Starting a Hedge Fund
- Thread starter ktm
- Start date
Thanks, ktm. My New Year's resolution is to not have any more drawdowns. 
Anything that an individual can trade and invest in, can be traded and invested in by a partnership or LLC. So narcotics, endangered animals, and human organs are out, but South African debt, Israeli real estate, and fine art are all possibilities.
Although you are stretching the definition of "hedge fund" with some things. Like a real estate partnership wouldn't really be considered a hedge fund, for example. When you say "hedge fund" most people think of exchange or investment bank traded securities and derivatives -- but like you say, it doesn't matter where they are traded and there are no rules saying what it can or can't be.
Although you are stretching the definition of "hedge fund" with some things. Like a real estate partnership wouldn't really be considered a hedge fund, for example. When you say "hedge fund" most people think of exchange or investment bank traded securities and derivatives -- but like you say, it doesn't matter where they are traded and there are no rules saying what it can or can't be.
yeah, hedge fund should be renamed to junk fund. You ever read about some of the junk managers invest in. Some of the big fraud case list the assets of fund upon receivorship or liquidation. Guys investing in restaurants, fitness clubs, their own ventures. Figures as much. They start hedge funds out as name implies, to hedge, not to speculate in illiquid crap. But as time goes by, the sly managers just decide its best to do some self-dealing and get rich along the way.
overrated.
Mr. Zen
overrated.
Mr. Zen
If you start a hedge fund, can you still trade your own account separately? Will that cause any legal dispute?
The question is, why do you want to? Why not invest in your own fund and eat your own cooking?
Now, granted, there may be reasons for personal trading outside of your fund. As a CTA I trade futures for my partners and only futures. So if I think Google or Krispy Kreme are overvalued, I'm going to short it personally -- not in my partners' accounts. But for futures I'm a big investor in my own trading programs, alongside my partners, and that futures trading is where I focus my attention.
A red flag goes up if you are trading the same thing in your personal account as in your fund. And may Eliot Spitzer have mercy on your soul if you are taking opposing positions!
why would a red flag go up if you are trading the same position in your personal account and in your hedge fund??
what if you wanted to pick up a little extra for yourself and not split the profits with the hedge fund investors?? especially if your hedge fund had a much larger position in the stock than you do in your personal account??
so, you are saying it is illegal or a "gray area" to take similar positions in a personal account?? I don't know much about the rules regarding hedge funds, so I hope someone can clarify this issue.
thanks,
BOSS
what if you wanted to pick up a little extra for yourself and not split the profits with the hedge fund investors?? especially if your hedge fund had a much larger position in the stock than you do in your personal account??
so, you are saying it is illegal or a "gray area" to take similar positions in a personal account?? I don't know much about the rules regarding hedge funds, so I hope someone can clarify this issue.
thanks,
BOSS
Stock brokers have been getting into trouble for trading the same things their clients are trading for years. It is especially dangerous when a broker has discretion over client accounts. There have been cases of front running (buying in their personal account before entering the big client buy order that will move the market), dumping (selling client shares so they can personally pick them up at a better price), and self-dealing (for issues with a large bid/offer spread, using client accounts to hit their resting bid when they want to buy in their personal account and vice versa when they want to sell).
This is why personal trading of brokers is closely monitored and regulated by the NASD and their firms. The same problems are possible with hedge and mutual fund managers. While dumping and self-dealing involve opposing positions in the personal and client accounts, front running involves trades in the same direction.
Front running, dumping, and self-dealing are especially possible in small, illiquid securities and probably least worrisome in large cap stocks and heavily traded futures.
If I'm doing due dilligence on a fund for possible investment, I'm going to want to see that the traders are focused on my account and not their own. Best would be a trader that has his own funds invested pari passu (on an equal footing) with mine so our interests are aligned.