Many funds (CTA/CPO and HFs) take the 2 and 20 on a monthly basis, using the .16 factor. If you have a significantly positive year, taking all those fees in December will cause a big downward spike in account value, and possibly a big negative December. Clients do not want that for Xmas, they want smooth upward equity curves. This also keeps the accounting simpler and contributes to an accurate equity curve. If you took it quarterly, you would have situations where you had a great first month, then two flat/down months yet were still positive for the quarter and had to take the fees in the third month, which would make the third month even worse. All of this added volatility unnecessarily messes with your sharpe ratio and makes the fund look more volatile than a monthly assessment.
Seems reasonable. But as a trader in the Hedge Fund, what does the Hedge Fund get out of it?...or am I simply salaried? Michael B.
I'm not sure what you mean by "what does the HF get out of it?" Some traders will be straight salaried, others will get a base plus incentive based on performance, some will get a decent salary then bonus based on overall fund performance. Much depends on your position. If you are just executing trades without bringing anything over and above button pushing and some basic judgment for getting orders through, in other words anyone could do it, then a salary is likely. Some funds, SAC for instance will bring in guys who have strategies of their own and let them run. In those cases you get a piece of the action in return for some added cash from the man, plus the man usually wants a spot in your fund if you ever decide to leave and do your own thing. If you don't have connections but have the ability to generate high returns, it's probably best to do your own thing.
ktm, I am realizing this more and more....I just wanted to speed up the capital build....but no free lunches and nothin' for free...hey is that a new song? I get joy out of helping people and making people money, while helping myself....ironic isn't it...no one appreciates me and my knowledge. I must be a legend in my own mind...lol I am unable to be a salesman...so my own thing needs to be a partnership with someone that can deal with the clients, whether it be a hedge fund, prop shop...managed accounts....I am a trader and I can make money out of money. Now if I could just find someone that believes in my abilities and/or has read my thousands of posts over the years in ET or...I will just continue to trade my own money, and post to my Journal here in ET. I have made many friends. Michael B.
Being a Business investor myself, first I would look for 1) Income statements, I would want to see exact 5-10% gain or any percentage you are trying to offer for a mininum of 6 months - 1 year. 2) Then I would want to know the risks / drawdowns 3) Then I would invest maybe $20k , And if everything goes fine for the next 6 months and I withdraw my money fine, I'll up it a bit. Lots of money out there, You do not have to be a salesmen, you just need to have your proof/statements avaliable, Money talks, bullshit sales techniques walks.
This post proves to me that I do not have the arrogance needed...I cannot talk to clients AND trade their money. I would simply tell them every negative thing about the system.. I am going to go crawl back into my Journal... Michael B.