A Fund vs. Your Own Money

Damn, I had no idea this topic would generate this much debate. LOL
Some people have given some pretty good advice though. It all boils down to whether a person wants to answer to investors and deal with the legal side of running a fund.

 

Hi Guys,

Kind of got busy and dropped off the board for a while.

WOW! Never in a million years did I even think there was someone in Siberia trading merrily away.

I like to think the Sandbox is an exotic location but you win the gold metal with Siberia.

It appears to me that these ‘arcade’ firms are simply a broker that provides loans to an account holder so the account holder trades more and thus generates more commissions etc.

Is that generally the idea?

All I can say is from listening to the cream of the hedge fund/CTA world coming through the door out here to pitch for an allocation is that necessity is the mother of invention.

It really comes down to the Doctor Evil quote: “why make billions when you can make millions”. If someone chooses not to leverage their talent then they are making a decision to accept Doctor Evil's logic as correct.

Over and over people think they are at capacity but when it comes to leveraging talent so you can become seriously rich most figures out a way to do exactly that.

The other thing is it has been my personal experience that true edge is robust and if it doesn’t work in most time frames and most markets than it isn’t robust enough to put capital behind.

In the professional asset allocation world your risk/reward fit with the existing asset allocator’s portfolio of Hedge Fund/CTAs is far more important than your profile as a stand alone.

I think the problem you have been facing is you are talking to people that are looking at you as a stand alone investment rather than the professional asset allocators who view you as just one of dozens of Hedge fund/CTAs with who they have investments.

It is far better to raise money from the pros that look at you as part of a portfolio than trying to convince amateurs that they should try investing in your individual risk profile.

I have never heard of this before. What lecture circuit are you talking about?

I personally do not know any professional asset allocator that attends a lecture circuit to find hedge fund/CTAs.

If I was starting out I would go direct to the Hedge fund/CTAs (owners not employees) and try to get a stake/mentor etc. But maybe I am partial to that route since it is the way I got out of market making and into proprietary trading.

BTW did the legendary trader offer to stake you? That would have been my first choice if I had been in your position.

I still think you guys would find it a lot easier pitching to a professional asset allocator that already has a portfolio of hedge fund/CTAs who view you are a piece of the puzzle and not a single stand alone investment.

Just don’t ask me how in this day and age to get that meeting. I was able to pull it off when I was young and full of piss and vinegar but today I am no longer a glutton for punishment.

I would phrase that a little differently.

For me it all boils down to if you are happy making a good living or you want to leverage your talent and get seriously rich.

All the best,

Cheers Smoker

 

Hi Smoker,

Haha, not too exotic really aside from weather forecast of -35C for the weekend.

Other than that, all signs of civilization here including pretty good Internet connection of all kinds.

 

I'm afraid to live even in Minnesota, where you could freeze to death if the propane truck doesn't make it there in time. At least in Siberia they have trees you can cut down for the wood stove.

 

Right, firewood for the country house outside of the city... but central heating in the city, no problems wearing T-shirt at home when -30-35C outside.

 

I don't doubt that starting out in institutional trading is the quickest way reach the top. But that is not an option for all of us. For some of us, making the most money is not our first priority. For myself, it's important to have a life and to be true to my nature.

My mentor never offered funding. He gets a lot of inquiries, and I would have appreciated a mention, but none was made. I learned a lot about trading, and that was what I had come for.

I contacted my FCM regarding getting into money management. One of the things I learned was that institutional funding usually starts at around USD5 million. Below that, we're talking high net worth (HNW) individuals. Institutions like to see at least a 3-year audited record, and then they usually want to follow the trader for another year. The audited record typically costs around USD25k. I know from prior experience that many investors discount any record that was based on personal money or friends & family funding.

I have noticed that institutional traders tend to be supremely confident, often beyond what their abilities justify. That works in most fields of endeavor, but it's not me. I am always trading scared, wondering what the person on the other side of my trade knows that I don't. What have I overlooked?

 

Trade your own money. Less restriction bs.

 

Any thought of being allocated institutional money as an at home trader is pure fantasy-- regardless of you skill. But thanks for the humor. surf

 

No slightest issue with private money though.

 

Hi guys,

Well the sandbox is rolling around25 to 30 Centigrade since it is the winter out here.

That is reasonable thinking as long as you are completely happy and feel that the level of success in your current working world is “true to your nature”.

But it you want more and are not satisfied and want to push your professional envelope then that is also ok.

That is too bad. It would have been the simplest and most elegant solution to the capital issue.

Your FCM is one of the top firms correct? They are not one of those arcade firms mentioned above correct?

You want to approach only the FCMs that are at the level where they have an extensive institutional desk that handles the action of the top hedge fund/CTAs in the world. Those are the guys that can show your track record around to the top asset allocators in the world.

Actually the professional allocators usually start about minimum (and I mean minimum) 50 million. They can’t go any lower because they are handling billions and anything less is just too much investment of time and resources with too little pay off.

Yes and those are the guys you want to avoid. For the most part they are making their first investment in alternative investments or only a small portion of their money is ear marked for alternative investments so they view you as a stand alone rather than part of a huge multiple hedge fund/CTA portfolio.

You want pros that view your profile in the context of its fit with their existing multiple hedge fund/CTA portfolio rather than the amateur view of a stand alone investment in something new.

You have been trading for years and years so putting an extensive track record together is just doing the work.

The question of paying for it is simple; you have to spend money to make money.

This is a catch 22 for most independent traders. They have to spend the time, money and resources it takes to pass due diligence but they don’t want to spend the time, money and resources it takes to pass due diligence unless they know for sure they will score an allocation.

This dilemma becomes a judgment call on the part of the trader. If you have an edge and have the numbers that show you have an edge and you are pretty sure you can compete with the big dogs and you seriously want to be rich then go for it.

If you are not sure if the big leagues are for you and you are happy with your current level of success then just skip the whole idea and keep doing what you are doing.

Very true but it is that attitude and huge freaking ego is what gets those guys to the point where they get least get a shot at the big leagues. And if they really do have what it takes then they become seriously rich.

If they don’t have the talent or temperament then the market rips them apart just like it does the smallest guy on the block.

The market really isn’t concerned if you are at the biggest fund in the world or a dentist from Omaha goofing around with a couple contacts. The market treats everyone the same.

Who cares what the other side of your trade thinks? Who cares what the Fed is doing? Who cares what the “smart money” is doing?

You have your edge. You have done the math. You have your trading record. Just do the stuff that got you to this point and leave the second guessing to the sheep.

Just my two dirhams worth.

Also less money!

All the best,

Cheers Smoker