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sj8070
Registered: Nov 2010
Posts: 15 |
08-10-12 02:07 PM
I have been trading a close friends account, along with my own, for around 2 years, charging zero fees in order to build up some track record.
Performance has been good: Avg. ~235bps per month, worst month -423bps, best 899bps. NAV 10k --> ~16k
I now have a number of willing investors (friends and family) and would like to start charging fees (was thinking 0,20) with a view to trading full time in the near future.
Launch NAV would be ~40k.
How is best to structure this legally? Incorporate? Investment club? This is surely not uncommon..
Also any views on charging fees with respect to FSA regulations much appreciated
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just21
Registered: Feb 2002
Posts: 3317 |
08-16-12 01:38 PM
Use interactivebrokers friends and family account. Upto 15 sub accounts, trades distributed evenly from the master account, no need to register with fsa or accept money as all stay in investor name.
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rtiger29
Registered: Jun 2010
Posts: 160 |
08-16-12 02:35 PM
Quote from just21:
Use interactivebrokers friends and family account. Upto 15 sub accounts, trades distributed evenly from the master account, no need to register with fsa or accept money as all stay in investor name.
This might be the easiest way to go about it. Seems way less complicated.
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LeeD
Registered: Feb 2008
Posts: 1764 |
08-16-12 02:44 PM
Quote from just21:
Use interactivebrokers friends and family account. Upto 15 sub accounts, trades distributed evenly from the master account, no need to register with fsa or accept money as all stay in investor name.
The OP asked about UK HF. So,the riles applied in the US (such as maximum 15 clients without need for registration) are largely irrelevent... unless the OP plans to actively market in the US.
Quote from sj8070:
How is best to structure this legally? Incorporate? Investment club? This is surely not uncommon..
Also any views on charging fees with respect to FSA regulations much appreciated
Investment clubs are base don the idea that no one gets paid for managing money. The investors who pooled the money are partners and as such they share investment ideas and the management workload.
Once you start charging fees, it's a totally different matter. Even to argue about what stock to buy to an individual (unlike publishing in the press/on the Web) you have to register as an investment advisor - exams and fees involved. This is probably the lowest-threshold entry into the regulated world.
If you want to pool money together as opposed to managing each idividual's account separately (even if the trades are replicated and pooled for execution) the best structure is probably the limited company or limited partnership. In this case I can see 2 solutions to charge correct fee:
1) have different classes of shares where yours will enjoy higher and guaranteed dividend (this will be difficult to set-up robustly when participation of investors changes over time... and would mean all gains are paid as didvidend);
2) put in the paperwork that you as a director have no fixed pay but are paid commission or bonus based on the fees you are going to charge - this will be taxed as "earned" income.
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clerk
Registered: Mar 2011
Posts: 36 |
08-16-12 07:29 PM
You can't take compensation for this in the UK without FSA authorization. Directly, or indirectly. Sorry.
In the UK, there is a barrier for entry into the HF world. You will need enough AUM and your own capital reserves for the FSA to give your business plan a thumbs up.
There is no FSA-light regime like the SEC's ERA regime in the United States.
If there is enough money at stake, look at working at a firm who will supervise you and give you a small cut of the fees. Or move.
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