Looking to allocate to funds in a managed account structure

Discussion in 'Trading' started by hedgefunds, Nov 16, 2006.

  1. I know there are a few hedge fund managers who visit these boards, so I wanted to let everyone know about this program:

    Our firm is working with an established asset management firm who is seeking to allocate at least $9 MM each to several managers across a broad spectrum of strategies, in the form of managed accounts. Managers will be compensated a 20% incentive fee payable quarterly. In addition, if performance exceeds 15% per annum, the incentive fee rises to 50% for those profits over 15%.

    The investment firm is seeking to identify managers who:

    -Have a high level of confidence in their ability to trade,

    -Currently manage a sum of more than $25 million in their strategy,

    -Have in the past expressed a willingness to personally invest in their fund, and

    -Desire to increase their participation in their funds’ upside.

    Managers will be required to allocate funds to the managed account, a minimum amount of 10% of the total allocation. For example, for every $9 MM allocated, the manager will contribute $1 MM. The amount will be employed in the strategy together with the investment firm's $9 MM. Draw-downs or the full extent of losses will be debited against the managers 10% contribution (and profits which follow will be fully credited to make up the total extent of the deficit).

    If you have an interest in discussing this program, please send me a PM with the following:

    -Your contact details
    -Brief info on your fund to include AUM, annualized return, sharpe ratio, max historical drawdown and strategy employed.

    Thanks and I look forward to speaking with you.
  2. Am I reading this right? Basically you are asking the manager, via co-investing his / her own funds, to provide guarantee against a 10% loss. Or maybe I am just hallucinating.
  3. me2


    what a racket.

    is this nigerian fund of fund manager that will send u a check for 20million and ask u to deposit and write a check back for 11million cause its hard to get money out of his country?
  4. gkishot


    They will have to reveal you their trading strategy. I doubt any sane manager would ever do that. I know I wouldn't. And my personal performance is above 15%.
  5. syrre


  6. First of all, let me state that this program is not a fit for every fund manager. It works for managers who are confident in their strategy, already have personal capital invested in their funds (or are willing to put up such capital) and are seeking to increase their AUM. Look at it from this perspective:

    If you put up 1M, you are matched with 9M, for an account which totals $10M. At 15% return per annum and above, the manager receives 50% of profits (standard incentive fees are 20% in a typical single strategy fund and aren't tiered to reward higher levels of performance).

    For argument's sake, say that the manager returns 20% on the 10M account (2M). The manager would retain 50% of profits (1M). In a normal structure, the manager would only retain 20% of profits (400K).

    The 10% contribution is a requirement from the institution funding the accounts, so that the manger has some "skin in the game" and their interests are aligned.
  7. gkishot


    This is so not serious. The fact that the manager has its own money at stake does not make any difference. Because good managers do not change their strategies whether they trade their own money or someone's else. They simply have a strategy and they stick to it. Besides if the manager is not so good the institution money will be still at risk. It cannot be serious.
  8. jem


    well I can sure think of a reason you would want more than 10% up.

    with no risk and no detriment to your public record, you might look to deploy a strategy --- money management or trade wise that will work until it blows up.

    Oh perhaps like trading for a reversion to the mean and when that starts to fail start selling puts on the S&Ps.

    My former neighbor (he lives in a bigger house now) but still, nearby, is a hedge fund manager with a strong track record. I will let him know of this offer.
  9. gkishot-

    The offer is serious. If you or anyone else would like to contact me, I will be happy to answer any questions and explain the program in further detail.
  10. I would advise any manager considering this proposal to run it by legal counsel. I think the other investors might well have a breach of contract action against the manager, unless this investment were set up in a separate fund.
    #10     Nov 16, 2006