On further review, it seems the original poster, lost money trading strategies he had low confidence in. I think that is different from "experimental strategies". This may seem to be semantics..but there is a key disitnction. Whether HFStartup is a discretionary or systematic trader, as others have said, focus on a stratgey that you have high confidnece in. This is still an "experimental" stratgey in the strict sense of the world as you have no certainty that it will work over time...bu that is much more wiser and prudent than trading low confidence strategies that you are still in essence testing and defining.
This anonymous alias of yours sounds a little shady. Before I get excited about defending the "reputation" of this anonymous alias... Let me give the retirees out there some constructive advice: make sure your prospective manager is properly registered with the regulatory agencies. Here in the US, that would be the NFA/CFTC. The same NFA is exactly why I'm not going to solicit for my fund in a public venue like this. Edit: I take that back. The SEC is why I'm not soliciting here.
Because geetting the first investor is such a big deal, the first investor often gets all kinds of priviledges: from lower fees to partnership in the fund management firm and corresponding share of profits. Agree. Just a small minority of recent posts seemed to me like an attack on the OP. Good luck! Leep us posted.
Check your facts. Actually per person the US donation amount isn't even in the top 10. Most Generous Countries in 2008 as donation per citizen in 2008: 1. Luxembourg - $114.4/citizen 2. Norway - $95.7/citizen 3. Sweden - $65.9/citizen 4. Ireland - $55.9/citizen 5. Denmark - $54.1/citizen 6. The Netherlands - $38.6/citizen 7. Kuwait - $32.8/citizen 8. Saudi Arabia - $28.7/citizen 9. Finland - $27/citizen 10. Switzerland - $25.4/citizen
It has been several months since my last post and my intention going forward is to update this thread on an ongoing quarterly basis as I report to my investors. I hope the markets have been treating everyone well in the meantime! When I first started this thread I swore to myself that if it were going to be beneficial for both myself and those who choose to read it, I would need to be honest with both the things I do right and the things I screw up. In my last post, I shared several of those screw-upâs and received some criticism. ET can be a harsh place and integrity is often brought into question. While I cannot say that I always agreed with the way the criticism was presented, I am thankful to all those who took the time to post. I deserved to be reprimanded and I can feel it making me a better fund manager. I have learned many lessons, of which I will share shortly. Thanks to all who contributed. Before I go on, there are a few things I wish to clarify... The first being that I am not here (on ET) to solicit funds. I approach this business with a very long-term perspective and I don't expect anything to happen fast. My primary focus is to demonstrate professional and prudent management of the funds I have been entrusted with and become the best fund manager I can be. I have no fear that if I can do this, the money will follow, so I do not need to nor do I intend to solicit funds through ET. The second is that I started my fund (and covered the startup costs) with my liquidated retirement account (at a penalty). In addition, I also regularly (as possible) contribute additional funds into it as well. I do this to demonstrate my faith in my trading methodology and to align my interests with those of my investors. This is as it should be. Accusations that I have nothing riding on this are incorrect. With that said, here are some lessons I have learned... When I first started my fund, the market was such that I was receiving very limited entry opportunities. I was eager to demonstrate my methodology and so I "drifted outside of my investing style" to try and create opportunities. (Thank you to all of you that tried to warn me about it-I suppose I had to touch the stove for myself). These strategies were modeled and tested, though not as thoroughly as my primary system. Where I ran into trouble was in how much I allocated towards these trades and this goes back to my inexperience. On a side note, I believe that every business must engage in R&D to be successful over the long-term. Hedge funds are no different. In hind sight, I would have waited to test other trading methodologies and done it in smaller amounts relative to the AUM. However, there is only so much modeling and testing that can be done before a new system just has