I guess in the next 3 years will have a chance to see how my account is handling a downturn market. From my point of view, if the market goes into a panic mode, that's the time that you can find the greatest values if you can meet the following conditions. 1. You keep buying on a consistent monthly basis. 2. You are very well diversified. 3. You are a buy and hold investor. 4. Have enough liquidity not to get a margin call. I have used that by the last bear market (Dec 2008- March 2009) and it worked out extremely wellâ¦
buy and hold has been a proven failure in the fund industry. it especially will not work running a fund with multiple investors. first you will not be able to " keep buying on a consistent monthly basis" if you are fully invested going into a downturn. second, your fund customers will want out at the worst possible time causing you to have to sell at the worst possible time to meet redemptions. you might want to consider where you would be had you started out fully invested one year earlier. just a few things to think about as a future fund manager.
If you have investors you can start an incubator fund for much less than this. When I started mine I paid a mere fraction of the costs you are mentioning. The audit was the most expensive part but even that can be completed for less than 10K. There is a lot of work you can do to make the auditors job much easier.
I understand the main downside of saving on the legal side of document preparation is and shoddy work on thi sside will be a major red flag for larger-size investors in the future. The cost of fund setup is one of the reasons to run "incubator". With the manager himself being the only investor there is no need for provisions regarding withdrawing funds or charging fees.
well now I can see what you are concerned about. general solicitation is a different animal with rules to be navigated. I did not see and incubator hedge fund worrying about that until it became a big hedge fund and tried to bring in random clients. But, I can see your point as well.
There is a way to get your hands on a high quality set of Private Placement Memorandums, Operating Agreements, and Subscription Agreements. You just have to know where to look. Depending on the instruments traded, taxes for a hedge fund aren't really that hard. Any accounting firm that quotes you 5k to do the return should be fired. The lowest quote I received was $1,500 and I didn't even want to pay that so I rolled up my sleeves and began studying LP taxation and filed the returns myself. The most important part is to have accurate investor allocation records.
Yeah, advertising is a big no-no. The best way to attract capital is through your broker. I know a guy at Infinity Futures who can put a hedge fund manager in touch with a guy who raises capital for hedge funds for a living. Naturally, that comes with a price. Another thing you can try is joining www.hedgefund.net. You gotta get creative to get around the advertising angle. Once you have a few investors word of mouth becomes a pretty powerful tool.
Sure, and you can cut your own lawn and save $50. But if you're running, or hoping to run, a hedgefund, your value-add is your research and trading -- that's where your time and energy need to go.
When you're first starting up you need to save every penny you can. I worked on the taxes after hours and on the weekends. It didn't interfere with my trading and as a result I learned a great deal about taxation, which has grown into a very valuable skill.