Best Structure Ever

Discussion in 'Professional Trading' started by Still Here, Oct 10, 2005.

  1. Is there a way to form a private equity company of 10 people to come in with 100 million collectively and have it traded without the company or the trader register with the cftc or nfa?
  2. Interesting idea, however I'm not aware of an idea for a pooled situation. Any ideas?
  3. no, that's the thing.

    You cannot have any 'pooled' money.

    You cannot be a hedge fund, mutual, act as a CTA or TA.

    This is a simple deal you cut privately with one person at a time.

    Some trust (or a lot of greed, desperation?) is involved.

    You open a Joint trading account with Mr. Big Bucks But Cannot Trade Investor.

    You may need to get POA but that may not even be necessary (consult an attorney).

    Basically any two people can open a joint trading account and it's nobody's business not even the SEC's.

    You can even cut a verbal deal - not even written.

    Smith Barney (SB) (or a firm like them) would be engaged to 'manage' the account. they'll charge about 1%.

    what does this mean? It means only SB can deposit money into the trading account or withdraw payouts based on specific account instructions. SB is the 'money-handler' to and from the trading account.

    this prevents both the investor and the trader from moving money out of the trading account, themselves.

    the money in the account is locked up for 2 years.

    the trader works on a "double blind" system that means he only can log into the trading account and he only can make trades. and he is the only one who can see his trades.

    that way his trading system is 100% protected from prying eyes. his system is not compromised by idiot investors who have no idea how to trade their ill-gotten gains.

    SB sends out a statement once a month or quarterly to the investor.

    when the (overall) trade/trading is closed at the end of the time-line period SB makes the distributions to the investor and to the trader.

    that's about it.

    only drawdown is that it is ONLY one investor per account. so you have to limit yourself to about 5 or 10 investors in order to make all the trades necessary in the different accounts.

    after SB makes the distributions it is up to each party to make tax arrangements.

    I can give you more specific details of an example of an arrangement if you want to email me.

    Though the conversation goes something like this:

    Mr. $$ Piquancy Investor Dumbass: *scratches head* "I dunno, I bought some mutual fund shares - they slid 20% for the year. So I invested into some hedge fund interests - the manager LEFT with my money and went back to Israel. Bought into another hedge fund, the government came in and shut 'em down - I got .13 cents back on every dollar. Then I tried trading forex... I got 80% of my port smoked in the first trade. Took about 4-seconds. Had something to do with 'NFP numbers' or something like that. The rate blew right thru my stop loss as if it wasn't even there.

    Competent Trader: "Tell you what. Let's open a joint account. Lock up some of your money (25% of your net worth) for 2 years. I'll trade it. Smith Barney will distribute the profits after the time is up. you will get up to 25%. I will get EVERYTHING after that. If we don't hit our 25% goal then we split the profit 50/50."

    Mr. $$ Piquancy Dumbass Investor: "And what happens if you LOSE all my money?"

    Competent Trader: "Tough sht, dude. You should have bought some T-bills."

  4. I don't know about others. But even if I am aware of any possible loopholes, I won't risk my own registrations to provide advice as to how to by-pass regulation. As an aside, CFTC have since 2001 started to hand out fairly severe fines for pyramid type of structures.

    However, if you are serious, I can give you the name of a former CFTC enforcement attorney (he is very good) who is now in private practice, he will be able to give you very concise advice.
  5. I agree.

    I came up with this structure off the top of my head.

    Legally, though, it may be doable. It may not be. I don't know.

    I have not actually ever talked to either an attorney OR a regulations guy (even though they wouldn't tell you the truth anyway).

    so the best thing to do would be to consult an attorney who specialized in compliance about this deal.

    common sense says you and me could put some of our money together and open a joint account - no laws against doing that (that I know of).

    and if one of us trades it, where would the compliance issues come in at?

    I don't think they would. It's our own private arrangement.

    that is like saying that the SEC and CFTC can regulate your own private trading account - they can't.

    so I don't think they have any jurisdiction over a joint account either.
  6. note on the last two lines of dialogue in my post above.

    It is presumed that the Competent Trader (CT) will NOT lose all of the investor's money.

    a CT will have great market exposure experience and be thoroughly accustomed to trading in different market environments.

    the CT will also be used to dealing with drawdown situations and know how to limit losses to a conservative number.

    for instance, I can limit losses to 1% all the way to 50% of the account balance so I have perfect control in the global currency market.

    other CTs should be able to do something similar.

    overall I think this structure gives the investor extreme advantage over all other options: the only ones who would not want to do this are either extremely stupid or extremely greedy, or both.
  7. here's an example of one of my systems.

    15% gain with medium to high risk in 60-days flat.

    a CT should not have wild swings in profits/losses.

    gains should be steady.

    this account will be traded for another 22-months.

    you have any idea what the % gain will be at the end of that time?

    this particular trading system, however, is set to extremely high aggressive.

    risk of loss is substantial. The system is still in tester mode. we'll see how it fairs during the next 22-months.

    it's drawdown may exceed 50% at times that may be outside the risk tolerance of an investor, for instance.

    on the attachment you can see the gain, starting from $100K and climb steadily to $115k.

    the pairs and other details have been removed and blocked from view.
    • th.xls
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  8. an investor should understand that having a CT trade his money is unlike anything he may have experienced in the investment world before.

    a CT earns his money because he is able to give the investor as much as 12.5% stable income in any and all kinds of market environments by working 100-hour weeks in the market.

    that's very valuable. to have your money traded competently.

    the rest of the investment options are simply gambling and/or playing shell games, with or without the SEC hanging out in the background.

    like I said, once an investor realizes the capability of a true CT, only the most stupid investor(s) would not have the CT trade his money.

    and, stupid investors don't remain rich investors.

    also, keep in mind, not to toot my own horn but just as an example: I trade currencies, that are the most complex and difficult instruments in the world to trade.

    typically your best and most competent traders will be found trading and excelling in the hardest markets in which to make money.

    and they'll be making money.

    there's no guess work about what I do when I trade. everything is concise. profit by design.

    I'm a very dangerous placer. :D

  9. for the layman to appreciate my performance more accurately here's some "relative" benchmark comparisons:

    from this source.

    The Hennessee Hedge Fund Index, which tracks the performance of more than 900 managers overseeing about half the capital {$500,000,000,000} in the industry climbed 1.7% in September, the firm said in a statement.

    Equity benchmarks such as Standard & Poor's 500 Index climbed 0.8%.

    The Nasdaq Composite Index lost 0.02% in September, Hennessee added.

    The bond market declined 0.85% in the month, as measured by the Lehman Brothers Intermediate Government Corporate Bond Index.

    Global macro hedge funds, which are free to sniff out investment opportunities in a broad range of different securities and markets, were among the best performers, gaining 3.4% on average in September, Hennessee said.

    The Dow Jones also slid in September.

    I hope these facts put things a little more in perspective.

    kingshtfxtrader :D
    #10     Oct 11, 2005