Thinking about starting a small hedge fund

Robert Morse said:
Since I have experience with Cap Intro, have Hedge Funds as customers and have invested in a number of Hedge Funds, CPOs and CTA with my money, I can tell you 100% that is not accurate. The 2%/30% is possible but


uncommon, but the "reveal nothing to them," a big NO. There are a few types of allocators; Wealth investors, other hedge funds, family offices and fund of funds. The last two will do an enormous amount to due diligence. Sometimes months, sometimes years. They have teams that not only want to meet and talk to you about you and your business, but also require data to analysis themselves. They also have mandates that vary. A typical one is that their minimum investment is no more than a set percentage of your fund. As an example, their minimum investment might be $5mm and no more than 5% of the fund AUM. That means they also do not look at any pooled asset with less than $100mm AUM. There are some that only look to be the angel investor. They want to get in early. Help you with your track record and then help raise money after a few years. They expect not only very low fees, but also a share in the business or general partnership. The hedge funds that might look, are typically a multi-strategy fund looking to add a strategy they do not have right now. I'm not sure how common that this. I have only spoken to one that did that. They were a bond fund looking to invest in SMA for a futures or equity strategy with about 5% of their assets.

With under $100mm in AUM, your target market will be Wealth investors looking for a certain type of investment that they neither have the time or experience to do on their own. You do not need to give away how you process data, but you will need a little more than a basic description of your trading. They will want to understand what you trade, who makes the decisions, what other team members are there, how do you manage risk etc. They will want to know about your past through a bio. They want to know what to expect and how they get out if you do not meet your expectations.

In summary, revealing nothing to them might work with friends and family but not strangers.
More...




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 and 20 is dead unless you have a clause that says you split anything above 100% returns and just the possibility of that happening will attract big money.

of course it helps if you have actually accomplished that in the past.

m
 
Just go to youtube post some videos of your trading results ...some videos of you trading and making free money like 99% of them do.... get a few thousand followers to join your courses, charge them $99 a month and like magic you'll be making tens of thousands per week...
Then just scale up from there.

No need for a hedgefund in 2024 when you can just be a youtuber showing others how you print free money trading stocks with never a loss!
 
S2007S said:
Just go to youtube post some videos of your trading results ...some videos of you trading and making free money like 99% of them do.... get a few thousand followers to join your courses, charge them $99 a month and like magic you'll be making tens of thousands per week...
Then just scale up from there.

No need for a hedgefund in 2024 when you can just be a youtuber showing others how you print free money trading stocks with never a loss!
More...
If you're gonna start a business... I say think Bamboo.

I graced an Amish furniture maker today I have known forever, and he showed me these Bamboo shavings that come off his lathe... said his wife uses them to scour pans... 1000X better than the green 3M things you buy that go bad in a week.

So he gave me a handful... and ya know what... he was right. I tried it. And it doesn't harm non-stick pans. Or it seems like it wouldn't. Not enough data, I asked, those Amish, I don't think they have non-stick pans, its all cast iron.

Either way... tune in. Van is taking it to O'leary and Cuban on ST. :thumbsup: :cool:
 
Running and managing a hedge fund is running a business where profits typically come from trading or investing. Not everyone has that skill or background. The same way a great home cook might not be very good at running a new restaurant. If you have gone through the CIA, worked in kitchens for years, it enables you better raise money and start a restaurant. It is easier for a trader that worked at another fund first and has experiance and contacts to start a fund than someone trading from home. The home trader might not be able to scale there strategy from $50K to even $5mm let alone $50mm. While at the same time putting themselves out there to meet possible investors. It often works best in a team. One with the expertise of cap intro and customer support and one ore more that develops and runs whatever the income source is. I say "income source" because not all hedge funds "trade."

trismes said:
good advice Robert. Given you’ve probably seen all kinds of pitches, what have been the most common mistakes you’ve noticed?
More...
 
Maverick2608 said:
My CAGR for the 15 years I have been trading is similar to the CAGR for the first 15 years of Medallion Fund - the best performing fund in history.

I do not think I can raise USD 50 million.
More...

You "could" IF you would have a proper operational set up with:

a) external and internal Risk Manager function independent from you/your strategy
b) internal, experienced Compliance Manager
c) Anti Money Laundering Manager
d) HR manager

Hundreds of "hedge fund managers" make one major mistake in judgement: institutional money manager´s/large family offices/pension fund´s thinking is that operational set up is more important than pure performance metrics.

Also: $200 Million, 2-3 year track record, independent fund admin and audits are a "MUST"!
 
Robert Morse said:
Running and managing a hedge fund is running a business where profits typically come from trading or investing. Not everyone has that skill or background. The same way a great home cook might not be very good at running a new restaurant. If you have gone through the CIA, worked in kitchens for years, it enables you better raise money and start a restaurant. It is easier for a trader that worked at another fund first and has experiance and contacts to start a fund than someone trading from home. The home trader might not be able to scale there strategy from $50K to even $5mm let alone $50mm. While at the same time putting themselves out there to meet possible investors. It often works best in a team. One with the expertise of cap intro and customer support and one ore more that develops and runs whatever the income source is. I say "income source" because not all hedge funds "trade."
More...
Makes a lot of sense thanks. Have you or anyone had experience of AR schemes; I don't know if there's any US equivalent but it's effectively umbrella hedge fund services for those not-registered by FCA in the UK. You still need to go through vetting et al, and your point about cap intro vs operations still stands but I'm struggling to find anyone who's even used them, even though there's a fair few around
 
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.

trismes said:
Makes a lot of sense thanks. Have you or anyone had experience of AR schemes; I don't know if there's any US equivalent but it's effectively umbrella hedge fund services for those not-registered by FCA in the UK. You still need to go through vetting et al, and your point about cap intro vs operations still stands but I'm struggling to find anyone who's even used them, even though there's a fair few around
More...
 
You must log in or register to reply here.
Back
Top