Starting a hedge fund

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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I appreciate that and sense you've been through the drill before. I know it won't be easy, ie step 1, and that's why I was leaning towards an incubator fund initially.

My system is quite simple and is not based on results that are arbitrary. I.e., for instance, I have a list of equities that have done very well over the past 10 years. But I'd be a complete idiot to assume that they'll do just as well in the future and I couldn't convince anyone otherwise. So I'm not planning on using that list and my model isn't about that anyway.

My model is based on a very simple methodology that I believe will be just as successful in the future as in the past, unless the entire world-economy shits the bed. Its not about individual stocks or bonds but more about how to keep that mixture in balance to achieve conservative, above average returns. And I believe my back-testing is a reasonable comparison to other results.

I appreciate you stressing the importance of selling this system...you can see I'm only in the early stages of doing that and I'll have to spend as much time developing my plan as my model.
 
Quote from LongView:

All that information is well and good, but tell me what makes your strategy work?
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I partly explained/answered that in a previous post. My system is all about diversification and balance, not individual stock picking or trading accumen. Its pretty simple and should do just as well in the future as in the past because of the way it is structured, ie its not time dependent.
 
Tatnic:

My model is based on a very simple methodology that I believe will be just as successful in the future as in the past, unless the entire world-economy shits the bed. Its not about individual stocks or bonds but more about how to keep that mixture in balance to achieve conservative, above average returns. And I believe my back-testing is a reasonable comparison to other results.
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Ok so basically you are timing various markets. How often do you rebalance your porftolio, so to speak?
 
Quote from Tatnic:

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:)
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Correct, those of us who know what we are talking about will not provide answers, but I will provide some warnings.

I would like to say you have a 1% chance of succeeding but it's not that good. If you are serious then put up your own money, at least 100k, and contact someone like: http://www.greencompany.com/HedgeFunds/LaunchServices.shtml
I have not used them but their incubator strategy seems logical. You just have to be prepared to trade for years, without charging anyone any money, to get a track record. Even when you have a proven track record that stretches 3 years you will still have a very hard time raising money. There are thousands of funds with track records and managers with pedigrees who have a lot of trouble raising money.

Anyone who tells you that it won't take years and even then be incredibly difficult doesn't know what they are talking about. An anonymous posting website is not the best source of serious information.
 
Quote from Tatnic:

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.
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No links, but for all the rambling on this site, there is a wealth of information in the forums.

There is one basic fact - if you trade OPM, you are subject to more regulations then you can imagine.
 
Quote from risky63:

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.
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Yes...I know it will be stressful and as sure as shooting, I'll start it right before a huge meltdown. But with this model, timing is not all that important in the long run (defined as 4 years or more). What I mean by that is, if I start the model right before the bubble burst in August of 2000, after 2 years its returned 3.71% annually; after 3 yrs its at 7.47%; after 4 its up to 9.8%, and after 5 years its up to 11.92%. Its what I call a resilient mixture.

But you're right, if I have nothing but scared money in the fund who flinch at a couple of bad months in a row, then I'll have nothing but headaches on my hands. I'd hope that I would have done my job explaining the possible outcomes and why patience is important over the longer term.

Green Tax is a good source...I have already contacted them and found out what the average costs are for setting up a fund.
 
Yes, there are probably more people who run/trade for hedge funds on here than you think. My point is, unless you have family money or big time connections, it's going to be nearly impossible to raise money from strangers with zero track record. Don't take this the wrong way, but why would someone give you their money when you've never traded your strategy with real money, when they can go out and give it to thousands of people who have instead? I support paper trading and backtesting to a degree, but it's a different world from trading real money, real time. There's no psychology involved in backtesting, you don't have to answer to your investors when you have a 5%-10% drawdown, etc. There's only so much you can explain to people, most won't even care about what exactly you're doing, as long as you're producing above average returns. With no track record, that's hard to do.
 
Quote from LongView:

Ok so basically you are timing various markets. How often do you rebalance your porftolio, so to speak?
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Its not a market timing model per se, and I'd rather not say how often since I had to work pretty hard at figuring that out. Sorry.
 
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