Results do get attention. Stars are packaged and guaranteed so much per sale. Often a bait and switch is common. That is a name is used to get hits and then several variously priced packages are shopped to the person who did the hit. The subsequent work that has to be done is of a fixed duration and intensity. The better deals come from putting litigation on the table right up front. Whether a star likes it or not, he is going to have to police these packagers periodically. Packagers do not have any money as a rule, they just have the established niche that creates a busy boiler room for sales. They particularly like being able to hustle past performance. thatr is what determines the deal pricing scale. If you get to a level of four times Bernstein you are doing okay. unless you have to commit to longer durations and intensity.
As the firm has already placed some trust in your system by putting certain resources of programming, administration and venture negotiation time to your invention, probably the firm would be quite willing to allocate a small amount of risk money for you to trade their account to be managed by you, in order to see the actual performance and else. If they don't even trust you for the intermediate step, why should you trust them? Secondly, you don't have to form a company of which the legal form will make you much easier losing control of almost everything, that most your family and friends can explain to you in plain words. I think, most of ZeroSigma's post would be correct and appropriate in the inventors' world. You may also check with some inventors (and cons) forums on the internet.
Mountbank, You hold all the aces; the other party has zilch. You call the shots - everything on YOUR terms . Of course, exhibit some degree flexibility to show you are reasonable; but who's kidding who in bs negotiations? You have the vital element , here - a (presumably) brilliant trading system. What are they offering? Money, of which there is a lot flying around from numerous potential parties. My point is anyone can get capital, but how simple is it to get a successful trading system? That's the hard part. I would suggest they are denied access to your programme. If it produces, eg 100% per year, will they walk away? No, because they can introduce trading/clients' capital. Yes, if their primary motive is acquisition of the programme - then they kick you out. One firm has shown interest; you can bet others will also show interest. Consider raising outside trading capital, possibly by offering an equity stake. Realistically, all responses to your question are based on vague notions. Perhaps you could provide something more tangible, eg the sums required to effect the trading programme, basic methods. You don't need to reveal anything sensitive. Grant.
50-50 split Then an Extra 10% to you for each profit factor above 2 on your system Extra 10% to you for every 10% above 50% win percentage extra 10% for every 10% less than 30% max drawdown. Therefore IF you have a system which has profit factor of 4 has a 70% win factor and has 20% max ddown. u should keep it
I have done 50/50 in an LLC arrangement with a modified scaled back version of what I trade full tilt for myself...........I make money for myself with the primary method and I make money off my LLC version from OPM with a modified version. I control/manage all the trading and no one ever sees anything but the daily statements. I have serious doubts that my system could be reverse engineered from the brokerage statements by the members in my LLC (great group of people that I actually get along with really good....so I trust them). There are ways to ramp up what you are doing in a controlled manner but do everything on your terms........you have ALL the leverage when you can prove a robust system and have the track record to prove it.
I was wondering, how can the OP be protected that the funding company doesn't play the same black box with much bigger capital in the backoffice? Let's say they tell to the OP: "we are playing your system with 100K and splitting the profits with you", but they also play the same system with 5 mill that the OP doesn't know about.
Grant, skill and capital (in that order) are indeed the required conditions, but are still insufficient for starting a hedge fund business. You just got lucky with your domicile, Sir America is a vast land of opporunity compared to Europe. Here all business plans go straight to the wastebin, regardless of how world-class the trading strategies underlying them might be. Reason? No legal definition of an accredited/qualifying/professional investor. The structure most resembling a hedge fund here is a broker-dealer, which in Europe requires: - exactly the same regulatory capital as a mutual fund, - two on-board licensed investment advisors (versed in long-term 30's investment techniques - most useful), - an on-board control officer, - two on-board licensed board members, - an office "of substance" (no outsourcing allowed), - etc, etc. Fixed costs (and hence operational risk) caused by all this regulatory stifling stuff are an order of magniture higher than for an ordinary company investing, say, in real estate. Double taxation can be avoided by setting up the broker-dealer as a limited partnership, but not in all countries. You can be PhD-level developer of 4xBernstein black boxes for S&P timing, turn sophisticated nonlinear models into multiple-Sharpe trading strategies, have a prop-trading quant friend who happens to be a winner of country-wide riskless arb competitions, and even willing investors able to seed you with regulatory capital (i.e. EUR 1 mio + 150k p.a. in costs), and still have all business plans stifled by the regulatory environment (oh, did I mention the 6-8 month wait for the [possible] approval?) The deadly combination of double taxation and high regulatory overhead can kill even the best alpha/capital pairs, especially those on the lower-risk end (my partner is a zero-VaR/capital-protection-by-construction advocate). And if your fellow residents are not even allowed to invest offshore (you would need to set up a full mutual fund, with a no-short-selling-custodian and daily strategy leaking, pardon, reporting, to market your products to your fellow countrymen), then you are effectively cooked. Yes folks, OPM capital can prove effectively useless if you happen to be born on the wrong side of the pond (read: EU). At least foreign investors are not barred, so perhaps we should go this route - that of scrapping our overregulated investors altogether and going for some quality capital from abroad? But the issue of trust is so much country-of-residence dependent, that I seriously doubt international capital will ever be forthcoming... Please PM me if you know any solutions to this third and final missing piece of the hedge fund puzzle. 0s
ZeroSigma, âAmerica is a vast land of opportunity compared to Europe. Here all business plans go straight to the wastebinâ. âHereâ in the above quote, Iâm guessing refers to where you (ZeroSigma) are located. I assume by your language, ie âreal estateâ âlimited partnershipâ, your designation (typically American Quant), referring to HRH Prince Charles as âChuckâ (I made that last one up) that you are American. Then when condemnation of the EU follows, I think you may be a US citizen/EU resident. Regardless⦠If you are talking of EU requirements, there are some points to consider. In the UK, it is possible to be an FSA authorised one-man firm, ie âSole traderâ ISD (Investment Services Directive) Category C, and operate a hedge fund/discretionary fund, certainly off-shore eg Isle of Man, for which you would need their approval. Further, the requirements for two investment advisers, control officer (Regulation and Compliance and/or Anti-Money Laundering officer?), back-office do not apply. The sole trader assumes all personnel roles and responsibilities. Execution, administration, clearing and settlement is via a clearing arrangement with a clearing member. A "Locum" agreement is also required from the clearer in case you die or are kidnapped by gypsies and clients' accounts need sorting out. Off-shore admin is via off-shore fund administrators. The Capital Requirement is Euro 50,000. The key here is that all clientsâ monies are held by the clearers. If the (sole trader) firm held these, the capital requirement would be significantly higher. If you want virtually zero regulation, Andorra (between France and Spain) has got to be the place. And the South of France is an attractive place to live (forget Spain - too many Brits with tattoos, British crooks, Eastern European mafia, and bullfights). Capital is fairly easy to raise; the problem is when it fails to materialise as promised (I'm not bitter, just twisted). Grant (an English Gentleman).