CPO startup

Discussion in 'Professional Trading' started by RockMachine, May 30, 2008.

  1. I'm in the process of launching a commodity pool. Basically have some indications of interest from friends and associates. realistically launching it with just under 1mm. Anyone have thoughts on how to grow/market a startup. The volatility and returns are too high for institutions, I believe. 50%cagr 27% dd..Thanks
     
  2. If you're undercapitalized, you'll have to generate huge returns in order to get ahead. Otherwise, try to focus on stability of return instead of magnitude of return in order for institutional investors to feel comfortable with you. After you've produced a good return for your initial investors, ask them for more money and referrals. This can allow you to concentrate on managing money instead of marketing and promoting.
     
  3. Thanks Nazz,
    It seems like wealthy individuals and referrals form them over time is the most reasonable way to prosper. I read recently that the average hedge fund lasts 5 years..Madness, the world wants stellar returns @ breakneck speed. I spoke with one potential institutional allocator and his conclusion was that my returns were too volatile. I even went as far as cold calling some hedgefunds, they seem too be more scared then anyone. I thought volatility was a positive thing as long as you had a positive expectancy over time?
     
  4. I am very familiar with CPO's (been there done that) and I would say you need to shoot for 2% to 3% per month starting out with never more than a 1% drawdown for any given month (and no consecutive losing months). If you can at least hit the benchmarks I have listed you will be on your way - anything over what I have described, and you will find that you can build your fund at a pace that will make you uncomfortable. :)
     
  5. Build up your own funds to a level that you can run with while trading some OPM for a year or two - then set up your own private fund (500k to 1mil minimum) where you do not have to answer to anyone again (unless you decide that is what you prefer - trading OPM).
     
  6. I'm Dead..
     


  7. The volatility and returns are too high for institutions, I believe. 50%cagr 27% dd..Thanks



    Do your mean you have 50%cagr 27% dd?
    If that is case, if you de-levergae, can you get 50/2=25% cagr 27/2=13.5% dd?
     
  8. Backtesting over last 25yrs while adjusting leverage I get returns of 26.3% max dd of 13.5

    Funny, everyone I approach seems scared because of drawdowns. Ytd I have experienced a max dd of 33% of which I am still in(currently 15%) but my ytd returns "before fees" is 126% as of yesterday.

    Read today in the WSJ that 87% of allocated capital to hedgefunds resides w/ funds that are $1 bil + AUM and 60% of allocated $$ are w/ funds that are $5bil or larger.

    My fund will be up soon, seems like a waste of time to try gather institutional $$ at this point.
     
  9. Don't worry about "gathering money" now. Just trade. Investors like consistency + low drawdown... and, your returns don't have to be "eye popping"... just decent.

    If you can do that.... and when you've done it LONG enough, you'll be able to attract funds.

    Keep records so that your results are audit-able.

    If you're a no-name start up, no sophisticated investors will trust you with money until they think you have proven yourself enough that it's worth their risk.
     

  10. Ytd I have experienced a max dd of 33% of which I am still in(currently 15%) but my ytd returns "before fees" is 126% as of yesterday.


    Is this live or backtest?
     
    #10     Jun 17, 2008