Funding a hedge fund...

Discussion in 'Professional Trading' started by praetorian2, May 26, 2002.

  1. I am thinking of starting a hedge fund finally. It has gotten to the point that even though I am supremely confident that I can return 300-400% annually, I would much prefer the peace of mind of returning somewhere around 50-100% annually and not going crazy. (I don't intend to debate the probabilities of achieving this goal. For the sake of this thread, assume it is a givin) I have my own reasons for choosing the hedge fund route. One of which is certainly that even running just a 10m account, 20-25% of gains on a piss poor 50% year is more than I can make now. (This would not include of course the money that my own stake in the account would return). There are quite a few threads here that I've read and am rereading now on how to set the fund up. What I'm curious in is how to get investors for this fund. I've heard from maybe 10 people that they want to invest with me, but most are just college friends (and probably not qualified). My father refuses to allow any of his friends from investing with me (though many want to), because if I were to loose any money, they'd get pissed at him. Do you know of any services where I could inquire about getting funding? I'm not exactly sure what I'm asking, and I appear to be rambling, but I'm curious as to where I could achieve at least 10m in funding for a new fund that would hopefully get going by jan 1 2003, if I decide to continue with this process. I'm sure that someone at this forum knows who I should contact.
  2. Mike777


    I am thinking of starting a hedge fund finally. It has gotten to the point that even though I am supremely confident that I can return 300-400% annually, I would much prefer the peace of mind of returning somewhere around 50-100% annually and not going crazy.

    If I could make 3-400% pa then I wouldn't need any peace of mind by earning 50-100%. If you have a track record of these kind of returns and assuming that you are not taking Leeson style risks then don't worry, you will find lots of people who want you to manage their money, but don't bother. Just work for 5 years and then retire.
  3. I earned 140% in 2000, 218.5% in 2001, I'm up about 150% so far this year after just under 5 months. I really think that 50-100% is much more maintainable. Big returns on large account bases is probably too hard to acheive. I wouldn't go prop just b/c I would want to hold all my positions overnight. I wouldnt, want to use leverage either with positions that large. I see the hedge fund route as a way to cut out about 3-5 years at least of compounding for me.
  4. def


    first, don't tell people you expect to earn 100% per year. They will run if they are knowledgeable as they would assume you are taking too much risk (see #2)

    second, most qualified investors will want to see a 5 year track record. thus, if you haven't been recording every trade and saving your statements, you should start doing so. put together a prospectus/marketing brochure and let your track record speak for itself.

    third, pound the pavement and start cold calling and networking. maybe you can attend a few hedge fund conferences and ask some successful managers how they raised cash as well. once successful, it will be easy to raise money, before that it requires much more work.
  5. Def, I would tell people that I shoot for just 50% a year. Let them be "surprised" when i do better. I know that 100% would scare people, but that's just b/c people who can't make money have convinced them that it's too hard to achieve. What I'm basically asking is that I know that there are people who farm out money to starting funds. These people also create funds of funds. What I would like to know is who to call/write for info. I don't think I'm allowed to cold call honestly for a hedge fund. That's considered marketing, but Im not sure on this.
  6. liltrdr


    Try Gelber capital.
    Elocaltrading does CTA funding. But w/ a track record like yours, I'm sure they might be able to accomodate you. Talk to brokers in your area. Try and find high net worth brokers. Ask the bright brothers and others on this board. You've built up a lot of good will on this board and there is some money here. Ask Gene or Vito Sisto. How about Rtharp or his dad? Actually in a way, getting money from traders is fantastic b/c they understand the risk.
  7. marketsurfer

    marketsurfer Vendor

    having watched you trade in the chat room, i do not doubt your ability and am quite impressed. however, starting a hedge fund may not be the way to go. first the SEC requires all "partners"(investors) in a hedge fund be accredited, meaning, a net worth of over one million dollars among other things.
    as the managing partner, the typical compensation is one percent (1%) of assets and twenty percent (20%) of profits with generally a "high water mark" stipulation. do the math---- you would make more money trading one million dollars from one partner with a 50/50 (or whatever) split than trading 10 million in a hedge fund. i know its really ego gratifying to run a hedge fund but unless you are huge, the rewards just are not there. i am speaking from experience as i am the trading partner in a hedge fund of under 20 million. the way we raised the initial capital was to pay a "finders" fee or a share of the profits to those who brought us funds or did introductions to high net worth people. this is a good way to get started.

    best wishes,

  8. Thanx liltradr and marketsurfer,
    Marketsurfer, I would like to speak to you on tuesday in the room when you get a free moment. I'm curious as to how you accumulated the money in your fund. I intended to ask you on friday, but you weren't in after the first bit of action. I would only want to get about 10-20m in funding as a maximum ammount at least for the time being. I think that the jump from a few hundred k's to a few mil will be just too extreme for me. I'd rather get to the 5-10m threshold and work at that for at least 6-18 mos. before trying to get more money. It's probably easier to scale up through just compounding at some point rather than getting new investors. Anyway, I intend to pm you on tuesday when it gets to quiet hours.

    Remainder of post removed to avoid complications with hedge fund solicitation laws
  9. liltrdr


    Can't you go to a big NYC bank like Goldman and ask for funding? I've read about something called "Prime brokerage." Is this the fund finding service?
  10. liltrdr


    The person I "represent" is looking for something safer. I however did learn something out of the search. There was one CTA I talked with who was very friendly and referred me to his marketer/broker. Of course, I was representing an investor :) His website is He's in your position. He's got 5M in assets and he averages .30 a year. Not bad. He's living well right now and if he grows big, he can live very well. Speak with him. Tell him your situation. Granted he's a CTA and he works w/ futures brokers who earn commissions of his trades, but funding is funding and contacts are contacts.
    #10     May 26, 2002