to be tested using real cash. So I paid for these mistakes with a breakeven (partial) 3rd quarter 2010 and a lousy 4th quarter 2010! I was ashamed and embarrassed by this performance, and rightfully so! It was pathetic. It was hard to read the comments posted because I agreed with most of them! I dreaded checking my balance and monitoring the fund became painful. I even considered cashing out and returning the capital to the investors. However, I forced myself to continue and I focused on my core methodology and extracting whatever lessons I could. I prayed and asked for guidance. My biggest concern was that I was letting my investors down who had placed a great deal of trust in me. Slowly, the losing positions were closed out and I stuck to my system (no drift) and by February, they were closed out and I had an almost breakeven month (down -.45%). This still underperformed the major indices but the bleeding was now staunched. I do not wish to get into the mechanics of my trading methodology because that is not what my thread is about. However, suffice it to say that my system always loses money for the first 3-5 months it begins because it takes time to develop positions across multiple markets. This was compounded by my poor judgment. Now that my initial mistakes are behind me (I can make new ones!) and the fund has had some time to establish itself in positions across markets, I am pleased to report a profitable month of March. It wasn't profitable by much, but enough to outperform SPY and QQQ (two of its benchmarks, DIA being the third). More importantly, I am seeing a return to the characteristic behavior of the methodology and also a profitable robustness that was demonstrated during the turbulent past couple of weeks when the major indices fell. This small success has restored my hope that I may just have a shot at this for my livelihood one day and that my system works if I just leave it alone. And before I get blasted for being happy about one small up month, (he has one up month and thinks he is Paul Tudor Jones) please take this comment in context. The greatest amount of my time recently has been spent with my accountant as he prepared the K1's. This is far more time intensive than I had thought it would be and I anticipate it will only get worse! So I'll leave it at that and prepare for the worst. Thank you for taking the time to read this thread and I wish you continued success!
Thank you for taking the time to read this thread. Hope you are well. Here is another update... I received an email a few weeks ago that my primary investor may need to withdraw his funds to finance a home he is having built. He wishes to do it using "petty cash" as opposed to taking out a loan. A withdrawal of his capital will mean the end of my fund, so naturally I was very concerned. I met with him this afternoon and I am happy to report that some cash has opened up to meet his immediate needs and he has given me a stay of execution. He anticipates more funds will become available to fund his home building project and so it may not ever be an issue. However, he has asked that I raise more capital so that his funds do not constitute such a large percentage of the AUM. I have begun contacting friends and relatives to do so. (Just to be clear, I am not trying to raise funds theough ET). The problem is I still have no real track record and the AUM are so small that institutional investors would have no interest. Starting a hedge fund is definitely an uphill climb the whole way! When I overcome one hurdle, there always seems to be another. But I am very thankful for this opportunity and will not give up. I would recommend the same to others out there that are trying to do the same thing. So ultimately, this ended up being good news (for now). Also, on a positive note, I have developed an algorhythm/model to follow "big money" and based on their activity, "predict" the direction of markets to include price targets and dates they will be met. This model compliments my existing trading methodology and therefore poses no risk of style drift as I foolishly succumbed to when I first started the fund. Right now, I am simply observing and taking only trades that conform direction-wise to what I am seeing from this model, but it appears to be producing very reliable and consistent results. If it remains consistent, it could be a game changer. Once again, I do not wish to get into the technical aspect of trading methodologies, so I will limit it to that brief description. With that said, I wish you all continued success in the markets and in your personal lives. Be well.
