HNW or Institutional money is something that I was unsure about for a while. I have decided I would rather manage for HNW than institutions. This is because after speak with a few of them I really get the impression that they will be your friend as long as you give them alpha. I spent two hours on the phone with one institution, who will remain nameless. I was trying to explain my strategy to the guy and how I came up with it. He kept interrupting me and was pretty much as rude as possible. He could not comprehend exactly what I was saying so at one point he said, "Where did you come up with this line of shit." At that point I ended the conversation. If this was a problem I had with everyone I would attribute it to me not being able to talk my book, but I have never had any problems with any other potential investors. I say all that to say HNW are much more likely to sit down and listen to what you have to say and if they don't understand it they seem to have more patience trying to figure it out. At least from what I've seen. I can't say all institutions are like this guy was because I am managing a bit of institutional money. Some are nicer than others, but this guy was just ridiculous.
I had a similar experience LongView. The guy was not rude to me, actually very polite. But he just could not understand the strategy...he was trying to fit me into a box - a box he had probably memorized and when he couldn't he got frustrated. Worse this guy is veyr young, probably a few years out of college and he's the guy doing "due diligence" for a MAJOR MAJOR FoF. What does he know about markets and risk? It is precisely because the FoF/institutions have no sense of market risk, market dynamics that they tend to be some of the worst investors. In general they all chase high retuns or high sharpe ratios and then bail during the first drawdown. They don't understand the strategy, don't understand risk managment and do a bad job of attempting to do so..(assuming they try)Amazing, but true.
I don't see why it matters what strategy is used. They are after the returns, correct? They should spend more time calling my auditor and accountant and making sure I am legit. I don't feel comfortable giving them too much detail anyway, lest they show up as a competitor a few months down the road - which has happened.
Welcome everybody, finally the thread I have been looking for. A lot of my experience is identical or similar: I also published in Futures, March 2005. Same experience with institutionals - one guy asked: how about S&P gaping down 15% at open ? (I trade S&P options) No comments. Few questions: 1. Is MFA helpful in any way for raising funds ? (I think not, but why not to ask) ? 2. Do you experience pressure from database people to set up clients from them with their Introducing Broker biz and pumping up your commissions ?
Regarding raising money, if you're in a major city, you really need to think about integrating yourself into the community thru things such as United Way or other community organizations. You'll meet a lot of people -- a lot of people with money.
Has anyone had any success (or lack thereof) contacting financial advisors and family investment offices that cater to high net worth individuals? I've been considering whether putting together a list of such financial advisors/investment managers and cold calling them directly, is a viable approach for a small fund or if financial advisors typically blow off such solicitations.
This is one of the most informed threads I have seen in a while. I have a question for those of you out there running money. All else being equal, do you feel it is easier to raise funds structured as a CTA or a hedge fund? I know, I might be comparing apples and oranges here, but these sense that I get is that the hedge fund market is much more institutional, driven by intermediaries such as consultants and FOF and therefore a much more difficult environment to raise funds in for a startup. It seems that high net worth nvestors would be more willing to take a chance on CTA in a database, given of course, the right performance and risk characteristics.
I think you may be comparing apples to oranages. 1) You're making the assumption that in both cases you're trading futures/commodities -- some hedge funds may not engage in that type of trading, in which case the whole CTA, CPO thing isn't applicable. 2) Are we talking about running a pool of money or individual accounts? 3) It is not necessarily easy to raise money for a hedge fund, but like anything, networking and contacts is key. How much money are we talking about here? The amount may dictate who is involved in the fundraising.
original quote from SnoopDogg: I think the comparison is fine. essentially most hedge funds and CTAs are doing the same thing. Trying to raise capital from outside investors so that they can place trades in financial markets. Regardless of whether they trade commodities, equities, bonds or whatever else. I think that if you took two money managers, one hedge fund and one CTA, and keep all factors the same, meaning they both started their business having zero connection to capital besides their own and their returns were identical. I think the CTA would have a much easier time raising money. This is because a CTA can place adds and solicite funds where as a hedge fund is a RegD investment and cannot solicite funds with advertising and things of that nature. That's my opinion.