Fund of Funds..what's your opinion?

Discussion in 'Professional Trading' started by erzafitch, Jul 28, 2008.

  1. erzafitch



    I'm thinking about setting up a Fund of Funds (FoF) business..I have a few questions that are somewhat elementary so...:

    -How eager are hedge fund managers when it comes to signing on board with a FoF manager?

    -Where is the greatest opportunity for FoF managers today? Europe? Asia?

    -Do I need to set up an offshore feeder fund component to attract foreign LPs?

    -What do I charge? 1% on top of what my single manager funds are already charging? Do I get a piece of the performance fee? and how much is that?

    -How fast can I kick out a low performing hedge fund out of my FoF?

    -I know as a FoF I don't do any hands on money management per se, so am I just constantly reviewing and monitoring my manager's results? and evaluating new up and coming managers, and always hosting marketing events where I can get new clients for my managers?

    About me:

    I always wanted to get involved in the hedge fund business. I was proficient at stock picking and trading..but never flew out on my own. I knew a lot of guys who had their own funds..some did really well, others..well not so good. The risk is, then in a FoF is one or more of my 10 or so managers blows up and I go down with the ship..and clients may also see some managers own several of the same stocks/bonds in their portfolios..getting double or triple exposure. But the upside I see is diversification among managers/style/sectors..etc. Also clients/LPs may be more open to investing through a FoF rather than a single manager fund. As for risk, I can spread it out 10 managers deep.

    I know many of you may be turned off by it and rather manage the $ yourself..but this is just a thought right now..and I'm just keeping an open mind toward opportunities in the hedge fund arena before I graduate.

    I used to work as a retail broker for several years, (Bear, Morgan, etc)..wanted to be more entrepreneurial and run my own shop/business so I went back to business school (UCB Haas) and will be finished in a yr and a half.
  2. central park

    central park Guest

    yes, it can work.

    do you have investors now, and if so, how much capital are you working with?

  3. central park

    central park Guest

    oh, lest we forget, this information will be critical for your start up FOF. You can pay me from your first fee received.:D

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  4. FOF is an ok concept for you to start a business because....

    You piggyback the presence of others that have a long standing and solid professionally audited track record....

    It gives you a uniqueness if your management pool is different than other products....

    What would further help you....

    If you could establish a fee structure advantage over
    your peers.

    If you could have an immediate liquidity option if anyone wants some or all their money back.

    If each manager had significant skin in the game....including you.

    If each participant could log in to the internet to see the actual real time value of their account holdings.
  5. central park

    central park Guest

    immeditate liquidity is impossible, as the underlying funds have lockups, etc. however, it can be and is done via bank financing-- but only for the largest players in the space. good ideas, but zero relevance for the real world.