The valuation of most mutual funds is, as I understand it, about 5% of assets... Now this differs whether or not there is a trend towards net redemptions or net subscriptions... With a hedge fund it's a lot different, since revenue flows are consistent with performance in addition to AUM... I'd probably put a premium on it, maybe 10 million, since performance isn't guaranteed is it?
$15 Million assumes a P/E of 5 with earnings of $3 Million per year. Very rich on the private market especially for this type of business. One major down year or down period can ruin this business (remember Amaranth?). Investors are not locked-up (assumption) and the business line is volatile. I would also want to "buy it right" to allow for a nice profit for my risk. All in all, I believe that my numbers are a fair representation of where things would trade public/private vs. real value. The real interesting thing is that I truly believe that the business would sell at 100% of assets in the public market given the public's infatuation with equities, IPOs and hedge funds. We'll see what happens with Fortress. As for the current team, I assume the traders are being incentivized as a % of their trading profits so they really just want to see additional capital being raised. Vested stock in the Management company can be offered as an long-term incentive. Key people would need to be locked in for a number of years as a condition of the deal.
30% annual return for for 5 years ? hmmm , I think its time to short this fund ; it about to drop to the mean.
Why do you want to sell? Assuming a profit of 3 mil a year, I am surprised that you didn't want to pay for a good software engineer (to save 150K)?
One has to wonder how many of those replying on this thread are really traders. The guy doesn't have a system to sale. He's just bored like everyone else and went fishing. Quote "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"
What kind of valuation is MAN's listed hedge fund getting? Note that it has multiple managers so losing one is not a huge hit and is diversified style and asset wise. It also has things like established distribution, diversified client base etc. Hedge fund biz is beginning to look like the dot.com i.e it doesn't matter if at the end of the day it doesn't work you are only interested in the option payoff profile of the fund raising. e.g. Three guys who worked for a few years ar Goldberg Suchs put in around 300k each to cover initial marketing and documentation bearing the names institutions feel reassured by and raise 5bn with 1% management fee = USD50m/3 =USD16m each. Not bad. All they have to do is use their persusive skills to get the investors tpo keep their assets in the fund for one year. I am seeing funds with 8bn under management saying they will top any existing package for anyone who can generate 15% PA doiing size with good sharpe ratio, but what's really giving it away is the insistence that has crept in that employees have Ivy League type educational backgrounds - why? because looking right to mainstream institutions is probably more a function of this than performance.
As I mentioned, this is just for discussion purposes. No one is selling there fund. There's Citadel issuing bonds, there's Hedge Fund IPOs going around. All this hype about Hedge Fund managers getting news reminds me of the .COM companies back in the late 1990s and early 2000s. Being one of the surviving traders from the "good ol' days", it's like a dejavu for me. As one of the newer hedge fund managers, I'm trying to see how others view the industry. I survived one "bubble", I hope to survive through the next. ... Good software engineers are hard to find around my area. A monkey is only a monkey. Getting 100 monkeys is still a bunch of monkeys. It doesn't make them smarter or better. Team work is mulitiplicative, not additive. I also find some of the jobs out there to be overrated. Of course, there's not a lot of FIX engineers, so their prices may be high. But it's not as hard as people think it is. I started programming 3 years ago and learned C# like a bit over a year ago. It took me about 100 hours of studying / programming to figure the thing out. And I'm sure it's not worth the $150,000 and once you have it programmed and debugged, what are they going to do??? Sit around with their PS3??? Upgrading to FAST or FIX 5 is not much of a big deal, most brokers don't use it yet (Mostly FIX 4.2-4.3) and most of the work is done by the FIX engine developer. ... I'll say this again... I'm only talking in terms of hypothetical situations. Maybe I was too vague... Well, keep on discussing... thanks...
Our Commodore 64 clusters are working great! We clean the floppy disk drives every day so that the program won't crash. Code??? What code??? Troubled times??? We can always run to the brokers office and trade directly!!! We don't have bathrooms in our office. We take a dump out the window and like those damn pigeons.