Hedge Fund Question

Discussion in 'Trading' started by KS2007, Feb 21, 2007.

  1. KS2007


    If a fund can get 1-5 million to start from an an investor...with the promise of more money in the future...obviously based on performance...do you think it's smart to go ahead and set up the fund from the start? Or is it wise to start by creating an incubator fund?
  2. fund.
  3. KS2007


    interesting...why is that 2cents? I mean...considering it isn't such a MAJOR commitment.
  4. its not but how do you compare?
    . setup & running costs: in % of AUM, in % of perf?
    . credibility, when you try to attract extra capital: if your perf profile & ratios are good, you are way more credible if you've had a proper "fund" running for a while. at the other extreme, you just run a managed acct for a while (PoA-basis) and you just get the account & perf audited... then only, setup a proper fund once the total commitments are of the size you are happy with...
    . independence: ability to choose your brokers etc... negotiate tight rates & spreads...

    depends what the incubator offers you...
  5. Jaime


    I am interested to learn more about an incubator fund...

    Is this just a managed account to grow assets and build performance record until you are ready to set up the fund properly?

    If so can anyone tell me how to go about doing that??
  6. asap


    most of those questions are answered here:

  7. Jaime


    Thanks, that is a great link

  8. stussy


    Has anyone actually set up an incubator fund? If yes, can you share your experience?
  9. 1. You never promise, anything, for a fund. I, almost, got in big trouble when one of the marketing guys "promised" a return to a prominent investor. Fired the guy for acting stupid.

    Anyways, never use the word, "PROMISE". Seriously, they can sue you for fraud, even before they invest money into your fund. Promised return and expected return has 2 completely different meanings.

    2. It's a matter of having your trades audited by a well known firm. But when you get an investor, you wouldn't want to tell your investor to wait a few months for the fund to open up. So... open the fund up if you can cover the costs.
  10. I don't think you read this correctly. It appears the investor is "promising" to give the manager even more money if performance is good.

    Nevertheless, you are correct in that you should never promise or guarantee performance of any kind.

    #10     Apr 15, 2007