This is my first post, so here goes. It has always struck me as odd that aspiring hedge fund managers are quite willing to give 75-80% of trading profits to others. Limited Partners typically receive this much in a hedge fund, subject to a hurdle rate of say 6%. That is, the LLC Managing Member receives 20-25% of profits above this 6%, the outside investors recieve the rest (ignoring management fees here which are typically 1-2% of assets).
There are a wide number of scenarios in which this might make sense outside of the short- term, high-turnover, stock trading world that most of this board's members live in. Convertible bond arbitrage, yen carry trades, and commercial mbs, markets have very high entry prices, in the hundreds of millions. Nasdaq and NYSE trading has a relatively low entry price, often $25,000 is enough to start as a serious trader, which of course can be leveraged.
I doubt one can raise investor capital to form a hedge fund without a documented track record. And with such a track record, i.e consistent profitability and reasonable equity drawdown, I can't understand why you would want outside money on the terms cited above. Its almost a vote of no confidence in your own performance expectations. I emphasize that I am referring just to daytrading and short term position trading.
