Good luck. Like Aaron, I suspect you are still quite wet behind the ears. Unfortunately, they don't track failure statistics of small hedge funds like prop, but I tend to think the failure rates are similar for one who approaches both with a long term game plan, proper funding, and the right mindset. Aaron's statistical figures disturbed me during his on line chat. He was so specific about gains "Yes, after we topped the charts with +97% in '02 we got a lot of new investors" but talked about drawdowns of 20 to 30%. Isn't it interesting how people know exactly the upside figures, and give a wide range of down side? I tried to ask about the 97% number, whether that was total return, or from some valley to peak, but the question did not go through. I had a position back in the late 80's where I was working for a firm hawking managed futures accounts. My job was to look at track records, and they are very misleading in small funds, as big gains can come easily. Big losses can come just as easily. Someone can come into the fund at the wrong time, and easily lose 50% while the fund draws down only 20% depending on how they measure the overall performance. I wish you luck with your goal, but it is unrealistic in my opinion. A good hedge fund over time will outperform the market, but these ideas of generating double digit returns on a regular basis for clients are just nonsense statistically speaking over a 10 year period. The truly wealthy people I know, and I do know a few, would laugh at someone talking about the kind of returns that are thrown around. They know the truth, and the truth is that if you beat the S&P by 10 to 15% annually on a very consistent basis, you are among the best in the business. They also know the difference in trading a few million dollars and large funds. Not the same animal at all.
very well said, trader99 . thank you. however, i think the point don was getting to, is that for most traders with limited capital a hedge fund structure does not make any sense. yes, for the size funds that you mention, a hedge fund structure is the only way to go . i particularly like kovner's statement. best, surfer
not to mention the sharpe ratio would be so skrewed after a 97% one year gain and 20-30% drawdowns that it would greatly concern any legitimate institution or fund of funds. for those of you who don't know--- the sharpe ratio does not distinguish between upside and downside fluctuations. it is a measure of volatility not risk. best, surfer
I tried to ask about the 97% number, whether that was total return, or from some valley to peak, but the question did not go through. Did you check the log Optional? I saw your peak to valley question, but thought he had addressed it already. I found this: trader99 (Mar 26, 2003 5:11:31 PM) aaron - is that 20-30% drawdown for the yr or a month? Aaron Schindler (Mar 26, 2003 5:11:44 PM) peak to valley. ...but then that's talking about the downside, not the upside. André
People do have a tendency to highlight the best and minimize the worst when they are selling something, don't they? Always a lot of detail of the good, and hazy on the bad. Don Bright is a master of that trick.
Thankyou for the kind words. Dispite some negativity on this thread in regard to small funds, I am not disheartened. In fact, unlike a lot of people, I appreciate opposing views on things. It helps me to reevaluate my own opinions. I hired greentradertax.com to set up my fund. GTT also does my accounting and other back office type work so that I can focus more on my own trading. They just recently redid their website, and now have a lot of information on setting up a hedge fund. It is worth a look for those of you who have questions. I personally am very content with the work that they have done for me. http://www.greencompany.com/HedgeFunds/index.shtml I think that those lipper style type groupings are very misleading. I am mainly just an agressively trading fund now with about a third of the fund's capital dedicated to that. The rest is employed in value investing with some shorts also.
Andre- I think you hit it right on. It isn't ego. I sure am not gonna boast about my fund size. In fact, I managed more last year before I took some out to pay bills, taxes and set some aside for future expenses. As i said above, I felt that I could never grow my account or income to the level that I want because of taxes and expenses. Andre, you are right. Don was dragged in and I don't know how his own feelings now are. I apologize and I am going to errase my past comments. I am sorry.
let's not forget that the 97% figure was before his fund was even at the 1.5 million dollar ( us) figure it is now. day traders regularly double their money can they do it again is the question. please don't think i am ripping on the presenter , he seems like a great guy and was very kind to share his knowledge. best, surfer
it's not ego concerning the fund size, it's ego when picking up chicks or just at a party--- "what do you do for a living?" well, i manage a hedge fund ! totally true but it does conjure up images of private G5's and mansions. i think it is a great thing, and as you know, do it myself--BUT i believe that the focus should be on raising substantial capital or it's a waste of time. best, surfer