One more question: Our strategy is a global high-frequency one. Our commission fee amounts to around 40k this month. We are using IB. Is there anyway we can negotiate about the commissions with IB? What percentage of discount can we get with 40k/month? How about 100k/month? Thanks.
You bring up some excellent points here but you are well versed in this business. If the OP went to potential investors and said, "I earned 2000% this year" he will have more money than he knows what to do with. Average Joe investor has never heard of a Sharpe or Sortino ratio. All they will see is one number ---->>> 2000%. To the OP, just contact your broker and tell them to mail you "stamped" brokerage statements, which is something you can't duplicate. Provide these to your investors and tell them you won't even come close to last years return. In fact, tell them you will do less than 100%. If you do more they will be pleasantly surprised. The game changes completely when you start managing money for other people. And now I gotta go google Sortino ratio and I have an MBA in Analytical Finance. Good luck OP!
Use Google search engine at http://www.google.com There are services that give advice on startup, regulations, compliance, and administration issues involving hedge funds. Assuming you haven't spent any of your 800k... You can easily afford to hire one of those reputable firms to help you get it right out of the gate. By the way, I knew someone in the 90's that did something similar (65k traverse into 825k). However, he was young and loose with the money. * Bought 2 expensive cars with a goal of collecting rare autos. * Took several expensive vacations with friends. * Spent lots of money on his girlfriend. * Ate several times every week at very expensive restaurants. * Almost forgot about the IRS...they got a nice portion of that 825k. Simply, realistically, compounding is not possible for traders like this even though there are those that oddly think he should be filthy rich in a few years. Thus, I think most profitable traders aren't able to exploit compounding. Anyways, not much of that 825k was left. Since then, he's still profitable (about 40k per year after taxes and living expenses). Now he's talking about getting married and raising a family. I told him, he can now forget about compounding. Just put a little money aside each year for the retirement and kids college fund... Be happy with that because most traders aren't even profitable. P.S. Has anybody notice that there's rarely any conversation at EliteTrader.com about living expenses (insurance, health plans, car payments, rent or mortgage, kids education fund et cetera). There's more talk about if you are profitable you should be rich from compounding in a few years. Have you called IB or any other broker to negotiate for a better comission rate??? Simply, you should be able to easily answer that question yourself. Mark
Think very hard if you want to deal with all of the issues that will come up when managing other peoples money. It may not be worth it at all. If you could continue doing what you did this year with half the returns and no stress of fund running. go this route instead.
"Is there anyway we can negotiate about the commissions with IB? What percentage of discount can we get with 40k/month? How about 100k/month?" With the trading you are supposedly doing one would assume that you wouldn't need to ask this question.
Hi parabolic, It matters to us. Our profit is 760k pre-tax this year, and the commission fee is about 350k this year. Also, with more money traded, return could tend to flat a bit, and commission keep increasing. Our strategy has high sucess rate and good statistics. However, it trades a lot.
Good point. I know quite a few new managers under 20million AUM who dumped their investors and found direct financing solution to leverage to 20MM themselves and keep 100% of the profits. Eventually many successful hedge funds who actually perform and don't rely on a mgmt fee to make a buck, return $ back to investors or buy them out.
What is wrong with this picture? (1) A claim of 20x in one year is not credible... And could ONLY be done with an insane ultra-high risk strategy. (2) People who make this claim... Are not aware of the existence of Audited Financial Statements... And actually come to this cesspool for advice. LOL. Over and out.
Only statistics will tell if it is a high risk strategy, not high return itself. What's your opinion about Renaissance Technology's risk in context of their returns? I know something about Audited Financial Statements. However, I do not have first-hand experience, and believe there are various services. Also, it does not hurt to ask and get the best services out there. Moreover, our discussion would be valuabe to other newbies.
Xiangfin, There are several third party services that verify performance. One that I have seen is TimerTrac at www.timertrac.com They provide a graph of the verified performance of your strategy versus your chosen benchmark. In addition, they provided the verified statistics which include maximum drawdown from peak, sharpe ratio, beta, monthly returns, and etc. Here's a link for a investment company that uses TimerTrac for third party verification. I do not advocate them. I just wanted to show you an example. www.marketsci.com Maverick007