Starting a Hedge Fund
- Thread starter ktm
- Start date
oh forgot, the so called prime brokerage is the total "package" solution HFs get.
im not sure if you can get it or not with 1M usd, but i doubt it.
they offer about everything you can wish for, leverage, they do the clearing, hey they can even set you up in nice offices
the service itself is not necessary that expensive, the investment banks make good money in the loan-structure they offer.
I am in the process of starting a small HF, most of the large bank prime brokers will not be interested in working with you until you reach about 10 million AUM. Their trading fees can be a bit expensive .015 per/share, but their lending rates are better than most of the middle introductory prime brokers out there.
Most PB's make their money from the lending and small from the execution and clearing.
Most PB's make their money from the lending and small from the execution and clearing.
Congratulations again! do you use a PrimeBroker? I am wondering if it is necessary to have a PB for a small fund starting w/ about 4-5MM. I am thinking of finding a PB once the fund has grown to about 10MM.
What are the broker choices out there for a small fund also trading in the futures makets?
Don.
You appear on every thread about hedge funds, talking about why people should not start one and should instead trade prop with Bright. Give it a rest and let the people who want to talk about starting a hedge fund have a dicussion without constantly interrupting and promoting your firm....
You appear on every thread about hedge funds, talking about why people should not start one and should instead trade prop with Bright. Give it a rest and let the people who want to talk about starting a hedge fund have a dicussion without constantly interrupting and promoting your firm....
At the level you're talking about, you don't really need a prime broker. As long as you have a reputable and reliable custodian/brokerage and an experienced (1) legal counsel, (2) auditor and (3) fund administrator, you should be fine.
For example, I've been in discussions with Rydex Financial Services (which is the custody/brokerage division of Rydex -- not just their fund platform) for about a $5 - 7.5 million hedge fund. As part of this, we would be using the UNX trading platform.
The need for a Prime Brokerage really depends on your trading style and needs.
For example, I've been in discussions with Rydex Financial Services (which is the custody/brokerage division of Rydex -- not just their fund platform) for about a $5 - 7.5 million hedge fund. As part of this, we would be using the UNX trading platform.
The need for a Prime Brokerage really depends on your trading style and needs.
You might be able to use Interactive Brokers for a small futures fund. Also, check out Tradestation.
http://www.tradestation.com/aboutts/hedge.shtm
http://www.tradestation.com/aboutts/hedge.shtm
Sorry for the last post which was blank.
I'm an attorney who practiced business/corporate/securities law and even I decided against doing the documents myself because having reputable legal counsel adds to your credibility. You may find cheaper rates by using some non-coastal firms who still have experience with hedge funds.
I'm an attorney who practiced business/corporate/securities law and even I decided against doing the documents myself because having reputable legal counsel adds to your credibility. You may find cheaper rates by using some non-coastal firms who still have experience with hedge funds.
From experience, I can tell you that no prime broker is interested in your business if you are under 10M. Your only option to get prime services is introducing prime brokers, of which there are now pleanty since the need has arisen to serve the 40% of funds with under 10M. At 10M you have access to second tier prime brokers and between 20 and 40 million you pretty much have your pick of the litter. The reason the number varies so much is because they will take you at 20, maybe, if they are convinced that you are connected (and good) enough to raise another 20 relatively quickly. You also have to be working with brand name legal, accounting, etc. Basically, there are now some serious barriers to entry for the small fund. It is almost better to trade your own money until you have a few million and a good enough rep to raise some capital than to jump in head first and have to eat 100K a year for all of your admin services and additional large quantities of money for your employees. I met a guy and his wife that had run a small mom and pop shop for 6 years with an audited record (by a no name firm). He had managed to grow his personal wealth to 1.5m and raise 1.5m from family and friends over 6 yrs. He had not had a losing year and he averaged 12% net. He couldn't raise a dime...can't break out of his circle of friends and get real money...probably never will. The sad truth is that even the tiniest of funds has to open with 10M in the first year and grow quickly to 50 or 100m otherwise you will miss your "window" of opportunity. if you are 5 years down the road with great performance and only 30m people will wonder what the hell is wrong with you and stay away. I actually thought the money would start effortlessly finding me at some point until I met a guy who had been running a fund foor 10yrs with over 30% net performance and he only had 400m. He told me that investors never found him and even went as far as to say that investors were stupid and none of his big clients ever found him. He had to maket himself and keep showing up at their offices, etc....lots of face time and lots of work in this business absolutely unrelated to trading. So you are a good trader....does that make you a good PM? how about a good CEO, COO, CFO, CTO, analyst, etc. After you pick up some real money the business actually turns into more of a, well...business. I would say you have a better chance getting rich by going back to college getting a pre med, going to med school, interning for 4 or 5yrs in surgery and then opening up a shop in Florida giving strippers implants, ha! Whooo Hooo! But you have to follow your dreams I guess. I mean buffet started out running a hedge fund bank rolled by two women with the equivalent of only 1M and look at him now.