Starting a hedge fund

T

Tatnic

I'm exploring the possibility of starting my own hedge fund and am wondering if anyone here has gone through that process? At this point I have an idea and have compared it to the averages and think its worth pursueing. I was suprised to see some "average" numbers for 2006:

Hedge fund aggregate average = 11.99%
Fund of funds average = 9.6%
Aggressive Equity ave. = 10.81%
Equity average = 12.76%
Relative value ave. = 11.58%

After subtracting out fees you're left with an average return of around 7.5%. I can't see how anyone could market an expected return of that amount, with a straight face anyway.

So if anyone here has any input, comments, war-stories, etc about running their own fund I'd appreciate reading it. Thanks.
 
Quote from Tatnic:

I'm exploring the possibility of starting my own hedge fund and am wondering if anyone here has gone through that process? At this point I have an idea and have compared it to the averages and think its worth pursueing. I was suprised to see some "average" numbers for 2006:

Hedge fund aggregate average = 11.99%
Fund of funds average = 9.6%
Aggressive Equity ave. = 10.81%
Equity average = 12.76%
Relative value ave. = 11.58%

After subtracting out fees you're left with an average return of around 7.5%. I can't see how anyone could market an expected return of that amount, with a straight face anyway.

So if anyone here has any input, comments, war-stories, etc about running their own fund I'd appreciate reading it. Thanks.
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You are obviously young and/or new at this. Keep reading and you'll find out why the posted returns seem so low.
 
Quote from cashmoney69:

Whats your starting capital?..what will you be trading?
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I'm guessing I'll start an incubator fund, under a million and see how things progress. Nothing complicated, just equities (US and foreign) and bonds. Based on my back-testing, I have a "strategy" that returned the following and I would expect it to outperform the "averages" going forward:

2006= 13.98%
2005= 16.05%
2004= 13.96%
2003= 30.93%
2002= -1.72%
2001= 3.76%
2000= 14.82%

Not on level of Simmons obviously (not too many are), but given its simplicity and relative safety, its not that bad. Bonds haven't done that well (relatively) over the past few years so the back-testing returns reflect that.
 
Quote from krazykarl:

You are obviously young and/or new at this. Keep reading and you'll find out why the posted returns seem so low.
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Keep reading what? Is there a thread on this site that I missed? I haven't been here that much so that's possible. Please post a link if you have one.
 
I think anyone can open a hedge fund, thats not the problem.

The real problem is (1)finding someone to invest in your fund. Then once you have found the bagholders then you have to (2) find a way to keep them interested.

The strategies, book-keeping and all the other technicalities can be worked out easily enough. You just need to accomplish the top two goals and then your in the money.
 
Quote from michaelscott:

I think anyone can open a hedge fund, thats not the problem.

The real problem is (1)finding someone to invest in your fund. Then once you have found the bagholders then you have to (2) find a way to keep them interested.

The strategies, book-keeping and all the other technicalities can be worked out easily enough. You just need to accomplish the top two goals and then your in the money.
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Yep, agreed. And I may be too hopeful into thinking that anyone who has actually succeeded at this would volunteer any info on how they did it. But what the heck, its worth a shot. Worse case I get some responses about how young I must be:)
 
It's pretty simple, actually. Step 1: Raise the money Step 2: retain the money. Step 1 is all about sales, and you're going to have to be one hell of a salesman to convince people to give you their money based on backtesting. Step 2 is about performance and customer service.
 
Quote from Moneyball:

It's pretty simple, actually. Step 1: Raise the money Step 2: retain the money. Step 1 is all about sales, and you're going to have to be one hell of a salesman to convince people to give you their money based on backtesting. Step 2 is about performance and customer service.
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he's right.......until you can show returns on REAL money traded and at least 6 months of steady PROFITS, YOU WILL BE DISAPPOINTED.
If you have a proven trading record already w/ your own money,
that will help.
Greentax can be helpful.
taking and trading opm is easy, trading hard earned savings that belong to friends and family is ..... well..... stressfull. If you end up losing money 1 or 2 months in a row , you'll have some interesting phone calls.
 
Tatnic:

I'm guessing I'll start an incubator fund, under a million and see how things progress. Nothing complicated, just equities (US and foreign) and bonds. Based on my back-testing, I have a "strategy" that returned the following and I would expect it to outperform the "averages" going forward:

2006= 13.98%
2005= 16.05%
2004= 13.96%
2003= 30.93%
2002= -1.72%
2001= 3.76%
2000= 14.82%

Not on level of Simmons obviously (not too many are), but given its simplicity and relative safety, its not that bad. Bonds haven't done that well (relatively) over the past few years so the back-testing returns reflect that.
More...

All that information is well and good, but tell me what makes your strategy work?
 
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