Starting small, for example family and friends? What are the cheapest ways to do it legally (I guess offshore)? What is the minimum AUM for which you would deem it worthwhile starting a fund? (even though the idea is to start small and grow witrh performance)
Also, how do you solve the vicious circle : "I do not have a track record managing X, but I am trying to raise X. However, a track record not managing X is not a "valid" track record to raise X..." ?...
Rather than focusing on the costs, focus on the revenue side of your proposed business. How will you get sales (AUM). And then determine the costs to get those sales. Different clients will require different fund structures which can vary in costs from a few thousand a year to a few hundred thousand a year. That study will also tell you if it's worth it for you to start a fund. I know a guy who started a friend and family fund. It made sense to him because he had a net worth of 50MM and he was able to raise another 50MM from his friends and family. He had rich friends and a stellar track record and pedigree.
IF you have worked from BB firms then following doesn't apply. However for all others: For starters with no ibanking hf pedigree, IBs friends and family structure is a great way to start in this business. If you are consistently profitable, Just start with your own account, add 1 account at a time and slowly build your business. In 12 months, if you can have just 12 more accounts (even small accounts like 20-40k), you are looking at a 300-500k AUM after one year. Perform well on that amount and take it from there. In 2-3 years, you might be looking at 1-1.5mm AUM. Not bad for a start. Once you get a good start with F&F, go with managed accounts and then next step is a fund.
Yes that s my idea. Question is : what is the proper way to do it LEGALLY? (ir manage other people s money, even if they are friends/family, I guess there must be some constraints, and it might be better to do it offshore, BVI etc)
It's time consuming and expensive to comply with regulations... especially when you have custody of customer funds and even more so when their funds are co-mingled... as would be the case in a fund.
Well yeah the more the merrier of course..... To be perfectly honest I don t come from a super wealthy background (statiscally surprising.. LOL..) and woud be looking to start first maybe 25 accounts with 10kâ¬, which I have found is a sum a lot of people interested are willing to risk... so only 250k plus my equity to start with...
Yes exactly, so I was thinking offshore. To avoid first the "qualified" investor rules, because my investors would not be of the super wealthy type, ie >1Million in assets, or >100k in revenues (for many), or investing >100k (none..)
Not sure "offshore" would give you what you seek if you have US citizens domiciled in US as customers. Trying to dodge compliance is sticky business. You'd likely be better off working within a stated regulatory exemption if possible.
Depends on what you are trading. Opening as a CTA is easy. You can pass the series 3 in a couple of months, incorporate for $800 and you are in business to run managed accounts, which for many investors is far preferable to a fund. You need to focus on sales first. If you can't sell your product don't even start until you can. Going "off-shore" is nutty. You and US investors need to report global income. Also, it can cost $100k to start an off-shore fund. Off-shore doesn't mean off limits, there are compliance and registration requirements in these countries. Finally, you do not avoid compliance you are just breaking the law. If you are domiciled in the US (I assume) then you must register domestically. Off-shore registration is for foreign investors who want access to US managers without being subject to US law, but as a US registrant you are not precluded.