What is to tell an investor when looking for funds?
- Thread starter tonyzhou
- Start date
If you're trading in their account (SMA) that have to see everything. If you're trading in a fund or partnership like an LP or LLC, they only have to see monthly returns. If you don't want to show them monthly statements, you are going to need an auditor to confirm your returns. I doubt they will get anything from your monthly statements to replace you. Be happy you have investors and don't lose them.
1245
I think the investor will ask a lot of question in
the meeting, that I should prepare
Monthly return
leverage
long/short ratio
maximum drawdown
Statistics such as Sharpe ratio
Turnover
Allocation, such as how many stocks in a portfolio,
how many are large/mid/small cap, how many
in different sector
Liquidity
I think I can comfortably provide above, but I do
not want to answer questions such as how
do I pick the stocks.
the meeting, that I should prepare
Monthly return
leverage
long/short ratio
maximum drawdown
Statistics such as Sharpe ratio
Turnover
Allocation, such as how many stocks in a portfolio,
how many are large/mid/small cap, how many
in different sector
Liquidity
I think I can comfortably provide above, but I do
not want to answer questions such as how
do I pick the stocks.
description of your strategy
Your bio
Monthly returns
worst Monthly draw down
how you monitor risk and allocate assets
Your infrastruction: PRime Broker, Introducing Broker, accountant etc.
Then answer questions-simple, direct answers-extra details confuse them. Don't tell stories that don't answer their questions. Stay focused on moving forward and expect to close them.
I think every investor understands that a manager will keep private the "specifics" of their secret sauce. The exact parameters of what makes up your secret sauce should rightly stu private.
But you should be able to articulate:
- how you came about your secret sauce,
- what can your historical results be used to prove about your secret sauce,
- what does your secret sauce taste like - what are the market conditions in which your sauce does well/poor, and why,
- what are the basic inputs into your secret sauce (or at the very least - what do you ignore),
- how do you go about updating your secret sauce over time,
- why hasn't anyone else derived the secret sauce - what's unique about you or your approach.
Frankly, anyone unwilling to share the above will be seen very skeptically.
I like to think every investor I talk to walks away understanding what (I think) my edge is, and exactly what drives returns historical/future. They will draw their own conclusion as to whether they agree.
But you should be able to articulate:
- how you came about your secret sauce,
- what can your historical results be used to prove about your secret sauce,
- what does your secret sauce taste like - what are the market conditions in which your sauce does well/poor, and why,
- what are the basic inputs into your secret sauce (or at the very least - what do you ignore),
- how do you go about updating your secret sauce over time,
- why hasn't anyone else derived the secret sauce - what's unique about you or your approach.
Frankly, anyone unwilling to share the above will be seen very skeptically.
I like to think every investor I talk to walks away understanding what (I think) my edge is, and exactly what drives returns historical/future. They will draw their own conclusion as to whether they agree.
I have never heard of a wealthy investor, fund of fund or family office ask for this. They care about Risk, Return, Character of the money manager, safety of funds, lock up period. And if money is not SMA and is commingled in a fund, they want to know who the third party admin. is and who their auditor is.
They don't look for a trader who will manage their money as a hobby. They look for a professional money manager with a good track record, good background that they can trust with their money and a business infrastructure in place.
1245
Well, I don't pretend to know all, but I do have $22mm in AUM (starting from $2 million 3 years ago)... the bulk of which are, of course, coming from wealth investors, fund of funds, and family offices. So, I think I have some credibility here.
And yes, of course they will want to know all of the above, but probably a good 80% of the fund managers out there are doing enough to get check-marks on all of the above.
- independent third party admin? check.
- "funds safe?" check.
- "no lock up period? check.
- credible independent auditor? check.
- credible FCM or prime broker? check.
- "good character"? check.
Seriously, how many fund managers are getting crossed off the list for not being "safe", at this point?
The real question is how do you separate yourself from the at least 80%+ of all fund managers who are professional enough to meet the above standards? How do you gain assets beyond what they're doing? By talking about exactly what you do as part of your investment process.