Key factors for hedge fund launch

Discussion in 'Professional Trading' started by evogel, Aug 22, 2012.

  1. evogel


    Hello, anyone !

    I’m an individual trader managing my own funds. Right now I’m seriously considering creating my own hedge fund. I do not have any significant experience in this area, so I decided to ask few questions here. Two main points for me are

    1) Availability of my fund’s results for institutional investors, that might be interested in investing to my fund.
    2) Possibility of keeping overall costs, including audit and legal fees, as low as possible.

    Other things that are not clear for me is country of registration, possible structure and whether my auditor should be one of the “Big Four”. Also I’ve read about incubator funds but I’m not sure whether institutional investors threat their track records seriously. Any opinion about that ?

    Another moment that I do not understand properly is the amount of money that I should invest in fund initially. Whether 100k USD of 500k USD make any difference ? If it does matter, on the initial stage I plan to trade 200.000 USD of my own money and hope to raise up to 50 mln USD in few years.

    Also there may be other things that I’ve not mentioned due to lack of experience, so I ask everyone to feel free expressing everything that comes to mind regarding this topic.

    Thanks in advance.
  2. sheda


    You hope to raise 50 mln USD with 0.4% of your own money on the line?
  3. evogel


    As you can see in first message, one of my questions was exactly about the amount of money that I should invest in fund initially.
  4. Personally I don't see the value of an incubator fund. For audits just get your personal accounts audited. Someone feel free to correct me if I'm wrong.

    As to money, obviously the more money your track record is based on, the more people will respect that record. If you are a trader, why not have all your money in one place and have that audited. If I were an investor, I would not trust the performance of any one account. You could have 10 accounts created and be showing me the best performing one.

  5. Exactly,thats why backtested results from last 8-20 years (if done fair and correctly) are of much higher value.
    But people will never understand such a simple thing.

    Also, what is the value of a 6 year track record on a 500 million $, if a manager is a nut, psycho and crazy mofo'er who is able to lose 50% next month?

    since nobody knows how to identify a viable strategy and spot a snakeoil salesmen who just got lucky during a bull trend....
  6. cmlg


    If you delay drafting your hedge fund’s offering documents and are willing to defer collection of management and performance fees, you can operate an incubator hedge fund. There is no legal need for an audit ever when operating an incubator hedge fund. It is purely optional. You do not need fund administration either while operating an incubator fund. All you need to do is create a compelling track record and file a tax return every year for the hedge fund and its management company. The point of the incubator fund is avoid spending money needlessly. Read a lot more here: