p2- i know you didn't want to debate if it was a good idea or not..but look on the SEC website...Harvey Pitt is trying to put more regulation in the hedgefund area..and from what I read they are trying to limit the fee structure in some way. If you ask me it's just the SEC trying to assist the big players again by blocking out the little (and usually better performing) players. Check it out: http://www.hedgeworld.com/news/read_news.cgi?section=dail&story=dail7155.html
If there ever was a doubt that Pitt was in the pockets of Wall Street, he has helped that evaporate with this silly endeavour. Rather than using the limited SEC resources to go after the real crooks that are bilking millions of Americans everyday he is going to use the possibility that a handful of millionaires/billionaires will lose part of their fortune, as a facade to squeeze the competition to Wall Street's big wigs. No wonder Komansky looks relaxed.
Pitt's reference was part of another speech and was loosely phrased. He has to appear concerned because there has been a bit more fraud than usual and some accredited folks have been taken to the cleaners lately. Some of those have substantial pull on the Hill and the administration must appear as if it is proactive. I don't see any real changes being made. Any changes that are made would likely benefit legitimate operators.
It's no secret that I can't find a single positive thing that pitt ever did for anyone not named goldman or salomon, but I can't really find the passage that is pertinant to them taking away or changing the fee structure of hedge funds.
i was insinuating the fee reductions. as in when the Pattern Daytrader Rule was to "protect" investors. In other words..when ever I read "regulation"..I see...help the big firms aquire more assets because they're the guys who are shmoozing the hell outta the polititians..giving them $, gifts, getting them laid etc. I hope you do start a fund. I'd be interested. I don't think I meet the "accredited investor" rule or whatever it is.... And I'm not a millionaire. Yet. Good luck.
I have a quick question about hedge funds. If someone asks me "what percentage of the management company's equity are you willing to share with the seed investor (assuming you receive the maximum amount of capital sought and the most favorable terms)? What does this mean. Does this mean giving a percentage of a management fee to the provider of seed capital, or does it refer to what % of the fund's assets (and future assets) the seed investor can control?
He could mean a number of things but here is my guess: when you start your hedge fund you are creating a company that may or may not have value in the future. For instance, ten years from now if you have $1B in assets and maybe you are running multiple hedge funds with one management company you may elect to sell your company to an even larger hedge fund or mutual fund company. If someone sees value there they would rather have a piece of that than just a piece of the mgt fee. Note, they will get a piece of the mgt fee as well, depending on how you structure the agreement.
To me, that means a percentage of your company. They provide seed money and you give them "shares". They can watch it grow and decide what to do with it later. This could be good or bad depending on your success and your goals...I've seen it work both ways. Typically one buys the other out once the business matures. Let's say you give them 20% for some cash now. Five years from now, you're looking like Soros. You can offer them some cash for their 20%, presumably at a substantial return of their original investment. You could also offer them your 80% at a substantial return on your investment, then cut a deal to stay on as a consultant under terms favorable to you. This depends on your goals at the time. If you don't mind running things and spending the time, you'd want to stay an owner. If it's time with the family and travelling you're after, you could sell out. The bottom line is that if you are successful, your options will be plenty. I wouldn't give away too much here, even for substantial cash. If you're profitable and patient, the money will come to you.
Just a note. We have discussed this topic in the forum in detail. In the current market environment, it's very hard to get funding for a hedge fund. Assume you do have a proven track record with a 200k account, could you get the same results with $2,000,000+ dollars or more? It's alot easier to trade 200k than $2,000,000. What strategies would you use. Even if you have a $2,000,000 hedge fund and you make a 30% return, assume your share would 20% of the net profit or (.2 X 600,000) $120,000. This is not a bad payout, however a good stock trader trading his own account would make alot more with no regulatory headaches. A startup hedge fund would cost between 15K-75K . You will also have the headaches of running a business and the possibility of litigation with unhappy investors, should your fund not perform. If I was a good trader, I would rather trade 200K and make a good living for myself , than start a hedge fund. If anyone wants to start a hedge fund, I would suggest you work at a real one first and gain experience. Many successful hedge funds are started by traders that work at another hedge fund and go on their own. Gene Weissman Lieber & Weissman Sec., LLC gweissman@stockltrade.net