Building a track record for raising money

Discussion in 'Professional Trading' started by doublet83, Sep 27, 2011.

  1. I'm currently managing my own money spread across a few accounts, including 2 IRA accounts. Would it be possible for me, at some time in the future, to get my historical returns audited for the purpose of raising capital?

    I am not interested in raising capital now so I don't want to pay to have someone audit my results in real time.

    I am curious if at some time in the future, I can just submit monthly account statements for the past few years of my brokerage accounts, get these audited, and whether this would suffice as some track record that will allow me to potentially raise capital.

    Thanks for your insights..
     
  2. Lucias

    Lucias

    Not an expert on this but doubtful but possible.

    A few notes..

    * Without stellar returns or managing 1 million+ and at least several years performance record then it is unlikely you will attract any interest

    * There are several routes to raising capital. They are going to work for proprietary firm, seed hedge fund/hedge fund, and CTA. Review each. A proprietary firm may look at your results.

    * You can try to sell anything you want too but check all laws/regulations. There is no law stating you need real money returns record for raising capital (to my knowledge).

     
  3. I imagine I would need solid returns to attract capital, but what I want to focus on is whether I can provide historical account statements to the auditors. I want to make sure that I don't need to have auditors tracking my results in real time, because that is not an expense I want to pay for right now.

    I'm not particularly interested in the prop firm route right now, I just don't feel like they have anything to offer me. I have enough capital of my own to trade, and I don't need their leverage. I don't think they have anything useful to teach me either, although I could be wrong.
     
  4. toc

    toc

    track record helps only partially. Better tools are PR and gain Trust of the money holders.

    :D
     
  5. Epic

    Epic

    Really depends on what structure you will be operating under in the future, and what types of securities you trade. We'll need more info if you want a good answer to your question.

    --Systematic or Discretionary?
    --Automated or not?
    --Equities, Forex, Commodities, etc..?
    --Pooled Fund or Managed Accounts?
     
  6. Discretionary, not automated, equity, pooled fund.
     
  7. LEAPup

    LEAPup

    Op, more importantly, what is your plan for gathering AUM? Do you have a plan?
     
  8. Epic

    Epic

    OK... understand that you just made everything much harder on yourself.

    You'll fall under SEC regulation for pooled funds. There are very stiff requirements there. Not only are you going to need a track record to attract investors, but you'll be required to provide a 5 year history of all accounts that you traded.

    Most investors are only interested in discretionary systems with a long history. They recognize that you don't have a system to fall back on, so it isn't as much about your trading criteria as it is about their confidence in you. I can empathize with you there because my program also has a significant discretionary element and is not fully automated.

    Every single prospective client has asked me the same two questions.

    -What if you go on vacation?
    -What if you die?

    The structure you are proposing is much more vulnerable. They don't know what is going on each day. They don't know if you are giving the fund adequate attention when things get wild. They have no idea what will happen if you take off for a couple weeks and nobody is keeping a handle on things.

    If you expect to raise any significant amount of capital in a short period of time, you'll need more than two years of stellar results with few and small drawdowns. By all measures, my program has an amazing history since inception two years ago. Even then, 2/3 of all prospective clients say they wouldn't even consider it if it were a pooled fund. There is a massive shift developing right now away from pooled funds and toward managed accounts.
     
  9. Lucias

    Lucias

    I think if you want to use your returns and claim they are from a hedge fund then you must start a seed hedge fund to make those claims. But, I'm not 100% sure.

    However, beyond that there is no requirement for auditing. What I mean is that you could claim anything you want so long as you aren't lying... who cares! Its a free market. Sell what you want. Buy what you want. There is no Office of Real Money Track Records that I'm aware of.

    Now.. having said that, if you want to later start a hedge fund or become a CTA and make certain claims that your *fund returned a certain amount* then you would need to check with a professional about that.
     
  10. Raising money is hard work. Instead of trading, you are building a money management business. Trading becomes one of many activities you will engage in.

    You will be building a business the same way an accountant, lawyer, or doctor would build his business.

    Just saying it, because many people I talk to about this seem to miss this point.
     
    #10     Sep 28, 2011