Prop vs. Hedge Fund

Discussion in 'Prop Firms' started by Lights, Aug 13, 2006.

  1. (I can relate what I understand ours to be...things change, and my Compliance Officer is the only one who can accurately define our structure). Ours is somewhat different than most. Most are "Introducing Broker" types. We are an exchange member (SRO) LLC, subject to all regulatory agency approvals.

    My Compliance Officer would need more information about exactly what you're asking. Raising money from others to trade with? Using shareholder money (if any) to start a firm?

    I'll ask if you give me more info.

    Don
     
    #21     Aug 15, 2006
  2. Because most fund managers have no confidence that they will have any profit!
     
    #22     Aug 15, 2006
  3. We have an investment club with only 1 active member (the one responsible for trading). Basically we have a pool of money already but We like to join a prop to increase our leverage. We are thinking of setting up a LP or LLC with pass-thru, so all profit will be taxed in the individual level. Can we distribute the profit not proportional to their investments? We like to have the active member giving a higher profit ratio. Can we change the distribution ratio every year.
    I have a license so myself joining prop is not a problem.
    Appreciate your input.
     
    #23     Aug 15, 2006
  4. You don't want to join as an LLC, and to be honest, cannot. If you were to, you must personally sign a guarantee for any losses in excess of funds put up, and you will be responsible for Self-Employment taxes (15%+), our traders are exempt.

    Since it's only you who will be trading, simply join as an individual, and distribute money as you see fit.

    Don
     
    #24     Aug 15, 2006
  5. Some money managers actually like the 1 to 3% fees they charge on multi million dollar accounts. It's a different world, complete with big 3 audits, marketing, back scratching. Maybe it looks more professional than just being a very good prop trader. Some people like the limelight too...who knows.
     
    #25     Aug 15, 2006
  6. dac8555

    dac8555

    1. HF charge 2, 20 on other peoples money. a small fund
    (say 20mm) charges 2% per year if progitable or not...400k in your pocket. 1-2 people can run a 20mm fund.

    2. less risk, better rep. 10 to 1 leverage you can get wiped out FAST. if a hedge fund goes to pot...you have "hedge fund" on your resume. if you are a prop trader that goes belly up...you have "cowboy" on your resume.
     
    #26     Aug 15, 2006
  7. If I join as an individual, I have to pay all the tax that is supposed to be distributed.
     
    #27     Aug 15, 2006
  8. Your payments to others are deducted of course.

    Seriously, don't over-complicate the whole thing. I'll be glad to walk you through it....feel free to give me a call. 702.739.1393 (mid trading day is usually a good time ...the slower time).

    Don
     
    #28     Aug 15, 2006
  9. DB,

    thanks for setting so many questions straight,

    its a pleasure to see someone from a firm owner's perspective weigh in on these boards,

    that makes coming to ET.com worth the time spent, as well as continues to make it a reasonable place to get facts straight about trading, the markets and the business entity formation process...

    just can't figure out why so many complain all the time,
     
    #29     Aug 15, 2006
  10. Why thank you....always nice to hear .....

    Don :)
     
    #30     Aug 15, 2006