Is having your own hedge fund good idea vs. staying as prop.

you don't get 2% management fee at a prop

 

Yes, I am clairvoyant. You got that quick.

 

That is exactly what I am debating. Being a prop has many advantages.
The goal or the fund here is start with 10 mil., perform well in the first year and raise more funds and grow it to $150 mil with funds of funds money in 3-4 years.

 

Is it possible to do both, in other words trade a prop. account for income while you build the hedge fund?

It might be worth looking into.

 

Most important point to consider. At the onset a hedgefund has a much lower payback than staying on your own (unless someone does give you $100m+ at the start). But, the longer you show consistent performance, the more funds you should be able to raise, and eventually you'll get to a point where the return finally beats what you could get from staying independent. But, the crucial thing is how scalable are your strategies and what your anticipated annual ROC would be. I'd easily take a strategy that returned 30% annually but was scalable to $5 billion over a strategy that returned 100% but only scaled to $5 million.

 

even if someone gives you 100million to start, you are only getting 2/20 if you are lucky, extremely lucky. ( mostly, for startups it's now 0/10 or worse) why not take the 100million and trade it on your own for much greater reward??

remember, im talking if you already have the money---hedge fund structure makes no sense unless you need to raise the money.

surf

 

why not trade your hedge fund at a prop shop taking advantage of the leverage without the primebroker hassles and requirements?


surf

 

True..but you don't ONLY get 20% to 30% of the profits made off trading the $10 Mil

 

OK, $10 million, keep 100% assume 20% return. $2 million per year. (We don't really use "Return on Investment" because it doesn't apply to actual trading, our traders make money based on their efforts, the money we let them use is simply another tool to use). We, of course, have traders who make that much.

$10million, 20% return, $2million profits before taxes....give away $1.6 million to investors, give away half of what's left leaves $200K. Quite a difference.

And, grow your own "hedge fund" that's exactly what our family has done over the years.

And, if you do "pretty well" then you still have a good track record based on what "investors" are looking for (beating the "street").

FWIW,

Don

 

ya don't get it at a start up hedge fund any longer, either. unless you are very lucky!

surf