What's a cost efficient way to PROVE your track record to eventually start hedge fund

[harrytrader]

A performance alone proves little: it proves that you made it in the past not that it is REPRODUCIBLE.

Quote from canadian_dude:

I've had a lot of success as a trader over the last 18 months. I made over 200% profit on capital during the first 12 month period, trading the emini's. I do NOT daytrade, I trade
only a couple times a day, sometimes I do not trade at all for several days, I just hold a position.

Like many people, I have all my friends asking to invest money with me. So far I have told them all it is illegal for me to manage their money for them.

But its not like I haven't thought about professional money management. Not the chump change my friends want to invest, no, I would want to manage much larger sums eventually if I wanted to do that at all.

So like many people here, I have looked into what it takes to get into this field, the obvious one being to start your own hedge fund. But that looks like an EXTREMELY difficult task. It's like a "what comes first chicken or egg" problem.

You can't attract investors without a proven track record, and you can't create a track record without investors. Of sure, I have my PERSONAL trading record, but from what I have read, these are largely ignored by the investment community. They are looking for several years worth of AUDITED trading results.

My question is this: Is there any way to create an AUDITED trading record that will be taken seriously by potential hedge fund investors, without actually going out and starting that hedge fund?

Because from what I read, you need at least $1 million to start a hedge fund, because you will incut $75,000 in costs your first year, and $25,000 a year after that. So you need some size to the fund to justify these costs.

What about alternatives? Is it possible to create a REGISTERED COMMODITY POOL instead, and get that thing audited, therby developing a track record that would be taken seriously by potential investors when you take the next step and start a hedge fund a couple years later?

My understanding of the Registered Commodity Pool requirements are that that it be limited to $5 million and 99 investors, but that the investors don't need to invest huge
sums of money. This would allow me to tap into all the $10,000 amounts that most of the people I know want to invest. I also think that there are no auditing requirements for a Registered Pool, am I correct about this? Or do you need an annual audit? Like I said, I would probably want an audit anyway, so I can use the PROVEN results to attract hedge fund money a few years from now.

Does anyone know what the costs are to run a Registered Commodity Pool versus a hedge fund start-up? I would think the Pool would be much cheaper to run?

Thanks for some answers.

 

[Don Bright]

Quote from harrytrader:

A performance alone proves little: it proves that you made it in the past not that it is REPRODUCIBLE.

Oh, I agree about the "past performance"....but we all know that nothing is "reproducable' ..results wise, since the market is the pitcher, and traders are the batters. You can't use the same "swing" that you used the last time you hit the ball when the pitch is totally different.

Another thought is...."who cares" about proving it others? If you're making money, compound it, or put your theories to use by growing an enterprise with othes under your wing.

Like I said, "just a thought"...

Don

 

[omcate]

Quote from Don Bright:

Another thought is...."who cares" about proving it others? If you're making money, compound it, or put your theories to use by growing an enterprise with others under your wing.

The law of compounding is very powerful. $5,000 compounded at a monthly rate of 5% will become $1,744,560 in ten years. Unfortunately, I probably cannot achieve this kind of consistent performance in the foreseeable future.

:eek: :eek: :eek:

 

[T-REX]

Quote from Don Bright:



Oh, I agree about the "past performance"....but we all know that nothing is "reproducable' ..results wise, since the market is the pitcher, and traders are the batters. You can't use the same "swing" that you used the last time you hit the ball when the pitch is totally different.

Another thought is...."who cares" about proving it others? If you're making money, compound it, or put your theories to use by growing an enterprise with othes under your wing.

Like I said, "just a thought"...

Don

Hey Don. I have not spoken to you in a while. How are ya?

Anyway, playing the devils advocate for a moment......I tend to believe that past performance IS indicative of future results provided the systems primace is a valid one to begin with. Markets DO behave in predictive repeatable patterns that is why we are able to trade in the 1st place. I think the harder question to answer is "if your so good why do you need my money"? or like an article I read today that asked- "If you have such a great system why are you selling it to me"? The question presupposes that IF you have found/created the "Holy Grail" then you would not share it with the world much less do it for "FREE" -(which is exactly what I've been doing):eek: :eek: :eek: