Starting my own hedge fund

rmorse said:
Only self-clearing broker dealers that are member of the exchanges they trade at, don't pay commission, but they have a large monthly infrastructure cost. (BTW-They still have to pay transaction fees at the exchanges)
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Sorry, my question is off the subject but you would be the one to know. Are brokers trading futures for their own accounts and MM's bound by SPAN the same as retail traders? I would think they are, but maybe at a lower rate.

Thank you.
 
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It is my understanding that margin on futures is determined by the exchange. They have one requirement from the customer and 8% of that is also required by the FCM. I don't think that requirement changes if the futures are traded by a customer, member of the exchange or an FCM. The exchanges are responsible for counter party risk and have a certain requirement that must be met. BTW, this margin is only calculated for overnight positions.
 
rmorse said:
Not for a small hedge fund. To do SMA, you might have to register as a RIA.
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Yes, a series 65 license (investment advisor representative) is required to run OPM in most states.

For futures, I think only the series 3 is required, however I'm not sure.
 
rmorse said:
In general there are two sides to this. You need to establish a trading strategy and verifiable track record that is marketable.
Bob
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Hello Robert,

What makes a strategy/track record "marketable"?

thanks!
fan27
 
Consistently profitable with appropriate draw downs. I say "appropriate", because if your net is 30%/year or 5%/year, the acceptable draw downs are different. Then your return will have a target market. Some will be looking for low risk, low leverage and 6%. Others will want 20%+ and be willing to take on more risk.

Investors clearly have a comfort level. They need to understand what you are doing and feel like they are missing out if they don't participate. They also invest in the manager and a business. They want to feel comfortable with the manager and know there is an infrastructure behind what he is offering. One man shops are a harder sell.
 
rmorse said:
Consistently profitable with appropriate draw downs. I say "appropriate", because if your net is 30%/year or 5%/year, the acceptable draw downs are different. Then your return will have a target market. Some will be looking for low risk, low leverage and 6%. Others will want 20%+ and be willing to take on more risk.

Investors clearly have a comfort level. They need to understand what you are doing and feel like they are missing out if they don't participate. They also invest in the manager and a business. They want to feel comfortable with the manager and know there is an infrastructure behind what he is offering. One man shops are a harder sell.
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Makes sense. thanks!
 
rmorse said:
In general there are two sides to this. You need to establish a trading strategy and verifiable track record that is marketable. Then after or concurrently, you'll need to start a business. The business side of the hedge fund will include at a minimum:

-Lawyer (establish your GP, LP, investment manager,investor agreements and do any filings that are necessary)
-3rd party Administrator (Keep track of you P & L and cash movement)
-Auditor (Check books and records for accuracy)
-Prime Broker (clear and custody positions and cash)

We are called a mini-prime or introducing broker. Most importantly, we offer an introduction to the Prime Broker and provide trading platforms and access to the exchanges. However, we help coordinate the needs of all of the above.

When an investor invests as a LP in a hedge fund, they expect to be investing in a business, not just a person.

Bob
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What is the typical cost per year of this setup?
 
Not sure. Depends on who you choose to form the fund and who you choose for each provider. You have to shop around but keep in mind that for larger allocations, you can save money by using a auditor from India.
 
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