I hope the markets have been treating you all well. Here is the Q2, 2011 update. A lot has happened since my last post. My primary investor let me know that he was considering a complete withdrawal of his capital. This was of great concern because it meant the end of the fund. Fortunately, he was able to raise what he needed from other sources and decided to wait until December to see what costs were like at that time. He suggested that I use the time to seek out additional capital so that the fund could sustain itself should he withdraw. This was disconcerting because I had already approached everyone I knew to raise the measly US$123K I was already managing. Some of you may not like my next comment because it is typically thought that spirituality and finance should be isolated from one another. But in keeping with the honesty I have promised from the beginning, I must share this. Sadly, I see very little signs of spirituality in the finance world. However, that is not how it works in my life; God is intertwined in everything I do and so my faith naturally spills into my trading. I started my fund to achieve my spiritual goals and so I turn to the Lord and His Word for counsel in tough times. When the situation I mentioned above occurred, I prayed to the Lord and let Him know that while I preferred to continue managing the fund, I would leave it in His hands. When I did this, it took away any fear or anxiety I had and put me at peace. If the investor withdrew his money, I would take it as a sign that I was not to pursue the path of fund management and would leave it forever. If the money remained, I prayed that He would help me to raise additional capital (and I did not see any likely candidates). Not only did the investor not withdraw (he will reconsider in December when the next stage of costs are due), but a within a few days, a second, unsolicited investor approached me about investing in the fund. He ended up investing US$150K into the fund, simultaneously more than doubling the AUM and removing the threat of fund collapse should the first investor withdraw. I thank the Lord and that man for that blessing. I have learned a great deal about portfolio management in the 10 months since starting the fund. This was something I never had the opportunity to do because while I had developed a steadily consistent system with a clear edge over the past 5 years, I was only ever able to apply it to a single index rather than multiple indices due to having such limited capital. Without this diversification, downside exposure always loomed precariously. Now, I have the resources to apply the system to over 11 major indices. Beyond the benefit of hedging against unforeseen market events (including black swans), I get to observe first-hand how the correlation of markets fluctuate and influence each other. I have also come to see the challenge in protecting against adverse moves without compromising the benefits of upside moves. I feel like a mechanic that is constantly fine tuning an engine depending on the air temperature, type of track, altitude, etc for that particular day. A very pleasant discovery was the iShares Barclays 20 Year Treasury Index fund which trades under the ticker âTLTâ. I cannot say enough good things about it as a portfolio hedge as it shares a strongly inverse relationship to the Dow. I started an ET link on its self hedging properties entitled âIs TLT (20 yr bond index) self hedging?â for those interested in my observations. As mentioned in prior posts, the Fund did not start out well. I experienced âstyle driftâ caused from a self-induced pressure to perform for my investor even though my system didnât provide me with any entry signals. It took me several months of losses before I realized that I just need to trust in the system and it is better to be flat than to lose money. While the fund has been beaten the major indices 2 out of the last 3 months and most months are profitable, I am still making up those losses and will continue to do for the next several months to bring it to breakeven. The equity curve of the fund has proven to be very stable, smooth and gently sloping to the upside. This is characteristic of historical performance and further verification that I am managing it in accordance with my methodology which was designed to protect capital first and make profits second. I am especially careful to keep a close eye on how much the fund moves each day; I have been successful in limiting the moves to no more than 1% either way in a single trading day. Upside moves tend to be about ½ of what they are for the Dow and downside moves tend to be about 1/8 of what they are to the downside. Correlations to the Dow, Nasdaq and S&P are almost non-existent. Up to this point, I have used no leverage whatsoever. I am aware that hedge funds can employ great amounts of leverage, but I am not comfortable with the exposure during a black swan event. I am trading through an OptionsXpress account with which I have negotiated very low commissions. OptionsXpress offered me up to 4x leverage, but I declined in favor of continuing with the standard 2x leverage offered in the typical retail trading account. My experiences with OptionsXpress have been good so far, although I recently requested a report that provided my daily balance since inception of the fund and they were unable to provide it due to their database limitations. The fact that they could not provide such a simple analytic underscores the fact that they are not setup to support a hedge fund, even a small incubator fund like mine. I anticipate staying with them for another year or two, but as the complexity of the needs of the fund grow, I may need to seek out a broker with these kinds of in-house capabilities. Speaking of complexity, I have seen it grow since starting my fund. My spreadsheets and models have grown more complex and the analytics I use to track the fund are becoming more extensive. I am speaking in relative terms because compared to most funds, I am probably still in preschool. One lesson I have learned is on how to handle testing and development of new trading ideasâ¦I am now very slow to introduce them into the real time trading of the fund. My testing period has become much more arduous and I use a Collective2 account to test the ideas and have them tracked statistically. I intend to give these ideas at least 6 months of real time trading before utilizing them in actual trading. I know I have found my passion because I canât wait to get up in the morning and see what the market has in store. I absolutely love what I am doing and hope I can one day do it as my sole profession. I wish you all the same. Thank you for reading this post and best of luck! Be well.