Hello, I have recently started my own capital management company and am hoping to get some feedback from those of you who were once in my shoes as a startup business and succeeded in your endeavours. I have been in touch with a prime broker and they are willing to do business with me but want to see a minimum of 50k in AUM within 8 weeks of startup. My problem is I dont know how I am going to come up with that amount of capital so fast. Do I hire money raisers and give them a percentage of my incentive fee paid out on the total $ they bring into the business for a certain period of time? If this is the answer where do I find these types of people and will they do business with someone who is just starting out with only 4 months of track record? I currently am thinking about offering 3 months with no incentive fee's charged to any new clients I bring on. Is this a successful strategy? I am not looking for people to tell me I am crazy for starting a business and what a serious matter it is to handle others money. I have been trading for 6 years and in the last 2 years have managed friends/family accounts successfully. I know the risks involved. I also am in the process of getting regulated and licensed by NFA/CFTC. Any feedback is appreciated, also if anyone is interested in helping me and needs more info about my operation please PM me and I will provide you with the link to my webpage.
If you don't have 50k in assets at launch, then don't worry about getting "established". You don't need to pass the series 3/7, establish a corporate entity, or talk to a prime broker. Just trade via IBs friends and family setup while you try to build a track record. The NFA has exemptions for tiny funds. Very unlikely investors will be motivated by zero incentive fees for a fund this fledgling... The lack of assets and track record will be fatal.
I will continue to work on building my track record with friends/family accounts. I am still going to take my NCFE, it is something that I want to do and eventually will need if I continue to be successful in this business.
How do you legally trade for someone you know and make an income off your success in their account without having to change your life to go work for a broker just to get the series 7 license?
How? well you set up a master account and invoice your clients at the end of each month/quarter based off of your decided incentive fee. if you asking how is it legal then read this from the NFA. Registration with the CFTC is required unless: a. You have provided advice to 15 or fewer persons during the past 12 months and do not generally hold yourself out to the public as a CTA or b. You are in one of a number of businesses or professions listed in the Commodity Exchange Act or are registered in another capacity and your advice is solely incidental to your principal business or profession.
Ok what? You have been trading for 6 years, trading relatives/friends money successfully but only have 4 months track record and you can't come up with $50k? What did you smoke that made you think you have any business starting a capital management company?
Unless you have family or close friends who are liquid enough to give you the 50k to start off with, you will have to approach outside investors or hf startup seeders and most likely give away a portion of your fund. Going rate is 1% ownership per $1MM in new money. Not sure how you would get an amount as small as 50k from those types. Also, the due diligence process in any case will take you MUCH more than 8 weeks, unfortunately. I'm not sure why your "prime broker" would give you a window of 8 weeks. Actually, not sure what you mean by prime broker, since most PB's I'm aware of require much more than 50k to get started. Do you mean a futures broker? Just take your time accumulating the funds and then open up an account with IB when you are ready, I would say.