Funding a Hedge Fund, How Easy?

Discussion in 'Trading' started by Corso482, Jan 5, 2003.

  1. Let's say you have a friend who's in the oil drilling industry. He gives you an opportunity to invest in it. You feel good about it and consider it.


    How would you approach it? Wouldn't you want to make sure you're doing the right thing. Wouldn't you be skeptical and do massive research? I think it's very similar.
    #11     Jan 5, 2003

  2. when you are buffets size you can do anything and people will follow. if you have the capital to do the above--fantastic ! do it. if not you have to put up with crap from your partners, is it worth it for 20% ?? it depends on your size....


    #12     Jan 5, 2003
  3. Easyguru-

    I read that same book. I looked into a few of those services a while back. Maybe you can correct me, but it seemed as though they'd only steer money your way if you gave them a huge percentage of the fees from that money. Many of the services wanted 30%+. It is almost better to just ignore those it seems.

    Surf, I'm going the route where I have 35 non-accredited investors. Most of those are going to be relatives actually. I don't intend to take on investors who are not accredited who I don't know, or who don't come from a very close friend.

    I really want to limit any legal risk. I hate lawyers.

    I hate to deviate, but this may make an interesting thread also for fund managers out there:

    I am interested in how you think your style or attitude to trading changed once you took on other people's money as opposed to just your own. Do you think you performed better or worse, and why? Please feel free to add any other info that you think would be helpful for someone like me who's now making the jump so that I can avoid any pitfalls.
    #13     Jan 5, 2003
  4. Honestly, I'd do a lot of research on it, and question him a lot. I know that when Buffett was selling, he spent days talking to people at first, but once the sale was complete, he wanted to be left alone.

    If I were a passive investor (I'd be a bad one), I'd do my dd, but then leave the guy alone to do his thing. If already trusted him enough to run my money, why do I need to keep checking up on him. Especially if my money is locked up for a period anyway.
    #14     Jan 5, 2003
  5. p2,

    be extremely careful. under SEC regulations only 20% of the investor partners in your fund can be non-accredited to the best of my knowledge
    #15     Jan 5, 2003
  6. Vishnu


    When Buffett started his fund in the 50s he put $100 in it and worked out of his bedroom. The top size of his fund in year 1 was $100K but he still opened for business only one day of the year. The key to his success was never his money (like most people, he started with none) but his personality.
    #16     Jan 5, 2003

  7. 1950's were very very different from today. he would not have suceeded, to his level, starting from scratch in 2003 with those parameters.

    #17     Jan 5, 2003
  8. They steer money if you offer them decent commission. I don't think it is 30% it is percentage of your fees. I was offered a job by a hedge fund recently that is when I spent some time understanding the business. I also had a meeting with an acquaintance in Merrill and he explained how the marketing worked. basically either you go through the outside consultant route or you have in house marketing person. In many cases the funds have partner who have primarily marketing skill.
    All the large institutions offer hedge fund to their clients and in many cases they offer you some sort of direct or indirect sponsorship. All of them offer trading desks and backroom management so that you can concentrate on the trading. The audit firms like KPMG and others have products for hedge funds which take care of all reporting and auditing to both regulators and investors.
    #18     Jan 5, 2003
  9. There are people who still do it . Go through this site and the funds rules and regulations. It is exact copy of Buffet
    #19     Jan 5, 2003
  10. I have to agree with surf. Even in 50's money, it would have probably taken 3-5k minimum to start it. Might have been about all he had.He wouldn't have had to be so fearful of lawsuits either.

    I'm surprised that he didn't start with more of his own money involved.
    #20     Jan 5, 2003