Problems & Opportunity of life time ?

Discussion in 'Professional Trading' started by savagemp5, Jul 29, 2012.

  1. Hi, some problems I would encounter, please value add here only if you are already at this level. I have some shared posts over at the automated trading, most discretionary trades are kept quiet by me :)p) probably handing at most $200,000 - $500,000, but it seems that the majority of ppl here are still stuck with the basic trading mechanics.

    just needed some ideas to give myself a break.

    I have a friend, partner whose on hand a couple of UHNI. Ppl worth at least > 10m, and they want to pour money into hedge funds, something not traditional business, not mutual funds, not real estate, not fixed deposits. We were thinking of starting a $15 Million hedge fund, taking 2-3 years to raise it.

    In simple terms the fund, is not gonna be hedged like market neutral you think it is, nor is it a quant fund with exotic models (that might fail like LTCM), nor is it spilling 200 million on a single credit trade bet with leveraged to 2 billion just for that 1 pip/yr trade.

    Without the hedge fund management experience, but after some talks and my performance I was asked to see if I could handle and manage that much $.

    Initially I was happy. A chance to start my own firm, my partner's job to bring in new funds, my job to print money, be it blackbox low frequency trading or discretionary. a 2/20 on 15 mil works out around >300k. Let's just say we are not selfish, we hit it at 1.5/15, less away fund expenses like acct and audits, we could bring home a 100k each, or just near 8k a month That is full time trading and fund manger, and luxury to work form home, at its peak.

    Then theres a set of problem. My trading, would become so different with the talks of trading here and I foresee a lonely world, even lonelier than what I am now (only less than 3% of social frends and ppl I met understand what im talking in terms of trading and investing. - thats a 3 standard deviation or 98% confident away from norm =p)

    Problems like:
    - Like looking at % of portfolio instead @ per stock/ sector/ industry / asset class, and balancing between them (eg. a 2% of 15 mil stands at 300k. eg Ford @ $9, gives me around 33333 shares.)

    - Buying and selling securities thru algo trading, literally position trading, requires like buy/sell 200,000 shares thru 500 x 400 in randoms of +- 500 shares, btwn 20 seconds to 20 minutes over 1 week, over several accounts with TWAP or VWAP, instead of the usual buy/sell And then calculating the cost for these block trades. U know what I mean if you've done this.

    - Hedging and all sorts of derivatives options and futures to dismantle, uncorrelate, protect and insure each security and VaR, the index performance to my fund returns. The investors will turn off if the returns are directly correlated to SP500 or World index.

    - Looking at overall world index and macro investing. im based in Asia so I have better access to HK, SG, JP markets and making sure the fund is well diversed, then comes those problems with markets without derivatives, no short selling, or no liquidity.

    Some brokers like IB have many cool functions to support them. Others, like prime brokerages in banks, not as great.

    Well, afterall, my dream of becoming a hedge fund manager ...(trading on my personal acct => look for a trading job ? Why not start one yourself and be the boss =)

    - Not forgetting the licenses to obtain
    - The regulations to go pass, accounting audits and all tons of expenses
    - Hiring anaylsts and traders, not some bookworms or gamblers
    - High watermark, fund liquidations, redemptions or investors pull out problems
    - Quitting my current $80,000/yr job ? Hell no, its also 1 of my dream job - just that Im already in it.

    Just something to share not looking for any solutions, pls share ideas if you've been in my situation before.
  2. Be forewarned this response does not address any of your questions.

    To me, this is the first question you must resolve:

    Is it worth it?

    Seems like a lot of stress for $8000.00 per month.

    When it is going good you are making $266.00 per day when it is going bad you are making $266.00 per day (or less). I bet after awhile of it going bad you would gladly pay someone $266.00 per day to not to have to think about it.

    $8000.00/ 30 days = $266.00 because during the ups/downs you will be thinking about it everyday.

    On the good days you won't be getting compensated enough and on the bad days you definitely won't be getting compensated well enough for the stress.
  3. I have the perfect hedge fund for your investor and the ability to compensate you on the investment. Avoid the headaches, send me a PM. Thanks, Surf
  4. Why would I waste the 2% on you. It becomes another mutual fund like blackrock, ing fund or pimco and charges annual ?

  5. Yes Thanks Tonkadad. I have the same feeling. Its just probably slightly better than other jobs in terms of social status but it doesnt really justify the work.

    On the high side, we can accept new funds. 15, 20, 25, 30. Once its at 30, everything doubles. That includes the stress. *Just thinking of the multiple country macro im in sucks too. I cant imagine hedging FX currency in all 4 major cities, already a standalone job by itself.

    On the low side, I see the end of tunnel, I cant imagine doing anything else after this. Not forgetting I might be a slave to these millionaires. Or i might just roll back, close down the fund, return the money and find a 9-5 job sucks too.

    I now understood why Ken griffin says a 6% mgmt fees they are still operating at a loss while James simon charges 0 at mgmt but 50% on performance. Neither which I have the ability to do so as of now.
  6. danielc1


    Don't forget problems you are not thinking about now:

    I was in the same position as you 12 years ago... a friend of mine could raise some money from his relationships he had with other people who had money.

    Long story short: Because I 'knew' we were going to have a crash in the stock market I waited with the funds to invest. My goal was to buy Graham stocks and write options on it, during the fall down of the market. After three months of absurd raising prices, my partner that raised funds and did not understand anything about the market, thought that it was 'his' money too. So he decided to use the money in the maintime for something else. He has depleated the account so fast, that when it was time to buy, the account was empty...

    And this is just one story. I have seen hunderds and hunderds of people with an idea to start a hedge funds and ended up a hoax. Did you know that al most all of the hoax in the hedge fund industry, like Madoff, start legit and with the best intentions? But that they crack under pressure of delivering the promised result and when they cannot do that, they seek alternative ways to deliver...
  7. No, I can provide you with real edge that you are not aware of and can't access if you were. Access is everything and you only pay if you make $$, no 2% or any management fee.
  8. Then why would I trust you ? Why would I wired money to you ?

    Is your Fund listed on SEC ? At least in Singapore any Registered Fund appears on the official regulatory website.

    So what have you've got ? By the way you are soliciting on public, that makes it enough for me and everyone else not to trust you, and btw you are riding on my thread for a publicity stint, adding no value to this thread . yuck
  9. Yeah my friend had not much knowledge of markets and thinks differently. As of the current climate its one of the hardest to start woit markets so volatile.

    There were also thoughts to start 2-3 separate funds so we can "maximize" the returns for ourselves, using accounting. Or have the 2% mgmt fees withdrawn in a monthly fashion, which is to our advantage. Or ended up playing roulette with OPM. Almost reaching the dark side.
  10. TIRH


    snakeoil salesmen should not fight each other. You should unite and scam innocent ET readers.

    the guy registered in 2002, must have scammed quite a few over the years. Or in day trading circle, he has been trading for a long time.
    #10     Jul 30, 2012