Thanks Aaron. Looks like the person wasn't quoting anything unusually high. Its more of a "lay down money" than a "hand shake intro".
one thing perhaps, set yr rate(s) once and for all, and don't leave it open to negotiation, that wld be an unnecessary distraction, the only thing that shld matter to yr investors / referrers etc is how consistent yr performance... going into nitty-gritty stuff, i charge family and close friends 15%, total stranger-type (or beer mate who just wants to punt or boast about his bonus etc) 25%. 20% is my base rate. in any case, any referred party gets charged 25, 5 of which goes to the referrer. easy enough to manage / sell ;-) good luck to you
Yes, I know how negotiations eventually work out (It doesnt). Everything will be set in stone with no negotiations.
I would not even touch a fund that would not pay me at least 20% of their fees, in perpetuity for referred accounts. It's not easy to raise capital- it involves reviewing (and possibly revising) marketing materials, gaining an in-depth understanding of the strategy, doing extensive due diligence on the fund and then- calling/meeting each and every one of your contacts and telling them about the fund, scheduling conference calls, handling paperwork, etc... Before I get flamed by people who do not truly understand the industry, know that the business model makes sense for some funds but not for others....
20% of both Management and performance fee for the life of the client is industry standard. I've heard as high as 30% for early-stage capital and as low as 15% for larger funds with established track records. This is a well worn path, there is a definate industry standard. Personally, I think 100% of the management and incentive fee for the first $10 Million introduced into your Fund is appropriate and creative. Fund managers need to understand that they are not God's gift to Wall St. and investors have many choices. The first $10 Mil. is very hard to raise. Think about it if you are really hungry to run a hedge fund.
If a friend with connections markets a CTA's services, do they have to be registered as an AP with the NFA? Anyone run into issues with this?
[Jerry's Apartment] (Morty coming out of the bathroom) MORTY: You know I've been thinking, why is Kramer getting twenty-five percent? HELEN: Well he told you about the place. MORTY: So what, why is that worth twenty-five percent? It's a finders fee. You know what a finders fee is? HELEN: You find something you get a fee. MORTY: Finder's fee is ten percent and no more. HELEN: Well it's too late now. MORTY: Those are my coats. I saved them, I stored them, I've been waiting years for this pay off. HELEN: Well you're not gonna say anything. (Kramer enters) KRAMER: I've been thinking about something. MORTY: Ya so have I KRAMER: Ahh! I don't think the deal is fair. MORTY: You don't think it's fair. KRAMER: No no, I found the place, I set the whole thing up, I'm doing all the leg work. MORTY: What leg work? KRAMER: Oh, there's leg work. MORTY: If anything you're getting too much. KRAMER: Too much?! MORTY: That's right, they're my coats. KRAMER: Look I want thirty-five percent. MORTY: I'm thinking more like fifteen. KRAMER: No way I'm taking fifteen. MORTY: Well you're not getting thirty-five. KRAMER: Alright let's compromise. Twenty-five percent. MORTY: Ok it's a deal (They shack hands.)
On what basis do you derive these figures- your past experience, experience of others, or what you feel is right. I'm asking because this seems reasonable....but I keep on hearing (mainly from the marketers themselves) that 20% of fees in perpetuuity is "industry standard" Also for your suggested 10/5% is this in perpetuity or for a limited time? Thanks!
I don't know whose ass everyone here is pulling all of this shit out of, but 20% of all fees (Management + incentive) forever is typical. Oh, if you are under 10 to 20M a good fund raiser won't even look at you. IT IS CRITICALLY IMPORTANT FOR YOU TO KNOW THAT THE FUNDRAISER MUST BE A REGISTERED BROKER DEALER. If you going paying your friend or acquaintance, etc even one dollar for raising assets you are violating all kinds of laws and will be totally fucked if your fund ever loses money. Basically, anyone who was introduced to your fund in an illegal manner (such as paying a non broker dealer for introductions) has the right to sue your ass of to be made whole. So if you suck and lose all of their money they can sue your criminal ass personally and take your house to pay them back 100% of their original investment (yes you are breaking laws so out the window with all the corporations and partnerships protecting your assets). If you are much too good a trader for that to ever happen to you then don't fuck around paying friends for introductions. It is time for you to step up to the plate, hire a good law firm and use their council for just such questions that no one on here has a clue about.