Wow... I actually started this thread for discussion purposes. No one is selling their own hedge fund in here. I'm talking in terms of hypothetical terms. And... I do a lot of the work around my fund... In reality, I have more work than I was trading my own money. - Working longer hours than when I had a night job as a chef to pay my bills. (70+ hours/week) - Learning IT stuff on my own due to Software Engineers costing so much to hire. ( FIX engineers costing $150,000+ /year??? insane... I learned the whole thing in 2 months and it's working flawlessly!!! Though, some IT engineers amazes me... not alot) - I don't get to go out just for fun. Most outings are business oriented, kissing ass to potential 3rd party marketers / investors) - More legal constraints. PPM is a bitch!!! Anyways... back to the topic... There's a semi-successful hedge fund in front of you for sale. Considering all the flashy image that hangs around in hedge fund management (These days it's getting a bit insane, like those IT moguls from back in the internet bubble) How much are you willing to pay to become a hedge fund manager???
Fund is probably worth about $12-15 Million in a private sale. Probably would trade at a valuation of $100 Million in an IPO and probably has a real value of about $25 million. That is my best guess given the information that you provided. There are a lot of missing pieces, however.
Are you kidding? The revenue from performance fee is around 6M a year. What are the operating cost, and operating return? These are the minimal info for valuation?
My unbelievably kind offer of one dollar ( not necessarily US) still stands. Call me a romantic fool if you will, but there you go.
No, not kidding and that is about what it is worth. Admittedly, I had to make some broad assumptions like the Senior manager is also a portfolio manager and some other generic assumptions. The net profits should be about $3-5 Million on gross revs of about $7 Million. 30% annual performance will not be sustained, however, neither will only $100 Million in capital. The Fund will go to $500 Million in a heartbeat if the manager takes a shower at least once a week and doesn't screw up too badly. 5 years of strong performance is highly saleable. No info on the stability of the asset base, etc. so it's really a very back of the envelope estimate. If you have a Fund like that, I'd be happy to make a purchase. With Fortress coming public, this hedge fund management company can get 10x the private valuation on the public markets. It is also a "growth" Fund as opposed to a mature business (see: Google vs. IBM).
I understand that. I think your bid is too low with your assumption of current $3 M operating profit. The consistent performance of 30% for 5 years (without changing the strategy) is a very impressive one. However if they keep changing their strategies, there is a possibility that new strategies might not come out with new management team. Unless the team wants to go and start a new one, I don't think they will sell at 15M. What is your strategy to keep the current team without increasing the cost.
Your stats are great. I have a feeling a lot of guys here might be better off investing in your fund rather than trying to go it alone. Especially when you consider many startup traders are at 100% margin to equity ratio or pretty close.
I can just imagine the spaghetti code in your mission critical apps just because you're too cheap to hire someone that you can count on in times of trouble. Do you also put on a bandana and wipe your office toilets after hours ?