Thinking about starting a small hedge fund

[newwurldmn]

tell me if you disagree with this statement:

if as an emerging manager you are trying to raise capital just on your returns, you are sunk.

If that is similar to a First loss program in the USA, then yes. I'm not a fan. An example without any names, is you provide $1mm in a pooled asset in their name. They give you $10mm of BP for an approved strategy. They claim after 1 year of good performance they will help you start a fund. During the first year, you have what I say is a problem. A PMA with $1mm gets up to $6.67mm of BP. Their $10mm is like them providing your $500K of their assets and $1mm of yours as if you put up $1.5mm of your money, in your account, you would get up to $10mm of BP. They often take 45% of profits during that time. And, what do you tell investors. Your returns are based on $1mm or $10mm of AUM. They say it helps raise money based on the BP. I think the deal is horrible but some of these have $200mm of their assets and about the same of what I think I horrible deals with despite managers.

 

[Robert Morse]

I Agree. Maybe a few SMA with friends and family. Not a fund with $25mm or more.

tell me if you disagree with this statement:

if as an emerging manager you are trying to raise capital just on your returns, you are sunk.

 

[trismes]

If that is similar to a First loss program in the USA, then yes. I'm not a fan. An example without any names, is you provide $1mm in a pooled asset in their name. They give you $10mm of BP for an approved strategy. They claim after 1 year of good performance they will help you start a fund. During the first year, you have what I say is a problem. A PMA with $1mm gets up to $6.67mm of BP. Their $10mm is like them providing your $500K of their assets and $1mm of yours as if you put up $1.5mm of your money, in your account, you would get up to $10mm of BP. They often take 45% of profits during that time. And, what do you tell investors. Your returns are based on $1mm or $10mm of AUM. They say it helps raise money based on the BP. I think the deal is horrible but some of these have $200mm of their assets and about the same of what I think I horrible deals with despite managers.

Something different by the sounds of it. Appointed rep schemes don't offer any leverage or capital, they basically offer hedge fund as a service - license sponsorship, legal, prime broker, audit, compliance etc.
First loss isn't all that common here, there's one called Falcon and couldn't see much more but thanks for heads up

 

[zdreg]

I have only had experience with small hedge funds my same guy has switched a few times I'm on my third one.

I can tell you for sure 2 & 20 is dead. RIP.

Nobody pays that anymore. ~stoney

2% pays for the cocaine, the mistress and management salaries.

 

[MarkBrown]

we also participated in commissions as well as 2 and 20 - but you need some decent returns to do that.

if you use quartiles to estimate the 75 percentile gain of a move and then sell options against your future positions it generates a lot of commissions and brings in premium. plus park everything in t-bills now your cooking. only thing left is to do currency swaps to hedge devaluation of all the assets.