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Starting a hedge fund
- Thread starter Tatnic
- Start date
Quote from hajimow:
Titanic
I believe your edge or your marketing edge can be that you guarantee returns over CD rate which is 5% and anything over 50% will be yours. I remember there was a guy in the market wizards 2 book which was investing on mutual funds and he guaranteed that you would not lose money and his return was pretty impressive. If you can do what I said and have a minimum investment of 20K, you will be successful.
If I recall correctly, that guy you mentioned was doing fund timing which is now illegal.
...couple of things, one I've started a paper fund to showcase my methodology for anyone interested (actually, I won't showcase that much, just generalities). This paper fund is different than the idiot model I've been talking about, which is still very useful and would return better than most funds of funds. Anyway, this one I'm going to post here I set the start date at the beginning of the year so I can compare it to other funds performance-wise. Its a long-only fund, with 37.5% bonds (us treasuries). The 62.5% remaing stock portion is comprised of 23.3% tech; 3.3% financial; 13.3% biotech; 6.7% agriculture-related; 6.7% mining; 3.3% defense; 20% energy; 16.7% steel; and 3.3% consumer non-cyclicals. You can probably figure out that there's only 30 stocks...I plan on keeping numbers for re-balancing the mix and one for simple buy and hold and see how they compare.
So far for 2007 the simple buy-and-hold is up 11.75%. I haven't set up the re-balanced mix yet but in the short run I wouldn't expect much difference in performance, or at least I'd be surprised to see a huge difference in just 3.5 months time.
Lastly, I've been reading a very informative book about starting and managing a hedge fund. So far, the main message is that running a successful hedge fund isn't about stock picking or trading accumen, its more about running the fund like a business. Raising capital and marketing are more important than putting up good numbers, although you need to be able to do that as well. But to assume that all you need to do is put up the numbers and the investors will come flocking to you is not the typical path of most successful funds, at least according to the author (Strachman). The title of the book for anyone interested is called The Fundamentals of Hedge Fund Management.
So far for 2007 the simple buy-and-hold is up 11.75%. I haven't set up the re-balanced mix yet but in the short run I wouldn't expect much difference in performance, or at least I'd be surprised to see a huge difference in just 3.5 months time.
Lastly, I've been reading a very informative book about starting and managing a hedge fund. So far, the main message is that running a successful hedge fund isn't about stock picking or trading accumen, its more about running the fund like a business. Raising capital and marketing are more important than putting up good numbers, although you need to be able to do that as well. But to assume that all you need to do is put up the numbers and the investors will come flocking to you is not the typical path of most successful funds, at least according to the author (Strachman). The title of the book for anyone interested is called The Fundamentals of Hedge Fund Management.
...the numbers so far are not that good, at least my spread sheet does not agree with the Yahoo numbers. But so far, the buy and hold is up 11.03% for the year as compared to a remix model which only beats it by 0.07%...hardly worth the effort and commissions assuming one were to actually use this.
Again, this is just a "paper fund" of 29 stocks and a chunk of index bond funds in long term u.s. treasuries (37.5% of the port). I'm guessing it will return around 30% for the entire year but that's just a guess.
I don't expect too many traders here to be interested in such a boring, simple idea, (I mean how simple and mindless can you get than buying at the beginning of the year and holding??) but with way above average returns as compared to the hedge fund universe. Obviously I can't predict the future but if recent past is any guide it won't be hard to beat the hedge fund universe handily.
About a year ago (during the mother's day massacre) I compiled a paper port of dividend paying stocks that to date is up 32% (I bought a few of them and have held). I compiled another one back around thanksgiving that's up 15% to date. These are about as boring and steady as you can imagine. But the nice thing about dividend paying stocks is that you have a built-in cushion.
Again, this is just a "paper fund" of 29 stocks and a chunk of index bond funds in long term u.s. treasuries (37.5% of the port). I'm guessing it will return around 30% for the entire year but that's just a guess.
I don't expect too many traders here to be interested in such a boring, simple idea, (I mean how simple and mindless can you get than buying at the beginning of the year and holding??) but with way above average returns as compared to the hedge fund universe. Obviously I can't predict the future but if recent past is any guide it won't be hard to beat the hedge fund universe handily.
About a year ago (during the mother's day massacre) I compiled a paper port of dividend paying stocks that to date is up 32% (I bought a few of them and have held). I compiled another one back around thanksgiving that's up 15% to date. These are about as boring and steady as you can imagine. But the nice thing about dividend paying stocks is that you have a built-in cushion.
Are hedge funds more intra day traders than longer term or the opposite? It seems to me that the more successful hedge funds are longer term so why does there seem to be so many quant and programming people that the hedge funds are looking to hire?
Quote from youngtrader:
Are hedge funds more intra day traders than longer term or the opposite? It seems to me that the more successful hedge funds are longer term so why does there seem to be so many quant and programming people that the hedge funds are looking to hire?
It probably has to do with the fact that the superior analytical skills that are required to do short term trading, translate well into longer term trading. If your "edge" is that you have a significant amount of "experience", or that you've worked on the floor, then chances are good that you are deluding yourself regarding whether you have an edge at all, or at the very least, you are deluding yourself about how robust your edge is.
Forget about this strategy as a viable hedge fund!!!
You must be non correlated to the market and show consistent monthly returns to have a chance.
You must be non correlated to the market and show consistent monthly returns to have a chance.
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.
I've always wondered why someone would even take the risk with their money to only earn 7-8% return on their money....hell you can get a certificate with 6% that's pretty much risk free, barring a collapse of the entire economy.....
Not my place to make decisions for others, but I seriously always wondered that.