musing about what everything will cost, I don't think anyone mentioned the possibility of the accountants and lawyers (those who have the most intimate knowledge of the operation) substantially reducing their fees because they (or closely related parties) are investors in the fund. Of course this bartering reduces my take, but it becomes less fixed overhead for all customers as the attorney(s)/accountant(s) are not the primary providers of capital.
Frankly, I am only concerned that the operation is bottom line profitable. I am confident that it will be. I have traded my own account for some time and have other sources of income - as should anyone but the most well capitalized in starting a hedge fund. I have sufficient revenue for living expenses and other income exclusive of any provided by the hedge fund. Essentially, this is a "side job" for me. It is one that will be managed far better than most FT jobs for many (before some of you start bashing the "side job" comment). I will manage day to day operations for some time, but would eventually like to maintain oversight and pass the more active role to a manager who can carry out my trading and investment philosophy. This would leave me time to focus on meeting with larger shareholders and institutions while giving me freedom from being tied to the ticker.
Thanks to all for the advice and best of luck to you in your endeavors.
Having your auditor and your attorney as investors in the fund and bartering for services is a clear conflict of interests for them. Also, if you plan on giving up your trading responsibilities to a manager, that will substantially cut in to your personal income as you have to pay them and any manager who is going to work for less than10% of the total pie better hope that you raise at least 50 million right off the bat, or else it just isn't going to be worth it. Just your statement that you would want to turn over your trading to someone else makes me wonder if you really have the mentality to be a successful trader; so the debate of whether you should be a prop trader or go the hedge fund route is moot, as you will never make a living as a prop trader.
ktm,
you've got a good business mind.
to build the business and let it run itself is the ultimate, any kind that is. That's what it sounds like your saying. but to run money based on your track record, without you making the calls, gives me the immediate impression that you can train people to do what you do, or that what you do is mechanical. Is this the case?
Otherwise you wouldn't be able to hire others to do it for you. Especially not for a new firm. They would just do it themselves.?? this is not criticism, but I'm starting to think that you think you have the Holy Grail and are trying to convert it into a cash machine on a shoestring budget.
If you've got the HG then why not let it run for a while longer, and do the hedge fund right?
DE Shaw started with 28 or 48 million in seed money. correct me if I'm wrong on that.
you've got a good business mind.
to build the business and let it run itself is the ultimate, any kind that is. That's what it sounds like your saying. but to run money based on your track record, without you making the calls, gives me the immediate impression that you can train people to do what you do, or that what you do is mechanical. Is this the case?
Otherwise you wouldn't be able to hire others to do it for you. Especially not for a new firm. They would just do it themselves.?? this is not criticism, but I'm starting to think that you think you have the Holy Grail and are trying to convert it into a cash machine on a shoestring budget.
If you've got the HG then why not let it run for a while longer, and do the hedge fund right?
DE Shaw started with 28 or 48 million in seed money. correct me if I'm wrong on that.
Just curious... if you have less than 30 or so people, why not just establish an investment club with those people as partners? I'd think you could set up a partnership agreement that allows you to gain consensus of all partners on trading decisions quickly, and would also allow the Investment Club to reimburse reasonalble expenses.