Thanks for the response. Just a quick follow up. Do all CTA's investors need to be accredited? (200K single, 300K married couple income, 1 million in net worth) If not I think there is a tremendous universe of investors looking to gain exposure to "alternative asset classes" but are shut out of hedge funds. Also, how effective have you found the CTA databases in attracting new money? Obviously, pounding the pavement and selling your fund is still going to be required, but it would be nice is a solid track record in one of these published places would attract at least some money on its own.
Do you know if it feasable to cold call the private wealth management firms and pitch your fund, or would this also require an introduction?
No, the accredited requirement has to do with unregistered securities, i.e. hedge funds or commodity pools. If the investor is going to open their own account and give a CTA power of attorney to trade it for them, there is no accreditation requirement. There is still the "suitability" requirement, though, but not an accreditation requirement. Yes, I agree that a small allocation to alternative investments that aren't correlated with stocks and bonds is wise. Aaron Schindler Schindler Trading
If you are talking about CTA's making cold calls to sophisticated investors -- sure, that's fine. CTA's are not prohibited from general solicitation. But hedge fund managers are prohibited from general solicitation for unregistered hedge funds. Aaron Schindler Schindler Trading
So then would be it accurate to say that for a fund, your only options of marketing it are: 1) Approach people you already know 2) Hire a third party marketer with a big rolodex 3) List yourself in the ranking services and hope that potential investors notice you Can those really be the only legal options available?
I belive this is correct. When I first started I had a CPO and a CTA. A CPO is in the same class as a hedge fund. When I was building my web site I put in information about both the CTA and CPO. The NFA told me that I had to take down anything that mentioned the CPO because you cannot solicit for a RegD investment. So in answer to your question I believe those really are the only options you have. There may be other ways, but I am not familiar with them. I have since closed the CPO because there was zero demand for it. Everyone wants managed accounts. At least every one who has contacted me.
The world of fundraising money is both hard and filled with a great deal of rules. I would suggest that anyone looking to start a fund retain a good lawyer who is well versed in the space. You need to be real careful how you raise the money and how you keep people informed. The last thing you want is to violate the rules, the punishment is severe. I used a well-known firm and they provide advice with all aspects of the process; from your marketing deck to your web site and distribution lists (for results).
Would be an exaggeration to ask for the name of the firm ? Would they mind to get some more business ?
absolutely right... fwiw, am sharing an office with someone who's set up a 'hedge fund mall' and despite my mickey mouse size (<$3mio) has wanted me and has finally got me on his 'mall' in the 'highly leveraged pure fx play' box, but clearly and after meeting scores of 'asset allocators' etc i have now come to think that institutional money is just not worth the effort... better focus on family offices / HNW individuals directly, they are much less demanding in the way of cover-my-arse-prove-nothing-type ratios, and they are usually pretty well connected to other HNW people... all they want to see is some reasonable performance and a simple and robust risk / money management system, they don't want the details... much less hassle... and they don't pretend to understand what you are doing nor how you are doing it... precious!