i have a question for anyone starting their own LLC for the purpose of investing/trading in an aim to generate alpha for investors. As a startup, how do you deal with having no track record? for most cases, isn't this is the one thing that bars new investment/hedge fund/mutual fund/ ? i mean, who would besides, your relatives, invest in someone who has no track record ? how can this problem be resolved? incubation funds ? i have a friend, who just graduated from a Canadian university, and he wants to start a LLC company in here or hong kong. he wants me to join him, but I think I lack the experience (i run an investment club at the university only), and have doubt my skills as an investor (i have traded for 2 years, and just beginning to use value investing methods in equities only now). I've read most of the important literatures like Security Analysis, and slowly starting to grasp the principals and its philosophies. As for trading, I was quite successful using algorithms to trade, but then it blew up, causing me to break even. I realized trading is volatile, and i turned my focus on to investing for long term. As for my friend, its similiar level of skills and experience as me. but he would focus more on acquiring investors money. I suggest to him that he can do fund focusing only on equities, OR getting the CTA, and doing a FX fund, or pooled futures fund. many thanks!
One of the best ways to build a track record is thru incubation funds. With some groups that offer this service, they also have access to feeder funds and depending on your level of success will forward your info to them. Green Trader does the incubation route and supposedly has some feeder fund types he works with, but I never tried this so I can't say for sure. Check out this thread by ProfitTakgFool about starting a small hedge fund. It's a great discussion about starting from ground up. http://www.elitetrader.com/vb/showthread.php?s=&threadid=118059
also in your opinion would going the CTA route, and start trading something i am familiar with a better choice than starting an LLC that aims to invest in stocks and so on. i think that for the long run, investing in long run in equities could yield more consistent returns....but maybe this is a bias on my part because of my run in with trading.
An incubator fund is the typical set up. But you still need to have enough capital to work with. 100k is not going to be enough. 500k can get you into some mini prime brokerages with nice support but you know your size is going to be small. ideally you want to have 1-3 million to work with. Of course this depends on your strategy. If you're running a FX fund you don't need that much. As for the long run, the Japanese know this well.... Don't think about short-term or long-term, think about making money, think about how you've made money in the past, you make a trade and the market moves in the direction of your trade, regardless the timeframe.