business dev person?...... you havent even gotten your first few clients. You're jumping the gun. Pay the marketing guy based on the amount of money any new client invests with you, that will make him work harder for the bigger fish..... which is in your best interest.
Starting up a CTA firm
- Thread starter cooltraderabhi
- Start date
Check out http://www.daytraderjobs.com/index.php and click on the two Stonehenge links.
Seems like this is what you're looking for.
G'luck!
Seems like this is what you're looking for.
G'luck!
This is not true according to my lawyers as well as the NFA and CFTC. The only required performance history is the most recent 5 years of every discretionary account for every principal/trading partner in the company. This EXCLUDES proprietary or hypothetical performance. Before including any prop performance it must include a certain disclosure statement and be presented in a completely separate section labeled as such. But only the required performance is subject to the 5 year rule. Any optional disclosure must follow the prescribed format but is not subject to a minimum time. But part of the disclosure is a statement telling the investor that you have little or no experience.
+1
Remember that giving up equity is not your only option. Profit sharing is much more common and would likely be a much better option for you, depending on what this person is going to be doing for you. Keep a few things in mind.
Marketing -- a small fund doesn't need in house marketing. The restrictions on marketing are such that the small amount that you are able to do can be handled easily by a third party. Logo and brochure design with a little bit of marketing material will cost you a few thousand. Web design isn't all that expensive either.
Administration -- Admin for a CTA is actually very simply. If you have a decent broker, they provide most of the admin for you. Clients all maintain their own individual accounts anyway. Annual compliance for CTAs is easy and doesn't require audits or anything. Even if you did hire a third party admin, you'd only be paying about $1K/month.
Sales/Fundraising -- This is the part that it helps to have in house, but it can be contracted as well. And there are many avenues. Typically a fundraiser will get 20% profit sharing on any capital that they raise. This only applies to the profits resulting from performance incentives and does not apply to administrative fees or capital that they didn't raise directly. IOW, if they get a client with $1MM and 6 months later that client refers a friend to you. The fundraiser doesn't get profit sharing on the referred account.
So if you give 25% equity to this person, what are they providing outside of those three areas? If the only valuable service they are providing that you couldn't easily hire out is sales, then they should be profit sharing. No equity involved.
Proprietary results are taken with a grain of salt, I.e. they're nearly WORTHLESS in gathering AUM.
Why?
Because unlike discretionary accounts, where you are managing another person/entity's money with POA, you are NOT required to report *all* of your proprietary activity.
I.E., you blow out 6 prop accounts, do well on the seventh, and report its proprietary performance.
If you've traded other people's money with POA, you MUST report all of this trading results. ALL of it. Even that account five years ago you didn't pay much attention to.
Marketing?
Get a D-Doc first.
GL!
Why?
Because unlike discretionary accounts, where you are managing another person/entity's money with POA, you are NOT required to report *all* of your proprietary activity.
I.E., you blow out 6 prop accounts, do well on the seventh, and report its proprietary performance.
If you've traded other people's money with POA, you MUST report all of this trading results. ALL of it. Even that account five years ago you didn't pay much attention to.
Marketing?
Get a D-Doc first.
GL!
OP -
20% of fees earned is a fair amount to pay a broker/allocator, as compensation for new business.
I believe this was your question.
20% of fees earned is a fair amount to pay a broker/allocator, as compensation for new business.
I believe this was your question.
That's illegal to not report the blown accounts. Even if it is prorpietary that doesn't mean you can legally omit the performance history of the principals or ap's.
Incidentally, I said ddoc first, then marketing, so I agree with you.
I like the WorldCupAdvisor.com and Covestor.com distribution channels. They don't require any marketing expense, and are very scalable.
Congrats, how hard was it to pass?
Not true according to the contact at the NFA as well as my lawyer. ONLY discretionary accounts are required to be reported. Prop accounts are never required. You linked the NFA document that explains that very point. It clearly states that only discretionary accounts are subject to the 5 year reporting requirement.
IMO, anyone who talks up Covestor as a distribution channel is pretty small time. If you want to at least be somewhat legit, you'll list on IASG or Barclayhedge. No serious managers consider Covestor to be a legit listing service.