Starting a Hedge Fund

Hello, I've been looking for a good place to ask these 2 questions. It would appear that this is the thread.

After many years running an internal hedge fund (within a large bank) I left to eventually set-up my own fund. However before undertaking the madness of capital raising, registration etc., I prefer to just keep it simple and small and trade my own cash.

So...for a very small "fund" (actually a simple LLC) with less than $5 Million in Capital...

(1) Who out there in NY (preferably downtown) offers hedge fund hosting services. That is, I would like to re-create the work environment of the typical trading desk with shared office space, resources, idea-generation.

(2) Who provides Prime-Brokerage Services (or perhaps just custody and clearing) for the super-small guys. I used to PB with Morgan Stanley.
 
Quote from Don Bright:

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.
More...

This is hilarious.
1. The term itself is not misleading. There are misunderstood people mis-using the term.
2. Dont you pay someone to trade for you?
3. If you are in fact a good trader, say trading your 100k retail acc. and it has a consistent growth - Woldn't you rater trade 100 M, for a cut instead?
4. Isn't this what prop. also is all about, instead of trading the 10k retail acc. they can call you and trade 100-200k.? It's all the same - HF is just the next step up.
5. HF business is one of the largest growing industries in the financial world.
6. I personally think you are, at best, misleading.
 
Quote from Zastaber:

This is hilarious.
1. The term itself is not misleading. There are misunderstood people mis-using the term.
2. Dont you pay someone to trade for you?
3. If you are in fact a good trader, say trading your 100k retail acc. and it has a consistent growth - Woldn't you rater trade 100 M, for a cut instead?
4. Isn't this what prop. also is all about, instead of trading the 10k retail acc. they can call you and trade 100-200k.? It's all the same - HF is just the next step up.
5. HF business is one of the largest growing industries in the financial world.
6. I personally think you are, at best, misleading.
More...

Your number 4 above is what I'm referring to. If a good trader has $20K or so, and I will let them us $millions of our capital to trade with, give him a 100% payout, allow him his independence (no "investors" breathing down his neck), isn't that better than
giving away 80% of his profits?

By mis-leading I simply mean that HF with the $30Million base as recognized by regulators is one thing...a guy raising money from family and friends under the guise of a "hedge fund" is what I find mis-leading....they are simply "borrowing money" to risk, and keeping some of it for nothing (the 2%).

Legitimate hedge funds most certainly have their place in our markets.

I try my best to keep the facts straight, and welcome discussions about anything related to trading. My opinions may differ from yours, but I assure you that I don't try to mis-lead, quite the contrary.

All the best,

Don
 
Quote from Don Bright:

If a good trader has $20K or so, and I will let them us $millions of our capital to trade with, give him a 100% payout, allow him his independence (no "investors" breathing down his neck), isn't that better than
giving away 80% of his profits?
More...

Nice pitch.
 
Quote from NoFixedAddress:

Hello, I've been looking for a good place to ask these 2 questions. It would appear that this is the thread.

After many years running an internal hedge fund (within a large bank) I left to eventually set-up my own fund. However before undertaking the madness of capital raising, registration etc., I prefer to just keep it simple and small and trade my own cash.

So...for a very small "fund" (actually a simple LLC) with less than $5 Million in Capital...

(1) Who out there in NY (preferably downtown) offers hedge fund hosting services. That is, I would like to re-create the work environment of the typical trading desk with shared office space, resources, idea-generation.

(2) Who provides Prime-Brokerage Services (or perhaps just custody and clearing) for the super-small guys. I used to PB with Morgan Stanley.
More...

You would have been a perfect fit for BofA securities, since they used to provide office space as well (they got out of the business around end of '05), I was there for 2.5 years around '00 for the fund I was with, but then we became too big for their space. If you can get an intro, Goldman PB is still in the real estate business (100 Broad I believe). It depends on what your strategy might be, it is not just AUM, it is also the trading style. Have you tried to get in touch with Bear's incubation fund? If you had a good reputation (since internal fund returns are probably never publicized), I know people who have started PB relationships with Goldman or even MS for < 10M. Then there are the second tier PBs, Fortis, ABN come to mind.

Rufus
 
Quote from Don Bright:

Some people are just not aware of the alternatives.

Don
More...
?


Your outfit would seem to be only a possible alternative to those who are trading only intraday. And how many of those considering a hedge fund structure are trading intraday only?

Your comments seem to me to be misplaced on this particular thread.

In conversations with you in the past, and with your representatives, it appeared to me that you are not welcoming to even successful traders who take longer term positions. It doesn't fit with your business model.

For those who may be interested, what is your fee structure for longer term positions, including "haircuts", commissions, desk fees, monthly interest, etc.

Also, to what do you refer when you talk about "hedging" overnight positions? Can you give an example of a requirement? Let's say, for example, a successful position/swing trader is long 200K overnight in a diversified account holding fundamentally strong U.S.. equities? What's your requirement?

I'm asking these questions not to challenge you, but to get a clear picture of how you would "welcome" anyone who is not trading intraday.

You may in fact be a reasonable alternative to a trader who is other than intraday, but I'd like to hear why.
 
Hmmm? I'm sure that the 500 traders or so who keep positions always, conversions, dozens of sets of pairs, M&A, etc. would be shocked to think that anyone thinks we close out positions every day....

We have hundreds of $millions in use with longer term positions.

Big fallacy about "intraday" trading...we have never stopped our traders from holding stocks.


I will be glad to discuss the various costs and limits you ask about. Hedged is simply dollar long vs. dollar short and you can keep 6 times with no "haircut" and up to 100 times if your trading plan requires it. Our largest growth area in recent months is from traders who need capital in large doses to continue making money, and most firms simply cannot allow it for net capital reasons.

Things change, we adapt, all is well.

All the best,

Don
 
Quote from Don Bright:

Legitimate hedge funds most certainly have their place in our markets.
More...

Thank you for clearing this up, that sounds a little bit different and way better than;
"There may be a legitimate reason for starting a "fund" but I haven't heard of one yet."

But dont pretend the average buying power for the guys at your place give the same $ in pocket as the BSD traders at big HFs.

I like your business, I think it is great, but your first post in this thread I found a little bit off the line.

All the best.
 
Quote from Zastaber:

Thank you for clearing this up, that sounds a little bit different and way better than;
"There may be a legitimate reason for starting a "fund" but I haven't heard of one yet."

But dont pretend the average buying power for the guys at your place give the same $ in pocket as the BSD traders at big HFs.

I like your business, I think it is great, but your first post in this thread I found a little bit off the line.

All the best.
More...

I may have come off wrong, it happens to the best of us....my point comes from having so many people borrowing money from friends and being talked into a calling themselves a hedge fund to add some legitimacy to the whole thing. Of the 50 or so traders who initially wanted to start a "hedge fund" (that I suggested the alternative to), most are pretty glad they did. The idea of having a few relatives looking at every trade just isn't too pretty, LOL.

Don
 
You must log in or register to reply here.
Back
Top